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AEHI > SEC Filings for AEHI > Form 10-Q on 14-Nov-2012All Recent SEC Filings

Show all filings for ALTERNATE ENERGY HOLDINGS, INC.

Form 10-Q for ALTERNATE ENERGY HOLDINGS, INC.


14-Nov-2012

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the provisions of the Private Securities Litigation Reform Act of 1995 which represent our projections, estimates, expectations or beliefs concerning among other things, financial items that relate to management's future plans or objectives or to our future economic and financial performance. In some cases, you can identify these statements by terminology such as "may", "should", "plans", "believe", "will", "anticipate", "estimate", "expect" "project", or "intend", including their opposites or similar phrases or expressions. You should be aware that these statements are projections or estimates as to future events and are subject to a number of factors that may tend to influence the accuracy of the statements. These forward-looking statements should not be regarded as a representation by the Company or any other person that the events or plans of the Company will be achieved. You should not unduly rely on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe in the reports we file from time to time with the Securities and Exchange Commission ("SEC") after the date of this Quarterly Report. Actual results may differ materially from any forward looking statement.

Overview

Description of Business

Alternate Energy Holdings, Inc., (and its subsidiaries Idaho Energy Complex, LLC, Green World Water, LLC, Energy Neutral, LLC and Reactor Development, LLC) formerly Nussentials Holdings Inc., is a development stage enterprise focused on the purchase, optimization and construction of green energy sources - primarily nuclear power plants.

Sunbelt Energy Resources Inc. was formed on August 29, 2005 to operate in the alternate energy industry and has limited operational activity. In September 2006, Sunbelt acquired Nussential Holdings, Inc. by exchanging 17,900,000 shares of Sunbelt which represented 100% of the outstanding shares for 21,399,998 shares of common stock of Nussential Holdings Inc. As a result of the acquisition, the shareholders of Sunbelt owned a majority of the voting stock of Nussentials Holdings, Inc. which changed its name to Alternate Energy Holdings, Inc. The merger has been accounted for as a reverse merger whereby Alternate Energy Holdings, Inc. is the accounting acquirer resulting in a recapitalization of Alternate Energy Holdings, Inc.'s equity. In connection with and simultaneous to the reverse merger, Nussentials Corporation, a wholly owned subsidiary of Nussentials Holdings Inc. was transferred to Nussential Holdings, Inc. majority shareholder through issuance of 4,252,088 shares of common stock.

Our Company

We are a holding company comprised of five operating corporate entities: Idaho Energy Complex, LLC, Reactor Land Development, LLC, Energy Neutral, LLC, Energy Neutral Development, LLC and Green World Water, LLC (which was formed in 2010, and has succeeded to the business formerly conducted by a fifth, inactive subsidiary, International Reactors Incorporated).

Idaho Energy Complex, LLC

Idaho Energy, an Idaho limited liability company and 100% wholly-owned subsidiary of the Company that was formed in March 2007, is the operating entity for our proposed $10 billion nuclear complex near Payette, Idaho. Idaho Energy is the manager of Reactor Land Development, LLC, a Delaware limited liability company that is attempting to obtain funding for the nuclear facility land, water rights acquisition and the NRC operating license. Five thousand acres have been dedicated to the Project, which will provide enough electricity to power Idaho's growth, as well as generate income through the sale of power to out-of-state markets. The Payette facility will feature a new advanced nuclear reactor design that does not require large amounts of water for cooling. The Company plans to build up to six advanced reactors at Idaho Energy and operate as an Independent Power Product ("IPP").

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Reactor Land Development, LLC

Reactor Land Development, LLC, a 99% owned subsidiary of Idaho Energy, is a Delaware limited liability company. Reactor Land Development, LLC began operations in September 2007, with Idaho Energy as its manager. Its purpose is to acquire funding for land and water rights, permits and licenses, development rights and such other properties and services necessary to develop approved sites in Idaho for one or more nuclear reactors.

