SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB

      [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ending March 31, 2006

      [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _______ to _______

                        COMMISSION FILE NUMBER 000-28015

                             ALTERNATE ENERGY CORP.
        (Exact name of small business issuer as specified in its charter)


           Nevada                                            86-0884116
   (State or other jurisdiction of                         (I.R.S. Employer
    incorporation or organization)                        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)

                                       N/A
                                   ----------
              (Former name, former address and former fiscal year,
                         if changed since last report)




      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 |_|


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

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS

      Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes |_|   No |_|

APPLICABLE ONLY TO CORPORATE ISSUERS

      State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 123,202,405 shares as of May
12, 2006.

      Transitional Small Business Disclosure Format (Check one): Yes |X| No |_|


<PAGE>

ITEM 1. FINANCIAL STATEMENTS.


<TABLE>
<CAPTION>
ALTERNATE ENERGY CORP.
(A Development Stage Company)
Consolidated Balance Sheets
----------------------------------------------------------------------------------------------------------------------
                                                                              March 31, 2006
                                                                                 unaudited           December 31, 2005
----------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>                     <C>
ASSETS
      Current
                   Cash                                                          $   105,533             $    135,881
                   Prepaid expenses and sundry assets                                142,660                  182,104
                   Marketable securities                                                  --                   11,250
----------------------------------------------------------------------------------------------------------------------
                                                                                     248,193                  329,235
----------------------------------------------------------------------------------------------------------------------
      Other
                   Property and equipment, net                                       282,817                  301,279
                   Patents and technology                                            218,000                  218,000
----------------------------------------------------------------------------------------------------------------------
                                                                                     500,817                  519,279
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
                                                                                 $   749,010             $    848,514
----------------------------------------------------------------------------------------------------------------------

LIABILITIES
      Current
                   Accounts payable and accrued liabilities                      $   208,603             $    134,361
                   Warrant Liability                                                      --                  167,427
                   Convertible debt                                                       --                  444,329
                   Due to director                                                   268,451                  466,455
----------------------------------------------------------------------------------------------------------------------
                                                                                     477,054                1,212,572
----------------------------------------------------------------------------------------------------------------------

SHAREHOLDERS EQUITY
      Capital stock                                                                  123,441                  110,254
      Additional paid in capital                                                  27,639,306               25,982,150
      Accumulated other comprehensive income                                         (13,830)                  10,654
      (Deficit) Accumulated during development stage Statement III               (27,476,961)             (26,467,116)
----------------------------------------------------------------------------------------------------------------------
                                                                                     271,956                 (364,058)
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
                                                                                 $   749,010             $    848,514
----------------------------------------------------------------------------------------------------------------------
</TABLE>

{See accompanying notes to the financial statements.}


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                                       2
<PAGE>

<TABLE>
<CAPTION>
ALTERNATE ENERGY CORP.
(A Development Stage Company)
Consolidated Statements of Operations
Unaudited
----------------------------------------------------------------------------------------------------------------------
Three months ending March 31                                2006                    2005             Inception To Date
----------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                      <C>                       <C>
REVENUE                                               $         --             $         --              $         --
----------------------------------------------------------------------------------------------------------------------

EXPENSES
     Administrative                                         42,112                  120,691                 1,032,960
     Consulting fees                                       956,335                  473,589                12,727,520
     Professional fees                                      58,241                  139,164                 1,043,638
     Research and development                               37,380                       --                   176,319
     Financing expense                                      50,386                       --                   559,714
     Impairment of intangible assets                            --                       --                 1,947,458
     Management fee                                             --                       --                   240,000
     Recovery of loan                                           --                       --                  (202,000)
     Depreciation                                           17,068                   17,789                   138,889

     Gain on adjustment on derivative /
     warrant liability to fair value of
     underlying securities                                (167,427)                      --                (1,075,339)

