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


**Washington,
      D.C. 20549**





**FORM
      10-KSB**





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


SECURITIES
      EXCHANGE ACT OF 1934


For
      the
      fiscal year ended December 31, 2005


OR


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


SECURITIES
      EXCHANGE ACT OF 1934


Commission
      file number 33-08732-D





**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.
                employerincorporation
                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. Yes ý No.  ̈





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


The
      Issuer’s revenues for the fiscal year ended December 31, 2005 were
      -0-.





As
      of
      April 5, 2006, 15,703,800 shares of the Issuer’s common stock were issued and
      outstanding of which 8,183,671 were held by non-affiliates. As of April 5,
      2006,
      there was no active market in the Issuers securities.





DOCUMENTS
      INCORPORATED BY REFERENCE: NONE








**TABLE
      OF CONTENTS**





PagePART
                IItem
                1.
            Description
                of Business
            3Item
                2.
            Properties
            11Item
                3.
            Legal
                Proceedings
            11Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            11PART
                IIItem
                5.
            Market
                for the Registrant’s Common Stock and Related Security Holder
                Matters
            11Item
                6.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operation
            16Item
                7.
            Financial
                Statements
            24Item
                8.
            Changes
                and Disagreements with Accountants on Accounting and Financial
                Disclosure
            40Item
                8A.
            Controls
                and Procedures
            41Item
                8B.
            Other
                Information
            42PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliance with
                Section
                16(a) of the Exchange Act
            42Item
                10.
            Executive
                Compensation
            44Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management
            46Item
                12.
            Certain
                Relationships and Related Party Transactions
            47Item
                13.
            Exhibits,
                Financial Statements, Schedules and Reports on Form 8 K
            48Item
                14.
            Principal
                Accounting Fees and Services
            49





**PART
      I**





**Disclosure
      Regarding Forward Looking Statements**




The
      Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for
      forward looking statements. Certain information in this Form 10-KSB include
      information that is forward looking, such as the Company’s opportunities to tax
      obligations, its anticipated liquidity and capital requirements and the results
      of legal proceedings. The matters referred to in forward looking statements
      could be affected by the risks and uncertainties involved in the Company’s
      business. These risks and uncertainties include, but are not limited to, certain
      other risks described in Item 1 and in Item 7 of this Form10-KSB. Subsequent
      written and oral forward looking statements attributable to the Company or
      persons acting on its behalf are expressly qualified in their entirety by the
      cautionary statements in this paragraph and elsewhere in this Form
      10-KSB.


2


**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.





3


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 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.


4





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.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
                Company7.
            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 completed its audited financial statements for the years
                ended
                December 31, 1995 through 2005.3.
            Tax
                liabilities to the Internal Revenue Service of approximately $269,093
                had
                been reduced to $256,620 as of December 31, 2005.


5





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 obtained the preliminary agreement of a registered-broker
                to make
                a market in the Company’s common stock.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 prepared and filed Form 10-KSB’s for the years ended December 31,
                1996 - 2004 and with this Form 10-KSB, for the year ended December
                31,
                2005.9.
            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.





6


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
      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.





7


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 a Business 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.





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.


8


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 stock or asset acquisition.





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.


9


**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.





**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.





10


**ITEM
      2. 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 2004.





**PART
      II**





**ITEM
      5.**  **MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED SECURITY HOLDER
      MATTERS**





There
      is
      no active market for the Company’s common stock. The Company’s common stock is
      sporadically traded on a workout basis in the over-the-counter
      market.





**Shares
      Issued in Unregistered Transactions in 2005**





We
      issued
      shares of our common stock in unregistered transactions during 2005. 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
            24,000
            3/31/05
            Compensation
                valued at $2,400David
                Knudson
            81,000
            3/31/05
            Compensation
                valued at $8,100Mark
                A. Scharmann
            34,500
            6/30/05
            Compensation
                valued at $3,450David
                Knudson
            169,500
            6/30/05
            Compensation
                valued at $16,950Mark
                A. Scharmann
            36,000
            9/30/05
            Compensation
                valued at $3,600David
                Knudson
            76,200
            9/30/05
            Compensation
                valued at $7,620Mark
                A. Scharmann
            83,250
            12/31/05
            Compensation
                valued at $8,325David
                Knudson
            173,850
            12/31/05
            Compensation
                valued at $17,385Total:
            678,300





11


**Shares
      Issued in Unregistered Transactions Prior to 2005**





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


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


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.





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 $80Workout
                  Specialists, Inc.
              200,000
              6/29/98
              Consulting
                  services valued at $1,000William
                  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 ScharmannWilliam
                  M. Hynes, II
              150,000
              5/20/00
              Consulting
                  Services valued at $15,000Michael
                  Harrop
              187,500
              8/7/02
              Consulting
                  Services valued at $18,750PIL
                  S.A.
              1,250,000
              6/28/02
              $249,871Northcliffe
                  Consulting
              1,000,000
              2/24/04
              Consulting
                  Services value at $10,000William
                  M. Hynes, II
              250,000
              2/24/04
              Consulting
                  Services valued at $2,500PIL
                  S.A.
              100,000
              5/14/04
              $19,978Total:
              3,533,578


14


Shares
      Issued for Services from 1997 to December 31, 2005





Those
      persons who have been serving as the Company’s officers and directors since 1996
      have been issued shares of common stock for services rendered in lieu of cash
      compensation. Total compensation shares issued to each of the Company’s officers
      and directors is as follows:





Mark
                A. Scharmann
            1,605,776Dan
                Price
            37,275David
                Knudson
            2,286,841





**Holders**





As
      of
      April 5, 2006, there were 15,703,800 shares 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


**Transfer
      Agent and Registrar**





Our
      transfer agent is Fidelity Transfer Company, 1800 South West Temple, Suite
      301,
      Salt Lake City, UT 84115; telephone (801) 484-7222.





