**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


______________




**FORM
      10-QSB**


______________




**x**
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




**For
      the quarterly period ended March 31, 2007**




o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934




**For
      the transition period from _____________**




**Commission
      File No. 000-50868**


______________




**ALLIANCE
      RECOVERY CORPORATION**


**(Exact
      name of small business issuer as specified in its charter)**


______________




**Delaware**
            **30-0077338**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer Identification No.)






**#390-1285
                N. Telegraph Road Monroe, Michigan**
            **48162-3368**(Address
                of principal executive offices)
            (Zip
                Code)







**(519)
                671-0417**(Issuer’s
                telephone number)




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




Check
      whether the registrant has filed all documents and reports required to be filed
      by Sections 12, 13, or 15(d) of the Exchange Act subsequent to the distribution
      of securities under a plan confirmed by a court.


Yes o No x




Indicate
      by check mark whether the registrant is a shell company as defined in Rule
      12b-2
      of the Exchange Act.


Yes x No o




State
          the
          number of shares outstanding of each of the issuer’s classes of common equity,
          as of May 10, 2007: 19,233,825 shares of common stock.


Transitional
      Small Business Disclosure Format (check one): Yes o No x






1




**Item
        1.**  **Financial
        Information**
  BASIS
        OF
        PRESENTATION
  The
        accompanying reviewed financial statements are presented in accordance with
        generally accepted accounting principles for interim financial information
        and
        the instructions to Form 10-QSB and item 310 under subpart A of Regulation
        S-B.
        Accordingly, they do not include all of the information and footnotes required
        by generally accepted accounting principles for complete financial statements.
        In the opinion of management, all adjustments (consisting only of normal
        occurring accruals) considered necessary in order to make the financial
        statements not misleading, have been included. Operating results for the
        three
        months ended March 31, 2007 are not necessarily indicative of results that
        may
        be expected for the year ending December 31, 2007. The financial statements
        are
        presented on the accrual basis.








2






**ALLIANCE
        RECOVERY CORPORATION**
 **(A
        DEVELOPMENT STAGE COMPANY)**
   **CONTENTS**
 PAGE
              F-1
              CONDENSED
                  BALANCE SHEET AS OF MARCH 31, 2007 (UNAUDITED)PAGE
              F-2
              CONDENSED
                  STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2007
                  AND 2006 AND FOR THE PERIOD FROM NOVEMBER 6, 2001 (INCEPTION)
                  TO MARCH 31, 2007 (UNAUDITED)PAGES
              F-3
              CONDENSED
                  STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY FOR PERIOD FROM
                  NOVEMBER
                  6, 2001 (INCEPTION) TO MARCH 31, 2007 (UNAUDITED)PAGE
              F-4
              CONDENSED
                  STATEMENTS OF CASH FLOWS FOR THE THEEE MONTHS ENDED MARCH 31,
                  2007 AND 2006 AND FOR THE PERIOD FROM NOVEMBER 6, 2001 (INCEPTION)
                  TO MARCH 31, 2007 (UNAUDITED)PAGES
              F-5
                  - F-16
              NOTES
                  TO CONDENSED FINANCIAL STATEMENTS
                  (UNAUDITED)




**ALLIANCE
        RECOVERY CORPORATION**
 
 **(A
        DEVELOPMENT STAGE COMPANY)**
 
 **CONDENSED
        BALANCE SHEET**
 **(UNAUDITED)**


**ASSETS****CURRENT
                  ASSETS**Cash
              
              $
              12,002Prepaid
                  Expenses
              
              
              500**TOTAL
                  CURRENT ASSETS**
              
              
              12,502Property
                  and Equipment, net
              
              
              4,187**TOTAL
                  ASSETS**
              
              $
              16,689**LIABILITIES
                  AND STOCKHOLDERS’ DEFICIENCY****CURRENT
                  LIABILITIES**Accounts
                  payable and accrued expenses
              
              $
              59,528Due
                  to related party
              
              
              390,697Notes
                  payable - net of discount of $789
              
              
              24,211Notes
                  payable - related party
              
              
              200,000**TOTAL
                  CURRENT LIABILITIES**
              
              
              674,436**COMMITMENTS
                  AND CONTINGENCIES**
              
              
              -Common
                  Stock Subject to Rescission Offer, $.01 par value,1,986,646
                  shares issued and outstanding
              
              
              1,084,823**STOCKHOLDERS’
                  DEFICIENCY**Common
                  stock, $0.01 par value, 100,000,000 shares authorized,
                17,247,179
                  shares issued and outstanding
              
              
              172,471Additional
                  paid in capital
              
              
              743,348Subscriptions
                  receivable
              
              
              (6,600
              )Deferred
                  compensation
              
              
              (142,027
              )Accumulated
                  deficit during development stage
              
              
              (2,509,762
              )Total
                  Stockholders’ Deficiency
              
              
              (1,742,570
              )**TOTAL
                  LIABILITIES AND STOCKHOLDERS’ DEFICIENCY**
              
              $
              16,689




See
        accompanying notes to condensed financial statements.




F-1






**ALLIANCE
        RECOVERY CORPORATION**
 
 **(A
        DEVELOPMENT STAGE COMPANY)**
 
 **CONDENSED
        STATEMENTS OF OPERATIONS**
 **(UNAUDITED)**


For
                  the Three Months Ended March 31,
              
              For
                  The Period From November 6, 2001 (Inception) to December 31,
                  20062007
              
              2006**OPERATING
                  EXPENSES**Consulting
                  fees
              
              $
              14,028
              
              $
              -
              
              $
              540,896Consulting
                  fees - related party
              
              
              62,500
              
              
              62,500
              
              
              1,333,333Professional
                  fees
              
              
              21,137
              
              
              14,542
              
              
              312,110General
                  and administrative
              
              
              8,432
              
              
              22,136
              
              
              302,412**TOTAL
                  OPERATING EXPENSES**
              
              
              106,097
              
              
              99,178
              
              
              2,488,751**OTHER
                  EXPENSES**Interest
                  Expense
              
              
              4,151
              
              
              1,931
              
              
              21,011**NET
                  LOSS BEFORE PROVISION FOR****INCOME
                  TAXES**
              
              
              (110,248
              )
              
              (101,109
              )
              
              (2,509,762
              )**PROVISION
                  FOR INCOME TAXES**
              
              
              -
              
              
              -
              
              
              -**NET
                  LOSS**
              
              $
              (110,248
              )
              $
              (101,109
              )
              $
              (2,509,762
              ).Net
                  loss per share - basic and diluted
              
              
              (0.01
              )
              
              (0.01
              )
              $
              (0.15
              )Weighted
                  average number of shares outstanding during the period - basic
                  and
                  diluted
              
              
              16,914,512
              
              
              16,819,510
              
              
              16,560,798








See
        accompanying notes to condensed financial statements.










F-2


**ALLIANCE
        RECOVERY CORPORATION**
 
 **(A
        DEVELOPMENT STAGE COMPANY)**
 
 **CONDENSED
        STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY**
 
 **FOR
        THE PERIOD FROM NOVEMBER 6, 2001 (INCEPTION)**
 
 **TO
        MARCH 31, 2007 (UNAUDITED)**


Common
                  Stock
              
              Additional
                  Paid-In
              
              Subscription
              
              Deferred
                  Stock
              
              Accumulated
                  Deficit During DevelopmentShares
              
              Amount
              
              Capital
              
              Receivable
              
              Compensation
              
              Stage
              
              TotalCommon
                  stock issued to founders for services ($0.01 per share)
              
              
              8,410,000
              
              $
              84,100
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              84,100Common
                  stock issued for cash ($0.0137 per share)
              
              
              7,687,800
              
              
              76,878
              
              
              28,186
              
              
              (105,064
              )
              
              -
              
              
              -
              
              
              -Net
                  loss for the period from November 6, 2001 (inception) to December
                  31,
                  2001
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (104,933
              )
              
              (104,933
              )**Balance,
                  December 31, 2001 (Restated)**
              
              
              16,097,800
              
              
              160,978
              
              
              28,186
              
              
              (105,064
              )
              
              -
              
              
              (104,933
              )
              
              (20,833
              )Common
                  stock with warrants issued for services ($0.50 per
                  share)
              
              
              112,710
              
              
              1,127
              
              
              55,228
              
              
              -
              
              
              (27,083
              )
              
              -
              
              
              29,272Common
                  stock issued for services ($0.50 per share)
              
              
              100,000
              
              
              1,000
              
              
              49,000
              
              
              -
              
              
              (16,667
              )
              
              -
              
              
              33,333Collection
                  of subscriptions receivable
              
              
              -
              
              
              -
              
              
              -
              
              
              56,290
              
              
              -
              
              
              -
              
              
              56,290Net
                  loss, 2002
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (482,211
              )
              
              (482,211
              )**Balance,
                  December 31, 2002 (Restated)**
              
              
              16,310,510
              
              
              163,105
              
              
              132,414
              
              
              (48,774
              )
              
              (43,750
              )
              
              (587,144
              )
              
              (384,149
              )Amortization
                  of deferred compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              43,750
              
              
              -
              
              
              43,750Net
                  loss, 2003
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (417,622
              )
              
              (417,622
              )**BALANCE,
                  DECEMBER 31, 2003 (Restated)**
              
              
              16,310,510
              
              
              163,105
              
              
              132,414
              
              
              (48,774
              )
              
              -
              
              
              (1,004,766
              )
              
              (758,021
              )Common
                  stock with options issued for services ($0.50 per share)
              
              
              200,000
              
              
              2,000
              
              
              98,000
              
              
              -
              
              
              (4,158
              )
              
              -
              
              
              95,842Issuance
                  of warrants for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss, 2004
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (489,255
              )
              
              (489,255
              )**BALANCE,
                  DECEMBER 31, 2004 (Restated)**
              
              
              16,510,510
              
              
              165,105
              
              
              230,414
              
              
              (48,774
              )
              
              (4,158
              )
              
              (1,494,021
              )
              
