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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                For the quarterly period ended February 29, 2012

                                       or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

             For the transition period from _________ to _________

                        Commission file number: 000-52410


                           SKY HARVEST WINDPOWER CORP.
             (Exact name of registrant as specified in its charter)

           Nevada                                                   N/A
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

890 West Pender Street, Suite 710, Vancouver, BC, Canada          V6C 1J9
     (Address of principal executive offices)                    (Zip Code)

                                 (604) 267-3041
              (Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter)  during the  preceding 12 months (or for such shorter  period that
the registrant was required to submit and post such files). 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" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]                        Accelerated filer [ ]

Non-accelerated filer [ ]                          Smaller reporting company [X]
(Do not check if a smaller reporting company)

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

31,706,016  shares of common  stock are issued and  outstanding  as of April 16,
2012  (including  15,680,016  shares of common  stock  reserved  for issuance in
exchange for certain outstanding exchangeable securities of the registrant).

INDEX Page ---- PART I FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) CONSOLIDATED BALANCE SHEETS as of February 29, 2012 and May 31, 2011 3 CONSOLIDATED STATEMENTS OF OPERATIONS for the Three and Nine Months Ended February 29, 2012 and February 28, 2011, and for the period since inception 4 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY for the period since inception 5 CONSOLIDATED STATEMENTS OF CASH FLOWS for the Nine Months Ended February 29, 2012 and February 28, 2011, and for the period since inception 8 NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Item 3. Quantitative and Qualitative Disclosures About Market Risk 25 Item 4. Controls and Procedures 25 PART II OTHER INFORMATION Item 1. Legal Proceedings 26 Item 1A. Risk Factors 26 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26 Item 3. Defaults Upon Senior Securities 26 Item 4. (Removed and reserved) 26 Item 5. Other Information 26 Item 6. Exhibits 27 SIGNATURES 29 2
Sky Harvest Windpower Corp. (A Development Stage Company) Consolidated Balance Sheets (Expressed in US Dollars) (Unaudited) February 29, May 31, 2012 2011 ---------- ---------- $ $ ASSETS CURRENT ASSETS Cash and cash equivalents 101,558 23,465 Other receivables 9,763 10,855 Prepaid expenses 3,100 53,120 ---------- ---------- TOTAL CURRENT ASSETS 114,421 87,440 Property and equipment, net (Note 4) 69,916 71,945 ---------- ---------- TOTAL ASSETS 184,337 159,385 ========== ========== LIABILITIES AND STOCKHOLDERS' DEFICIT LIABILITIES Accounts payable 154,575 166,576 Accrued liabilities 1,106 3,156 Due to related parties (Note 7) 106,098 283,023 Note payable (Note 5) 50,000 60,324 ---------- ---------- TOTAL LIABILITIES 311,779 513,079 ---------- ---------- STOCKHOLDERS' EQUITY (DEFICIT) Preferred Stock: Authorized: 10,000,000 shares, $0.001 par value Issued and outstanding: 1 share (May 31, 2011 - 1 share) -- -- Common Stock: Authorized: 100,000,000 shares, $0.001 par value Issued and outstanding: 31,702,016 shares (May 31, 2011 - 29,732,016 shares) 31,702 29,732 Additional paid-in capital 6,434,329 5,829,796 Common stock subscribed (Notes 8(b) and 11) 26,750 6,750 Accumulated other comprehensive loss (67,182) (82,445) Deficit accumulated during the development stage (6,553,041) (6,137,527) ---------- ---------- TOTAL STOCKHOLDERS' DEFICIT (127,442) (353,694) ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIT 184,337 159,385 ========== ========== Continuing operations (Note 1) Commitments and contingencies (Note 11) (The accompanying notes are an integral part of these consolidated financial statements) 3
Sky Harvest Windpower Corp. (A Development Stage Company) Consolidated Statements of Operations (Expressed in US Dollars, except number of shares) (Unaudited) Accumulated from February 25, 2005 For the For the For the For the (Date of Three Months Three Months Nine Months Nine Months Inception) to Ended Ended Ended Ended February 29, February 29, February 28, February 29, February 28, 2012 2012 2011 2012 2011 ---------- ---------- ---------- ---------- ---------- $ $ $ $ $ EXPENSES Consulting fees 381,634 -- 3,234 15,187 49,311 Engineering and development 534,391 (2,008) 21,598 121,960 61,612 Management fees (Note 7) 719,932 14,835 15,924 119,352 77,994 Professional fees 472,384 82,885 10,639 118,619 42,048 General and administrative 1,794,165 9,986 23,317 26,653 53,803 Acquired development costs 242,501 -- -- -- -- ---------- ---------- ---------- ---------- ---------- Operating loss (4,144,907) (105,698) (74,712) (401,771) (284,768) OTHER INCOME (LOSS) Impairment loss (2,551,440) -- -- -- -- Interest income 89,382 -- -- -- 24 Foreign exchange gain (loss) 65,911 30,980 37,031 (17,742) 47,074 Settlement of debt (11,987) -- -- 3,999 -- ---------- ---------- ---------- ---------- ---------- NET LOSS (6,553,041) (74,718) (37,681) (415,514) (237,670) OTHER COMPREHENSIVE LOSS Foreign currency translation adjustments (67,182) (34,113) (41,242) 15,263 (51,992) ---------- ---------- ---------- ---------- ---------- Comprehensive loss (6,620,233) (108,831) (78,923) (400,251) (289,662) ========== ========== ========== ========== ========== Net Loss Per Common Share - Basic and Diluted (0.00) (0.00) (0.01) (0.01) ---------- ---------- ---------- ---------- Weighted average number of common stock outstanding 31,702,000 29,732,000 29,883,000 29,732,000 ---------- ---------- ---------- ---------- (The accompanying notes are an integral part of these consolidated financial statements) 4
Sky Harvest Windpower Corp. (A Development Stage Company) Consolidated Statement of Stockholders' Equity (Expressed in US Dollars, except number of shares) (Unaudited) Deficit Accumulated Additional Common During the Preferred Common Paid-in Stock Development Stock Amount Shares Amount Capital Subscribed Stage Total # $ # $ $ $ $ $ ------ ------ ---------- -------- --------- ------- ---------- -------- Balance - February 25, 2005 (Date of Inception) -- -- -- -- -- -- -- -- Common stock issued on March 2, 2005 to founders for cash at $0.00167 per share -- -- 6,000,000 6,000 4,000 -- -- 10,000 Common stock issued from March 4, 2005 to March 20, 2005 for cash at $0.0033 per share -- -- 3,000,000 3,000 7,000 -- -- 10,000 Common stock issued on March 31, 2005 for cash at $0.0167 per share -- -- 300,000 300 4,700 -- -- 5,000 Common stock issued from April 7, 2005 to April 28, 2005 for cash at $0.0167 per share -- -- 480,000 480 7,520 -- -- 8,000 Common stock issued from May 1, 2005 to May 25, 2005 for cash at $0.0167 per share -- -- 690,000 690 10,810 -- -- 11,500 Common stock issued on May 29, 2005 for cash at $0.0167 per share -- -- 60,000 60 9,940 -- -- 10,000 Net loss for the period -- -- -- -- -- -- (12,321) (12,321) ------ ------ ---------- -------- --------- ------- ---------- -------- Balance - May, 31 2005 carried forward -- -- 10,530,000 10,530 43,970 -- (12,321) 42,179 ------ ------ ---------- -------- --------- ------- ---------- -------- (The accompanying notes are an integral part of these consolidated financial statements) 5
