UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549




**FORM
      10-QSB/A**




**x**
              **QUARTERLY
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF 1934**
  For
        the quarterly period ended June 30,
        2007
  **o**
              **TRANSITION
                  REPORT UNDER 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 small business issuer as specified in its charter)




**Nevada**
              ****
              **86-0884116**(State
                  or other jurisdiction of incorporation or organization)
              
              (I.R.S.
                  Employer Identification No.)
  **3325
                  North Service Rd, Suite 105**
                **Burlington,
                  Ontario**
                **Canada
                  L7N 3G2**(Address
                  of principal executive offices)**905.332.3110**(Issuer’s
                  telephone number)




Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 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 x
        No o
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes o No x
 
 State
        the
        number of shares outstanding of each of the issuer’s classes of common equity,
        as of the latest practicable date: 134,969,019 shares as of May 7,
        2007.
 
 Transitional
        Small Business Disclosure Format (Check one): Yes o No x







**ALTERNATE
      ENERGY CORP.**


**(A
      Development Stage Company)**




**QUARTERLY
      REPORT ON FORM 10-QSB/A**


**FOR
      THE QUARTER ENDED JUNE 30, 2007**




**INDEX**




PART
        I
  FINANCIAL
          INFORMATION





Item
                  1 - Consolidated Balance Sheets as of June 30, 2007
                  (Unaudited)
              
              F-1Consolidated
                  Statements of Operations for the Three and Six Months Ended June
                  30, 2007
                  and 2006 (Unaudited)
              
              F-2Consolidated
                  Statements of Cash Flows for the Six Months Ended June 30, 2007
                  and 2006
                  (Unaudited)
              
              F-3Notes
                  to the Unaudited Consolidated Financial Statements
              
              F-4
                  - F-6Item
                  2 - Management's Discussion and Analysis or Plan of
                  Operation
              
              1-11Item
                  3 - Controls and Procedures
              
              11
  **PART
          II - OTHER INFORMATION**
  Item
                  1 - Legal Proceedings
              
              11-12Item
                  2 - Unregistered Sales of Equity Securities and Use of
                  Proceeds
              
              12-13Item
                  3 - Defaults Upon Senior Securities
              
              13Item
                  4 - Submission of Matters to a Vote of Security Holders
              
              13Item
                  5 - Other Information
              
              13Item
                  6 - Exhibits and Reports on Form 8-K
              
              14-15










**PART
      I**


**FINANCIAL
      INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS.**




**ALTERNATE
                    ENERGY CORP.**
                  **(A
                    Development Stage Company)**
                  **Consolidated
                    Balance Sheets****June
                    30 , 2007*****unaudited***
                
                **December
                    31, 2006****ASSETS****Current**Cash
                
                $
                21,146
                
                $
                97,443Prepaid
                    expenses and sundry assets
                
                
                54,624
                
                
                62,245Marketable
                    securities
                
                
                32,487
                
                
                114,934108,257
                
                
                274,622**Other**Property
                    and equipment, net
                
                
                188,188
                
                
                210,343Patents
                    and technology
                
                
                -
                
                
                -$
                296,445
                
                $
                484,965**LIABILITIES****Current**Accounts
                    payable
                
                $
                257,722
                
                $
                174,842Accrued
                    liabilities
                
                
                221,016
                
                
                168,591Due
                    to directors and officers
                
                
                559,709
                
                
                399,1621,038,447
                
                
                742,595**SHAREHOLDERS
                    EQUITY****Capital
                    stock**
                
                
                141,281
                
                
                133,949**Additional
                    paid in capital**
                
                
                29,546,016
                
                
                29,119,777**Prepaid
                    expenses paid with common stock**
                
                
                (142,401
                )
                
                (101,606
                )**Accumulated
                    other comprehensive income**
                
                
                (296,540
                )
                
                (271,344
                )**(Deficit)
                    Accumulated during development stage**
                
                
                (29,990,358
                )
                
                (29,138,406
                )(742,002
                )
                
                (257,630
                )$
                296,445
                
                $
                484,965
 {See
          accompanying notes to the financial statements.}
  F-1
  **ALTERNATE
                      ENERGY CORP.****(A
                      Development Stage Company)****Consolidated
                      Statements of Operations****Unaudited****Three
                      Months Ending June 30 2007**
                  
                  **Three
                      Months Ending June 30 2006**
                  
                  **Six
                      Months Ending June 30 2007**
                  
                  **Six
                      Months Ending June 30 2006**
                  
                  **Inception
                      To Date****REVENUE**
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -**EXPENSES**Administrative
                  
                  
                  48,898
                  
                  
                  329,945
                  
                  
                  144,647
                  
                  
                  372,057
                  
                  
                  1,610,509Consulting
                      fees
                  
                  
                  157,475
                  
                  
                  330,888
                  
                  
                  354,157
                  
                  
                  1,287,223
                  
                  
                  14,079,424Professional
                      fees
                  
                  
                  16,958
                  
                  
                  150,301
                  
                  
                  164,657
                  
                  
                  208,542
                  
                  
                  1,485,936Research
                      and development
                  
                  
                  100,744
                  
                  
                  49,513
                  
                  
                  164,294
                  
                  
                  86,893
                  
                  
                  506,255Financing
                      expense
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  50,386
                  
                  
                  559,714Impairment
                      of intangible assets
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,165,458Management
                      fee
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  240,000Recovery
                      of loan
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (202,000
                  )Depreciation
                  