Energy Neutral, LLC

Energy Neutral™, a 100% wholly-owned subsidiary of the Company, was formed to assist homeowners, businesses and farmers to operate with minimal or no reliance on the electrical grid. Energy Neutral's primary services are: design and construction of residential "energy neutral" homes, evaluating existing homes, businesses and farms for conservation and renewable energy potential; drafting plans to attain or approach energy neutrality; and working with wind, conservation and solar suppliers and installers to install products in the marketplace. During 2010 and early 2011, Energy Neutral completed construction of six "energy neutral" homes in Boise, Idaho, which feature unique design elements as well as standard "energy neutral" elements, including the Energy Star certification and solar power generation. All five homes and the model home were sold during the year of 2011, representing our first revenues, for gross sales proceeds of approximately $923,650. We plan to begin franchising the concept to developers and builders in a few select markets starting during the fiscal year 2013 through Energy Neutral Development, LLC, a wholly owned subsidiary of Energy Neutral, LLC.

Green World Water, LLC

Green World Water,™ a 100% wholly-owned subsidiary of the Company was formed in 2010 to assist developing countries with power generation, as well as the production of potable water. Green World Water has succeeded to the business of another Company subsidiary, International Reactors Incorporated, a Nevada corporation, which was formed in November 2007 but now is inactive. Green World Water seeks to construct, in conjunction with other third parties, commercial nuclear reactors on oceanfront sites, particularly in Africa and western-friendly Middle Eastern countries to co-generate clean energy and desalinate water. Green World Water believes that advanced nuclear technology can be used to address electrical energy needs while simultaneously producing fresh water from ocean intake. The Company has an agreement with China National Nuclear Corporation (CNNC) to produce desalinization reactors in China to market on a worldwide basis.

Plan of Operations

The Company estimates the total cost of the first phase of the Payette County project will be approximately $150.0 million. The initial $150.0 million is planned to be raised through a private placement by Reactor Development, LLC, which shall result in the investors receiving in the aggregate up to a 5% ownership in the form of common stock. Any shortfall will have to be funded through such things as debt financing, cost-sharing by contractors and suppliers, or public offering.

While the success of the Project does not depend on financial assistance from the government, management believes that based on the 2005 Energy Policy Act, the Project may be eligible for an 80% Federal loan guarantee for the construction of new nuclear facilities, and an applicable Federal tax credit of $1.0 billion over eight years, which should be sufficient to cover all operating expenses during that timeframe. Furthermore, the excess heat for this plant may be used to produce biofuels from local crops and agriculture waste.

The intended use of the funds for the Reactor Land Project is shown below:

                                                                            In millions ($)
Payment to owner for site land                                                             5
Payment for COLA plus 10% price escalation due to delays                                  50
Payments for third party project management, engineering support and G&A                  25

Adjacent land with water rights                                                           20
Long lead time equipment order deposit; reactor vessel and turbine                        50
                                                                   Total   $             150

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From inception through September 30, 2012, the Reactor Land Development private placement has raised gross proceeds of $1,000,000 in exchange for a 1% equity interest in Reactor Land Development. If the Reactor Land Development, LLC private placement does not raise the entire $150.0 million listed above, the Company will seek to raise the remaining balance through debt financing and/or a public or private equity offering. The Company may adjust the budget categories in the execution of its permitting and development plans. The above line items represent managements best estimates, none of the line items is to be considered fixed or unchangeable.

Although the Company reserves the right to reallocate the funds according to field experience, the Company believes that the net proceeds from the planned offering will be sufficient to fund its initial capital requirements for the next year for operations. The foregoing assumes the offering will be fully subscribed, but there can be no assurance the Company will not require additional funds if unforeseen issues arise. Any additional required funds over the maximum offering amount will need to be financed as a loan. The availability and terms of any future financing will depend on market and other conditions. The amount of proceeds and uses are based upon the projections by management, which may also change according to unforeseen future events and market changes. There are no commitments for loans as of September 30, 2012.

In the continuance of the Company's business operations it does not intend to purchase or sell any significant assets and the Company does not expect a significant change in the number of its employees, although the Company may add additional contractors during the first quarter of 2013.

In addition, the United States and the global business community is experiencing severe instability in the commercial and investment banking systems which is likely to continue to have far-reaching effects on the economic activities in the country for an indeterminable period. The long-term impact on the United States economy and the Company's operating activities and its ability to raise capital cannot be predicted at this time, but could be substantial.