----------------------------------------------------------------------------------------------------------------------
NET (LOSS) FOR THE PERIOD                             $   (994,095)            $   (751,233)             $(16,589,159)
----------------------------------------------------------------------------------------------------------------------
NET (LOSS) PER SHARE                                  $      (0.01)            $      (0.01)
----------------------------------------------------------------------------------------------------------------------

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
----------------------------------------------------------------------------------------------------------------------
                                                       117,101,306              105,102,500
----------------------------------------------------------------------------------------------------------------------
</TABLE>

{See accompanying notes to the financial statements.}


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                                       3
<PAGE>

<TABLE>
<CAPTION>
ALTERNATE ENERGY CORP.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Unaudited
-------------------------------------------------------------------------------------------------------------------------------
Three months Ending March 31                                            2006                 2005            Inception To Date
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net (loss)                                                         $(994,095)         $   (751,233)         $(16,589,159)
      Adjustments to reconcile net loss from operations to net
         cash used in operating activities:
         Stock based expenses                                              960,753               175,000            11,767,531
         Impairment of intangible assets                                        --                    --             1,947,458
         Depreciation and amortization                                      18,462                17,789               140,283
         Accretion 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)                   --               137,031
      Changes in operating assets and liabilities
         Increase (decrease) in deferred revenue                                --                    --               (81,086)
         Decrease (increase) in prepaid expenses                            39,444                 2,008              (142,660)
         Decrease (increase) in deferred consulting expense                     --               171,000                    --
         Increase (decrease) accounts payable and accrued
         liabilities                                                        34,008               (84,215)              (33,631)

-------------------------------------------------------------------------------------------------------------------------------
      Net cash (used in ) operating activities                             (64,568)             (469,651)           (3,434,857)
-------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
      Purchase of property and equipment                                        --                    --             (423,100)
      Purchase of patents and technology                                        --                46,950             (154,373)
      Proceeds from (investment in) marketable securities                   17,349                    --             (147,463)

-------------------------------------------------------------------------------------------------------------------------------

      Net cash provided by (used in) investing activities                   17,349                46,950             (724,936)
-------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
      Issue of common shares for cash                                       14,875                    --             3,296,875
      Principal received from notes payable                                     --               500,000               500,000
      Advances from directors and officers                                   1,996               (45,899)              468,451

-------------------------------------------------------------------------------------------------------------------------------

      Net cash provided by (used in) financing activities                   16,871               454,101             4,265,326
-------------------------------------------------------------------------------------------------------------------------------

      NET INCREASE (DECREASE) IN CASH DURING PERIOD                        (30,348)               31,400               105,533

      CASH, BEGINNING OF THE PERIOD                                        135,881               418,253                    --
      -------------------------------------------------------------------------------------------------------------------------

      CASH, END OF THE PERIOD                                            $ 105,533          $    449,653          $    105,533
      -------------------------------------------------------------------------------------------------------------------------

      -------------------------------------------------------------------------------------------------------------------------
      Non-cash activities

         Common shares issued for patents and technology (net)                  --                    --             1,970,000
         Common shares issued for note conversion                          500,000                                     500,000
         Common shares issued for satisfaction of due to
            related parties                                                200,000                    --               200,000

      -------------------------------------------------------------------------------------------------------------------------
</TABLE>

{See accompanying notes to the financial statements.}


--------------------------------------------------------------------------------
                                       4

<PAGE>

ALTERNATE ENERGY CORP.  AND SUBSIDIARY
NOTES TO THE (UNAUDITED) CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2006

1. GENERAL

The unaudited condensed 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 (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 will be 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, 2005 included in the company's Annual Report on Form
10-KSB.

There were stock options outstanding at March 31, 2006 to purchase 7,780,000 of
common stock, December 31, 2005 - 8,680,000.

Basic weighted average shares outstanding March 31, 2006 were 117,101,306,
December 31, 2005 - 109,490,631.


2. CAPITAL STOCK

There are 250,000,000 common shares authorized with a par value of 0.001

There were 13,186,082 common stock issued during this period.