              (1,151,434
              )Common
                  stock with options issued for services ($0.50 per share)
              
              
              300,000
              
              
              3,000
              
              
              147,000
              
              
              (300
              )
              
              (149,700
              )
              
              -
              
              
              -Amortization
                  of deferred compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              147,621
              
              
              -
              
              
              147,621Collection
                  of subscription receivable
              
              
              -
              
              
              -
              
              
              -
              
              
              42,774
              
              
              -
              
              
              -
              
              
              42,774Net
                  loss, 2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (545,477
              )
              
              (545,477
              )**BALANCE,
                  December 31, 2005**
              
              
              16,810,510
              
              $
              168,105
              
              $
              377,414
              
              $
              (6,300
              )
              $
              (6,237
              )
              $
              (2,039,498
              )
              
              (1,506,516
              )Amortization
                  of deferred compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              6,237
              
              
              -
              
              
              6,237Conversion
                  of notes payble to common stock
              
              
              136,669
              
              
              1,367
              
              
              215,933
              
              
              -
              
              
              -
              
              
              -
              
              
              217,300Net
                  Loss, 2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (360,016
              )
              
              (360,016
              )**BALANCE,
                  December 31, 2006**
              
              
              16,947,179
              
              $
              169,472
              
              $
              593,347
              
              $
              (6,300
              )
              $
              -
              
              $
              (2,399,514
              )
              $
              (1,642,995
              )Common
                  stock issued for services ($0.51 per share)
              
              
              300,000
              
              
              3,000
              
              
              150,000
              
              
              (300
              )
              
              (152,700
              )
              
              -
              
              
              -Amortization
                  of deferred compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              10,673
              
              
              -
              
              
              10,673Net
                  Loss, March 31, 2007
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (110,248
              )
              
              (110,248
              )**BALANCE,
                  March 31, 2007**
              
              
              17,247,179
              
              $
              172,472
              
              $
              743,347
              
              $
              (6,600
              )
              $
              (142,027
              )
              $
              (2,509,762
              )
              $
              (1,742,570
              )




See
      accompanying notes to condensed financial statements.


F-3




**ALLIANCE
        RECOVERY CORPORATION**
 
 **(A
        DEVELOPMENT STAGE COMPANY)**
 
 **CONDENSED
        STATEMENTS OF CASH FLOWS**
 **(UNAUDITED)**


For
                  the Three Months Ended March 31,
              
              For
                  The Period From November 6, 2001 (Inception) To2007
              
              2006
              
              March
                  31, 2007**CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (110,248
              )
              $
              (101,109
              )
              $
              (2,509,762
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Stock
                  issued for services
              
              
              10,673
              
              
              6,237
              
              
              450,828Depreciation
                  expense
              
              
              558
              
              
              558
              
              
              6,979Amortization
              
              
              370
              
              
              1,932
              
              
              13,011Changes
                  in operating assets and liabilities:Prepaid
                  expenses
              
              
              (500
              )
              
              -
              
              
              (500
              )Due
                  to related party
              
              
              28,846
              
              
              -
              
              
              390,697Accounts
                  payable and accrued expenses
              
              
              266
              
              
              10,591
              
              
              70,328Net
                  Cash Used In Operating Activities
              
              
              (70,035
              )
              
              (81,791
              )
              
              (1,578,419
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Purchase
                  of property and equipment
              
              
              -
              
              
              
              
              
              (11,166
              )Net
                  Cash Used In Investing Activities
              
              
              -
              
              
              -
              
              
              (11,166
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                  from issuance of debt
              
              
              
              
              
              -
              
              
              123,700Proceeds
                  from issuance of debt - related party
              
              
              50,000
              
              
              100,000
              
              
              294,000Proceeds
                  from issuance of common stock subject to rescission
              
              
              -
              
              
              -
              
              
              1,084,823Proceeds
                  from issuance of common stock
              
              
              -
              
              
              -
              
              
              99,064Net
                  Cash Provided By Financing Activities
              
              
              50,000
              
              
              100,000
              
              
              1,601,587NET
                  INCREASE (DECREASE) IN CASH
              
              
              (20,035
              )
              
              18,209
              
              
              12,002CASH
                  AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
              
              
              32,037
              
              
              18,736
              
              
              -CASH
                  AND CASH EQUIVALENTS AT END OF PERIOD
              
              $
              12,002
              
              $
              36,945
              
              $
              12,002Supplemental
                  disclosure of non cash investing & financing
                  activities:Cash
                  paid for income taxes
              
              $
              -
              
              $
              -
              
              $
              -Cash
                  paid for interest expense
              
              $
              -
              
              $
              -
              
              $
              -




See
      accompanying notes to condensed financial statements.






F-4






**ALLIANCE
        RECOVERY CORPORATION**
 
 **(A
        DEVELOPMENT STAGE COMPANY)**
 
 **NOTES
        TOCONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **AS
        OF MARCH 31, 2007 and 2006**




**NOTE
        1**            
**SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES AND
        ORGANIZATION**
 
 ***(A)
        Basis of Presentation***
  The
        accompanying unaudited condensed financial statements have been prepared
        in
        accordance with accounting principles generally accepted in The United States
        of
        America and the rules and regulations of the Securities and Exchange Commission
        for interim financial information. Accordingly, they do not include all the
        information necessary for a comprehensive presentation of financial position
        and
        results of operations.
  It
        is
        management's opinion, however that all material adjustments (consisting of
        normal recurring adjustments) have been made which are necessary for a fair
        financial statements presentation. The results for the interim period are
        not
        necessarily indicative of the results to be expected for the year.
  ***(B)  Organization***
  Alliance
        Recovery Corporation (a development stage company) (the “Company”) was
        incorporated under the laws of the State of Delaware on November 6, 2001.
        The
        Company is developing resource recovery technologies and strategies to convert
        industrial and other waste materials into fuel oil, gases and other valuable
        commodities.
 
 Activities
        during the development stage include developing the business plan and raising
        capital.
  ***(C)  Use
        of Estimates***
 
 In
        preparing financial statements in conformity with generally accepted accounting
        principles, management is required to make estimates and assumptions that
        affect
        the reported amounts of assets and liabilities and the disclosure of contingent
        assets and liabilities at the date of the financial statements and revenues
        and
        expenses during the reported period. Actual results could differ from those
        estimates.
 
 ***(D)  Cash
        and Cash Equivalents***
 
 For
        purposes of the cash flow statements, the Company considers all highly liquid
        investments with original maturities of three months or less at the time
        of
        purchase to be cash equivalents. The Company at times has cash in excess
        of FDIC
        insurance limits and places its temporary cash investments with high credit
        quality financial institutions. At March 31, 2007, the Company did not have
        any
        balances that exceeded FDIC insurance limits.






F-5




**ALLIANCE
        RECOVERY CORPORATION**
 
 **(A
        DEVELOPMENT STAGE COMPANY)**
 
 **NOTES
        TOCONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **AS
        OF MARCH 31, 2007 and 2006**




***(E)
        Property and Equipment***
 
 Property
        and equipment are stated at cost, less accumulated depreciation. Expenditures
        for maintenance and repairs are charged to expense as incurred. Depreciation
        is
        provided using the straight-line method over the estimated useful life of
        five
        years.
 
 ***(F)  Stock-Based
        Compensation***
  Effective
        January 1, 2006 The Company adopted SFAS No. 123R “Share-Based Payment”
(“SFAS 123R”), a revision to SFAS No. 123 “Accounting for Stock-Based
        Compensation” (“SFAS 123”). Prior to the adoption of SFAS 123R the Company
        accounted for stock options in accordance with APB Opinion No. 25
“Accounting for Stock Issued to Employees” (the intrinsic value method), and
        accordingly, recognized no compensation expense for stock option
        grants.
 
 Under
        the
        modified prospective approach, the provisions of SFAS 123R apply to new awards
        and to awards that were outstanding on January 1, 2006 that are subsequently
        modified, repurchased pr cancelled. Under the modified prospective approach,
        compensation cost recognized in the year ended December 31, 2006 includes
        compensation cost for all share-based payments granted prior to, but not
        yet
        vested as of January 1, 2006, based on the grant -date fair value estimated
        in
        accordance with the original provisions of SFAS 123, and the compensation
        costs
        for all share-based payments granted subsequent to January 31, 2006, based
        on
        the grant-date fair value estimated in accordance with the provisions of
        SFAS
        123R. Prior periods were not restated to reflect the impact of adopting the
        new
        standard.
 
 ***(G)  Loss
        Per Share***
  Basic
        and
        diluted net loss per common share is computed based upon the weighted average
        common shares outstanding as defined by Financial Accounting Standards No.
        128,
“Earnings Per Share.” As of March 31, 2007 and 2006, 1,954,896 and 2,881,502;
        respectively of common share equivalents were anti-dilutive and not used
        in the
        calculation of diluted net loss per share.
 
 ***(H)  Business
        Segments***
 
 The
        Company operates in one segment and therefore segment information is not
        presented.
 
 ***(I)  Long-Lived
        Assets***
  The
        Company accounts for long-lived assets under the Statements of Financial
        Accounting Standards Nos. 142 and 144 “Accounting for Goodwill and Other
        Intangible Assets” and “Accounting for Impairment or Disposal of Long-Lived
        Assets” (“SFAS No. 142 and 144”). In accordance with SFAS No. 142 and 144,
        long-lived assets, goodwill and certain identifiable intangible assets held
        and
        used by the Company are reviewed for impairment whenever events or changes
        in
        circumstances indicate that the carrying amount of an asset may not be
        recoverable. For purposes of evaluating the recoverability of long-lived
        assets,
        goodwill and intangible assets, the recoverability test is performed using
        undiscounted net cash flows related to the long-lived assets.






