United States Securities and Exchange Commission


WASHINGTON, D.C. 20549





FORM 10-K





(Mark One)þ  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the fiscal year ended January 31, 2010or ̈  Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from ___________to ___________Commission File Number 333-137920ALLIANCE NETWORK COMMUNICATIONS HOLDINGS, INC.

(Exact name of registrant as specified in charter)





Delaware



20-3547389(State or other jurisdiction of incorporation or organization)



(I.R.S. Employer Identification No.)120 Wall Street, Suite 2401

New York, NY

10005

(212) 646-808-3093(Address of principal executive offices)

(Zip Code)

(Telephone No.)Securities Registered Pursuant to Section 12(b) of the Act:Title of each class

Name of each exchange on which registeredCommon Stock, par value $0.001 per share

OTC





Securities Registered Pursuant to Section 12(g) of the Act:(Title of class)





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   ̈ No  þ





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes   ̈ No  þ





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No  ̈





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large accelerated filer   ̈
Accelerated filer   ̈Non-accelerated filer   ̈
Smaller reporting company  þ





1




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   ̈ No  þ





The aggregate market value of the outstanding common equity of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter was $4,674,800 .




There were 19,977,778 shares of voting common stock with a par value of $0.001 outstanding at May 14, 2010.





DOCUMENTS INCORPORATED BY REFERENCE





None.








2













ALLIANCE NETWORKS COMMUNICATIONS HOLDINGS, INC.


FORM 10-K


INDEX





PAGEPART IItem 1.
Business

4Item 1A.
Risk Factors

5Item 2.
Properties

9Item 3.
Legal Proceedings

9Item 4.
Submission of Matters to a Vote of Security Holders

10PART IIItem 5.
Market for Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

10Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations

11Item 8.
Financial Statements and Supplementary Data

12Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

12Item 9 A.
Controls and Procedures

12Item 9 B.
Other Information

13PART III
Other InformationItem 10.
Directors, Executive Officers and Corporate Governance

14Item 11.
Executive Compensation

15Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

15Item 13.
Certain Relationships and Related Transactions, and Director Independence

16Item 14.
Principal Accountant Fees And Services

16Part IVItem 15.
Exhibits, Financial Statement Schedules

16Signatures

18










3








PART I





ITEM 1: BUSINESS







FORWARD-LOOKING STATEMENTS





Statements in this information statement that are not historical facts constitute forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential’’ or ‘‘continue’’ or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of these statements. We are under no duty to update any of the forward-looking statements after the date of this information statement to conform these statements to actual results.





Corporate Background - Reverse Merger





From August 14, 2007 to August 21, 2009, we operated as Halcyon Jets Holdings, Inc. (“HJH”), a Delaware corporation.  During that period HJH operating through its wholly-owned subsidiary Halcyon Jets, Inc. was a broker of on-demand aircraft services, serving as agent to its customers in arranging for their transportation needs.  Prior to August 14, 2007, we operated as Greenleaf Forest Products, Inc., a Nevada corporation importing pine wood blocks from Brazil and Argentina that are used for civil architecture purposes, such as moldings, porch posts, door components, stair parts and packaging materials.





Effective July 1, 2009, HJH entered into two material agreements, one to acquire a new business and the other to dispose of its existing private aviation brokerage business.  HJH entered into a Share Exchange Agreement with all of the shareholders of Alliance Networks Communications, Inc.  (“ANC”) pursuant to which all of those shareholders would transfer their shares in ANC to HJH in consideration of the issuance of 18,266,666 shares of the HJH’s common stock.   Simultaneously, the Registrant entered into a Stock Purchase Agreement with Halcyon Jets Acquisition Group, LLC, the principal of which is Gregory D. Cohen, HJH’s former Chief Executive Officer, to sell all of the outstanding shares of our Halcyon Jets, Inc. subsidiary to Halcyon Jets Acquisition Group, LLC.





On August 21, 2009, HJH completed the transactions described above and upon the effectiveness and as a result of these transactions, HJH filed an Amendment to its Certificate of Incorporation to change the Company’s name to Alliance Networks Communications Holdings, Inc.(“Alliance”).





Also on August 21, 2009, in accordance with the consent of the stockholders, the Company filed an Amendment to the Company’s Certificate of Incorporation to “reverse split” the issued and outstanding common stock, $.01 par value, in the ratio of one (1) share of common stock for fifteen (15) shares of common stock outstanding immediately preceding the filing of the Amendment, including the shares issued in connection with the transaction described above.   As a result of this reverse split, the voting rights of the Preferred Stock Series A were adjusted to reflect the one (1) for fifteen (15) reverse split and therefore each share of the outstanding Preferred Stock have voting rights equivalent to 67 common shares. All share amounts in the Annual Report have been retroactively restated for the split.





The merger was accounted for as a reverse acquisition and recapitalization. ANC is the acquirer for accounting purposes and Alliance is the issuer. Accordingly, ANC’s historical financial statements for periods prior to the acquisition become those of the acquirer retroactively restated for the equivalent number of shares received in the merger. The accumulated deficit of ANC was carried forward after the acquisition. Operations prior to the merger are those of ANC. Earnings per share for the period prior to the merger have been  restated to reflect the equivalent number of shares outstanding as well as the reverse split.





Alliance carries on ANC’s business as its sole line of business. Alliance relocated its executive offices to 120 Wall Street, Suite 2401, New York, New York 10005 and its telephone number is (646) 808-3064.





Overview





ANC while currently only in development stage, plans to become an integrated company that will research, design, manufacture, market and distribute a number of generic and custom application electrical surge protection devices. The primary product focus will be electrical surge limiting terminals that combine easy field line installation with protection from transient voltage, lightning, induction or electronic discharge.




4





The Company through ANC plans to develop the ability to quickly research, design, and produce specialty products to allow it to develop a market niche to supply both generic and custom built products to a number of industry players in both Canada and the US. With the introduction of high speed internet services in the last few years this market is expected to continue to grow.





The Telecommunication Industry





The current telecommunication infrastructure is a series of networks that rely on sophisticated switches and relays that are sensitive to fluctuations in voltage and current caused by transient voltage, lightning, induction, electrical discharge or other electrical hazards. Preventing these hazards from harming people, damaging expensive equipment, and causing system downtime requires the installation of proven, quality protection products throughout the network.





The significant increase in traffic (voice, data and internet) using this communication network has resulted in higher capacity fiber optic cables replacing traditional cables in the last 10 years. Fiber is expensive to install and has been used primarily for major network conduits. The “last mile” connection to a business or household is still based on copper wire technology. This situation has enticed software developers and equipment manufacturers to develop products that can handle the high traffic volumes utilizing the copper wire infrastructure.





These new products have revitalized copper wire communications and will continue to support this infrastructure. These new products however are more sensitive to voltage fluctuations than the traditional telephone. This has reinforced the need for proven, quality electrical primary surge protection equipment. It has also created a market for secondary surge protection equipment designed to protect the new equipment from lower electrical current fluctuations.





TMI Transformers, Inc. is ANC's initial customer for its Modular AC Protection Products. TMI currently manufactures high quality transformer and telecom products.  With TMI’s introduction of high bandwidth connectivity devices, they have been able to branch out into what would be defined as the “Customer Premise” side of the telecommunications infrastructure.  Starbridge (a supplier of next generation modems), has engaged the services of TMI to supply a patentable protecting device to be designed and assembled by Alliance for the customer premises or basically for the home owner (end user)


.


The marketing plan will be to introduce this family of products into the larger ISP (Internet Service Providers) telephone companies. The concept for this product has been introduced to Verizon and QWEST, with favorable results to date. To put things in perspective, in the opinion of management virtually every residence in the USA and Canada will at some point require a multi service “protected modem”, whether it is for recreational purposes or to run a business at home.




A “fast reacting” device is required now by end users purchasing internet or CATV signal from these larger RBOC’s (regional bell operating companies). Revenues, from this product line over a three period could exceed to $20.4 million in North America alone.




