Trimerica Energy (TECO) 10-Q 2008 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

ü	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
	ACT OF 1934
For the quarterly period ended: September 30, 2008
or
	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
	ACT OF 1934
For the transition period from: _____________ to _____________

Commission File Number: 000-28015

———————

ALTERNATE ENERGY CORP.
(Exact name of registrant as specified in its charter)

———————

Nevada	86-0884116
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

3325 North Service Rd, Suite 105

Burlington, Ontario

Canada L7N 3G2

 (Address of Principal Executive Office) (Zip Code)

905.332.3110

(Registrant’s telephone number, including area code)

 (Former name, former address and former fiscal year, if changed since last report)

———————

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.			ü	Yes		No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer		Accelerated filer
Non-accelerated filer	(Do not check if a smaller	Smaller reporting company			ü
	reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
				Yes	ü	No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.   As of October 31, 2008, there were 363,329,949 shares of Common Stock outstanding.

ALTERNATE ENERGY CORP.

(A Development Stage Company)

QUARTERLY REPORT ON FORM 10-Q
FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2008

INDEX

PART I FINANCIAL INFORMATION

Page

PART II - OTHER INFORMATION

PART I

FINANCIAL INFORMATION

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS.

ALTERNATE ENERGY CORP.

(A Development Stage Company)

Consolidated Balance Sheets

	September 30, 2008			December 31, 2007
ASSETS	(Unaudited)
Current
Cash	$	4,276		$	30,908
Prepaid expenses and sundry assets		5,238			54,985
Marketable securities – restricted		24,000			28,529
		33,514			114,422
Other
Prepaid expenses and sundry assets		-			15,994
Property and equipment, net of accumulated depreciation of $105,358 and $97,030 at September 30, 2008 and December 31, 2007, respectively		26,345			49,516
TOTAL ASSETS		59,859			179,932
LIABILITIES
Current
Accounts payable		184,756			292,569
Accrued liabilities		250,601			165,261
Due to directors and officers		340,924			706,521
Due to related parties		225,001			194,392
TOTAL LIABILITIES		1,001,282			1,358,743
STOCKHOLDERS’ DEFICIT
Capital stock: (par value $0.001) 358,267,948 and 148,134,019 issued and outstanding at September 30, 2008 and December 31, 2007, respectively		358,268			148,134
Additional paid in capital		32,971,131			30,383,725
Accumulated other comprehensive loss		(120,111	)		(141,889	)
Accumulated deficit during development stage		(34,150,711	)		(31,568,781	)
TOTAL STOCKHOLDERS’ DEFICIT		(941,423	)		(1,178,811	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	59,859		$	179,932

(See accompanying notes to the financial statements.)

1

ALTERNATE ENERGY CORP.

(A Development Stage Company)

Consolidated Statements of Operations

(Unaudited)

	Nine Months Ended September 30, 2008 (Unaudited)			Nine Months Ended September 30, 2007 “Restated” (Unaudited)				Three Months Ended September 30, 2008 (Unaudited)			Three Months Ended September 30, 2007 “Restated” (Unaudited)			May 23, 2003 (Inception) To September 30, 2008 “Restated” (Unaudited)
REVENUE	$	––		$	––			$	––		$	––		$	––
EXPENSES
Administrative		165,709			139,756				80,253			27,109			1,812,921
Consulting fees		1,384,128			497,669				94,506			143,512			16,159,909
Professional fees		51,831			201,751				18,611			34,493			1,625,805
Research and development		62,538			164,294				––			––			756,949
Financing expense		44,114			29,081				10,264			11,162			689,764
Impairment of intangible assets		––			––				––			––			2,165,458
Management fee		––			––				––			––			240,000
Recovery of loan		––			––				––			––			(202,000	)
Depreciation		10,904			35,063				2,694			10,865			242,650
NET LOSS FROM OPERATIONS		(1,719,224	)		(1,067,614		)		(206,328	)		(227,141	)		(23,491,456	)
OTHER INCOME (EXPENSES)
Other income		5,531			5,749				1,581			5,749			20,914
Loss on sale of equipment		––			(41,160		)		––			(41,160	)		(65,235	)
Losses on settlements		(868,237	)		––				(307,303	)		––			(650,794	)
Gain on adjustment on derivative / warrant liability to fair value of underlying securities		––			––				––			––			907,912
NET LOSS FOR THE PERIOD		(2,581,930	)		(1,103,025		)		(512,050	)		(262,552	)		(23,278,659	)
COMPREHENSIVE LOSS
Gains/(losses) on foreign currency translation		27,034			(210,962		)		9,860			(268,213	)		4,809
Unrealized gains/(losses) on investments		(5,256	)		(22,400		)		(16,000	)		––			(124,920	)
TOTAL COMPREHENSIVE LOSS		(2,560,152	)		(1,336,387		)		(518,190	)		(530,765	)		(23,398,770	)
NET LOSS PER SHARE, BASIC AND DILUTED	$	(0.01	)	$	(0.01		)	$	(0.00	)	$	(0.00	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
		250,543,979				139,164,516			328,426,084			142,677,461

2

ALTERNATE ENERGY CORP.

(A Development Stage Company)

Consolidated Statement of Stockholders’ Deficit

For the Nine Months Ended September 30, 2008 (Unaudited)

	Common Stock
	Shares		Amount		Additional  Paid In  Capital		Accumulated  Other Compr.  Gains (Losses)			Accumulated  Deficit  During the  Development Stage			Total Sotckholders’  Deficit
December 31, 2007		148,134,019	$	148,134	$	30,383,725	$	(141,889	)	$	(31,568,781	)	$	(1,178,811	)
Stock options granted						207,030								207,030
Modification of options						58,826								58,826
Issue of shares for services		59,674,216		59,674		746,419								806,093
Issue of shares for cash		920,000		920		19,240								20,160
Stock options exercised for cash		100,000		100		150								250
Stock options exercised		14,572,500		14,573		39,358								53,931
Warrants issued						8,248								8,248
Issue of shares for note conversion		101,000,000		101,000		1,119,000								1,220,000
Issue of shares for note conversion – related party		700,000		700		7,000								7,700
Shares issued to settle trade payables		5,167,213		5,167		56,840								62,007
Shares issued to settle lawsuit		28,000,000		28,000		280,000								308,000
Unrealized loss on securities								(5,256	)					(5,256	)
Imputed interest on director note						45,295								45,295
Foreign currency translation adjustment								27,034						27,034
Net loss, nine months ended September 30, 2008											(2,581,930	)		(2,581,930	)
September 30, 2008		358,267,948	$	358,268	$	32,971,131	$	(120,111	)	$	(34,150,711	)	$	(941,423	)

3

ALTERNATE ENERGY CORP.