During the three months ended March 31, 2006, the Company issued 1,844,400
shares of its common stock for services performed totaling $245,066 or $0.13 per
share (weighted average price).

During the three months ended March 31, 2006, the Company issued 60,000 shares
of its common stock for services performed totaling $8,500 or $0.14 per share
(weighted average price).

During the three months ended March 31, 2006, the Company issued 2,000,000
shares of its common stock for satisfaction of a related party liabilities
(officers and directors of the Company) totaling $200,000 or $0.10 per share.

During the three months ended March 31, 2006, the Company issued 250,000 shares
of its common stock related to exercise of stock warrants at an exercise price
of $0.06 per share for a total cash proceeds of $14,875.

During the three months ended March 31, 2006, the Company issued 9,032,082
shares of its common stock related to conversion of convertible debts totaling
$500,000.

During the three months ended March 31, 2006, the Company granted stock options
for 6,150,000 shares of it common stock to directors and employees, which vested
immediately, and recorded an expense totaling $707,000 based upon fair value
under Black-Scholes options pricing model. The assumptions used under the
Black-Scholes option pricing model included an exercise price of $0.10,
volatility rate of 324%, risk free interest rate of 3.5%, and life expectancy of
1.5 years.


--------------------------------------------------------------------------------
                                       5
<PAGE>

ITEM. 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The following discussion and analysis and plan of operation should be read in
conjunction with the financial statements, and the notes thereto included
herein. The information contained below includes statements of AEC's or
management's beliefs, expectations, hopes, goals and plans that, if not
historical, are forward-looking statements subject to certain risks and
uncertainties that could cause actual results to differ materially from those
anticipated in the forward-looking statements. For a discussion on
forward-looking statements, see the information set forth in the Introductory
Note to this quarterly report under the caption "Forward Looking Statements".

Information Regarding Forward-Looking Statements

This Form 10-QSB contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. 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 the
forward-looking statements. Forward-looking statements include, but are not
limited to, statements about:

      o     Our product development efforts;

      o     The commercialization of our products;

      o     Anticipated operating losses and capital expenditures;

      o     Our estimates regarding our needs for additional financing;

      o     Our estimates for future revenues and profitability; and

      o     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. Also,
these forward-looking statements represent our estimates and assumptions only as
of the date of this resale.


Overview

Alternate Energy Corp., 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, we have 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. AEC'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. AEC's process is entirely
chemical, not requiring electrolysis or any external source of electrical power.

In February 2004, we 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 our accounts.


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                                       6
<PAGE>

The Company's core technology 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.
AEC's hydrogen production system leverages a patent-pending chemical process
that yields fuel-cell quality hydrogen, with no known harmful by-products. AEC's
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.

Over the past 3 years, we have worked closely with Experchem Laboratories of
Toronto Canada, a nationally recognized, independent chemical laboratory, to
further refine our hydrogen generation process. The revised formulation has
improved hydrogen production significantly, with the added creation of at least
two 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 system to be more price
competitive with current gasoline, diesel and hydrogen prices.

The first by-product was analyzed and certified by SGS Laboratories Canada, on
September 7, 2005 as USP29-grade, the highest level of purity required for any
existing use as a food-grade ingredient. This opens up immediate global market
opportunities for bulk sales of these by-products to a long list of potential
buyers in multiple markets.

Our Hydrogen Production Unit can be transported safely and could be designed for
commercial small and large scale use, residential, and could even be installed
in gas stations to satisfy a potential hydrogen-platform automotive sector. The
hydrogen gas can be produced and sold on-site while the by-product can be stored
in a liquid form in tanks for collection, processing and distribution on a
regular basis. This would also apply to larger scale production facilities such
as food processors, who can benefit greatly by hydrogen being produced on-site
as a key ingredient in their process, as well providing a potential secondary
source of electricity. In many cases, hydrogen is transported to these locations
daily with trucking expenditures being a significant percentage of the overall
cost of hydrogen, in some cases upwards of 40%. On-site production of hydrogen
would eliminate the entire cost for transport to their facilities. In addition,
our process produces low grade heat which could be captured and re-engineered
for use as well.

