The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements under federal securities laws. Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties. Our actual results could differ materially from those indicated by forward-looking statements as a result of various factors, including but not limited to those set forth under this Item, as well as those discussed in Part II - Item 1A, "Risk Factors," and elsewhere in this document and those that may be identified from time to time in our reports and registration statements filed with the Securities and Exchange Commission.

This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part I - Item 1 of this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and related Notes and the Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 7, 2008.

DESCRIPTION OF COMPANY:

Our corporate headquarters is located at 2910 Bush Drive, Melbourne, Florida 32935. Its website address is http://www.actechpanel.com. In addition, Alternative Construction by Revels, Inc., a subsidiary of ACCY maintains a website at www.acbyrevels.com. The websites are not incorporated in this Form 10-Q.

ACCY operates under three divisions; a (i) Alternative Construction Manufacturing Division, (ii) Alternative Construction Development Division, and
(iii) Alternative Construction Ancillary Services Division. The Manufacturing Division currently contains two subsidiaries, ACMT, which manufactures the ACTech® Panel System, and ACMF, which will provide manufacturing services in Florida. The Development Division contains three subsidiaries; Alternative Construction by ProSteel Builders, Inc., Alternative Construction by Ionian, Inc., and Alternative Construction by Revels, Inc. The Alternative Construction Ancillary Services Division contains five subsidiaries; Alternative Construction Design, Inc., Alternative Construction Consulting Services, Inc., Alternative Construction Safe Rooms, Inc., Modular Rental and Leasing Corporation, and Solar 18 ACTech Panel, Inc. Future of Building Institute, Inc., as a non-profit entity, functions separately.

During the fourth quarter of 2008 the Company will discontinue its development/construction division. Under the terms and conditions of the various purchase agreements, the original founders may repurchase their companies at par value, with par value being defined as ($0.0001) for failure of the Company to meet its financial obligations. Under these agreements the Company will reduce its liabilities and assets. The previous owners of Alternative Construction by Revels, Inc., and Alternative Construction by Ionian, Inc., have each declared their intent to

reacquire their company. Alternative Construction by ProSteel Builders, Inc., will be shutdown and discontinued upon the settlement of its lawsuit with its previous customer.

OVERVIEW:

Alternative Construction Technologies, Inc., formerly known as Alternative Construction Company, Inc. (the "Company" or "ACCY"), is a Florida corporation organized in 2004 with corporate offices located in Melbourne, Florida. The Company's common stock is traded on the NASDAQ OTC Bulletin Board under the symbol "ACCY.OB."

The Company is a manufacturing company engaged in the research, development and marketing of proprietary products for the construction industry. We manufacture and distribute the ACTech® Panel, a structural insulated panel (SIP), throughout the United States. Our products are marketed through our internal sales staff and by manufacturer representatives.

The Company's primary product and service is the manufacturing, research, development and marketing of proprietary products for the construction industry. We manufacture and distribute the ACTech® Panel, a structural insulated panel (SIP), throughout the United States, with concentration in the southeast region. The Company has delivered its products and services internationally and believes that a huge portion of its future growth will be derived from those markets. The marketing of our products is through our internal sales staff and the use of manufacturer representatives. The Company currently licenses 21 manufacturer sales representatives.

Our corporate headquarters is located at 2910 Bush Drive, Melbourne, Florida 32935. Its website address is http://www.actechpanel.com. The website is not incorporated in this Form 10-Q.

In 2007, the Company experienced a 50.1% growth in sales to $12,960,008, as compared to 2006 sales of $8,634,349. Net income of $1,603,261, represents an increase of $3,642,555 in net income from 2006. The Company earned $0.22 per basic share in 2007. The potential dilutive effects of convertible debt and securities warrants and options in 2007, while providing a significant increase in available cash, would have had a negative effect on earnings by $0.08 per share outstanding during 2007. The Company performance is indicative of the management decisions made in 2006.