**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.




**ITEM
      6. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION AND RESULTS 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, 2005, we had no assets. Therefore, we 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, 2005, we had total
      liabilities of $773,362 of which $302,523 was for tax liabilities. At December
      31, 2005, a total of $415,389 of our liabilities was for funds loaned to us
      by
      management and other stockholders compared to $334,822 in such loans as of
      December 31, 2004. At December 31, 2005, a total of $-0- of our liabilities
      was
      for accrued compensation expenses for our officers and directors.





16


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.





It
      is
      likely that we will be required to raise additional capital in order to attract
      and potential acquisition partner but there can be no assurance that we will
      be
      able to raise any additional capital. 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, 2005 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, 2005 or the year ended December 31,
      2004. We anticipate that we will not generate any revenues until we acquire
      or
      merge with another company.





Our
      total
      expenses of $291,770 for the year ended December 31, 2005 compared to $237,913
      for the year ended December 31, 2004. Our total cost of compensation for the
      year ended December 21, 2005 was $67,830 compared to $35,730 for the year ended
      December 31, 2004. Our total interest costs were $38,032 for the year ended
      December 31, 2005 compared to $41,596 for year ended December 31,
      2004.





**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


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.





18


***Stock-Based
      Compensation.*** In
      December 2002, the FASB issued SFAS 148, “Accounting for Stock-Based
      Compensation” -- Transition and Disclosure, which amends SFAS 123. SFAS 148
      provides alternative methods of transition for a voluntary change to the fair
      value based method of accounting for stock-based employee compensation. SFAS
      148
      also requires prominent disclosures in both annual and interim financial
      statements about the method of accounting for stock-based employee compensation
      and the effect of the method used on reported results. As permitted by SFAS
      123,
      we have elected to account for stock-based compensation using the intrinsic
      value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25,
“Accounting for Stock Issued to Employees,” and related interpretations
      including Financial Accounting Standards Board (“FASB”) Interpretation No. 44,
“Accounting for Certain Transactions Involving Stock Compensation -- an
      Interpretation of APB Opinion No. 25,” and have adopted the disclosure-only
      provisions of SFAS 123. Accordingly, for financial reporting purposes,
      compensation cost for stock options granted to employees is measured as the
      excess, if any, of the estimated fair market value of our stock at the date
      of
      the grant over the amount an employee must pay to acquire the stock. Equity
      instruments issued to nonemployees are accounted for in accordance with FAS
      123
      and Emerging Issues Task Force (“EITF”) Abstract No. 96-18, “Accounting for
      Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
      in
      Conjunction with Selling Goods or Services.”





**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.





19


**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, revenues or expenses, results of operations, liquidity, capital
      expenditures or capital resources that is material to investors.





**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. ****





**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.


20


***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.





***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.





21


***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 regulatory developments, 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.





***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.





22


***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.





***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 to intense competition from competitors of the Target
      Business. In particular, certain industries which experience rapid growth
      frequently attract an increasingly 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.





23


***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 becomes subject 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.





**ITEM
      7. FINANCIAL STATEMENTS**





Index
      to Financial Statements





Pacific
                Alliance Corporation Financial Statements
            PageReports
                of Independent Registered Public Accounting Firms
            25Balance
                Sheet
            27Statements
                of Operations
            28Statements
                of Changes in Stockholders’ Deficit
            29Statements
                of Cash Flows
            30Notes
                to Financial Statements
            31


24


[LETTERHEAD]





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, 2005, and the related statements
      of operations, stockholders’ deficit, and cash flows for the year ended December
      31, 2005, and from the inception of the development stage on December 21, 1995.
      The financial statements of Pacific Alliance Corporation (a development stage
      company) for the year ended December 31, 2004 and from inception of the
      development stage on December 21, 1995 were audited by other auditors whose
      report, dated May 23, 2005, expressed an unqualified opinion with a going
      concern uncertainty. 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 auditing 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. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes 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, 2005, and the results of its
      operations and its cash flows for the year then ended, and from inception of
      the
      development stage on December 21, 1995 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 1  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 1. The financial statements do not
      include any adjustments that might result from the outcome of this
      uncertainty.





/s/
      Spector and Wong, LLP


Pasadena,
      California


April
      26,
      2006


25


REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM











Board
      of
      Directors and Shareholders of


Pacific
      Alliance Corporation


Ogden,
      Utah





We
      have
      audited the accompanying balance sheet of Pacific Alliance Corporation as of
      December 31, 2004, and the related statements of operations, stockholder’s
      equity (deficit) and cash flows for the year ended December 31, 2004. These
      financial statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audit.