Sky Harvest Windpower Corp. (A Development Stage Company) Consolidated Statement of Stockholders' Equity (Expressed in US Dollars, except number of shares) (Unaudited) Deficit Accumulated Additional Common During the Preferred Common Paid-in Stock Development Stock Amount Shares Amount Capital Subscribed Stage Total # $ # $ $ $ $ $ ------ ------ ---------- -------- --------- ------- ---------- --------- Balance - May, 31, 2005 brought forward -- -- 10,530,000 10,530 43,970 -- (12,321) 42,179 Net loss for the year -- -- -- -- -- -- (57,544) (57,544) ------ ------ ---------- -------- --------- ------- ---------- --------- Balance - May 31, 2006 -- -- 10,530,000 10,530 43,970 -- (69,865) (15,365) Common stock subscribed -- -- -- -- -- 500,500 -- 500,500 Stock-based compensation -- -- -- -- 365,508 -- -- 365,508 Net loss for the year -- -- -- -- -- -- (435,426) (435,426) ------ ------ ---------- -------- --------- ------- ---------- --------- Balance - May 31, 2007 carried forward -- -- 10,530,000 10,530 409,478 500,500 (505,291) 415,217 ------ ------ ---------- -------- --------- ------- ---------- --------- Common stock issued on July 11, 2007 for cash at $0.70 per share -- -- 715,000 715 499,785 (500,500) -- -- Common stock issued on July 11, 2007 for finders' fees -- -- 71,500 71 49,979 -- -- 50,050 Common stock issued on July 27, 2007 for cash at $1.20 per share -- -- 1,075,000 1,075 1,288,925 -- -- 1,290,000 One million share purchase warrants issued for finders' fee -- -- -- -- 321,279 -- -- 321,279 Finders' fees -- -- -- -- (498,080) -- -- (498,080) Net loss for the year -- -- -- -- -- -- (256,830) (256,830) ------ ------ ---------- -------- --------- ------- ---------- --------- Balance - May 31, 2008 -- -- 12,391,500 12,391 2,071,366 -- (762,121) 1,321,636 Common stock subscribed -- -- -- -- -- 6,750 -- 6,750 Net loss for the year -- -- -- -- -- -- (341,733) (341,733) ------ ------ ---------- -------- --------- ------- ---------- --------- Balance - May 31, 2009 carried forward -- -- 12,391,500 12,391 2,071,366 6,750 (1,103,854) 986,653 ------ ------ ---------- -------- --------- ------- ---------- --------- (The accompanying notes are an integral part of these consolidated financial statements) 6
Sky Harvest Windpower Corp. (A Development Stage Company) Consolidated Statement of Stockholders' Equity (Deficit) (Expressed in US Dollars, except number of shares) (Unaudited) Deficit Accumulated Additional Common Accumulated During the Preferred Common Paid-in Stock Other Development Stock Amount Shares Amount Capital Subscribed Comprehensive Stage Total # $ # $ $ $ Loss $ $ ---- ------ ---------- -------- --------- ------- ---------- ---------- ---------- Balance - May 31, 2009 carried forward -- -- 12,391,500 12,391 2,071,366 6,750 -- (1,103,854) 986,653 Common stock issued pursuant to business acquisition -- -- 17,340,516 17,341 2,583,736 -- -- -- 2,601,077 Preferred stock issued pursuant to business acquisition 1 -- -- -- -- -- -- -- -- Stock-based compensation -- -- -- -- 589,514 -- -- -- 589,514 Accumulated other comprehensive loss -- -- -- -- -- -- (28,257) -- (28,257) Net loss for year -- -- -- -- -- -- -- (1,549,409) (1,549,409) ---- ------ ---------- -------- --------- ------- ---------- ---------- ---------- Balance - May 31, 2010 1 -- 29,732,016 29,732 5,244,616 6,750 (28,257) (2,653,263) 2,599,578 Stock-based compensation -- -- -- -- 585,180 -- -- -- 585,180 Accumulated other comprehensive loss -- -- -- -- -- -- (54,188) -- (54,213) Net loss for the year -- -- -- -- -- -- -- (3,484,264) (917,550) ---- ------ ---------- -------- --------- ------- ---------- ---------- ---------- Balance - May 31, 2011 1 -- 29,732,016 29,732 5,829,796 6,750 (82,445) (6,137,527) (353,694) Stock-based compensation -- -- -- -- (4,897) -- -- -- (4,897) Accumulated other comprehensive loss -- -- -- -- -- -- 15,263 -- 15,263 Common stock issued on June 21, 2011 for cash at $0.25 per share -- -- 1,970,000 1,970 490,530 -- -- -- 492,500 Stock subscriptions received -- -- -- -- -- 20,000 -- -- 20,000 Disgorgement of swing trading profits -- -- -- -- 118,900 -- -- -- 118,900 Net loss for the period -- -- -- -- -- -- -- (415,514) (415,514) ---- ------ ---------- -------- --------- ------- ---------- ---------- ---------- Balance - February 29, 2012 1 -- 31,702,016 31,702 6,434,329 26,750 (67,182) (6,553,041) (127,442) ==== ====== ========== ======== ========= ======= ========== ========== ========== (The accompanying notes are an integral part of these consolidated financial statements) 7
Sky Harvest Windpower Corp. (A Development Stage Company) Consolidated Statements of Cash Flows (Expressed in US Dollars) (Unaudited) Accumulated from February 25, 2005 For the For the (Date of Nine Months Nine Months Inception) to Ended Ended February 29, February 29, February 28, 2012 2012 2011 ---------- ---------- ---------- $ $ $ OPERATING ACTIVITIES Net loss for the period (6,553,041) (415,514) (237,670) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 23,533 522 3,637 Stock-based compensation 1,540,265 (4,897) (13,504) Impairment loss 2,551,440 -- -- Loss (Gain) on settlement of debt 11,987 (3,999) -- Acquired development costs 242,501 -- -- Changes in operating assets and liabilities: Prepaid expenses 9,034 50,020 17,879 Accrued interest 244 -- 31 Accounts payable and accrued liabilities 138,014 (10,053) 124,945 Account receivable (28,120) 1,093 (21,658) Note receivable (280,000) -- -- Due to related parties 42,736 (31,712) 61,313 ---------- ---------- ---------- NET CASH FLOWS USED IN OPERATING ACTIVITIES (2,301,407) (414,540) (65,027) ---------- ---------- ---------- INVESTING ACTIVITIES Purchase of equipment (23,504) -- -- Purchase of short-term investments (2,472,839) -- -- Redemption of short-term investments 2,493,484 -- 22,840 Cash acquired from acquisition 21,016 -- -- ---------- ---------- ---------- NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES 18,157 -- 22,840 ---------- ---------- ---------- FINANCING ACTIVITIES Proceeds from common stock issuances 2,210,749 492,500 -- Proceeds from common stock subscribed 20,000 20,000 -- Proceeds from (Repayment of) related party loans 62,854 (144,536) 61,741 Proceeds from (Repayment of) note payable 50,000 (10,324) 50,000 Proceeds from swing sale disgorgement 118,900 118,900 -- ---------- ---------- ---------- NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 2,462,503 476,540 111,741 ---------- ---------- ---------- Effect of exchange rate changes on cash (77,695) 16,093 (56,912) Increase in cash and cash equivalents 101,558 78,093 12,642 Cash and cash equivalents - beginning of period -- 23,465 234 ---------- ---------- ---------- CASH AND CASH EQUIVALENTS - END OF PERIOD 101,558 101,558 12,876 ========== ========== ========== SUPPLEMENTARY DISCLOSURES: Interest paid -- -- -- Income taxes paid -- -- -- ---------- ---------- ---------- SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES: Stock issuance for acquisition 2,601,077 -- -- Increase intangible asset due to acquisition 2,551,400 -- -- Accounts payable increased due to acquisition 30,986 -- -- (The accompanying notes are an integral part of these consolidated financial statements) 8