The Company believes its 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 AEC's 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.


Basis of Presentation

These consolidated financial statements present the accounts of Alternate Energy
Corp. and its wholly-owned subsidiary, 2040412 Ontario Inc. The consolidated
entities are referred to herein as the "Company." All significant intercompany
accounts and transactions have been eliminated.


--------------------------------------------------------------------------------
                                       7
<PAGE>

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND NEW ACCOUNTING PRONOUNCEMENTS

      Management's discussion and analysis of our financial condition and plan
of operations are based upon our 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 listed below:


Going Concern

      The financial statements included in this report 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 our 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.

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.


Deferred Consulting Costs

         Shares have been issued to service providers and consultants over the
term of contracts ranging from six months to one year. Shares have been issued
at the fair market value price at date of contract signing and the expense will
be amortized over the term of the contract.

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 the company and had performed their duties as
per their contractual terms. The following is a chart of the current deferred
consulting as of the period ending March 31, 2006, with accompanying notes:


NAME                       PERIOD OF DEFERRAL                     # OF SHARES
----                       ------------------                     -----------

Corbee Dutchburn (1)       up to Aug 31, 2006                     264,700

Jason Holt (2)             up to May 8, 2006                      10,247

Rick Jabra (3)             May 16, 2005 to May 16, 2006           3,575

Jason Froats (4)           July 18,2005 to July 18, 2006          68,900

(1)   Corbee Dutchburn was hired to work in areas involving the management,
      marketing, product development and operations of the corporation.

(2)   Jason Holt has been hired by the company as a consultant for miscellaneous
      corporate duties


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                                       8
<PAGE>

(3)   Rick Jabra was hired for services including miscellaneous corporate
      planning, acquisitions and merger negotiations.

(4)   Jason Froats, the son of Blaine Froats, and was hired to be the investor
      relations representative, as well as for communication management.

Loss per share

      The company reports earnings per share in accordance with the provisions
of SFAS No. 128, "earnings per share." SFAS No. 128 requires presentation of
basic and diluted earnings per share in conjunction with the disclosure of the
methodology used in computing such earnings per share. Basic earnings per share
excludes dilution and is computed by dividing income available to common shares
by the weighted average common shares outstanding during the period. Diluted
earnings per share takes into account the potential dilution that could occur if
the securities or other contracts to issue stock were exercised and converted to
common stock.


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 the 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, then the amount of
the impairment loss must be measured. The impairment loss would be calculated by
comparing the implied fair value of the reporting unit to its carrying amount.
The initial evaluation of our patents and technology, completed as of October 1,
2003 in accordance with SFAS No. 142 resulted in no provision for impairment
losses being recorded. Additionally, we performed our periodic review of
intangible assets for impairment as of December 31, 2005 and identified asset
impairment as a result of the review of approximately $1,906,000.

      We are currently in litigation with Russell Rothman in the Ontario
Superior Court of Justice (Case No. 04-CV-277760CM2) and are seeking the
rescission of agreements between us and Rothman, return of shares paid to him,
and return of money paid. We had entered into an agreement with Rothman for the
purchase of certain technology related to the production of hydrogen gas.
Rothman represented to us that he had all right title and interest in the
technology and had the ability to sell the technology. We alleged in our lawsuit
that Rothman had in fact sold the technology to other companies, and on more
than one occasion, prior to entering into the agreement with us. We do not rely
on the Rothman technology for the production of hydrogen as we have developed
our own proprietary processes for producing hydrogen.