Although initially designed to be deployed in the North American market, this device (with modifications to fit the network) also has potential for the European marketplace for smaller service providers.




ITEM 1A. RISK FACTORS





There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our common stock could decline and investors could lose all or part of their investment.





Risks Relating to Our Business





We can provide no assurance that our business plan will materialize.





We are a development stage company that has not produced product revenue to date and does not expect to do so in the immediate future. There can be no assurance that we will be able to successfully introduce our products, which are primarily only in the development stage, or achieve or sustain significant commercial revenue or profitability in the future.  The development of our products will require the commitment of substantial resources to conduct the research and development necessary to bring any products to market, and the rate at which we incur development expenses is expected to increase.   We will require additional financing in order to fulfill our objectives.




5





Our independent registered public accounting firm has expressed doubt about our ability to continue as a going concern.  This could make it more difficult for us to raise funds and adversely affect our relationships with lenders, investors and suppliers





Our independent registered public accounting firm has expressed doubt about our ability to continue as a going concern. This indicates that our auditors believe that substantial doubt exists regarding our ability to continue to remain in business. We cannot provide any assurance that we will in fact operate our business profitably or obtain sufficient financing to sustain our business in the event we are not successful in our efforts to generate sufficient revenue and operating cash flow. The expression of such doubt by our independent registered public accounting firm or our inability to overcome the factors leading to such doubt could have a material adverse effect on our relationships.





We will need financing to execute our business plan and fund operations, which financing may not be available.





We may not be able to execute our current business plan and fund business operations long enough to achieve profitability without obtaining financing. Our ultimate success may depend upon our ability to raise capital. There can be no assurance that funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us.





We may be required to pursue sources of capital through various means, including joint venture projects and debt or equity financings. Future financings through equity investments are likely to be dilutive to existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, the issuance of warrants or other derivative securities, and the issuances of incentive awards under equity employee incentive plans, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition.





Our ability to obtain needed financing may be impaired by such factors as the capital markets, both generally and specifically in our industry, and the fact that we are not profitable, which could impact the availability and cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.





We will be dependent upon the acceptance of our products in the marketplace.





The commercial success of any products that we develop will depend upon acceptance of these products by the business community as safe, useful and cost-effective. While we believe the benefits of electrical surge protection and of our prospective products will be able to be demonstrated, there can be no assurance that the benefits will be considered sufficient by the business community to enable any such products to gain market acceptance.





The electrical surge protection market is highly competitive and designs change often to adjust to patent constraints and to changing market preferences. Therefore, product life cycles can be relatively short. Therefore, any delays in our product launches may significantly impede our ability to enter or compete in a given market, and may reduce the revenue that it is able to generate from these products.  We may experience delays in any phase of a product launch, including during research and development, clinical trials, manufacturing, marketing and the education process. If we suffer delays in product introductions, our sales could be adversely affected.





We will need to protect our intellectual property in order to achieve and maintain a competitive position.





Our success depends significantly on our ability to protect our proprietary rights to technologies used in our prospective products.  We will rely on patent protection, as well as a combination of non-disclosure, confidentiality and other contractual arrangements to protect our proprietary technology. However, these legal means afford only limited protection and may not adequately protect our rights or permit us to obtain or keep any competitive advantage.  Our success will depend upon our ability to protect our proprietary rights in our technology, and the failure to obtain patent protection could severely limit our ability to grow and be successful. There can be substantial delays in obtaining patent approval, and it may take up to two years or more to complete that process.  Any delays in obtaining a patent, as well as the inability to obtain a patent at all, could have a material adverse effect on our business.





We will encounter manufacturing risks and may face product liability claims.





Our manufacture and sale of electrical surge protection devices will expose us to significant risk of product liability claims. We intend to obtain product liability insurance but such coverage may be inadequate to protect us from any liabilities we may incur, or we may not be able to maintain adequate product liability insurance at acceptable rates. If a product liability claim or series of claims were brought against us for uninsured liabilities or for amounts in excess of insurance coverage, and it is ultimately determined that we are liable, our business could suffer. In addition, we could experience some material design or manufacturing failure, a quality system failure, other safety issues or heightened regulatory scrutiny that would warrant a recall of our products. A recall of any of our products could also result in increased product liability claims.




6





We may be negatively affected by the changing economic conditions including the current economic downturn.





A general downturn in economic, business and financial conditions, including recession, inflation and higher interest rates, could have an adverse effect on our business.





Since we lack a meaningful operating history, it is difficult for potential investors to evaluate our business.





Our limited operating history makes it difficult for potential investors to evaluate our business or prospective operations. We are subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays inherent in a new business. Investors should evaluate an investment in us in light of the uncertainties encountered by new companies in an intensely competitive industry. Our business is dependent upon the implementation of our business plan, as well as our ability to enter into agreements with third parties for, among other things, for the manufacturing of our products on commercially favorable terms. There can be no assurance that our efforts will be successful or that we will be able to attain profitability.





We will be dependent upon key personnel whose loss may adversely impact our business.





We will be relying heavily on the expertise, experience and the services of our senior management and sales personnel once engaged. The loss, or any inability to attract or retain key individuals, could materially adversely affect us. We will seek to compensate and motivate our executives, as well as other employees and independent contractors, through competitive salaries, commissions and bonus plans, but there can be no assurance that these programs will allow us to retain key employees and contractors or hire or attract new key employees and contractors. As a result, if we are not able to engage key personnel or once retained were to leave or cease to be available or our ability to utilize their skills, contacts and other resources impeded, we could face substantial difficulty in finding qualified successors and could experience a loss in productivity while any such successors obtain the necessary training and experience





The electrical surge protection device market is extremely competitive.





We will compete with a number of companies that are engaged in business similar to ours.  Our competitors have been in business far longer than we have and they may have significantly greater financial stability, access to capital markets and name recognition. Unanticipated shortfalls in expected revenues due to price competition or inadequate supply of raw materials would negatively impact our financial results and harm our business. There is no assurance that we will be able to successfully compete in this industry.





We may not be able to effectively control and manage our growth.





Our strategy envisions a period of potentially rapid growth. We currently maintain nominal administrative and personnel capacity due to the startup nature of our business, and our expected growth may impose a significant burden on our future planned administrative and operational resources. The growth of our business may require significant investments of capital and increased demands on our management, workforce and facilities. We will be required to substantially expand our administrative and operational resources and attract, train, manage and retain qualified management and other personnel. Failure to do so or satisfy such increased demands would interrupt or would have a material adverse effect on our business and results of operations.





Risks Relating to Our Organization





Failure to achieve and maintain effective disclosure controls or internal controls could have a material adverse effect on our ability to report our financial results timely and accurately.





We are a public reporting company and, accordingly, subject to the information and reporting requirements of the Exchange Act and other federal and state securities laws, including compliance with the Sarbanes-Oxley Act of 2002. The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders will cause our expenses to be higher than they would have been if we were privately-held. In addition, we have identified that we have a material weakness in our system of internal accounting controls and accounting and financial reporting processes as a result of a lack of sufficient resources with SEC, generally accepted accounting principles (GAAP) and tax accounting expertise.





It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We need to hire financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications required by that Act.  In addition, effective internal controls and procedures are necessary for us to provide reliable financial reports. If we continue to have material weaknesses in our internal controls and procedures, we may not be able to provide reliable financial reports and our business and operating results could be harmed.





Public company compliance requirements may make it more difficult to attract and retain officers and directors.





The Sarbanes-Oxley Act and rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies. Compliance with the new rules and regulations increases our operating costs and makes certain activities more time consuming and costly than if we were not a public company. As a public company, these new rules and regulations make it more difficult and expensive for us to obtain director and officer liability insurance. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers.




7





Because we became public by means of a reverse acquisition, we may not be able to attract the attention of major brokerage firms.