Sky Harvest Windpower Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements February 29, 2012 (Expressed in US Dollars) (Unaudited) 1. Organization and Description of Business Sky Harvest Windpower Corp. (the "Company") was incorporated in the State of Nevada on February 25, 2005. The Company is a Development Stage Company, as defined by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 915, DEVELOPMENT STAGE ENTITIES. Its activities to date have been limited to capital formation, organization, and development of its business plan for the exploration and development of wind power projects in Canada. Effective July 13, 2009, the Company acquired all the outstanding common stock of Sky Harvest Windpower (Saskatchewan) Corp. ("Sky Harvest - Saskatchewan"), a private company incorporated under the laws of Canada. On September 1, 2009, the Company completed a merger with its wholly-owned inactive subsidiary, Sky Harvest Windpower Corp., a Nevada corporation, which was incorporated solely to effect a change in the Company's name. As a result, the Company changed its name from Keewatin Windpower Corp. to Sky Harvest Windpower Corp. These consolidated 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 never generated revenues 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, the successful exploitation of economically recoverable electricity in its wind power projects, and the attainment of profitable operations. As at February 29, 2012, the Company has accumulated losses of $6,553,041 since inception. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. These consolidated 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. Management plans to raise additional funds through debt and equity offerings. Management has yet to decide what type of offering the Company will use or how much capital the Company will attempt to raise and on what terms. There is however no assurance that the Company will be able to raise any additional capital through any type of offering on terms acceptable to the Company. 2. Significant Accounting Polices a. Basis of Accounting The Company's consolidated financial statements are prepared using the accrual method of accounting. These consolidated statements include the accounts of the Company and its wholly-owned subsidiaries Keewatin Windpower Inc. and Sky Harvest - Saskatchewan. All significant intercompany transactions and balances have been eliminated. The Company has elected a May 31 year-end. b. Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. c. Fair Value Measurements ASC 820, FAIR VALUE MEASUREMENTS AND DISCLOSURES, defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. 9
Sky Harvest Windpower Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements February 29, 2012 (Expressed in US Dollars) (Unaudited) 2. Significant Accounting Polices (continued) c. Fair Value Measurements (continued) FAIR VALUE HIERARCHY ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring 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. ASC 820 establishes three levels of inputs that may be used to measure fair value: LEVEL 1 Level 1 applies to assets and liabilities for which there are quoted prices in active markets for identical assets or liabilities. Valuations are based on quoted prices that are readily and regularly available in an active market and do not entail a significant degree of judgment. LEVEL 2 Level 2 applies to assets and liabilities for which there are other than Level 1 observable inputs 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 2 instruments require more management judgment and subjectivity as compared to Level 1 instruments. For instance: * Determining which instruments are most similar to the instrument being priced requires management to identify a sample of similar securities based on the coupon rates, maturity, issuer, credit rating and instrument type, and subjectively select an individual security or multiple securities that are deemed most similar to the security being priced; and * Determining whether a market is considered active requires management judgment. LEVEL 3 Level 3 applies to assets and 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. The determination of fair value for Level 3 instruments requires the most management judgment and subjectivity. The Company believes the fair value of its financial instruments consisting of cash, other receivables, accounts payable, amounts due to related parties and notes payable approximate their carrying values due to the relatively short maturity of these instruments. d. Equipment (i) Amortization Methods and Rates Equipment is carried at cost. Depreciation is computed using a straight-line method over the estimated useful lives of the depreciable property, which range from 3 to 5 years. Management evaluates useful lives regularly in order to determine recoverability taking into consideration current technological conditions. Maintenance and repairs are charged to expenses as incurred; additions and betterments are capitalized. Upon retirement or disposal of any item of equipment, the cost and related accumulated depreciation of the disposed assets is removed, and any resulting gain or loss is credited or charged to operations. Costs included in wind equipment are under construction and will be amortized over their useful life on a straight-line basis once they are put into use. 10