                  
                  11,394
                  
                  
                  17,251
                  
                  
                  24,198
                  
                  
                  34,319
                  
                  
                  214,476**NET
                      (LOSS) FROM OPERATIONS**
                  
                  
                  (335,468
                  )
                  
                  (877,898
                  )
                  
                  (851,952
                  )
                  
                  (2,039,420
                  )
                  
                  (20,659,771
                  )**OTHER
                      INCOME (EXPENSES)**Other
                      income
                  
                  
                  -
                  
                  
                  463,021
                  
                  
                  -
                  
                  
                  463,021
                  
                  
                  4,217Gain
                      on settlement
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  167,427
                  
                  
                  461,909Gain
                      on adjustment on derivative / warrant liability to fair value of
                      underlying securities
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,075,339**NET
                      (LOSS) FOR THE PERIOD**
                  
                  $
                  (335,468
                  )
                  $
                  (414,877
                  )
                  $
                  (851,952
                  )
                  $
                  (1,408,972
                  )
                  $
                  (19,118,306
                  )**NET
                      (LOSS) PER SHARE**
                  
                  $
                  (0.00
                  )
                  $
                  (0.01
                  )
                  $
                  (0.01
                  )
                  $
                  (0.02
                  )**WEIGHTED
                      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING**
                  
                  
                  139,269,217
                  
                  
                  122,504,948
                  
                  
                  137,378,931
                  
                  
                  119,803,127


{See
        accompanying notes to the financial statements.}
  F-2


**ALTERNATE
                ENERGY CORP.****(A
                Development Stage Company)****Consolidated
                Statements of Cash Flows*****Unaudited***Six
                months Ending June 30,
            
            **2007**
            
            **2006**
            
            **Inception
                To Date****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                (loss)
            
            $
            (851,952
            )
            $
            (1,408,972
            )
            $
            (19,118,306
            )Adjustments
                to reconcile net loss from operations to net cash used in operating
                activities:Stock
                based expenses
            
            
            367,776
            
            
            1,490,615
            
            
            13,366,286Impairment
                of intangible assets
            
            
            -
            
            
            -
            
            
            2,165,458Depreciation
                and amortization
            
            
            24,198
            
            
            34,319
            
            
            214,476Accretion
                of principal related to convertible debt
            
            
            -
            
            
            50,386
            
            
            494,715(Gain)
                loss on derivatives related to warrants
            
            
            -
            
            
            (167,427
            )
            
            (1,075,339
            )(Gain)
                Loss on sale of marketable securities
            
            
            -
            
            
            (6,099
            )
            
            165,358(Gain)
                Loss on settlement
            
            
            -
            
            
            -
            
            
            (376,909
            )Changes
                in operating assets and liabilitiesDecrease
                (increase) in prepaid expenses and sundry assets
            
            
            7,621
            
            
            19,518
            
            
            (191,533
            )Decrease
                (increase) in deferred consulting expense
            
            
            -
            
            
            -
            
            
            -Increase
                (decrease) accounts payable and accrued liabilities
            
            
            135,305
            
            
            205,579
            
            
            258,949Increase
                (decrease) in due to directors and officers
            
            
            -
            
            
            -
            
            
            264,000Net
                cash (used in ) operating activities
            
            
            (317,052
            )
            
            (154,990
            )
            
            (3,832,845
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**Purchase
                of property and equipment
            
            
            (2,043
            )
            
            (5,271
            )
            
            (494,980
            )Purchase
                of patents and technology
            
            
            -
            
            
            -
            
            
            (154,373
            )Proceeds
                from (investment in) marketable securities
            
            
            -
            
            
            17,349
            
            
            (152,840
            )Net
                cash provided by (used in) investing activities
            
            
            (2,043
            )
            
            (12,078
            )
            
            (802,193
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**Issue
                of common shares for cash
            
            
            25,000
            
            
            174,875
            
            
            3,481,875Principal
                received from notes payable
            
            
            -
            
            
            -
            
            
            500,000Advances
                from directors and officers
            
            
            160,547
            
            
            59,546
            
            
            595,709Net
                cash provided by (used in) financing activities
            
            
            185,547
            
            
            234,421
            
            
            4,577,584**EFFECT
                OF FOREIGN EXCHANGE RATES**
            
            
            57,251
            
            
            -
            
            
            78,600**NET
                INCREASE (DECREASE) IN CASH DURING PERIOD**
            
            
            (76,297
            )
            
            91,509
            
            
            21,146**CASH,
                BEGINNING OF THE PERIOD**
            
            
            97,443
            
            
            135,881
            
            
            -**CASH,
                END OF THE PERIOD**
            
            $
            21,146
            
            $
            227,390
            
            $
            21,146Non-cash
                activitiesCommon
                shares issued for patents and technology (net)
            
            
            -
            
            
            -
            
            
            1,970,000Issuance
                of common stock for note conversion
            
            
            -
            
            
            9,032,082
            
            
            494,715Issuance
                of common stock for satisfaction of accrued liabilities due to related
                parties
            
            
            -
            
            
            200,000
            
            
            300,000





{See
        accompanying notes to the financial statements.}


F-3


**ALTERNATE
      ENERGY CORP.**


**(A
      Development Stage Company)**


**NOTES
      TO THE (UNAUDITED) CONDENSED FINANCIAL STATEMENTS**


**SIX
      MONTHS ENDED June 30, 2007**




1.
          GENERAL
 
 The
          unaudited condensed 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, 2006 included in the Company’s Annual Report on Form
          10-KSB.
 
 2.
          BACKGROUND INFORMATION
 
 Alternate
          Energy Corporation (the “Company”), formerly known as COI Solutions, Inc., was
          incorporated in the State of Nevada on August 1, 1997. 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 power.
 
