UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
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[X]
|
QUARTERLY
REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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FOR
THE QUARTERLY PERIOD ENDED APRIL 30, 2009
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OR
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[ ]
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Commission
file number 333-153858
ALTERNATIVE
ENERGY DEVELOPMENT CORPORATION
(Formerly
Terrasol Holdings Ltd.)
(Exact
name of registrant as specified in its charter)
NEVADA
(State
or other jurisdiction of incorporation or organization)
17505
N 79th Ave
Suite
#309
Glendale,
Arizona 85308
(Address
of principal executive offices, including zip code.)
(623)
776-3200
(Registrant’s
telephone number, including area code)
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 last 90 days.
YES
[X] NO [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,
“accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
Large Accelerated
Filer
[ ]
Accelerated
Filer
[ ]
Non-accelerated
Filer
[ ]
Smaller Reporting
Company
[X]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
YES
[X] NO [ ]
State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date: 65,800,000 as of June 19, 2009.
PART
I – FINANCIAL INFORMATION
ITEM
1. FINANCIAL
STATEMENTS
Alternative
Energy Development Corporation
(formerly
Terrasol Holdings Ltd.)
(A
Development Stage Company)
April 30,
2009
Index
FINANCIAL
STATEMENTS
Balance
Sheets ............................................................................................................................................F–1
Statements
of
Operations ..........................................................................................................................F–2
Statements
of Stockholders’ Equity
(Deficiency) ..................................................................................F–3
Statements
of Cash
Flows .........................................................................................................................F–4
NOTES TO
THE FINANCIAL
STATEMENTS ......................................................................................F–5
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Alternative Energy Development
Corporation
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(formerly
Terrasol Holdings Ltd.)
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(A Development Stage
Company)
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Balance
Sheets
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(Expressed in US
Dollars)
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April
30,
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July
31,
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2009
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2008
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(Unaudited)
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(Audited)
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ASSETS
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Current
Assets
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Cash
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$
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546
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$
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34,096
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Prepaid
expenses
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2,783
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205
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Total
current assets
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3,329
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34,301
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Mineral
property acquisition costs
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-
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5,500
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License
agreement costs, net of accumulated amortization of $171 (Note
4)
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399,829
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-
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Total
Assets
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$
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403,158
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$
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39,801
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LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIENCY)
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Current
Liabilities
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Accounts
payable and accrued liabilities
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$
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7,041
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$
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8,500
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Due
to related parties
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5,184
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125
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Class
A Convertible Preferred Stock due Assignor of license agreement (Note
4)
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400,000
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-
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Total
current liabilities
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412,225
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8,625
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Stockholders'
Equity (Deficiency)
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Preferred
Stock, $0.00001 par value;
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authorized
100,000,000 shares, none issued and outstanding
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-
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-
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Common
Stock, $0.00001 par value;
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authorized
200,000,000 shares,
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issued
and outstanding 65,800,000 shares (July 31, 2008 - 72,800,000 shares)
(Note 7)
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658
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728
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Additional
paid-in capital
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52,642
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49,872
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Deficit
accumulated during the development stage
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(62,367
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)
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(19,424
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)
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Total
stockholders' equity (deficiency)
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(9,067
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)
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31,176
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Total
Liabilities and Stockholders' Equity (Deficiency)
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$
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403,158
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$
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39,801
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See notes
to financial statements
F-1
|
Alternative
Energy Development Corporation
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(formerly
Terrasol Holdings Ltd.)
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(A Development Stage
Company)
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Statements
of Operations
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|
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(Expressed
in US Dollars)
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(Unaudited)
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Three
months ended April 30, 2009
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Nine
months ended April 30, 2009
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Cumulative
during the exploration stage (June 2, 2008 to April 30,
2009)
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Revenue
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$
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-
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$
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-
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$
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-
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Total
Revenue
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-
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-
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-
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Costs
and expenses
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General
and administrative
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8,099
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34,277
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50,101
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Donated
services
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900
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2,700
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3,300
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Impairment
of mineral property acquisition costs
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-
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5,500
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5,500
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Exploration
costs
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-
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295
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3,295
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Amortization
of license agreement costs (Note 4)
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171
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171
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171
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Total
Costs and Expenses
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9,170
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42,943
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62,367
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Net
Loss
|
|
$
|
(9,170
|
)
|
|
$
|
(42,943
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)
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$
|
(62,367
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)
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Net
loss per share
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Basic
and diluted
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$
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(0.00
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)
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$
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(0.00
|
)
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Number
of common shares used to compute net loss per share
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Basic
and Diluted
|
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72,249,000
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72,621,000
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See notes
to financial statements
F-2
|
Alternative
Energy Development Corporation
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(formerly
Terrasol Holdings Ltd.)