F-6






**ALLIANCE
        RECOVERY CORPORATION**
 
 **(A
        DEVELOPMENT STAGE COMPANY)**
 
 **NOTES
        TOCONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **AS
        OF MARCH 31, 2007 and 2006**






***(J)  Recent
        Accounting Pronouncements***
  In
        February 2006, the FASB issued SFAS No. 155, " *Accounting
        for Certain Hybrid Financial Instruments-an amendment of FASB Statements
        No. 133
        and 140* ",
        to
        simplify and make more consistent the accounting for certain financial
        instruments. SFAS No. 155 amends SFAS No. 133, " *Accounting
        for Derivative Instruments and Hedging Activities* ",
        to
        permit fair value re-measurement for any hybrid financial instrument with
        an
        embedded derivative that otherwise would require bifurcation, provided that
        the
        whole instrument is accounted for on a fair value basis. SFAS No. 155 amends
        SFAS No. 140, " *Accounting
        for the Impairment or Disposal of Long-Lived Assets* ",
        to
        allow a qualifying special-purpose entity to hold a derivative financial
        instrument that pertains to a beneficial interest other than another derivative
        financial instrument. SFAS No. 155 applies to all financial instruments acquired
        or issued after the beginning of an entity's first fiscal year that begins
        after
        September 15, 2006, with earlier application allowed. The adoption of this
        statement is not expected to have a material effect on the Company's future
        reported financial position or results of operations.
 
 In
        March
        2006, the FASB issued SFAS No. 156, " *Accounting
        for Servicing of Financial Assets, an amendment of FASB Statement No. 140,
        Accounting for Transfers and Servicing of Financial Assets and Extinguishments
        of Liabilities* ".
        This
        statement requires all separately recognized servicing assets and servicing
        liabilities be initially measured at fair value, if practicable, and permits
        for
        subsequent measurement using either fair value measurement with changes in
        fair
        value reflected in earnings or the amortization and impairment requirements
        of
        Statement No. 140. The subsequent measurement of separately recognized servicing
        assets and servicing liabilities at fair value eliminates the necessity for
        entities that manage the risks inherent in servicing assets and servicing
        liabilities with derivatives to qualify for hedge accounting treatment and
        eliminates the characterization of declines in fair value as impairments
        or
        direct write-downs. SFAS No. 156 is effective for an entity's first fiscal
        year
        beginning after September 15, 2006. The adoption of this statement is not
        expected to have a material effect on the Company's future reported financial
        position or results of operations.
 
 In
        June
        2006, the FASB issued FASB Interpretation No. 48, *“Accounting
        for Uncertainty in Income Taxes,*
 *an
        interpretation of FASB Statements No. 109”* .
        FIN 48
        clarifies the accounting for uncertainty in income taxes by prescribing a
        two-step method of first evaluating whether a tax position has met a more
        likely
        than not recognition threshold and second, measuring that tax position to
        determine the amount of benefit to be recognized in the financial statements.
        FIN 48 provides guidance on the presentation of such positions within a
        classified statement of financial position as well as on derecognition, interest
        and penalties, accounting in interim periods, disclosure, and transition.
        FIN 48
        is effective for fiscal years beginning after December 15, 2006. The adoption
        of
        this statement is not expected to have a material effect on the Company's
        future
        reported financial position or results of operations.






F-7




**ALLIANCE
          RECOVERY CORPORATION**
 
 **(A
          DEVELOPMENT STAGE COMPANY)**
 
 **NOTES
          TOCONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **AS
          OF MARCH 31, 2007 and 2006**




In
        September 2006, the FASB issued SFAS No. 157, “ *Fair
        Value Measurements* ”.
        The
        objective of SFAS 157 is to increase consistency and comparability in fair
        value
        measurements and to expand disclosures about fair value measurements. SFAS
        157
        defines fair value, establishes a framework for measuring fair value in
        generally accepted accounting principles, and expands disclosures about fair
        value measurements. SFAS 157 applies under other accounting pronouncements
        that
        require or permit fair value measurements and does not require any new fair
        value measurements. The provisions of SFAS No. 157 are effective for fair
        value
        measurements made in fiscal years beginning after November 15, 2007. The
        adoption of this statement is not expected to have a material effect on the
        Company's future reported financial position or results of
        operations.
 
 In
        September 2006, the FASB issued SFAS No. 158, “ *Employers’
        Accounting for Defined Benefit Pension and Other Postretirement Plans - an
        amendment of FASB Statements No. 87, 88, 106, and 132(R)* ”.
        This
        statement requires employers to recognize the over-funded or under-funded
        status
        of a defined benefit postretirement plan (other than a multiemployer plan)
        as an
        asset or liability in its statement of financial position and to recognize
        changes in that funded status in the year in which the changes occur through
        comprehensive income of a business entity or changes in unrestricted net
        assets
        of a not-for-profit organization. This statement also requires an employer
        to
        measure the funded status of a plan as of the date of its year-end statement
        of
        financial position, with limited exceptions. The provisions of SFAS No. 158
        are
        effective for employers with publicly traded equity securities as of the
        end of
        the fiscal year ending after December 15, 2006. The adoption of this statement
        is not expected to have a material effect on the Company's future reported
        financial position or results of operations.
 
 In
        September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108,
“ *Considering
        the Effects of Prior Year Misstatements when Quantifying Misstatements in
        Current Year Financial Statements* .”
SAB
        No. 108 addresses how the effects of prior year uncorrected misstatements
        should
        be considered when quantifying misstatements in current year financial
        statements. SAB No. 108 requires companies to quantify misstatements using
        a
        balance sheet and income statement approach and to evaluate whether either
        approach results in quantifying an error that is material in light of relevant
        quantitative and qualitative factors. SAB No. 108 is effective for period
        ending
        after November 15, 2006. The Company is currently evaluating the impact of
        adopting SAB No. 108 but does not expect that it will have a material effect
        on
        its financial statements.






F-8




**ALLIANCE
            RECOVERY CORPORATION**
 
 **(A
            DEVELOPMENT STAGE COMPANY)**
 
 **NOTES
            TOCONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **AS
            OF MARCH 31, 2007 and 2006**




In
          February 2007, the Financial Accounting Standards Board (FASB) issued SFAS
          No.
          159, “ *The
          Fair Value Option for Financial Assets and Financial Liabilities - Including
          an
          Amendment of FASB Statement No. 115* ”.
          This
          statement permits entities to choose to measure many financial instruments
          and
          certain other items at fair value. Most of the provisions of SFAS No. 159
          apply
          only to entities that elect the fair value option. However, the amendment
          to
          SFAS No. 115 “ *Accounting
          for Certain Investments in Debt and Equity Securities* ”
applies
          to all entities with available-for-sale and trading securities. SFAS No.
          159 is
          effective as of the beginning of an entity’s first fiscal year that begins after
          November 15, 2007. Early adoption is permitted as of the beginning of a
          fiscal
          year that begins on or before November 15, 2007, provided the entity also
          elects
          to apply the provision of SFAS No. 157, “ *Fair
          Value Measurements”.* The
          adoption of this statement is not expected to have a material effect on
          the
          Company's financial statements.




**NOTE
        2**  **PROPERTY
        AND EQUIPMENT**
  Property
          and equipment at March 31, 2007 were as follows:




Computer
              
              $
              11,166Less
                  accumulated depreciation
              
              
              (6,979
              )$
              4,187




During
        the three months ended March 31, 2007 and 2006 and for the period from November
        6, 2001 to March 31, 2007, the Company recorded depreciation expense of $558,
        $558 and $6,979 respectively.
  **NOTE 3**  ****NOTES
          PAYABLE****
  Note
                      Amount
                  
                  $
                  25,000Discount
                  
                  
                  (789
                  )Balance
                  
                  $
                  24,24,211
  December
          2006 an investor loaned the Company a total of $25,000. The note is unsecured,
          due one year from the date of issuance and is non interest bearing for
          the first
          nine months, then accrues interest at a rate of 6% per annum for the remaining
          three months.
  The
          Company imputed interest on the non interest bearing portion of the notes
          at a
          rate of 6% per annum. At March 31, 2007 the Company recorded a discount
          on the
          notes of $1,500 and amortized $711 of the discount as interest
          expense.




F-9




**ALLIANCE
        RECOVERY CORPORATION**
 
 **(A
        DEVELOPMENT STAGE COMPANY)**
 
 **NOTES
        TOCONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **AS
        OF MARCH 31, 2007 and 2006**


**NOTE
        4**  **NOTES
        PAYABLE - RELATED PARTY**
  In
        June,
        2006 a director of the Company loaned the Company $100,000. The loan bears
        a
        rate of interest of 8% per annum and is payable twelve months from the date
        of
        issuance. In addition the Company issued the director warrants to purchase
        100,000 shares of common stock with an exercise price of $1.50 per share
        for one
        year from the date of the note. The loan is unsecured and due June 28, 2007.
        In
        December, 2006 the Director loaned the Company an additional $50,000. The
        loan
        bears a rate of interest of 8% per annum and is payable eighteen months from
        the
        date of issuance. In January 2007 a director of the Company loaned the Company
        $50,000. The loan bears interest at a rate of eight percent per annum. The
        loan
        is unsecured and due July 9, 2007. As of March 31, 2007 the Company recorded
        and
        accrued interest expense of $8,000 related to these three notes.
 