(A Development Stage Company)

Consolidated Statements of Cash Flows

Unaudited

Nine months Ending September 30	2008			2007 (Restated)			Inception To Date
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,581,930	)	$	(1,103,025	)	$	(23,278,659	)
Stock based expenses		1,080,197			420,590			14,925,232
Impairment of intangible asset		––			––			2,165,458
Depreciation expense		10,904			35,063			242,651
Accretion of principal related to convertible debt		––			––			494,715
Gain on derivatives related to warrants		––			––			(907,912	)
Loss on sale of marketable securities		––			––			143,130
Losses on settlements		868,237			––			650,794
Loss on sale of equipment		-			113,988			65,235
Imputed interest		45,295			29,081			134,537
Changes in operating assets and liabilities
Decrease (increase) in prepaid expenses and sundry assets		63,772			14,473			(7,207	)
Increase (decrease) accounts payable and accrued liabilities		112,604			274,537			396,425
Increase (decrease) deferred revenue		––			––			(81,086	)
Increase (decrease) in due to directors and officers		262,464			181,587			1,104,652
Net cash used in operating activities		(138,457	)		(33,706	)		(3,952,035	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		––			(2,043	)		(433,015	)
Purchase of patents and technology		––			––			(154,373	)
Proceeds from buy out of lease		8,000			––			8,000
Proceeds from sale of equipment		11,747			56,319			70,272
Investment in marketable securities		––			––			(153,562	)
Net cash provided by (used in) investing activities		19,747			54,276			(662,678	)
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of common shares for cash		20,410			25,000			3,525,225
Principal received from notes payable		––			––			500,000
Advances from directors and officers		8,573			57,061			494,298
Repayment of loans to directors		(4,000	)		––			(4,000	)
Cash advances from acquisition target		40,061			––			40,061
Cash received in settlement		––			––			85,000
Net cash provided by financing activities		65,044			82,061			4,640,584
EFFECT OF FOREIGN EXCHANGE RATES		27,034			(148,647	)		(21,595	)
NET INCREASE (DECREASE) IN CASH DURING PERIOD		(26,632	)		(46,016	)		4,276
CASH, BEGINNING OF THE PERIOD		30,908			97,443			––
CASH, END OF THE PERIOD	$	4,276		$	51,427		$	4,276

(See accompanying notes to the financial statements.)

4

ALTERNATE ENERGY CORP.

(A Development Stage Company)

Supplemental Disclosures of Non-Cash Financing Activities

Unaudited

Nine months Ending September 30	2008			2007 (Restated)		Inception To Date
Common shares issued for patents and technology (net)		––			––		2,032,007
Issuance of common stock for note conversion		––			494,715		494,715
Shares issued to settle related party debt		7,700			––		7,700
Shares issued to settle trade payables		62,007			––		62,007
Common shares issued in satisfaction of director and officer debt		1,220,000			200,000		1,645,000
Stock options issued for note conversion		53,931			––		53,931
Gain/(loss) on marketable securities		(5,256	)		––		124,920
Property sold for receivable		520			––		520

(See accompanying notes to the financial statements.)

5

ALTERNATE ENERGY CORP.

(A Development Stage Company)

NOTES TO THE (UNAUDITED) CONSOLIDATED FINANCIAL STATEMENTSNINE MONTHS ENDED SEPTEMBER 30, 2008

1.

GENERAL

The unaudited consolidated financial statements have been prepared on the same basis as the audited financial statements and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation for each of the periods presented and to make the financial statements not misleading. The results of operations for interim statements are not necessarily indicative of results to be achieved for full fiscal years.

As contemplated by the Securities and Exchange Commission (the “SEC”) under Rule 10-01 of Regulation S-X, the accompanying financial statements and related footnotes have been condensed and do not contain certain information that is included in the Company’s annual financial statements and footnotes thereto. For further information, refer to the financial statements and related footnotes for the year ended December 31, 2007 included in the Company’s Annual Report on Form 10-KSB/A.

2.

BACKGROUND INFORMATION

Alternate Energy Corp. (the “Company”), formerly known as COI Solutions, Inc., was incorporated in the State of Nevada on August 1, 1997.  On May 22, 2003, we acquired all the assets of AEC I, Inc. formerly known as Alternate Energy Corporation, and changed our name to Alternate Energy Corp.  The Company commenced active business operations on June 1, 2003 and is considered to be a development stage company under SFAS 7.  Since 2003, the Company has had the objective of producing a clean, on demand hydrogen technology that would have global, multiple market applications on both a small and large scale.  The Company’s hydrogen production system leverages a non-toxic proprietary chemical reaction that yields high quality hydrogen along with a number of globally valuable chemical compounds.  The Company’s process is entirely chemical, not requiring electrolysis or any external source of electrical pow er.

In February 2004, the Company incorporated a wholly-owned subsidiary, 2040412 Ontario Inc. in the Province of Ontario, Canada.  The subsidiary holds title to certain property and equipment reflected in the Company’s accounts.  

Alternate Energy Corp. (AEC) is an energy company committed to delivering innovative, practical, and environmentally responsible fuel, power and chemical solutions to consumer, commercial, and government markets.  

The Company has been working diligently to continue to raise capital for the continuation of its business strategy to refine, build, certify and sell hydrogen production units for back up power, as well as the possible building of pilot plants to create and market high demand, chemical by-products.  The Company has not been successful to date in its fund raising efforts, and as a result has hired a Chief Restructuring Officer to negotiate with the Company’s creditors and evaluate the options available to the Company.  These options include different financing alternatives and potential mergers, acquisitions, or business combinations with other companies.  

3.

GOING CONCERN  

These financial statements have been prepared on a going concern basis and do not include any adjustments to the measurement and classification of the recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  The Company has experienced a loss for the nine months ended September 30, 2008 of $2,581,930, has a deficit accumulated in the development stage of $34,150,711 and has negative working capital of $967,768.  The Company’s ability to realize its assets and discharge its liabilities in the normal course of business is dependent upon continued support.  The Company is currently attempting to obtain additional financing from its existing shareholders and other strategic investors to continue its operations.  However, there can be no assurance that the Company will obtain sufficient additional funds from these sources.

