**U.S. SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-KSB**

 

xANNUAL REPORT PURSUANT TO SECTION 13 OR            15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For            the fiscal year ended December 31, 2007

OR

oTRANSITION REPORT            PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-51777

 

**PACIFIC ALLIANCE CORPORATION**

(Name            of Small Business Issuer as specified in its charter)

 

|   | Delaware                        |   | 87-044584-9         |   |
|--------|---------------------------------|--------|---------------------|--------|
|   | (State or other jurisdiction of |   | (I.R.S. employer    |   |
|   | incorporation or organization   |   | identification No.) |   |

 

1661            Lakeview Circle

Ogden, UT 84403

(Address of principal executive offices)

 

Issuer’s telephone number, including area            code:(801) 399-3632

 

Securities registered pursuant to Section 12(b) of the Exchange Act:            None

 

Securities registered pursuant to Section 12(g) of the Exchange Act :            $.001 Par Value Common Stock

 

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 registrant was required to file such reports), and (2) has been            subject to such filing requirements for the past 90 days. YesxNoo

 

Check if there is no disclosure of delinquent filers in response to Item            405 of Regulation S-B contained in this form, and no disclosure will be contained, to            the best of Issuer’s knowledge, in definitive proxy or information statements            incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form            10-KSB.x

             

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

             

The Issuer’s revenues for the fiscal year ended December 31, 2007            were -0-.

             

As of March 31, 2008, the aggregate market value of the voting and            non-voting common equity held by non-affiliates was $409,184 based on the average bid            and ask price for the Company’s common equity as quoted on the OTC Bulletin            Board. On that date 36,828,500 shares of the Company’s common stock were issued            and outstanding of which 8,183,671 were held by non-affiliates. As of March 31, 2008,            there was no active market in the Company’s securities.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

 

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**TABLE OF CONTENTS**

 

|        |                                                                                                                                                                                           | Page       |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| PART I      |                                                                                                                                                                                           |       |
| Item 1.     | Description of Business                                                                                                                                                                        | 3          |
| Item 2.     | Description of Properties                                                                                                                                                                      | 11         |
| Item 3.     | Legal Proceedings                                                                                                                                                                              | 11         |
| Item 4.     | Submission of Matters to a Vote of Security                            Holders                                                                                                                 | 11         |
|        |                                                                                                                                                                                           |       |
| PART II     |                                                                                                                                                                                           |       |
| Item 5.     | Market for Common Equity and Related Stockholder Matters                            and Small Business Issuer Purchase of Equity Securities                                                    |  

11 |
| Item 6.     | Management’s Discussion and Analysis or Plan of                            Operations                                                                                                    |  

16 |
| Item 7.     | Financial Statements                                                                                                                                                                           | 24         |
| Item 8.     | Changes in and Disagreements with Accountants on                            Accounting and Financial Disclosure                                                                                |  

36 |
| Item 8A(T). | Controls and Procedures                                                                                                                                                                        | 37         |
| Item 8B.    | Other Information                                                                                                                                                                              | 38         |
|        |                                                                                                                                                                                           |       |
| PART III    |                                                                                                                                                                                           |       |
| Item 9.     | Directors, Executive Officers, Promoters and Control                            Persons and Corporate Governance; Compliance with Section 16(a) of the                            Exchange Act |  

38 |
| Item 10.    | Executive Compensation                                                                                                                                                                         | 39         |
| Item 11.    | Security Ownership of Certain Beneficial Owners and                            Management and Related Stockholder Matters                                                                      |  

41 |
| Item 12.    | Certain Relationships and Related Party Transactions,                            and Director Independence                                                                                     |  

42 |
| Item 13.    | Exhibits                                                                                                                                                                                       | 43         |
| Item 14.    | Principal Accountant Fees and Services                                                                                                                                                         | 44         |

 

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**PART I**

 

**ITEM 1. DESCRIPTION OF BUSINESS**

 

**General**

             

Pacific Alliance Corporation (the “Company”) is a Delaware            corporation which is currently inactive. The Company was previously engaged in the            business of distributing television programming. On June 23, 1995, the Company filed            for protection under Chapter 11 of the United States Bankruptcy Code (Case No. BK. No.            SV 95-14737 KL). On May 28, 1997 (the “Confirmation Date”), the United            States Bankruptcy Court for the Central District of California Confirmed the            Company’s Modified Plan of Reorganization (the “Plan”) and First            Amended Disclosure Statement (the “Disclosure Statement”). The Effective            Date of the Plan was June 8, 1997. The Company’s current business plan calls for            it to locate and acquire an operating company. Currently, we are a "shell" company            conducting virtually no business operation, other than our efforts to seek merger            partners or acquisition candidates. We have no full time employees and own no real            estate.

             

**History**

 

The Company was organized on April 22, 1986 under the laws of the State            of Utah under the name of Kaiser Research, Inc. On December 2, 1994, the Company            changed its domicile from the State of Utah to the State of Delaware through a            reincorporation merger. In order to effect the reincorporation merger, the Company            formed a wholly-owned subsidiary under Delaware law under the name of PACSYND, Inc.            After the change of the Company’s domicile, it acquired a privately held            corporation (“Private PSI”) in a merger transaction, and in connection            therewith, the Company’s name was changed to Pacific Syndication, Inc.

 

After the acquisition of Private PSI in December 1994, and prior to its            filing of a Petition under Chapter 11, the Company was engaged in the business of            transmitting television programming to television stations and others via satellite or            land deliveries on behalf of production companies, syndicators and other distributors            of television programming. Although the Private PSI was not the survivor of the Merger,            and did not exist after the Merger, pursuant to the accounting requirements of the            Securities and Exchange Commission the Merger was treated as a “reverse            merger” and, solely for accounting purposes, Private PSI was deemed to be the            survivor.

             

Private PSI was formed under the laws of the State of Delaware in            December 1991. Private PSI was formed to engage in the business of providing a variety            of television industry related services to its clients. Such services included, but            were not limited to, video tape duplication, standards conversion and delivery of            television programming by way of conventional carriers (such as UPS, Airborne and            Federal Express) and by satellite or fiber optic transmission.

 

Private PSI provided its clients (primarily television producers,            programmers and syndicators) with several related but different services, including            distribution of syndicated programming to television stations, program mastering            and  standards   conversion,   infomercial              customization and   delivery,   master tape and film 

-3-

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storage, library distribution services and video integration and            delivery services. Private PSI developed its own tape tracking and vault library            management system and a system for infomercial customization and voice-over            integration.

 

From its inception, Private PSI was undercapitalized. It funded its            initial operations through the factoring of its accounts receivable. The Company was            unable to commence operations in the television programming services business and            ultimately, substantially all of its assets were sold and it discontinued its            operations.

 

**Chapter 11 Plan of Reorganization**

 

On June 23, 1995, the Company filed a Petition under Chapter 11 of the            U.S. Bankruptcy Code. As of December 1995, the Company had sold most of its assets,            reduced its debt and terminated its operations. By that date, there was no trading            market in the Company’s securities. In 1996, Troika Capital, Inc.            (“Troika”), a Utah corporation, agreed to assist the Company in developing            a Plan of Reorganization which would provide the Company, its shareholders and            creditors with at least a possibility of recouping all or some of their investment in            the Company or the debts owed to them by the Company. Troika is a privately-owned Utah            corporation which has been involved in various company formations, mergers and            financings.

 

Mark A. Scharmann, the President of Troika, and now the President of the            Company, and his affiliates, were shareholders of the Company and creditors of the            Company at the time the Company commenced its bankruptcy proceeding. Mr. Scharmann was            a founder of the Company in 1986 and was an original shareholder of the Company. At the            time the Company acquired Private PSI, he resigned as an officer and director of the            Company but remained a shareholder and later became a creditor of the Company. Many of            the investors in the Company are friends and acquaintances of Mr. Scharmann. The            Company believed that if it were to liquidate, there would be a total loss to creditors            and shareholders. Because of his own equity and debt investment in the Company, and his            relationship with other shareholders and creditors of the Company, Mr. Scharmann            agreed, through Troika, to develop a business plan for the Company and to attempt to            assist the Company in carrying out such plan.

 

The Plan of Reorganization developed for the Company by Troika was            essentially as follows:

 

|   | 1.     | Eliminate all non-tax liabilities of the Company through                            the conversion of debt into equity.                                                                                                                                                                                               |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                  |
|   | 2.     | Replace the current officers and directors of the                            Company with new management. The new management includes the following:                            Mark Scharmann, Dan Price and David Knudson.                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                  |
|   | 3.     | File all required Securities and Exchange Commission                            reports which may be necessary to bring the Debtor current in its                            filing requirements under Section 15(d) of the 1934 Act. File all SEC                            reports which become due in the future. |
|   |   |                                                                                                                                                                                                                                                                                                                  |
|   | 4.     | File any tax returns which are in arrears and file all                            required tax returns and reports which become due in the                            future.                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                  |

 

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|   | 5.     | Use existing cash of the Company to pay quarterly tax                            payments and for working capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 6.     | Prepare and bring current, the financial statements of                            the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 7.     | Attempt to raise additional cash to be used to fund                            quarterly tax payments and for working capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 8.     | Locate a private-company which is seeking to become a                            public company by merging with the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 9.     | Assist the Company in completing any merger which is                            located and which the Board of Directors deems appropriate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 10.    | Assist the post-merged company with shareholder                            relations, financial public relations and with attempts to interest a                            broker-dealer in developing a public market for the Company’s                            common stock so that the Company’s shareholders (including                            creditors whose debt was converted into shares of the Company’s                            common stock) may ultimately have a opportunity to liquidate their                            shares for value in market or in privately negotiated                            transactions. |

             

The Plan and Disclosure Statement was confirmed by the Bankruptcy Court            on May 28, 1997. The Effective Date of the Plan was June 8, 1997.

 

**Post Confirmation Date Activities**

 

Since the Confirmation of the Plan of Reorganization the following have            occurred:

             

|   | 1.     | Pre-Confirmation Date non-tax debt in the amount of                            approximately $1,458,000 was converted into 1,458,005 shares of the                            Company common stock.                                  |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                 |
|   | 2.     | The Company has audited financial statements for the                            years ended December 31, 1995 through 2007.                                                                                                          |
|   |   |                                                                                                                                                                                                                                 |
|   | 3.     | Tax liabilities to the Internal Revenue Service are                            approximately $281,172 as of December 31, 2007.                                                                                                       |
|   |   |                                                                                                                                                                                                                                 |
|   | 4.     | The Company effected a 1-for-6 reverse split of its                            issued an outstanding common stock in order to establish a more                            desirable capital structure for potential merger partners. |
|   |   |                                                                                                                                                                                                                                 |
|   | 5.     | The Company changed its name to Pacific Alliance                            Corporation.                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                 |
|   | 6.     | The Company’s common stock is now quoted on the                            OTC Bulletin Board under the trading symbol PALC.                                                                                                   |
|   |   |                                                                                                                                                                                                                                 |

 

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|   | 7.     | The Company filed an application for approval of                        secondary trading in its common stock with the Division of Securities of                        the State of Utah. An Order Granting such application was issued by the                        Utah Division of Securities which was effective through March 31,                        1999. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |  

                                                                                                                                                                                                                                                                                                                                                         |
|   | 8.     | The Company has prepared and filed its quarterly and                        annual reports for the years ended December 31, 1996 through                        2007.                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                  |
|   | 9.     | Effective February 22, 2000 - the Bankruptcy Court                        entered an Order of Final Decree closing the Bankruptcy Case.                                                                                                                                                                                                                               |

 

**Business Plan**

 

The Company’s current business plan is to serve as a vehicle for            the acquisition of, or the merger or consolidation with another company (a            ‘Target Business”). The Company intends to utilize its limited current            assets, equity securities, debt securities, borrowings or a combination thereof in            effecting a Business Combination with a Target Business which the Company believes has            significant growth potential. The Company’s efforts in identifying a prospective            Target Business are expected to emphasize businesses primarily located in the United            States; however, the Company reserves the right to acquire a Target Business located            primarily elsewhere. While the Company may, under certain circumstances, seek to effect            Business Combinations with more than one Target Business, as a result of its limited            resources the Company will, in all likelihood, have the ability to effect only a single            Business Combination.

 

The Company may effect a Business Combination with a Target Business            which may be financially unstable or in its early stages of development or growth. To            the extent the Company effects a Business Combination with a financially unstable            company or an entity in its early stage of development or growth (including entities            without established records of revenue or income), the Company will become subject to            numerous risks inherent in the business and operations of financially unstable and            early stage or potential emerging growth companies. In addition, to the extent that the            Company effects a Business Combination with an entity in an industry characterized by a            high level of risk, the Company will become subject to the currently unascertainable            risks of that industry. An extremely high level of risk frequently characterizes            certain industries which experience rapid growth. Although management will endeavor to            evaluate the risks inherent in a particular industry or Target Business, there can be            no assurance that the Company will properly ascertain or assess all risks.

 

Probable Lack of Business Diversification.            As a result of the limited resources of the Company, the Company, in all likelihood,            will have the ability to effect only a single Business Combination. Accordingly, the            prospects for the Company’s success will be entirely dependent upon the future            performance of a single business. Unlike certain entities that have the resources to            consummate several Business Combinations or entities operating in multiple industries            or multiple segments of a single industry, it is highly likely that the Company will            not have the resources to diversify its operations or benefit from the possible            spreading of risks or offsetting of losses.  The Company’s              probable   lack of   diversification may   subject the            Company to numerous

             

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economic, competitive and regulatory             developments, any or all of which may have a material adverse            impact upon the particular industry in which the Company may operate subsequent to            consummation of a Business Combination. The prospects for the Company’s success            may become dependent upon the development or market acceptance of a single or limited            number of products, processes or services. Accordingly, notwithstanding the possibility            of capital investment in and management assistance to the Target Business by the            Company, there can be no assurance that the Target Business will prove to be            commercially viable.

 

No Independent Appraisal of Potential Acquisition            Candidates. The Company does not anticipate that it will            obtain an independent appraisal or valuation of a Target Business. Thus, stockholders            of the Company will need to rely primarily upon management to evaluate a prospective            Business Combination. However, a Business Combination will not be consummated unless it            is approved by the stockholders of the Company.

 

Limited Ability to Evaluate Management of a Target            Business. The role of the present management of the Company,            following a Business Combination, cannot be stated with any certainty. Although the            Company intends to scrutinize closely the management of a prospective Target Business            in connection with its evaluation of the desirability of effecting a Business            Combination with such Target Business, there can be no assurance that the            Company’s assessment of such management will prove to be correct. While it is            possible that certain of the Company’s directors or its executive officers will            remain associated in some capacities with the Company following consummation of a            Business Combination, it is unlikely that any of them will devote a substantial portion            of their time to the affairs of the Company subsequent thereto. Moreover, there can be            no assurance that such personnel will have significant experience or knowledge relating            to the operations of the particular Target Business. The Company also may seek to            recruit additional personnel to supplement the incumbent management of the Target            Business. There can be no assurance that the Company will have the ability to recruit            additional personnel or that such additional personnel will have the requisite skills,            knowledge or experience necessary or desirable to enhance the incumbent management. In            addition, there can be no assurance that the future management of the Company will have            the necessary skills, qualifications or abilities to manage a public company intending            to embark on a program of business development.