We
      conducted our audit in accordance with 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. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides 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 as
      of
      December 31, 2004, and the results of its operations and its cash flows for
      the
      year ended December 31, 2004 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 1 to the financial
      statements, the Company has no operations, has a stockholders deficit and
      minimal working capital. Together these factors raise substantial doubt about
      its ability to continue as a going concern. Management’s plans in regard to
      these matters are also described in Note 1. The financial statements do not
      include any adjustments that might result from the outcome of this
      uncertainty.











/s/
      HJ
& Associates, LLC


Salt
      Lake
      City, Utah


May
      23,
      2005























26


PACIFIC
      ALLIANCE CORPORATION


(A
      DEVELOPMENT STAGE COMPANY)


BALANCE
      SHEET


December
      31, 2005





**ASSETS**Current
                AssetsCash
            
            $
            -**TOTAL
                ASSETS**
            
            $
            -**LIABILITIES
                AND STOCKHOLDERS' DEFICIT**Current
                LiabilitiesOverdraft
            
            $
            3,360Accrued
                Interest
            
            
            11,712Other
                Accrued Expenses
            
            
            40,379Notes
                payable
            
            
            55,000Advances
                from Officer
            
            
            216,318Current
                portion of Tax Liabilities and Related Accrued Interest
            
            
            302,523Notes
                payable to Related Parties
            
            
            144,070Total
                current liabilities
            
            
            773,362Long
                Term LiabilitiesTax
                Liabilities
            
            
            -**TOTAL
                LIABILITIES**
            
            
            773,362Stockholders'
                DeficitCommon
                Stock, par value $0.001, authorized 30,000,000 shares; and 15,480,600shares
                issued and outstanding
            
            
            15,481Paid-in
                Capital
            
            
            3,193,271Accumulated
                deficit prior to the developmental stage
            
            
            (2,632,447
            )Accumulated
                deficit during the developmental stage
            
            
            (1,349,667
            )Total
                Stockholders Deficit
            
            
            (773,362
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS' DEFICIT**
            
            $
            -





See
      notes
      to financial statements.


27


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****2005**
            
            **2004**
            
            **December
                31, 2005**Operating
                Expenses:Selling,
                General and Administrative Expenses
            
            $
            139,687
            
            $
            196,317
            
            $
            1,034,939Tax
                Penalty and Interest Expense
            
            
            114,051
            
            
            -
            
            
            114,051Loss
                on Investment
            
            
            **-**
            
            
            -
            
            
            6,844Loan
                Interest Expense
            
            
            38,032
            
            
            41,596
            
            
            262,908Net
                Loss before Extraordinary Item
            
            
            (291,770
            )
            
            (237,913
            )
            
            (1,418,742
            )Extraordinary
                Item, Gain on Forgiveness of Tax debt
            
            
            **-**
            
            
            -
            
            
            69,075Net
                Loss
            
            $
            (291,770
            )
            $
            (237,913
            )
            $
            (1,349,667
            )Net
                Loss per share, Basic and Diluted
            
            $
            (0.02
            )
            $
            (0.02
            )Weighted
                Average Number of Shares
            
            
            15,067,600
            
            
            13,913,621





See
      notes
      to financial statements.





28


PACIFIC
      ALLIANCE CORPORATION


(A
      DEVELOPMENT STAGE COMPANY)


STATEMENTS
      OF CHANGES IN STOCKHOLDERS’ DEFICIT





Additional
            
            Accumulated
            
            AccumulatedCommon
                Stock
            
            Paid-in
            
            Deficit
                Prior to
            
            Deficit
                AfterShares
            
            
            Amount
            
            
            Capital
            
            
            December
                21, 1995
            
            
            December
                21, 1995Balance
                at December 21, 1995
            
            $
            2,099,125
            
            $
            2,099
            
            $
            884,901
            
            $
            (2,632,447
            )
            
            -Conversion
                of Trade Accounts Payable
            
            
            1,458,005
            
            
            1,458
            
            
            1,456,547
            
            
            -
            
            
            -Issuance
                of Common Stock for Cash
            
            
            5,000,000
            
            
            5,000
            
            
            20,000
            
            
            -
            
            
            -Issuance
                of Common Stock for Services
            
            
            216,000
            
            
            216
            
            
            864
            
            
            -
            
            
            -Conversion
                of Debt
            
            
            300,000
            
            
            300
            
            
            14,700
            
            
            -
            
            
            -Issuance
                of Common Stock for IRS ClaimReduction
            
            
            80,078
            
            
            80
            
            
            79,998
            
            
            -
            
            
            -Issuance
                of Common Stock
            
            
            1,250,000
            
            
            1,250
            
            
            248,621
            
            
            -
            
            
            -Conversion
                of Management CompensationLiability
            
            
            1,854,292
            
            
            1,854
            
            
            183,575
            
            
            -
            
            
            -Issuance
                of Common Stock for ConsultingServices
            
            
            337,500
            
            
            338
            
            
            33,412
            
            
            -
            
            
            -Activity
                from December 21, 1995 ThroughDecember
                31, 2002
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (675,396
            )Balance
                at December 31, 2002
            
            
            12,595,000
            
            
            12,595
            
            
            2,922,618
            
            
            (2,632,447
            )
            
            (675,396
            )Net
                Loss for the Year EndedDecember
                31, 2003
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (144,588
            )Balance
                at December 31, 2003
            