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(A
Development Stage Company)
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Statements
of Stockholders' Equity (Deficiency)
|
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|
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For
the Period June 2, 2008 (Inception) to April 30, 2009
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(Expressed
in US Dollars)
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(Unaudited)
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Common
Stock, $0.00001 par value
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Additional
Paid-in
|
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Deficit
Accumulated During the Development
|
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Shares
|
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Amount
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Capital
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Stage
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Total
|
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Sale
of Common stock:
|
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|
-
June 4, 2008 at $0.00014
|
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42,000,000
|
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|
$
|
420
|
|
|
$
|
5,580
|
|
|
$
|
-
|
|
|
$
|
6,000
|
|
|
-
July 18, 2008 at $0.00143
|
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30,800,000
|
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|
308
|
|
|
|
43,692
|
|
|
|
-
|
|
|
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44,000
|
|
|
Donated
services
|
|
|
-
|
|
|
|
-
|
|
|
|
600
|
|
|
|
-
|
|
|
|
600
|
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|
Net
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(19,424
|
)
|
|
|
(19,424
|
)
|
|
Balance
- July 31, 2008
|
|
|
72,800,000
|
|
|
|
728
|
|
|
|
49,872
|
|
|
|
(19,424
|
)
|
|
|
31,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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Cancellation
of Common stock on April 23, 2009
|
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|
(7,000,000
|
)
|
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|
(70
|
)
|
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|
70
|
|
|
|
-
|
|
|
|
-
|
|
|
Donated
services
|
|
|
-
|
|
|
|
-
|
|
|
|
2,700
|
|
|
|
-
|
|
|
|
2,700
|
|
|
Net
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(42,943
|
)
|
|
|
(42,943
|
)
|
|
Balance
- April 30, 2009
|
|
|
65,800,000
|
|
|
$
|
658
|
|
|
$
|
52,642
|
|
|
$
|
(62,367
|
)
|
|
$
|
(9,067
|
)
|
See notes
to financial statements
F-3
|
Alternative
Energy Development Corporation
|
|
|
|
|
|
|
|
(formerly
Terrasol Holdings Ltd.)
|
|
|
|
|
|
|
|
(A
Development Stage Company)
|
|
|
|
|
|
|
|
Statements
of Cash Flows
|
|
|
|
|
|
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|
(Expressed
in US Dollars)
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Nine
months ended April 30, 2009
|
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Period
from June 2, 2008 (Inception) to April 30, 2009
|
|
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(42,943
|
)
|
|
$
|
(62,367
|
)
|
|
Adjustments
to reconcile net loss to net cash used for operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donated
services
|
|
|
2,700
|
|
|
|
3,300
|
|
|
Impairment
of mineral property acquisition costs
|
|
|
5,500
|
|
|
|
5,500
|
|
|
Amortization
of license agreement costs
|
|
|
171
|
|
|
|
171
|
|
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
|
(2,578
|
)
|
|
|
(2,783
|
)
|
|
Accounts
payable and acrrued liabilities
|
|
|
(1,459
|
)
|
|
|
7,041
|
|
|
Net
cash used for operating activities
|
|
|
(38,609
|
)
|
|
|
(49,138
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
Mineral
property acquisition costs
|
|
|
-
|
|
|
|
(5,500
|
)
|
|
Net
cash used for investing activities
|
|
|
-
|
|
|
|
(5,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
Increase
in due to related parties
|
|
|
5,059
|
|
|
|
5,184
|
|
|
Proceeds
from sales of common stock
|
|
|
-
|
|
|
|
50,000
|
|
|
Net
cash provided by financing activities
|
|
|
5,059
|
|
|
|
55,184
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease)
increase in cash
|
|
|
(33,550
|
)
|
|
|
546
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
- beginning of period
|
|
|
34,096
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
- end of period
|
|
$
|
546
|
|
|
$
|
546
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Income
taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
Investing and Financing Transactions:
|
|
|
|
|
|
|
|
|
|
Acquisition
of license agreement in exchange for Class A Convertible Preferred
Stock
|
|
$
|
400,000
|
|
|
$
|
400,000
|
|
See notes
to financial statements
F-4
Alternative
Energy Development Corporation
(formerly
Terrasol Holdings Ltd.)