These conditions cause substantial doubt about the Company’s ability to continue as a going concern. A failure to continue as a going concern would require that stated amounts of assets and liabilities be reflected on a liquidation basis that could differ from the going concern basis.

4.

MARKETABLE SECURITIES - RESTRICTED

As of September 30, 2008, the Company holds 800,000 restricted shares of common stock of Carthew Bay Technologies, Inc. (OTC:  CWBYF) and the rights to purchase 1,500,000 warrants at $0.19 for a period of three years.  The shares are considered restricted because they are being held as collateral by a vender with an outstanding balance owed.  During the nine months ended September 30, 2008, the Company had an unrealized loss on marketable securities of $5,256.

6

5.

RELATED PARTY TRANSACTIONS

As of September 30, 2008, the Company was indebted $340,924 (as of December 31, 2007 - $706,521) to a director, Blaine Froats. The agreement was put in writing and executed on January 1, 2005 and amended on January 1, 2006 and January 2, 2007 to reflect the outstanding amount owed.  The amount of $340,924 does not represent a one-time lump sum but rather a series of transactions between January 2003 and September 2008.

The Company is indebted to Marilyn Froats, spouse of Blaine Froats, for$225,001 (as of December 31, 2007 - $169,392 to Marilyn Froats and $25,000 to Jason Froats) in consulting fees for the services rendered during the period between July 1, 2005 to September 30, 2008.  On June 6, 2008, Jason Froats exercised options to purchase 700,000 shares of common stock in exchange for the retirement of his related-party payable in the amount of $25,000.  We recorded the issuance of the shares at the options exercise price, or $7,700, and recorded a loss of $17,300 which is included in “Losses on Settlements”.  

6.

CAPITAL STOCK

The Company is authorized under its charter to issue 500,000,000 shares of common stock, par value 0.001 per share. At September 30, 2008 and December 31, 2007, there were 358,267,948 and 148,134,019 shares of common stock issued and outstanding, respectively.

During the nine months ended September 30, 2008, we undertook the following transactions in our common stock:

·

We issued 59,674,216 shares of common stock for services valued at $806,093 based on the quoted market price of the Company’s common stock on the date of issue.

·

On April 16, 2008, the Company entered into an agreement with Coral Capital Partners and its designee, Erik Nelson, to engage Erik Nelson as the Company’s Chief Restructuring Officer for a term of three months.  The agreement will renew automatically unless either party has given at least thirty days prior written notice.  The compensation under this agreement entails the issuance of 48,846,216 shares of common stock which were issued in June of 2008, and a cash fee based upon the value received for the accomplishment of a successful restructuring of the Company.  The Company has valued the stock at $586,155 based on the quoted market price of the Company’s common stock on the date of issuance.  This amount is included in the total stock for services value of $806,093.  In August, 2008, we gave notice of termination to Coral Capital Partners.

·

Certain vendors were issued 5,167,213 shares of the Company’s common stock in settlement of $97,490 of trade payables.  We valued these shares at the closing price on the date of issuance, or $62,007 and recorded a gain on settlement of $35,483.This was a non-cash transaction.

·

Consultants exercised 100,000 options, at an exercise price of $0.0025, or $250.  This was a cash transaction.  

·

Certain related parties exercised their option to purchase 14,572,500 shares of the Company’s common stock in satisfaction of $53,931 of the debt owed them by the Company.  This was a non-cash transaction where options were exercised and debt was reduced.

·

The Company sold 920,000 shares of common stock for $20,160 cash.

·

101,000,000 shares of the Company’s common stock were issued to a director for a total debt reduction of $520,000.  This was a non-cash transaction, and the difference between the fair market value of the shares granted and the debt reduction was recognized as a loss on settlement of $700,000.

·

700,000 shares of the Company’s common stock were issued to related parties for a total debt reduction of $25,000. This was a non-cash transaction, and the difference between the fair market value of the shares granted and the debt reduction was recognized as a gain on settlement in the financial statements.

·

We issued 28,000,000 shares of the Company’s common stock in connection with our settlement with Investorsource Group, LLC (see Note 10).  We valued these shares at $308,000 -  the closing price on the date of issuance  - and included the transaction in “Losses on Settlements”.

During January 2008, the Company granted 12,500,000 fully vested stock options pursuant to the Stock Plan.  The  weighted-average  estimated  fair  value  of  the stock  options  granted was $0.02 per share using the  Black-Scholes  model  with  the  following  assumptions:

Term	3 years
Expected volatility	155.58%
Risk-free interest rate	2.28%

7

Based on the Company's limited forfeiture history, the Company utilized a zero percent rate for estimated forfeitures. The total fair value of options granted during the nine months ended September 30, 2008 was $207,030.

On January 25, 2008, the Company re-valued 6,202,500 options to $0.02. The aggregate sum of the 6,202,500 options was at an exercise price of $0.03. These options were re valued to retain good faith in the Company’s service personnel pertaining to the downward flux in stock price. The re-pricing of the options using the Black Scholes option pricing model with a volatility of 248% and a discount rate of 2.28% was compared to the  previous model and the difference in fair value of $8,786 was expensed.

On May 28, 2008, the Company re-valued its 16,802,500 total outstanding options to $0.013. The aggregate sum of the 16,802,500 options was at an exercise price of $0.0025. These options were re-valued to retain good faith in the Company’s service personnel pertaining to the downward flux in stock price. The re-pricing of the options using the Black Scholes option pricing model with a volatility of 248% and a discount rate of 2.28% was compared to the previous model and the difference in fair value of $58,826 was expensed.

8.

STOCK WARRANTS

During the nine months ended September 30, 2008, the Company issued warrants to purchase 250,000 shares of the Company's common stock at an exercise price of $0.08 per share. These warrants have a term of seven years.  The  fair value of these warrants of approximately $8,248 was calculated  using  the  Black-Scholes  pricing  model  with  the  following assumptions-  dividend yield of 0%; a volatility  of  154% and a discount rate of 5.07%.  In  accordance  with  EITF  00-19,  Accounting  for Derivative  Financial Instruments Indexed to, and Potentially Settled in, a Company's  Own  Stock,  these warrants have been accounted for as permanent equity  instruments.

9.