Sky Harvest Windpower Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements February 29, 2012 (Expressed in US Dollars) (Unaudited) 2. Significant Accounting Polices (continued) d. Equipment (continued) (ii) Asset Impairment The Company performs impairment tests on its property and equipment when events or changes in circumstances occur that indicate the carrying value of an asset may not be recoverable. Estimated future cash flows are calculated using estimated future prices and operating and capital costs on an undiscounted basis. When the carrying value of the property and equipment exceeds estimated future cash flows, the asset is impaired. An impairment loss is recorded to the extent the carrying value exceeds the discounted value of the estimated future cash flows. (iii)Repairs and Maintenance Repairs and maintenance costs are charged to expense as incurred, except when these repairs significantly extend the life of an asset or result in an operating improvement. In these instances, the portion of these repairs relating to the betterment is capitalized as part of property and equipment. e. Long Lived Assets INTANGIBLE ASSETS In accordance with ASC 350, INTANGIBLES - GOODWILL AND OTHER, goodwill is required to be tested for impairment on an annual basis, or more frequently if certain indicators arise, using the guidance specifically provided, and purchased intangible assets other than goodwill are required to be amortized over their useful lives unless there lives are determined to be indefinite. Management reviews intangible assets at least annually, and on an interim basis when conditions require, evaluates events or changes in circumstances that may indicate impairment in the carrying amount of such assets. An impairment loss is recognized in the statement of operations in the period that the related asset is deemed to be impaired. In accordance with ASC 360, PROPERTY, PLANT AND EQUIPMENT, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. f. Income Taxes Income taxes are provided in accordance with ASC 740, INCOME TAXES. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 11
Sky Harvest Windpower Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements February 29, 2012 (Expressed in US Dollars) (Unaudited) 2. Significant Accounting Polices (continued) g. Foreign Currency Translation The functional currency of the Company's Canadian subsidiaries is the applicable local currency. The functional currency is translated into U.S. dollars for balance sheet accounts using current exchange rates in effect as of the balance sheet date and for revenue and expense accounts and cash flow items using a weighted-average exchange rate during the reporting period. Adjustments resulting from translation are included in accumulated comprehensive income (loss), a separate component of shareholders' equity (deficit). Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations. h. Basic Earnings (Loss) per Share The Company computes net income (loss) per share in accordance with ASC 260, EARNINGS PER SHARE. ASC 260 specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. Basic net earnings (loss) per share amounts are computed by dividing the net earnings (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company. i. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results could differ from those estimates. Significant estimates made by management are, among others, realizability of long-lived assets, deferred taxes and stock option valuation. Management reviews its estimates on a quarterly basis and, where necessary, makes adjustments prospectively. j. Stock-Based Compensation The Company records stock-based compensation in accordance with ASC 718, COMPENSATION - STOCK BASED COMPENSATION, and ASC 505-50, EQUITY BASED PAYMENTS TO NON-EMPLOYEES, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued. k. Website Development Costs The Company capitalizes website development costs in accordance with ASC 350, INTANGIBLES - GOODWILL AND OTHER, whereby costs related to the preliminary project stage of development are expensed and costs related to the application development stage are capitalized. Any additional costs for upgrades and enhancements which result in additional functionality will be capitalized. Capitalized costs will be amortized based on their estimated useful life over three years. Internal costs related to the development of website content are charged to operations as incurred. 12
Sky Harvest Windpower Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements February 29, 2012 (Expressed in US Dollars) (Unaudited) 2. Significant Accounting Polices (continued) l. Comprehensive Income ASC 220, COMPREHENSIVE INCOME, establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements. As at February 29, 2012 and February 28, 2011, the Company`s only component of comprehensive income (loss) was foreign currency translation adjustments. 3. Recent Accounting Pronouncements The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. 4. Property and equipment ` February 29, 2012 May 31, 2011 Accumulated Net Carrying Net Carrying Cost Depreciation Value Value ---- ------------ ----- ----- $ $ $ $ Computer equipment 6,100 (5,665) 435 781 Asset under construction 68,960 -- 68,960 70,447 Wind tower equipment 22,116 (21,595) 521 717 ------- ------- ------- ------- 97,176 (27,260) 69,916 71,945 ======= ======= ======= ======= 5. Note Payable During the year ended May 31, 2011, the Company received advances from third parties in the amount of $60,324. During the nine months ended February 29, 2012, the Company repaid $10,324. At February 29, 2012, advances of $50,000 remain outstanding. The amount is unsecured, non-interest bearing and due on demand. 6. Preferred Stock On July 11, 2009, the Company entered into a voting and exchange trust agreement among its subsidiary, Keewatin Wind Power Corp., and Valiant Trust Company (Valiant Trust) whereby the Company issued and deposited with Valiant Trust one special preferred voting share of the Company in order to enable Valiant Trust to execute certain voting and exchange rights as trustee from time to time for and on behalf of the registered holders of the preferred shares of Keewatin Wind Power Corp. Each preferred share of Keewatin Wind Power Corp. is exchangeable into one share of common stock of the Company at the election of the shareholder, or, in certain circumstances, of the Company. As of February 29, 2012, the Company had issued 885,000 shares of common stock to holders of 885,000 shares of exchangeable preferred shares of its subsidiary Keewatin Wind Power Corp., pursuant to them exercising their exchange rights. As of February 29, 2012, there were 15,680,016 outstanding exchangeable shares (May 31, 2011 - 15,680,016 shares). As the exchangeable shares have already been recognized in connection with the acquisition of Sky Harvest - Saskatchewan, the value ascribed to these shares on exchange is $Nil. 13