 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.
 
 3. LIQUIDITY
 
 During
          the six months ended June 30,
          2007 and 2006, the Company incurred losses of $851,952 and $1,408,972,
          respectively and cash used in operations was $317,052 and $154,990,
          respectively. The Company financed its operations using sales of its common
          stock, the exercise of share purchase warrants, vendor credit, debt financing
          and convertible notes.
 
 While
          the Company believes that it will
          have sufficient cash to meet its short-term capital requirements through
          the
          third quarter of 2007, there are no assurances that the Company will be
          able to
          raise sufficient funds to meet its long-term capital needs. The Company
          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 the Company. Accordingly, the Company will continue
          to seek
          additional financing through issuance of debt and/or equity
          securities.
 
 4.
          MARKETABLE SECURITIES
 
 As
          of
          June 30, 2007, the Company holds 800,000 restricted shares of common stock
          of
          Astris Energi Inc. and the rights to purchase 1,500,000 warrants at $0.19
          for a
          period of three years with an unrealized loss of $300,861. On the Over-The
          Counter Bulletin Board, the reported sale price of Astris Energi’s common stock
          was $0.03 as of June 30, 2007.
 F-4




5.
      PROPERTY AND EQUIPMENT




Property
      and equipment at June 30, 2007
      consists of the following:




Automobile
                
                $
                90,465Computer
                    hardware
                
                
                36,926Computer
                    software
                
                
                8,077Equipment
                
                
                242,043Telephone
                
                
                6,450Office
                    equipment
                
                
                4,629386,590Less
                    accumulated depreciation
                
                
                (198,402
                )$
                188,188




6.
        RELATED PARTY TRANSACTIONS
 
 As
        of
        June 30, 2007, the Company was indebted $559,709 (as of December 31, 2006
        -
        $399,162) to a director, Blaine Froats. The amount of $537,100 is pursuant
        to a
        non-interest bearing demand note. 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 $ 537,100 does not represent a
        one-time lump sum but rather a series of transactions between January 2003
        and
        June 2007.
 
 The
        Company is indebted to Marilyn Froats, spouse of Blaine Froats, $147,583
        (as of
        December 31, 2006 - $99,802) in consulting fees for the services rendered
        during
        the period between July 1, 2005 to June 30, 2007.
 
 7.
        CAPITAL STOCK
 
 The
        Company is authorized under its charter to issue 250,000,000 shares of common
        stock, par value 0.001 per share.
 
 The
        Company issued 3,975,000 shares of common stock during the six months ending
        June 30, 2007. The amount issued consisted of 487,979 shares of common stock
        for
        expenses totaling $28,301 or $0.06 per share (weighted average price), 500,000
        shares of common stock for the exercise of options and 2,987,021 were to
        consultants for services performed for the Company totaling $169,480 or $0.06
        per share (weighted average price).
 
 At
        June
        30, 2007 and December 31, 2006, there were 141,280,591, and 133,948,877 shares
        of common stock issued and outstanding, respectively.
 
 8.
        DEFERRED CONSULTING COSTS
 
 We
        have
        issued shares to service providers and consultants over the terms of their
        contracts which range from three months to three years. We recorded shares
        at
        the fair value at date issued and the expense is recorded as services are
        rendered.
 
 All
        deferred assets are recorded at fair market value at the time of share issuance
        and are systematically reduced based on the terms of each agreement. Each
        party
        providing services had either positive working references or had previously
        provided services to us and had performed their duties as per their contractual
        terms.
 
 F-5
  9.
        STOCK
        OPTIONS AND WARRANTS
 
 On
        May
        22, 2003 the Company adopted a stock option plan that is accounted for based
        on
        SFAS No. 123 (R) and related interpretations. The plan allows the Company
        to
        grant options to persons employed or associated with the Company, including,
        without limitation, any employee, director, general partner, officer, attorney,
        accountant, consultant or advisor up to an aggregate of 5,000,000 common
        shares.
 
 The
        options have a term of expiration to be set by the Compensation Committee
        of the
        Board of Directors but will not exceed ten (10) years after the grant date.
        The
        options vest immediately. The exercise price for each option is chosen at
        the
        discretion of the Compensation Committee. On February 24, 2004 the Company
        increased the number of shares to be issued under the plan to 15,000,000.
 
 In
        December 2006, 2,000,000 options were exercised. These common shares were
        issued
        in January 2007 as reflected in the Company’s financial statements.
 
 At
        June
        30, 2007 and December 31, 2006, there were 7,780,000 and 7,780,000 options
        to
        purchase shares of common stock, respectively. There were no other exercised,
        expired or issued options during the three month period.
 
 The
        total
        amount of warrants outstanding at June 30, 2007 was 10,166,676. There were
        no
        issued warrants and 3,720,556 warrants expired during the six month
        period.
  10.
        NET
        INCOME (LOSS) PER COMMON SHARE
 
 The
        Company computes net income (loss) per common share in accordance with SFAS
        No.
        128, “Earnings per Share”, SEC Staff Accounting Bulletin No. 98 (“SAB 98”) and
        Emerging Issues Task Force No. 04-8 “The Effect of Contingently Convertible
        Instruments on Diluted EPS”. Under the provisions of SFAS 128 and SAB 98, basic
        net income (loss) per common share (“Basic EPS”) is computed dividing net income
        (loss) available to common stockholders by the weighted average number of
        common
        shares outstanding. Diluted net income (loss) per common share (“Diluted EPS”)
        is computed by dividing net income (loss) adjusted for interest expense and
        amortization of debt issuance costs associated with the Convertible Debentures,
        by the weighted average number of common shares and dilutive potential common
        share equivalents then outstanding. Potential common shares consist of shares
        issuable upon the exercise of stock options and convertible securities such
        as
        Convertible Debentures. The calculation of diluted net loss per share does
        not
        include potential shares of common stock equivalents for the three and six
        months ended June 30, 2007 and 2006 respectively, as their impact on net
        loss
        per share would be antidilutive.
 