There may be risks associated with our company becoming public through a “reverse acquisition”. Securities analysts of major brokerage firms may not provide coverage of us since there is no incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will, in the future, want to conduct any secondary offerings on behalf of our post-merger company.





Risks Relating to our Common Stock





Our stock price may be volatile.





The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:





·
changes in our industry;·
competitive pricing pressures;·
our ability to obtain working capital financing;·
additions or departures of key personnel;·
limited “public float”, in the hands of a small number of persons whose sales or lack of sales, could result in positive or negative pricing pressure on the market price for our common stock;·
our ability to execute our business plan;·
operating results that fall below expectations;·
loss of any strategic relationship;·
regulatory developments;·
economic and other external factors; and·
period-to-period fluctuations in our financial results.





In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.





We do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.





We do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on investment will only occur if our stock price appreciates.





There is currently no liquid trading market for our common stock and we cannot ensure that one will ever develop or be sustained.





To date there has been no liquid trading market for our common stock. We cannot predict how liquid the market for our common stock might become. Our common stock is quoted on the automated quotation service known as the OTC Bulletin Board and although we are not presently eligible, we intend to apply for listing of our common stock on either The Nasdaq Capital Market or other national securities exchanges if and when we meet the requirements for listing. We cannot ensure that we will be able to satisfy such listing standards or that our common stock will be accepted for listing on any of these exchanges. Should our company fail to satisfy the initial listing standards of the exchanges, or our common stock is otherwise rejected for listing and remain listed on the OTC Bulletin Board or suspended from the OTC Bulletin Board, the trading price of our common stock could suffer and the trading market for our common stock may be less liquid and our common stock price may be subject to increased volatility.





Our common stock is deemed a “penny stock”, which may make it more difficult for our investors to sell their shares.





Our common stock is subject to the “penny stock” rules adopted under Section 15(g) of the Securities Exchange Act of 1934. The penny stock rules apply to companies whose common stock is not listed on a national securities exchange and trades at less than $5.00 per share or that have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. Insofar as many of our shares are subject to the penny stock rules, investors will find it more difficult to dispose of those shares.





Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.





If our stockholders sell substantial amounts of our common stock in the public market, or upon the expiration of any holding period under Rule 144 it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. The shares of common stock issued to the former shareholders of Alliance, upon the expiration of the applicable holding period under Rule 144, will become freely tradable, subject to securities laws and SEC regulations regarding sales by insiders. Recent revisions to Rule 144 shortened the holding period under Rule 144, as a result of which the overhang period arises earlier than would previously have been the case.




8





ITEM 2. PROPERTIES







The Company does not own any properties at this time.  It leases its headquarters at 120 Wall Street, Suite 2401, New York, NY 10005 for $2,000 per month on a month to month basis.





ITEM 3. LEGAL PROCEDINGS







In September 2008, Jet One Group, Inc. ("Jet One") commenced an action against Halcyon Jets Holdings, Inc., the Company’s predecessor and several of its former officers, directors and employees in the United States District Court, alleging, among other matters, that the Company’s predecessor fraudulently induced Jet One to enter into a Letter of Intent to acquire Jet One's business. The Complaint alleged that the Company violated the federal Racketeering Influenced Corrupt Organizations Act, the federal Computer Fraud and Abuse Act, the New York consumer fraud and Business law statutes and committed various common law torts, and sought compensatory damages of $15 million and treble or punitive damages of $45 million. On August 14, 2009, the Court dismissed the complaint without prejudice to Jet One's right to re-file the lawsuit.





On or about October 28, 2009, Jet One Group filed a new action against the Company’s predecessor, its former subsidiary and the other defendants in the matter discussed above, in the Supreme Court of New York (“Nassau County Action”), which repeats the factual allegations of the dismissed federal court complaint and asserts claims for conversion, fraud, tortious interference with contract and violation of the state consumer fraud statute.  The new complaint seeks compensatory damages of $15 million, attorneys’ fees of $100,000 and punitive damages against each of the defendants in the amount of $45 million.





Separately, the former subsidiary filed an action against Jet One and its principals in the Supreme Court of New York in which the former subsidiary alleges that the Complaint in Jet One’s Federal Court Action contains false and defamatory statements regarding the former subsidiary and that Jet One filed its suit for the sole purpose of circulating a press release publicizing the false and defamatory allegations.  Jet One moved to dismiss the suit for failure to state a claim upon which relief may be granted, but this motion was denied by the court and the denial was affirmed by the Appellate Division of the Supreme Court of New York in February 2010.  On March 19, 2010, the Company’s former subsidiary dismissed its complaint without prejudice.





On March 22, 2010, all the defendants in the Nassau County Action filed a Verified Answer, Counterclaims and Third-Party Complaint denying any liability to Jet One.  In addition, the Company and the former subsidiary re-asserted the defamation claims that had previously been asserted against Jet One and its principals in the discontinued case described above; and the Company asserted a breach of contract claim against Jet One and its principals relating to a $150,000 promissory note executed in favor of its predecessor by Jet One and personally guaranteed by Jet One’s principals.





In October and December 2008, Blue Star Jets, LLC  (“Blue Star”) filed a complaint against the Company and certain former employees, including our former President, who were former employees of Blue Star (“former Blue Star employee”) in the Supreme Court of New York, New York County alleging, among other matters, that the Blue Star’s former employees stole confidential information belonging to Blue Star prior to joining the Company and that one or more of such former employees violated post-employment restrictive covenants by joining the Company.  The complaint seeks $7 million in damages.  This action is a revival of an earlier action that was voluntarily discontinued by Blue Star in 2007.





The Company and the other defendants, in February 2009, filed a motion to dismiss the counts of the complaint for violation of the federal Computer Fraud and Abuse Act and for civil conspiracy for failure to state a claim upon which relief may be granted.





In February 2009, Blue Star served a second amendment to its complaint which withdrew plaintiff’s claims under the federal Computer Fraud and Abuse Act and added Alfred Palagonia and Apollo Jets as additional defendants.  The Company has filed a cross-motion to strike the second amendment on the ground that it was improperly filed or in the alternative to dismiss the certain portions related to the civil conspiracy.  On May 20, 2009, the Court dismissed plaintiff’s civil conspiracy claims and ordered plaintiff to file a third amended complaint.  In October 2009, the parties entered into a “global stipulation” agreeing to stay all proceedings for 90 days and as of May 14, 2010 there has been no additional activity in this matter.





On or about October 23, 2009, Mitchell Blatt, a former Chairman of the Board and Chief Executive Officer of Company’s predecessor, commenced an action against the Company’s predecessor, its former subsidiary and the Company relating to alleged breach of an agreement between and among the Company’s predecessor, its former subsidiary and Mr. Blatt dated as of August 12, 2008.  In his complaint, Mr. Blatt has alleged causes of action for breach of contract, fraud in the inducement, fraud in the execution, unjust enrichment and conversion.  The complaint seeks compensatory damages of $232,500, punitive damages of $5 million and attorneys’ fees and costs.  In February 2010, the Company filed a motion to dismiss the action and intends to vigorously defend itself in the event that the motion to dismiss is denied.





Except as set forth above, there are no other pending or threatened legal proceedings against the Company.  Based on the advice of counsel, it is management's opinion that we have made adequate provision for potential liabilities, if any, arising from potential claims arising from litigation, governmental investigations, legal and administrative cases and proceedings. In connection with the sale of the Company’s Halcyon Jet subsidiary to the Company’s former Chief Executive Officer the Company was indemnified by the buyer against any liability which may arise from the above litigation.




9





ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





None.




PART II





ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES







Our common stock is quoted on the ‘‘Over the Counter Bulletin Board’’ trades under the symbol ‘‘ALHN.OB’’.  The market for our common stock has often been sporadic, volatile and limited.