Sky Harvest Windpower Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements February 29, 2012 (Expressed in US Dollars) (Unaudited) 7. Related Party Transactions a) During the nine months ended February 29, 2012, the Company incurred $Nil (February 28, 2011 - $30,903) for management services provided by a former director and a principal shareholder of the Company. b) During the nine months ended February 29, 2012, the Company incurred $45,492 (February 28, 2011 - $47,092) to a company controlled by the President and principal shareholder of the Company for management services. During the nine months ended February 29, 2012, the Company paid a bonus of $73,860 (Cdn$75,000) (2010 - $nil) to the President and principal shareholder of the Company for management services. As at February 28, 2012, the Company is indebted to that company and the Company's President for $40,879 (May 31, 2011 - $178,872), which is non-interest bearing, unsecured and due on demand. c) On June 18, 2010, the Company entered into a loan agreement with a director for $27,000 which is payable within three months a written demand is received from the note holder. The amount is unsecured and bears interest at 15% per annum. As at February 29, 2012, accrued interest of $6,891 was recorded. During the year ended May 31, 2011, the Company received an advance of $71,753 (CDN$71,000) from the same director. During the nine months ended February 29, 2012, the Company repaid $40,424 (CDN$40,000). At February 29, 2012, $31,329 (CDN$31,000) is unsecured, non-interest bearing and has no terms of repayment. d) During the nine months ended February 29, 2012, the Company incurred $75,330 to a company controlled by a director of the Company for legal services. e) On August 31, 2011, the Company received a disgorgement of swing trading profits of $59,450 from the President of the Company. This amount has been credited to additional paid-in capital. f) On January 7, 2012, the Company received a disgorgement of swing trading profits of $59,450 from a director of the Company. This amount has been credited to additional paid-in capital. These related party transactions are recorded at the exchange amount, being the amount established and agreed to by the related parties. 8. Common Stock a) On June 21, 2011, the Company closed a private placement consisting of 1,970,000 shares of common stock at a price of $0.25 per share for gross proceeds of $492,500. b) During the nine months ended February 29, 2012, the Company received stock subscriptions for 80,000 shares of common stock at $0.25 per share for cash proceeds of $20,000. At February 29, 2012, the amount is included in common stock subscribed. 9. Stock Based Compensation On September 11, 2009, the Company's board of directors adopted the 2009 Stock Option Plan which provides for the granting of stock options to acquire up to 2,900,000 common shares of the Company to eligible employees, officers, directors and consultants of the Company. At February 29, 2012, the Company had 1,650,000 shares of common stock available to be issued under the Plan. The fair value for stock options vested during the nine month periods ended February 29, 2012 and February 28, 2011 were estimated at the vesting and granting date using the Black-Scholes option-pricing model. The weighted average assumptions used are as follows: Nine Months Nine Months Ended Ended February 29, February 28, 2012 2011 ------ ------ Expected dividend yield 0% 0% Risk-free interest rate 0.51% 1.87% Expected volatility 573% 371% Expected option life (in years) 3.13 4.00 14
Sky Harvest Windpower Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements February 29, 2012 (Expressed in US Dollars) (Unaudited) 9. Stock Based Compensation (continued) The following table summarizes the continuity of the Company's stock options: Weighted- Average Remaining Average Contractual Aggregate Number of Exercise Term Intrinsic Options Price (years) Value ------- ----- ------- ----- $ $ Outstanding: May 31, 2010 1,250,000 0.51 Granted 2,600,000 0.16 Expired (666,666) 0.51 --------- ---- Outstanding: May 31, 2011 and February 29, 2012 3,183,334 0.23 3.80 -- ---------- ---- ---- ----- Exercisable: February 29, 2012 3,183,334 0.23 3.80 -- ========= ==== ==== ===== A summary of the status of the Company's non-vested stock options as of February 29, 2012, and changes during the nine months ended February 29, 2012, is presented below: Weighted Average Number of Grant Date Non-vested options Options Fair Value ------------------ ------- ---------- $ Non-vested at May 31, 2011 62,500 0.42 Granted -- -- Forfeited/Cancelled -- -- Vested (62,500) 0.42 ------- ---- Non-vested at February 29, 2012 -- -- ======= ==== At February 29, 2012, there was $nil of unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan. 10. Joint Venture On February 3, 2012, the Company and its joint venture partner incorporated a British Columbia corporation under the name Levant Energy Inc. ("Levant"). The Company will initially hold a 65% interest in Levant by investing $500,000. The investment is subject to certain conditions, including completion of further equity or debt funding in order to finance acquisition. The Company's joint venture partner will hold the remaining 35% interest in Levant. At February 29, 2012, the Company and its joint venture partner have not made any contribution to Levant and operations have not yet begun. 11. Commitments and Contingencies a) On February 23, 2009, the Company entered into a consulting agreement with a consultant (the "Consultant"). Pursuant to the agreement, the Consultant provided investor relations services for the Company from February 24, 2009 to July 5, 2009. In consideration for the investor relations services, the Company agreed to pay the Consultant $5,000 per month and to issue 15,000 shares of the Company's common stock. At February 29, 2012, the fair value of the 15,000 shares issuable was $6,750 and is included in common stock subscribed. 15
Sky Harvest Windpower Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements February 29, 2012 (Expressed in US Dollars) (Unaudited) 11. Commitments and Contingencies (continued) b) On February 3, 2012, the Company and its joint venture partner incorporated a British Columbia corporation called Levant Energy Inc., for the purposes of developing underground natural gas storage plants in the Republic of Turkey. The Company intends to invest $500,000 to hold a 65% interest in Levant. The investment is subject to certain conditions, including the Company's completion of further equity or debt funding in order to finance the acquisition. c) On February 3, 2012, the Company entered into a consulting agreement with a consultant. Pursuant to the agreement, the consultant will introduce the Company potential acquisition and investment opportunities in the energy sector, as well as any related sectors. If the Company completes an acquisition of any interest in any company or assets as a result of the consultant's introduction to investment opportunity, the Company shall pay the consultant a success fee equal to 10% of the value of the transaction in shares of the Company's common stock. The Company may also pay such success fees in cash, or a combination of shares and cash. If the Company completes transactions as a result of the consultant's introductions with an aggregate value of at least $3,000,000, including any concurrent financings, the consultant shall have the option to cause the Company to enter into an employment agreement with him, join the Company's Board of Directors, and be appointed as the Company's President and Chief Executive Officer. The term of the agreement is three years. 12. Subsequent Events In accordance with ASC 855, SUBSEQUENT EVENTS, the Company has evaluated subsequent events through the date of issuance of the audited consolidated financial statements. Subsequent to the fiscal period ended February 29, 2012, the Company did not have any material recognizable subsequent events. 