(A Development Stage
Company)
NOTES TO
FINANCIAL STATEMENTS
April 30,
2009
(Unaudited)
Note
1. Organization
and Business Operations
Terrasol
Holdings Ltd. (the “Company”) was incorporated in the State of Nevada on June 2,
2008 and changed its name to Alternative Energy Development Corporation on May
4, 2009. From inception to April 28, 2009, the Company’s principal business was
the acquisition and exploration of mineral resources. On April 28, 2009 (see
Note 4), the Company acquired rights to a certain Technology License and
Distribution Agreement dated August 1, 2008 (the “Technology Agreement”) and to
a certain Exclusive Manufacturing Agreement dated August 1, 2008 (the
“Manufacturing Agreement”) and a change in control of the Company occurred. The
Company plans to develop the related technology and manufacture products to
reduce fuel use.
On May 5,
2009 (see Note 9), the Company effected a 7 for 1 forward stock split,
increasing the issued and outstanding shares of common stock from 9,400,000
shares to 65,800,000 shares. All share amounts in these financial statements
have been retroactively adjusted for all periods presented to reflect this stock
split.
These
financial statements have been prepared on a going concern basis, which implies
the Company will continue to realize its assets and discharge its liabilities in
the normal course of business. The Company has not generated any revenue since
inception and has never paid any dividends and is unlikely to pay dividends or
generate earnings in the immediate or foreseeable future. The continuation of
the Company as a going concern is dependent upon the continued financial support
from its shareholders, the ability of the Company to obtain necessary equity
financing to continue operations, and the attainment of profitable operations.
As at April 30, 2009, the Company had cash of $546 and has accumulated losses of
$62,367 since inception. These factors raise substantial doubt regarding the
Company’s ability to continue as a going concern. These financial statements do
not include any adjustments to the recoverability and classification of recorded
asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
F-5
Alternative
Energy Development Corporation
(formerly
Terrasol Holdings Ltd.)
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
April 30,
2009
(Unaudited)
Note
2. Summary of
Significant Accounting Policies
|
a)
|
Interim
Financial Information
|
The
unaudited financial statements as of April 30, 2009 and for the three and nine
months then ended and for the period June 2, 2008 (inception) to April 30, 2009
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with instructions to
Form 10-Q. In the opinion of management, the unaudited financial statements have
been prepared on the same basis as the annual financial statements and reflect
all adjustments, which include only normal recurring adjustments, necessary to
present fairly the financial position as of April 30, 2009 and the results of
operations and cash flows for the periods then ended. The financial data and
other information disclosed in these notes to the interim financial statements
related to these periods are unaudited. The results for the three and nine month
periods ended April 30, 2009 is not necessarily indicative of the results to be
expected for any subsequent quarter of the entire year ending July 31, 2009. The
balance sheet at July 31, 2008 has been derived from the audited financial
statements at that date.
Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted pursuant to the Securities and
Exchange Commission's rules and regulations. These unaudited financial
statements should be read in conjunction with our audited financial statements
and notes thereto for the period June 2, 2008 (inception) to July 31, 2008 as
included in our Form S-1/A-2 filed with the Securities and Exchange Commission
on November 21, 2008.
|
b)
|
Financial
Instruments and Fair Value Measures
|
Statement
of Financial Accounting Standards (“SFAS”) No. 157,
“Fair Value Measurements”,
requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. SFAS No. 157
establishes a fair value hierarchy based on the level of independent, objective
evidence surrounding the inputs used to measure fair value. A financial
instrument’s categorization within the fair value hierarchy is based upon the
lowest level of input that is significant to the fair value measurement. SFAS
No. 157 prioritizes the inputs into three levels that may be used to measure
fair value:
F-6
Alternative
Energy Development Corporation
(formerly
Terrasol Holdings Ltd.)
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
April 30,
2009
(Unaudited)
Note
2. Summary of
Significant Accounting Policies (continued)
b) Financial
Instruments and Fair Value Measures (continued)
Level
1
Level 1
applies to assets or liabilities for which there are quoted prices in active
markets for identical assets or liabilities.
