**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 September 30, 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 November 8, 2007: 19,742,159 shares of common stock.




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


















**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 nine months ended September 30, 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.
   **ALLIANCE
          RECOVERY CORPORATION**
 **(A
          DEVELOPMENT STAGE COMPANY)**
   **CONTENTS**
  PAGE
                F-1
                CONDENSED
                    BALANCE SHEET AS OF SEPTEMBER 30, 2007 (UNAUDITED)PAGE
                F-2
                CONDENSED
                    STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS
                    ENDED SEPTEMBER 30, 2007 AND 2006 AND FOR THE PERIOD FROM NOVEMBER
                    6,
                    2001 (INCEPTION) TO SEPTEMBER 30, 2007 (UNAUDITED)PAGES
                F-3
                CONDENSED
                    STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY FOR PERIOD FROM
                    NOVEMBER
                    6, 2001 (INCEPTION) TO SEPTEMBER 30, 2007
                    (UNAUDITED)PAGE
                F-4
                CONDENSED
                    STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                    2007 AND 2006 AND FOR THE PERIOD FROM NOVEMBER 6, 2001 (INCEPTION)
                    TO SEPTEMBER 30, 2007 (UNAUDITED)PAGES
                F-5
                    - F-13
                NOTES
                    TO CONDENSED FINANCIAL STATEMENTS
                    (UNAUDITED)














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




**ASSETS****CURRENT
                  ASSETS**Cash
              
              $
              15,460**TOTAL
                  CURRENT ASSETS**
              
              
              15,460Property
                  and Equipment, net
              
              
              3,070**TOTAL
                  ASSETS**
              
              $
              18,530**LIABILITIES
                  AND STOCKHOLDERS’ DEFICIENCY****CURRENT
                  LIABILITIES**Accounts
                  payable
              
              $
              40,735Accrued
                  Interest
              
              
              22,225Due
                  to related party
              
              
              429,718Notes
                  payable - net of discount of $37
              
              
              24,963Note
                  payable - related party
              
              
              200,000**TOTAL
                  CURRENT LIABILITIES**
              
              
              717,641**LONG-TERM
                  LIABILITIES**Convertible
                  notes payable - net of discount $6,380
              
              
              93,621Convertible
                  notes payable - related party, net of discount $1,235
              
              
              88,735**TOTAL
                  LONG-TERM LIABILITIES**
              
              
              182,356**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,  17,580,513 shares issued and
                  outstanding
              
              
              175,805Additional
                  paid in capital
              
              
              848,811Subscriptions
                  receivable
              
              
              (6,600
              )Deferred
                  compensation
              
              
              (148,177
              )Accumulated
                  deficit during development stage
              
              
              (2,836,129
              )Total
                  Stockholders’ Deficiency
              
              
              (1,966,290
              )**TOTAL
                  LIABILITIES AND STOCKHOLDERS’ DEFICIENCY**
              
              $
              18,530






See
        accompanying notes to condensed financial statements.








F-1




**ALLIANCE
        RECOVERY CORPORATION**
 
 **(A
        DEVELOPMENT STAGE COMPANY)**
 
 **CONDENSED
        STATEMENTS OF OPERATIONS**
 **(UNAUDITED)**
   For
                    The PeriodFrom
                    November 6, 2001For
                    the Three Months Ended
                
                
                For
                    the Nine Months Ended
                
                
                (Inception)
                    toSeptember
                    30,
                
                
                September
                    30,
                
                
                September
                    30,2007
                
                
                2006
                
                
                2007
                
                
                2006
                
                
                2007**OPERATING
                    EXPENSES**Consulting
                    fees
                
                $
                17,500
                
                
                $
                1,500
                
                
                $
                17,500
                
                
                $
                1,500
                
                
                $
                544,368Consulting
                    fees - related party
                
                
                62,500
                
                
                
                62,500
                
                
                
                187,500
                
                
                
                187,500
                
                
                
                1,458,333Professional
                    fees
                
                
                18,345
                
                
                
                11,718
                
                
                