The following table sets forth the high and low sale price of the common stock on a quarterly basis, as reported by Over the Counter Bulletin Board from September 5, 2007 through January 31, 2010 and have been adjusted, as appropriate, for the 1:15


split on September 2, 2009:











Fiscal 2010


Fiscal 2009High


Low


High


LowFirst Quarter

$
1.05


$
.15


$
14.25


$
4.50Second Quarter


.60



.15



8.10



4.50Third Quarter


.50



.11



6.75



.90Fourth Quarter


.51



.04



1.05



.45





The per share closing sales price of the common stock as reported by the Over the Counter Bulletin Board on May 12, 2010, was $.08.   As of this date there were approximately 85 holders of record of common stock and 19,977,836 shares of common stock outstanding. We have not paid dividends on our common stock outstanding in the past. There are no contractual or legal restrictions that limit our ability to pay dividends in the future; however, there are no expectations that we would pay dividends in the near future.




10





ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS







INTRODUCTION AND CERTAIN CAUTIONARY STATEMENTS





You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this annual report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under ‘‘Risk Factors’’ under Part II.  Item 1A.





OVERVIEW





Our discussion and analysis of operations is based upon ourconsolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from these estimates under different assumptions or conditions.





Critical Accounting Policies





As the Company has not begun to execute its business plan we have identified only the following policies as critical to understanding of our financial results for the periods presented.





As a result of the transactions described in Note 1 – to the Consolidated Financial Statements, the former stockholders of ANC were the controlling stockholders of the Company and the Company discontinued its former business. Accordingly, the transactions were treated for accounting purposes as a reverse acquisition, and the transactions have been accounted for as a recapitalization of the Company, rather than a business combination. Therefore, the historical financial statements of ANC are the historical financial statements of the Company and historical stockholders' equity of ANC has been restated to reflect the recapitalization. Pro forma information has not been presented since the transaction is not a business combination.





The consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which assume the continuation of the Company as a going concern.  This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. Since the Company ‘s formation in April 2009, the Company has not begun its efforts to produce and market electrical surge protection devises and its activities, to date, have been organizational in nature, and have been directed towards the raising of capital and to discussions of potential business combinations which was completed in August 2009.





The Company may not be able to execute its current business plan and fund business operations long enough to achieve profitability without obtaining financing. The Company's ultimate success may depend on its ability to raise capital. There can be no assurance that funds will be available to the Company when needed from any source or; if available, on terms that are favorable to the Company.   The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.





Business Plan





We are a development stage company which plans to research, design, manufacture, market and distribute a number of generic and custom application electrical surge protection devices. The primary product focus will be electrical surge limiting terminals that combine easy field line installation with protection from transient voltage, lightning, induction or electronic discharge.





We plan to develop the ability to quickly research, design, and produce specialty products to allow us to develop a market niche to supply both generic and custom built products to a number of industry players in both the United States and Canada. We initially intend to sell devices that provide over-voltage current/ limiting protection for sensitive communication systems requiring high speed modems.




11





Results of Operations





From inception (April 20, 2009) to January 31, 2010





During these periods the Company had no revenues as its activities principally involved its formation and negotiation of the reverse acquisition. Expenses incurred are general and administrative principally staff costs and professional fees.  The interest cost relates to notes payable and includes amortization of debt discount and finance costs charges as described below.





The proceeds from issuance of the promissory notes were allocated to the notes and the warrants based upon their relative fair values. This allocation resulted in allocating $9,500 to the notes and $7,500 to the warrants. The warrants issued for services were recorded as prepaid financing fees of $6,750 and will be amortized to interest expense over the related loan periods.  During the year ended January 31, 2009, the Company recorded $3,500 as additional interest expense related to the amortization of the debt discount and prepaid financing fees.  The fair value of the warrants was determined using the Black-Scholes option pricing model using the following weighted-average assumptions: volatility of 452 % and 457 %; risk-free interest rate of .87% and .94%; expected life of 3 years and estimated dividend yield of 0%.




In November 2009, the Company entered into an arrangement with LeadDog Capital LP in which the Company may borrow an aggregate of $500,000 with interest payable at 14% per annum three years from the date of any borrowings.  The indebtedness including interest is convertible into common stock at the lesser of $.10 or 75% of the lowest closing bid price during the 15 day period prior to the conversion date but in no event can the conversion price be less than $0.005 The Company accounted for the borrowings under this arrangement  in accordance with ASC 480 - “Distinguishing Liabilities from Equity”, as the conversion feature embedded in the debentures could result in the principal being converted to a variable number of the Company's common shares.   The fair value of the conversion feature is calculated at the time of issuance and the Company records a conversion liability for the calculated value. The conversion liability is revalued at the end of each reporting period which results in a gain or loss for the change in fair value.  During the year ended January 31, 2010, the Company borrowed $62,400 under this arrangement. The Company determined the fair value of the debentures at the dates of issuance to be $122,909 which represented the face value of the debentures plus the fair value of the conversion feature of $60,509. The conversion liability was revalued at January 31, 2010 resulting in a reduction in the fair value of $39,709 which was recognized as a reduction in financing cost.





Liquidity and Capital Resources





The Company may not be able to execute its current business plan and fund business operations long enough to archive profitability without obtaining financing. The Company has received interim financing from a related party.  The Company's ultimate success may depend upon its ability to raise capital. There can be no assurance that funds will be available to the Company when needed from any source or; if available, on terms that are favorable to the Company. Our independent registered public accounting firm has expressed doubt about our ability to continue as a going concern.  The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.





Except as set forth under Part II.  Item 1 – Legal Proceedings, there are no pending or threatened legal proceedings against the Company.  In the opinion of management, on the advice of counsel, we have made adequate provision for potential liabilities, if any, arising from potential claims arising from litigation, governmental investigations, legal and administrative cases and proceedings. In connection with the sale of the Company’s Halcyon Jet subsidiary to the Company’s former Chief Executive Officer the Company was indemnified by the buyer against any liability which may arise from the above litigation.





Off-Balance Sheet Arrangements





We have no off-balance sheet arrangements.





ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA






The financial statements required by Item 8 are submitted in a separate section of this report, beginning on Page F-1.





ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE




None.




12





ITEM 9 A CONTROLS AND PROCEDURES




Evaluation of Disclosure Controls and Procedures





The Company is in the process of implementing disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’), that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports are recorded, processed, summarized, and reported within the time periods specified in rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our Chief Executive Officer  and Chief Financial Officer to allow timely decisions regarding required disclosure.





As of January 31, 2010, the Chief Executive Officer and Chief Financial Officer carried out an assessment, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). As of the date of this assessment, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of January 31, 2010, because of the material weakness described below.





The Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including detailed validation work with regard to balance sheet account balances, additional analysis on income statement amounts and managerial review of all significant account balances and disclosures in the Annual Report on Form 10-K, to ensure that the Company’s Annual Report and the financial statements forming part thereof are in accordance with accounting principles generally accepted in the United States of America. Accordingly, management believes that the financial statements included in this Annual Report fairly present, in all material respects, the Company’s financial condition, results of operations, and cash flows for the periods presented.





Management’s Report on Internal Control over Financial Reporting





Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the interim or annual financial statements.





Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.





The Chief Executive Officer and Chief Financial Officer assessed the effectiveness of the Company’s internal control over financial reporting as of January 31, 2010. In performing its assessment of the effectiveness of the Company’s internal control over financial reporting, management applied the criteria described in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (‘‘COSO’’).





A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.





The material weakness identified during management's assessment was the lack of sufficient resources with SEC, generally accepted accounting principles (GAAP) and tax accounting expertise. This control deficiency could result in a material misstatement of significant accounts or disclosures that would result in a material misstatement to the Company’s interim or annual financial statements that would not be prevented or detected. Accordingly, management has determined that this control deficiency constitutes a material weakness.





Because of the material weakness, management concluded that the Company did not maintain effective internal control over financial reporting as of January 31, 2010, based on the criteria in Internal Control-Integrated Framework issued by COSO.





Changes in Internal Control over Financial Reporting





There were no changes in internal control over financial reporting during the fourth quarter ended January 31, 2010.