            
            12,595,000
            
            
            12,595
            
            
            2,922,618
            
            
            (2,632,447
            )
            
            (819,984
            )Issuance
                of Common Stock for OtherServices
            
            
            1,093,750
            
            
            1,094
            
            
            86,406
            
            
            -
            
            
            -Issuance
                of Common Stock for Accrued Liabilityfor
                Other Services
            
            
            156,250
            
            
            156
            
            
            12,344
            
            
            -
            
            
            -Issuance
                of Common Stock for Cash
            
            
            100,000
            
            
            100
            
            
            19,878
            
            
            -
            
            
            -Issuance
                of Common Stock for ManagementCompensation
                Expense
            
            
            357,300
            
            
            357
            
            
            35,373
            
            
            -
            
            
            -Issuance
                of Common Stock for Accrued Liabilityfor
                Management Compensation
            
            
            500,000
            
            
            500
            
            
            49,500
            
            
            -
            
            
            -Net
                Loss for the Year Ended December 31, 2004
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (237,913
            )Balance
                at December 31, 2004
            
            
            4,802,300
            
            
            14,802
            
            
            3,126,119
            
            
            (2,632,447
            )
            
            (1,057,897
            )Issuance
                of Common Stock for ManagementCompensation
                Expense
            
            
            678,300
            
            
            679
            
            
            67,152
            
            
            -
            
            
            -Net
                Loss for the Year Ended December 31, 2005
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (291,770
            )**Balance
                at December 31, 2005**
            
            
            **15,480,600**
            
            **$**
            **15,481**
            
            **$**
            **3,193,271**
            
            **$**
            **(2,632,447**
            **)**
            **$**
            **(1,349,667**
            **)**





See
      notes
      to financial statements.





29





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****2005**
            
            **2004**
            
            **December
                31, 2005****Cash
                Flow from Operating Activities:**Net
                Loss
            
            $
            (291,770
            )
            $
            (237,913
            )
            $
            (1,349,667
            )Adjustments
                to Reconcile Net Loss to Net Cash Used in Operations:Loss
                on investments
            
            
            -
            
            
            -
            
            
            6,844Gain
                on forgiveness on tax debt
            
            
            -
            
            
            -
            
            
            (69,075
            )Stock
                issued for services
            
            
            67,831
            
            
            123,230
            
            
            426,491(Increase)
                Decrease in:Accounts
                receivable
            
            
            -
            
            
            -
            
            
            95,841Increase
                (Decrease) in:Accrued
                expenses
            
            
            133,815
            
            
            18,479
            
            
            256,482Tax
                liabilities
            
            
            6,211
            
            
            -
            
            
            (73,314
            )**Net
                Cash Used in Operating Activities**
            
            
            (83,913
            )
            
            (96,204
            )
            
            (706,398
            )**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
            
            
            3,347
            
            
            12
            
            
            773Proceeds
                from notes payable
            
            
            35,000
            
            
            59,986
            
            
            204,986Payments
                of note payable
            
            
            -
            
            
            -
            
            
            (50,000
            )Proceeds
                from notes payable to related parties
            
            
            54,084
            
            
            -
            
            
            54,084Advance
                from officer
            
            
            90,961
            
            
            43,627
            
            
            603,646Repayment
                of advance from officer
            
            
            (99,479
            )
            
            (7,421
            )
            
            (385,096
            )Proceeds
                from issuance of common stock
            
            
            -
            
            
            -
            
            
            25,000Proceeds
                from common stock subscription
            
            
            -
            
            
            -
            
            
            259,849**Net
                Cash Flow Provided by Financing Activities**
            
            
            83,913
            
            
            96,204
            
            
            713,242**Net
                Increase in Cash**
            
            
            -
            
            
            -
            
            
            -Cash
                Balance at Beginning of Period
            
            
            -
            
            
            -
            
            
            -**Cash
                Balance at End of Period**
            
            $
            -
            
            $
            -
            
            $
            -Supplemental
                Disclosures of Cash Flow InformationInterest
                paid
            
            $
            28,819
            
            $
            11,177
            
            $
            178,123Noncash
                Investing and Financing:Issuance
                of common stock for subscription
            
            $
            -
            
            $
            19,978
            
            $
            19,978Common
                stock issued for prior accrued liability for management
                services
            
            $
            -
            
            $
            50,000
            
            $
            50,000Common
                stock issued for accrued liability other services
            
            $
            -
            
            $
            12,500
            
            $
            12,500





See
      notes
      to financial statements.





30


**PACIFIC
      ALLIANCE CORPORATION**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO FINANCIAL STATEMENTS**





**NOTE
      1 - NATURE OF BUSINESS**





Organization
      and Going Concern 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
      8).
      The IRS portion of tax liabilities was payable in cash by quarterly installments
      (see note 3). Repayment of other taxes is still being negotiated.





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,
      2005
      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, 2005, 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.








31


**PACIFIC
      ALLIANCE CORPORATION**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO FINANCIAL STATEMENTS**





**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 2004 financial statements to conform
      with the 2005 financial statements presentation. Such reclassification had
      no
      effect on net losses previously reported.





Use
      of
      estimates The
      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
      Recognition The
      Company currently has no source of revenues. Revenue recognition policies will
      be determined when principal operations begin.