  The changes in the carrying amount of patents and technology for the two years
ended December 31, 2005 are as follows:


Balance, December 31, 2003                                            1,969,236

Patents and technology acquired during 2004                             218,000

Patents and technology disposed of during the 2004 year                 (62,863)
                                                                    -----------
Balance, December 31, 2004                                          $ 2,124,373
                                                                    -----------
Patents and Technology adjustment for impairment during the year     (1,906,373)
                                                                    -----------
Balance, December 31, 2005                                              218,000
                                                                    -----------


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                                       9
<PAGE>

Income Taxes

      We account for our income taxes under the 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 reverse.


Comprehensive Income

      We have adopted SFAS No. 130, "Reporting Comprehensive Income", which
establishes standards for reporting and display 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 shareholder's equity and
in the balance sheet as a component of shareholder's 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 year.
Actual results could differ from those estimates.


Stock Option Plans

      On May 22, 2003, we adopted a stock option plan that is accounted for
based on SFAS No. 123 its related interpretations and subsequently adopted SFAS
No. 123R. The plan allows for the grant of options to persons employed or
associated with us, including without limitation, any employee, director,
general partner, officer, attorney, accountant, consultant or advisor up to an
aggregate of 5,000,000 shares of common stock. The options have a term of
expiration to be set by the Compensation Committee of the Board of Directors but
will not exceed ten years after the grant date and the options vest immediately.
The exercise price for each option is chosen at the discretion of the
Compensation Committee. On February 24, 2005, we increased the number of shares
to be issued under the plan to 15,000,000.


Convertible Note, Derivative and Warrant Liabilities

In accordance with Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended
("SFAS No. 133"), the holder's conversion right provision, interest rate
adjustment provision, liquidated damages clause, cash premium option, and the
redemption option (collectively, the debt features) contained in the terms
governing the Notes are not clearly and closely related to the characteristics
of the Notes. Accordingly, the features qualified as embedded derivative
instruments at issuance and, because they do not qualify for any scope exception
within SFAS No. 133, they were required by SFAS No. 133 to be accounted for
separately from the debt instrument and recorded as derivative financial
instruments.

As of March 31, 2006, the entire convertible note principal balance totaling
$500,000 was converted in 9,032,082 shares of the Company's common stock.

During the three months ended March 31, 2006, we recorded a realized gain of
approximately $167,000 reflected in the income statement as a component of Other
Income (Expense), which relates to the elimination of warrant liabilities which
are no longer subject to SFAS No. 133 since the convertible note has been fully
satisfied.


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                                       10
<PAGE>

RESULTS OF OPERATIONS

                    FOR FISCAL QUARTER ENDED MARCH 31, 2006,
               COMPARED TO THE FISCAL QUARTER ENDED MARCH 31, 2005
REVENUES

      For the fiscal quarter ended March 31, 2006 and March 31, 2005, we had no
revenues. We are now exploring a dual phase business strategy that may allow for
the realization of revenue opportunities sooner as it continues development of
our hydrogen production systems as well as our sales and marketing strategies.


EXPENSES

      We had total expenses of $994,095 and $751,233 in the fiscal quarter ended
March 31, 2006 and March 31, 2005, respectively. Our expenses for the fiscal
quarter ended March 31, 2006 consisted of $42,112 in administrative expenses,
$956,335 in consulting fees, $58,241 in professional fees, $37,380 for research
and development, $50,386 in financing expenses, $17,068 in depreciation and
($167,427) as a gain on the adjustment on derivative / warrant liability to fair
value of underlying securities. During the fiscal quarter ended March 31, 2006,
our expenses were 32.3% higher than in fiscal quarter ended March 31, 2005,
mostly due to consulting fees which were $956,335 and financing expenses of
$50,386 in the period.

There was a decrease of $78,579 in administrative expenses for the fiscal
quarter ending March 31, 2006 compared to the fiscal quarter ending March 31,
2005. This decrease is attributed to conservative expenditures to overall
administrative needs. These expenses were spread out over a multitude of areas.
There have also been shares issued for some expenses contributing to the
reduction of the administrative expenses.