RESTRUCTURE EVENTS

On July 9, 2008 we signed a letter of intent (LOI) for a possible merger with a Texas-based oil company (the “merger target”) that is contingent on the Company bringing its financial filings fully current with the United States Securities and Exchange Commission and successfully regaining its listing on the OTCBB on a timely basis.  The LOI automatically terminated as of August 29, 2008.  In the event the Company is successful in achieving OTCBB trading status in the near term we have reason to believe a new LOI is likely to be announced, and any possible merger would be subject to a Definitive Agreement and the Company’s obtaining a sufficient fairness opinion.  If a merger occurred, the current operations of the Company would be divested to the current officers and directors in return for the cancellation of the outstanding liabilities owed to those officers and directors.  If finalized this transaction wi ll result in a change in control of the Company.  This transaction, if finalized, will dilute the current shareholders of the Company.  

As of September 30, 2008, we have received $40,061 in cash advances from this merger target.

10.

LEGAL SETTLEMENT WITH INVESTORSOURCE GROUP, LLC

In 2005, we entered into a consulting arrangement with InvestorSource Group, LLC (“InvestorSource”) to provide certain consulting services related to financing, capital structure and merger and acquisition opportunities.  Subsequent to the agreement, we became unhappy with the quality of the services provided and cancelled payments on the contract.  InvestorSource forced the contract into arbitration per the terms of our agreement and, on October 1, 2008, we reached a settlement arrangement with InvestorSource.  Under the terms of the settlement, we are to pay InvestorSource $10,000 on or before October 30, 2008 and $10,000 on or before November 29, 2008.  Additionally, we issued InvestorSource 28 million shares which we valued at $308,000 and is included in this report as “Losses on Settlements”.  We issued these shares on October 2, 2008, but accrued them back into our financial statements as of September 30, 2008.  T here are two contingencies in the settlement agreement with InvestorSource:  first, if we default on any of the payment terms, the judgment amount becomes $500,000.  Second, if we fail to restructure the Company before December 31, 2008, the judgment amount becomes $250,000.

8

11.

SUBSEQUENT EVENTS

On October 31, 2008 we issued 2,850,000 shares of our common stock to consultants in return for services rendered valued at the quoted market price of the Company’s common stock on the date of grant of the underlying options.

On October 27 and 29, 2008, we issued an additional 2,212,001 shares to a contractor and a director for compensation.

On October 1, 2008, we paid our first installment on our settlement agreement with InvestorSource (see Note 10) which was paid for on our behalf by the Texas-based oil company with whom we had signed a letter of intent to engage in a reverse merger (see Note 9). The Texas-based oil company has expressed both the wherewithal and intent to make the second payment, due November 29, 2008, and to close the reverse merger as planned.  We therefore feel that the possibility of realization of the contingent liabilities delineated in Note 10 are remote.

12.

RESTATEMENT

In its September 30, 2007 Form 10QSB filing, the Company failed to disclose the components of Other Comprehensive Income on the face of the Statement of Operations for the three and nine months ended September 30, 2007.  Also, there were several audit adjustments recorded as part of our December 31, 2007 audit that affected the three and nine months periods ended September 30, 2007.

9

The effect of the restatement for the three months ended September 30, 2007 was:

ALTERNATE ENERGY CORP.

(A Development Stage Company)

Consolidated Statements of Operations

(Unaudited)

Three months ending September 30	2007 (as reported)			Adjustments				2007 (restated)
REVENUE	$	––		$	––			$	––
EXPENSES
Administrative		27,109			––				27,109
Consulting fees		132,512			11,000		(a)		143,512
Professional fees		––			34,493		(b)		34,493
Research and development		––			––				––
Financing expense		––			11,162		(c)		11,162
Impairment of intangible assets		––			––				––
Management fee		––			––				––
Recovery of loan		––			––				––
Depreciation		10,865			––				10,865
NET LOSS FROM OPERATIONS		(170,486	)		(56,655	)			(227,141	)
OTHER INCOME (EXPENSES)
Other income		5,749			––				5,749
Loss on sale of equipment		(84,299	)		43,139		(d)		(41,160	)
Gain on settlement		––			––				––
Gain on adjustment on derivative / warrant liability to fair value of underlying securities		––			––				––
NET LOSS FOR THE PERIOD		(249,036	)		(13,516	)			(262,552	)
COMPREHENSIVE LOSS
Loss on foreign currency translation		––			(268,213	)	(e)		(268,213	)
Unrealized gains (losses) in investments		––			––				––
TOTAL COMPREHENSIVE LOSS	$	(249,036	)	$	(281,729	)		$	(530,765	)
NET LOSS PER SHARE, BASIC AND DILUTED	$	(0.00	)					$	(0.00	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
		142,677,461							142,677,461

———————

(a)

To record additional consulting fees.

(b)

To record accrued legal fees.

(c)

To record imputed interest on director note payable.

(d)

To correct loss on sale of equipment.

(e)

To separately record the components of Other Comprehensive Income.

10

The effect of the restatement for the nine months ended September 30, 2007 was:

ALTERNATE ENERGY CORP.

(A Development Stage Company)

Consolidated Statements of Operations
(Unaudited)

Nine months ending September 30	2007 (as reported)			Adjustments				2007 (restated)
REVENUE	$	––		$	––			$	––
EXPENSES
Administrative		171,756			(32,000	)	(a)		139,756
Consulting fees		486,669			11,000		(b)		497,669
Professional fees		164,657			37,094		(c)		201,751
Research and development		164,294			––				164,294
Financing expense		––			29,081		(d)		29,081
Impairment of intangible assets		––			––				––
Management fee		––			––				––
Recovery of loan		––			––				––
Depreciation		35,063			––				35,063
NET LOSS FROM OPERATIONS		(1,022,439	)		(45,175	)			(1,067,614		)
OTHER INCOME (EXPENSES)
Other income		5,749			––				5,749
Loss on sale of equipment		(84,299	)		43,139		(e)		(41,160		)
Gain on settlement		––			––				––
Gain on adjustment on derivative / warrant liability to fair value of underlying securities		––			––				––
NET LOSS FOR THE PERIOD		(1,100,989	)		(2,036	)			(1,103,025		)
COMPREHENSIVE LOSS
Loss on foreign currency translation		––			(210,962	)	(f)		(210,962		)
Unrealized gains (losses) in investments		––			(22,400	)	(f)		(22,400		)
TOTAL COMPREHENSIVE LOSS	$	(1,100,989	)		(235,398	)			(1,336,387		)
NET LOSS PER SHARE, BASIC AND DILUTED	$	(0.01	)					$	(0.01		)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
		139,164,516								139,164,516

(a)   To adjust accrued insurance liability.

(b)   To record additional consulting expense.