Level
2
Level 2
applies to assets or liabilities for which there are inputs other than quoted
prices that are observable for the asset or liability such as quoted prices for
similar assets or liabilities in active markets; quoted prices for identical
assets or liabilities in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which
significant inputs are observable or can be derived principally from, or
corroborated by, observable market data.
Level
3
Level 3
applies to assets or liabilities for which there are unobservable inputs to the
valuation methodology that are significant to the measurement of the fair value
of the assets or liabilities.
Financial
instruments consist principally of cash, accounts payable and amounts due to
related parties. Pursuant to SFAS No. 157, the fair value of cash equivalents is
determined based on “Level 1” inputs, which consist of quoted prices in active
markets for identical assets. The recorded values of all of other financial
instruments approximate their current fair values because of their nature and
respective maturity dates or durations.
Certain
reclassifications have been made to the prior period’s financial statements to
conform to the current period’s presentation.
Note
3. Mineral
Property
In June
2008, the Company acquired a 100% interest in the Terrasol Lode Claim located in
Clark County, Nevada at a cost of $5,500. At April 30, 2009, the Company
recognized an impairment loss of $5,500 as it had not been determined whether
there were proven or probable reserves on the property. During the nine months
ended April 30, 2009, the Company paid $295 in maintenance fees.
F-7
Alternative
Energy Development Corporation
(formerly
Terrasol Holdings Ltd.)
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
April 30,
2009
(Unaudited)
Note
4. License
Agreement Costs, Net
License
agreement costs, net, at April 30, 2009 consists of:
|
Class
A Convertible Preferred Stock due Licensor
|
|
|
$
|
400,000
|
Less
accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
License
agreement costs, net
|
|
|
$
|
399,829
|
On April
28, 2009, the Company entered into two Assignment Agreements to acquire the
right, title and interest to a technology license and distribution agreement
(the “Technology Agreement”) and to an exclusive manufacturing agreement (the
“Manufacturing Agreement”) in consideration for 2,000,000 shares of Class A
Convertible Preferred Stock (see Note 6) and a $10 royalty obligation to
Assignor for each unit sold. The stated purchase price in the Assignment
Agreement is $1,220,000 payable in the form of 2,000,000 shares of the Company’s
Class A Convertible Preferred Stock. However, the Company recorded the
acquisition at the $400,000 estimated fair value of the 2,000,000 shares of
Class A Convertible Preferred Stock at April 28, 2009.
The
Company recorded amortization expense of $171 for the period April 28, 2009 to
April 30, 2009 (using the straight line method over the remaining term,
including option terms, of the Technology Agreement (approximately 19.25
years)).
Pursuant
to the Technology Agreement, the Company has the exclusive rights to
manufacture, sell and distribute products embodied in United States Patent No.
7117859 until August 1, 2013. The Company has three options to extend the term
by 5 years per option upon the same terms and conditions as the initial term.
The Company also has a $40 royalty obligation to Fuel Concepts LLC (the initial
licensor ) for each unit sold over 6,000 units per year.
Pursuant
to the Manufacturing Agreement, Fuel Concepts LLC has the exclusive world-wide
non-assignable right to manufacture products for the Company at a specified
price per unit for 5 years.
F-8
Alternative
Energy Development Corporation
(formerly
Terrasol Holdings Ltd.)
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
April 30,
2009
(Unaudited)
Note
5. Related
Party Transactions
On June
4, 2008, the Company issued 6,000,000 (42,000,000 post forward stock split)
shares of common stock at $0.001 per share to the president of the Company for
cash proceeds of $6,000. On April 23, 2009, 1,000,000 (7,000,000 post forward
stock split) shares were returned to the Company and cancelled.
As at
April 30, 2009, the Company is indebted to the former president of the Company
for $184 (July 31, 2008 - $125), for expenses paid on behalf of the Company.
This amount is non-interest bearing, unsecured and due on demand.
As at
April 30, 2009, the Company is indebted to the Assignor and controlling
stockholder of the Company for $5,000 (July 31, 2008 - $0), for expenses paid on
behalf of the Company. This amount is non-interest bearing, unsecured and due on
demand.
The
Company received services from its former president at no cost to the Company.
For accounting purposes, the estimated fair value of these donated services
($300 per month for the services) is included in the statements of operations as
an expense and additional paid-in capital is increased by the same amounts. For
the nine months ended April 30, 2009, the Company expensed $2,700 in donated
services.