 **NOTE
        5** **EQUITY
        SUBJECT TO RESCISSION**
  Common
        stock sold prior to July, 2005 pursuant to the Company's private placement
        offer
        may be in violation of the requirements of the Securities Act of 1933. In
        October 2005, the Company became aware that the private placement offers
        made
        prior to July 1, 2005 may have violated federal securities laws based on
        the
        inadequacy of the Company's disclosures made in its offering documents for
        the
        units concerning the lack of unauthorized shares. Based on potential violations
        that may have occurred under the Securities Act of 1933, the Company made
        a
        rescission offer to investors who acquired the Company's common stock prior
        to
        July 1, 2005. As such, the proceeds of $1,084,823 from the issuance of 1,986,646
        shares of common stock through July 1, 2005 have been classified outside
        of
        equity in the balance sheet and classified as common stock subject to
        rescission.
  During
        2002, the Company received cash and subscriptions receivable of $148,000
        for
        296,000 units consisting of one share of common stock and one common stock
        warrant exercisable for a period of one year after an effective Registration
        Statement is approved at an exercise price of $1.00 ($0.50 per share). Such
        amounts have been recorded as equity subject to rescission as of March 31,
        2007.
  During
        2003, the Company received cash and a subscription receivable of $661,323
        for
        1,322,646 units consisting of one share of common stock with one common stock
        warrant exercisable for a period of one year after an effective Registration
        Statement is approved at an exercise price of $1.00 ($0.50 per share). Such
        amounts have been recorded as equity subject to rescission as of March 31,
        2007.
  During
        the year ended December 31, 2004, the Company received cash of $92,500 for
        185,000 units consisting of one share of common stock with one common stock
        warrant exercisable for a period of one year after an effective Registration
        Statement is approved at an exercise price of $1.00 per share ($0.50 per
        share).
        Such amounts have been recorded as equity subject to rescission as of March
        31,
        2007.
  In
        2005,
        the Company sold a total of 183,000 shares of common stock to nine individuals
        for cash of $183,000 ($1.00 per share). Such amounts have been recorded as
        equity subject to rescission as of March 31, 2007.






F-10




**ALLIANCE
          RECOVERY CORPORATION**
 
 **(A
          DEVELOPMENT STAGE COMPANY)**
 
 **NOTES
          TOCONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **AS
          OF MARCH 31, 2007 and 2006**


**NOTE
        6**  **STOCKHOLDERS'
        EQUITY**
 
 ***(A)  Common
        Stock Issued to Founders***
 
 During
        2001, the Company issued 8,410,000 shares of common stock to founders for
        services with a fair value of $84,100 ($0.01 per share).
 
 (B)  Common
        Stock and Warrants Issued for Cash
 
 During
        2001, the Company received subscriptions receivable of $105,064 for 7,687,800
        shares of common stock ($0.0137 per share).
 
 During
        the year ended December 31, 2004, the Company collected $159,782 of
        subscriptions receivable.
 
 In
        2005,
        the Company sold a total of 183,000 shares of common stock to nine individuals
        for cash of $183,000 ($1.00 per share).
 
 By
        the
        year ended December 31, 2005 the Company collected $42,774 of subscription
        receivables.
 
 ***(C)  Common
        Stock and Warrants Issued for Services***
  During
        April 2002, the Company entered into an agreement with a consultant to provide
        services for a period of one year. The agreement called for compensation
        of
        100,000 units with a fair value of $50,000 based on recent cash offerings
        ($0.50
        per share). The Company recorded $16,667 and $33,333 of consulting expense
        for
        the years ended December 31, 2003 and 2002, respectively. As of December
        31,
        2006, the warrants have expired.
 
 During
        May 2002, the Company entered into an agreement with a consultant to provide
        services for a period of two months. The agreement called for compensation
        of
        12,710 units, each unit consists of one share of common stock and one common
        stock warrant exercisable at $1.00 per share for a period of two years. The
        units had a fair value of $6,355 based on recent cash offerings. The Company
        recorded consulting expense of $6,355 for the year ended December 31, 2002
        ($0.50 per share). As of December 31, 2006, the warrants have
        expired.
 
 During
        July 2002, the Company entered into an agreement with a consultant to provide
        services for a period of one year. The agreement called for compensation
        of
        100,000 units, each unit consists of one share of common stock and one common
        stock warrant exercisable at $1.00 per share for a period of two years. The
        units had a fair value of $50,000 based on recent cash offerings ($0.50 per
        share). The Company recorded $22,917 and $27,083 of consulting expense for
        the
        years ended December 31, 2002 and 2003, respectively.
 
 During
        January 2004, the Company entered into a consulting agreement with a consultant
        to provide management and public relations services. The agreement calls
        for the
        consultant to provide services for a period of one year and the consultant
        to
        receive: 200,000 shares of common stock warrants to purchase 100,000 shares
        of
        common stock at an exercise price of $5.00 for a period of three years, and
        an
        option to purchase 100,000 shares of common stock at an exercise price of
        $7.50
        for a period of three years. The common stock has a fair value of $100,000
        based
        on recent cash offerings and will be amortized over the life of the agreement
        ($0.50 per share). For the years ended December 31, 2005 and 2004, the Company
        has recognized consulting expense of $4,158 and $95,842, respectively under
        the
        agreement. As of March 31, 2007, the warrants have expired.






F-11




**ALLIANCE
            RECOVERY CORPORATION**
 
 **(A
            DEVELOPMENT STAGE COMPANY)**
 
 **NOTES
            TOCONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **AS
            OF MARCH 31, 2007 and 2006**
 In
          January 2005, the Company entered into a consulting agreement with a consultant
          to provide management and public relations services. The agreement calls
          for the
          consultant to provide services for a period of one year and the consultant
          to
          receive compensation of $2,000 per month. In addition the Company sold
          the
          consultant 300,000 shares of common stock for cash proceeds of $300 and
          recorded
          the fair value of the common stock of $149,700. The fair value of the common
          stock will be recognized over the term of the agreement. For the year ended
          December 31, 2005 the Company has recognized consulting expense of $143,463
          under the agreement. For the year ended December 31, 2006 the Company recognized
          consulting expense of $6,237 under the agreement.
 
 In
          March
          2007, the Company entered into a consulting agreement with a consultant
          to
          provide management and public relations services. The agreement calls for
          the
          consultant to provide services for a period of one year and the consultant
          to
          receive compensation of $4,000 per month. In addition the Company sold
          the
          consultant 300,000 shares of common stock for cash proceeds of $300 and
          recorded
          the fair value of the common stock of $153,000. The fair value of the common
          stock will be recognized over the term of the agreement. The Company has
          also
          agreed the pay the public relation firm a 5% finder fee for any business
          or
          capital raise derived from its relationship with the public relations firm.
          The
          fair value of the common stock will be recognized over the term of the
          agreement. For the three months ended March 31, 2007 the Company recorded
          an
          expense of $10,673 under this agreement.
 
 ***(D)
          Common Stock and Warrants Issued for Conversion of Notes
          Payable***
 
 Between
          October and December 2005 three investors and a director loaned the Company
          a
          total of $205,000. The notes are unsecured, due one year from the date
          of
          issuance and are non interest bearing for the first nine months, then accrued
          interest at a rate of 6% per annum for the remaining three months.  The
          Company imputed interest of $12,300 on the non interest bearing portion
          of the
          notes at a rate of 6% per annum. On July 21, 2006, we amended four promissory
          notes (the “Amended Notes”) originally executed on October 7, 2005 in favor of
          Lewis Martin, James E. Schiebel, Susan Hutchison, and Walter Martin respectively
          (each a “Holder” and collectively the “Holders”). The Amended Notes provide for
          a conversion feature pursuant to which each Holder is entitled to convert
          the
          outstanding principal amount into shares of the Company's common stock
          at a
          conversion rate of $1.50 per share. In addition, upon conversion, each
          Holder is
          entitled to receive a warrant to purchase one-quarter of one share of our
          common
          stock exercisable within one-year of issuance at an exercise price of $1.50
          per
          share. On July 24, 2006, pursuant to the terms of the Amended Notes, the
          Holders
          converted the principal amount outstanding into shares of our common stock.
          Based on same, we issued an aggregate of 136,669 shares of our common stock
          and
          a price of $1.50 per share (the “Conversion Shares”). In addition, we issued
          warrants with a cashless exercise provision to purchase an aggregate of
          51,250
          shares of our common stock to the Holders exercisable within one year of
          issuance at a price per share of $1.50 (the “Conversion Warrants”). The
          Conversion Shares and shares underlying the Conversion Warrants are restricted
          in accord with Rule 144 promulgated under the Securities Act of 1933, as
          amended.
 
 (E)
          Common Stock Warrants
  The
          Company issued 765,146 warrants during 2004, at an exercise price of $1.00
          per
          share to a consultant for services. The fair market value of the warrants
          was
          estimated on the grant date using the Black-Scholes option pricing model
          as
          required under SFAS 123 with the following weighted average assumptions:
          expected dividend yield 0%, volatility 0%, risk-free interest rate of 3.5%,
          and
          expected warrant life of one year. The value was immaterial and therefore
          no
          expense was recorded in general and administrative expense at the grant
          date. As
          of December 31, 2006, the warrants have expired.




F-12




**ALLIANCE
        RECOVERY CORPORATION**
 
 **(A
        DEVELOPMENT STAGE COMPANY)**
 
 **NOTES
        TOCONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **AS
        OF MARCH 31, 2007 and 2006**


In
        connection with the issuance of a $100,000 note payable on June 28, 2006,
        the
        Company issued a total of 100,000 common stock warrants with an exercise
        price
        of $1.50 per share. The warrants expire June 29, 2007. The fair market value
        of
        the warrants was estimated on the grant date using the Black-Scholes option
        pricing model as required under SFAS 123R with the following weighted average
        assumptions: expected dividend yield 0%, volatility 0%, risk-free interest
        rate
        of 5.18%, and expected warrant life of one year. The value was immaterial
        and
        therefore no expense was recorded.
  In
        connection with conversion of $205,000 of notes payable to common stock on
        July
        24, 2006 the Company issued warrants with a cashless exercise provision to
        purchase an aggregate of 51,250 shares of our common stock to the Holders
        exercisable within one year of issuance at a price per share of $1.50 (the
        “Conversion Warrants”). The Conversion Shares and shares underlying the
        Conversion Warrants are restricted in accordance with Rule 144 promulgated
        under
        the Securities Act of 1933, as amended.
  In
        connection with the issuance of common stock units for cash and services,
        the
        Company has an aggregate of 1,954,896 and 2,881,572 warrants outstanding
        at
        March 31, 2007 and 2006, respectively. The Company has reserved 1,954,896
        shares
        of common stock for the future exercise of the warrants at March 31,
        2007.
 