 F-6
  **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-QSB/A 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-QSB/A, except as required
        by law.
 
 Background
 
 We
        are a
        development stage company. We have not earned revenues from our technology
        through March 31, 2007. 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 state.
 
 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.
  1
  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.
 
 We
        are
        currently negotiating with Brasil Óleo de Mamona Ltda, known as BOM, a world
        leader in castor oil production, to build a pilot plant supplying their company
        with hydrogen to fuel their hydrogenation process. We believe completion
        of this
        plant would achieve a number of objectives including testing and refining
        of BOM
        Brazil’s process technology, selling its hydrogen and requisite chemicals
        through BOM related sales channels and revenue generation by 2008. We are
        currently seeking private investment to complete the first steps required
        for
        the pilot plant operations in Brazil.
 
 We
        believe our hydrogen production technology could have immediate application
        in
        the areas of existing hydrogen industries such as hydrogenation of food oils
        and
        petro-chemicals, as well as emergent power uses including: back-up and, in
        some
        cases, primary power for commercial, industrial and military purposes;
        stationary and portable fuel cell power applications, in fuel cell-driven
        and
        internal combustion engine vehicles; and residential and commercial applications
        for users wishing to gain independence from the existing electrical grid.
        The
        chemical by-products produced by our hydrogen production process, via any
        one of
        the aforementioned hydrogen applications, are environmentally safe, meet
        applicable industry standards and possess wide, established global markets
        in
        the food products and pharmaceutical industries.
 
 Current
        Events
 
 On
        May
        17, 2007, we adopted a 2007 Stock Benefit Plan for 25,000,000 shares covering
        employees and consultants. On June 21, 2007, our board of directors approved
        the
        exercise of 2,500,000 shares related to a warrant previously granted to Sean
        Froats, an employee of the Company.
 
 Basis
        of Presentation
 
 These
        consolidated financial statements present the accounts of Alternate Energy
        and
        its wholly-owned subsidiary, 2040412 Ontario, Inc. All significant intercompany
        accounts and transactions have been eliminated.
 
 **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 results 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
        we be unable to continue as a going concern. We have experienced losses in
        the
        period and there is negative working capital. Our ability to realize our
        assets
        and discharge our liabilities in the normal course of business is dependent
        upon
        continued support. We are currently attempting to obtain additional financing
        from its existing shareholders and other strategic investors to continue
        operations. However, there can be no assurance that we will obtain sufficient
        additional funds from these sources.
 
 2
  These
        conditions cause substantial doubt about our 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.
 
 Accounting
        Principles
 
 Our
        accounting and reporting policies conform to generally accepted accounting
        principles and industry practice in the United States. The financial statements
        are prepared in United States dollars.
 
 *Risks
        and Uncertainties*
 
 We
        operate in an emerging industry that is subject to market acceptance and
        technological change. Our operations are subject to significant risks and
        uncertainties, including financial, operational, technological and other
        risks
        associated with operating an emerging business, including the potential risk
        of
        business failure.
 
 *Financial
        Instruments and Risk Concentrations*
 
 Our
        estimate of the fair value of cash, accounts payable and accrued liabilities,
        warrant liability, convertible notes and due to directors and officers
        approximates carrying value due to the short-term nature of these instruments.
        Marketable securities are stated at fair value.
 
 Our
        operations are in Canada and virtually all 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, we do not use derivative instruments
        to
        reduce its exposure to foreign currency risk. We may not be able to effectively
        protect our intellectual property rights, which form the foundation of the
        business. The business exposes us to potential product liability claims that
        are
        inherent in hydrogen and products that use hydrogen. We have not obtained
        insurance coverage on acceptable terms.
 
 *Deferred
        Consulting Costs*
 
 We
        have
        issued shares to service providers and consultants over the terms of their
        contracts which range from three months to three years. We recorded shares
        at
        the fair value at date issued and the expense is recorded as services are
        rendered.
 
 All
        deferred assets are recorded at fair market value at the time of share issuance
        and are systematically reduced based on the terms of each agreement. Each
        party
        providing services had either positive working references or had previously
        provided services to us and had performed their duties as per their contractual
        terms.
 
 *Marketable
        Securities*
 
 Marketable
        securities are classified as current, are available for sale and are stated
        at
        fair value. Unrealized gains and losses, net of tax, are included in Accumulated
        Other Comprehensive Income (Loss) on the Balance Sheet.
 
 3
  *Patents
        and Technology*
 
 In
        accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” which was
        adopted in its entirety on May 22, 2003, we evaluate the carrying value of
        other
        intangible assets annually as of December 31 and between annual evaluations
        if
        events occur or circumstances change that would more likely than not reduce
        the
        fair value of the reporting unit below its carrying amount. When evaluating
        whether or not an asset is impaired, we compare the fair value of the reporting
        unit to which the asset is assigned to its carrying amount. If the carrying
        amount of a reporting unit exceeds its fair value, the amount of the impairment
        loss must be measured. The impairment loss is calculated by comparing the
        implied fair value of the reporting unit to its carrying amount.
 