Cash
      Equivalents For
      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 Equipment As of
      December 31, 2005, the Company did not maintain or control any fixed
      assets.





Income
      Taxes Income
      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 Share Net 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.














32


**PACIFIC
      ALLIANCE CORPORATION**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO FINANCIAL STATEMENTS**





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





Non-employees
      Equity Transactions The
      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 May
      2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, *Accounting
      Changes and Error Corrections* ,
      a
      replacement of APB Opinion No. 20, *Accounting
      Changes* ,
      and
      SFAS No.3, *Reporting
      Accounting Changes in Interim Financial Statements.* SFAS No.
      154 changes the requirements for the accounting for and reporting of a change
      in
      accounting principle. Previously, most voluntary changes in accounting
      principles were required recognition via a cumulative effect adjustment within
      net income of the period of the change. SFAS No. 154 requires retrospective
      application to prior periods’ financial statements, unless it is impracticable
      to determine either the period-specific effects or the cumulative effect of
      the
      change. SFAS No. 154 is effective for accounting changes made in fiscal years
      beginning after December 15, 2005; however, the Statement does not change the
      transition provisions of any existing accounting pronouncements. Management
      does
      not believe adoption of SFAS No. 154 will have a material effect on the
      Company’s financial position, results of operations or cash flows.








33


**PACIFIC
      ALLIANCE CORPORATION**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO FINANCIAL STATEMENTS**





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





In
      December 2004, the FASB issued SFAS No. 153. This statement addresses the
      measurement of exchanges of nonmonetary assets. The guidance in APB Opinion
      No.
      29, *Accounting
      for Nonmonetary Transactions* ,
      is
      based on the principle that exchanges of nonmonetary assets should be measured
      based on the fair value of the assets exchanged. The guidance in that opinion;
      however, included certain exceptions to that principle. This statement amends
      Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
      productive assets and replaces it with a general exception for exchanges of
      nonmonetary assets that do not have commercial substance. A nonmonetrary
      exchange has commercial substance if the future cash flows of the entity are
      expected to change significantly as a result of the exchange. This statement
      is
      effective for financial statements for fiscal years beginning after June 15,
      2005. Earlier application is permitted for nonmonetary asset exchanges incurred
      during fiscal years beginning after the date of this statement is issued.
      Management does not believe the adoption of this statement will have a material
      effect on the Company’s financial position, results of operations or cash flows.





In
      December 2004, the FASB issued SFAS No. 123R, *Share
      Based Payment* .
      SFAS
      123R is a revision of SFAS No. 123, *Accounting
      for Stock-Based Compensation* ,
      and
      supersedes APB Opinion No. 25, *Accounting
      for Stock Issued to Employee* and its
      related implementation guidance. SFAS 123R establishes standards for the
      accounting for transactions in which an entity exchanges its equity instruments
      for goods or services. It also addresses transactions in which an entity incurs
      liabilities in exchange for goods or services that are based on the fair value
      of the entity’s equity instruments or that may be settled by the issuance of
      those equity instruments. SFAS 123R focuses primarily on accounting for
      transactions in which an entity obtains employee services in share-based payment
      transactions.  SFAS 123R requires a public entity to measure the cost of
      employee services received in exchange for an award of equity instruments based
      on the grant-date fair value of the award (with limited exceptions). That cost
      will be recognized over the period during which an employee is required to
      provide service in exchange for the award - the requisite service period
      (usually the vesting period). SFAS 123R requires that the compensation cost
      relating to share-based payment transactions be recognized in financial
      statements. That cost will be measured based on the fair value of the equity
      or
      liability instruments issued. Public entities that file as small business
      issuers will be required to apply SFAS 123R in the first interim or annual
      reporting period that begins after December 15, 2005. The adoption of this
      standard is not expected to have a material effect on the Company’s results of
      operations or financial position.


34


**PACIFIC
      ALLIANCE CORPORATION**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO FINANCIAL STATEMENTS**





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





In
      March
      2005, the SEC staff issued Staff Accounting Bulletin No. 107 (“SAB 107”) to give
      guidance on the implementation of SFAS 123R. The Company will consider SAB
      107
      during implementation of SFAS 123R.


The
      FASB
      has also issued SFAS No. 151 and 152, but they will not have relationship to
      the
      operations of the Company. Therefore a description and its impact for each
      on
      the Company’s operations and financial position have not been
      disclosed.





**NOTE
      3 - OTHER ACCRUED EXPENSES**





Accrued
      expenses at December 31, 2005:





Accrued
                Professional Fees
            $29,173Accrued
                Expenses
            11,206Total
            $40,379





**NOTE
      4 - TAX LIABILITIES**





The
      Company owes back taxes to the IRS, 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, $256,620, was payable in quarterly installments
      of $
      11,602, final payment due in January 2002. However, no payments have been made
      since April 2000. The taxes owed to IRS are delinquent and accruing interest
      at
      9% per annum.





As
      of
      December 31, 2005, the Company owed $39,135 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, 2005, the Company owed $6,768 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.








35


**PACIFIC
      ALLIANCE CORPORATION**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO FINANCIAL STATEMENTS**





**NOTE
      5 - SHORT TERM NOTE PAYABLE**





During
      2005, the Company obtained additional notes payable of $35,000, from third
      parties. The notes payable bear interest at 10% per annum and are due on demand.
      As of December 31, 2005 the balance was $55,000.