 ***(F)
        Amendment to Articles of Incorporation***
  During
        2004, the Company amended its Articles of Incorporation to provide for an
        increase in its authorized share capital. The authorized capital stock increased
        to 100,000,000 common shares at a par value of $0.01 per share.
 
 **NOTE
        7**  **RELATED
        PARTY TRANSACTIONS**
  In
        June,
        2006 a director of the Company loaned the Company $100,000. The loan bears
        a
        rate of interest of 8% per annum and is payable twelve months from the date
        of
        issuance. In addition the Company issued the director warrants to purchase
        100,000 shares of common stock with an exercise price of $1.50 per share
        for one
        year from the date of the note. The loan is unsecured and due June 28, 2007.
        In
        December, 2006 the Director loaned the Company an additional $50,000. The
        loan
        bears a rate of interest of 8% per annum and is payable eighteen months from
        the
        date of issuance In February 2007 a director of the Company loaned the Company
        $50,000. The loan bears interest at a rate of eight percent per annum . The
        loan
        is unsecured and due July 9, 2007. As of March 31, 2007 the Company recorded
        and
        accrued interest expense of $8,000 related to these three notes.
  During
        December 2001, the Company entered into an agreement with a consultant to
        serve
        as its interim President for a term of up to five years. The agreement called
        for annual compensation of $250,000. The agreement expires the earlier of
        December 2006 or on the effectiveness of an employment agreement and is
        renewable annually after December 2006. During 2006, the Company approved
        a one
        year renewal of the agreement. The Company has accrued $390,697 under the
        agreement to the consultant at March 31, 2007. For the Period November 6,
        2001(Inception) to March 31, 2007 the Company recorded $1,333,333 of expenses
        associated with this agreement.
 
 During
        2004, the Company entered into an employment agreement with a consultant
        to
        assume the position of Chief Executive Officer and President for a term of
        five
        years at an annual minimum salary of $250,000 with additional bonuses and
        fringe
        benefits. The agreement is to become effective upon the approval by the
        Securities and Exchange Commission on the SB-2 Registration Statement. During
        March 2006, the Company and the President amended the start date to begin
        upon
        the Company raises all or substantially all the project funding pertaining
        to
        the first facility. As of the date of this report, the Company has not completed
        the funding. (See Note 8(A) and 10).






F-13




**ALLIANCE
          RECOVERY CORPORATION**
 
 **(A
          DEVELOPMENT STAGE COMPANY)**
 
 **NOTES
          TOCONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **AS
          OF MARCH 31, 2007 and 2006**


**NOTE
        8**  **COMMITMENTS
        AND CONTINGENCIES**
 
 ***(A)  Consulting
        Agreements***
 
 During
        December 2001, the Company entered into an agreement with a consultant to
        serve
        as its interim President for a term of up to five years. The agreement called
        for annual compensation of $250,000. The agreement expires the earlier of
        December 2006 or on the effectiveness of an employment agreement and is
        renewable annually after December 2006. During 2006, the Company approved
        a one
        year renewal of the agreement. The Company has accrued $390,697 under the
        agreement to the consultant at March 31, 2007. For the Period November 6,
        2001(Inception) to March 31, 2007 the Company recorded $1,333,333 of expenses
        associated with this agreement.
 
 During
        April 2002, the Company entered into an agreement with a consultant to provide
        services for a period of one year. The agreement called for compensation
        of
        100,000 units with a fair value of $50,000 based on recent cash offerings
        ($0.50
        per share). The Company recorded $16,667 and $33,333 of consulting expense
        for
        the years ended December 31, 2003 and 2002, respectively.
 
 During
        May 2002, the Company entered into an agreement with a consultant to provide
        services for a period of two months. The agreement called for compensation
        of
        12,710 units, each unit consists of one share of common stock and one common
        stock warrant exercisable at $1.00 per share for a period of two years. The
        units had a fair value of $6,355 based on recent cash offerings. The Company
        recorded consulting expense of $6,355 for the year ended December 31, 2002
        ($0.50 per share).
 
 During
        June 2002, the Company entered into an agreement with a consultant to provide
        services for a period of one year. The agreement called for cash payments
        totaling $120,000. The Company recorded $55,000 and $65,000 of consulting
        expense for the years ended December 31, 2003 and 2002,
        respectively.
  During
        July 2002, the Company entered into an agreement with a consultant to provide
        services for a period of one year. The agreement called for compensation
        of
        100,000 units, each unit consists of one share of common stock and one common
        stock warrant exercisable at $1.00 per share for a period of two years. The
        units had a fair value of $50,000 based on recent cash offerings. The Company
        recorded $27,083 and $22,917 of consulting expense for the years ended December
        31, 2003 and 2002, respectively ($0.50 per share). The agreement was fully
        expensed as of December 31, 2003.
 
 During
        January 2004, the Company entered into a consulting agreement with a consultant
        to provide management and public relations services. The agreement calls
        for the
        consultant to provide services for a period of one year and the consultant
        to
        receive: 200,000 shares of common stock, monthly retainers of $4,000, warrants
        to purchase 100,000 shares of common stock at an exercise price of $5.00
        for a
        period of three years, and an option to purchase 100,000 shares of common
        stock
        at an exercise price of $7.50 for a period of three years. The common stock
        has
        a fair value of $100,000 based on recent cash offerings and will be amortized
        over the life of the agreement ($0.50 per share) (See Note 6(A)).
 
 In
        January 2005, the Company entered into a consulting agreement with a consultant
        to provide management and public relations services. The agreement calls
        for the
        consultant to provide services for a period of one year and the consultant
        to
        receive compensation of $2,000 per month. In addition the Company sold the
        consultant 300,000 shares of common stock for cash proceeds of $300 and recorded
        the fair value of the common stock of $149,700. The fair value of the common
        stock will be recognized over the term of the agreement. For the year ended
        December 31, 2005, the Company has recognized consulting expense of $143,463
        under the agreement. During the year ended December 31, 2006, the Company
        has
        recognized consulting expense of $6,237 under the agreement.






F-14




**ALLIANCE
          RECOVERY CORPORATION**
 
 **(A
          DEVELOPMENT STAGE COMPANY)**
 
 **NOTES
          TOCONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **AS
          OF MARCH 31, 2007 and 2006**




In
        March 2007, the Company entered into a consulting agreement with a consultant
        to
        provide management and public relations services. The agreement calls for
        the
        consultant to provide services for a period of one year and the consultant
        to
        receive compensation of $4,000 per month. In addition the Company sold the
        consultant 300,000 shares of common stock for cash proceeds of $300 and recorded
        the fair value of the common stock of $153,000. The fair value of the common
        stock will be recognized over the term of the agreement. The Company has
        also
        agreed the pay the public relation firm a 5% finder fee for any business
        or
        capital raise derived from its relationship with the public relations firm.
        The
        fair value of the common stock will be recognized over the term of the
        agreement. For the three months ended March 31, 2007 the Company recorded
        an
        expense of $10,673 under this agreement.
 
 ***(B)  License
        Agreement***
 
 Upon
        effectiveness of the employment agreement with our Chief Executive Officer
        and
        President, the Company will be entitled to use certain technology and know-how
        that is owned by our Chief Executive Officer and President royalty free until
        the end of the employment agreement. Upon termination of the employment
        agreement with the Chief Executive Officer and President, the Company has
        the
        right to license the technology for a one time fee. The license fee will
        be
        negotiated by the Company and the Chief Executive Officer and will equal
        the
        replacement value of such technology and will be determined with reference
        to
        the engineer's opinion dated March 6, 2002, a copy of which is attached to
        the
        employment agreement (See Note 5(A)).
 
 ***(C)  Employment
        Agreement***
 
 During
        2004, the Company entered into an employment agreement with a consultant
        to
        assume the position of Chief Executive Officer and President for a term of
        five
        years at an annual minimum salary of $250,000 with additional bonuses and
        fringe
        benefits. The agreement is to become effective upon the approval by the
        Securities and Exchange Commission on the SB-2 Registration Statement. During
        March 2006, the Company and the President amended the start date to begin
        upon
        the Company raises all or substantially all the project funding pertaining
        to
        the first facility. As of the date of this report, the Company has not completed
        the funding. (See Note 8(A) and 10).
 
 ***(D)  Rescission
        Offer***
 
 Common
        stock sold prior to July 1, 2005 pursuant to the Company's private placement
        offer may be in violation of the requirements of the Securities Act of 1933.
        In
        October 2005, the Company became aware that the private placement offers
        made
        prior to July 1, 2005 may have violated federal and state securities laws
        based
        on the inadequacy of the Company's disclosures made in its offering documents
        for the units concerning the lack of unauthorized shares. Under state securities
        laws the investor can sue us to recover the consideration paid for the security
        together with interest at the legal rate, less the amount of any income received
        from the security, or for damages if he or she no longer owns the security
        or if
        the consideration given for the security is not capable of being returned.
        Damages generally are equal to the difference between the purchase price
        plus
        interest at the legal rate and the value of the security at the time it was
        disposed of by the investor plus the amount of any income, if any, received
        from
        the security by the investor. Generally, certain state securities laws provide
        that no suit can be maintained by an investor to enforce any liability created
        under certain state securities statues if the seller makes a written offer
        to
        refund the consideration paid together with interest at the legal rate less
        the
        amount of any income, if any, received on the security or to pay damages
        and the
        investor refuses or fails to accept the offer within a specified period of
        time,
        generally not exceeding 30 days from the date the offer is received. In
        addition, the various states in which the purchasers reside could bring
        administrative actions against as a result of the rescission offer.






F-15






**ALLIANCE
          RECOVERY CORPORATION**
 
 **(A
          DEVELOPMENT STAGE COMPANY)**
 
 **NOTES
          TOCONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **AS
          OF MARCH 31, 2007 and 2006**




The
        remedies vary from state to state but could include enjoining us from further
        violations of the subject state law, imposing civil penalties, seeking
        administrative assessments and costs for the investigations or bringing suit
        for
        damages on behalf of the purchaser.
 