 

Selection of a Target Business and Structuring of a Business            Combination. Management of the Company will have substantial            flexibility in identifying and selecting a prospective Target Business within the            specified businesses. In evaluating a prospective Target Business, management will            consider, among other factors, the following: (i) costs associated with effecting the            Business Combination; (ii) equity interest in and opportunity for control of the Target            Business; (iii) growth potential of the Target Business; (iv) experience and skill of            management and availability of additional personnel of the Target Business; (v) capital            requirements of the Target Business; (vi) competitive position of the Target Business;            (vii) stage of development of the Target Business; (viii) degree of current or            potential market acceptance of the Target Business; (ix) proprietary features and            degree of intellectual property or other protection of the Target Business; (x) the            financial statements of the Target Business; and (xi) the regulatory environment in            which the Target Business operates.

             

The foregoing criteria are not intended to be exhaustive and any            evaluation relating to the merits of a particular Target Business will be based, to the            extent relevant, on the above factors as well as other considerations deemed relevant            by management in connection with effecting aBusiness Combination            consistent with the Company’s business objectives. In connection with its            evaluation of a prospective Target Business, management anticipates that it will            conduct a due diligence review which will encompass, among other things, meeting with            incumbent management and inspection of facilities, as well as a review of financial,            legal and other information which will be made available to the Company.

             

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The time and costs required to select and evaluate a Target Business            (including conducting a due diligence review) and to structure and consummate the            Business Combination (including negotiating relevant agreements and preparing requisite            documents for filing pursuant to applicable securities laws and state “blue            sky” and corporation laws) cannot presently be ascertained with any degree of            certainty. The Company’s current executive officers and directors intend to            devote only a small portion of their time to the affairs of the Company and,            accordingly, consummation of a Business Combination may require a greater period of            time than if the Company’s management devoted their full time to the            Company’s affairs. However, each officer and director of the Company will devote            such time as they deem reasonably necessary to carry out the business and affairs of            the Company, including the evaluation of potential Target Businesses and the            negotiation of a Business Combination and, as a result, the amount of time devoted to            the business and affairs of the Company may vary significantly depending upon, among            other things, whether the Company has identified a Target Business or is engaged in            active negotiation of a Business Combination. Any costs incurred in connection with the            identification and evaluation of a prospective Target Business with which a Business            Combination is not ultimately consummated will result in a loss to the Company and            reduce the amount of capital available to otherwise complete a Business Combination or            for the resulting entity to utilize.

 

The Company anticipates that various prospective Target Businesses will            be brought to its attention from various non-affiliated sources, including securities            broker-dealers, investment bankers, venture capitalists, bankers, other members of the            financial community and affiliated sources, including, possibly, the Company’s            executive officer, directors and their affiliates. While the Company has not yet            ascertained how, if at all, it will advertise and promote itself, it may elect to            publish advertisements in financial or trade publications seeking potential business            acquisitions. While the Company does not presently anticipate engaging the services of            professional firms that specialize in finding business acquisitions on any formal basis            (other than the independent investment banker), the Company may engage such firms in            the future, in which event the Company may pay a finder’s fee or other            compensation.

             

As a general rule, Federal and state tax laws and regulations have a            significant impact upon the structuring of business combinations. The Company will            evaluate the possible tax consequences of any prospective Business Combination and will            endeavor to structure a Business Combination so as to achieve the most favorable tax            treatment to the Company, the Target Business and their respective stockholders. There            can be no assurance that the Internal Revenue Service or relevant state tax authorities            will ultimately assent to the Company’s tax treatment of a particular consummated            Business Combination. To the extent the Internal Revenue Service or any relevant state            tax authorities ultimately prevail in recharacterizing the tax treatment of a Business            Combination, there may be adverse tax consequences to the Company, the Target Business            and their respective stockholders. Tax considerations as well as other relevant factors            will be evaluated in determining the precise structure of a particular Business            Combination, which could be effected through various forms of a merger, consolidation            or stockor asset acquisition.

             

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There currently are no limitations on the Company’s ability to            borrow funds to effect a Business Combination. However, the Company’s limited            resources and lack of operating history may make it difficult to borrow funds. The            amount and nature of any borrowings by the Company will depend on numerous            considerations, including the Company’s capital requirements, potential            lenders’ evaluation of the Company’s ability to meet debt service on            borrowings and the then prevailing conditions in the financial markets, as well as            general economic conditions. The Company does not have any arrangements with any bank            or financial institution to secure additional financing and there can be no assurance            that such arrangements if required or otherwise sought, would be available on terms            commercially acceptable or otherwise in the best interests of the Company. The            inability of the Company to borrow funds required to effect or facilitate a Business            Combination, or to provide funds for an additional infusion of capital into a Target            Business, may have a material adverse effect on the Company’s financial condition            and future prospects, including the ability to effect a Business Combination. To the            extent that debt financing ultimately proves to be available, any borrowings may            subject the Company to various risks traditionally associated with indebtedness,            including the risks of interest rate fluctuations and insufficiency of cash flow to pay            principal and interest. Furthermore, a Target Business may have already incurred debt            financing and, therefore, all the risks inherent thereto.

 

**Competition**

 

The Company expects to encounter intense competition from other entities            having business objectives similar to that of the Company. Many of these entities are            well established and have extensive experience in connection with identifying and            effecting business combinations directly or through affiliates. Many of these            competitors possess greater financial, technical, human and other resources than the            Company and there can be no assurance that the Company will have the ability to compete            successfully. The Company’s financial resources will be limited in comparison to            those of many of its competitors. Further, such competitors will generally not be            required to seek the prior approval of their own stockholders, which may enable them to            close a Business Combination more quickly than the Company. This inherent competitive            limitation may compel the Company to select certain less attractive Business            Combination prospects. There can be no assurance that such prospects will permit the            Company to satisfy its stated business objectives.

 

**Uncertainty of Competitive Environment of Target            Business**

 

In the event that the Company succeeds in effecting a Business            Combination, the Company will, in all likelihood, become subject to intense competition            from competitors of the Target Business. In particular, certain industries which            experience rapid growth frequently attract an increasingly large number of competitors            including competitors with increasingly greater financial, marketing, technical, human            and other resources than the initial competitors in the industry. The degree of            competition characterizing the industry of any prospective Target Business cannot            presently be ascertained. There can be no assurance that, subsequent to a Business            Combination, the Company will have the resources to compete effectively, especially to            the extent that the Target Business is in a high-growth industry.

**Certain Securities Laws Considerations**

 

Under the Federal securities laws, public companies must furnish            stockholders certain information about significant acquisitions, which information may            require audited financial statements for an acquired company with respect to one or            more fiscal years, depending upon the relative size of the acquisition. Consequently,            the Company will only be able to effect a Business Combination with a prospective            Target Business that has available audited financial statements or has financial            statements which can be audited.

 

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**Shareholder Approval**

 

The Company will not effect any merger unless it first obtains approval            from its shareholders. In connection with obtaining shareholder approval of a proposed            merger, the Company will distribute a Proxy, Notice of Meeting of Stockholders and            Proxy Statement which contains information about the proposed acquisition transaction.            Such information will likely include audited financial statements and other financial            information about the acquisition target which meets the requirements of Form 8-K as            promulgated under the Securities Exchange of 1934, as amended, resumes of potential new            management, description of potential risk factors which shareholders should consider in            connection with their voting on the proposed acquisition and a description of the            business operations of the acquisition target.

             

Troika and its affiliate will vote all of their shares of the            Company’s common stock for or against any merger proposal in the same ratio which            the shares owned by other shareholders are voted. This will permit other shareholders            to be able to effectively determine whether the Company acquires any particular            Operating Company. The merger will be effected only if a majority of the other            shareholders attending the meeting of shareholders in person and/or by proxy, vote in            favor of such proposed merger. The shares of Troika and its affiliates will be included            for purposes of determining whether a quorum of shareholders is present at the            meeting.

 

**Employees**

             

As of the date of this Prospectus, the Company has no full time            employees.

             

             

**ITEM 2. DESCRIPTION OF PROPERTIES**

 

The Company’s offices are located at 1661 Lakeview Circle, Ogden,            UT 84403. The Company, pursuant to an oral agreement, utilizes an office at the            residence of Mark A. Scharmann, a stockholder of the Company and the Company’s            President.

 

**ITEM 3. LEGAL PROCEEDINGS**

 

None.

             

| **ITEM 4.** | **SUBMISSION OF MATTERS TO A VOTE OF SECURITY                            HOLDERS** |
|-------------|------------------------------------------------------------------------------------|

 

No matters were presented to the Company’s Shareholders for a vote            during the last quarter of 2007.

             

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**PART II**

 

**ITEM 5.** **MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL            BUSINESS ISSUER PURCHASE OF EQUITY SECURITIES**

 

The Company’s common stock is quoted on the OTC Bulletin Board            under the trading symbol PALC. There currently is no active market for the            Company’s common stock. Trading in the Company’s common stock is sporadic            and trades are made on a workout basis with the market maker.

 

**Shares Issued in Unregistered Transactions in 2007 and            2006**

 

We issued shares of our common stock periodically to our officers and            directors in unregistered transactions during 2007 and 2006. All of the following            shares of common stock issued were issued in non registered transactions in reliance on            Section 4(2) of the Securities Act of 1933, as amended (the “Securities            Act”). The shares of common stock issued were as follows:

 

|  

**Issued To** | **Number of**

**Shares** |  

**Date** |  

**Consideration**      |
|-----------------------|---------------------------|------------------|--------------------------------|
| Mark A. Scharmann     | 78,750                    | 3/31/06          | Compensation valued at $7,875  |
| David Knudson         | 144,450                   | 3/31/06          | Compensation valued at $14,445 |
| Mark A. Scharmann     | 54,000                    | 6/30/06          | Compensation valued at $5,400  |
| Dan Price             | 22,500                    | 6/30/06          | Compensation valued at $2,250  |
| David Knudson         | 141,450                   | 6/30/06          | Compensation valued at $14,145 |
| Mark A. Scharmann     | 26,250                    | 9/30/06          | Compensation valued at $2,625  |
| David Knudson         | 49,050                    | 9/30/06          | Compensation valued at $4,905  |
| Mark A. Scharmann     | 20,000,000                | 12/19/06         | $100,000 of outstanding notes  |
| Mark A. Scharmann     | 20,250                    | 12/31/06         | Compensation valued at $2,025  |
| Dan Price             | 9,000                     | 12/31/06         | Compensation valued at $900    |
| David Knudson         | 57,150                    | 12/31/06         | Compensation valued at $5,715  |
| Mark A. Scharmann     | 22,500                    | 3/31/07          | Compensation valued at $2,250  |
| David Knudson         | 41,100                    | 3/31/07          | Compensation valued at $4,110  |
| Mark A. Scharmann     | 25,500                    | 6/30/07          | Compensation valued at $2,550  |
| Dan Price             | 95,250                    | 6/30/07          | Compensation valued at $9,525  |
| David Knudson         | 6,000                     | 6/30/07          | Compensation valued at $600    |
| Mark A. Scharmann     | 28,500                    | 9/30/07          | Compensation valued at $2,850  |
| David Knudson         | 47,700                    | 9/30/07          | Compensation valued at $4,770  |
| Mark A. Scharmann     | 115,500                   | 12/31/07         | Compensation valued at $11,550 |
| Dan Price             | 174,000                   | 12/31/07         | Compensation valued at $17,400 |
| David Knudson         | 22,500                    | 12/31/07         | Compensation valued at $2,250  |
| Total:                | 21,181,400                |             |                           |

 

-11-

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**Shares Issued in Unregistered Transactions Prior to            2006**

 

Shares Issued Prior to Confirmation Date

 

Immediately prior to the confirmation of the Company’s Plan of            Reorganization by the Bankruptcy Court on May 28, 1997, there were a total of            12,594,422 shares of the Company’s common stock issued and outstanding. The Plan            of Reorganization, called for a 1-for-6 reverse split of the issued and outstanding            shares which reduced the 12,594,422 shares to 2,099,125 shares.

 

Shares Issued to Troika

 

Pursuant to the Plan of Reorganization, 5,000,000 shares of the            Company’s common stock, calculated after the reverse stock split, were issued to            Troika Capital Investment. The shares issued to Troika were issued pursuant to Section            4(2) of the Securities Act of 1993, as amended (the “Securities            Act”).

             

Shares Issued to Creditors

 

A total 1,458,005 shares of the Company’s common stock (calculated            after the 1-for-6 reverse stock split) were issued to creditors pursuant to the Plan of            Reorganization. In exchange for every $1.00 of Allowed Unsecured Claims (as defined in            the Plan of Reorganization) a creditor was issued one share of common stock, one Class            A Warrant and One Class B Warrant. Each Class A Warrant entitles the holder to purchase            one share of the Company’s common stock at $2.50 per share for a period of three            years commencing on the Effective Date of the Plan. Class A Warrants expired in 2000            and none were exercised. Each Class B Warrant entitles the holder to purchase one share            of the Company’s common stock at $5.00 per share for a period of five years            commencing on the Effective Date of the Plan. The Effective Date of the Plan was June            8, 1997. The 1,458,005 shares and the Class A and Class B Warrants issued to claim            holders, were issued under Section 1145 of the United States Bankruptcy Code (the            “Code”). Section 1145 provides that the securities registration            requirements of federal, state and local laws do not apply to the offer or sale of            securities issued by a debtor (or its successor) if (i) the offer or sale occurs under            a plan of reorganization and (ii) the securities are transferred in exchange (or            principally in exchange) for a claim against or interest in the debtor. Accordingly,            under Section 1145 of the Code, the issuance of common stock in exchange for a Claim            against the Company was exempt from the registration requirements of Section 5 of the            Securities Act of 1933, as amended (the “1933 Act”) and from the            registration requirements of any state securities laws. Approximately 86 creditors were            issued shares in exchange for claims against the Company.

             

Resales or Transfers of Plan Securities.            Any person who is not an “underwriter” under Section 1145 of the Code or a            “dealer” under the 1933 Act and who transfers shares received under the            Plan (“Plan Securities”) need not comply with the registration requirements            of the 1933 Act or of any state securities laws. The term “underwriter”, as            used in Section 1145, includes four categories of persons, which are referred to in            this Disclosure Statement as “Controlling Persons”,            “Accumulators”, “Distributors” and “Syndicators”.            “Dealers” and the four types of underwriters are discussed            below.

             

-12-

             

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a.         *Controlling Persons*.            “Controlling Persons” are persons who, after the Effective Date, have the            power, whether direct or indirect and whether formal or informal, to control the            management and policies of the reorganized debtor. Whether a person has such power            depends on a number of factors, including the person’s equity in the reorganized            debtor relative to other equity holders, and whether the person, acting alone or in            concert with others, has a contractual or other relationship giving that person power            over management policies and decisions. In order to transfer the Plan Securities            without registration, a Controlling Person would be required to comply with the            restrictions set forth in SEC Rule 144, other than the holding period requirement set            forth in that Rule. The restrictions of Rule 144 are complicated. In general, in order            for the resale of Plan Securities by a Controlling Person to be permissible under Rule            144, the Controlling Person must not sell during any three-month period, more than one            percent of the Company’s common stock (or, if greater, the average weekly report            volume of trading in such securities).