ITEM 9 B. OTHER INFORMATION




None.




13





PART III





ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE




Directors and Executive Officers





Our directors, executive officers and key executives of our operating groups during fiscal year ended January 31, 2010 are as follows:





Name

Age

Position with CompanyBoris Rubizhevsky

59

Director, Chairman and Chief Executive OfficerJan E. Chason

64

Chief Financial OfficerWinston (“Buzz”) Willis

63

DirectorPaul Lisak

64

Director








BORIS RUBISHEVSKY has served as a Director of the Company since August 2009. He was a Director of United EcoEnergy Corp. from June 2008 until April 16, 2010.  Mr. Rubizhevsky founded NexGen Security Corporation, a consulting firm specializing in homeland security, biological and environmental products and technologies. In 1992 Mr. Rubizhevsky co-founded Isonics Corporation a diversified international company in life science, semi-conductor wafer services and homeland security products.  Before founding Isonics, Mr. Rubizhevsky spent more than ten years with General Electric Company in a number of international sales and marketing managerial positions. Mr. Rubizhevsky holds a B.S. degree in engineering from the Stevens Institute of Technology.




Boris Rubizhevsky has over thirty years of business experience ranging from corporate management and mergers and acquisitions, to business development, sales and marketing and has held officer positions in public companies since 1997.  The companies have been as large as $150 million in market value and have grossed up to $30 million in revenue. Boris provides relevant Chief Executive Officer as well technology experience.




JAN E. CHASON was appointed the Company’s Chief Financial Officer in September 2009.  He is also the Chief Financial Officer of Spring Creek Capital Corp. and United EcoEnergy Corp. since November 20, 2009 and October 7, 2009 respectively.    Mr. Chason has also served as the Chief Financial Officer of several other publicly-owned companies including Halcyon Jets Holdings, Inc. (the Company’s predecessor from August 2007 to August 2009), Ckrush Inc. (February 2006 to September 2008) and Majesco Entertainment Company (January 2003 to January 2006). Mr. Chason was also formerly a partner at Ernst & Young.  Mr. Chason, is a certified public accountant and has a Bachelor of Business Administration from City College of New York.





Since 1994, Mr. Chason has been a senior financial officer of ten public companies which ranged from development stage to mature operating companies with revenues ranging from $10 million to $1.6 billion.  During his 25 year career in public accounting he provided assurance services to both publicly-owned as well as privately-own enterprises.  Mr. Chason provides a high level of financial literacy as well a broad exposure to various industries.





WINSTON ‘BUZZ’ WILLIShas been a Director of the Company since August 2009 and is also a Director of Paradise Music & Entertainment, Inc.  Mr. Willis is acknowledged as a true pioneer and marketing innovator in the music industry.   Since 1996 he has provided services such as artist management, tour direction, record production and concert tour promotion.  Buzz is a member of the R&B Hall of Fame.  He has a B.S. degree from Case Weston University in Business Administration.





In addition to being a member of the Rhythm & Blues Hall of Fame and at the time the youngest Vice-President of a public music company Mr. Willis has been a member of the Board of Directors of a public company for many years. His addition to the Board provides diversity as well as marketing experience to our Board.




PAUL LISAKhas been a member of the Board of Directors since August 2009 and Director of Paradise Music & Entertainment, Inc. since 2007.  Mr. Lisak retired in 2002 as Los Angeles County’s Hazardous Materials Control Manager, and has over 30 years service devoted to the administration and management of public health and management of hundreds of millions of dollars in public funds. Mr. Lisak has a Bachelor’s Degree in Biology and another in Environmental Science, from Indiana State University. He also has a Master’s Degree in Environmental Science and Occupational Health from California State University at Northridge. Mr. Lisak provides governmental and political expertise to our Board.





14





ITEM 11. EXECUTIVE COMPENSATION




Summary Compensation Table





The following table sets forth certain information regarding compensation during each of the last two fiscal years to our Chief Executive Officers for each of those years and any officer who earned in excess of $100,000 during the year ended January 31, 2010.





Name and Principal

Position

Year

Salary

$

Option/

Warrant

Awards

$(1)


All Other

Compensation

$


Total

$Boris Rubishevsky

2010

-0-

-0-


-0-


-0-Chief ExecutiveOfficerGregory D. Cohen

2010


200,000










200,000Chief ExecutiveOfficer (2)

2009


287,708


177,781



145,833



611,322Mitchell BlattChairman and Chief ExecutiveOfficer (3)

2009


85,000


222,720



65,000



372,720Christian Matteis

2009


362,500


6,560







369,060PresidentJan E. Chason(4)

2010


200,000










200,000Chief Financial Officer

2009


204,166


1,640



—



205,806Andrew DrykermanExecutive Vice President

2009


133,761


3,280



—



137,041





(1)
Represents compensation expense incurred by the predecessor company in the prior fiscal year. See Note 8 to 2009 Halcyon Jets Holdings, Inc.’s  Consolidated Financial Statements for details as to the assumptions used to determine the fair value of the option awards including the expense related to the repricing, in fiscal 2009, of options issued in 2008.





(2)
The predecessor company paid Philabelle Consulting Corp for Mr. Cohen’s services.  “Salary” is the portion of the compensation paid subsequent to his appointment and payments prior to that date were included in “All Other Compensation”





(3)
Mr. Blatt served as the predecessor company’s Chairman and Chief Executive Officer from May to August 2008 and the related compensation during the period was included in “Salaries”.  Payments under his termination agreement during the fiscal year were included in “All Other Compensation”.





(4)
Included in the 2010 salary is $40,000 paid to JEC Consulting Associates LLC for his services as the Company’s Chief Financial Officer and the balance was salary paid by the predecessor company.







ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT RELATED STOCKHOLDER MATTERS




The following table is based on 19,977,836 shares of Common Stock issued and outstanding on January 31, 2010 plus 1,400,000 equivalent voting rights applicable to issued and outstanding 21,000 shares of Series A Preferred and sets forth based upon our knowledge of securities issued by us, certain information regarding the ownership of our common stock, by (i) each person or entity who, to our knowledge, owns more than 5% of our voting power; (ii) each executive officer; (iii) each director; and (iv) all of our executive officers and directors as a group. Unless otherwise indicated in the footnotes to the following table, each of the stockholders named in the table has sole voting and investment power with respect to such shares of common stock. The address of each of the stockholders listed below except as noted is c/o Alliance Network Communications Holdings, Inc., 120 Wall Street, Suite 2401, New York, New York 10005.




Name of Beneficial Owner


Number of

Equivalent Shares

Beneficially

Owned



Voting

Power (%)Lawler & Associates, LLP (1)


13,396,667



67.1Boris Rubizhevsky


-



-Winston ("Buzz") Willis


-



-Paul Lisak


-



-Jan E. Chason


8,334
(2)


*All executive officer and directors as a group (4 persons)


8,334



*




(1)
- Lawler & Associates disclaims beneficial ownership of these shares as it is holding them in trust for certain clients





(2)
-  Includes options to purchase 1,667 shares of our common stock.


*- less than 1%





15





ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE




None.




ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES




On behalf of Alliance and its shareholders, we retained Rosenberg Rich Baker Berman and Company to audit our consolidated financial statements for fiscal 2010. In addition, the predecessor company also retained Rosenberg Rich Baker Berman.   We understand the need for Rosenberg Rich Baker Berman to maintain objectivity and independence in its audit of our financial statements and our internal control over financial reporting. To minimize relationships that could appear to impair the objectivity of Rosenberg Rich Baker Berman, we have restricted the non-audit services that Rosenberg Rich Baker Berman may provide to us primarily to tax services and merger and acquisition due diligence services. The Company has also adopted policies and procedures for pre-approving all non-audit work performed by Rosenberg Rich Baker Berman. The Chairman of the Board is authorized to pre-approve any audit or non-audit service on behalf of the Board, provided such decisions are presented to the full Board at its next regularly scheduled meeting.