There was an increase in consulting fee expenses of $956,335. The increase is
mainly attributed to options issued during the period as the utilization of core
consultants relative to the focus on research and our marketing / operation
strategy have remained consistent with our 2005 results. Shares have been issued
to select consultants to the company reducing the total cash fees paid and due.

Professional fees decreased by $80,923 over the 2005 period and are attributed
to a decrease in legal expenses towards general legal activity and fees incurred
during financing.

There was an increase in R&D expenses of $37,380 as we continue on our course of
action with testing and development of our hydrogen production systems as well
as valuable byproducts.

There was $50,386 expensed as accretion of debt relative to the private
placement with certain accredited investors in the fiscal year 2005.

There was a gain on the adjustment on derivative / warrant liability to fair
value of underlying securities with relation to our financing activity with
convertible debentures in the fiscal year 2005 as we had entered into a private
placement with certain accredited investors. The gain relates to the elimination
of warrant liabilities which are no longer subject to SFAS No. 133 since the
convertible note has been fully satisfied.


Over the next 12 months, we anticipate that our expenses will not increase over
our expenses in the period ending March 31, 2006, unless financing is obtained.
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.


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                                       11
<PAGE>

NET LOSS
We had a net loss of $994,095 for the fiscal quarter ended March 31, 2006,
compared with a net loss of $751,233 for the fiscal quarter ended March 31,
2005. The increase of $242,862 in the net loss for the 2006 fiscal quarter
compared to the 2005 fiscal quarter relates mainly to the increase in consulting
and financing fees in the 2006 period. Management believes that, for the fiscal
year ending December 31, 2006, we will continue to incur losses at the rate
experienced during the first quarter and 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 loss of $994,095
and $751,233 for the quarters ended March 31, 2006 and March 31, 2005,
respectively, and have an accumulated deficit of $27,476,961 at March 31, 2006.
AEC had $105,533 in cash on hand as of March 31, 2006. 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 AEC ultimately obtaining profitable operations.
However, no assurances can be given that we will be successful in these
activities. Should any of these events not occur, the accompanying financial
statements will be materially affected.

Management believes that the net proceeds from the convertible note together
with cash generated from private placements, including an interim equity
financing on April 28, 2006, will be sufficient to meet the company's short term
cash requirements into the third quarter of 2006. However, these funds will not
be sufficient to meet the cash requirements for this year ending December 31,
2006. Due to no cash generated from operations, we currently do not 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 AEC's
present methods of generating cash flow will be sufficient to meet future
obligations. Historically, AEC has, from time to time, been able to raise
additional capital, but there can be no assurances that AEC will be able to
raise additional capital in this manner.

Net cash used in operating activities was $64,568 for the three month period
ended March 31, 2006, compared with $469,651 for the three month period ended
March 31, 2005. The Net Cash used for this period resulted mainly from
consulting fees for the ongoing movement towards the development, marketing and
operations of the company.

Net cash obtained from financing activities was $16,871 for the three month
period ended March 31, 2006, compared with $454,101 for three month period ended
March 31, 2005. In the three month period ended March 31, 2006 we received
advances from one of our directors, as well as $14,875 from the issuance of
common stock. In the 2005 period we received $500,000 from accredited investors
and advances from a director.

Net cash provided by investing activities for the three month period ended March
31, 2006 was $17,349. The investing activities during the three month period
ended March 31, 2006 was from the sale of marketable securities.

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, including
certain of our directors and officers.

In March 2005, the Company entered into a convertible debenture agreement (see
below). The initial closing for $500,000 and its conversion features triggered
the anti-dilution clause in previous private placement agreements. As such, an
additional 2,811,429 shares will need to be issued. At December 31, 2005,
324,857 shares were issued and the remaining 2,486,572 will be issued. There
have been no other anti-dilution clauses triggered as of March 31, 2006

On March 2, 2005, the company entered into a private placement agreement with
certain accredited investors whereby these investors will purchase up to
$1,500,000 in convertible notes, with Class A Warrants, Class B Warrants and
Class C Warrants. We have received $500,000 in proceeds from the investors as of
December 31, 2005 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.