 We
        performed our periodic review of our intangible assets for impairment as
        of
        December 31, 2005 and identified asset impairment as a result of the review
        of
        $1,906,373.
 
 We
        purchased technology during the 2004 fiscal year for $218,000 and had filed
        for
        provisional patents covering the newly acquired technology. This technology
        showed no impairment during the fiscal year ended December 31, 2005.
 
 As
        a
        result of change in technology in the third quarter ending September 30,
        2006,
        we concluded that the technology is no longer functional, deemed inadequate
        to
        the needs of the business at this future time, and does not fit into our
        business plan as set out in relation to the requirements for a competitive
        margin needed for our targeted markets. We performed our periodic review
        of our
        intangible assets for impairment as of December 31, 2006 and identified asset
        impairment as a result of the review of approximately $218,000.
 
 As
        a
        result, we withdrew two provisional patents through our patent attorneys,
        and
        recorded the impairment as shown in the chart below.
 
 Through
        our own extensive research and development, we have developed our own
        proprietary process for producing hydrogen. We believe this process has improved
        hydrogen production significantly, with the added creation of valuable
        by-products. Since these by-products have a much higher value to weight ratio
        than the hydrogen itself, subsidization of the hydrogen’s selling price via the
        sale of this product will allow for this process to be more price competitive
        with current gasoline, diesel and hydrogen prices.
 
 It
        is
        with this newly developed technology that we will continue our business strategy
        which may allow for the realization of better revenue opportunities to arise
        in
        the future. We will continue in the development and refinement of our hydrogen
        production systems.
 
 *Income
        Taxes*
 
 We
        account for our income taxes under the asset and liability method specified
        by
        SFAS No. 109, “Accounting for Income Taxes.” Deferred tax assets and liabilities
        are determined based on the difference between the financial statement and
        tax
        bases of assets and liabilities as measured by the effective tax rates which
        will be in effect when these differences as expected to reverse. Deferred
        tax
        assets are reduced by a valuation allowance when, in the opinion of management,
        it is more than likely than not that some portion or all of the deferred
        tax
        assets will not be realized.
 
 4
  *Property
        and Equipment*
 
 Property
        and equipment are recorded at cost less accumulated depreciation. Depreciation
        is provided annually on a declining-basis over the estimated useful lives
        of the
        assets, except for current year additions on which 1⁄2 of the rates are
        applicable. The declining balance rates are as follows:


Automobile
                
                30%
                    declining balanceComputer
                    hardware
                
                30%
                    declining balanceComputer
                    software
                
                100%
                    declining balanceEquipment
                
                20%
                    declining balanceTelephone
                
                30%
                    declining balanceOffice
                    equipment
                
                30%
                    declining balance
  *Comprehensive
            Income*
 
 We
            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’ equity.
 
 *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*
 
 We
            apply
            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 our equity instruments at those dates.
 
 *Earnings
            per Share*
 
 We
            compute net income (loss) per common share in accordance with SFAS No.
            128,
“Earnings per Share,” SEC Staff Accounting Bulletin No. 98 (“SAB 98”) and
            Emerging Issues Task Force No. 04-8 “The Effect of Contingently Convertible
            Instruments on Diluted EPS.” Under the provisions of SFAS 128 and SAB 98, basic
            net income (loss) per common share (“Basic EPS”) is computed by dividing net
            income (loss) available to common stockholders by the weighted average
            number of
            common shares outstanding. Diluted net income (loss) per common share
            (“Diluted
            EPS”) is computed by dividing net income (loss) adjusted for interest expense
            and amortization of debt issuance costs associated with our Convertible
            Debentures by the weighted average number of common shares and dilutive
            potential common share equivalents then outstanding. Potential common
            shares
            comprise shares issuable upon the exercise of stock options and convertible
            securities such as Convertible Debentures.
 
 *Foreign
            Currency Translation*
 
 We
            consider the functional currency to be the Canadian dollar and, accordingly,
            financial information is translated into U.S. dollars using exchange
            rates in
            effect at year-end for assets and liabilities and average exchange rates
            during
            each reporting period for the results of operations.
 
 5
  *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.
 
 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.
 
 *Advertising*
 
 We
            expense the cost of advertising when incurred. Advertising expenses are
            included
            in general and administrative expenses in the consolidated statements
            of
            operations.
 
 *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) disclose 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 our fiscal year ending September 30, 2007.
            We do not
            expect the adoption of SFAS 158 to have a material impact on our 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 fair value measurements
            and disclosures made by us in our fiscal year beginning on October 1,
            2008. We
            do not expect the adoption of SFAS 157 to have a material impact on our
            financial position, results of operation or cash flows.
 
 In
            July
            2006, the FASB issued FIN. 48, “Accounting for Uncertainty in Income Taxes (an
            interpretation of FASB Statement No. 109), *(* “FIN
            48”)
            which is effective for fiscal years beginning after December 15, 2006.
            This
            interpretation was issued to clarify the accounting for uncertainty in
            income
            taxes recognized in the financial statements by prescribing a recognition
            threshold and measurement attribute for the financial statement recognition
            and
            measurement of a tax position taken or expected to be taken in a tax
            return. We
            are currently evaluating the potential impact of FIN 48, but it is not
            expected
            to have a material impact on our financial position, results of operations
            or
            cash flows.
 