 There
        is
        considerable legal uncertainty under both federal securities and related
        laws
        concerning the efficacy of rescission offers and general waivers with respect
        to
        barring claims that would be based on the failure to disclose information
        described above in a private placement. The SEC takes the position that
        acceptance or rejection of an offer of rescission may not bar stockholders
        from
        asserting claims for alleged violations of federal securities laws. Further,
        under California's Blue Sky law, which would apply to stockholders resident
        in
        that state, a claim or action based on fraud may not be waived or prohibited
        pursuant to a rescission offer. As a result, the rescission offer may not
        terminate any or all potential liability that we may have in connection with
        that private placement. In addition, there can be no assurance that we will
        be
        able to enforce the waiver we received in connection with the rescission
        offer
        to bar any claims based on allegations of fraud or other federal or state
        law
        violations that the rescission offerees may have, until the applicable statutes
        of limitations have run.
 
 Based
        on
        potential violations that may have occurred under the Securities Act of 1933,
        the Company made a rescission offer to investors who acquired the Company's
        common stock prior to July 1, 2005. As such, the proceeds of $1,084,823 from
        the
        issuance of 1,986,646 shares of common stock through July 1, 2005 have been
        classified outside of equity in the balance sheet and classified as common
        stock
        subject to rescission.
  **NOTE
        9**  **GOING
        CONCERN**
  As
        reflected in the accompanying financial statements, the Company is in the
        development stage with no operations, a stockholders' deficiency of $1,742,570
        a
        working capital deficiency of $661,934 and used cash in operations from
        inception of $ 1,578,419. This raises substantial doubt about its ability
        to
        continue as a going concern. The ability of the Company to continue as a
        going
        concern is dependent on the Company's ability to raise additional capital
        and
        implement its business plan. The financial statements do not include any
        adjustments that might be necessary if the Company is unable to continue
        as a
        going concern.
  Management
        believes that actions presently being taken to obtain additional funding
        and
        implement its strategic plans provide the opportunity for the Company to
        continue as a going concern.












F-16




**Item
      2.**    **Management’s
      Discussion and Analysis or Plan of Operation**




The
      following discussion and analysis provides information which management believes
      is relevant to an assessment and understanding of our financial condition.
      The
      discussion should be read in conjunction with our financial statements and
      notes
      thereto appearing in this prospectus. The following discussion and analysis
      contains forward-looking statements, which involve risks and uncertainties.
      Our
      actual results may differ significantly from the results, expectations and
      plans
      discussed in these forward- looking statements.




**Overview**




We
      are a
      developmental stage company that is in the process of implementing our business
      plan to develop a showcase waste to energy facility at a site to be determined.
      The first showcase installation will be the cornerstone for both United States
      and European expansion. It will thermally convert rubber waste to oil and
      subsequently use the oil as fuel for large reciprocating engines driving
      alternators making electricity. In addition to the sale of electricity, several
      additional valuable bi-products produced in the thermal conversion process
      will
      also be sold into either domestic or international markets.




Our
      business plan is focused on providing large urban centers with community based
      processing facilities to address the needs of rubber waste disposal where the
      waste is generated. This rubber waste is largely scrap tires. Similarly, large
      urban centers also have an increasing requirement for electrical energy for
      both
      domestic and industrial use. Our processing facilities can be located,
      constructed and operated to meet the specific needs of the community in an
      environmentally friendly manner.




We
      believe that the effective implementation of our business plan will result
      in
      our position as a provider of community based waste to energy installations
      dealing with rubber waste at source while providing reliable electrical energy
      to meet base load and/or on peak energy demands.




The
      successful implementation of the business plan will also be dependent on our
      ability to meet the challenges of developing a management team capable of not
      only the construction and operation of the first installation but also marketing
      management and the implementation of specific marketing strategies.





These
      strategies will include the utilization of specific existing distributors
      currently in the business of marketing carbon black. As well, we will be going
      to regional disposal operators and collectors to offer our services as a point
      of final disposition for their collection and disposal
      requirements.




Additionally,
      it will be necessary to educate targeted jurisdictions about the environmental
      and commercial benefits of an Alliance installation in their
      community.




During
      the fiscal quarter March 31, 2007, no revenues were generated and we do not
      anticipate revenues until such time as the first facility has been constructed
      and commercially operated. The construction of the first showcase facility
      will
      require $20 million. However, currently there are no commitments for capital
      and
      furthermore, the successful implementation of all aspects of the business plan
      is subject to our ability to complete the $20 million capitalization. It is
      expected the required funds will be raised as a result of private offerings
      of
      securities or debt, or other sources.




Should
      the required funding not be forthcoming from the aforementioned sources, public
      offerings of equity, or securities convertible into equity may be necessary.
      In
      any event, our investors should assume that any additional funding will cause
      substantial dilution to current stockholders. In addition, we may not be able
      to
      raise additional funds on favorable terms, if at all.




Our
      independent auditor has expressed substantial doubt about our ability to
      continue as a going concern. The notes to our financial statements include
      an
      explanatory paragraph expressing substantial doubt about our ability to continue
      as a going concern. Among the reasons cited in the notes as raising substantial
      doubt as to our ability to continue as a going concern are the following: we
      are
      a development stage company with no operations, a stockholders’ deficiency of
      $1,742,570 and cash used in operations from inception through March 31, 2007
      of
      $1,578,419. As of March 31, 2007, we had a working capital deficiency of
      $661,934.






3






Our
      ability to continue as a going concern is dependent on our ability to further
      implement our business plan, raise additional capital and generate revenues.
      These conditions raise substantial doubt about our ability to continue as a
      going concern.




**Plan
      of Operations**




Management
      has developed forged relations with several corporate finance entities that
      have
      expressed an interest in participating in our overall expansion in the United
      States and Europe. In most cases, as a condition precedent to their
      participation, we must be publicly traded or quoted on a recognized stock
      exchange such as the OTC Bulletin Board. This occurred on January 26,
      2007.




The
      efforts of our management team and our consultants and advisors will be to
      complete appropriate financing arrangements. The completion of the $20,000,000
      financing will be our exclusive effort prior to the construction and development
      of the first installation.




Upon
      completion of the $20,000,000 capitalization, our next priority will be the
      construction of the first installation. For this construction, it will be
      necessary for management to initially focus on two specific activities. First,
      project management consultants will be engaged to assist us in all matters
      associated with identifying and preparing the site. This activity includes
      regulatory approvals as well as final design and layout based upon commercial
      equipment available for procurement and/or fabrication




In
      the
      event we are not able to raise $20,000,000 to complete construction of our
      first
      showcase facility, we will be forced to seek additional financing in order
      to
      maintain operations over the next 12 months.





In
      addition, we will continue to develop our industry contacts, develop our
      business plan, refine our technology, search for suitable sites, and devote
      efforts to secure the capital required to implement our business
      plan.




Second,
      our management and consulting engineers will commence activities to enlarge
      our
      management team by adding key employees as well as consultants that will be
      responsible for specific tasks & operations associated with the first
      installation.




During
      the permitting period, estimated by management and their consulting engineers,
      to be 90 to 120 days, our engineering and fabrication team will finalize design
      and layouts for the first site as well as prepare and circulate site building
      bid documents. Similarly, turnkey contracts will be negotiated for specific
      pieces of the thermal processing equipment utilized in the rubber to oil
      conversion process. The supply and operation of the electrical generation
      equipment will also be contracted out during this period of the development.
      We
      have already identified and pre-qualified several suppliers of the type of
      electrical generation equipment. However, as a result of the preliminary stage
      of these discussions, we are unable to provide greater detail as to the exact
      nature of the relationship or participation of these suppliers.




Also
      at
      this time, some preliminary site work will be completed to facilitate the
      installation of the design/build structures required. The site will also be
      prepared to accept the modularized electrical generation equipment that will
      be
      installed on the site subsequent to the installation and start-up of the thermal
      conversion process. The contracted operator of the electrical generation
      equipment will also be responsible for the sale of electricity. During initial
      discussions with these supplier/operators, an interest has been expressed in
      participating in our overall business. Some discussions pertaining to the
      exchange of our shares for all, or part, of the value of the turnkey have
      transpired. However, it is unlikely that meaningful discussions will commence
      until such time as our capitalization set forth above has been completed. Even
      if the capitalization has been completed, there can be no certainty that the
      contract operators will participate in the first installation other than on
      a
      fee for services basis. In any event, until such time as the $20 Million
      capitalization has been completed, specific details pertaining to the
      participation of supplier/operators will not be available and we are unable
      to
      provide the details of any possible forthcoming agreements.




Management
      and their consulting engineers believe that, the overall fabrication and
      installation timeframe is approximately 18 months from execution of contracts.
      As all the components utilized in our installation are currently in use in
      manufacturing operations in the United States and around the world, lead times
      for delivery and installation are generally short.


4


Several
      components are stock items and available for almost immediate delivery. However,
      the engineering firm responsible for the overall project management of the
      first
      installation will monitor all fabricator/suppliers to ensure that the various
      components and required ancillary equipment and structures have been readied
      onsite for installation. Additionally, engineering verification will be required
      for all progress draws prior to our making payments to the various
      supplier/fabricators. As is customary with the supply of this type of equipment,
      established payment holdbacks upon completion of installation and start-up
      will
      be released only upon engineering verification of performance. Additionally,
      it
      may be necessary for selected fabricator/suppliers to provide delivery and
      performance bonds specific to their components.




The
      entire project could be delayed as a direct result of several factors. Should
      we
      not be able to a lease or purchase a suitable property within a timely manner,
      the project could be delayed indefinitely until such time as an appropriate
      site
      is secured. Although we have located several suitable sites that could be
      appropriately permitted, unforeseen regulatory changes could make it difficult
      to obtain the required permits causing further delays thereby causing us to
      take
      additional time to identify other suitable sites. Should there be delays in
      the
      delivery of thermal processing or electrical generation equipment as a result
      of
      material shortages, labor problems, transportation difficulties etc., our
      commercial operation would be delayed thereby not allowing us to generate
      revenues as anticipated. Should the delay be lengthy, management could be
      required to seek additional financing or seek other remedies in law pertaining
      to delivery and performance failures of the fabricator suppliers. Regulatory
      changes causing delays in the construction, processing equipment installation
      and start-up of the showcase facility will lengthen the period of time for
      us to
      start to generate revenues from operations. We will only be in the position
      to
      commence a US expansion of processing facilities upon the successful completion,
      start-up and operation of the showcase facility.