(c)   To record additional professional fees, principally investor relations costs.

(d)   To record imputed interest on director note payable.

(e)   To correct loss on sale of equipment.

(f)   To separately record the components of Other Comprehensive Income.

11

ITEM. 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The following Management’s Discussion and Analysis and Plan of Operation should be read in conjunction with the financial statements, and the notes thereto included herein.  

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ, perhaps materially, from any future results, performance or achievements expressed or implied by forward-looking statements.  Forward-looking statements include, but are not limited to, statements about:

·

Our product development efforts;

·

The commercialization of our products;

·

Anticipated operating losses and capital expenditures;

·

Our estimates regarding our needs for additional financing;

·

Our estimates for future revenues and profitability; and

·

Sources of revenues and anticipated revenues, including contributions from corporate collaborations, license agreements and other collaborative efforts for the development and commercialization of our product candidates, and the continued viability and duration of those agreements and efforts.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “intend,” “potential” and similar expressions intended to identify forward-looking statements.  These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties.  Given these uncertainties, you should not place undue reliance on these forward-looking statements.  Any forward-looking statements, speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-Q, except as required by law.

Background

We are a development stage company.  We have not earned revenues from our technology through September 30, 2008.  We are currently developing our core technology which is focused on production of on-demand, pure, safe hydrogen. Hydrogen has numerous applications, such as a fuel to power internal combustion engines and fuel cells, and in bulk form, as a process ingredient in the food, pharmaceutical, oil refining, glass production and several other major manufacturing industries.  Our hydrogen production process is designed to overcome three major industry obstacles: affordability, storage and safety.  Our hydrogen production system leverages a chemical process that yields fuel-cell quality hydrogen with no known harmful by-products. Our hydrogen-maker can be scaled according to application and designed to directly supply almost any application on an as-needed basis, eliminating the need to store hydrogen in a compressed st ate.

Since 2003, our objective has been to create a clean, on-demand hydrogen technology that has multiple market applications. Our hydrogen production system leverages a non-toxic proprietary chemical reaction that yields high quality hydrogen and potentially valuable chemical compounds as by-products.  Our unique production method yields no waste or emissions and does not require the use of fossil fuels or electricity.  It is also environmentally friendly because it produces hydrogen without utilizing any toxic ingredients or producing harmful emissions.  

The process of making hydrogen produces a number of chemical by-products.  These chemicals have many applications.  If we can produce these by-products in significant volume, we believe we could generate revenues from their sales which could subsidize the cost of producing the hydrogen gas.  We believe this ‘subsidized model’ approach to producing bulk hydrogen is unique in the alternate energy industry and we believe it will make us more competitive because we can offer hydrogen at a lower cost than our competitors.  

Our hydrogen production process is designed to overcome three major industry obstacles: affordability, storage and safety. Our hydrogen-maker can be scaled according to application and designed to directly supply almost any application on an as-needed basis, eliminating the need to store hydrogen in a compressed state.

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Our fund raising efforts have not been successful and we have no reasonable expectations of future funding.  On April 16, 2008, the Company hired a Chief Restructuring Officer for the purposes of negotiating revised payment terms with our creditors, to consider and help us evaluate different funding options, and to evaluate companies interested in potential mergers, acquisitions, or business combinations with the company.  We are considering other business ventures and options at this time as there can be no assurance that our current business plan will ever achieve revenue and ultimately profitability.  

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND NEW ACCOUNTING PRONOUNCEMENTS

Management's discussion and analysis of its financial condition and plan of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  At each balance sheet date, management evaluates its estimates.  We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.  Actual results may differ from these estimates under different assumptions or conditions.  The estimates and critical accounting policies that are most important in fully understanding and evaluating our financial condition and resu lts of operations include those stated in our financial statements and those listed below:

Going Concern

These financial statements have been prepared on a going concern basis and do not include any adjustments to the measurement and classification of the recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  The Company has experienced losses during the nine months ended September 30, 2008 of $2,581,930, a deficit accumulated in the development stage of $34,150,711 and has negative working capital of $967,768.  The Company’s ability to realize its assets and discharge its liabilities in the normal course of business is dependent upon continued support.  The Company is currently attempting to obtain additional financing through a restructuring effort to continue its operations. However, there can be no assurance that the Company will obtain sufficient additional funds from these sources.  

These conditions cause substantial doubt about the Company’s ability to continue as a going concern. A failure to continue as a going concern would require that stated amounts of assets and liabilities be reflected on a liquidation basis that could differ from the going concern basis.

Comprehensive Income

The Company has adopted SFAS No. 130, “Reporting Comprehensive Income”, which establishes standards for the reporting of comprehensive income, its components and accumulated balances.  Comprehensive income is defined to include all changes in equity except those resulting from investments by owners or distributions to owners.  Among other disclosures, SFAS No. 130 requires that all items that are required to be recognized under the current accounting standards as a component of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements.  Comprehensive income is displayed in the statement of shareholders’ equity and in the balance sheet as a component of shareholders’ deficit.

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Stock Option Plans and Stock-Based Compensation

The Company applies the fair-value-based method of accounting prescribed by SFAS No. 123 (R), “Accounting for Stock-Based Compensation,” in accounting for its stock options granted to employees and stock granted to non-employees.  As such, compensation expense for employees is recorded on the date of the grant, which vests immediately based on the fair market value of the stock and is expensed in the period in which the option was granted.  Compensation cost for non-employees is recognized when services are received using the fair value of the Company’s equity instruments at those dates.

Revenue Recognition

Revenues are recognized when all of the following criteria have been met: persuasive evidence for an arrangement exists; delivery has occurred; the fee is fixed or determinable; and, collection is reasonably assured.  Upfront contract payments received from the sale of services not yet earned are initially recorded as deferred revenue on the balance sheet.

13

Revenue from time and material service contracts is recognized as the services are provided.  Revenue from fixed price, long-term service or development contracts is recognized over the contract term based on the percentage of services that are provided during the reporting period compared with the total estimated services to be provided over the entire contract.  Losses on fixed price contracts are recognized during the reporting period in which the loss first becomes apparent.  Payment terms vary by contract.