 6
  In
            March
            2006, the FASB issued Statement of Financial Accounting Standards No. 156,
            Accounting for Servicing of Financial Assets (“SFAS No. 156”), which amends FASB
            Statement No. 140 (“SFAS No. 140”). SFAS 156 may be adopted as early as January
            1, 2006, for calendar year-end entities, provided that no interim financial
            statements have been issued. Those not choosing to early adopt are required
            to
            apply the provisions as of the beginning of the first fiscal year that
            begins
            after September 15, 2006 (e.g., January 1, 2007, for calendar year-end
            entities).  The intention of the new statement is to simplify accounting
            for separately recognized servicing assets and liabilities, such as those
            common
            with mortgage securitization activities, as well as to simplify efforts
            to
            obtain hedge-like accounting.  Specifically, the FASB said FAS No. 156
            permits a servicer using derivative financial instruments to report both
            the
            derivative financial instrument and related servicing asset or liability
            by
            using a consistent measurement attribute, or fair value.  We do not expect
            the adoption of SFAS 156 to have a material impact on our financial
            position, results of operations or cash flows.
 
 **RESULTS
            OF OPERATIONS**
 
 **FOR
            QUARTER ENDED JUNE 30, 2007,**
 
 **COMPARED
            TO THE QUARTER ENDED JUNE 30, 2006**
 
 **REVENUES**
 
 For
            the
            quarter ended June 30, 2007 and for the quarter ended June 30, 2006 we
            had no
            revenues. As a development stage company we are working diligently to
            progress
            our technology into realized revenue. We are continuing with our exploration
            of
            our dual phase business strategy that may allow for the realization of
            revenue
            opportunities sooner as we continue the development and refinement of
            our
            hydrogen production systems as well as our sales and marketing strategies.
 
 **OTHER
            INCOME**
 
 For
            the
            quarter ended June 30, 2007, we had no other income.
 
 **EXPENSES**
 
 We
            had
            total expenses of $335,468 and $877,898 in the quarter ended June 30,
            2007 and
            2006, respectively. Our expenses for the quarter ended June 30, 2007
            and 2006
            consisted of $48,898 and $329,945 in administrative expenses, respectively,
            $157,475 and $330,888 in consulting fees, $16,958 and $150,301 in professional
            fees, respectively, $100,744 and $49,513 for research and development,
            respectively, $0 and $50,386 for financing expense, respectively, and
            $11,394
            and $17,251 in depreciation, respectively. During the quarter ended June
            30,
            2007, our expenses were 62% lower than in quarter ended June 30, 2006,
            mostly
            due to reduction in administrative expenses and consulting fees.
 
 Administrative
            expenses decreased by $281,047 in the quarter ending June 30, 2007 as
            compared
            to the quarter ending June 30, 2006. The decreased is attributed to a
            one time
            bonus in the prior year’s period which did not recur in the current period nor
            do we anticipate incurring such bonus in the fiscal year 2007.
 
 Consulting
            fee expenses decreased by $173,413 in the quarter ending June 30, 2007
            as
            compared to the quarter ending June 30, 2006. The decrease is mainly
            attributed
            to the non issuance of stock options of $115,343 in the prior year’s quarter to
            our core consultants which we do not anticipate recurring such expense
            for the
            current fiscal year.
 
 Professional
            fees decreased by $133,343 in the quarter ending June 30, 2007 as compared
            to
            the quarter ending June 30, 2006. The decrease is attributed to reduction
            in
            legal expenses which in the prior year was incurred due to patent filings
            and
            litigations which we do not anticipate incurring such level of expenses
            in
            fiscal year 2007.
 
 Research
            and development expenses increased by $51,231 in the quarter ending June
            30,
            2007 as compared to the quarter ending June, 2006 as we continue on our
            course
            of action with testing and development of our hydrogen production systems
            as
            well as our valuable byproducts. We anticipate our research and development
            expenses to continue at the current levels for fiscal year 2007.
 
 7
  Over
            the
            next 12 months, we anticipate that our expenses will remain at same current
            levels as experienced in the quarter period ended June 30, 2007, however,
            decrease comparatively to fiscal year 2006. In the event significant
            financing
            is obtained, we would expect that expenses will only increase in proportion
            with
            the amount of funds received as a result of 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 $335,468 in the quarter ended June 30, 2007, compared with
            a net
            loss of $877,898 in the quarter ended June 30, 2006. The decrease of
            $542,430 in
            the net loss in the 2007 quarter compared to the 2006 quarter to aforementioned
            explanations. We believe that, for the fiscal year ending December 31,
            2007, we
            will continue to incur losses at the rate experienced during the second
            quarter.
            In 2007, we believe we would only be able to slow our losses if we can
            create
            and sustain significant revenues from our hydrogen production system
            and
            byproducts.
 
 **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 income
            (loss) of
            $(851,952) and $1,408,972 for the six months ended June 30, 2007 and
            2006,
            respectively, and have an accumulated deficit of $29,990,358 at June
            30, 2007.
            We had $21,146 in cash on hand as of June 30, 2007. 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.
 
 While
            the
            Company believes that it will have sufficient cash to meet its short-term
            capital requirements through the third and fourth quarter of 2007, there
            are no
            assurances that the Company will be able to raise sufficient funds to
            meet its
            long-term capital needs. Due to 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 $317,052 for the six month period ended
            June
            30, 2007, compared with $154,990 for the six month period ended June
            30, 2006.
            The net cash used for this period resulted mainly from consulting fees
            and
            liabilities to continue the ongoing movement towards our development,
            marketing
            and operations. The consulting fees were paid in shares of our common
            stock.
 
 Net
            cash
            obtained from financing activities was $185,547 for the six month period
            ended
            June 30, 2007, compared with $234,421 for the six month period ended
            June 30,
            2006. In the six month period ended June 30, 2007, we received advances
            from one
            of our directors.
 