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis should be read together with our Consolidated Financial Statements and the Notes to those statements included elsewhere in this quarterly report on Form 10-Q and the Consolidated Financial Statements and the Notes to those statements included in our Form 10-K for the year ended May 31, 2011. Certain statements contained herein constitute "forward-looking statements" as defined in the U.S. Private Securities Litigation Reform Act of 1995. In some cases forward-looking statements can be identified by terminology, such as "believes," "anticipates," "expects," "estimates," "plans," "may," "intends," or similar terms. These statements appear in a number of places in this Form 10-Q and include statements regarding the intent, belief or current expectations of our company, its directors or its officers with respect to, among other things: (i) trends affecting our financial condition or results of operations, (ii) our business and growth strategies and (iii) our financing plans. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our company's or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur. Our consolidated financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles. In this quarterly report, unless otherwise specified, all references to "common shares" refer to the common shares in our capital stock and the terms "we", "us" and "our", "the Company" and "Sky Harvest" mean Sky Harvest Windpower Corp., a Nevada Corporation and its subsidiaries. CORPORATE OVERVIEW We were incorporated in the State of Nevada on February 25, 2005. We are a development stage company in the business of electrical power generation through the use of wind energy. We have not generated any revenue from operations since our incorporation. We do not anticipate earning any revenue until the completion of an environmental assessment on our properties, securing a power purchase agreement and erecting and commissioning wind turbines on our properties, of which there is no guarantee. RECENT CORPORATE DEVELOPMENTS On February 6, 2012, we announced that we had formed a British Columbia joint venture corporation, named Levant Energy Inc., for the purpose of developing underground natural gas storage plants in the Republic of Turkey. Pursuant to an agreement with Mr. Bertan Atalay, we can earn a 65% initial interest in the corporation by investing $500,000 to fund operations. Mr. Atalay will act as President and CEO of Levant Energy Inc. On February 6, 2012, we entered into an agreement with Mr. Atalay whereby he will act as our consultant for the purpose of introducing us to additional acquisition opportunities in renewable energy and related sectors, including wind power development opportunities in North America, Turkey, and other regions 17
of Europe. We will compensate Mr. Atalay based on the successful completion of such transactions with a success fee equal to 10% of the transaction's value. On March 19, 2012, we announced that we had formed an advisory board that will be responsible for providing guidance to our Board of Directors as it proceeds with the development of its anticipated gas storage project in Turkey. Initially, the advisory board consists of the following members: Noah Cohen, Bertan Atalay, Martin Bernholtz, and William Lister. On March 19, 2012, we granted incentive stock options on an aggregate of 990,000 shares of our common stock to members of our advisory board, as well as an eligible consultant. These stock options are exercisable at a price of $0.10 per share for a period of five years. RESULTS OF OPERATIONS The following summary of our results of operations should be read in conjunction with our unaudited interim consolidated financial statements for the fiscal quarter ended February 28, 2011, which are included herein. Three months ended February 28/29, 2012 2011 Increase/(Decrease) -------- -------- ------------------- $ $ $ % Revenue 0 0 0 N/A Expenses 105,698 74,712 30,986 41.5% Foreign exchange (gain) loss (30,980) (37,031) 6,051 N/A Interest income 0 0 0 N/A -------- -------- -------- ---- Net Loss 74,718 37,681 37,037 98.3% ======== ======== ======== ==== Nine months ended February 28/29, 2012 2011 Increase/(Decrease) -------- -------- ------------------- $ $ $ % Revenue 0 0 0 N/A Expenses 401,771 284,768 117,003 41.1% Foreign exchange (gain) loss 17,742 (47,074) 64,816 N/A Settlement of Debt (3,999) 0 (3,999) N/A Interest income 0 (24) 24 N/A -------- -------- -------- ---- Net Loss 415,514 237,670 177,844 74.8% ======== ======== ======== ==== REVENUES We recorded a net operating loss of $105,698 for the fiscal quarter ended February 29, 2012 and have an accumulated deficit of $6,620,233 since inception. We have had no operating revenues since our inception on February 25, 2005 through to the fiscal quarter ended February 29, 2012. We anticipate that we will not generate any revenues while we are a development stage company. EXPENSES Our expenses for the three and nine months ended February 29, 2012 and February 28, 2011 are outlined below: 18
Three months ended February 28/29, 2012 2011 Increase/(Decrease) -------- -------- ------------------- $ $ $ % Consulting fees 0 3,234 (3,234) (100.0%) Engineering and development (2,008) 21,598 (23,606) N/A Management fees 14,835 15,924 (1,089) (6.8%) Professional fees 82,885 10,639 72,246 87.2% General and administrative 9,986 23,317 (13,331) (57.2%) -------- -------- -------- ------ Net Operating Loss 105,698 74,712 30,986 41.5% ======== ======== ======== ====== Nine months ended February 28/29, 2012 2011 Increase/(Decrease) -------- -------- ------------------- $ $ $ % Consulting fees 15,187 49,311 (34,124) (69.2%) Engineering and development 121,960 61,612 60,348 97.9% Management fees 119,352 77,994 41,358 53.0% Professional fees 118,619 42,048 76,571 182.1% General and administrative 26,653 53,803 (27,150) (50.4%) -------- -------- -------- ------ Net Operating Loss 401,771 284,768 117,003 41.1% ======== ======== ======== ====== Consulting expenses decreased by $3,234 in the three month period ended February 29, 2012 compared to the three month period ended February 28, 2011, and by $34,124 in the nine month period ended February 29, 2012 compared to the nine month period ended February 28, 2011. These decreases primarily related to a reduction in fees paid for investor relations services. Engineering and development expenses decreased by $23,606 in the three month period ended February 29, 2012 compared to the three month period ended February 28, 2011, and by $60,348 in the nine month period ended February 29, 2012 compared to the nine month period ended February 28, 2011. This decrease is a result of reduced development work on our wind power projects. Management fees decreased by $1,089 in the three month period ended February 29, 2012 compared to the three month period ended February 28, 2011, and increased by $41,358 in the nine month period ended February 29, 2012 compared to the nine month period ended February 28, 2011. This increase relates to fees paid to William Iny, our president and sole director, for management services. Until this quarter, Mr. Iny had not received any payments for his services since he became our president in September 2010. Professional fees, consisting primarily of legal, audit, and accounting costs, increased by $72,246 in the three month period ended February 29, 2012 compared to the three month period ended February 28, 2011, and by $76,571 in the nine month period ended February 29, 2012 compared to the nine month period ended February 28, 2011. These increases relate to legal fees that we paid to our director, Greg Yanke, during the quarter. General and administrative expenses decreased by $13,331in the three month period ended February 29, 2012 compared to the three month period ended February 28, 2011, and by $27,150 in the nine month period ended February 29, 2012 compared to the nine month period ended February 28, 2011. The decrease relates primarily to cost reduction initiatives that management has implemented during the current fiscal year. 19