             

----

             

b.         *Accumulators and Distributors*.            “Accumulators” are persons who purchase a Claim against or Interest in the            Company with a view to distribution of any Plan Securities to be received under the            Plan in exchange for such Claim or Interest. “Distributors” are persons who            offer to sell Plan Securities for the holders of those securities. In a 1986 SEC No-            Action Letter (Manville Corp.), the SEC staff took the position that resales by            Accumulators and Distributors of securities distributed under a plan are exempt from            the registration requirements of the 1933 Act if made in “ordinary trading            transactions”. The SEC staff took the position that a transaction is an ordinary            trading transaction if it is made on an exchange or in the over-the-counter market at a            time when the issuer is a reporting company under the 1934 Act and does not involve any            of the following factors:

 

(i)        concerted action by            recipients of Plan Securities in connection with the sale of such securities, concerted            action by distributors on behalf of one or more such recipients in connection with such            sales, or both;

             

(ii)       informational documents            concerning the offering of the securities prepared or used to assist in the resale of            such securities other than this Disclosure Statement and any supplements hereto and            documents filed with the SEC by the issuer pursuant to the 1934 Act; or

             

(iii)      special compensation to brokers            and dealers in connection with the sale of such securities designed as a special            incentive to resell such securities, other than compensation that would be paid            pursuant to arm’s length negotiations between a seller and a broker or dealer,            each acting unilaterally, and not greater than the compensation that would be paid for            a routine similar-sized sale of a similar issue.

 

c.         *Syndicators*.            “Syndicators” are persons who offer to buy Plan Securities from the holders            with a view to distribution, under an agreement made in connection with the Plan, with            consummation of the Plan or with the offer or sale of securities under the            Plan.

             

-13-

             

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d.         *Dealers*. “Dealers” are            persons who engage either for all or part of their time, directly or indirectly, as            agent, broker, or principal, in the business of offering, buying, selling, or otherwise            dealing or trading in securities. Section 4(3) of the 1933 Act exempts transactions in            the Plan Securities by dealers taking place more than 40 days after the Effective Date.            Within the 40-day period after the Effective Date, transactions by dealers who are            stockbrokers are exempt from the 1933 Act pursuant to Section 1145 (a) (4) of the Code,            as long as the stockbrokers deliver a copy of this Disclosure Statement (and periodic            supplements hereto, if any, as ordered by the Court) at or before the time of delivery            of Plan Securities to their customers. This requirement specifically applies to trading            and other after-market transactions in such securities. In this regard, however, in the            1986 SEC No-Action Letter (Manville Corp.), the staff of the SEC took the position that            it would not recommend action if stockbrokers did not comply with the Disclosure            Statement delivery requirements of Section 1145 (a) (4) as long as the issuer of the            securities was a reporting person under the 1934 Act and was current and timely in its            reporting obligations.

 

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Shares Issued Subsequent to Confirmation Date

 

As part of the Plan, the Company issued 5,000,000 shares to Troika            Capital for $25,000. Subsequent to the Confirmation Date, the Company issued its            securities in non-registered transactions pursuant to the exemption provided by Section            4(2) of the Securities Act. The Company did not pay a commission or any finders fees in            connection with such transactions. In addition to the following transactions, we issued            shares to management for services (See Item 12 of this Form 10-KSB). The securities            issued in such transactions were as follows:

             

|  

**Issued To**     | **Number of**

**Shares** |  

**Date** |  

**Consideration**                                                                                                                                                                 |
|---------------------------|---------------------------|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Harold Spector            | 16,000                    | 5/28/98          | Consulting services valued at $80                                                                                                                                                         |
| Workout Specialists, Inc. | 200,000                   | 6/29/98          | Consulting services valued at $1,000                                                                                                                                                      |
| William M. Hynes, II      | 80,078                    | 9/30/98          | These shares were issued to Mr. Hynes as payment in full                            for $80,077.57 in IRS tax credits transferred to the Company by Mr.                            Hynes. |
| Mark Scharmann            | 300,000                   | 2/29/00          | Repayment of $15,000 loan from Mark Scharmann                                                                                                                                             |
| William M. Hynes, II      | 150,000                   | 5/20/00          | Consulting Services valued at $15,000                                                                                                                                                     |
| Michael Harrop            | 187,500                   | 8/7/02           | Consulting Services valued at $18,750                                                                                                                                                     |
| PIL S.A.                  | 1,250,000                 | 6/28/02          | $249,871                                                                                                                                                                                  |
| Northcliffe Consulting    | 1,000,000                 | 2/24/04          | Consulting Services value at $10,000                                                                                                                                                      |
| William M. Hynes, II      | 250,000                   | 2/24/04          | Consulting Services valued at $2,500                                                                                                                                                      |
| PIL S.A.                  | 100,000                   | 5/14/04          | $19,978                                                                                                                                                                                   |
| Mark Scharmann            | 20,000,000                | 12/19/06         | Repayment of $100,000 of notes owed Mark                            Scharmann                                                                                                             |
| Total:                    | 23,533,578                |             |                                                                                                                                                                                      |

 

-14-

 

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Shares Issued for Services from 1997 to December 31,            2007

 

Those persons who have been serving as the Company’s officers and            directors since 1996 have periodically been issued shares of common stock for services            rendered in lieu of cash compensation. Aggregate compensation shares issued to each of            the Company’s officers and directors over the term of the period specificed above            are as follows:

             

|   | Mark A. Scharmann | 1,437,026 |   |
|--------|-------------------|-----------|--------|
|   | Dan Price         | 97,275    |   |
|   | David Knudson     | 3,036,991 |   |

             

**Holders**

 

As of April 10, 2008, there were36,828,500shares of common stock outstanding and approximately 150 stockholders of            record of common stock.

             

**Purchases of Equity Securities by the Small Business Issuer and            Affiliated Purchasers**

 

None

             

**Limitation on Directors’ Liability, Charter Provisions and            Other Matters**

 

Delaware law authorizes corporations to limit or eliminate the personal            liability of directors to corporations and their stockholders for monetary damages for            breach of directors’ fiduciary duty of care. The duty of care requires that, when            acting on behalf of the corporation, directors must exercise an informed business            judgment based on all material information reasonably available to them. Absent the            limitations authorized by Delaware law, directors are accountable to corporations and            their stockholders for monetary damages for conduct constituting gross negligence in            the exercise of their duty of care. Delaware law enables corporations to limit            available relief to equitable remedies such as injunction or rescission. Our            Certificate of Incorporation limits the liability of our directors to us or to our            stockholders (in their capacity as directors but not in their capacity as officers) to            the fullest extent permitted by Delaware law.

 

The inclusion of this provision in the Certificate of Incorporation may            have the effect of reducing the likelihood of derivative litigation against directors            and may discourage or deter stockholders or management from bringing a lawsuit against            directors for breach of their duty of care, even though such an action, if successful,            might otherwise have benefited the Company and its stockholders.

             

Our Bylaws provide indemnification to our officers and directors and            certain other persons with respect to certain matters. Insofar as indemnification for            liabilities arising under the 1933 Act may be permitted to our directors and officers,            we have been advised that in the opinion of the Securities and Exchange Commission,            such indemnification is against public policy as expressed in the 1933 Act and is,            therefore, unenforceable.

             

-15-

             

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**Transfer Agent and Registrar**

 

Our transfer agent is Fidelity Transfer Company, 8915 South 700 East,            Suite 102, Sandy, UT 84070; telephone (801) 562-1300.

             

**Dividends**

 

The Company has not paid any cash dividends to date and does not            anticipate or contemplate paying dividends in the foreseeable future. It is the present            intention of management to utilize all available funds for the development of the            Company’s business.

             

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**ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF            OPERATION**

             

**Overview**

             

The Company is currently inactive. Our current business plan calls for            us to locate and acquire an operating company. Currently, we are a "shell" company            conducting virtually no business operation, other than our efforts to seek merger            partners or acquisition candidates. We have no full time employees and own no real            estate.

             

We were previously engaged in the business of distributing television            programming. On September 23, 1995, the Company filed for protection under Chapter 11            of the United States Bankruptcy Code (Case No. BK. No. SV 95-14737 KL). On May 28, 1997            (the “Confirmation Date”), the United States Bankruptcy Court for the            Central District of California Confirmed the Company’s Modified Plan of            Reorganization (the “Plan”) and First Amended Disclosure Statement (the            “Disclosure Statement”). The Effective Date of the Plan was June 8, 1997.            On February 23, 2000, United States Bankruptcy Judge Kathleen T. Lax entered a            “Final Decree Order Pursuant to Bankruptcy Code Section 350”, and thereby            issued a final decree closing the bankruptcy case. The claim by the Internal Revenue            Service was not discharged by the Final Decree Order.

             

Our Plan of Operation is further described in Item 1 of this Form            10-KSB.

             

**Liquidity and Capital Resources**

 

As of December 31, 2007, we had total assets of $29. Therefore, we had            limited usable cash as of December 31, 2007 and are dependent upon loans and advances            from our management and affiliates to fund our expenses pending the completion of a            merger or acquisition. As of December 31, 2007, we had total liabilities of $936,740 of            which $337,130 was for tax liabilities. At December 31, 2007, a total of $501,028 of            our liabilities was for funds loaned to us by management and other stockholders            compared to $408,800 in such loans as of December 31, 2006. At December 31, 2007, a            total of $-0- of our liabilities was for accrued compensation expenses for our officers            and directors.

             

In the last quarter of 2006, we issued 20,000,000 shares of our common            stock to our president Mark Scharmann as payment for $100,000 of notes we owed Mr.            Scharmann.

             

-16-

             

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In the event we are able to locate an acquisition candidate, we            anticipate that some or all our debt to management and others will be converted into            additional shares of common stock. The conversion price, if a conversion of debt was to            occur, of which there can be no assurance, has not been established.

 

We intend to pay for various filing fees and professional fees relating            to our reporting obligations and to fund the costs which may arise from seeking new            business opportunities through funds advanced by our officers and directors.

             

Because all business operations have been terminated, we have taken            steps to minimize our operational expenses. We have no source of revenue and it is            likely that we will be required to raise additional capital in order to attract a            potential acquisition partner. We do not know how much additional capital will be            required and if our capital requirements will exceed the financial resources of our            officers and directors. We may seek alternatives sources for financing. In either case,            we can give no assurance that we will be able to raise sufficient additional capital to            continue as a shell company. It is also likely that any future acquisition will be made            through the issuance of shares of our common stock which will result in the dilution of            the percentage ownership of the current shareholders.

             

The auditors’ report on our December 31, 2007 financial statements            contains a going concern qualification, which provides that our ability to continue as            a going concern is dependent upon it raising additional capital. We will continue to be            an inactive company unless and until we raise additional capital and acquire an            operating company. There can be no assurance that either will occur.

             

**Results of Operations**

 

We have not conducted any active operations since our Confirmation Date            and generated no revenue for the year ended December 31, 2007 or the year ended            December 31, 2006. We anticipate that we will not generate any revenues until we            acquire or merge with another company.

             

Our total expenses of $185,974 for the year ended December 31, 2007            compared to $195,514 for the year ended December 31, 2006. Our total cost of            compensation for the year ended December 21, 2007 was $57,855 compared to $60,285 for            the year ended December 31, 2006. Our total interest costs were $46,477 for the year            ended December 31, 2007 compared to $46,863 for year ended December 31,            2006.

 

**Critical Accounting Policies**

 

This Management’s Discussion and Analysis of Financial Condition            and Results of Operations discuss the Company’s Financial Statements, which have            been prepared in accordance with accounting principles generally accepted in the United            States. We have

terminated our previous operations and such operations are treated as            discontinued operations for financial statement purposes.

 

-17-

 

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We anticipate that in the future, the preparation of our financial            statements will require management to make estimates and assumptions that will affect            reported amounts of assets and liabilities and the disclosure of contingent assets and            liabilities at the date of the financial statements and the reported amounts of            revenues and expenses during the reporting period. On an ongoing basis, management will            evaluate its estimates and assumptions, including those related to inventory, income            taxes, revenue recognition and restructuring initiatives. We anticipate that management            will base its estimates and judgments on historical experience of the operations we may            acquire and on various other factors that are believed to be reasonable under the            circumstances, the results of which form the basis for making judgments about the            carrying value of assets and liabilities that are not readily apparent from other            sources. Actual results may differ from these estimates under different assumptions or            conditions.

 

Management believes the following critical accounting policies, among            others, will affect its more significant judgments and estimates used in the            preparation of our Consolidated Financial Statements following the completion of an            acquisition:

 

***Inventory.***The Company will be            required to reduce the stated value of its inventory for obsolescence or impairment in            an amount equal to the difference between the cost of the inventory and the estimated            market value, based upon assumptions about future demand and market conditions. If            actual future demand or market conditions are less favorable than those projected by            management, additional reductions in stated value may be required.

             

***Income Taxes.***In determining the            carrying value of the Company’s net deferred tax assets, the Company will be            required to assess the likelihood of sufficient future taxable income in certain tax            jurisdictions, based on estimates and assumptions, to realize the benefit of these            assets. If these estimates and assumptions change in the future, the Company may record            a reduction in the valuation allowance, resulting in an income tax benefit in the            Company’s Statements of Operations. Management will be required to evaluate the            realizability of the deferred tax assets and assesses the valuation allowance            quarterly.

             

***Goodwill and Other Long-Lived Asset Valuations.***In June 2001, the FASB issued SFAS 141, “Business            Combinations”, and SFAS 142, “Goodwill and Other Intangible Assets”,            effective for fiscal years beginning after December 15, 2001 with early adoption            permitted for companies with fiscal years beginning after March 15, 2001. We currently            have no intangible assets. At such time as we have intangible assets, we will adopt the            new rules on accounting for goodwill and other intangible assets, Under the new rules,            goodwill and intangible assets deemed to have indefinite lives will no longer be            amortized but will be subject to annual impairment tests in accordance with the            statements. Other intangible assets will continue to be amortized over their useful            lives.

             

***Revenue Recognition***. At such time as            we have revenues from operations, we will adopt revenue recognitions policies            consistent with generally acceptable accounting standards.

             

***Stock-Based Compensation.***

 

Equity            securities issued for services rendered have been accounted for at the fair market            value of the securities on the date of authorization.

 

-18-

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On            January 1, 2006, we adopted SFAS No. 123 (revised 2004), “Share-Based            Payment,” (“SFAS123(R)”) which requires the            measurement and recognition of compensation expense based on estimated fair values for            all share-based payments to employees and Directors, including employee stock options            and stock purchases related to our employee stock option and award plans. SFAS 123(R)            supersedes our previous accounting under Accounting Principles Board            (“APB”) Opinion No. 25, “Accounting for Stock Issued to            Employees” (“APB 25”) for periods beginning in the fiscal year ended            December 31, 2006. In March 2005, the SEC issued Staff Accounting Bulletin No. 107            (“SAB 107”) relating to SFAS 123(R). We have applied the provisions of SAB            107 in our adoption of SFAS 123(R). We adopted SFAS 123(R) using the modified            prospective transition method, which requires the application of the accounting            standard as of January 1, 2006, the first day of our fiscal year ended December 31,            2006. SFAS 123(R) requires companies to estimate the fair value of share-based payment            awards on the date of grant using an option pricing model. The value of the portion of            the award that is ultimately expected to vest is recognized as expense over the            requisite service periods in our Statement of Operations. Under SFAS 123(R),            stock-based compensation expense recognized during the period is based on the value of            the portion of share-based payment awards that is ultimately expected to vest during            the period. At December 31, 2007, we have no outstanding options or warrants, nor where            any options or warrants granted during the year then ended. Therefore we did not            recognize any stock-based compensation expense under SFAS 123(R) for the year ending            December 31, 2007.