Recently Adopted Accounting Standards

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R).” (SFAS 158”) SFAS 158 requires an employer that sponsors one or more single-employer defined benefit plans to (a) recognize the overfunded or underfunded status of a benefit plan in its statement of financial position, (b) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the year but are not recognized as components of net periodic benefit cost pursuant to SFAS 87, “Employers’ Accounting for Pensions”, or SFAS 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”, (c) measure defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end, and (d) discl ose in the notes to financial statements additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. SFAS 158 is effective for the Company’s fiscal year ending December 31, 2008. The adoption of SFAS 158 is not expected to have a material impact on the Company’s financial position, results of operation or cash flows.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement.” ("SFAS 157") The Statement provides guidance for using fair value to measure assets and liabilities. The Statement also expands disclosures about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurement on earnings. This Statement applies under other accounting pronouncements that require or permit fair value measurements. This Statement does not expand the use of fair value measurements in any new circumstances. Under this Statement, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts. SFAS 157 is effective for the Company for fair value measurements and disclosures made by the Company in its fiscal year beginning on January 1, 2008. The adoption of SFAS 157 is not expected to have a material impact on the Company’s financial position, results of operation or cash flows.

14

RESULTS OF OPERATIONS

FOR THREE MONTHS ENDED SEPTEMBER 30, 2008,

COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2007

REVENUES

Since inception, we have had no revenues.  

EXPENSES

We had total expenses of $206,328 and $227,141 during the three months ended September 30, 2008 and 2007, respectively. Our expenses for the three months ended September 30, 2008 and 2007 consisted of $80,253 and $27,109 in administrative expenses,$94,506 and $143,512 in consulting fees,$18,611 and $34,493 in professional fees,$10,264and $11,162 for financing expense, and $2,694 and $10,865 in depreciation, respectively.

Our administrative expenses increased by $53,144 for the three months ended September 30, 2008 versus the same period in 2007 which was offset by a decrease in consulting expenses of $49,006.

Our professional fees decreased $15,882 for the three months ended September 30, 2008 versus the same period in 2007, mostly due to a decrease in defensive legal fees resulting from resolutions of outstanding legal actions against us.

Financing expenses were only $10,264 for three months ended September 30, 2008 versus $11,162 the same period in 2007.  This is due to lower interest being imputed on our note payable to a director and a related party, much of which was converted to common stock during the second quarter of 2008.

Depreciation expense of $2,694 is significantly down for the three months ended September 30, 2008 versus $10,865 in the same period in 2007, due to liquidation of some of our assets.  Additionally,  many of our assets have become fully depreciated during 2008.

Our loss on settlement of $307,303 results principally from our settlement with InvestorSource Group, LLC (see note 10).

Over the next 12 months, we anticipate that our expenses will not increase substantially over our expenses during the nine months ending September 30, 2008, unless additional financing is obtained.  In the event significant financing is obtained, we would expect that expenses will only increase in proportion with the activity levels resulting from any such financing.  We will continue as planned in the goals set for the continued development, sales and marketing of our hydrogen production system and sale of by-products.

NET LOSS

We had a net loss of $512,050 for the three months ended September 30, 2008, compared with a net loss of $262,552 in the three months ended September 30, 2007.  The increase of $249,498 was attributable to the above expense descriptions.

RESULTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008,

COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2007

REVENUES

Since inception, we have had no revenues.  

EXPENSES

We had total expenses of $1,719,224 and $1,067,614 during the nine months ended September 30, 2008 and 2007, respectively. Our expenses for the nine months ended September 30, 2008 and 2007 consisted of $165,709 and $139,756 in administrative expenses, $1,384,128 and $497,669 in consulting fees, $51,831 and $201,751 in professional fees, $62,538 and $164,294 for research and development, $44,114 and $29,081 for financing expense, and $10,904 and $35,063 in depreciation, respectively.

Our administrative was generally up during the nine months ended September 30, 2008 - $165,709 in 2008 versus $139,756.

Our vast increase in consulting fees for the two comparative periods - $1,384,128 in 2008 versus $497,669 in 2007 - was attributable to non-cash stock-based compensation:  we issued 48,846,216 shares of common stock to Coral Capital Partners.  For more information about this transaction, see Note 6.

15

Professional fees decreased by $149,920 for the nine months ended September 30, 2008 as compared to the same period in 2007.  This decrease is largely attributed to a reduction of legal and investor relations expenses in connection with a slowdown in overall operational activity.

Our research and development expenses declined by $101,756 for the nine months ending September 30, 2008 as compared to same period in 2007 as we have halted research and development activities for lack of adequate funds.

Or financing expenses increased by $15,033 for the nine months ended September 30, 2008 versus the same period in 2007 due to the increase in the average outstanding balance on notes payable due to officers and directors resulting from foregone salary payments on which we imputed interest.

Depreciation expense continues to decrease as many of our assets become fully-depreciated or are sold.  Depreciation expense for the nine months ended September 30, 2008 is $10,904 versus $35,063 for the same period in 2007.

Over the next 12 months, we anticipate that our expenses will not increase substantially over our expenses in the nine month period ending September 30, 2008, unless additional financing is obtained.  In the event significant financing is obtained, we would expect that expenses will only increase in proportion to the activity increase due to the receipt of those funds.  We will continue as planned in the goals set for the continued development, sales and marketing of our hydrogen production system and sale of by-products.

NET LOSS

We had a net loss of $2,581,930 for the nine months ended September 30, 2008, compared with a net loss of $1,103,025 during the same period in 2007.  Since we have no revenues, the increase in losses is attributable to the above expense descriptions.

LIQUIDITY AND CAPITAL RESOURCES

Our financial statements have been prepared on a going concern basis that contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.  We incurred a net loss of $2,581,930 and $1,103,025 for the nine months ended September 30, 2008 and 2007, respectively, and have an accumulated deficit of $34,150,711 at September 30, 2008.  We had $4,276 in cash on hand as of September 30, 2008.  Management may obtain additional capital principally through the sale of equity securities.  The realization of assets and satisfaction of liabilities in the normal course of business is dependent upon our ultimately obtaining profitable operations.  We may not be successful in these activities.  Should any of these events not occur, the accompanying financial statements will be materially affected.

The Company believes that it will not have sufficient cash to meet its short-term capital requirements through the end of 2008. Therefore, we will need to raise sufficient funds to meet our long-term capital needs. Due to the fact that we have no cash generated from operations, we currently do not have internally generated cash sufficient to pay all of our incurred expenses and other liabilities.  As a result, we are dependent on investor capital and loans to meet our expenses and obligations.  Although investor funds have allowed us to meet our obligations in the recent past, there can be no assurances that our present methods of generating cash flow will be sufficient to meet future obligations.  Historically, we have, from time to time, been able to raise additional capital, but there can be no assurances that we will be able to raise additional capital in this manner.