                51,479
                
                
                
                41,000
                
                
                
                342,452General
                    and administrative
                
                
                61,861
                
                
                
                7,861
                
                
                
                146,356
                
                
                
                36,016
                
                
                
                440,336**TOTAL
                    OPERATING EXPENSES**
                
                
                160,206
                
                
                
                83,579
                
                
                
                402,835
                
                
                
                266,016
                
                
                
                2,785,489**OTHER
                    EXPENSES**Financing
                    fees
                
                
                -
                
                
                
                -
                
                
                
                15,000
                
                
                
                -
                
                
                
                15,000Interest
                    Expense
                
                
                9,484
                
                
                
                8,198
                
                
                
                18,780
                
                
                
                13,196
                
                
                
                35,640**TOTAL
                    OTHER EXPENSES**
                
                
                9,484
                
                
                
                8,198
                
                
                
                33,780
                
                
                
                13,196
                
                
                
                50,640**NET
                    LOSS BEFORE PROVISION FOR****INCOME
                    TAXES**
                
                
                (169,690
                )
                
                
                (91,777
                )
                
                
                (436,615
                )
                
                
                (279,212
                )
                
                
                (2,836,129
                )**PROVISION
                    FOR INCOME TAXES**
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -**NET
                    LOSS**
                
                $
                (169,690
                )
                
                $
                (91,777
                )
                
                $
                (436,615
                )
                
                $
                (279,212
                )
                
                $
                (2,836,129
                ).
                
                
                
                
                
                
                
                .Net
                    loss per share - basic and diluted
                
                
                (0.01
                )
                
                
                (0.01
                )
                
                
                (0.03
                )
                
                
                (0.02
                )Weighted
                    average number of shares outstanding during the period - basic
                    and
                    diluted
                
                
                17,323,266
                
                
                
                16,911,526
                
                
                
                17,093,294
                
                
                
                16,844,677
  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
        SEPTEMBER 30, 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
              )
              
              
              -
              
              
              
              -Common
                  stock issued for consulting services ($.30 per share)
              
              
              333,334
              
              
              
              3,333
              
              
              
              96,667
              
              
              
              -
              
              
              
              (100,000
              )
              
              
              -
              
              
              
              -Amortization
                  of deferred compensation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              104,523
              
              
              
              -
              
              
              
              104,523Warrants
                  issued for convertible debt
              
              
              -
              
              
              
              -
              
              
              
              8,797
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              8,797Net
                  Loss, September 30, 2007
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (436,615
              )
              
              
              (436,615
              )**BALANCE,
                  September 30, 2007**
              
              
              17,580,513
              
              
              $
              175,805
              
              
              $
              848,811
              
              
              $
              (6,600
              )
              
              $
              (148,177
              )
              
              $
              (2,836,129
              )
              
              $
              (1,966,290
              )








See
      accompanying notes to condensed financial statements.






F-3






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


For
                  The Period FromNovember
                  6, 2001For
                  the Nine Months Ended
              
              
              (Inception)
                  ToSeptember
                  30,
              
              
              September
                  30,2007
              
              
              2006
              
              
              2007**CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (436,615
              )
              
              $
              (279,212
              )
              
              $
              (2,836,129
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Stock
                  issued for services
              
              
              104,523
              
              
              
              6,237
              
              
              
              544,678Depreciation
                  expense
              
              
              1,675
              
              
              
              1,675
              
              
              
              8,096Amortization
              
              
              2,274
              
              
              
              5,114
              
              
              
              15,115Changes
                  in operating assets and liabilities:Due
                  to related party
              
              
              67,867
              
              
              
              29,654
              
              
              
              429,718Accounts
                  payable and accrued expenses
              
              
              3,698
              
              
              
              24,968
              
              
              
              73,760Net
                  Cash Used In Operating Activities
              
              
              (256,578
              )
              
              
              (211,564
              )
              
              
              (1,764,762
              )**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
              
              
              50,000
              
              
              
              -
              
              
              
              213,500Proceeds
                  from issuance of convertible debt - related party
              