Note
6. Preferred
Stock
The
preferred stock may be divided into and issued in series. The Board of Directors
of the Company is authorized to divide the authorized shares of preferred stock
into one or more series, each of which shall be so designated as to distinguish
the shares thereof from the shares of all other series and classes.
On May 4,
2009, the Company designated 20,000,000 shares of its preferred stock as Class A
Convertible Preferred Stock (“Class A Stock”). Each share of Class A Stock is
convertible into 20 shares of common stock, has 100 votes, has no dividend
rights except as may be declared by the Board of Directors, and has a
liquidation preference of $1.00 per share.
Note
7. Common
Stock
On June
4, 2008, the Company issued 6,000,000 (42,000,000 post forward stock split)
shares of common stock at $0.001 per share to the president of the Company for
cash proceeds of $6,000.
On July
18, 2008, the Company issued a total of 4,400,000 (30,800,000 post forward stock
split) shares of common stock to 44 investors at $0.01 per share for cash
proceeds of $44,000.
F-9
Alternative
Energy Development Corporation
(formerly
Terrasol Holdings Ltd.)
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
April 30,
2009
(Unaudited)
Note
7. Common Stock
(continued)
On
November 25, 2008, the Securities and Exchange Commission declared effective the
Company’s registration statement to register 4,400,000 (30,800,000 post forward
stock split) shares of common stock held by certain stockholders (the “selling
stockholders”) of the Company. The Company will not receive any proceeds from
any sales of such shares.
On April
23, 2009, the former president of the Company returned 1,000,000 (7,000,000 post
forward stock split) shares to the Company and these shares were
cancelled.
At April
30, 2009, the Company had no stock option plan and there were no options or
warrants outstanding.
Note
8. Income
Taxes
The
provision for (benefit from) income taxes differs from the amount computed by
applying the statutory United States federal income tax rate of 35% to income
(loss) before income taxes. The sources of the difference follow:
|
|
|
Nine
Months
Ended
|
|
Period
June 2,
2008
(Inception)
to
|
|
April
30,
2009
|
April
30,
2009
|
|
|
|
|
|
|
|
Expected
tax at 35%
|
$
|
(15,030)
|
$
|
(21,829)
|
|
License
agreement costs
|
|
60
|
|
60
|
|
Donated
services
|
|
945
|
|
1,155
|
|
Increase
in valuation allowance
|
|
14,025
|
|
20,614
|
|
Income
tax provision
|
$
|
–
|
$
|
–
|
The
significant components of the Company’s deferred income tax assets are as
follows:
|
|
|
April
30,
|
|
July
31,
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
Net
operating loss carry forward
|
$
|
20,614
|
$
|
6,588
|
|
Valuation
allowance
|
|
(20,614)
|
|
(6,588)
|
|
Net
deferred tax assets
|
$
|
–
|
$
|
–
|
F-10
Alternative
Energy Development Corporation
(formerly
Terrasol Holdings Ltd.)
(A
Development Stage Company)
NOTES TO
FINANCIAL STATEMENTS
April 30,
2009
(Unaudited)
Note
8. Income Taxes
(continued)
Based on
management’s present assessment, the Company has not yet determined it to be
more likely than not that a deferred tax asset of $20,614 at April 30, 2009
attributable to the future utilization of the net operating loss carry-forward
of $58,896 will be realized. Accordingly, the Company has provided a 100%
allowance against the deferred tax asset in the financial statements. The
Company will continue to review this valuation allowance and make adjustments as
appropriate. The net operating loss carry-forward expires $18,824 in 2029 and
$40,072 in 2030.
Current
United States income tax laws limit the amount of loss available to offset
against future taxable income when a substantial change on ownership occurs.
Therefore, the amount available to offset future taxable income may be
limited.