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                                       12
<PAGE>

As of March 31, 2006, the entire convertible note principal balance totaling
$500,000 was converted in 9,032,082 shares of the Company's common stock.

In January 2004, we entered into a private placement with institutional and
accredited investors to which AEC 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, the Company transferred these patents and technology to its
parent company. In consideration for this transfer of the patents and
technology, the Company received 30 million of its own shares from the parent
company 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 squarely on its hydrogen production units. On November 1, 2004
AEC agreed to release these non-core technologies in order to facilitate and
reacquire 30 million shares of Alternate Energy Corp. from AEC 1, Inc.

We held 1,000,000 shares of Astris Energi Inc. (ASRNF) as of December 31, 2004.
These shares were purchased for the sum of $300,000 USD at the value of
$0.30USD/Share and adjusted as per market value for that period. The ownership
interest was 2.65%.

We sold all 1,000,000 shares of the Astris securities at intervals between
September 1st, 2005 and March 31, 2006, incurring a loss on the investment which
is reflected in the consolidated statements of cash flows.

While we believe that we will have sufficient cash to meet our short-term
capital requirements, there are no assurances that we will 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 ended 2006
to continue towards the goals set forth in our business strategy. AEC 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 AEC.

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 AEC's
business, the success of its operations, economic conditions and other factors
including the results of future operations.


PLAN OF OPERATION

Over the next twelve months AEC will be working on a number of concurrent
initiatives:

Revenue Generation

On Thursday, April 6, 2006, AEC received a letter of interest from BOM Brazil, a
major producer of hydrogenated castor bean oils and its derivatives in the
Americas, to supply them with its high purity, affordable and on-site hydrogen.
AEC is now working towards the securing of a 5-year contract to supply BOM with
on-site hydrogen at an extremely competitive price to what BOM is presently
paying. This will likely save BOM considerable expense related to their cost of
hydrogen, since is currently trucked-in on a daily basis. AEC intends 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. AEC will retain all rights to the by-product.

Contingent on the securing of a signed contract, AEC expects to contract a
reputable engineering firm in the designing and project management relating to
the construction of this turn-key operation. AEC believes that the financing of
the facility and equipment, together with the related capital requirements can
be found on a project financing basis, and therefore does not expect to be
required to provide this funding. Assuming the completion of contractual
requirements and project financing by August 1, 2006, we estimate a turn-key
plant could be completed by June 1,2007. We would expect revenues of hydrogen
and by-product to commence the shortly thereafter.


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                                       13
<PAGE>

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 & Development

Process optimization of by-product number two continues this year with AEC's
principal technical team and Experchem Labs, while new research has been
initiated by AEC's University of Waterloo Co-op chemical engineering students to
minimize raw material costs for both by-product processes, as well to identify
the future development of innovative, hydrogen yielding chemical reactions.


Partnerships / Strategic Alliances

Over the next 12 months, AEC continues to showcase its hydrogen production
technology to a list of prospective commercial customers, potential licensees,
select government and institutional contacts and other interested commercial
parties. These groups have been pre-qualified as having a demonstrated need for
quality hydrogen and/or one or both by-products.

In order to accomplish and continue with these steps, management estimates that
we will require several million dollars towards the end of fiscal year ended
2006. As we do not have any current revenue, we anticipate such funds will come
from loans from officers and private placements of our common stock.

Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure

There were no changes in accountants or any disagreements with our accountants
on accounting and financial disclosures.


ITEM 3. CONTROLS AND PROCEDURES.