              
              90,000
              
              
              
              200,000
              
              
              
              294,000Proceeds
                  from issuance of convertible debt
              
              
              100,001
              
              
              
              
              
              
              
              100,001Proceeds
                  from issuance of common stock subject to rescission
              
              
              -
              
              
              
              -
              
              
              
              1,084,823Proceeds
                  from issuance of common stock
              
              
              -
              
              
              
              -
              
              
              
              99,064Net
                  Cash Provided By Financing Activities
              
              
              240,001
              
              
              
              200,000
              
              
              
              1,791,388NET
                  INCREASE (DECREASE) IN CASH
              
              
              (16,577
              )
              
              
              (11,564
              )
              
              
              15,460CASH
                  AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
              
              
              32,037
              
              
              
              18,736
              
              
              
              -CASH
                  AND CASH EQUIVALENTS AT END OF PERIOD
              
              $
              15,460
              
              
              $
              7,172
              
              
              $
              15,460Supplemental
                  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
        TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **AS
        OF SEPTMBER 30, 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 September 30, 2007, the Company did not
        have
        any balances that exceeded FDIC insurance limits.
  ***(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 or cancelled. Under the modified prospective approach,
        compensation cost recognized in the year ended December 31, 2006 includes
        compensation cost of  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.
   
 F-5
  ***(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 September 30, 2007 and 2006, 1,948,647 and
        3,032,752; 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 and144 “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.
  ***(J)  Recent
        Accounting Pronouncements***
  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
        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 September 30, 2007 were as follows:
  Computer
              
              $
              11,166Less
                  accumulated depreciation
              
              
              (8,096
              )$
              3,070
  During
        the three and nine months ended September 30, 2007 and 2006 and for the period
        from November 6, 2001 to September 30, 2007, the Company recorded depreciation
        expense of $558, $1,675, $558, $1,675 and $8,096 respectively.
  **NOTE 3**
                **NOTES
                    PAYABLE**
  Note
                  Amount
              
              $
              25,000Discount
              
              
              (37
              )Net
              
              $
              24,963
   
 F-6
 
 
    In
        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 September 30,
        2007
        the Company recorded a discount on the notes of $1,500 and amortized $1,463
        of
        the discount as interest expense.
  **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 was due June 28,
        2007.
        The note was extended until June 28, 2008.  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 31, 2008. As of September 30, 2007, the Company has
        an
        outstanding balance under the three note agreements of $200,000 and recorded
        accrued interest expense of $16,513 related to these three notes.
 
 **NOTE
                  5******
              **CONVERTIBLE
                  NOTES PAYABLE - RELATED
                  PARTY**
  Note
                  Amount
              
              $
              90,000Discount
              
              
              (1,265
              )Net
              
              $
              88,735
 
 In
          May
          2007, a Director of the Company loaned the Company $50,000. The loan bears
          a
          rate of interest of 8% per annum and is payable twenty-four months from
          the date
          of issuance. The holder of the note has the right to convert the note into
          common stock of the Company at the market value on the date of conversion
          but
          not at a price less than $.20 per share of common stock.  In addition
          the Company issued the director warrants to purchase 25,000 shares of common
          stock with an exercise price of $1.00 per share for two years from the
          date of
          the note. The loan is unsecured and due May 17, 2009.The fair value of
          the
          warrants was estimated on the grant date using the Black-Scholes option
          pricing
          model with the following weighted average assumptions: expected dividend
          yield
          0%, volatility 103%, risk-free interest rate of 4.87%, and expected warrant
          life
          of two years. The value of the warrants on the date of issuance was $837.
          The
          Company will amortize the value over the term of the note. In June, 2007
          the
          Mother of the Director loaned the Company an additional $40,000. The loan
          bears
          a rate of interest of 8% per annum and is payable twenty-four months from
          the
          date of issuance. The holder of the note has the right to convert the note
          into
          common stock of the Company at the market value on the date of conversion
          but
          not at a price less than $.20 per share of common stock. The loan is unsecured
          and due July 3, 2009. The fair value of the warrants was estimated on the
          grant date using the Black-Scholes option pricing model with the following
          weighted average assumptions: expected dividend yield 0%, volatility 103%,
          risk-free interest rate of 4.87%, and expected warrant life of two years.
          The
          fair value of the warrants on the date of issuance was $669. The Company
          will
          amortize the value over the term of the note. As of September 30, 2007
          the
          Company recorded and accrued interest expense of $2,306 and amortization
          expense
          of $241 related to these two notes.
 