 

**Interest Rate Risk**

 

We currently have debt and will undoubtedly incur debt to finance our            operations. We anticipate that a substantial amount of our future debt and the            associated interest expense will be subject to changes in the level of interest rates.            Increases in interest rates would result in incremental interest expense.

 

**Plan of Operation**

             

The Company’s current plan of operation is to acquire another            operating company. (See “Item 1 - Description of Business - Current Business            Plan.”)

             

It is likely that any acquisition will be a “reverse merger”            acquisition whereby the Company acquires a larger company by issuing shares of the            Company’s common stock to the shareholders of the larger company. Although the            Company would be the surviving or parent company from a corporate law standpoint, the            shareholders of the larger company would be the controlling shareholders of the Company            and the larger company would be treated as the survivor or parent company from an            accounting point of view. It can be expected that any company which may desire to be            acquired by the Company will do so as method of potentially becoming a public company            more quickly and less expensively than if such company undertook its own public            offering. Even if the Company is able to acquire another company, there can be no            assurance that the Company will ever operate at a profit.

             

**Off-Balance Sheet Arrangements**

             

We do not have any off-balance sheet arrangements that have or are            reasonably likely to have a current or future effect on our financial condition,            changes in financial condition, revenuesor expenses, results of            operations, liquidity, capital expenditures or capital resources that is material to            investors.

             

-19-

             

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**Contractual Obligations and Commitments**

 

Except for the payment of accrued management compensation, accrued            taxes, rent and other payables, all of which are described in the financial statements            attached hereto, we have no contractual commitments or obligations.

             

**Inflation**

 

The Company does not believe that inflation will negatively impact its            business plans.

             

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**Forward Outlook and Risks**

 

This Form 10-KSB contains and incorporates by reference certain            “forward-looking statements” within the meaning of Section 27A of the            Securities Act and Section 21E of the Exchange Act with respect to results of our            operations and businesses. All statements, other than statements of historical facts,            included in this Form 10-KSB, including those regarding market trends, our financial            position, business strategy, projected costs, and plans and objectives of management            for future operations, are forward-looking statements. In general, such statements are            identified by the use of forward- looking words or phrases including, but not limited            to, “intended,” “will,” “should,”            “may,” “expects,” “expected,”            “anticipates,” and “anticipated” or the negative thereof or            variations thereon or similar terminology. These forward-looking statements are based            on our current expectations. Although we believe that the expectations reflected in            such forward-looking statements are reasonable, there can be no assurance that such            expectations will prove to be correct. Because forward-looking statements involve risks            and uncertainties, our actual results could differ materially. Important factors that            could cause actual results to differ materially from our expectations are disclosed            hereunder and elsewhere in this Form 10-KSB. These forward-looking statements represent            our judgment as of the date of this Form 10-KSB. All subsequent written and oral            forward-looking statements attributable to Pacific Alliance are expressly qualified in            their entirety by the Cautionary Statements. we disclaim, however, any intent or            obligation to update our forward-looking statements.

 

***Operating History; No Assets; No Present Source of            Revenues***. We have been inactive since 1995. We intend to            attempt to commence active operations in the future by acquiring a Target Business.            Potential investors should be aware that there is only a limited basis upon which to            evaluate our prospects for achieving our intended business objectives. We have no            resources and have had no revenues since 1995. In addition, we will not generate any            revenues (other than investment income) until, at the earliest, the consummation of a            Business Combination. Moreover, there can be no assurance that any Target Business will            derive any material revenues from its operations or operate on a profitable            basis.

             

***Possibility of Total Loss of Investment.***An investment in the Company, is an extremely high risk investment, and            should not be made unless the investor has no need for current income from the invested            funds and unless the investor can afford a total loss of his or her            investment.

             

-20-

             

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***Absence of Substantive Disclosure Relating to Prospective Business            Combinations; Investment in the Company Versus Investment in a Target            Business***. We have not yet identified a prospective Target            Business. Accordingly, investors will have no substantive information concerning            consummation of any specific Business Combination in considering a purchase of the            Preferred Shares in this offering.

 

***Seeking to Achieve Public Trading Market through Business            Combination.***While a prospective Target Business may deem            a consummation of a Business Combination with the Company desirable for various            reasons, a Business Combination may involve the acquisition of, merger or consolidation            with, a company which does not need substantial additional capital, but which desires            to establish a public trading market for its shares, while avoiding what it may deem to            be adverse consequences of undertaking a public offering itself, including time delays,            significant expense, loss of voting control and the time and expense incurred to comply            with various Federal and state securities laws that regulate initial public offerings.            Nonetheless, there can be no assurance that there will be an active trading market for            the Company’s securities following the completion of a Business Combination or,            if a market does develop, as to the market price for the Company’s            securities.

             

***Uncertain Structure of Business            Combination***. The structure of a future transaction with a            Target Business cannot be determined at the present time and may take, for example, the            form of a merger, an exchange of stock or an asset acquisition. We may form one or more            subsidiary entities to complete a Business Combination and may, under certain            circumstances, distribute the securities of subsidiaries to our stockholders. There can            be no assurance that a market would develop for the securities of any subsidiary            distributed to stockholders or, if it did, any assurance as to the prices at which such            securities might trade. The structure of a Business Combination or the distribution of            securities to stockholders may result in taxation of the Company, the Target Business            or stockholders.

             

***Unspecified Target Business; Unascertainable            Risks***. We have not selected an acquisition or other            Business Combination as of the date of this Form 10-KSB. Accordingly, there is no basis            for prospective investors to evaluate the possible merits or risks of the Target            Business or the particular sector of the technology industries in which the Company may            ultimately operate. To the extent we effect a Business Combination with a financially            unstable company or an entity in its early stage of development or growth (including            entities without established records of revenues or income), we will become subject to            numerous risks inherent in the business and operations of financially unstable and            early stage or potential emerging growth companies. Although management will endeavor            to evaluate the risks inherent in a particular Target Business or industry, there can            be no assurance that we will properly ascertain or assess all such risks.

 

***Probable Lack of Business            Diversification***. As a result of our limited resources, in            all likelihood, we will have the ability to complete only a single Business            Combination. Accordingly, our prospects for success will be entirely dependent upon the            future performance of a single business. Unlike certain entities which have the            resources to consummate several Business Combinations or entities operating in multiple            industries or multiple segments of a single industry, it is highly likely that the we            will not have the resources to diversify our operations or benefit from the possible            spreading of risks or offsetting of losses. Our probable lack of diversification may            subject us to numerous economic, competitive and regulatorydevelopments, any or all of which may have a material adverse impact            upon the particular industry in which we may operate subsequent to a consummation of a            Business Combination. There can be no assurance that the Target Business will prove to            be commercially viable.

             

-21-

             

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***Conflicts of Interest; Absence of Independent            Directors***. None of the Company’s directors or            executive officers are required to commit their full time to the affairs of the Company            and it is likely that such persons will not devote a substantial amount of time to the            affairs of the Company. Such personnel will have conflicts of interest in allocating            management time among various business activities. As a result, the consummation of a            Business Combination may require a greater period of time than if the Company’s            management devoted their full time to the Company’s affairs.

 

***Limited Ability to Evaluate Target Business Management;            Possibility That Management Will Change***. The role of the            present management in the operations of a Target Business of the Company following a            Business Combination cannot be stated with certainty. Although we intend to scrutinize            closely the management of a prospective Target Business in connection with our            evaluation of the desirability of effecting a Business Combination with such Target            Business, there can be no assurance that our assessment of such management will prove            to be correct, especially in light of the possible inexperience of current key            personnel of the Company in evaluating certain types of businesses. While it is            possible that certain of our directors or executive officers will remain associated in            some capacities with the Company following a consummation of a Business Combination, it            is unlikely that any of them will devote a substantial portion of their time to the            affairs of the Company subsequent thereto. Moreover, there can be no assurance that            such personnel will have significant experience or knowledge relating to the operations            of the Target Business acquired by the Company. We may also seek to recruit additional            personnel to supplement the incumbent management of the Target Business. There can be            no assurance that we will successfully recruit additional personnel or that the            additional personnel will have the requisite skills, knowledge or experience necessary            or desirable to enhance the incumbent management. In addition, there can be no            assurance that our future management will have the necessary skills, qualifications or            abilities to manage a public company embarking on a program of business            development.

 

***Competition***. We expect to encounter            intense competition from other entities having business objectives similar to our            business objectives. Many of these entities, including venture capital partnerships and            corporations, shell companies, large industrial and financial institutions, small            business investment companies and wealthy individuals, are well-established and have            extensive experience in connection with identifying and effecting Business Combinations            directly or through affiliates. Many of these competitors possess greater financial,            technical, human and other resources than the Company and there can be no assurance            that the Company will have the ability to compete successfully. The Company’s            financial resources will be limited in comparison to those of many of its competitors.            Further, such competitors will generally not be required to seek the prior approval of            their own stockholders, which may enable them to close a Business Combination more            quickly than we can. This inherent competitive limitation may compel us to select            certain less attractive Business Combination prospects. There can be no assurance that            such prospects will permit us to achieve our business objectives.

 

-22-

----

 

 

***Uncertainty of Competitive Environment of Target            Business***. In the event that we succeed in effecting a            Business Combination, we will, in all likelihood, become subject tointense competition from competitors of theTarget            Business. In particular, certain industries which experience rapid growth frequently            attract anincreasingly larger number of competitors, including            competitors with greater financial, marketing, technical, human and other resources            than the initial competitors in the industry. The degree of competition characterizing            the industry of any prospective Target Business cannot presently be ascertained. There            can be no assurance that, subsequent to a consummation of a Business Combination, we            will have the resources to compete in the industry of the Target Business effectively,            especially to the extent that the Target Business is in a high-growth            industry.

 

***Additional Financing Requirements***.            We will not generate any revenues until, at the earliest, the consummation of a            Business Combination. We cannot ascertain the capital requirements for any particular            Business Combination we may consider. We will likely be required to seek additional            financing. There can be no assurance that such financing will be available on            acceptable terms, or at all. To the extent that additional financing proves to be            unavailable when needed to consummate a particular Business Combination, we would, in            all likelihood, be compelled to restructure the transaction or abandon that particular            Business Combination and seek an alternative Target Business candidate, if possible. In            addition, in the event of the consummation of a Business Combination, we may require            additional financing to fund the operations or growth of the Target Business. Our            failure to secure additional financing could have a material adverse effect on the            continued development or growth of the Target Business. We do not have any arrangements            with any bank or financial institution to secure additional financing and there can be            no assurance that any such arrangement, if required or otherwise sought, would be            available on terms deemed to be commercially acceptable and in our best            interests.

 

***No Appraisal of Potential Business            Combination***. We do not anticipate that we will obtain an            independent appraisal or valuation of a Target Business. Accordingly, our stockholders            will need to rely primarily upon management to evaluate a prospective Business            Combination.

             

***No Public Market for Securities***.            Currently, there is no public market for our common stock and no assurance can be given            that an active market will develop or if developed, that it will be sustained. It is            unlikely that any market will develop prior to the consummation of a Business            Combination. Even if a Business Consummation is completed, there can be no assurance            that a trading market for our securities will ever develop.

 

***Risk of Application of Penny Stock            Rules***. Our common stock is subject to the penny stock            rules as adopted by the Securities and Exchange Commission (the            “Commission”). The penny stock rules require a broker-dealer, prior to a            transaction in a penny stock not otherwise exempt from the rules, to deliver a            standardized risk disclosure document prepared by the Commission that provides            information about penny stocks and the nature and level of risks in the penny stock            market. The broker-dealer also must provide the customer with current bid and offer            quotations for the penny stock, the compensation of the broker-dealer and its            salesperson in the transaction and monthly account statements showing the market value            of each penny stock held in the customer’s account. In addition, the penny stock            rules require that prior to a transaction in a penny stock not otherwise exempt from            such rules, the broker-dealer must make a special written determination that the penny            stock is a suitable investment for the purchaser and receive the purchaser’s            written agreement to the transaction. These disclosure requirements may have the effect            of reducing the level of trading activity in the secondary market for a stock that            becomessubject to the penny stock rules. If our common stock            remains subject to the penny stock rules, investors in the Offering may find it more            difficult to sell their shares.

             

             

             

-23-

 

----

 

 

**ITEM 7. FINANCIAL STATEMENTS**

 

Index to Financial Statements

 

| Pacific Alliance Corporation Financial                            Statements | Page                                                                                |
|------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|
|                                                                         |                                                                                |   |
|                                                                         | Report of Independent Registered Public Accounting                            Firms | 25 |
|                                                                         |                                                                                |   |
|                                                                         | Balance Sheet                                                                       | 26 |
|                                                                         |                                                                                |   |
|                                                                         | Statements of Operations                                                            | 27 |
|                                                                         |                                                                                |   |
|                                                                         | Statements of Changes in Stockholders’                            Deficit     | 28 |
|                                                                         |                                                                                |   |
|                                                                         | Statements of Cash Flows                                                            | 29 |
|                                                                         |                                                                                |   |
|                                                                         | Notes to Financial Statements                                                       | 30 |

 

-24-

 

----

 

 

| HAROLD Y. SPECTOR, CPA | SPECTOR & WONG, LLP | 80 SOUTH LAKE AVENUE |
|------------------------|-------------------------|----------------------|

| CAROL S. WONG, CPA |                                       Certified Public Accountants | SUITE 723 |
|--------------------|----------------------------------------------------------------------------------------------------------------------|-----------|

|   | (888) 584-5577 | PASADENA, CA 91101 |
|--------|----------------|--------------------|

|   | FAX (626) 584-6447 |
|--------|--------------------|

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING                FIRM**

 

**To the Board of Directors and**

**Stockholders of Pacific Alliance                Corporation**

 

We            have audited the accompanying balance sheet of Pacific Alliance Corporation (a            development stage company) as of December 31, 2007, and the related statements of            operations, stockholders’ deficit, and cash flows for the years ended December            31, 2007, and 2006, and from the inception of the development stage on December 21,            1995 to December 31, 2007. These financial statements are the responsibility of the            company’s management. Our responsibility is to express an opinion on these            financial statements based on out audits.

 

We            conducted our audits in accordance with the standards of the Public Company Accounting            Oversight Board (United States). Those standards require that we plan and perform the            audit to obtain reasonable assurance about whether the financial statements are free of            material misstatement. The company is not required to have, nor were we engaged to            perform, an audit of its internal control over financial reporting. Our audit included            consideration of internal control over financial reporting as a basis for designing            audit procedures that are appropriate in the circumstances, but not for the purpose of            expressing an opinion on the effectiveness of the company’s internal control over            financial reporting. Accordingly, we express no such opinion. An audit also includes            examining, on a test basis, evidence supporting the amounts and disclosures in the            financial statements, assessing the accounting principles used and significant            estimates made by management, as well as evaluating the overall financial statement            presentation. We believe that our audits provide a reasonable basis for our            opinion.