 Net
            cash
            used in investing activities for the six month period ended June 30,
            2007 was
            $2,043, compared with net cash provided of $12,078 for the six months
            ended June
            30, 2006. The net cash used for this period resulted primarily in purchases
            of
            new property and equipment.
 
 On
            April
            28, 2006, we sold 1,600,000 shares of common stock at a price of $0.10
            per
            share, for a total of $160,000, to certain accredited investors.
 
 8
  On
            April
            1, 2006 we entered into a lease agreement with Astris Energi, Inc. We
            will lease
            certain equipment to Astris over a 48 month period.
 
 In
            March
            2005, we entered into a convertible debenture agreement which is described
            below. The initial closing for $500,000 and its conversion features triggered
            the anti-dilution clause included in our private placement agreements
            with
            certain accredited investors. As such, an additional 2,811,429 shares
            of common
            stock will need to be issued to these investors. At June 30, 2006, 324,857
            shares of common stock were issued with 2,486,572 shares remaining to
            be issued.
 
 On
            March
            2, 2005, we entered into a private placement with certain institutional
            accredited investors whereby these investors agreed to purchase up to
            $1,500,000
            in Convertible Notes, with Class A Warrants to purchase a number of shares
            equal
            to the number of shares to which the Notes are convertible, at a price
            of $0.40
            per share expiring in 3 years, Class B Warrants to purchase up to three
            times
            the amount of Notes purchased at the initial closing at an exercise price
            equal
            to 70% of the volume weighted average price for the five days preceding
            the
            closing ($0.2875 per share) exercisable until 90 days after a resale
            registration statement is declared effective, and Class C Warrants to
            purchase
            400,000 shares at $0.40 per share and 600,000 shares at $1.00 per share,
            exercisable for 3 years from the date of the closing. The Notes were
            initially
            convertible into shares of our common stock at 70% of the average closing
            bid
            price for the 5 days preceding the notice to convert with an initial
            ceiling of
            $0.35 per share and floor of $0.15 per share. Under the terms of the
            Notes, the
            floor is no longer effective. The Notes carry an interest rate of 6%,
            payable
            quarterly in arrears in either cash or our stock, at our discretion.
 
 As
            of
            June 30, 2006, we have received $500,000 in proceeds from the investors
            and have
            issued warrants to purchase a total of 8,054,674 shares of common stock.
            Of this
            total there were 2,563,668 Class A warrants, 5,291,005 Class B warrants
            and
            200,000 Class C warrants issued, all of which have been converted to
            shares of
            common stock.
 
 In
            January 2004, we entered into a private placement with institutional
            and
            accredited investors in which we sold a total of 5,500,000 shares of
            common
            stock at a price of $0.50 per share and warrants to purchase a total
            of
            2,750,000 shares of common stock at an exercise price of $0.85 per share.
            The
            warrants have a three year term. We received gross proceeds of $2,750,000
            from
            this transaction.
 
 In
            November 2004, we cancelled 30,000,000 shares that were returned to us
            by AEC 1,
            Inc as part of an agreement that we divest certain non-core technology.
            Under
            the terms of the agreement, to return certain patents and technology
            to their
            original owner, we transferred these patents and technology to our parent
            company, AEC 1, Inc. In consideration for this transfer of the patents
            and
            technology, we received 30,000,000 of our own shares from AEC 1, Inc.
            which were
            subsequently cancelled.
 
 Though
            these technologies possessed market potential, our final analysis concluded
            that
            their development required an extremely high outlay of capital and would
            produce
            only marginal profitability. Management therefore decided to divest and
            focus on
            its hydrogen production units. On November 1, 2004, we agreed to release
            these
            non-core technologies in order to facilitate and reacquire 30,000,000
            shares of
            our common stock from AEC 1, Inc.
 
 We
            held
            1,000,000 shares of Astris Energi Inc. as of December 31, 2004, which
            comprised
            an ownership interest in Astris Energi of 2.65%. These shares were purchased
            for
            the sum of $300,000 at the value of $0.30 per share and adjusted as per
            market
            value for that period. We sold all 1,000,000 shares of the Astris Energi
            securities between September 1, 2005 and March 31, 2006, incurring a
            loss on the
            investment, which is reflected in the consolidated statements of cash
            flows.
 
 During
            the fiscal quarter ended June 30, 2006, our contract with Astris Energi
            was
            amended and we received 800,000 restricted shares of common stock of
            Astris
            Energi Inc, $85,000 in cash and the rights to purchase 1,500,000 warrants
            at
            $0.19 for a period of three years. On the Over-The Counter Bulletin Board,
            the
            last reported sale price of Astris Energi’s common stock was $0.071 as of
            November 9, 2006.
 
 While
            we
            believe that we will have sufficient cash to meet our short-term capital
            requirements, we may not be able to raise sufficient funds to meet long-term
            capital needs as management estimates that we will require several million
            dollars towards the end of fiscal year 2007 to continue towards the goals
            set
            forth in our business strategy as stated in our annual report on form
            10-KSB for
            the fiscal year ended December 31, 2006. We may also seek alternative
            sources of
            financing, including from 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.
 
 9
  From
            time
            to time, we may evaluate potential acquisitions involving complementary
            businesses, content, products or technologies. We have no present agreements
            or
            understanding with respect to any such acquisition. Our future capital
            requirements will depend on many factors, including growth of our business,
            the
            success of our operations, economic conditions and other factors including
            the
            results of future operations.
 