Net cash used in operating activities was $138,457 for the nine month period ended September 30, 2008, compared with net cash used in operations of $33,706 for the nine months ended September 30, 2007.  The decrease in cash used is a general result of our slowdown in activities.

Net cash obtained from financing activities was $65,044 for the nine month period ended September 30, 2008, compared with $82,061 for the nine months ended September 30, 2007, principally due to a decrease in cash loaned to the company from directors and officers.    

Net cash provided by investing activities for the nine months ended September 30, 2008 and 2007 was $19,747 and $54,276 respectively, resulting principally from the sale of equipment.

We do not believe that we will have sufficient cash to meet our short-term capital requirements, and there are no assurances that we will be able to raise sufficient funds to meet long-term capital needs.  We may also seek alternative sources of financing, including more conventional sources such as bank loans and credit lines, although no assurances in this regard can be made.  Further, the availability of any future financing may not be on terms that are satisfactory to us.  We have hired a Chief Restructuring Officer to assist us in our negotiations with our creditors and evaluate the options available to the Company.  If we are unsuccessful in raising additional funding, we may evaluate potential acquisitions involving complementary businesses, content, products, or technologies.  We may enter into a business combination that results in a change in control of the company, or may substantially dilute our existing shareholders.  

16

PLAN OF OPERATION

Over the next twelve months we will be working on the following initiatives:

Revenue Generation

We previously were in negotiations with Brasil Óleo de Mamona Ltda, known as BOM, to build a pilot plant supplying their company with hydrogen to fuel their hydrogenation process.  However BOM Brazil is moving away from the production of hydrogenated oils.  As a result negotiations were terminated with BOM Brazil.  

We have developed other uses for hydrogen technology including using it as a fuel source for gasoline powered engines, and as a fuel additive to diesel powered engines.  Our technology allows diesel powered engines to increase their fuel efficiency by ten to thirty percent, and slightly increase their power output at the same time.  Our current business model is based upon convincing commercial trucking companies that there is a significant cost benefit to using our hydrogen technology to reduce their fuel costs combined with our ability to produce cheap and inexpensive hydrogen to sell and deliver to those companies.

The Company has not been successful to date in its fund raising efforts, and as a result has hired a Chief Restructuring Officer to negotiate with the Company’s creditors and evaluate the options available to the Company.  These options include different financing alternatives and potential mergers, acquisitions, or business combinations with other companies.  

Research and Development

In order to commercially develop our products and refine our hydrogen production process we will need to expend considerable resources on research and development, which we are unable to do at this current time due to a lack of funding for those operations.

In order to continue and expand our research and development efforts, management estimates that the company will need to raise approximately $7 million dollars by the end of 2009.  Our fund raising efforts have not been successful recently.  As a result, we are unsure when we will be able to restart our research and development efforts.  We have hired a Chief Restructuring Officer to help us consider different funding options, and to evaluate companies interested in potential mergers, acquisitions, or business combinations with the Company.  If one of the funding options, or potential merger, acquisition, or business combinations takes place then our shareholders may be significantly diluted.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discusses our exposure to market risk related to changes in interest rates and foreign currency exchange rates. These exposures may change over time as business practices evolve and could have a material adverse impact on our business, financial condition and results of operations.

The Company’s operations are in the Canada and many of our assets and liabilities give rise to significant exposure to market risks from changes in foreign currency rates arising from fluctuations in foreign exchange rates and the degree of volatility of these rates.  Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e).  Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud.  A control system, no matter how well conceived

17

and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are 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.  Due to 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. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this annual report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and c ash flows for the periods presented.

There were no changes in our internal control over financial reporting during our most recent quarter that materially affected, or were reasonably likely to affect, our internal control over financial reporting.

18

PART II

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

On October 22, 2004, we instituted proceedings against Russell Rothman in the Ontario Superior Court of Justice (Case No. 04-CV-277760CM2).  We are seeking the rescission of agreements between us and Mr. Rothman, return of shares paid to him, and the return of money paid.  We had entered into an agreement with Mr. Rothman for the purchase of certain technology related to the production of hydrogen gas, for which he represented that he owned all right and title.  On December 29, 2004 Rothman filed a countersuit against the Company in the Ontario Supreme Court of Justice for breach of contract in the amount of $2 billion and is asking for punitive damages in the amount of $10 million. On December 9, 2005, the Ontario Supreme Court of Justice ordered that Mr. Rothman’s pleadings be struck, that he issue new pleadings by January 9, 2006 and that he appear in court on February 9, 2006.  

On January 9, 2006, Mr. Rothman substantially amended his claim, and is now seeking $12 million for breach of contract and punitive damages in the amount of $250,000. In 2007 Mr. Rothman asked the courts to require us to post a $50,000 bond as “Security Costs” because we are an American company operating in Canada.  Such a bond is designed to protect the Defendant in a case from having to pay legal fees if they prevail in the case.

In 2002, the SEC brought suit against COI Solutions Inc., our predecessor company, and one of our former Chief Executive Officers, Robert Wilder, in the United States District Court for the Southern District of Florida.  Subsequent to our acquisition of the assets of Alternate Energy Corporation in 2003 and complete management change, the SEC agreed to settle the litigation.  We neither admitted nor denied the allegations of the SEC's complaint as part of the settlement.  The settlement was entered by the District Court and included an injunction enjoining the company, its officers, and directors from violating securities laws in the future.

On February 17, 2005, the Court entered judgments of permanent injunction and other relief against defendants COI Solutions, Inc. and Mel Levine, a COI fundraiser, from violating Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder.  In addition to injunctive relief, the judgment against Mr. Levine provided for the imposition of a civil penalty. On March 30, 2005, the United States District Court for the Southern District of Florida entered a default judgment of permanent injunction against Robert Wilder.  The Court found that Mr. Wilder violated Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5, thereunder. In addition to injunctive relief, the judgment provided for the imposition of a civil penalty to be paid by Mr. Wilder, which was set in the amount of $110,000 on June 30, 2005.