**NOTE
      6 - NOTES PAYABLE TO RELATED PARTIES**





Notes
      payable to minority shareholders amounted to $144,070 at December 31, 2005.
      These notes bear interest at 10% to 12%, and are due on demand.





**NOTE
      7 - INCOME TAXES**





The
      Company has loss carryforwards available to offset future taxable income. The
      total loss carryforwards at December 31, 2005 are estimated at approximately
      $1,450,000 and expire between 2013 and 2025. 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 $493,000,
      which relates to these loss carryforwards, since future profits are
      indeterminable. The valuation allowance increased by $102,000 during the year
      ended December 31, 2005. As of the audit report date, the Company had not filed
      its corporate income tax returns for the years ended December 31, 2005 and
      2004.





**NOTE
      8 - 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


. ****


36


**PACIFIC
      ALLIANCE CORPORATION**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO FINANCIAL STATEMENTS**





**NOTE
      8 - COMMON STOCK AND WARRANTS (continued)**





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.





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.





37


**PACIFIC
      ALLIANCE CORPORATION**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO FINANCIAL STATEMENTS**





**NOTE
      8 - COMMON STOCK AND WARRANTS (continued)**





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.





During
      the year ended December 31, 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.





**NOTE
      9 - NET LOSS PER SHARE**





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




For
                the years ended December 31,2005
            2004Numerator:Net
                Loss
            $
                (291,770)
            $
                (237,913)Denominator:Weighted
                Average Number of Shares
            15,067,600
            13,913,621Net
                Loss per share-Basic and Diluted
            $
                (0.02)
            $
                (0.02)





**NOTE
      10 - RELATED PARTY TRANSACTIONS**





An
      officer of the Company advanced $90,961 for the year ended December 31, 2005.
      The Company repaid $99,479 for the year ended December 31, 2005. These advances
      bear interest at 10% and have no maturity date. The balance of advances was
      $216,318 at December 31, 2005.





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, 2005 and
      2004.





38


**PACIFIC
      ALLIANCE CORPORATION**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO FINANCIAL STATEMENTS**





**NOTE
      10 - RELATED PARTY TRANSACTIONS (continued)**





In
      accordance with the modified joint plan or reorganization, management is
      compensated on an hourly basis at a rate of $75 per hour. Such compensation
      is
      made through issuance of common stock at $0.10 per share. Management
      compensation amounted to $67,831 and $35,730 for the years ended December 31,
      2005 and 2004, respectively. The number of shares issued for management
      compensation was 678,300 and 857,300 shares for the years ended December 31,
      2005 and 2004, respectively.





**NOTE
      11 - 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.











39


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





On
      August
      2, 2005, Pacific Alliance Corporation (the “Registrant”) dismissed HJ &
Associates, LLC (“HJ”) as its principal accountant to audit its financial
      statements. HJ audited the Registrant’s financial statements for the year ended
      December 31, 2004, but did not audit the Registrant’s financial statements for
      any other period. HJ’s report on the financial statements of the Registrant for
      the past year did not contain an adverse opinion or a disclaimer of opinion,
      and
      was not qualified or modified as to uncertainty, audit scope or accounting
      principles. The opinion of HJ on the Auditor’s financial statement did contain a
      going concern qualification.





During
      the most recent fiscal year ended December 31, 2004 and the subsequent
      period to and including August 2, 2005, there have been no disagreements between
      HJ and the Registrant on any matter of accounting principles or practices,
      financial statement disclosure, or auditing scope or procedure which, if not
      resolved to the satisfaction of HJ, would have caused it to make a reference
      to
      the subject matter of any such disagreement with its report.





On
      July
      27, 2005, the Registrant engaged Spector & Wong, LLP (“Spector”) as its
      principal accountant to audit the Registrant’s financial statements. Prior to
      the engagement of Spector, Harold Spector sold his 16,000 shares of common
      stock, his whole holdings in the Company.  During the two most recent
      fiscal years ended December 31, 2004 and the subsequent period to and
      including July 27, 2005, the Registrant has not consulted with Spector
      regarding any of the following: (1) the application of accounting
      principles to a specified transaction, either completed or proposed;
      (2) the type of audit opinion that might be rendered on the Registrant’s
      respective financial statements, and neither a written report nor oral advice
      was provided to the Registrant that Spector concluded was an important factor
      considered by the Registrant in reaching a decision as to the accounting,
      auditing or financial reporting issue, or (3) any other
      matter.





On
      March
      2, 2005 Rose, Snyder & Jacobs resigned as our Independent Accountant
      effective March 2, 2005. On April 13, 2005, we appointed HJ & Associates,
      LLC as our independent accountants for the year ending December 31, 2004. Prior
      to appointing HJ & Associates, LLC as our independent accountant we have not
      consulted with HJ & Associates, LLC regarding: (i) either the application of
      accounting principles to a specified transaction, either completed or proposed;
      or the type of audit opinion that might be rendered on the Company's financial
      statements; or (ii) any matter that was either the subject of a disagreement
      (as
      defined in Item 304(a)(1)(iv) of Regulation S-B) or a reportable event (as
      described in Item 304(a)(1)(v) of Regulation S-B).