In            our opinion, the financial statements referred to above present fairly, in all material            respects, the financial position of Pacific Alliance Corporation (a development stage            company) as of December 31, 2007, and the results of its operations and its cash flows            for the years ended December 31, 2007 and 2006, and for the periods from inception of            the development stage on December 21, 1995 to December 31, 2007 in conformity with            accounting principles generally accepted in the United States of America.

 

The            accompanying financial statements have been prepared assuming that the Company will            continue as a going concern. As discussed in Note 3 to the financial statements, the            Company did not generate revenue and has a net capital deficiency and minimal working            capital. Those conditions raise substantial doubt about its ability to continue as            going concern. Management’s plans regarding those matters are also described in            Note 3. The financial statements do not include any adjustments that might result from            the outcome of this uncertainty.

 

/s/ Spector & Wong, LLP

Pasadena, California

 

April 8, 2008

 

-25-

----

 

**PACIFIC ALLIANCE CORPORATION**

**(A DEVELOPMENT STAGE COMPANY)**

 

**BALANCE SHEET**

 

 

|                                                                                          | **As of**        |   |
|-----------------------------------------------------------------------------------------------|------------------|--------|
|                                                                                          | **December 31,** |   |
|                                                                                          | **2007**         |   |
| **ASSETS**                                                                                    |             |   |
| Current Assets                                                                                |             |   |
| Cash                                                                                          | **$ 29**         |   |
| **TOTAL ASSETS**                                                                              | **$ 29**         |   |
|                                                                                          |             |   |
| **LIABILITIES AND STOCKHOLDERS' DEFICIT**                                                     |             |   |
| Current Liabilities                                                                           |             |   |
| Accrued Interest                                                                              | **$ 53,436**     |   |
| Other Accrued Expenses                                                                        | **45,146**       |   |
| Notes payable                                                                                 | **125,000**      |   |
| Advances from Officer                                                                         | **231,735**      |   |
| Tax Liabilities                                                                               | **337,130**      |   |
| Notes payable to Related Parties                                                              | **144,293**      |   |
| Total current liabilities                                                                     | **936,740**      |   |
|                                                                                          |             |   |
| Stockholders' Deficit                                                                         |             |   |
| Common Stock, par value $0.001, authorized 100,000,000                            shares; and |             |   |
| 36,662,000 shares issued and outstanding                                                      | **36,662**       |   |
| Paid-in Capital                                                                               | **3,390,229**    |   |
| Accumulated deficit prior to the developmental                            stage               | **(2,632,447)**  |   |
| Accumulated deficit during the developmental                            stage                 | **(1,731,155)**  |   |
| Total Stockholders Deficit                                                                    | **(936,711)**    |   |
|                                                                                          |             |   |
| **TOTAL LIABILITIES AND STOCKHOLDERS'                            DEFICIT**                    | **$ 29**         |   |
|                                                                                          |             |   |

             

             

See notes to audited            financial statements.

             

            -26-

             

----

 

PACIFIC            ALLIANCE CORPORATION

(A DEVELOPMENT STAGE COMPANY)

             

STATEMENTS OF OPERATIONS

 

 

|                                                                           |                    |                  | **From Inception of** |
|--------------------------------------------------------------------------------|-------------------------|-----------------------|-----------------------|
|                                                                           |                    |                  | **the Developmental** |
|                                                                           |                    |                  | **Stage,**            |
|                                                                           | **For the years ended** | **December 21, 1995** |
|                                                                           | **December 31,**        |                  | **Through**           |
|                                                                           | **2007**                | 2006                  | **December 31, 2007** |
| Operating Expenses:                                                            |                    |                  |                  |
| Selling, General and Administrative Expenses                                   | **$ 124,921**           | $ 128,620             | $ 1,288,480           |
| Tax Penalty and Interest Expense                                               | **14,576**              | 20,031                | 148,657               |
| Loss on Investment                                                             | **-**                   | -                     | 6,844                 |
| Interest Expense                                                               | **46,477**              | 46,863                | 356,249               |
|                                                                           |                    |                  |                  |
| Net Loss before Extraordinary Item                                             | **(185,974)**           | (195,514)             | (1,800,230)           |
|                                                                           |                    |                  |                  |
| Extraordinary Item, Gain on Forgiveness of Tax                            debt | **-**                   | -                     | 69,075                |
|                                                                           |                    |                  |                  |
| Net Loss                                                                       | **$ (185,974)**         | $ (195,514)           | $ (1,731,155)         |
|                                                                           |                    |                  |                  |
| Net Loss per share, Basic and Diluted                                          | **$ (0.01)**            | $ (0.01)              |                  |
|                                                                           |                    |                  |                  |
| Weighted Average Number of Shares                                              | **36,261,788**          | 17,492,704            |                  |
|                                                                           |                    |                  |                  |
|  

                                                                  |                    |                  |                  |

 

 

See            notes to audited financial statements

 

-27-

 

----

 

**PACIFIC ALLIANCE CORPORATION**

**(A            DEVELOPMENT STAGE COMPANY)**

 

**STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT** 

 

 

|                                 |                                                                                           |          |    Additional | Accumulated       | Accumulated       |          |
|--------------------------------------|------------------------------------------------------------------------------------------------|----------|-------------------------|-------------------|-------------------|---------------|
|                                 |                                       Common | Stock    | Paid-in                 | Deficit Prior to  | Deficit After     |          |
|                                 | Shares                                                                                         | Amount   | Capital                 | December 21, 1995 | December 21, 1995 | Total         |
| Balance at December 21, 1995         | 2,099,125                                                                                      | $ 2,099  | $ 884,901               | $ (2,632,447)     |              | $ (1,745,447) |
| Conversion of Trade Accounts Payable | 1,458,005                                                                                      | 1,458    | 1,456,547               |              |              | 1,458,005     |
| Issuance of Common Stock             |                                                                                           |     |                    |              |              |          |
| for Cash                             | 5,000,000                                                                                      | 5,000    | 20,000                  |              |              | 25,000        |
| Issuance of Common Stock             |                                                                                           |     |                    |              |              |          |
| for Services                         | 216,000                                                                                        | 216      | 864                     |              |              | 1,080         |
| Conversion of Debt                   | 300,000                                                                                        | 300      | 14,700                  |              |              | 15,000        |
| Issuance of Common Stock for IRS     |                                                                                           |     |                    |              |              |          |
| Claim Reduction                      | 80,078                                                                                         | 80       | 79,998                  |              |              | 80,078        |
| Issuance of Common Stock             | 1,250,000                                                                                      | 1,250    | 248,621                 |              |              | 249,871       |
| Conversion of Management             |                                                                                           |     |                    |              |              |          |
| Compensation Liability               | 1,854,292                                                                                      | 1,854    | 183,575                 |              |              | 185,429       |
| Issuance of Common Stock for         |                                                                                           |     |                    |              |              |          |
| Consulting Services                  | 337,500                                                                                        | 338      | 33,412                  |              |              | 33,750        |
| Activity from December 21, 1995      |                                                                                           |     |                    |              |              |          |
| Through December 31, 2002            |                                                                                           |     |                    |              | (675,396)         | (675,396)     |
| Balance at December 31, 2002         | 12,595,000                                                                                     | 12,595   | 2,922,618               | (2,632,447)       | (675,396)         | (372,630)     |
| Net Loss for the Year Ended          |                                                                                           |     |                    |              |              |          |
| December 31, 2003                    | -                                                                                              | -        | -                       | -                 | (144,588)         | (144,588)     |
| Balance at December 31, 2003         | 12,595,000                                                                                     | 12,595   | 2,922,618               | (2,632,447)       | (819,984)         | (517,218)     |
| Issuance of Common Stock for         |                                                                                           |     |                    |              |              |          |
| Consulting Services                  | 1,250,000                                                                                      | 1,250    | 98,750                  |              |              | 100,000       |
| Issuance of Common Stock             |                                                                                           |     |                    |              |              |          |
| for Stock Subscription               | 100,000                                                                                        | 100      | 19,878                  |              |              | 19,978        |
| Issuance of Common Stock for         |                                                                                           |     |                    |              |              |          |
| Management Compensation Expense      | 857,300                                                                                        | 857      | 84,873                  |              |              | 85,730        |
| Net Loss for the Year Ended          |                                                                                           |     |                    |              |              |          |
| December 31, 2004                    |                                                                                           |     |                    |              | (237,913)         | (237,913)     |
| Balance at December 31, 2004         | 14,802,300                                                                                     | 14,802   | 3,126,119               | (2,632,447)       | (1,057,897)       | (549,423)     |
| Issuance of Common Stock for         |                                                                                           |     |                    |              |              |          |
| Management Compensation              | 678,300                                                                                        | 679      | 67,152                  |              |              | 67,831        |
| Net Loss for the Year Ended          |                                                                                           |     |                    |              |              |          |
| December 31, 2005                    |                                                                                           |     |                    |              | (291,770)         | (291,770)     |
| Balance at December 31, 2005         | 15,480,600                                                                                     | $ 15,481 | $ 3,193,271             | $ (2,632,447)     | $ (1,349,667)     | $ (773,362)   |
| Issuance of Common Stock for         |                                                                                           |     |                    |              |              |          |
| Management Compensation              | 602,850                                                                                        | 602      | 59,682                  |              |              | 60,284        |
| Conversion of related party debt to  |                                                                                           |     |                    |              |              |          |
| common stock                         | 20,000,000                                                                                     | 20,000   | 80,000                  |              |              | 100,000       |
| Net Loss for the Year Ended          |                                                                                           |     |                    |              |              |          |
| December 31, 2006                    |                                                                                           |     |                    |              | (195,514)         | (195,514)     |
| Balance at December 31, 2006         | 36,083,450                                                                                     | $ 36,083 | $ 3,332,953             | $ (2,632,447)     | $ (1,545,181)     | $ (808,592)   |
| Issuance of Common Stock for         |                                                                                           |     |                    |              |              |          |
| Management Compensation              | 578,550                                                                                        | 579      | 57,276                  |              |              | 57,855        |
| Net Loss for the Year Ended          |                                                                                           |     |                    |              |              |          |
| December 31, 2007                    |                                                                                           |     |                    |              | (185,974)         | (185,974)     |
| Balance at December 31, 2007         | 36,662,000                                                                                     | $ 36,662 | $ 3,390,229             | $ (2,632,447)     | $ (1,731,155)     | $ (936,711)   |
|                                 |                                                                                           |     |                    |              |              |          |
|                                 |                                                                                           |     |                    |              |              |          |
|                                 |                                                                                           |     |                    |              |              |          |
|                                      |                                                                                                |          |                         |                   |                   |               |  |  |  |  |

             

             

See            notes to audited financial statements

 

-28-

 

----

 

**PACIFIC ALLIANCE CORPORATION**

**(A DEVELOPMENT STAGE COMPANY)**

 

**STATEMENTS OF CASH FLOWS**

 

 

|                                                                                                   |                                                                                                                                                                                          |                                                                                                                                                                                            | From Inception of                                                                                                                                                                                                                                                             |
|--------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                   |                                                                                                                                                                                          |                                                                                                                                                                                            | the Developmental                                                                                                                                                                                                                                                             |
|                                                                                                   |                                                                                                                                                                                          |                                                                                                                                                                                            | Stage,                                                                                                                                                                                                                                                                        |
|                                                                                                   | **For the years ended**                                                                                                                                                                       | December 21, 1995                                                                                                                                                                               |
|                                                                                                   | **December 31,**                                                                                                                                                                              |                                                                                                                                                                                            | Through                                                                                                                                                                                                                                                                       |
|                                                                                                   | **2007**                                                                                                                                                                                      | 2006                                                                                                                                                                                            | December 31, 2007                                                                                                                                                                                                                                                             |
| **Cash Flow from Operating                            Activities:**                                    |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |
|  Net Loss                                                                                         | **$ (185,974)**                                                                                                                                                                               | $ (195,514)                                                                                                                                                                                     | $ (1,731,155)                                                                                                                                                                                                                                                                 |
|  Adjustments to Reconcile Net Loss to Net Cash                            Used in Operations:     |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |
|      Loss on                            investments                                | **-**                                                                                                                                                                                         | -                                                                                                                                                                                               | 6,844                                                                                                                                                                                                                                                                         |
|      Gain on forgiveness on tax                            debt                    | **-**                                                                                                                                                                                         | -                                                                                                                                                                                               | (69,075)                                                                                                                                                                                                                                                                      |
|      Stock issued for                            services                          | **57,855**                                                                                                                                                                                    | 60,284                                                                                                                                                                                          | 591,960                                                                                                                                                                                                                                                                       |
|  (Increase) Decrease in:                                                                          |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |
|      Accounts                            receivable                                | **-**                                                                                                                                                                                         | -                                                                                                                                                                                               | 95,841                                                                                                                                                                                                                                                                        |
|  Increase (Decrease) in:                                                                          |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |
|      Accrued expenses                                                              | **21,350**                                                                                                                                                                                    | 25,141                                                                                                                                                                                          | 255,643                                                                                                                                                                                                                                                                       |
|      Tax liabilities                                                               | **14,576**                                                                                                                                                                                    | 20,031                                                                                                                                                                                          | (38,707)                                                                                                                                                                                                                                                                      |
| **Net Cash Used in Operating                            Activities**                                   | **(92,193)**                                                                                                                                                                                  | (90,058)                                                                                                                                                                                        | (888,649)                                                                                                                                                                                                                                                                     |
|                                                                                                   |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |
| **Cash Flow from Investing                            Activities**                                     |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |
|      Purchase of                            investments                            | **-**                                                                                                                                                                                         | -                                                                                                                                                                                               | (30,180)                                                                                                                                                                                                                                                                      |
|      Proceeds from sale of                            investments                  | **                                                      -** |                                                        - |                                                           23,336                                                        |
| **Net Cash Used In Investing                            Activities**                                   |                                                       -     |                                                        - |                                                          (6,844)                                                             |
|                                                                                                   |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |
| **Cash Flow from Financing                            Activities:**                                    |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |
|      Bank overdraft                                                                | **(6)**                                                                                                                                                                                       | (3,354)                                                                                                                                                                                         | (2,587)                                                                                                                                                                                                                                                                       |
|      Proceeds from notes                            payable                        | **5,000**                                                                                                                                                                                     | 1,500                                                                                                                                                                                           | 211,486                                                                                                                                                                                                                                                                       |
|      Payments of note                            payable                           | **-**                                                                                                                                                                                         | (1,277)                                                                                                                                                                                         | (51,277)                                                                                                                                                                                                                                                                      |
|      Net Proceeds from notes                            payable to related parties | **-**                                                                                                                                                                                         | 65,000                                                                                                                                                                                          | 119,084                                                                                                                                                                                                                                                                       |
|      Advance from                            officer                               | **139,710**                                                                                                                                                                                   | 184,100                                                                                                                                                                                         | 927,456                                                                                                                                                                                                                                                                       |
|      Repayment of advance from                            officer                  | **(52,482)**                                                                                                                                                                                  | (155,911)                                                                                                                                                                                       | (593,489)                                                                                                                                                                                                                                                                     |
|      Proceeds from issuance of                            common stock             | **-**                                                                                                                                                                                         | -                                                                                                                                                                                               | 25,000                                                                                                                                                                                                                                                                        |
|      Proceeds from common stock                            subscription            | **                            -**                 |                                                        - |                                                         259,849                                                                   |
| ** Net Cash Flow Provided by Financing                            Activities**                    | **                                           92,222**                                                              |                                              90,058                                                        |                                                                                    895,522                                             |
|                                                                                                   |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |
| **     Net Increase in                            Cash**                           | **29**                                                                                                                                                                                        | -                                                                                                                                                                                               | 29                                                                                                                                                                                                                                                                            |
|                                                                                                   |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |
| Cash Balance at Beginning of Period                                                                    | **                                                      -** |                                                        - |                                                                     - |
|                                                                                                   |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |
| **Cash Balance at End of                            Period**                                           | **$                                                29**                                   | $                                                      -           | $                                                               29                             |
|                                                                                                   |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |
| Supplemental Disclosures of Cash Flow                            Information                           |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |
|      Interest paid                                                                 | **$ 18,518**                                                                                                                                                                                  | $ 23,538                                                                                                                                                                                        |                                                                                                                                                                                                                                                                          |
|                                                                                                   |                                                                                                                                                                                          |                                                                                                                                                                                            |                                                                                                                                                                                                                                                                          |

See notes to financial statements

 

-29-

 

----

 

**PACIFIC ALLIANCE CORPORATION**

**(A DEVELOPMENT STAGE COMPANY)**

             

**NOTES TO AUDITED FINANCIAL STATEMENTS**

 

**NOTE 1 –NATURE OF            BUSINESS**

             

Pacific Alliance Corporation (the “Company”), whose name was            changed from Pacific Syndication, Inc. in 1997, was originally incorporated in December            1991 under the laws of the State of Delaware. It also became a California corporation            in 1991. Pacific Syndication, Inc. was engaged in the business of videotape            duplication, standard conversion and delivery of television programming. In 1994,            Pacific Syndication, Inc. merged with Kaiser Research, Inc.