FOREIGN EXCHANGE (GAIN) LOSS Foreign currency transactions are primarily undertaken in Canadian dollars. Foreign exchange gains and losses arise from the translation of transactions in Canadian dollars into US dollars. Foreign currency exchange rates fluctuate, and gains and losses resulting from these fluctuations recognized as they occur. Company has not, to the date of this report, utilized derivative instruments to offset the impact of foreign currency fluctuations. INTEREST INCOME We did not generate interest in the three month period ended February 29, 2012. The Company has redeemed funds previously held in term deposits in order to fund development of its wind power projects and continued corporate operations. LIQUIDITY AND CAPITAL RESOURCES Our financial condition as at February 29, 2012, and May 31, 2011, our fiscal year end, and the changes for on those dates are summarized as follows: WORKING CAPITAL February 29, May 31, 2012 2011 Increase/Decrease -------- -------- -------------------- $ $ $ % Current Assets 114,421 87,440 26,981 30.9% Current Liabilities 311,779 513,079 (201,300) (39.2%) -------- -------- -------- ----- Working Capital (197,358) (425,639) 228,281 N/A ======== ======== ======== ===== The increase in our working capital position of $228,281 from May 31, 2011, the date of our most recently fiscal year end, to February 29, 2012 was primarily due to our completion of a private placement in June 2011 consisting of the sale of 1,970,000 shares of our common stock at $0.25 each for aggregate proceeds of $492,000 and the payment of current liabilities with those funds. CASH FLOWS Nine months ended February 28/29, 2012 2011 Increase/(Decrease) -------- -------- ------------------- $ $ $ % Cash Flows from (used in) Operating Activities (414,540) (65,027) N/A Cash Flows provided by (used in) Investing Activities 0 22,840 (22,840) (100.0%) Cash Flows provided by Financing Activities 476,540 111,741 364,799 326.5% Effect of exchange rate changes on cash 16,093 (56,912) 73,005 N/A -------- -------- -------- ------ Net increase (decrease) in cash during period 78,093 12,642 65,451 517.7% ======== ======== ======== ====== During the nine months ended February 29, 2012, we used net cash in operating activities in the amount of $414,540. This cash outflow primarily consisted of payments for professional fees, management fees, and general and administrative expenses. 20
The $22,840 in cash flows provided by investing activities during the nine months ended February 28, 2011 represents funds we received by redeeming short-term investments in the form of term deposits. We did not receive any cash flows from investing activities during the current fiscal year. The $476,540 in cash flows provided by financing activities during the nine months ended February 29, 2012 represents private placement proceeds and proceeds we received from the disgorgement of short swing trade profits. DISCLOSURE OF OUTSTANDING SHARE DATA WARRANTS None SHARE OPTIONS Subsequent to the quarter, on March 19, 2012, we granted stock options to key advisors and consultants to acquire up to 990,000 shares of common stock exercisable at $0.10 per share on or before March 19, 2017. A summary of our stock option activity as at February 29, 2012 is as follows: Weighted Average Number of Exercise Options Price ------- ----- $ Balance as at May 31, 2010 1,250,000 0.51 Granted 2,600,000 0.16 Cancelled -- -- Expired (666,666) 0.51 Exercised -- -- ---------- ---- Balance, as at February 29, 2012 3,183,334 0.23 ---------- ---- LIQUIDITY POSITION We recorded a net loss of $415,514 for the nine month period ended February 29, 2012 and have an accumulated deficit of $6,620,233 since inception. As of February 29, 2012 we had cash and cash equivalents totaling $101,558 (May 31, 2011: $23,465). As of the date of this report, management anticipates that we will require at least $750,000 to fund our corporate operations and proposed development of gas storage operations in Turkey during the next 12 months. As well, we will require approximately an additional $350,000 to cover our current outstanding liabilities. Accordingly, we do not have sufficient funds to meet our planned expenditures over the next 12 months. In addition, we will require further financing in order to fund our anticipated expenses for the construction of our proposed wind turbine project. We have begun sourcing additional debt or equity financing to cover the balance of the anticipated costs for the next 12 months. However, there is no assurance that we will successfully complete this financing. We have not had any specific communications with any representative of a debt financing institution regarding our proposed wind power project. We will only be able to secure debt financing for wind turbines if we are able to prove that an 21
economic wind resource exists on a site over which we have acquired the rights to erect turbines and that we have negotiated a power purchase agreement with a credit-worthy counter-party. We anticipate continuing to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing shareholders. We may also seek to raise additional cash by the issuance of debt instruments. As of the date of this report, there is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our exploration and development activities during the next 12 month period. OFF BALANCE SHEET ARRANGEMENTS We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders. RISKS RELATED TO OUR BUSINESS IF WE DO NOT OBTAIN ADDITIONAL FINANCING OUR BUSINESS WILL FAIL. Over the next 12 months, we expect to spend approximately $250,000 on administrative costs, including management fees payable to our President, professional fees and general business expenses, including costs related to complying with our filing obligations as a reporting company. As our operations become more complex, it is anticipated that these costs will increase. We also expect incur a further $50,000 in pre-development costs related to our wind power projects. As of the date of this report, we do not have sufficient cash on hand to