Project Economics

The Company believes that if it is able to raise $150.0 million, it may develop a site licensed for construction of the advanced reactor by the end of 2016. The Company believes that by acquiring and obtaining the required permits and approvals for the proposed site now, it will be able to offer a site and an NRC license 3 to 4 years sooner than might otherwise be achievable, which will offer additional value to the Idaho site due to earlier power generation/revenue potential of the site.

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Consolidated Results of Operations

Comparison of the Three Months Ended September 30, 2012 to September 30, 2011

During the three months ended September 30, 2012, we recognized revenues of $-0- as compared to $160,000 and cost of sales of $-0- and $160,891 for the same period in the prior fiscal year. The decrease in revenues is due to no sales of any Energy Neutral homes in 2012 as compared to one sale that occurred during the three months ended September 30, 2011. During the three months ended September 30, 2012, we incurred operating expenses of $847,169 compared to $1,060,909 during the three months ended September 30, 2011. The following table is a comparison of the significant operational expenses that we incurred during the three months ended September 30, 2012 and 2011:

                                      Three Months Ended
                               September 30,       September 30,       INCREASE
                                   2012                2011           (DECREASE)

        Consulting services   $         5,189     $       147,648     $  (142,459 )
        Land Option Fees      $           -0-     $       500,000     $  (500,000 )
        Board Compensation    $           -0-     $       153,000     $  (153,000 )
        Legal fees            $       484,753     $        86,358     $   398,395

During the three months ended September 30, 2012 the Company engaged various attorneys in connection with our legal proceedings and the fact the Company's directors and liability insurance policy has exceeded its limit of reimbursable expenses, therefore the Company is paying all of the legal expenses in connection with defending the Company and its Officers. A land option fee for the prior year's period were relating to the Payette County site. Consulting expenses for the prior year's period were incurred in connection with the efforts to obtain Payette County rezone approval. There was no Board compensation in the three months ended September 30, 2012 compared to $153,000 in the three months ended September 30, 2011.

During the three months ended September 30, 2012, we recognized a net loss of $(844,443) compared to a net loss of $(1,149,728) during e three months ended September 30, 2011. The decrease of $305,285 in net loss was due mainly to lower consulting fees and no land option fee during the three months ended September 30, 2012. The Company's basic and diluted loss per share was $.00 during the three months ended September 30, 2012 and 2011.

Comparison of the Nine Months Ended September 30, 2012 to September 30, 2011

During the nine months ended September 30, 2012, we recognized revenues of $-0- as compared to $702,900 and cost of sales of $-0- and $682,698 for the same period in the prior fiscal year. The decrease in revenues is due to no sales of any Energy Neutral homes in 2012 as compared to four sales that occurred during the nine months ended September 30, 2011. During the nine months ended September 30, 2012, we incurred operating expenses of $3,288,621 compared to $2,693,993 during the nine months ended September 30, 2011. The following table is a comparison of the significant operational expenses that we incurred during the nine months ended September 30, 2012 and 2011:

                                       Nine Months Ended
                               September 30,       September 30,       INCREASE
                                   2012                2011           (DECREASE)

        Consulting services   $       184,554     $       514,625     $  (330,071 )
        Marketing services    $           445     $        79,620     $   (79,175 )
        Board Compensation    $        30,000     $       153,000     $  (123,000 )
        Legal fees            $     1,791,142     $       407,989     $ 1,383,153
        Land Option Fees      $       100,000     $       500,000     $ (400,000)

During the nine months ended September 30, 2012 the Company engaged various attorneys in connection with our legal proceedings and the fact the Company's directors and liability insurance policy has exceeded its limit of reimbursable expenses, therefore the Company is paying all of the legal expenses in connection with defending the Company and its Officers. Marketing expenses for the prior year's period were incurred in connection with the efforts to obtain Payette County rezone approval which occurred during the second quarter of fiscal year 2012. Land option fees relate to the Payette County site. Consulting expenses for the prior year's period were higher than this year in connection with the efforts to obtain Payette County rezone approval. There was $30,000 Board compensation in the nine months ended September 30, 2012 compared to $153,000 in the nine months ended September 30, 2011.