The aggregate fees billed by Rosenberg Rich Baker Berman in fiscal 2010 and 2009 for these various services were:





Type of Fees

2010


2009Audit Fees

$
27,125


$
90,210Audit-Related Fees


2,000



-Tax Fees


14,010



11,700Total

$
43,135


$
101,910





In the above table, in accordance with the SEC’s rules, “audit fees” are fees that we paid to Rosenberg Rich Baker Berman for the audit of our annual financial statements included in the Form 10-K and review of financial statements included in the Form 10-Qs. “Audit-related fees” are merger and acquisition due diligence services. “Tax fees” are fees for tax compliance.





PART IV





ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES




(1) Financial Statements.





The financial statements required by item 15 are submitted in a separate section of this report, beginning on Page F-1, incorporated herein and made a part hereof.





(2) Financial Statement Schedules.




Schedules have been omitted because of the absence of conditions under which they are required or because the required information is included in the financial statements or notes thereto.








16


(3) Exhibits
 
 (a)   Exhibits


Exhibit Number

Description2.1 (1)

Share Exchange Agreement by and Among Halcyon Jets Holdings, Inc. and the Shareholders of Alliance Network Communications, Inc., dated as of July 1, 20092.2 (1)

Certificate of Merger, dated August 17, 2007, between Halcyon, Inc. and Halcyon Jets Acquisition Corp.3.1(2)

Amendment to Certificate of Incorporation, dated August 21, 20093.2(3)

By-laws10.4 (4)

Form of Directors and Officers Indemnification Agreement10.5 (4)

2007 Equity Incentive Plan10.6 (4)

Form of 2007 Incentive Stock Option Agreement10.7 (4)

Form of 2007 Non-Qualified Stock Option Agreement21

Alliance Network Communications Holdings, Inc. subsidiaries31.1

Certification by Chief Executive Officer pursuant to Sarbanes-Oxley Section 302.31.2

Certification by Chief Financial Officer pursuant to Sarbanes-Oxley Section 302.32.1

Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350











(1) Incorporated by reference from the Company’s Definitive Information Statement filed July 30, 2009


(2) Incorporated by reference from the Company's Current Report on Form 8-K filed August 27, 2009


(3)   Incorporated herein by reference from the Company’s Current Report on Form 8-K filed August 15, 2007


(4)Incorporated by reference from the Company's Current Report on Form 8-K filed August 23, 2007.





(b) Reports on Form 8-K





None.





17





SIGNATURES





In accordance with Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




ALLIANCE NETWORK COMMUNICATIONS HOLDINGS, INC.Dated: May 14, 2010
By:
/s/  Boris RubizhevskyBoris RubizhevskyChief Executive Officer and Director


Dated: May 14, 2010
By:
/s/ Jan E. ChasonJan E. ChasonChief Financial Officer and Director





18
















ALLIANCE NETWORK COMMUNICATIONS HOLDINGS, INC.


(A Development Stage Company)





Report of Independent Registered Public Accounting Firm
F-2Consolidated Balance Sheet as of January 31, 2010
F-3Consolidated Statement of Operations for the period from inception (April 20, 2009) through January 31, 2010
F-4Consolidated Statements of Changes in Stockholders' Deficiency for the period from inception (April 20, 2009) through January 31, 2010
F-5Consolidated Statements of Cash Flows for the period from inception (April 20, 2009) through January 31, 2010
F-6Consolidated Notes to Financial Statements
F-7








F - 1





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the Board of Directors and
 Stockholders of Alliance Network Communications Holdings, Inc.
 
 
 We have audited the accompanying consolidated balance sheets of Alliance Network Communications Holdings, Inc. (a development stage company) as of January 31, 2010, and the related consolidated statements of operations, stockholders’ deficiency and cash flows for the period April 20, 2009 (Date of Inception) to January 31, 2010. Alliance Network Communications Holdings, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
 We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
 
 In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alliance Network Communications Holdings, Inc. as of January 31, 2010, and the results of its operations and its cash flows for the period ended April 20, 2009 (Date of Inception) to January 31, 2010 in conformity with accounting principles generally accepted in the United States of America.
 
 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully discussed in Note 2 to the financial statements, the Company is a development stage company and its activities, to date, have been organizational in nature.  The Company may not be able to execute its current business plan and fund business operations long enough to achieve profitability without obtaining financing.  These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  
 /s/ Rosenberg Rich Baker Berman & Company
 
 Somerset, New Jersey
 May 14, 2010








F - 2





ALLIANCE NETWORK COMMUNICATIONS HOLDINGS, INC AND SUDSIDIARY


(A DEVELOPMENT STAGE COMPANY)


CONSOLIDATED BALANCE SHEET


January 31, 2010





ASSETSCURRENT ASSETSCash

$
3,056Other current assets


3,400Deferred finance cost


4,344Total current assets


10,800Note and interest receivable


100,917TOTAL ASSETS

$
111,717LIABILITIES AND STOCKHOLDERS' DEFICIENCYCURRENT LIABILITIESAccounts payable – related party

$
3,120Accrued interest payable – related party


1,833Accrued expenses


21,019Notes payable, net of discount  of  $4,800 – related party


12,168Total current liabilities


38,140Convertible Debentures – related party


83,200STOCKHOLDERS' EQUITYPreferred stock – Series A – $.001 par value, 21,000 shares authorized, issued and outstanding


21Common stock - $.001 par value, authorized 300,000,000 shares 19,977,778

shares issued and outstanding


19,978Additional paid in capital


94,368Deficit accumulated during the development stage


(123,990
)Total stockholders' deficiency


(9,623
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY

$
111,717





See notes to the consolidated financial statements.








F - 3








ALLIANCE NETWORK COMMUNICATIONS HOLDINGS, INC AND SUBSIDIARY


(A DEVELOPMENT STAGE COMPANY)


CONSOLIDATED STATEMENT OF OPERATIONS


INCEPTION (APRIL 20, 2009) TO JANUARY 31, 2010





ExpensesGeneral and administrative

$
94,063Finance costs


29,010Interest – net


917Total expenses


123,990Net loss

$
(123,990
)Net loss per common share – (basic and diluted)

$
(.01
)Average number of shares outstanding – (basic and diluted)


19,977,778





See notes to the consolidated financial statements.








F - 4

















ALLIANCE NETWORKS COMMUNICATIONS HOLDINGS, INC.


(A DEVELOPMENT STAGE COMPANY)


CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY


From Inception (April 20, 2009) to January 31, 2010











Deficit Accumulated


TotalPreferred Stock


Common Stock





During Development


Stockholders’Shares


Amount


Shares


Amount


Paid In Capital


Stage


DeficiencyCommon stock issued to founders for cash


-


$
-



1,000,000


$
100



-


$
-


$
100Effect of recapitalization – reverseacquisition


21,000



21



18,977,778



19,878



80,101



-



100,000Issuance of warrants inconnectionwith:Notespayable –related party



-






-



-



7,517







7,517Financing cost – related party


-



-



-



-



6,750







6,750Net (loss)


-



-



-



-



-



(123,990
)


(123,990
)Balance, January 31, 2010


21,000


$
21



19,977,778


$
19,978


$
94,368


$
(123,990
)

$
(9,623)





See notes to the consolidated financial statements








F - 5

















ALLIANCE NETWORK COMMUNICATIONS HOLDINGS, INC AND SUBSIDIARY


(A DEVELOPMENT STAGE COMPANY)


CONSOLIDATED STATEMENT OF CASH FLOWS


Inception (April 20, 2009) to January 31, 2010





CASH FLOWS USED IN OPERATING ACTIVITIESNet loss

$
(123,990
)Adjustments to reconcile net loss to net cash provided by operating activities:Amortization and interest accruals


26,806Changes in operating assets and liabilities:Other current assets


(3,400
)Accounts payable


24,140NET CASH USED IN OPERATING ACTIVITIES


(76,444
)CASH FLOWS FROM FINANCING ACTIVITIESIssuance of common stock


100Notes payable – related party


17,000Convertible Debentures – related party


62,400NET CASH USED IN FINANCING ACTIVITIES


79,500NET CHANGE IN CASH


3,056CASH - BEGINNING OF THE PERIOD


-CASH - END OF THE PERIOD

$
3,056Supplemental DisclosuresNon-cash investing and financing activities

Warrants issued in connection with financing fees – related party

$
6,750







See notes to the consolidated financial statements.