 **PLAN
            OF OPERATION**
 
 Over
            the
            next twelve months we will be working on the following initiatives:
 
 Revenue
            Generation
 
 We
            are
            currently in negotiations with BOM Brasil, a world-leader in castor oil
            production, to build a pilot plant supplying their company with hydrogen
            to fuel
            their hydrogenation process. Completion of a plant is expected to achieve
            a
            number of our objectives including testing and refining of our process
            technology, selling our hydrogen and requisite chemicals through BOM-related
            sales channels and/or through other possible distributors, and revenue
            generation by 2008. Upon the successful completion and operation of the
            BOM
            pilot plant, we plan to build fully-operational hydrogen and chemical
            plants at
            appropriate sites worldwide.
 
 We
            are
            now working towards securing a five-year contract to supply BOM with
            on-site
            hydrogen at an extremely competitive price to what BOM is presently paying.
            We
            believe this will save BOM considerable expenses related to its cost
            of
            hydrogen, since it is currently trucked-in on a daily basis. We intend
            to design
            and build a hydrogen production facility on their site in Salvador, Brazil,
            which will produce a pre-determined volume of hydrogen, as mutually agreed
            upon
            by the contract. We expect to retain all rights to the by-product.
 
 Contingent
            on securing a signed contract, we anticipate a contract with a reputable
            engineering firm in the designing and project management relating to
            the
            construction of this turn-key operation. We believe that the financing
            of the
            facility and equipment, together with the related capital requirements
            can be
            found on a project financing basis, and therefore we do not expect to
            be
            required to provide this funding. Assuming the completion of contractual
            requirements and project financing by August 1, 2007, we estimates a
            turn-key
            plant could be completed by June 1, 2008. We would expect revenues of
            hydrogen
            and by-product to commence thereafter.
 
 Other
            revenue opportunities are being considered to supply hydrogen and by-products
            to
            a variety of industries and applications in traditional and emerging
            markets.
 
 Research
            and Development
 
 In
            addition to refining the hydrogen production process and developing new
            by-products, we expect to continue process optimization of current by-products
            with our principal technical team and external Labs. New research has
            been
            initiated by the University of Waterloo Co-op chemical engineering students
            to
            minimize raw material costs for the by-product processes, as well to
            identify
            the future development of innovative, hydrogen-yielding chemical
            reactions.
 
 Over
            the
            next 12 months, we intend to continue with this business strategy which
            may
            allow for the realization of better revenue opportunities to arise in
            the
            future.
 
 In
            order
            to accomplish and continue with these steps, management estimates that
            we will
            require up to seven million dollars towards the end of fiscal year ended
            2007.
            As we do not have any current revenue, we believe these funds will come
            from
            loans from officers and private placements of our common stock.
 
 10
  **Changes
            In and Disagreements with Accountants on Accounting and Financial Disclosure**
 
 None.
 
 **ITEM
            3. CONTROLS AND PROCEDURES.**
 
 Our
            management evaluated, with the participation of our Chief Executive Officer
            and
            our Principal Financial Officer, the effectiveness of our disclosure
            controls
            and procedures as of the end of the period covered by this Quarterly
            Report on
            Form 10-QSB. Based on this evaluation, our Chief Executive Officer and
            our
            Principal Financial Officer have concluded that our disclosure controls
            and
            procedures are effective to ensure that information we are required to
            disclose
            in reports that we file or submit under the Securities Exchange Act of
            1934 (i)
            is recorded, processed, summarized and reported within the time periods
            specified in Securities and Exchange Commission rules and forms, and
            (ii) is
            accumulated and communicated to our management, including our Chief Executive
            Officer, as appropriate to allow timely decisions regarding required
            disclosure.
            Our disclosure controls and procedures are designed to provide reasonable
            assurance that such information is accumulated and communicated to our
            management. Our disclosure controls and procedures include components
            of our
            internal control over financial reporting. Management’s assessment of the
            effectiveness of our internal control over financial reporting is expressed
            at
            the level of reasonable assurance that the control system, no matter
            how well
            designed and operated, can provide only reasonable, but not absolute,
            assurance
            that the control system’s objectives will be met. There was no change in our
            internal control over financial reporting that occurred during the last
            fiscal
            quarter that materially affected, or is reasonably likely to affect,
            our
            internal control over financial reporting.
 
 **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
            January 4, 2005 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. We continue to believe that the counterclaim has no merit and
            while it
            is too early to determine the outcome of such allegations, we intend
            to
            vigorously defend against Mr. Rothman’s counterclaim. This litigation has not
            progressed beyond the pleading stage and is ongoing as of May 7,
            2007.
 
 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.
 
 11
  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.
 
 **ITEM
            2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.**
 
 During
            April 2007, the Company issued 100,000 shares of common stock to a consultant
            for services valued at $5,800 or $0.058 per share.
 
 The
            Company issued the securities in the referenced transactions in reliance
            on the
            exemption contained in Section 4(2) of the Securities Act of 1933, as
            amended.
            There were no underwriters or placement agents employed in connection
            with the
            transactions described in this Item 2.
 
 **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 Exhibit3.1
                  
                  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).
  12
  Exhibit
                      No.
                  
                  Description
                      of Exhibit4.4
                  
                  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).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.
 
 13
 
 **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.
  **Alternate
                      Energy Corp.**Date: September
                    21, 2007
                  By:
                  /s/ Blaine
                    FroatsBlaine
                      Froats
                      Chief
                        Executive Officer
  **Alternate
                      Energy Corp.**Date: September
                    21, 2007
                  By:
                  /s/ Jack
                    WassermanJack
                      Wasserman
                      Treasurer
                        and Principal Accounting
                        Officer
  14