40


The
      reports of Rose, Snyder & Jacobs on our financial statements for the fiscal
      years ended December 31, 2003 and 2002 did not contain an adverse opinion or
      disclaimer of opinion and were not qualified or modified as to uncertainty,
      audit scope or accounting principles, except for Rose, Snyder & Jacobs
      issuance of going concern opinions on the financial statements for the fiscal
      years ending December 31, 2003 and 2002. During the period it served as our
      independent accountant, there were no disagreements between us and Rose, Snyder
      & Jacobs on any matter of accounting principles or practices, financial
      statement disclosure or auditing scope or procedure, which disagreements, if
      not
      resolved to the satisfaction of Rose, Snyder & Jacobs would have caused it
      to make a reference to the subject matter of the disagreement in connection
      with
      its audit report.





**ITEM
      8A. CONTROLS AND PROCEDURES**





As
      required by Rule 13a-15 under the Securities Exchange Act of 1934, as of
      December 31, 2005, the end of the period covered by this annual report, our
      management concluded its evaluation of the effectiveness of the design and
      operation of our disclosure controls and procedures. Disclosure controls and
      procedures are controls and procedures designed to reasonably assure that
      information required to be disclosed in our reports filed under the Securities
      Exchange Act of 1934, such as this annual report, is recorded, processed,
      summarized and reported within the time periods prescribed by SEC rules and
      regulations, and to reasonably assure that such information is accumulated
      and
      communicated to our management, including our President, to allow timely
      decisions regarding required disclosure.





Our
      management, including our President, does not expect that our disclosure
      controls and procedures will prevent all error and all fraud. A control system,
      no matter how well designed and operated, can provide only reasonable, not
      absolute, assurance that the control system's objectives will be met. Further,
      the design of a control system must reflect the fact that there are resource
      constraints, and the benefits of controls must be considered relative to their
      costs. Because of the inherent limitations in all control systems, no evaluation
      of controls can provide absolute assurance that all control issues and instances
      of fraud, if any, have been detected. These inherent limitations include the
      realities that judgments in decision-making can be faulty, and that breakdowns
      can occur because of simple error or mistake. The design of any system of
      controls is based in part upon certain assumptions about the likelihood of
      future events, and there can be no assurance that any design will succeed in
      achieving its stated goals under all potential future conditions.





As
      of the
      evaluation date, our President concluded that we maintain disclosure controls
      and procedures that are effective in providing reasonable assurance that
      information required to be disclosed in our reports under the Securities
      Exchange Act of 1934 is recorded, processed, summarized and reported within
      the
      time periods prescribed by SEC rules and regulations, and that such information
      is accumulated and communicated to our management, including the President,
      to
      allow timely decisions regarding required disclosure.


41


There
      have been no changes in our internal control over financial reporting that
      has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting.





**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; 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
            PositionMark
                Scharmann
            47
            President/DirectorDan
                Price
            51
            Vice
                President/DirectorDavid
                Knudson
            46
            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 called Digest
      of Stocks Listed on the Intermountain Stock Exchange .
      In 1981
      he compiled and edited an 800 page publication called the OTC
      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.





42


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.





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) .
      No
      disclosure is required here.





**Code
      of Ethics**





We
      have
      not yet adopted a code of ethics that applies to all executive officers,
      directors and employees of the Company. We intend to do so within the next
      fiscal year.





**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.





43


**ITEM
      10.**  **EXECUTIVE
      COMPENSATION**





The
      following table sets forth the aggregate compensation paid by the Company for
      services rendered during the last three years to the Company’s Chief Executive
      Officer and to the Company’s most highly compensated executive officers other
      than the CEO, whose annual salary and bonus exceeded $100,000:





**SUMMARY
                COMPENSATION TABLE**Annual
                CompensationName
                and Principal Position
            Year
            Salary
            Commissions
              and
              Bonuses
              ($)
            Other
                Annual
              Compensation
              ($)
            Restricted
              Stock
              Awards
              ($)
            Options/
              SAR’s
              (#)Mark
                Scharmann (1)
              President
            2005
              2004
              2003
            -0-
              -0-
              -0-
            -0-
              -0-
              -0-
            -0-
              -0-
              -0-
            $
                17,775
              $
                13,425
              $
                8,446
            -0-
              -0-
              -0-





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





Stock
      Options





The
      following table sets forth certain information concerning stock options granted
      during fiscal 2005 to the named executive officers.





**Options
      Grants in the Year Ended December 31, 2005**







Name
            Number
                of
              Securities
              Underlying
              Options
                Granted (#)
            Percentage
              of
                Total
              Options
                Granted to
              Employees
                in
              Fiscal
                Year
            Exercise
                orBase
                Price
              Per
                Share
              ($)
            Expiration
              DateMark
                Scharmann
            -0-
            -0-
            N/A
            N/A





The
      following table sets forth information concerning the number and value of
      options held at December 31, 2005 by each of the named executive officers.
      No
      options held by such executive officers were exercised during 2005.





44


**Option
      Values at December 31, 2005**





Number
                of Unexercised
              Options
                at
              December
                31, 2005 (#)
            Value
                of Unexercised
              In-the-Money
                Options
              At
                December 31, 2005($)Name
            Exercisable
            Unexercisable
            Exercisable
            UnexercisableMark
                Scharmann
            -0-
            -0-
            N/A
            N/A





**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.





For
      the
      year ended December 31, 2005 the Company compensated its officers as
      follows:





Name
            Compensation
            Shares
                IssuedMark
                Scharmann
            $
                17,775
            177,750Dan
                Price
            $
                -0-
            -0-David
                Knudson
            $
                50,055
            500,550





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.