As of the end of the period covered by this report, the Company's management
carried out an evaluation, under the supervision and with the participation of
the Company's principal executive officer and the principal financial officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures. The Company's disclosure controls and procedures are
designed to provide a reasonable level of assurance of achieving the Company's
disclosure control objectives. The Company's principal executive officer and
principal financial officer have concluded that the Company's disclosure
controls and procedures were effective at March 31, 2006. In addition, the
Company's management, with the participation of the Company's principal
executive officer and the principal financial officer, reviewed our internal
control over financial reporting. There were no changes that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting. during the fiscal quarter ended March 31, 2006.


                                     PART II

ITEM 1. LEGAL PROCEEDINGS.


      On October 22, 2004, we sued Russell Rothman in the Ontario Superior Court
of Justice (Case No. 04-CV-277760CM2). We are seeking the rescission of
agreements between us and Rothman, return of shares paid to him, and return of
money paid. We had entered into an agreement with Rothman for the purchase of
certain technology related to the production of hydrogen gas, for which he
represented he owned all right and title. Rothman has counterclaimed against us
for breach of contract in the amount of $2 billion and is asking for punitive
damages in the amount of $10 million. On January 9, 2006, 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 believed, and despite the
substantial amendments continue to believe, that the counterclaim was and is
completely without merit.


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                                       14
<PAGE>

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the three months ended March 31, 2006, the Company issued 1,844,400
shares of its common stock for services performed totaling $245,066 or $0.13 per
share (weighted average price).

During the three months ended March 31, 2006, the Company issued 60,000 shares
of its common stock for services performed totaling $8,500 or $0.14 per share
(weighted average price).

During the three months ended March 31, 2006, the Company issued 2,000,000
shares of its common stock for satisfaction of a related party liabilities
(officers and directors of the Company) totaling $200,000 or $0.10 per share.

During the three months ended March 31, 2006, the Company issued 250,000 shares
of its common stock related to exercise of stock warrants at an exercise price
of $0.06 per share for a total cash proceeds of $14,875.

During the three months ended March 31, 2006, the Company issued 9,032,082
shares of its common stock related to conversion of convertible debts totaling
$500,000. As of March 31, 2006, the entire convertible note principal balance
totaling $500,000 was converted in 9,032,082 shares of the Company's common
stock.

During the three months ended March 31, 2006, the Company granted stock options
for 6,150,000 shares of it common stock to directors and employees, which
options vested immediately and will be exercisable for a term of 3 years. In
connection with these grants, the Company recorded an expense totaling $707,000
based upon fair value under Black-Scholes options pricing model. The assumptions
used under the Black-Scholes option pricing model included an exercise price of
$0.10, volatility rate of 324%, risk free interest rate of 3.5%, and life
expectancy of 1.5 years.

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.

The following exhibits are filed with this Form 10-QSB:

Exhibit No.    Description
31.1           Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2           Rule 13a-14(a)/15d-14(a) Certification of Treasurer and Principal
               Accounting Officer
32             Section 1350 Certifications


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                                       15
<PAGE>

                                   SIGNATURES


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


                                    Alternate Energy Corp.

Date: May 16, 2006                  By: /s/ Blaine Froats
                                        -----------------
                                    Blaine Froats
                                    Chief Executive and Acting Principal
                                    Accounting Officer

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


/s/ Blaine Froats
-----------------
Blaine Froats                       Date: May 16, 2006
Director


/s/ Sean Froats
---------------
Sean Froats                         Date: May 16, 2006
Director


/s/ Jack Wasserman
------------------
Jack Wasserman                      Date: May 16, 2006
Director


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                                       16
<PAGE>


                                INDEX OF EXHIBITS


---------------------------- ---------------------------------------------------
Exhibit No.                  Description
---------------------------- ---------------------------------------------------
31.1                         Rule 13a-14(a)/15d-14(a) Certification of Chief
                             Executive Officer
---------------------------- ---------------------------------------------------
31.2                         Rule 13a-14(a)/15d-14(a) Certification of
                             Treasurer and Principal Accounting Officer
---------------------------- ---------------------------------------------------
32                           Section 1350 Certifications


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