During the nine months ended September 30, 2012, we recognized a net loss of $(3,483,374) compared to a net loss of $(2,692,775) during the nine months ended September 30, 2011. The increase of $790,599 in net loss was due mainly to higher legal expenses incurred during the nine months ended September 30, 2012. The Company's basic and diluted loss per share was $.01 during the nine months ended September 30, 2012 and 2011.

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Liquidity and Capital Resources

As of September 30, 2012, we had total of cash and cash equivalents of $16,553,
total current assets of $2,018,053 and current liabilities of $1,609,759. The
following table provides detailed information about our net cash flow for all
financial statements periods presented in this report.

                                                            Cash Flow
                                                        Nine Months Ended
                                                          September 30,
                                                      2012             2011

      Net cash used by operating activities       $ (1,800,937 )   $ (2,350,631 )
      Net cash provided by investing activities   $  1,439,798     $  3,202,678
      Net cash used by financing activities       $    109,000     $    (60,000 )
      Net cash (outflow) inflow                   $   -252,139     $    792,047

Operating Activities

During the nine months ended September 30, 2012, the net cash used in our operating activities was $1,800,937. During the nine months ended September 30, 2011, the net cash used in our operating activities was $2,350,631. Net cash used in our operating activities decreased by $549,694 for the nine months ended September 30, 2012 as compared to the same period in 2011. This decrease in funds used by our operating activities was primarily due to a increase in the accounts payable of the Company in 2012.

Investing Activities

During the nine months ended September 30, 2012, the net cash provided by our investing activities was $1,439,798, which was primary comprised of the net proceeds from the sale of short-term investments and the sale of a fixed asset. The net cash provided in our investing activities was $3,202,678 for the nine months ended September 30, 2011, primary comprised of net proceeds from the sale of short-term investments and the purchase of the Energy Neutral model home.

Financing Activities

Net cash used provided by financing activities for 2012 of $109,000 as compared to net cash used of $60,000 in 2011. The increase by $49,000 for the nine months ended September 30, 2012 as compared to the same period of 2011 was primarily due to the advance from related party in 2012.

As discussed above, we estimate that we will need to raise approximately $150 million in order to fund the Project. We plan on funding the Project through a private placement or other offering of securities of our subsidiary, Reactor Land Development, LLC, which would result in investors receiving up to 5% ownership in the first reactor unit. Any shortfall will have to be funded through other means, such as a debt financing, cost-sharing with contractors and suppliers, or other securities offerings, including a securities offering by our company or any of our other subsidiaries. If additional funds are raised through the issuance of equity securities, there may be a significant dilution in the value of our outstanding common stock.

Critical Accounting Policies

The Company has identified the policies below as critical to the Company business operations and the understanding of the Company results from operations. The impact and any associated risks related to these policies on the Company's business operations is discussed throughout Management's Discussion and Analysis of Financial Conditions and Results of Operations where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 1 in the Notes to the Consolidated Financial Statements beginning on page 9 for the period ended September 30, 2012. Note that the Company's preparation of this document requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the Company's financial statements, and the reported amounts of expenses during the reporting periods.

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Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses and the and disclosures of contingent assets and liabilities. Accordingly, actual results could differ from those estimates. It is management's opinion that all adjustments necessary for the fair statement of the results for the interim period have been made. All adjustments are of normal recurring nature or a description of the nature and amount of any adjustments other than normal recurring adjustments.

Cash and Cash Equivalents

Alternate Energy Holdings, Inc. considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value. The Federal Deposit Insurance Corporation insures balances of up to $250,000 per institution at September 30, 2012 and December 31, 2011. The uninsured balances at September 30, 2012 and December 31, 2011 was $-0-.

Stock-Based Compensation

The Company's non-employees, share-based expenses are recorded in accordance with FASB ASC 505-50. The Company has not issued any stock options or stock warrants since its inception through September 30, 2012.

Off-Balance Sheet Arrangement

As of September 30, 2012, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

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