             

The            Company filed a petition for Chapter 11 under the Bankruptcy Code in June 1995. The            debtor in possession kept operating until December 21, 1995, when all assets, except            cash and accounts receivable, were sold to a third party, Starcom. The purchaser            assumed all post-petition liabilities and all obligations collateralized by the assets            acquired.

             

In            1997, a reorganization plan was approved by the Bankruptcy Court, and the remaining            creditors of all liabilities subject to compromise, excluding tax claims, were issued            1,458,005 shares of the Company’s common stock in March 1998, which corresponds            to one share for every dollar of indebtedness. Each share of common stock issued was            also accompanied by an A warrant and a B warrant (see note 9). The IRS portion of tax            liabilities was payable in cash by quarterly installments (see note 5). Repayment of            other taxes is still being negotiated.

 

NOTE            2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The            accompanying consolidated financial statements have been prepared in accordance with            accounting principles generally accepted in the United States of America            (GAAP).

 

Reclassification:Certain reclassifications            have been made to the 2006 financial statements to conform with the 2007 financial            statements presentation. Such reclassification had no effect on net losses previously            reported.

 

Use of estimatesThe preparation of the            accompanying financial statements in conformity with accounting principles generally            accepted in the United States requires management to make certain estimates and            assumptions that directly affect the results of reported assets, liabilities, revenue,            and expenses. Actual results may differ from these estimates.

 

Revenue RecognitionThe Company currently            has no source of revenues. Revenue recognition policies will be determined when            principal operations begin.

 

Cash EquivalentsFor purposes of the            statements of cash flows, the Company considers all highly liquid debt instruments with            an original maturity of three months or less to be cash equivalents.

 

Property and EquipmentAs of December 31,            2007, the Company did not maintain or control any fixed assets.

 

Income TaxesIncome tax expense is based on            pretax financial accounting income. Deferred tax assets and liabilities are recognized            for the expected tax consequences of temporary differences between the tax bases of            assets and liabilities and their reported amounts.

 

Net Loss Per ShareNet Loss Per Share Basic            net loss per share includes no dilution and is computed by dividing net loss available            to common stockholders by the weighted average number of common stock outstanding for            the period. Diluted net loss per share does not differ from basic net loss per share as            the Company did not have dilutive items during the audit period.

 

-30-

 

----

**PACIFIC ALLIANCE CORPORATION**

**(A DEVELOPMENT STAGE COMPANY)**

             

**NOTES TO AUDITED FINANCIAL STATEMENTS**

 

 

**NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            (Continued)**

 

Non-employees Equity TransactionsThe            Company accounts for equity instruments issued to non-employees in accordance with the            provisions of Statement of Financial Accounting Standards (SFAS) No. 123 and the            Emerging Issues Task Force (EITF) Issue No. 00-18,*Accounting            for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in            Conjunction with Selling, Goods or Services.*SFAS No. 123            states that equity instruments that are issued in exchange for the receipt of goods or            services should be measured at the fair value of the consideration received or the fair            value of the equity instruments issued, whichever is more reliably measurable. Under            the guidance in Issue 00-18, the measurement date occurs as of the earlier of (a) the            date at which a performance commitment is reached or (b) absent a performance            commitment, the date at which the performance necessary to earn the equity instruments            is complete (that is, the vesting date).

 

New Accounting Pronouncements:In February            2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “THE            FAIR VALUE OPTION FOR FINANCIAL ASSETS AND LIABILITIES – INCLUDING AN AMENDMENT            OF FASB STATEMENT NO. 115.” SFAS No. 159 provides companies with an option to            measure, at specified election dates, certain financial instruments and other items at            fair value that are not currently measured at fair value. A company that adopts SFAS            159 will report unrealized gains and losses on items for which the fair value option            has been elected in its financial statements during each subsequent reporting date.            SAFS No.159 is effective for financial statements issued for fiscal years beginning            after November 15, 2007, and interim periods within those fiscal years. The Company            does not expect SFAS 159 to have material impact on its financial position, results of            operations and cash flows.

 

In            May 2007, the FASB issued FASB Staff Position No. FIN 48-1, “DEFINITION OF            SETTLEMENT IN FASB INTERPRETATION NO. 48.” FSP 48-1 amended FIN 48 to provide            guidance on how an enterprise should determine whether a tax position is effectively            settled for the purpose of recognizing previously unrecognized tax benefits. FSP 48-1            required application upon the initial adoption of FIN 48.  The adoption of            FSP 48-1 did not affect the Company’s financial statements.

             

In            December 2007, the FASB issued SFAS No. 160, “NONCONTROLLING INTEREST IN            CONSOLIDATED FINANCIAL STATEMENTS – AN AMENDMENT OF ARB No. 51.” SFAS 160            clarifies the accounting for noncontrolling or minority interests. This statement            requires expanded disclosures in the consolidated financial statements that clearly            identify and distinguish between the interests of the parent’s owners and            interests of the noncontrolling owners of a subsidiary. Those expanded disclosures            include a reconciliation of the beginning and ending balances of the equity            attributable to the parent and the noncontrolling owners and a schedule showing the            effects of changes in a parent’s ownership interest in a subsidiary on the equity            attributable to the parent. The provisions of SFAS 160 are effective for fiscal years            beginning after December 15, 2008. The Company is currently evaluating the impact of            the adoption of SFAS 160 on its financial statements.

 

In            June 2006, the FASB issued Interpretation No. 48, "ACCOUNTING FOR UNCERTAINTY IN INCOME            TAXES", ("FIN 48"). This Interpretation clarifies the accounting for uncertainty in            income taxes recognized in an enterprise's financial statements in accordance with FASB            Statement No. 109, "ACCOUNTING FOR INCOME TAXES." This Interpretation prescribes a            recognition threshold and measurement attribute for the financial statement recognition            and measurement of a tax position taken or expected to be taken in a tax return. This            Interpretation also provides guidance on derecognition, classification, interest and            penalties, accounting in interim periods, disclosure, and transition. FIN 48 is            effective for fiscal years beginning after December 15, 2006. The Company does not            engage in risky tax transactions and therefore does not anticipate the need for a FIN            48 tax adjustment.

 

-31-

 

----

**PACIFIC ALLIANCE CORPORATION**

**(A DEVELOPMENT STAGE COMPANY)**

             

**NOTES TO AUDITED FINANCIAL STATEMENTS**

 

 

**NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES            (Continued)**

 

In September 2006, the FASB issued SFAS No. 157, "FAIR VALUE            MEASUREMENTS." SFAS No. 157 defines fair value, establishes a framework for measuring            fair value in generally accepted accounting principles, and expands disclosures about            fair value measurements. This statement addresses how to calculate fair value            measurements required or permitted under other accounting pronouncements. Accordingly,            this statement does not require any new fair value measurements. However, for some            entities, the application of the statement will change current practice. SFAS No. 157            is effective for the Company beginning January 1, 2008.

 

In            September 2006, the Securities and Exchange Commission ("SEC") staff issued Staff            Accounting Bulletin No. 108 ("SAB 108"), "CONSIDERING THE EFFECTS OF PRIOR YEAR            MISSTATEMENTS WHEN QUANTIFYING MISSTATEMENTS IN CURRENT YEAR FINANCIAL STATEMENTS." The            stated purpose of SAB 108 is to provide consistency between how registrants quantify            financial statement misstatements.

 

Prior to the issuance of SAB 108, there have been two widely-used            methods, known as the "roll-over" and "iron curtain" methods, of quantifying the            effects of financial statement misstatements. The roll-over method quantifies the            amount by which the current year income statement is misstated while the iron curtain            method quantifies the error as the cumulative amount by which the current year balance            sheet is misstated. Neither of these methods considers the impact of misstatements on            the financial statements as a whole.

 

SAB            108 established an approach that requires quantification of financial statement            misstatements based on the effects of the misstatement on each of the Company's            financial statements and the related financial statement disclosures. This approach is            referred to as the "dual approach" as it requires quantification of errors under both            the roll-over and iron curtain methods.

 

SAB            108 allows registrants to initially apply the dual approach by either retroactively            adjusting prior financial statements as if the dual approach had always been used, or            by recording the cumulative effect of initially applying the dual approach as            adjustments to the carrying values of assets and liabilities as of January 1, 2006 with            an offsetting adjustment recorded to the opening balance of retained            earnings.

 

The            Company will initially apply SAB 108 using the cumulative effect transition method in            connection with the preparation of the annual financial statements for the year ending            December 31, 2006. The Company does not believe the adoption of SAB 108 will have a            significant effect on its financial statements.

 

**NOTE 3 –GOING            CONCERN**

             

The            accompanying financial statements have been prepared on a going concern basis, which            contemplated the realizations of assets and the satisfaction of liabilities in the            normal course of business. As shown in the December 31, 2007 financial statements, the            Company did not generate any revenue, and has a net capital deficiency. These factors            among others may indicate that the Company will be unable to continue as a going            concern for a reasonable period of time. For the year ended, December 31, 2007 the            Company funded its disbursements using loans from an officer and other related            parties.

 

The            financial statements do not include any adjustments relating to the recoverability of            assets and classification of liabilities that might be necessary should the Company be            unable to continue as a going concern.

             

The            Company is no longer operating, and is attempting to locate a new business (operating            company), and offer itself as a merger vehicle for a company that may desire to go            public through a merger rather than through its own public stock offering.

 

-32-

 

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**PACIFIC ALLIANCE CORPORATION**

**(A DEVELOPMENT STAGE COMPANY)**

             

**NOTES TO AUDITED FINANCIAL STATEMENTS**

 

 

**NOTE 4– OTHER ACCRUED EXPENSES**

 

Other accrued expenses at December 31, 2007 consist of:

 

|   | Accrued Professional Fees |   | $ 27,884 |   |   |
|--------|---------------------------|--------|----------|--------|--------|
|   | Other Accrued Expenses    |   | 17,262   |   |   |
|   | Total                     |   | $ 45,146 |   |   |

 

             

**NOTE 5– TAX LIABILITIES**

 

The            Company owes back taxes to the IRS, California Franchise Tax Board, California State            Board of Equalization, and County of Los Angeles, before the bankruptcy. The Company is            attempting to negotiate settlements and the final amount may differ from the amount            recorded on the balance sheets.

 

The            IRS portion of tax liabilities was payable in quarterly installments of $ 11,602, and            the final payment was due in January 2002. However, no payments have been made since            April 2000. As of December 31, 2007, the Company owes $281,172 to the IRS. The taxes            owed to IRS are delinquent and accruing interest at 9% per annum.

 

As            of December 31, 2007, the Company owes $5,455 to California Franchise Tax Board. No            payments have been made and the taxes owed to California Franchise Tax Board are            delinquent. No interest is being accrued; however, a protection lien is being            filed.

 

As            of December 31, 2007, the Company owes $43,057 to California State Board of            Equalization. No payments have been made and the taxes owed to California State Board            of Equalization are delinquent and accruing an interest at 9% per annum.

 

As of December 31, 2007, the Company owes $7,446 to the County of Los            Angeles. No payments have been made and the taxes owed to the County of Los Angeles are            delinquent and accruing an interest at 9% per annum.

 

**NOTE 6– SHORT TERM NOTE            PAYABLE**

 

During 2007, the Company obtained additional notes payable of $5,000,            from third parties. The notes payable bear interest at 10% per annum and are due on            demand. As of December 31, 2007, the balance was $125,000.

 

**NOTE 7–NOTES            PAYABLE TO RELATED PARTIES**

             

Notes payable to minority shareholders amounted to $144,293 at December            31, 2007. These notes bear interest at 10% to 12%, and are due on demand.

 

-33-

 

----

 

**PACIFIC ALLIANCE CORPORATION**

**(A DEVELOPMENT STAGE COMPANY)**

             

**NOTES TO AUDITED FINANCIAL STATEMENTS**

 

 

**NOTE 8–INCOME TAXES**

 

The            Company has loss carryforwards available to offset future taxable income. The total            loss carryforwards at December 31, 2007 are estimated at approximately $1,700,000 and            expire between 2015 and 2027. Loss carryforwards are limited in accordance with the            rules of change in ownership. A valuation allowance is recorded for the full amount of            deferred tax assets of approximately $580,000, which relates to these loss            carryforwards, since future profits are indeterminable. The valuation allowance            increased by $40,000 during the year ended December 31, 2007. As of the audit report            date, the Company did not file its corporate income tax returns for the year ended            December 31, 2007.

 

**NOTE 9 – COMMON STOCK AND WARRANTS**

 

On            May 28, 1997, a reorganization plan was approved by the Bankruptcy Court. As a result,            existing shares of the Company were reverse split 1-for-6 and pre-bankruptcy creditors            were issued 1,458,005 shares of Company’s common stock. On November 13, 1997, an            additional 5,000,000 shares of common stock were issued (after reverse split) to an            officer of the Company in return for proceeds of $25,000 ($.005 per share).

 

In            accordance with the reorganization plan, the pre-bankruptcy creditors were also issued            1,458,005 class “A” warrants and 1,458,005 class “B” warrants.            The class “A” warrants allowed the purchase of a share of common stock at            an exercise price of $2.50 per share. The “A” warrants expired in June 2000            and none were exercised. The class “B” warrants allowed the purchase of a            share of common stock at an exercise price of $5.00 per share, and the warrants expired            in June 2002, and none were exercised.