Note
9. Subsequent
Events
|
a)
|
On
May 4, 2009, the Company amended the articles of incorporation and changed
the name of the Company from Terrasol Holdings Ltd. to Alternative Energy
Development Corporation and increased the authorized common stock from
100,000,000 shares to 200,000,000 shares. Also the Company designated
20,000,000 shares of its preferred stock as Class A Convertible Preferred
Stock.
|
|
b)
|
On
May 5, 2009, the Company effected a forward stock split of its common
stock in a ratio of seven (7) new shares for every one (1) existing share
of common stock. As a result, the issued and outstanding share capital
increased from 9,400,000 shares of common stock to 65,800,000 shares of
common stock. All share amounts have been retroactively adjusted for all
periods presented.
|
|
c)
|
On
May 5, 2009, the Company entered into an exclusive employment agreement
with the new president and chief executive officer of the Company for a
term of two years ending May 4, 2011. The president is to be paid $120,000
per annum, and is to receive 1,000,000 shares of common stock within 90
days (to vest evenly over the 2 years
term).
|
|
d)
|
On
May 6, 2009, the Company issued 2,000,000 shares of Class A Convertible
Preferred Stock to the Assignor as consideration for the Technology
License and Distribution Agreement referred to in Note
4.
|
F-11
ITEM
2. MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
This section of the report includes a
number of forward-looking statements that reflect our current views with respect
to future events and financial performance. Forward-looking statements are often
identified by words like: believe, expect, estimate, anticipate, intend, project
and similar expressions, or words which, by their nature, refer to future
events. You should not place undue certainty on these forward-looking
statements, which apply only as of the date of this report. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical results or our
predictions.
We are no longer in the mineral
exploration business.
We are
now engaged in the business of designing, developing, manufacturing, marketing,
and distributing cost-effective after-market fuel conservation
technologies
Currently
our exclusive product is the e3 Fuel Saver 7000. The e3 Fuel Saver 7000 is
unique in that its operation is unlike any other fuel saving device. The fuel
saver was originally engineered in 1995 by an Ohio company called Fuel Concepts
and manufacturing began in 2004. In October of 2006, the fuel saver 7000 was
patented (US PATENT 7117859). With the combined efforts of Fuel Concepts and
AEDC, production began and was completed creating a superior fuel saving device,
the e3 Fuel Saver 7000.
Fuel
saving devices currently being marketed can only be compared to the e3 Fuel
Saver 7000 by their reference to reducing fuel consumption. Their
process to create the end result verses AEDC’s is completely different. AEDC has
the only device currently using vapor combustion which decreases the need for
gas to be used thus creating the reduction in fuel usage. Unlike systems that
use hydrogen or magnetic fields, the e3 Fuel Saver 7000 uses combustion to
minimize a vehicles consumption of fuel. E3's 3-Stage Cold Vapor System can
convert any gasoline based automobile in to a extremely efficient, fuel saving
machine. Normally, vehicles without the e3 Fuel Saver 7000 system
installed rely on the injectors job is to atomize the fuel into the cylinder in
order to create combustion. Unfortunately, the result is extremely inefficient.
For every amount of fuel that is sprayed into each cylinder... less than 30% is
actually used to fire the cylinder...the rest is wasted into the our
environment.
The e3
Fuel Saver 7000 canister creates vapor, which is comparable to atomizing the
fuel, and the car interprets the message that less fuel is needed while still
maintaining the factory’s required air to fuel ratio. The result is less
dependence on fuel with significantly fewer emissions. In extensive
road testing conducted in the US and Australia, the e3 Fuel Saver system has
been shown to significantly increase fuel mileage and reduce emissions. The e3
Fuel Saver has reported gas mileage increases between 20% - 50%. The average gas
mileage boost for vehicles using e3's patented fuel system is over 30% on the
highway.
Performance
Benefits
e3 Fuel
Saver greatly enhances engine power and performance:
• 3
stage vapor based fuel saving system that gives the consumer a significant
increase in gas mileage
• Boosts
engine power and performance. Quicker pick up and acceleration in town and on
the highway.
• Works
on gasoline fuel injection or carburated engines for cars, trucks, vans, RV's,
boats, motorcycles, race cars, and other performance vehicles.
• Constructed
from top quality anodized T-6 aircraft aluminum and polishedbrass fittings for
long lasting protection.
• Works
in addition to all other gas savers.
• No
moving parts.
• Can
be uninstalled and moved to any other gasoline powered car, truck, van or motor
home.
• Easily
installed in about an hour.
AEDC’s
approach is to the market our fuel conservation technology to consumers,
business, and government agencies. There is a demand to protect our environment
and the e3 Fuel Saver 7000 will provide a sizable contribution to the
environment.
Our
strategy for Consumer and Business to Business marketing is by advertising
through National television, radio and internet commercials, fundraisers, and
direct/indirect sales force teams.
Retail
price is $300.00 USD. Wholesale is $195.00 USD.