The
      supplier/fabricators will also be responsible for the training of key employees
      and/or contractors and will work with the engineering project managers to
      include established operating protocols in the systems operations manual. In
      conjunction with this effort, during the start-up of the first installation,
      fabricator/suppliers and the project management will establish operating set
      points incorporating them into the system software thereby ensuring continued
      reliable system performance and measurable quality standards.




It
      is
      management’s and their consulting engineers opinion that overall, the entire
      installation through construction completion, training, start-up and commercial
      acceptance based upon engineering performance verification is approximately
      18
      months. The overall development schedule could be delayed as a result of
      unforeseen regulatory delays, labor disputes and seasonal delays due to weather
      conditions.




Pursuant
      to preliminary discussions with corporate finance professionals, items #16
      through #18 set forth below are anticipated fees and expenses pertaining to
      the
      $20,000,000 financing that we will be seeking. The following schedule outlines
      the categories associated with the financing, completion, start-up and
      commercial operation of the first installation. It is expected that many of
      the
      following development categories outlined in the following schedule will be
      completed concurrently.




1)
                Consulting Fees & Out-of -Pocket Reimbursement
            
            $
            480,0002)
                Site Lease Matters & Development Fees
            
            $
            260,0003)
                Site Engineering, Regulatory & Compliance
            
            $
            211,5004)
                Site Work
            
            $
            1,125,6005)
                Buildings
            
            $
            798,5006)
                Rubber to Oil Thermal Conversion Process Equipment
            
            $
            7,736,5007)
                Warehouse & Conveyance Equipment Leases/Purchases
            
            $
            74,0838)
                Government Relations
            
            $
            41,0009)
                Administrative Construction Expenses
            
            $
            153,00010)Legal,
                Accounting, Travel & Misc. Fees & Expenses
            
            $
            322,00011)Media,
                Promotion & Government Relations
            
            $
            313,00013)Salaries,
                Wages & Fees
            
            $
            846,43414)Consulting
                Engineers
            
            $
            33,00015)Turn-key
                Energy System & Installation
            
            $
            5,000,00016)Financing
                Fees
            
            $
            2,000,00017)Financing
                Legal & Accounting
            
            $
            300,00018)Administrative
                Contingency
            
            $
            305,383Total
            
            $
            20,000,000







5






During
      the construction and installation of the first facility, our future Vice
      President of Marketing with assistance from our future Vice President of
      Technology will commence a specific and targeted marketing campaign directed
      at
      the current rubber waste disposal infrastructure, regulatory agencies, retail
      associations and the public. Promotional activities will include media, public
      awareness, trade journals, seminars and meetings and discussions with waste
      hauler and disposal companies. These activities will also include meetings
      and
      discussions with state regulatory and enforcement officials.




Based
      upon discussions with state regulators, it is our belief that all communities
      in
      the United States and Canada are being encouraged by state, provincial and
      federal authorities to be more environmentally responsible. An example of
      amplified environmental concern occurring in 2004 was the State of Michigan’s
      position pertaining to the continued dumping of waste from out-of-state
      communities that included Toronto, Ontario, Canada. State regulations were
      implemented in an attempt to curtail the amount and sources of waste being
      disposed at Michigan dump sites. It is our belief, that since the early 1990s
      the federal EPA has been concerned with the interstate transportation of waste.
      The federal position seems to be that communities that generate should be
      responsible for the ultimate disposition of the waste within their municipality.
      An attempt to limit interstate transportation of waste was contained in the
      Interstate Modal Transportation Act which was never approved as originally
      proposed.




Community
      based environmental initiatives are being encouraged. Dealing with waste at
      the
      source is considered much more environmentally friendly than trucking the waste
      hundreds of miles away. The first installation is perceived as a convenient
      and
      environmentally friendly solution to rubber waste. The targeted marketing
      campaign will exploit the current thinking pertaining to community based waste
      reduction and processing and waste to energy initiatives.





However,
      there may be difficulties associated with encouraging the existing disposal
      and
      transportation infrastructure to utilize the Alliance installation as an
      alternative to their current method of disposal. Historic relationships between
      the existing infrastructure serving retailers and dumps or processors often
      hundreds of miles away and the financial commitment to the trucking the waste
      may be difficult to overcome. However, management’s discussion with several
      haulers has been encouraging as a cost effective alternative to the existing
      transportation of waste to often out-of-state locations is a welcomed
      alternative.




A
      targeted marketing campaign pertaining to the sale of carbon black and scrap
      steel will also commence prior to completion of construction. However, we may
      not be positioned to enter into carbon black supply contracts until such time
      as
      samples are made available from the operation of the showcase facility. It
      is
      likely that these samples would be made available as a result of operation
      the
      processing equipment during the performance testing phase of the installation
      and immediately prior to commercial certification. The commercial certification
      will occur after the equipment has operated for a period of approximately 90
      days and all contract performance specifications have been achieved. There
      may
      be delays associated with the correction of deficiencies in order that the
      processing equipment meet certain performance standards prior to commercial
      certification. However, the Company has included the 90 day start-up phase
      within the overall timeline to allow for the correction of deficiencies by
      fabricator suppliers. Although the vast majority of the rubber to oil system
      is
      based upon off-the-shelf components, if further delays occur as a result of
      fabricator suppliers correction of deficiencies, we could be delayed in our
      ability to generate revenue.




Although,
      we have identified several experts currently responsible for the sale of carbon
      products currently with other companies and they have expressed an interest
      in
      the position of VP Marketing, there is no guarantee that their previous
      experience will allow them to successfully initiate a campaign that will lead
      to
      the sale of our carbon black. However, the successful operation of the thermal
      system will generate commercial grades of carbon black that could be utilized
      by
      rubber formulation companies for specific products. Additionally, our carbon
      black could be blended with other sources of carbon black thereby allowing
      rubber formulators to meet customers requirements for recycled content. We
      believe our carbon black will be advantageous to other forms of recycled content
      as it will be is a virgin product made from oil that is a waste rubber
      derivative.






6






Furthermore,
      the heat recovery system utilized through the entire system will be ready to
      deliver hot water and/or steam to a greenhouse operator. Although we have yet
      to
      complete an agreement with a hydroponics greenhouse operator, preliminary
      discussions with several current operators would indicate that the availability
      of a reliable discounted heat source for the production of hot water, could
      be a
      cost effective alternative to their current consumption of non-renewable
      resources to fuel boilers to generate the required hot water.




The
      ARC
      installation is designed to operate continuously. As a result, the installation
      has the ability to produce heat constantly to service the hot water requirements
      of a hydroponics operator or other commercial uses. The heat produced can be
      considered a bi-product from the operation of the thermal conversion and
      electrical generation equipment. Rather than utilizing the heat source for
      any
      particular use, we could use a commercial cooling tower to cool the thermal
      processing equipment and could decide not to operate the heat recovery system
      components associated with the reciprocating engines responsible for the
      generation of electricity. However, management believes that utilizing the
      bi-product heat capacity in an environmentally friendly way is a common sense
      alternative to exhausting heat into the atmosphere. It is the belief of
      management, our consulting engineers and the several of the hydroponics
      operators that have discussed our ability to generate heat, that a15 to 20
      acre
      hydroponics greenhouse could be heated from the heat recovered from the thermal
      process heat recovery boiler in combination with the heat available from
      standard heat recovery mechanisms that are part of the reciprocating engines
      driving the alternators making electricity.




The
      type
      of relationship discussed is based upon the notion that the hydroponics
      greenhouse operator would lease a site immediately adjacent to the showcase
      facility. Based upon our final equipment selection, pertaining to both the
      thermal conversion of rubber to oil and the generation of electricity, we will
      be positioned to provide details as to the amount of steam and/or hot water
      that
      be generated for conveyance to the greenhouse via an insulated pipeline. A
      heat
      exchanger will transfer the heat from the ARC steam and/or hot water to the
      hot
      water in the hydroponics operator’s underground reservoir.





The
      ARC
      cooled condensate and/or water will be returned to the ARC via the
      aforementioned pipeline heated again and once again returned to the greenhouse
      in a closed loop system.




Several
      methods of compensation for ARC heat sources have been discussed. These include
      a percentage of the hydroponics greenhouse gross or not sales and discounted
      avoided cost which is the operators cost of natural gas or fuel oil less a
      negotiated discount. We will not be positioned to enter into specific
      negotiations until such time as the $20,000,000 financing has been
      completed.




**Going
      Concern Consideration**




As
      reflected in the accompanying financial statements, we are in the development
      stage with no operations, a stockholders’ deficiency of $1,742,570, a working
      capital deficiency of $661,934 and used cash in operations from inception of
      $1,578,419. This raises substantial doubt about our ability to continue as
      a
      going concern. Our ability to continue as a going concern is dependent on our
      ability to raise additional capital and implement our business plan. The
      financial statements do not include any adjustments that might be necessary
      if
      we are unable to continue as a going concern.




We
      believe that actions presently being taken to obtain additional funding and
      implement our strategic plans provide the opportunity for us to continue as
      a
      going concern.




**Liquidity
      and Capital Resources**




Our
      balance sheet as of March 31, 2007 reflects assets of $16,689 consisting of
      cash
      of $12,002, prepaid expenses of $500 and property and equipment of $4,187 and
      total current liabilities of $674,436 consisting of accounts payable and accrued
      expenses of $59,528, an amount of $390,697 due to a related party, a note
      payable of $25,000 with a net discount of $789, and a note payable due to a
      related party of $200,000.




Cash
      and
      cash equivalents from inception to date have been sufficient to cover expenses
      involved in starting our business. We will require additional funds to continue
      to implement and expand our business plan during the next twelve
      months.