 **NOTE
                  6**
              **CONVERTIBLE
                  NOTES PAYABLE**
  Note
                  Amount
              
              $
              100,001Discount
              
              
              (6,380
              )Net
              
              $
              93,621
 
 In
          July
          2007, a third party loaned Company loaned the Company $100,001. The loan
          bears a
          rate of interest of 8% per annum and is payable twenty-four months from
          the date
          of issuance. The holder of the note has the right to convert the note into
          common stock of the Company at the market value on the date of conversion
          but
          not at a price less than $.20 per share of common stock.  In addition
          the Company issued the director warrants to purchase 100,001 shares of
          common
          stock with an exercise price of $1.00 per share for two years from the
          date of
          the note. The loan is unsecured and due July 5, 2009.The fair value of
          the
          warrants was estimated on the grant date using the Black-Scholes option
          pricing
          model with the following weighted average assumptions: expected dividend
          yield
          0%, volatility 111%, risk-free interest rate of 4.99%, and expected warrant
          life
          of two years. The fair value of the warrants on the date of issuance was
          $7,291.
          The Company will amortize the value over the term of the note.  As of
          September 30, 2007 the Company recorded and accrued interest expense of
          $1,907
          and amortization expense of $911 related to the note.
 
 
 F-7
  
 **NOTE
                  7**
              **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 September
        30,
        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 September
        30,
        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 September
        30, 2007.
  In
        2005,
        the Company sold a total of 183,000 shares of common stock to nine individuals
        for cash of $183,000 ($1.00per share). Such amounts have been recorded as
        equity
        subject to rescission as of September 30, 2007.
  **NOTE
                  8**
              **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.
   F-8
 
 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 June 30, 2007, the warrants have expired.
  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 to 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 and nine months ended September 30, 2007 the Company
        recorded an expense of $38,175 and $87,023 under this agreement.
 
 In
        July 2007, the Company
        entered into a consulting agreement with a consultant to provide public
        relations services. The agreement calls for the consultant to provide services
        for a period of four months and the consultant to receive compensation of
        333,334 shares of common stock with the fair value of the common stock of
        $100,000 ($.30 per share). The fair value of the common stock will be amortized
        over the term of the agreement. For the three and nine months ended September
        30, 2007 the Company recorded an expense of $17,500 and $17,500 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, the
        Company  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 at 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.
 
 Between
        May and June 2007 two related parties loaned the Company a total of $90,000.
        The
        convertible notes are unsecured, due two years from the date of issuance
        and
        accrue interest at a rate of 8% per annum. In addition, the holders received
        a
        total of 45,000 warrants to purchase one share of our common stock exercisable
        within two-year of issuance at an exercise price of $1.00 per
        share.
 
 **(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 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 fair 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-9
  
 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 expired June 29, 2007. The fair 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 fair value was immaterial
          and therefore no expense was recorded.
  In
        connection with the 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. These warrants expired during the
        quarter ended September 30, 2007
  In
        connection with the issuance of common stock units for cash and services,
        the
        Company has an aggregate of 1,948,647 and 3,032,752 warrants outstanding
        at
        September 30, 2007 and 2006, respectively. The Company has reserved 1,948,647
        shares of common stock for the future exercise of the warrants at September
        30,
        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.
 