F - 6











ALLIANCE NETWORK COMMUNICATIONS HOLDINGS, INC AND SUBSIDIARY


Notes to the Consolidated Financial Statements





Note 1.  Description of Business





Alliance Network Communications Holdings, Inc. (formerly Halcyon Jets Holdings, Inc.) operating through its wholly-owned subsidiary Alliance Networks Communications, Inc. (“ANC”) (collectively the “Company”) is a development stage company.  The Company plans to research, design, manufacture, market and distribute a number of generic and custom application electrical surge protection devices.





On August 21, 2009, Alliance Network Communications Holdings, Inc acquired ANC from its shareholders in exchange for 18,266,667 shares of the Company’s common stock. Simultaneously, the Company sold all of the outstanding shares of our Halcyon Jets, Inc. subsidiary to Halcyon Jets Acquisition Group, LLC (“HJAG”), the principal of which is our former Chief Executive Officer.  As consideration for the acquisition HJAG:





1.
Provided a promissory note for $100,000, payable 10-years from closing, bearing interest at the rate of 2% per annum;


2.
Assumed all liabilities of the Company and its subsidiary, including the pending litigation, in which the Company was a named party; and


3.
Released the Company of its obligation under his consulting agreement to pay the former CEO $600,000 as a result of the transactions referred to in this Information Statement.





The promissory note is unsecured and there are no guaranties issued with respect to the note.  HJAG and Mr. Cohen, personally, have agreed to indemnify the Company with respect to any claims against the former Halcyon Jets subsidiary, including pending litigation.





As a result of the above transactions, the former stockholders of ANC were the controlling stockholders of the Company and the Company discontinued its former business. Accordingly, the transactions were treated for accounting purposes as a reverse acquisition, and the transactions have been accounted for as a recapitalization of the Company, rather than a business combination. Therefore, the historical financial statements of ANC are the historical financial statements of the Company and historical stockholders' equity of ANC has been restated to reflect the recapitalization. Pro forma information has not been presented since the transaction is not a business combination.





Upon the effectiveness and as a result of these transactions, the Company changed its name to Alliance Network Communications Holdings, Inc and effectuated a reverse stock split in the ratio 1-for-15. All share amounts have been retroactively restated for the split.  On September 2, 2009, the Company’s trading symbol was changed to ALHN.





Note 2.  Significant Accounting Policies





Basis of Preparation





The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which assume the continuation of the Company as a going concern.  This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. Since its formation in April 2009, ANC, the Company’s principal subsidiary, has been a development stage company and has not begun its efforts to produce and market electrical surge protection devises and its activities, to date, have been organizational in nature, and have been directed towards the raising of capital and to discussions of potential business combinations which was completed in August 2009.





The Company may not be able to execute its current business plan and fund business operations long enough to archive profitability without obtaining financing. The Company's ultimate success depends upon its ability to raise capital. There can be no assurance that funds will be available to the Company when needed from any source or; if available, on terms that are favorable to the Company.  These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.




F - 7





Consolidation





The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.




Use of Estimates





The preparation of financial statements in conformity with generally accepted accounting principles requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Changes in the economic environment, financial markets, as well as in the healthcare industry and any other parameters used in determining these estimates could cause actual results to differ.





Concentration of Credit Risk





The Company may place its cash with various financial institutions and, at times, cash held in depository accounts at such institutions may exceed the Federal Deposit Insurance Corporation insured limit.





Revenue Recognition




Upon initiation of active operations, the Company will recognize revenues when persuasive evidence of an arrangement exists, product has been delivered or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Revenue will be recognized net of estimated sales returns and allowances.




Income Taxes




The Company accounts for income taxes using a method that requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax bases and financial reporting bases of the Company’s assets and liabilities (commonly known as the asset and liability method). In assessing the ability to realize deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.




The Company evaluates its tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are ‘‘more-likely-than-not’’ of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as an expense in the applicable year.   The Company does not have a liability for any unrecognized tax benefits. Management’s evaluation of uncertain tax positions may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof





As of January 31, 2010, the Company has approximately $300,000 of net operating loss carry-forwards available to affect future taxable income and has established a valuation allowance equal to the tax benefit of the net operating loss carry- is forwards and temporary differences as realization of the asset is not assured. Utilization of net operating loss carry-forwards arising from our predecessor company are subject to a substantial annual limitation due to the ‘‘change in ownership’’ provisions of the Internal Revenue Code. The annual limitation may result in the expiration of net operating loss carry-forwards before utilization.




F - 8





Loss per share




Loss per common share is based upon the weighted average number of common shares outstanding during the periods.  Diluted loss per common share is the same as basic loss per share, as the effect of potentially dilutive securities (options – 21,667;warrants – 457,111; and convertible debentures - 985,905) are anti-dilutive.




Outstanding options were issued by the Company’s predecessor and are exercisable through 2018 with an exercise price of $5.70. Warrants for 322,111 shares of common stock were issued by our predecessor with weighted average exercise price of $11.21 and are exercisable through 2014. The balance of the outstanding warrants were issued in connection with the notes payable to a related party (see Note 3 ).


New Accounting Pronouncements





In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to FASB ASC Topic 605, Revenue Recognition ) (“ASU 2009-13”). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-13 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company does not expect adoption of ASU 2009-13 to have a material impact on the Company’s results of operations or financial condition.





In April 2010, the FASB issue ASU 2010-17, Revenue Recognition – Milestone Method (“ASU 2010-17”).  ASU 2010-17 provides guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate.  A vendor can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive.  The following criteria must be met for a milestone to be considered substantive.  The consideration earned by achieving the milestone should:




1.
Be commensurate with either the level of effort required to achieve the milestone or the enhancement of the value of the item delivered as a result of a specific outcome resulting from the vendor’s performance to achieve the milestone.2.
Related solely to past performance.3.
Be reasonable relative to all deliverables and payment terms in the arrangement.  No bifurcation of an individual milestone is allowed and there can be more than one milestone in an arrangement





Accordingly, an arrangement may contain both substantive and nonsubstantive milestones.   ASU 2010-17 is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010





Management does not believe there would have been a material effect on the accompanying financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period.





Note 3.  Related Party Transactions





Notes Payable





In September and October 2009, the Company borrowed an aggregate of $17,000 from LeadDog Capital LP through issuances of notes payable for periods of 1 year with interest payable at 16% per year.  In connection with the issuance of these notes the Company granted the lender warrants to purchase 90,000 shares of the Company’s common stock at $.001.  In addition, the Company issued warrants to purchase 45,000 shares of the Company’s common stock at $.001 to LeadDog Capital Markets LLC (the general partner) for due diligence services. LeadDog Capital LP and its affiliates are shareholders and warrant holders however the group is restricted from becoming a beneficially owner (as such term is defined under Section 13(d) and Rule 13d-3 of the Securities Exchange Act of 1934, as amended, (the 1934 Act)), of the Company’s common stock which would exceed 4.9% of the number of shares of common stock outstanding.




The proceeds from issuance of the promissory notes were allocated to the notes and the warrants based upon their relative fair values. This allocation resulted in allocating $9,500 to the notes and $7,500 to the warrants. The warrants issued for services were recorded as prepaid financing fees of $6,750 and will be amortized to interest expense over the related loan periods.  During the year ended January 31, 2010, the Company recorded $3,500 as additional interest expense related to the amortization of the debt discount and prepaid financing fees.  The fair value of the warrants was determined using the Black-Scholes option pricing model using the following weighted-average assumptions: volatility of 452 % and 457 %; risk-free interest rate of .87% and .94%; expected life of 3 years and estimated dividend yield of 0%.