In 2005, we entered into a consulting arrangement with InvestorSource Group, LLC (“InvestorSource”) to provide certain consulting services related to financing, capital structure and merger and acquisition opportunities.  Subsequent to the agreement, we became unhappy with the quality of the services provided and cancelled payments on the contract.  InvestorSource forced the contract into arbitration per the terms of our agreement and, on October 1, 2008, we reached a settlement arrangement with InvestorSource.  Under the terms of the settlement, we are to pay InvestorSource $10,000 on October 30, 2008 and $10,000 on November 29, 2008.  Additionally, we issued InvestorSource 28 million shares which we valued at $308,000 and is included in this report as “Losses on Settlements”.  We issued these shares on October 2, 2008, but accrued them back into our financial statements as of September 30, 2008.  There a re two contingencies in the settlement agreement with InvestorSource:  first, if we default on any of the payment terms, the judgment amount becomes $500,000.  Second, if we fail to merge with another company before December 31, 2008, the judgment amount becomes $250,000.

On October 30, 2008, we paid our first installment on our settlement agreement with InvestorSource (see Note 10) which was paid for on our behalf by the Texas-based oil company with whom we have signed a letter of intent to engage in a reverse merger (see Note 9).   The Texas-based oil company has expressed both the wherewithal and intent to make the second payment, due November 29, 2008, and to close the reverse merger as planned.  We therefore feel that the possibility of realization of the contingent liabilities delineated in Note 10 are remote.

We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances.  Other than the litigation described above, we are not aware of any pending or threatened litigation against us or our officers and directors in their capacity as such that could have a material impact on our operations or finances.

19

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5.

OTHER INFORMATION.

None

ITEM 6.

EXHIBITS AND REPORTS ON FORM 8-K.

Exhibit No.	Description of Exhibit
3.1	Articles of Incorporation, as filed August 1, 1997 (included as Exhibit 3.1 to the Form 10-SB12G filed November 10, 1999, and incorporated herein by reference).
3.2	Bylaws (included as Exhibit 3.2 to the Form 10-SB12G filed November 10, 1999, and incorporated herein by reference).
3.3	Articles of Amendment to the Articles of Incorporation, as filed August 23, 1997 (included as Exhibit 3.3 to the Form 10-SB12G filed November 10, 1999, and incorporated herein by reference).
3.4	Articles of Amendment to the Articles of Incorporation, as filed November 20, 1998 (included as Exhibit 3.4 to the Form 10-SB12G filed November 10, 1999, and incorporated herein by reference).
3.5	Articles of Amendment to the Articles of Incorporation, as filed May 16, 2003 (included as Exhibit 3.5 to the Form 10-SB12G filed November 10, 1999, and incorporated herein by reference).
4.1	2003 Stock Benefit Plan, dated July, 1, 2003 (included as Exhibit 4.1 to the Form S-8 filed July 23, 2003, and incorporated herein by reference).
4.2	Form of Class A Warrant (included as Exhibit 4 to the Form 8-K filed March 15, 2005, and incorporated herein by reference).
4.3	Form of Class B Warrant (included as Exhibit 4 to the Form 8-K filed March 15, 2005, and incorporated herein by reference).
4.4	Form of Class C Warrant (included as Exhibit 4 to the Form 8-K filed March 15, 2005, and incorporated herein by reference).
4.5	Subscription Agreement between the Company and various subscribers (included as Exhibit 10.1 to the Form SB-2/A filed September 14, 2005, and incorporated herein by reference).
4.6	Subscription Agreement between the Company and various subscribers (included as Exhibit 4 to the Form 8-K filed March 15, 2005, and incorporated herein by reference).
10.1	Asset Purchase Agreement between the Company and AEC1, Inc., formerly known as Alternate Energy Corporation, dated February 20, 2003 (included as Exhibit 10.1 to the Form 8-K filed June 5, 2003, and incorporated herein by reference).
10.2	Form of Securities Purchase Agreement between the Company and various purchasers (included as Exhibit 10.1 to the Form 10-KSB filed March 16, 2004, and incorporated herein by reference).
10.3	Form of Registration Rights Agreement between the Company and various purchasers (included as Exhibit 10.2 to the Form 10-KSB filed March 16, 2004, and incorporated herein by reference).
10.4	Form of Common Stock Purchase Warrant between the Company and various purchasers (included as Exhibit 10.3 to the Form 10-KSB filed March 16, 2004, and incorporated herein by reference).

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10.5	Securities Purchase Agreement between the Company and Feldman Weinstein, LLP (included as Exhibit 10.4 to the Form 10-KSB filed March 16, 2004, and incorporated herein by reference).
10.6	Form of Common Stock Purchase Warrant between the Company and various purchasers (included as Exhibit 10.5 to the Form 10-KSB filed March 16, 2004, and incorporated herein by reference).
10.7	Addendum to Securities Purchase Agreement between the Company and various purchasers (included as Exhibit 10.6 to the Form 10-KSB filed March 16, 2004, and incorporated herein by reference).
10.8	Addendum to Registration Rights Agreement between the Company and various purchasers (included as Exhibit 10.7 to the Form 10-KSB filed March 16, 2004, and incorporated herein by reference).
10.9	Letter of Engagement for Marketing Communications and Manufacturing Consulting Management Services between the Company and Velocity Product Solutions Inc., dated September 25, 2003 (included as Exhibit 10.8 to the Form 10-KSB filed March 16, 2004, and incorporated herein by reference).
10.10	Letter of Engagement for Expanded Executive Management Services among the Company, Corbee Dutchburn and Lyle Goodis, dated October 30, 2003 (included as Exhibit 10.9 to the Form 10-KSB filed March 16, 2004, and incorporated herein by reference).
10.11	Addendum to October 30, 2003 Letter of Engagement for Expanded Executive Management Services among the Company, Corbee Dutchburn, and Lyle Goodis, dated December 5, 2003 (included as Exhibit 10.10 to the Form 10-KSB filed March 16, 2004, and incorporated herein by reference).
10.12	Funds Escrow Agreement between the Company and various subscribers (included as Exhibit 10.10 to the Form SB-2/A filed September 14, 2005, and incorporated herein by reference).
10.13	Security Agreement between the Company and Blaine Froats, dated January 1, 2005 (included as Exhibit 10.12 to the Form SB/2-A filed January 19, 2006, and incorporated herein by reference).
14.1	Corporate Code of Ethics (included as Exhibit 14 to From 10-KSB filed March 16, 2004, and incorporated herein by reference).
21.1	Subsidiaries of the registrant (filed herewith).
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 13, 2008		Alternate Energy Corp.
	By:	/s/ BLAINE FROATS
		Blaine Froats
		Chief Executive Officer

Date: November 13, 2008		Alternate Energy Corp.
	By:	/s/ JACKWASSERMAN
		Jack Wasserman
		Treasurer and Principal Accounting Officer

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