             

In            May and June 1998, the Company issued 16,000 and 200,000 shares of common stock            respectively, for professional services received from non-related individuals. These            shares were valued at $0.005 per share.

 

In            June 1998, the IRS applied a personal tax refund from a former officer of the Company            against the Company’s tax liability, reducing it by $80,078. In accordance with            an agreement between the management and the former officer, 80,078 shares of common            stock were issued to the former officer in exchange for the loss of his personal tax            refund.

             

In            February 2000, the Company issued 300,000 shares to an officer for repayment of $15,000            in advances the officer loaned to the Company and accrued interest.

             

In            May 2000, the Company issued 150,000 shares for repayment of consulting services            rendered to the Company from a former officer. These shares were valued at $0.10 per            share.

             

Pursuant to the provisions of the modified joint plan of reorganization,            Pacific Alliance Corporation compensates its management on an hourly basis at $75 per            hour for the time actually devoted to the business of the Company. Payment for services            is made through issuance of shares of common stock until such time as the            Company’s net worth reaches $350,000. According to the modified joint plan of            reorganization, the stock issued for services shall be valued at $0.10 per share.            During the year ended December 31, 2000, the Company issued 1,666,801 shares of common            stock for accrued compensation, and in June 2002, the company issued an additional 187,            491 shares of common stock.

 

-34-

 

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**PACIFIC ALLIANCE CORPORATION**

**(A DEVELOPMENT STAGE COMPANY)**

             

**NOTES TO AUDITED FINANCIAL STATEMENTS**

 

**NOTE 9 – COMMON STOCK AND WARRANTS            (continued)**

 

In            October 2001, the Company entered into an agreement under which PIL S.A. would make a            capital infusion and bring in new majority shareholders. Total capital to be brought to            the Company was to be $500,000 by October 31, 2001, and an additional $500,000 by            December 31, 2001, at a rate of $0.20 per share. The right to cancel any subscription            under the agreement and have the consideration refunded would have required a breach of            the agreement, termination of the agreement by mutual consent, or termination of the            agreement by its own terms. At December 31, 2002, 1,250,000 shares of stock were issued            to PIL S.A. for the $249,871 that had been received from PIL S.A. in previous quarters            as subscription of shares of common stock. In May 2004, 50,000 shares for an additional            subscription of $9,978 received in 2002 were issued to PIL S.A. In June 2002, PIL S.A.            elected to convert a loan with balance of $10,000 into 50,000 shares of common stock.            At June 30, 2004 the 50,000 shares were issued. Both the $10,000 and $9,978 were            classified as common stock subscription deposit as of December 31, 2002. The agreement            with PIL S.A. has been terminated.

 

In            September 2002, the Company issued 187,500 shares of its common stock for consulting            services received from a non-related individual. The shares were valued at $0.10 per            share.

             

In            2004, the Company issued 857,300 shares of common stock for management services of            $85,730, of which $50,000 was accrued at December 31, 2003. The shares were valued at            $0.10 per share pursuant to the Modified Joint Plan of Reorganization approved by U.S.            Bankruptcy Court.

 

The            Company also issued 1,250,000 shares of common stock in 2004 for consulting fees of $            100,000, of which $12,500 was accrued at December 31, 2003. The shares were valued at            $0.08, the closing market price on the Board’s authorization date.

 

In            2005, the Company issued 678,300 shares of common stock for management services of            $67,830, pursuant to the provisions of the Modified Plan of Reorganization approved by            the U.S. Bankruptcy Court. Pursuant to the Modified Joint Plan of Reorganization, the            stock issued for services was valued at $0.10 per share.

 

In            2006, the Company issued 602,850 shares of common stock for management services of            $60,284, pursuant to the provisions of the Modified Plan of Reorganization approved by            the U.S. Bankruptcy Court. Pursuant to the Modified Joint Plan of Reorganization, the            stock issued for services was valued at $0.10 per share.

 

In            2006, the Company issued 20,000,000 shares of restricted common stock to Mr. Scharmann,            the CEO of the Company, as payment of $100,000 of debt owed by the Company to him as            advances from officer.

 

In            2007, the Company issued 578,550 shares of common stock for management services,            pursuant to the provisions of the Modified Plan of Reorganization approved by the U.S.            Bankruptcy Court in 1997. The stocks were valued $0.10 per share, or $57,855 of            total.

 

-35-

 

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**PACIFIC ALLIANCE CORPORATION**

**(A DEVELOPMENT STAGE COMPANY)**

             

**NOTES TO AUDITED FINANCIAL STATEMENTS**

 

 

**NOTE 10 – NET LOSS PER SHARE**

 

The            following table sets forth the computation of basic and diluted net loss per            share:

 

|                                 | For the years ended December 31, |
|--------------------------------------|----------------------------------|
|                                 | 2007                             | 2006 |   |   |
| Numerator:                           |                             |   |   |   |
| Net Loss                             | $ (185,974)                      | $ (195,514) |   |   |
| Denominator:                         |                             |   |   |   |
| Weighted Average Number of Shares    | 36,261,788                       | 17,492,704 |   |   |
|                                 |                             |   |   |   |
| Net Loss per share-Basic and Diluted | $ (0.01)                         | $ (0.01) |   |   |
|                                 |                             |   |   |   |
|                                 |                             |   |   |   |

 

**NOTE 11 – RELATED PARTY TRANSACTIONS**

 

An            officer of the Company, the CEO, advanced $139,710 for the year ended December 31,            2007. The Company repaid $52,482 for the year ended December 31, 2007. These advances            bear interest at 10% and have no maturity date. The balance of advances was $231,735            with accrued interest of $442 at December 31, 2007.

 

During the quarter ended March 31, 2002, the Company passed a resolution            to pay rent, office and secretarial services to a stockholder of the Company at a rate            of $500 per month. These charges were retroactive to July 1997, subsequent to the date            of approval of the reorganization plan by the Bankruptcy court. As such, $6,000 was            recorded as expense during the years ended December 31, 2007 and 2006.

 

**NOTE 12 – EXTRAORDINARY ITEM**

 

On            December 19, 2000, the Employment Development Department (EDD) accepted an “Offer            in Compromise” in the amount of $7,600 to satisfy in full, all outstanding            liabilities of $76,675 due to the EDD by Pacific Alliance Corporation. The settlement            amount was paid in January 2001, and an extraordinary gain of $69,075 was            recognized.

 

**ITEM            8.         CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL            DISCLOSURE**

 

None.

 

-36-

 

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| **ITEM 8A(T).** | **CONTROLS AND PROCEDURES** |
|-----------------|-----------------------------|

             

Under the supervision and with the participation of our management,            including our President/Principal Executive Officer and Secretary/Treasurer/Principal            Financial Officer, we evaluated the effectiveness of the design and operations of our            disclosure controls and procedures, as defined in Rule13a-15(e) under the Securities            Exchange Act of 1934. Based on this evaluation, our Principal Executive Officer and            Principal Financial Officer concluded that, as of the end of the period covered by this            report, our disclosure controls and procedures are adequately designed to ensure that            information required to be disclosed in the reports submitted under the Securities and            Exchange Act of 1934 is recorded, processed, summarized and reported within the time            periods specified in Securities and Exchange Commission ("SEC") rules and            forms.

 

**Management’s Annual Report on Internal Control over Financial            Reporting**

 

Our            Secretary/Treasurer, who is also our principal financial officer, is responsible to            design or supervise a process to be effected by our board of directors that provides            reasonable assurance regarding the reliability of financial reporting and the            preparation of financial statements for external purposes in accordance with generally            accepted accounting principles.  The policies and procedures include:             maintenance of records in reasonable detail to accurately and fairly reflect the            transactions and dispositions of assets,

 

|   | **•** | provide reasonable assurance that transactions are                            recorded as necessary to permit preparation of financial statements in                            accordance with  generally accepted accounting principles, and                            that receipts and expenditures are being made only in accordance with                            authorizations of management and directors, and |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

             

|   | **•** | provide reasonable assurance regarding prevention or                            timely detection of unauthorized acquisition, use or disposition of                            assets that could have a material effect on our financial                            statements. |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

For the            year ended December 31, 2007, management has relied on the Committee of Sponsoring            Organizations of the Treadway Commission (COSO), “Internal Control - Integrated            Framework,” issued in 1992, to evaluate the effectiveness of our internal control            over financial reporting and based upon that framework, management has determined that            our internal control over financial reporting is effective.

 

Our            management determined that there were no changes made in our internal controls over            financial reporting during the fourth quarter of 2007 that have materially affected, or            are reasonably likely to materially affect our internal control over financial            reporting.

 

-37-

 

----

 

 

**ITEM 8B. OTHER INFORMATION**

We must disclose under this item any information required to be            disclosed in a report on Form 8-K during the fourth quarter of the year covered by this            Form 10-KSB, but not reported, whether or not otherwise required by this Form 10-KSB.            If disclosure of such information is made under this item, it need not be repeated in a            report on Form 8-K which would otherwise be required to be filed with respect to such            information or in a subsequent report on Form 10-KSB.  No additional disclosure is            required under this item.

 

**PART III**

 

**ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS            AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE            ACT.**

 

A.        Identification of Directors and Executive            Officers. The current directors and officers of the Company,            who will serve until the next annual meeting of shareholders or until their successors            are elected or appointed and qualified, are set forth below:

 

| Name           | Age    | Position                     |
|----------------|--------|------------------------------|
|           |   |                         |
| Mark Scharmann | 49     | President/Director           |
| Dan Price      | 53     | Vice President/Director      |
| David Knudson  | 48     | Secretary/Treasurer/Director |

 

Mark Scharmann.Mr. Scharmann has been a            private investor and business consultant since 1981. Mr. Scharmann became involved in            the consulting business following his compilation and editing in 1980 of a publication            calledDigest of Stocks Listed on the Intermountain Stock            Exchange. In 1981 he compiled and edited an 800 page            publication called theOTC Penny Stock            Digest. Mr. Scharmann has rendered consulting services to            public and private companies regarding reverse acquisition transactions and other            matters. Mr. Scharmann was vice president of OTC Communications, Inc. from March 1984            to January 1987. From 1982 to 1996, he was the president of Royal Oak Resources            Corporation. In 1996, Royal Oak Resources completed and acquisition and in connection            therewith changed its name to Hitcom Corporation. Mr. Scharmann was the President of            Norvex, Inc., a blank check company which completed an acquisition and in connection            therewith, changed its name to Capital Title. Mr. Scharmann is a promoter of            Nightingale, Inc., a publicly-held corporation blank check company. He has also been an            officer and director of several other blind pool companies.

 

Dan O. Price. Since February 2001, Mr.            Price has been working as an Enrollment Counselor for the University of Phoenix. From            1998 to October 2000, Mr. Price worked as an evaluator at Learning Technics, Kirkland,            WA and Salt Lake City, UT. From 1993 to 1998, Mr. Price served as Vice-President of            Corporate Development for Troika Capital Investment. Prior to that, Mr. Price worked            for seven (7) years as the National Sales Director for a business providing electronic            bankcard processing and other merchant services. For four (4) years he worked as an            Organizational Manager involved in direct sales of educational material, with 50 sales            people in the western states under his management. Mr. Price has been in sales and            marketing for twenty (20) years and sales management and business management for            fifteen (15) years. Mr. Price received his B.A. from Weber State College in 1983. He            has served as an officer and director on two (2) small publicly traded            companies.

             

-38-

----

 

David Knudson. Mr. Knudson has worked as a            business consultant since 1985. He earned his B.S. Degree in Finance from Weber State            College in 1984 and a B.S. Degree in Information Systems and Technologies at Weber            State University in 1996. He has been an officer and director of several small            publicly-held “blind-pool” companies. Mr. Knudson was also employed as an            adjunct professor and from 1992 to 1996 was employed as a computer information systems            consultant at Weber State University. Mr. Knudson is an officer and director of            Nightingale, Inc., an inactive publicly-held corporation.

 

|   | B. | Significant Employees.                            None |
|--------|----|--------------------------------------------------------|

 

C.        Family Relationships. There are no family            relationships among the Company’s officers and directors.

             

D.        Other Involvement in Certain Legal            Proceedings. There have been no events under any bankruptcy            act, no criminal proceedings and no judgments or injunctions material to the evaluation            of the ability and integrity of any director or executive officer during the last five            years.

 

|   | E. | Compliance With Section                            16(a). None. |
|--------|----|-----------------------------------------------------------------|

             

**Code            of Ethics**

 

We have not yet adopted a code of ethics that applies to all executive            officers, directors and employees of the Company, but will do so prior to commencing            business operations.

 

**Audit Committee Financial Expert**

 

We have not established an audit committee or designated any person as            our financial expert. We anticipate that we will not establish an audit committee or            designate a financial expert until such time as we complete an acquisition.

 

| **ITEM 10.** | **EXECUTIVE COMPENSATION** |
|--------------|----------------------------|

 

The following Summary Compensation Table sets forth the aggregate            compensation paid or accrued by the Company to our Principle Executive Officer, our            Principal Financial Officer and certain other executive officers, (the “Named            Executive Officers”) as of December 31, 2007.

             

**Summary Compensation Table**

|  

**Current**

**Officers**

**Name &****Principal Position** |   | **Year** |   | **Salary****($)** |   | **Bonus****($)** |   | **Stock****($)(1)** |   | **Option Awards****($)** |   | **Non-Equity****Incentive Plan****Compensation****($)** |   | **Nonqualified Deferred****Compensation****Earnings ($)** |   | **All Other****Compensation ($)** |   | **Total****($)** |
|-------------------------------------------------------------------------|--------|----------|--------|-------------------|--------|------------------|--------|---------------------|--------|--------------------------|--------|---------------------------------------------------------|--------|-----------------------------------------------------------|--------|-----------------------------------|--------|------------------|

 

| M. Scharmann

CEO, Pres. |   |   | 2007   |   |   | 0      |   |   |   | 0      |   |   |   | 19,200 |   |   |   | 0      |   |   |   |   | 0      |   |   |   | 0      |   |   | 0      |   |   |   | 19,200 |   |   |
|--------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                     |   | 2006   |   |   | 0      |   |   |   | 0      |   |   |   | 17,925 |   |   |   | 0      |   |   |   |   | 0      |   |   |   | 0      |   |   | 0      |   |   |   | 17,925 |   |   |
|                     |   | 2005   |   |   | 0      |   |   |   | 0      |   |   |   | 17,775 |   |   |   | 0      |   |   |   |   | 0      |   |   |   | 0      |   |   | 0      |   |   |   | 17,775 |   |   |
|                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| D. Knudson, Sec/Treas    |   |   | 2007   |   |   | 0      |   |   |   | 0      |   |   |   | 35,805 |   |   |   | 0      |   |   |   |   | 0      |   |   |   | 0      |   |   | 0      |   |   |   | 35,805 |   |   |
|                     |   | 2006   |   |   | 0      |   |   |   | 0      |   |   |   | 39,210 |   |   |   | 0      |   |   |   |   | 0      |   |   |   | 0      |   |   | 0      |   |   |   | 39,210 |   |   |
|                     |   | 2005   |   |   | 0      |   |   |   | 0      |   |   |   | 50,055 |   |   |   | 0      |   |   |   |   | 0      |   |   |   | 0      |   |   | 0      |   |   |   | 50,055 |   |   |

             

(1) Stock compensation is paid in shares of Restricted Stock priced at            $.10 per share.