The continued growth of the Company was negatively impacted by the severe downturn in the U.S. economy, particularly in the building and construction segment and the Company's inability to obtain new financing in January 2008. As part of its financing in June 2007, the Company stated to its lenders that additional capital would be required within a short period of time to maintain the growth levels that the Company expected to achieve. The Company began negotiating with its financiers in December 2007 and January 2008 to secure such additional financing. Simultaneously with these discussions, the Company obtained commitments for additional equity and secured financing from third parties. In each case, such third parties required the debenture holders to waive or amend the terms of the "Green Shoe" option which they were granted in connection with the June 2007 debenture financing. A waiver or satisfactory amendment could not be agreed upon and the Company's cash needs were not met.

In May 2008 the Company entered into a $3,000,000 line of credit financing with the existing financiers. The line of credit is secured by "eligible" contracts and drawn down there under with interest at 13%. On September 30, 2008 the outstanding balance was $1,981,750 outstanding under this facility. On July 19, 2008 BridgePointe Master Fund, one of the lenders, notified the Company that it did not intend to fund any additional draw-downs under the line of credit until all current defaults had been cured and a "field audit" conducted. On July 31, 2008 BridgePointe Master Fund notified the Company that it was in default in its debenture and that it must cure such defaults within five (5) days. On August 1, 2008 BridgePointe Master Fund notified the Company that it was in default in its line of credit and had five (5) days to cure it. The terms of the debentures called for principal amortization there under to commence on July 1, 2008, and monthly thereafter at a rate of 1/24 per month with a balloon payment due July 1, 2009 for any outstanding remaining balance. The Company is unable to make these payments without access to additional outside funding or in connection with draw-downs under the line of credit. On November 3, 2008, the Company was notified by its registered agent that it was served with a verified complaint captioned Roswell Capital Partners, LLC, as Collateral Agent; Bridgepointe Master Fund Ltd.; CAMHZN Master LDC; and CAMOFI Master LDC vs. Alternative Construction Technologies, Inc. et al. (the "Complaint"). The Complaint, which was filed in the Circuit Court Eighteenth Judicial Circuit, Brevard County, Florida relates to the investment made by the plaintiffs (the "Secured Lenders") in 2007 in convertible debentures of the Company (the "Debentures") and a Secured Line of Credit made to the Company in May of 2008 (the "LOC") by these same parties. The Debentures are secured by certain assets of the Company and its subsidiaries, including three patents of the company as well as real property of the company located in Bolivar, TN. The LOC is secured by specific contracts and guarantees of certain of the Company's subsidiaries. The plaintiffs had previously notified the Company of defaults under the Debentures and the LOC and their intent to foreclose on the assets securing these instruments. The lawsuit asserts breaches of the various documents executed by the Company and its subsidiaries in connection with the issuance of the Debentures and of the loan agreements signed by the Company in connection with the LOC. In addition to monetary damages, the lawsuit seeks a determination that the Secured Lenders hold a valid lien in certain assets of the Company, seeks an order of foreclosure relating to assets subject to valid lien (except to real property located outside of Florida) and the appointment of a receiver.

The Company is assessing its options and will respond to the lawsuit shortly. Among the options being considered are counterclaims against the Secured Lenders for violations of state and federal lending and securities laws, a buy-out of all or some of the obligations which are the subject of this lawsuit, commencing vigorous enforcement actions to collect the debts underlying the contracts securing the LOC, making third party claims related to the defaults, and a reorganization under the Federal Bankruptcy Act. While the Company is hopeful that a satisfactory

resolution of this matter will be achieved, no assurance can be given at this time that this will occur, in which case, if successful in this lawsuit, the Secured Lenders would materially adversely affect the Company's business.

The following Management Discussion and Analysis should be read in conjunction with the financial statements and accompanying notes included in this Form 10-Q.

COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2008 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 2007



                           Development Division             Manufacturing Division            Ancillary Division                 Corporate                 Eliminations                 Consolidated
                           2008            2007           2008              2007             2008           2007            2008           2007          2008         2007          2008            2007
Revenue                  $ 1,086,352     $ 1,419,282      $      -       $       26,000     $  97,595     $ 1,851,335     $        -     $        -      $      -     $     -     $ 1,183,947     $ 3,296,617
Cost of Sales                755,901         896,331             -                4,820        86,106       1,606,835              -              -             -           -         842,007       2,507,986
Gross Profit                 330,451         522,951             -               21,180        11,489         244,500              -              -             -           -         341,940         788,631
Operating Expenses            85,881         159,367             -                1,612        73,857         140,003        349,326        244,898             -        (100 )       509,064         545,780
Income (Loss) from
Operations               $   244,570     $   363,584      $      -       $       19,568     $ (62,368 )   $   104,497     $ (349,326 )   $ (244,898 )    $      -     $   100     $  (167,124 )   $   242,851