F - 9




Convertible Debentures




In November 2009, the Company entered into an arrangement with LeadDog Capital LP in which the Company may borrow an aggregate of $500,000 with interest payable at 14% per annum three years from the date of any borrowings.  The indebtedness including interest is convertible into common stock at the lesser of $.10 or 75% of the lowest closing bid price during the 15 day period prior to the conversion date but in no event can the conversion price be less than $0.005 The Company accounted for the borrowings under this arrangement  in accordance with ASC 480 - “Distinguishing Liabilities from Equity”, as the conversion feature embedded in the debentures could result in the principal being converted to a variable number of the Company's common shares.   The fair value of the conversion feature is calculated at the time of issuance and the Company records a conversion liability for the calculated value. The conversion liability is revalued at the end of each reporting period which results in a gain or loss for the change in fair value.  During the year ended January 31, 2010, the Company borrowed $62,400 under this arrangement. The Company determined the fair value of the debentures at the dates of issuance to be $122,909 which represented the face value of the debentures plus the fair value of the conversion feature of $60,509. The conversion liability was revalued at January 31, 2010 resulting in a reduction in the fair value of $39,709 which was recognized as a reduction in financing cost.





Office Space





The Company rents its shared office space from LeadDog Capital Partners, Inc., an affiliate of LeadDog Capital LP for $2000 a month on a month to month basis.





Note 4. Preferred Stock





The Board of Directors is authorized to issue up to 10 million shares of preferred stock in one or more series. Each series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by the board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.





Each share of the Preferred Stock -Series A is entitled to 67 votes with respect to each matter presented to the stockholders of the Company for approval. The Series A Preferred Stock has a liquidation value of $1.00 per share ($21,000 in the aggregate) and is not entitled to receive any dividends. The Series A Preferred shares are not convertible into common stock and are mandatorily redeemable at par per share on the earlier of March 31, 2011 or the date on which any shares of Series A are owned by any person other than the one to whom they were originally issued.





Note 5.  Litigation





In September 2008, Jet One Group, Inc. ("Jet One") commenced an action against Halcyon Jets Holdings, Inc., the Company’s predecessor and several of its former officers, directors and employees in the United States District Court, alleging, among other matters, that the Company’s predecessor fraudulently induced Jet One to enter into a Letter of Intent to acquire Jet One's business. The Complaint alleged that the Company violated the federal Racketeering Influenced Corrupt Organizations Act, the federal Computer Fraud and Abuse Act, the New York consumer fraud and Business law statutes and committed various common law torts, and sought compensatory damages of $15 million and treble or punitive damages of $45 million. On August 14, 2009, the Court dismissed the complaint without prejudice to Jet One's right to re-file the lawsuit.





On or about October 28, 2009, Jet One Group filed a new action against the Company’s predecessor, its former subsidiary and the other defendants in the matter discussed above, in the Supreme Court of New York (“Nassau County Action”), which repeats the factual allegations of the dismissed federal court complaint and asserts claims for conversion, fraud, tortious interference with contract and violation of the state consumer fraud statute.  The new complaint seeks compensatory damages of $15 million, attorneys’ fees of $100,000 and punitive damages against each of the defendants in the amount of $45 million.




F - 10





Separately, the former subsidiary filed an action against Jet One and its principals in the Supreme Court of New York in which the former subsidiary alleges that the Complaint in Jet One’s Federal Court Action contains false and defamatory statements regarding the former subsidiary and that Jet One filed its suit for the sole purpose of circulating a press release publicizing the false and defamatory allegations.  Jet One moved to dismiss the suit for failure to state a claim upon which relief may be granted, but this motion was denied by the court and the denial was affirmed by the Appellate Division of the Supreme Court of New York in February 2010.  On March 19, 2010, the Company’s former subsidiary dismissed its complaint without prejudice.





On March 22, 2010, all the defendants in the Nassau County Action filed a Verified Answer, Counterclaims and Third-Party Complaint denying any liability to Jet One.  In addition, the Company and the former subsidiary re-asserted the defamation claims that had previously been asserted against Jet One and its principals in the discontinued case described above; and the Company asserted a breach of contract claim against Jet One and its principals relating to a $150,000 promissory note executed in favor of its predecessor by Jet One and personally guaranteed by Jet One’s principals.





In October and December 2008, Blue Star Jets, LLC  (“Blue Star”) filed a complaint against the Company and certain former employees, including our former President, who were former employees of Blue Star (“former Blue Star employee”) in the Supreme Court of New York, New York County alleging, among other matters, that the Blue Star’s former employees stole confidential information belonging to Blue Star prior to joining the Company and that one or more of such former employees violated post-employment restrictive covenants by joining the Company.  The complaint seeks $7 million in damages.  This action is a revival of an earlier action that was voluntarily discontinued by Blue Star in 2007.





The Company and the other defendants, in February 2009, filed a motion to dismiss the counts of the complaint for violation of the federal Computer Fraud and Abuse Act and for civil conspiracy for failure to state a claim upon which relief may be granted.





In February 2009, Blue Star served a second amendment to its complaint which withdrew plaintiff’s claims under the federal Computer Fraud and Abuse Act and added Alfred Palagonia and Apollo Jets as additional defendants.  The Company has filed a cross-motion to strike the second amendment on the ground that it was improperly filed or in the alternative to dismiss the certain portions related to the civil conspiracy.  On May 20, 2009, the Court dismissed plaintiff’s civil conspiracy claims and ordered plaintiff to file a third amended complaint In October 2009, the parties entered into a “global stipulation” agreeing to stay all proceedings for 90 days and as of May 14, 2010 there has been no additional activity in this matter.





On or about October 23, 2009, Mitchell Blatt, a former Chairman of the Board and Chief Executive Officer of Company’s predecessor, commenced an action against the Company’s predecessor, its former subsidiary and the Company relating to alleged breach of an agreement between and among the Company’s predecessor, its former subsidiary and Mr. Blatt dated as of August 12, 2008.  In his complaint, Mr. Blatt has alleged causes of action for breach of contract, fraud in the inducement, fraud in the execution, unjust enrichment and conversion.  The complaint seeks compensatory damages of $232,500, punitive damages of $5 million and attorneys’ fees and costs.  In February 2010, the Company filed a motion to dismiss the action and intends to vigorously defend itself in the event that the motion to dismiss is denied.





Except as set forth above, there are no other pending or threatened legal proceedings against the Company.  Based on the advice of counsel, it is management's opinion that we have made adequate provision for potential liabilities, if any, arising from potential claims arising from litigation, governmental investigations, legal and administrative cases and proceedings. In connection with the sale of the Company’s Halcyon Jet subsidiary to the Company’s former Chief Executive Officer the Company was indemnified by the buyer against any liability which may arise from the above litigation.




F - 11





NOTE 6:  Fair Value Measurements




Accounting principles generally accepted in the United States define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Additionally, the inputs used to measure fair value are prioritized based on a three-level hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:




·
Level 1 — Quoted prices in active markets for identical assets or liabilities.


·
Level 2 — Observable inputs other than quoted prices included in Level 1. We value assets and liabilities included in this level using dealer and broker quotations, bid prices, quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable market data.


·
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.





Recurring Fair Value Measurements





In accordance with accounting principles generally accepted in the United States, certain assets and liabilities are required to be recorded at fair value on a recurring basis. For the Company, the only assets and liabilities that are adjusted to fair value on a recurring basis are derivative instruments which were fair valued using Level 2 inputs (see Note 3).





Note 7.  Subsequent Events





The Company has no material events other than additional borrowings of $29,000 through the issuances of convertible debentures to the related party discussed in Note 3.