**Grants of Plan Based Awards**

 

| **Name** |   | **Grant Date**                                                                                    |   |                                                           |   |               |   | **All Other Stock Awards; Number of Shares of Stock or                            Units****(#)** |   | **All Other Option****Awards;****Number of****Securities Underlying Options****(#)** |   | **Exercise or Base Price of Option                            Awards****($/Sh)** |   | **Grant Date Fair Value of Stock and Option                            Awards**

**($)** |
|----------|--------|---------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|--------------------|--------|--------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|
|     |   |                                                                                              |   |                                                           |   |
|     |   | **Estimated Future Payouts Under Non-Equity                            Incentive****Plan Awards** |   | **Estimated Payouts Under****Equity Incentive****Plan Awards** |
|     |   | **Threshold****($)**                                                                              |   | **Target****($)**                                              |   | **Maximum****($)** |   | **Threshold****(#)**                                                                             |   | **Target****(#)**                                                                    |   | **Maximum****(#)**                                                               |
| None     |   |                                                                                              |   |                                                           |   |               |   |                                                                                             |   |                                                                                 |   |                                                                             |   |                                                                                     |   |   |   |  

                              |   |  

                              |   |  

                              |

             

-39-

----

             

         

There were no other stock based awards under any stock plan in fiscal            2007 to the Named Executive Officers.

 

**Outstanding Equity Awards at Fiscal Year End**

             

The following table sets forth the outstanding equity awards of the            Named Executive Officers as of December 31, 2007.

             

|     |   | **Option Awards**                                                                                  |   | **Stock Awards**                                                                                     |
|----------|--------|----------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------|
| **Name** |   | **No. of****Securities Underlying Unexercised Options (#)                            Exercisable** |   | **No. of****Securities Underlying Unexercised Options (#)                            Unexercisable** |   | **Equity****Incentive Plan Awards:****No. of****Securities Underlying Unexercised Unearned                            Options****(#)** |   | **Option****Exercise****Price****($)** |   | **Option****Expiration Date** |   | **No. of Shares or Units of Stock That Have Not                            Vested****(#)** |   | **Market Value of Shares or Units of Stock That Have                            Not Vested****($)** |   | **Equity Incentive Plan Awards:****No. of Unearned Shares, Units or Other Rights That                            Have Not Vested****(#)** |   | **Equity****Incentive Plan Awards: Market or Payout Value of                            Unearned Shares, Units or Other Rights That Have Not                            Vested****($)** |
| None     |   |                                                                                               |   |                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |   |   |   |   |
|     |   |                                                                                               |   |                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |    |   |   |   |   |   |

 

**Option Exercises and Stock Vested**

|   | **OPTION AWARDS** | **STOCK AWARDS** |
|--------|-------------------|------------------|

 

|  

                             

                             

                             

**Name** | **Number of****Shares****Acquired****on Exercise****(#)** | **Value****Realized****on****Exercise****($)** | **Number of****Shares****Acquired****on****Vesting****(#)** | **Value****Realized****on****Vesting****($)** |
|------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------|------------------------------------------------|-------------------------------------------------------------|-----------------------------------------------|
|                                                                                                                         |                                                      |                                           |                                                        |                                          |
| **None**                                                                                                                     |                                                      |                                           |                                                        |                                          |

 

 

**Pension Benefits and Nonqualified Deferred            Compensation**

 

The Company does not provide pension benefits or provide any other            qualified retirement plans or non-nonqualified deferred compensation plans for its            employees or directors.

             

**Compensation of Directors**

             

The Company does not currently compensate its directors for director            services to the Company.

 

**Employment Agreements**

 

The Company is currently not a party to any employment agreement. The            Plan of Reorganization provides that the Company’s officers will be compensated            at the rate of $75.00 per hour for services rendered to the Company. Until such time as            the Company’s shareholder’s equity reaches $350,000, the Company’s            officers shall be issued shares of its common stock for services rendered. Such shares            shall be valued at $.10 per share. At such time as the Company effects an acquisition            or merger, the Board of Directors, as then constituted, shall set the compensation of            officers, directors and employees.

             

-40-

             

----

             

             

For the year ended December 31, 2007 the Company compensated its            officers as follows:

 

| Name           | Compensation | Shares Issued |
|----------------|--------------|---------------|
|           |         |          |
| Mark Scharmann | $ 19,200     | 192,000       |
| Dan Price      | $ 2,850      | 28,500        |
| David Knudson  | $ 35,805     | 358,050       |

             

The Company’s Bankruptcy Plan of Reorganization also provides that            upon the completion of an acquisition or merger, the Company’s management group            will be issued shares of the Company’s common stock which amount to 1% of the            total shares issued in connection with such acquisition or merger.

 

**Equity Compensation Plan**

 

We are not a party to any equity compensation plan.

 

**ITEM 11.**  **SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND            MANAGEMENT**

 

**Security Ownership of Certain Beneficial Owners**

 

The following table sets forth information regarding shares of the            Company’s common stock beneficially owned as of March 31, 2008 by: (i) each            officer and director of the Company; (including and (ii) each person known by the            Company to beneficially own 5 percent or more of the outstanding shares of the            Company’s common stock.

 

| Title of Class | Name

and Address

of Beneficial

Owner                          |  

Amount and Nature of Beneficial Ownership |  

                             

                             

Percent of Class(1) Ownership |
|----------------|------------------------------------------------------------------|---------------------------------------------------|---------------------------------------------------------------------------------------------------------------|
|  

Common |  

Mark Scharmann(1)

1661 Lakeview Circle

Ogden, UT 84403 |  

25,706,896                                |  

69.8%                                                                                                 |
|  

Common |  

Dan Price(1)

1661 Lakeview Circle

Ogden, UT 84403      |  

105,775                                   |  

0.3%                                                                                                  |
|  

Common |  

David Knudson(1)

1661 Lakeview Circle

Ogden, UT 84403  |  

2,832,158                                 |  

7.7%                                                                                                  |
|  

Common |  

All Officers and Directors

as a Group (3 Persons)       |  

28,644,829                                |  

77.8%                                                                                                 |
|           |  

Total Shares Issued                                      |  

36,828,500                                |  

100%                                                                                                  |

 

(1)These individuals are the officers and directors of the            Company.

             

             

-41-

----

             

             

Unless otherwise indicated in the footnotes below, the Company has been            advised that each person above has sole voting power over the shares indicated above.            All of the individuals listed above are officers and directors of the            Company.

             

**Security Ownership of Management**

 

See Item 4(a) above.

 

**Changes in Control**

 

We currently have no proposed change of control transaction. We are            continuing to discuss business combinations with Target Businesses. If, and when we            complete a Business Combination, it will likely result in a change of            control.

 

**ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY            TRANSACTIONS**

**AND DIRECTOR INDEPENDENCE**

 

As part of its Plan of Reorganization, the Company issued 5,000,000            shares of its common stock to Troika Capital in consideration of $25,000 and            Troika’s agreement to provide an additional $75,000 in equity or debt funding to            pay the Company’s tax obligations.

 

During 1998, Troika Capital loaned $50,263 to the Company. Such loan is            due on demand and bears interest at the rate of 10% per annum.

 

During 1999, Troika Capital loaned $56,250 to the Company. The Company            repaid $2,000 during 1999. Such loan is due on demand and bears interest at the rate of            10% per annum.

 

During 2000, Troika Capital loaned $154,030 to the Company. The Company            repaid $90,335 during 2000. Such loan is due on demand and bears interest at the rate            of 10% per annum.

 

During 2001, Troika Capital loaned $89,250 to the Company. The Company            repaid $127,971. Such loan is due on demand and bears interest at the rate of 10% per            annum

             

During 2002, Troika Capital loaned $28,215 to the Company. The Company            repaid $57,890 in 2002. Such loan is due on demand and bears interest at the rate of            10% per annum.

             

During 2003, Troika Capital loaned $85,550 to the Company. Such loan is            due on demand and bears interest at 10% per annum.

 

During 2004, Troika Capital loaned $36,206 to the Company. Such loan is            due on demand and bears interest at 10% per annum.

 

During 2005, The Company repaid $8,517 to Troika Capital. Such loan is            due on demand and bears interest at 10% per annum.

             

During 2006, Troika Capital loaned $27,923 to the Company. Such loan is            due on demand and bears interest at 10% per annum.

             

During 2006, the Company issued 20,000,000 shares of its common stock to            Mark Scharmann, the Company’s president as payment of $100,000 of outstanding            notes.

             

During 2007, Mark Scharmann, the Company’s president, loaned            $87,228 to the Company. Such loan is due on demand and bears interest at 10% per            annum.

             

-42-

----

             

             

The Company’s officers and directors were issued shares of the            Company’s common stock for services rendered during the last three years in the            following amounts:

             

|   |           | Shares Issued |   |              |   |   |
|--------|----------------|---------------|--------|-------------------|--------|--------|
| Year   | Officer        | or Accrued    |   | Value of Services |   |
|   |           |          |   |              |   |   |
| 2007   | Mark Scharmann | 192,000       |   | $                 | 19,200 |   |

| 2007 | Dan Price      | 28,500  |   | $ | 2,850  |   |
|------|----------------|---------|--------|---|--------|--------|
| 2007 | David Knudson  | 358,050 |   | $ | 35,805 |   |
| 2006 | Mark Scharmann | 179,250 |   | $ | 17,925 |   |
| 2006 | Dan Price      | 31,500  |   | $ | 3,150  |   |
| 2006 | David Knudson  | 392,100 |   | $ | 39,210 |   |
| 2005 | Mark Scharmann | 177,750 |   | $ | 17,775 |   |
| 2005 | Dan Price      | -0-     |   | $ | -0-    |   |
| 2005 | David Knudson  | 500,550 |   | $ | 50,055 |   |

 

 

**Director Independence**

 

|   | None of the Company’s directors are deemed to be                            independent. |
|--------|------------------------------------------------------------------------------------------------|

 

**Parents of Company**

 

The only parents of the Company, as defined in Rule 12b-2 of the            Exchange Act, are the officers and directors of the Company. For information regarding            the share holdings of the Company’s officers and directors, see Item            11.

 

| **ITEM 13.** | **EXHIBITS** |
|--------------|--------------|

             

|   | Exhibit

Number |  

Exhibit                                                                                                                                                                                           |   |
|--------|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | 3.1             | Amended and Restated Articles of Incorporation                            (1)                                                                                                                             |   |
|   | 3.2             | Bylaws (1)                                                                                                                                                                                                |   |
|   | 21.1            | Subsidiaries of Registrant (None)                                                                                                                                                                         |   |
|   | 31.1            | Certification of Chief Executive Officer in accordance                            with 18 U.S.C. Section 1350, as adopted by Section 302 of the                            Sarbanes-Oxley Act of 2002     |   |
|   | 31.2            | Certification of Principal Financial Officer in                            accordance with 18 U.S.C. Section 1350, as adopted by Section 302 of                            the Sarbanes-Oxley Act of 2002 |   |
|   | 32.1            | Certification of Chief Executive Officer in accordance                            with 18 U.S.C. Section 1350, as adopted by Section 906 of the                            Sarbanes-Oxley Act of 2002     |   |
|   | 32.2            | Certification of Chief Financial Officer in accordance                            with 18 U.S.C. Section 1350, as adopted by Section 906 of the                            Sarbanes-Oxley Act of 2002     |   |
|   |            |                                                                                                                                                                                                      |   |
|   | (1)             | Previously Filed                                                                                                                                                                                          |   |

             

-43-

----

             

             

**ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

**2007**

**Independent Auditors**

 

Spector & Wong, LLP was appointed as the Company’s auditor for            the years ended December 31, 2007 and December 31, 2006. As an inactive Company our            Board of Directors serves as our audit committee.

 

**Fees billed to the Company by Spector & Wong, LLP**

 

|   |   |       |   |   | **2007** |   |   | **2006** |
|--------|--------|------------|--------|--------|----------|--------|--------|----------|
|   | (1)    | Audit Fees |   | $      | 18,500   |   | $      | 18,500   |
|   | (2)    | Tax Fees   |   | $      | -0-      |   | $      | -0-      |
|   | (3)    | Other Fees |   | $      | -0-      |   | $      | -0-      |

 

|   | (1) | Audit fees billed to the Company by Spector & Wong,                            LLP were for all professional services performed in connection with the                            audit of the Company's annual financial statements and review of those                            financial statements, reviews of our quarterly reports on                            Form 10-QSB. Audit fees during 2007 and 2006 also included audit                            services related to our compliance with Section 404 of the                            Sarbanes-Oxley Act regarding our internal controls over financial                            reporting. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

             

|   | (2) | Tax services generally include fees for services                            performed related to tax compliance, consulting services. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------|

 

|   | (3) | Spector & Wong, LLP did not bill the Company for                            other services during 2007 or 2006. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------|

 

All audit and non-audit services and fees are pre-approved by the Audit            Committee or by the Chairman of the Audit Committee pursuant to delegated            authority.

             

Effective May 6, 2003, the Securities and Exchange Commission adopted            rules that require that before Spector & Wong, LLP was engaged by us to render any            auditing or permitted non-audit related service, the engagement be:

 

|   | **•** | approved by our Audit Committee; or |
|--------|------------|-------------------------------------|

 

|   | **•** | entered into pursuant to pre-approval policies and                            procedures established by the Audit Committee, provided the policies                            and procedures are detailed as to the particular service, the Audit                            Committee is informed of each service, and such policies and procedures                            do not include delegation of the Audit Committee’s                            responsibilities to management. |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

             

All of the above services and fees were reviewed and approved by our            entire Board of Directors either before or after the respective services were rendered.            Our Board of Directors has considered the nature and amount of fees billed by Spector            & Wong, LLP and believes that the provision of services for activities unrelated to            the audit is compatible with maintaining Spector & Wong, LLP            independence.

             

-44-

             

----

             

SIGNATURES

 

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

 

|                 | Pacific Alliance Corporation                                                                                                                |
|----------------------|---------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                                                        |
| Date: April 11, 2008 | By:       /s/ Mark                            A. Scharmann

President/Principal Executive Officer        |
|                 |                                                                                                                                        |
| Date: April 11, 2008 | By:       /s/                            David Knudson

Secretary/Treasurer

Principal Financial Officer |

 

In accordance with the Securities Exchange Act, this report has been            signed below by the following persons on behalf of the Company and in the capacities            and on the dates indicated.

 

| Signature             | Capacity                                                                             | Date           |
|-----------------------|--------------------------------------------------------------------------------------|----------------|
|                  |                                                                                 |           |
| /s/ Mark A. Scharmann | President/Principal Executive                            Officer/Director            | April 11, 2008 |
|                  |                                                                                 |           |
| /s/ Dan Price         | Vice President/Director                                                              | April 11, 2008 |
|                  |                                                                                 |           |
| /s/ David Knudson     | Secretary/Treasurer/Principal Accounting                            Officer/Director | April 11, 2008 |

 

 

 

 

-45-