Total revenues decreased to $1,183,947 for the three months ended September 30, 2008 from $3,296,617 for the three months ended September 30, 2007. The decrease of $2,112,670 or 64.1% resulted primarily from (1) the severe downturn in the U.S. economy, particularly in the building and construction industries; (2) disputes with the Company's financiers which have culminated in a foreclosure action commenced by the financiers on November 3, 2008; and (3) the Company's inability to collect accounts receivable from an affiliated entity. The Company believes it lost significant business because of its inability to reach financing terms with its financing partners. Once financing was achieved, May 8, 2008, the Company began moving forward with its remaining contracts. As the Company has been unable to acquire the raw materials due to lack of cash, we have been unable to produce the finished product needed to fulfill orders. In addition, three contracts for homes were cancelled through ACI.

Total revenues and as a percent of consolidated revenues for the three months ended September 30, 2008, were provided as follows: Manufacturing Division - $1,086,352 (91.8%) and Development Division - ($97,595) ( 8.2%).

Cost of sales was $842,007 and $2,507,986, respectively for the three months ended September 30, 2008 and 2007. As a percent of revenue, the cost of sales decreased from 76.1% to 71.1%, for the three months ended September 30, 2007 as compared to the three months ended September 30, 2008. The Manufacturing Division recognizes a lower cost of sales percent, 69.5%, than the consolidated total of the developing division at 88.6%, therefore, when the Development Division recognizes a greater percentage of the overall revenue, the cost of sales increase.

Gross profit was $341,940 and $788,631, respectively for the three months ended September 30, 2008 and 2007. As a percent of revenue, gross profit was 28.8% and 23.9%, respectively for the three months ended September 30, 2008 and 2007. One cause of the increase in gross profit is a direct correlation to the revenue split between the Manufacturing Division and the Development Division as defined in cost of sales above. In addition, the loss of revenue caused by the lack of funding, had a direct impact on the gross profit as the Company's management had to consider the implications of laying off qualified staff that would look for work elsewhere.

Total operating expenses decreased to $509,064 for the three months ended September 30, 2008 from $545,780 for the three months ended September 30, 2007. This $36,716 or 6.7% decrease was attributed mostly to the reduction of administration costs associated and in direct correlation to the decrease in sales.

The operating expenses and the percent of consolidated operating expenses for the three months ended September 30, 2008, were contributed as follows: Manufacturing Division $85,881 (16.9%); Development Division $73,857 (14.5%); and Corporate, $349,326 (68.6%).

Adjusted Earnings Before Depreciation, Interest, Taxes, and Amortization

The Company presents Adjusted EBITDA as a financial measure as management believes it provides useful information to investors regarding the Company's liquidity and financial condition and because management, as well as the Company's lenders, uses this measure in evaluating the performance of the Company.

Management uses Adjusted EBITDA as a supplement to GAAP measures to further evaluate the Company's period-to-period operating performance and evaluate the Company's ability to meet future capital expenditure and working capital requirements. Management believes the exclusion of non-cash charges, including stock-based compensation, is useful in measuring the Company's cash available to operations and the performance of the Company. Management also believes that financing fees associated with the raising of capital is a one time fee that does not accurately reflect the overall performance of the Company. Because the Company finds Adjusted EBITDA useful, the Company believes its investors will also find Adjusted EBITDA useful in evaluating the Company's performance.

Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flows, or other consolidated income or cash flow data prepared in accordance with GAAP in the United States or as a measure of the Company's profitability or liquidity. Adjusted EBITDA is not in accordance with or an alternative for GAAP, and may be different from non-GAAP measures used by other companies. Unlike EBITDA which may be used by other companies or investors, Adjusted EBITDA does not include stock-based compensation charges and income from minority interest in the Company's subsidiaries, ACP, ACI, and ACSR. The Company believes that Adjusted EBITDA is of limited use in that it does not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and does not accurately reflect real cash flow. In addition, other companies may not use Adjusted EBITDA or may use other non-GAAP measures, limiting the usefulness of Adjusted EBITDA. Therefore, Adjusted EBITDA should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures. The presentation of Adjusted EBITDA is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP measures. The Company compensates for the limitations of Adjusted EBITDA by relying upon GAAP results to gain a complete picture of the Company's performance. Since Adjusted EBITDA is a non-GAAP financial measure as defined by the Securities and Exchange Commission, the Company includes in the tables below reconciliations of Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States.

                                                     Three Months Ended                          Nine Months Ended
                                                       September 30,                               September 30,
                                                  2008                 2007                  2008                  2007
Net Income (Loss)                            $   (4,295,610 )       $    96,736         $   (6,309,881 )       $     738,055
Minority Interest in Income (Loss) of
Subsidiary                                           42,527                   -                 36,580                     -
  Provision for Income Taxes                              -                   -                      -                     -
  Interest                                          124,148             148,658                270,224               233,158
Income from Operations                       $   (4,128,935 )       $   245,394         $   (6,003,077 )       $     971,213
  Depreciation and Amortization                      54,982              87,280                249,350               234,877
Allowance for Bad Debt Expenses                   3,930,374                   -              3,930,374                     -
  Non-Cash Stock Based Compensation                  16,967                   -                 82,367                     -
  Financing Fees                                      4,833                   -              1,407,888                     -
Adjusted EBIDTA                              $     (121,779 )       $   332,674         $     (333,099 )       $   1,206,090
Adjusted EBIDTA Margin                               -10.23 %             10.90 %                -6.34 %               19.89 %

Adjusted EBIDTA is defined as net income before minority interest in income of subsidiaries, interest expense and financing fees, bad debt, provisions for income taxes, depreciation, amortization, and other non-cash stock-based compensation.

Adjusted EBIDTA Margin is calculated as Adjusted EBIDTA divided by total revenues for the period.

Manufacturing Division


                      ACMT                         ACMF                   Eliminations                  Consolidated
              2008           2007           2008          2007         2008           2007          2008            2007
Revenue      $ 344,506     $ 1,419,282     $ 741,846      $     -      $      -       $     -     $ 1,086,352     $ 1,419,282
Cost of
Sales          305,901         896,331       450,000            -             -             -         755,901         896,331
Gross
Profit          38,605         522,951       291,846            -             -             -         330,451         522,951
Operating
Expenses        85,811         159,367            70            -             -             -          85,881         159,367
Income
(Loss)
from
Operations   $ (47,206 )   $   363,584     $ 291,776      $     -      $      -       $     -     $   244,570     $   363,584

ACMF recognized $741,846 (33.9%) in revenue through two contracts with New Century Structures, Inc. As ACMF was incorporated in 2008 it has no historical financials in which to compare revenue. ACMT's revenue decreased from $1,419,282 to $344,506 (75.7%) for the three months ended September 30, 2007 and 2008, respectively. ACMT revenue decrease was directly associated with the inability of the Company to receive financing, which delayed the delivery of our raw materials. The cycle for obtaining raw materials, especially our steel requirements, has created shortfalls in production and our lack of performance on outstanding orders. All steel suppliers now require cash payment before delivery scheduling, which often can take up to two weeks for delivery. As the Company was previously sporadically funded under the line of credit, and never on the schedule in which it was promised, the Company had to shut down production for weeks at a time while waiting on raw materials. ACMT has received no additional financing since June 2008 and as such relies on payment of order in advance in order to obtain the materials needed to complete the orders.

The manufacturing facility, ACMT, recognizes a cost of sales percent of 88.8%, (73.1% of the overall cost of sales), while ACMF recognizes a cost of sales percent, 60.6%, (107.5% overall cost of sales - due to the cancellation of contracts in the Development Division), respectively which represents an increase of 6.4%, as a percentage, which is caused by two factors, (i) the increase cost of raw materials, and (ii) the Company is required to maintain certain levels of staffing and facility operations that increase overall cost of sales as a percentage when production levels decline. ACMT's cost of sales decreased from 896,331 to 305,901 (34.1%) for the three months ended September 30, 2007 and 2008, respectively as a direct result in the reduction of gross sales.