45


**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 April 5, 2006 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.





Nameand
                Addressof
                BeneficialOwner
            Amount
                and Nature of Beneficial Ownership
            Percent
                of Class(1)OwnershipMark
                Scharmann(1)
              1661
                Lakeview Circle
              Ogden,
                UT 84403
            5,316,896
            33.86%Dan
                Price(1)
              1661
                Lakeview Circle
              Ogden,
                UT 84403
            38,275
            0.24%David
                Knudson(1)
              1661
                Lakeview Circle
              Ogden,
                UT 84403
            2,164,958
            13.79%Northcliffe
                Consulting, LLC
              12144
                Mt. Shadow Road
              Sandy,
                UT 84092
            1,000,000
            6.37%Curtis
                Kaminska
              1327
                E. 6125 S.
              Ogden,
                UT 84405
            1,012,002
            6.44%PIL
                S.A.
              8
                Rue Neuve du Molard
              Geneva
                Switzerland
            1,350,000
            8.60%All
                Officers and Directors
              as
                a Group (3 Persons)
            7,520,129
            47.89%Total
                Shares Issued
            15,703,800
            100%





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


46


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. The transaction we
      contemplated with PIL SA has been terminated. We are continuing to discuss
      business combinations with other 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**





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, Troika Capital loaned $8,517 to the Company. Such loan is due on demand
      and bears interest at 10% per annum.


47


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
                IssuedYear
            Officer
            or
                Accrued
            
            Value
                of Services2005
            Mark
                Scharmann
            177,750
            
            $
            17,7752005
            Dan
                Price
            -0-
            
            $
            -0-2005
            David
                Knudson
            500,550
            
            $
            50,0552004
            Mark
                Scharmann
            134,250
            
            $
            13,425.002004
            Dan
                Price
            -0-
            
            $
            -0-2004
            David
                Knudson
            223,050
            
            $
            22,305.002003
            Mark
                Scharmann
            84,460
            
            $
            8,446.002003
            Dan
                Price
            -0-
            
            $
            -0-2003
            David
                Knudson
            266,815
            
            $
            26,681.50





**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
            Exhibit3.1
            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 200231.2
            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
                200232.1
            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 200232.2
            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





48


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





**2005**





**Independent
      Auditors**





On
      July
      27, 2005, we appointed Spector & Wong, LLP to audit the consolidated
      financial statements of the Company for the year ending December 31, 2005
      and to report the results of their audit to our Board of Directors. As an
      inactive Company our Board of Directors serves as our audit committee.





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


**2005**
            
            
            **2006**(1)
            Audit
                Fees
            
            $
            14,500
            
            $
            4,000(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 2005 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 2006
                or
                2005.





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.


49


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.





**2005**





In
      2005
      our auditor was HJ & Associates, LLC. Information about fees billed by HJ
& Associates, LLC in 2005 is as follows:





***Audit
      Fees.*** The
      aggregate fees billed by HJ & Associates, LLC for professional services
      rendered for the audit of our annual financial statements included in our Annual
      Report on Form 10-KSB for the fiscal year ended December 31, 2004 and for the
      review of quarterly financial statements included in our Quarterly Reports
      on
      Form 10-QSB for the quarter ending March 31, 2005 were $5,750.





***Audit
      Related Fees.*** For
      the
      fiscal year ended December 31, 2004, no fees were billed for assurance and
      related services by HJ & Associates, LLC relating to the resolution of SEC
      comments which are not reported under the caption “Audit Fees.”





***Tax
      Fees*** *.* For
      the
      fiscal year ended December 31, 2004, the aggregate fees billed by HJ &
Associates, LLC for other non-audit professional services, other than those
      services listed above totaled $-0-.





We
      did
      not use HJ & Associates, LLC for financial information system design and
      implementation. These services, which include designing or implementing a system
      that aggregates source data underlying the financial statements or generates
      information that is significant to our financial statements, are provided
      internally or by other service providers. We do not engage HJ & Associates,
      LLC to provide compliance outsourcing services.





Our
      entire Board of Directors currently acts as our audit committee. Our Board
      of
      Directors pre-approves all services provided by our independent auditors. The
      pre-approval process has just been implemented in response to the new rules,
      and
      therefore, the audit committee does not have records of what percentage of
      the
      above fees were pre-approved. However, all of the above services and fees were
      reviewed and approved by the audit committee either before or after the
      respective services were rendered. The Board of Directors has considered the
      nature and amount of fees billed by HJ & Associates, LLC and believes that
      the provision of services for activities unrelated to the audit is compatible
      with maintaining HJ & Associates, LLC independence.













50


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 CorporationDate:
                May 12, 2006
            By:/s/
                Mark A. Scharmann
              President/Principal
                Executive OfficerDate:
                May 12, 2006
            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/Director
            May
                12, 2006/s/
                Dan Price
            Vice
                President/Director
            May
                12, 2006/s/
                David Knudson
            Secretary/Treasurer
                Director
            May
                12, 2006











51