 **(G)
        Financing Agreement**
  On
        May
        29, 2007, the Company entered into an Investment Agreement.  Pursuant
        to this Agreement, the Investor  shall commit to purchase up to
        $20,000,000 of the Company's common stock over the course of thirty-six (36)
        months. The amount that we shall be entitled to request from each purchase
        (“Puts”) shall be equal to, at the Company's election, either (i) up to $250,000
        or (ii) 200% of the average daily volume (U.S. market only) of the common
        stock
        for the three (3) trading days prior to the applicable put notice date,
        multiplied by the average of the three (3) daily closing bid prices immediately
        preceding the put date. The put date shall be the date that the Investor
        receives a put notice of a draw down by us. The purchase price shall be set
        at
        ninety-three percent (94%) of the lowest closing bid price of the common
        stock
        during the pricing period. The pricing period shall be the five (5) consecutive
        trading days immediately after the put notice date. There are put restrictions
        applied on days between the put date and the closing date with respect to
        that
        particular Put. During this time, we shall not be entitled to deliver another
        put notice. Further, we shall reserve the right to withdraw that portion
        of the
        Put that is below seventy-five percent (75%) of the lowest closing bid prices
        for the 10-trading day period immediately preceding each put notice. The
        Company
        was obligated to pay $15,000 preparation fee for the documents. $10,000 of
        which
        was paid upon the execution of the agreement and $5,000 due upon the closing
        of
        the first put.
 
 The
        Company is obligated to file a registration statement with the Securities
        and
        Exchange Commission (“SEC”) covering 15,000,000 shares of the common stock
        underlying the Investment Agreement within 30 days after the closing date.
        In
        addition, the Company is obligated to use all commercially reasonable efforts
        to
        have the registration statement declared effective by the SEC within 90 days
        after the closing date. The Company will have an ongoing obligation to register
        additional shares of our common stock as necessary underlying the draw
        downs.
  **NOTE
                  9**
              **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 was due June 28,
        2007.
        The note was extended until June 28, 2008.  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 31, 2008. As of September 30, 2007 the Company has
        an
        outstanding balance under the three note agreements of $200,000 and recorded
        accrued interest expense of $16,513 related to these three notes.
 
 In
          May
          2007, a Director of the Company loaned the Company $50,000. The loan bears
          a
          rate of interest of 8% per annum and is payable twenty-four months from
          the date
          of issuance. The holder of the note has the right to convert the note into
          common stock of the Company at the market value on the date of conversion
          but
          not at a price less then $.20 per share of common stock.  In addition
          the Company issued the director warrants to purchase 25,000 shares of common
          stock with an exercise price of $1.00 per share for two years from the
          date of
          the note. The loan is unsecured and due May 17, 2009.The fair value of
          the
          warrants was estimated on the grant date using the Black-Scholes option
          pricing
          model with the following weighted average assumptions: expected dividend
          yield
          0%, volatility 103%, risk-free interest rate of 4.87%, and expected warrant
          life
          of two years. The fair value of the warrants on the date of issuance was
          $837.
   F-10
     The
        Company will amortize the value over the term of the note. In June, 2007
        the
        Mother of the Director loaned the Company an additional $40,000. The loan
        bears
        a rate of interest of 8% per annum and is payable twenty-four months from
        the
        date of issuance. The holder of the note has the right to convert the note
        into
        common stock of the Company at the market value on the date of conversion
        but
        not at a price less than $.20 per share of common stock. The loan is unsecured
        and due July 3, 2009. The fair value of the warrants was estimated on the
        grant date using the Black-Scholes option pricing model with the following
        weighted average assumptions: expected dividend yield 0%, volatility 103%,
        risk-free interest rate of 4.87%, and expected warrant life of two years.
        The
        fair value of the warrants on the date of issuance was $669. The Company
        will
        amortize the value over the term of the note. As of September 30, 2007 the
        Company recorded and accrued interest expense of $2,306 and amortization
        expense
        of $241 related to these two 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 $429,718 under the
        agreement to the consultant at September 30, 2007. For the Period November
        6,
        2001(Inception) to September 30, 2007 the Company recorded $1,458,333 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 10(A) and 12).
 