ACMT represents 16.9% of the overall operating expenses of the Company. Payroll, insurance, maintenance and marketing represent the majority cost of operations.

Development Division



                      ACP                          ACI                          ACR                     Eliminations                  Consolidated
              2008          2007          2008           2007           2008          2007           2008           2007          2008           2007
Revenue      $       -     $ 394,768     $       0     $ 1,352,610     $  97,595     $ 103,957      $       -       $      -     $  97,595     $ 1,851,335
Cost of
Sales               31       354,177             0       1,163,725        86,075        88,933              -              -        86,106       1,606,835
Gross
Profit             (31 )      40,591             0         188,885        11,520        15,024              -              -        11,489         244,500
Operating
Expenses        18,977        90,551        23,506          39,772        31,374         9,680              -              -        73,857         140,003
Income
(Loss)
from
Operations   $ (19,008 )   $ (49,960 )   $ (23,506 )   $   149,113     $ (19,854 )   $   5,344      $       -       $      -     $ (62,368 )   $   104,497

The revenue attributed by ACI and ACR for the period was a and $97,595 (15.9% of the overall revenue), respectively. ACPSB's revenue decreased from $394,768 to $0 for the three months ended September 30, 2007 and 2008, respectively, as the office has been closed.

ACR had a higher cost of sales percent (88.2 %,) as compared to the previous quarter due to the delays and lack of financing. ACR cost of sales represented 10.2% of the overall cost of sales, and ACI represented a negative 101.2% of the overall cost of sales,

COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2008 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2007

Results of Operations




                             Manufacturing Division              Ancillary Division                 Development Division                           Corporate                              Eliminations                      Consolidated
                             2008             2007              2008             2007            2008                 2007                 2008                  2007                2008              2007              2008            2007
Revenue                  $  3,529,881    $    4,070,774     $          -     $     26,000   $     1,623,888     $       5,150,028   $                     $                    $       (14,832)   $     (228,472)   $    5,138,937   $  9,018,330
Cost of Sales               2,641,796         2,646,249              813            4,820         1,500,361             3,957,637                                                      (14,832)         (228,472)        4.142,970      6,380,234
Gross Profit                  888,085         1,424,525            (813)           21,180           123,526             1,192,391                     -                    -                  -                 -          995,967      2,638,096
Operating Expenses            319,902           523,984            4,544            3,497           306,398               527,856             2,448,504              463,341                  -                 -        3,079,343      1,518,678
Income (Loss) from
Operations               $    568,183    $      900,541     $    (5,357)     $     17,683   $     (182,872)     $         664,535   $       (2,448,504)   $        (463,341)   $              -   $             -   $  (2,083,382)   $  1,119,418

Total revenues decreased to $5,138,937 for the nine months ended September 30, 2008 from $9,018,330 for the nine months ended September 30, 2007. The decrease of $3,879,393 or 43.0% resulted primarily from (1) the severe downturn in the U.S. economy, particularly in the building and construction industries; (2) disputes with the Company's financiers which have culminated in a foreclosure action commenced by the financiers on November 3, 2008; and (3) the Company's inability to collect accounts receivable from an affiliated entity.

Total revenues and as a percent of consolidated revenues for the nine months ended September 30, 2008, were provided as follows: Manufacturing Division - $3,515,049 (68.4), and Development Division - $1,623,888 (31.6%). The difference between the reported revenue and the individual subsidiaries is the result of consolidating eliminations and the cost associated with the Ancillary Division.

Cost of sales was $4,142,970 and $6,380,234, respectively for the nine months ended September 30, 2008 and 2007. As a percent of revenue, the cost of sales increased from 70.7% to 80.6%, for the nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007. The manufacturing division recognizes a lower cost of sales percent, than the consolidated total of the developing division at 92.4%, therefore, when the developing division recognizes a greater percentage of the overall revenue, the cost of sales increase. In addition, the pricing of raw materials has had substantial increases during this reporting period, which create a negative impact on cost of sales.

Gross profit was $995,967 and $2,638,234, respectively for the nine months ended . . .