Cost
of Good Sold (COGS)
Unit costs is $22.50.
Shipping fees are $2.50.
Technology license and distribution
agreement royalty is $40.
Assignment and assumption royalty is
$10.
Manufacturing
and Operations Plan
Location
and space requirements
The
corporate office is located in Glendale, Az. This location will be the hub for
all operations, sales, and marketing.
Manufacturing
The
entire product’s manufacturing and assembled is currently located in Ningbo,
China. The facility is capable of producing up to 50,000 units every 30 days. As
the demand grows, the company has a secondary plant that will be an exclusive e3
Fuel Saver 7000 manufacturing plant to produce an additional 80,000 units a
month.
Subcontractors
and Suppliers
Our
subcontractors will fall into two scenarios. First scenario will be
to purchase our units for resale on a pricing structure determined by volume and
footprint of targeted locations. Their commission is controlled by their own
pricing adjustments in their direct
sale.
Subcontractor is accepting personal payment and liability from their
customer.
The other
scenario is that the subcontractor will purchase product on an “as needed” basis
and payment is made for units directly to AEDC. Subcontractor receives a
commission per unit. Subcontractor is accepting payments on behalf of
AEDC.
Our
dealer, distributer network consist of: Automotive dealerships and
repair facilities as well as Retailers whose inventory tailor to after-market
automotive products.
Warranty
The e3
Fuel saver 7000 has no movable parts which keeps potential repairs to a minimum.
Proper installment (Install performed by a “Certified Installer) is what
determines if a warranty replacement is valid. There is a standard 1 year
manufacturer’s warranty.
Labor
requirements
Our labor
force will consist of direct sales team members, marketing representatives,
operational staff, and call center representatives. The Company anticipates a n
executive and administrative staff of 10-15 employees over the twelve
months.
Employees
will be paid based upon position. All sales positions are 1099 contractors and
are paid a commission per unit. Manufacturing Reps are also paid as sales
people.
Marketing
Plan
Target
Audiences-
• City
and State Municipalities
•
Government Agencies
•
Fleet
– Taxi
Cabs
–
Limousine Companies
– Rental
Car Companies
•
Consumer (marketed to by various segments)
–
Dealers
– TV /
Radio
–
Retailers
–
Internet
– Print
Ads
– Direct
Mail
–
Community Outreach
Milestones
The milestones for the next 12 months
are as follows:
(1)
Complete current orders for 27,000 units in the following foreign
territories:
Australia
New
Zealand
Guam
Panama
USA
South
Africa
(2) Open
a minimum of one major distributor for each of the following foreign
territories:
Australia
New
Zealand
Guam
Panama
USA
South
Africa
(3)
Increase present Dealer / installation Locations from 30 to 100 in the next 12
months
(4)
Launch first US based national television advertising campaign
ITEM
3.
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as
defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not
required to provide the information under this item.
|
ITEM
4.
|
CONTROLS
AND PROCEDURES.
|
Under the supervision and with the
participation of our management, including the Principal Executive Officer and
Principal Financial Officer, we have evaluated the effectiveness of our
disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as
of the end of the period covered by this report. Based on that evaluation, the
Principal Executive Officer and Principal Financial Officer have
concluded that these disclosure controls and procedures are effective. There
were no changes in our internal control over financial reporting during the
quarter ended April 30, 2009 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
PART
II. OTHER INFORMATION
We are a smaller reporting company as
defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not
required to provide the information under this item.
The
following documents are included herein:
|
Exhibit
No.
|
Document
Description
|
|
|
|
|
10.1
|
Technology
License and Distribution Agreement Amendment
|
|
|
|
|
31.1
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to section
906 of the Sarbanes-Oxley Act of
2002.
|
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following person on behalf of the Registrant and in the capacities on this
22
nd
day of June, 2009.
|
|
ALTERNATIVE
ENERGY DEVELOPMENT CORPORATION
|
|
|
|
|
|
|
BY:
|
JERRY ALVAREZ
|
|
|
|
Jerry
Alvarez, President, Principal Executive Officer, Principal Financial
Officer and a member of the Board of
Directors.
|
EXHIBIT
INDEX
|
Exhibit
No.
|
Document
Description
|
|
|
|
|
10.1
|
Technology
License and Distribution Agreement Amendment
|
|
|
|
|
31.1
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to section
906 of the Sarbanes-Oxley Act of
2002.
|
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