  **NOTE
                  10******
              **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 $429,718 under the
        agreement to the consultant at September 30, 2007. For the Period November
        6,
        2001(Inception) to September 30, 2007 the Company recorded $1,458,333 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 7(A)).
   F-11
 
 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.
 
 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 and nine months ended September 30, 2007 the Company
        recorded an expense of $38,175 and $87,023 under this agreement.
 
 In
        July 2007, the Company
        entered into a consulting agreement with a consultant to provide public
        relations services. The agreement calls for the consultant to provide services
        for a period of four months and the consultant to receive compensation of
        333,334 shares of common stock with the fair value of the common stock of
        $100,000 ($.30 per share). The fair value of the common stock will be amortized
        over the term of the agreement. For the three and nine months ended September
        30, 2007 the Company recorded an expense of $17,500 and $17,500 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 onetime 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 6(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 9(A) and 11).
 
 ***(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.
  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.
   F-12
  
 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 offer, 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
                  11**
              **GOING
                  CONCERN**
  As
        reflected in the accompanying financial statements, the Company is in the
        development stage with no operations, a stockholders' deficiency of $1,966,290
        a
        working capital deficiency of $702,181 and used cash in operations from
        inception of $1,764,762. 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.
  **NOTE
                  12**
              **SUBSEQUENT
                  EVENTS**
  In
        October 2007, the Company sold a total of 174,500 shares of common stock
        for
        gross proceeds of $24,605


























F-13




**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 September 30, 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
        $1,966,290 and cash used in operations from inception through September 30,
        2007
        of $1,764,762. As of September 30, 2007, we had a working capital deficiency
        of
        $702,181.
   
   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.
 
 
 
   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
   
  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 operationing
        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.
    
  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 $1,966,290, a working
        capital deficiency of $702,181 and used cash in operations from inception
        of
        $1,764,762. 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 September 30, 2007 reflects assets of $18,530 accrued
        interest of $22,225 consisting of cash of $15,460 and property and equipment
        of
        $3,070 total current liabilities of $717,641 consisting of accounts payable
        and
        accrued expenses of $40,735, an amount of $429,718 due to a related party,
        a
        note payable of $24,963 with a net discount of $37, and a note payable due
        to a
        related party of $200,000 and total long term liabilities of $182,356 consisting
        of  a note payable of $93,621 with a net discount of $6,380, and a
        note payable due to a related party of $88,735 with a net discount of
        $1,235.
  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.
   
  **Recent
          Accounting Pronouncements**
  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
          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.
  **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 of 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.
 **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 September 30, 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 third quarter of fiscal 2007 that has
        materially affected, or is reasonably likely to materially affect, our internal
        control over financial reporting.
  
 
 
  
 **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.**
  On
            July
            5, 2007, we issued 100,001 shares of our common stock to our Jonathan
            Brubacher.  Our securities were issued in reliance on the exemption
            from registration provided by Section 4(2) of the Securities Act of 1933.
            No
            commissions were paid for the issuance of such securities. All of the
            above
            issuances of our securities qualified for exemption under Section 4(2)
            of the
            Securities Act of 1933 since the issuance of such securities by us did
            not
            involve a public offering. The above listed parties were sophisticated
            investors
            and had access to information normally provided in a prospectus regarding
            us.
            The offering was not a “public offering” as defined in Section 4(2) due to the
            insubstantial number of persons involved in the deal, size of the offering,
            manner of the offering and number of securities offered. We did not undertake
            an
            offering in which we sold a high number of securities to a high number
            of
            investors. In addition, the above listed parties had the necessary investment
            intent as required by Section 4(2) since they agreed to and received
            share
            certificates bearing a legend stating that such shares are restricted
            pursuant
            to Rule 144 of the 1933 Securities Act. These restrictions ensure that
            these
            shares and the shares underlying the warrants would not be immediately
            redistributed into the market and therefore not be part of a “public offering.”
Based on an analysis of the above factors, we have met the requirements
            to
            qualify for exemption under Section 4(2) of the Securities Act of 1933
            for the
            above transaction.
  **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 September 30, 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.
 
   
 
 
 **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
  November
        13, 2007