7






**Critical
      Accounting Policies**




Our
      financial statements and related public financial information are based on
      the
      application of accounting principles generally accepted in the United States
      (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and
      subjective interpretations of accounting principles that have an impact on
      the
      assets, liabilities, revenue and expense amounts reported. These estimates
      can
      also affect supplemental information contained in our external disclosures
      including information regarding contingencies, risk and financial condition.
      We
      believe our use if estimates and underlying accounting assumptions adhere to
      GAAP and are consistently and conservatively applied. We base our estimates
      on
      historical experience and on various other assumptions that we believe to be
      reasonable under the circumstances. Actual results may differ materially from
      these estimates under different assumptions or conditions. We continue to
      monitor significant estimates made during the preparation of our financial
      statements.




Our
      significant accounting policies are summarized in Note 1 of our financial
      statements. While all these significant accounting policies impact our financial
      condition and results of operations, we view certain of these policies as
      critical. Policies determined to be critical are those policies that have the
      most significant impact on our financial statements and require management
      to
      use a greater degree of judgment and estimates. Actual results may differ from
      those estimates. Our management believes that given current facts and
      circumstances, it is unlikely that applying any other reasonable judgments
      or
      estimate methodologies would cause effect on our consolidated results of
      operations, financial position or liquidity for the periods presented in this
      report.




**Off
      Balance Sheet Arrangements**




We
      have
      no off-balance sheet arrangements.





**Recent
      Accounting Pronouncements**




In
      February 2006, the FASB issued SFAS No. 155, " *Accounting
      for Certain Hybrid Financial Instruments-an amendment of FASB Statements No.
      133
      and 140* ",
      to
      simplify and make more consistent the accounting for certain financial
      instruments. SFAS No. 155 amends SFAS No. 133, " *Accounting
      for Derivative Instruments and Hedging Activities* ",
      to
      permit fair value re-measurement for any hybrid financial instrument with an
      embedded derivative that otherwise would require bifurcation, provided that
      the
      whole instrument is accounted for on a fair value basis. SFAS No. 155 amends
      SFAS No. 140, " *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ",
      to
      allow a qualifying special-purpose entity to hold a derivative financial
      instrument that pertains to a beneficial interest other than another derivative
      financial instrument. SFAS No. 155 applies to all financial instruments acquired
      or issued after the beginning of an entity's first fiscal year that begins
      after
      September 15, 2006, with earlier application allowed. The adoption of this
      statement is not expected to have a material effect on the Company's future
      reported financial position or results of operations.





In
      March
      2006, the FASB issued SFAS No. 156, " *Accounting
      for Servicing of Financial Assets, an amendment of FASB Statement No. 140,
      Accounting for Transfers and Servicing of Financial Assets and Extinguishments
      of Liabilities* ".
      This
      statement requires all separately recognized servicing assets and servicing
      liabilities be initially measured at fair value, if practicable, and permits
      for
      subsequent measurement using either fair value measurement with changes in
      fair
      value reflected in earnings or the amortization and impairment requirements
      of
      Statement No. 140. The subsequent measurement of separately recognized servicing
      assets and servicing liabilities at fair value eliminates the necessity for
      entities that manage the risks inherent in servicing assets and servicing
      liabilities with derivatives to qualify for hedge accounting treatment and
      eliminates the characterization of declines in fair value as impairments or
      direct write-downs. SFAS No. 156 is effective for an entity's first fiscal
      year
      beginning after September 15, 2006. The adoption of this statement is not
      expected to have a material effect on the Company's future reported financial
      position or results of operations.





In
      June
      2006, the FASB issued FASB Interpretation No. 48, *“Accounting
      for Uncertainty in Income Taxes,*


*an
      interpretation of FASB Statements No. 109”* .
      FIN 48
      clarifies the accounting for uncertainty in income taxes by prescribing a
      two-step method of first evaluating whether a tax position has met a more likely
      than not recognition threshold and second, measuring that tax position to
      determine the amount of benefit to be recognized in the financial statements.
      FIN 48 provides guidance on the presentation of such positions within a
      classified statement of financial position as well as on derecognition, interest
      and penalties, accounting in interim periods, disclosure, and transition.


8


FIN
      48 is
      effective for fiscal years beginning after December 15, 2006. The adoption
      of
      this statement is not expected to have a material effect on the Company's future
      reported financial position or results of operations.





In
      September 2006, the FASB issued SFAS No. 157, “ *Fair
      Value Measurements* ”.
      The
      objective of SFAS 157 is to increase consistency and comparability in fair
      value
      measurements and to expand disclosures about fair value measurements. SFAS
      157
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. SFAS 157 applies under other accounting pronouncements
      that
      require or permit fair value measurements and does not require any new fair
      value measurements. The provisions of SFAS No. 157 are effective for fair value
      measurements made in fiscal years beginning after November 15, 2007. The
      adoption of this statement is not expected to have a material effect on the
      Company's future reported financial position or results of
      operations.




In
      September 2006, the FASB issued SFAS No. 158, “ *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans - an
      amendment of FASB Statements No. 87, 88, 106, and 132(R)* ”.
      This
      statement requires employers to recognize the over-funded or under-funded status
      of a defined benefit postretirement plan (other than a multiemployer plan)
      as an
      asset or liability in its statement of financial position and to recognize
      changes in that funded status in the year in which the changes occur through
      comprehensive income of a business entity or changes in unrestricted net assets
      of a not-for-profit organization. This statement also requires an employer
      to
      measure the funded status of a plan as of the date of its year-end statement
      of
      financial position, with limited exceptions. The provisions of SFAS No. 158
      are
      effective for employers with publicly traded equity securities as of the end
      of
      the fiscal year ending after December 15, 2006. The adoption of this statement
      is not expected to have a material effect on the Company's future reported
      financial position or results of operations.




In
      September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108,
“ *Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements* .”
SAB
      No. 108 addresses how the effects of prior year uncorrected misstatements should
      be considered when quantifying misstatements in current year financial
      statements. SAB No. 108 requires companies to quantify misstatements using
      a
      balance sheet and income statement approach and to evaluate whether either
      approach results in quantifying an error that is material in light of relevant
      quantitative and qualitative factors. SAB No. 108 is effective for period ending
      after November 15, 2006. The Company is currently evaluating the impact of
      adopting SAB No. 108 but does not expect that it will have a material effect
      on
      its financial statements.




In
      February 2007, the Financial Accounting Standards Board (FASB) issued SFAS
      No.
      159, “ *The
      Fair Value Option for Financial Assets and Financial Liabilities - Including
      an
      Amendment of FASB Statement No. 115* ”.
      This
      statement permits entities to choose to measure many financial instruments
      and
      certain other items at fair value. Most of the provisions of SFAS No. 159 apply
      only to entities that elect the fair value option. However, the amendment to
      SFAS No. 115 “ *Accounting
      for Certain Investments in Debt and Equity Securities* ”
applies
      to all entities with available-for-sale and trading securities. SFAS No. 159
      is
      effective as of the beginning of an entity’s first fiscal year that begins after
      November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
      year that begins on or before November 15, 2007, provided the entity also elects
      to apply the provision of SFAS No. 157, “ *Fair
      Value Measurements”.* The
      adoption of this statement is not expected to have a material effect on the
      Company's financial statements.








9








**Item
      3.**   **Controls
      and Procedures**




**Evaluation
      of disclosure controls and procedures**




Under
      the
      supervision and with the participation of our management, including our
      principal executive officer and principal financial officer, we conducted an
      evaluation of our disclosure controls and procedures, as such term is defined
      under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities
      Exchange Act of 1934, as amended (Exchange Act), as of March 31, 2007. Based
      on
      this evaluation, our principal executive officer and principal financial officer
      have concluded that our disclosure controls and procedures are effective to
      ensure that information required to be disclosed by us in the reports we file
      or
      submit under the Exchange Act is recorded, processed, summarized, and reported
      within the time periods specified in the Securities and Exchange Commission’s
      rules and forms and that our disclosure and controls are designed to ensure
      that
      information required to be disclosed by us in the reports that we file or submit
      under the Exchange Act is accumulated and communicated to our management,
      including our principal executive officer and principal financial officer,
      or
      persons performing similar functions, as appropriate to allow timely decisions
      regarding required disclosure.




**Changes
      in internal controls**




There
      were no changes (including corrective actions with regard to significant
      deficiencies or material weaknesses) in our internal controls over financial
      reporting that occurred during the first quarter of fiscal 2007 that has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting.












10







**PART
      II - OTHER INFORMATION**


**Item
      1.**    **Legal
      Proceedings.**




We
      are
      currently not a party to any pending legal proceedings and no such actions
      by,
      or to the best of its knowledge, against us have been threatened.





**Item
      2.**   **Unregistered
      Sales of Equity Securities and Use of Proceeds.**




None


**Item
      3.**    **Defaults
      Upon Senior Securities.**




None





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




No
      matter
      was submitted during the quarter ending March 31, 2007, covered by this report
      to a vote of our shareholders, through the solicitation of proxies or
      otherwise.





**Item
      5.**    **Other
      Information.**




None





**Item
      6.**    **Exhibits
      and Reports of Form 8-K.**




(a)
            Reports
                on Form 8-K and Form 8K-ANone.(b)
            Exhibits**Exhibit
                Number**
            **Exhibit
                Title**31.1
            Certification
                of Peter Vaisler pursuant to 18 U.S.C. Section 1350 as adopted pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002.32.1
            Certification
                of Peter Vaisler pursuant to 18 U.S.C. Section 1350 as adopted pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of 2002.









11








**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, there unto duly
      authorized.




**ALLIANCE
      RECOVERY CORPORATION**




By: /s/ *Peter
      Vaisler*


Peter
      Vaisler,


Chairman
      of the Board of Directors,


President,
      Chief Executive Officer,


Principal
      Financial Officer and


Principal
      Accounting Officer




May
      10,
      2007




12