fund these expenditures. We will need to raise additional debt or equity financing in order to cover remaining business costs. BECAUSE WE HAVE NOT COMMENCED BUSINESS OPERATIONS, WE FACE A HIGH RISK OF BUSINESS FAILURE. We have not yet commenced business operations as an independent power producer; accordingly, we have no way to evaluate the likelihood that our business will be successful. We were incorporated on February 25, 2005 and to date have been involved in conducting land assessments, acquiring leasehold interests in properties having the potential for wind power development, raising financing and completing wind, environmental and community assessments. Potential investors should be aware of the difficulties normally encountered by development stage companies and the high rate of failure of such enterprises. Prior to earning revenue, of which there is no assurance, we will likely incur significant costs and expect to incur significant losses in the foreseeable future. If we are unable to acquire a property interest and erect a wind farm on our property, we will not earn profits nor be able to continue operations. BECAUSE OUR CONTINUATION AS A GOING CONCERN IS IN DOUBT, WE WILL BE FORCED TO CEASE BUSINESS OPERATIONS UNLESS WE CAN GENERATE PROFITABLE OPERATIONS IN THE FUTURE. We have incurred losses since our inception. Further losses are anticipated in the development of our business. As a result, there is substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent in the short to medium term on our ability to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due, and in the longer term, on 22
upon our ability to generate profitable operations in the future. If we cannot raise financing to meet our obligations, we will be insolvent and will cease business operations. IF WE ARE NOT ABLE TO OBTAIN AN INTEREST IN A SUITABLE PROPERTY WITH A POTENTIAL WIND RESOURCE, OUR BUSINESS WILL FAIL. Third parties own the lands on which we will seek to construct wind projects. We have entered into land lease agreements covering approximately 15,520 acres that relate to our primary project, which is located in southwestern Saskatchewan, which we refer to as the Sky Harvest Project. These agreements allow us to erect wind turbines and install ancillary equipment, subject, in certain circumstances, to the payment of lease payments prior to construction of the project. Even though we own leasehold interests in these properties, we may not be able to obtain the financing necessary to complete lease obligations. If we are unable to maintain our property interests, our business will fail. We will need to enter into land leases or other appropriate agreements in order to erect wind turbines and install ancillary equipment on the Keewatin Project and Matador Project sites, which are also located in southwestern Saskatchewan. We have entered into agreements to operate meteorological towers on the properties comprising the Keewatin and Matador Projects in southwestern Saskatchewan. However, we do not yet have an arrangement whereby we may erect turbines on the properties. FUTURE CHANGES IN WEATHER PATTERNS COULD NEGATIVELY IMPACT OUR BUSINESS, REDUCING POTENTIAL PROFITABILITY OR CAUSING OUR BUSINESS TO FAIL. Changes in weather patterns may affect our ability to operate a wind power project on any property we acquire. Wind data that we collect from a meteorological tower may vary from results actually achieved when a wind turbine is installed. Changing global environmental and weather conditions may also affect the reliability of the data relating to a property. Any wind farm that we develop, no matter where it is located, would be subject to variations in wind and changes in worldwide climatic conditions. Sudden or unexpected changes in environmental and meteorological conditions could reduce the productivity of any wind farm we construct. Climatic weather patterns, whether seasonal or for an extended period of time, resulting in lower, inadequate and/or inconsistent wind speed to propel the wind turbines may render our wind parks incapable of generating adequate, or any, electrical energy. OUR ABILITY TO ERECT TURBINES ON A PROPERTY IN SASKATCHEWAN WILL BE CONTINGENT UPON IT OBTAINING ENVIRONMENTAL AND MUNICIPAL PERMITS. IF IT CANNOT ACQUIRE THESE PERMITS, OUR BUSINESS WILL FAIL. In order to erect turbines on the Saskatchewan property, we must excavate portions of the land and install concrete platforms below surface. Before we commence this, we will need to obtain environmental and municipal permits from the Saskatchewan provincial government and the town responsible for the property interest it acquires. Depending on environmental impact, our proposed land disturbance may be unacceptable to these government bodies. In addition, the turbines themselves may be seen to have a negative impact on the aesthetics of the region. These factors may prevent us from obtaining necessary permits. In such circumstances, we would be forced to abandon our business plan. IF WE CANNOT REACH AN AGREEMENT WITH A JOINT VENTURE DEVELOPER AND OPERATOR OUR BUSINESS WILL FAIL. As presently constituted, we do not have the skills and expertise necessary to build and operate a wind farm. Our management has never been involved in the construction or operation of a wind power project and does not have any technical background in the sector. 23
IF WE CANNOT FIND A JOINT VENTURE PARTNER FOR OUR PROJECTS OR A PARTY WHICH WILL PURCHASE OUR ELECTRICITY ON ACCEPTABLE TERMS, WE WILL NOT BE ABLE TO ESTABLISH A WIND POWER PROJECT AND OUR BUSINESS WILL FAIL. Even if we demonstrate a significant wind resource on a property that we acquire, we may not be able to secure a joint venture partner to further develop a project or a purchaser for any electricity that we produce on acceptable terms. Without a purchaser for electricity from a property, we will not be able to proceed with our business plan. BECAUSE ALL OF OUR ASSETS, AND OUR DIRECTORS AND OFFICERS ARE LOCATED IN CANADA, U.S. RESIDENTS' ENFORCEMENT OF LEGAL PROCESS MAY BE DIFFICULT. All of our assets are located in Canada. In addition, our sole director and officer resides in Canada. Accordingly, service of process upon our company, or upon individuals related to Sky Harvest, may be difficult or impossible to obtain within the United States. As well, any judgment obtained in the United States against us may not be collectible within the United States. RISKS RELATED TO OUR COMMON STOCK A DECLINE IN THE PRICE OF OUR COMMON STOCK COULD AFFECT OUR ABILITY TO RAISE FURTHER WORKING CAPITAL, IT MAY ADVERSELY IMPACT OUR ABILITY TO CONTINUE OPERATIONS AND WE MAY GO OUT OF BUSINESS. A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because we may attempt to acquire a significant portion of the funds we need in order to conduct our planned operations through the sale of equity securities, a decline in the price of our common stock could be detrimental to our liquidity and our operations because the decline may cause investors not to choose to invest in our stock. If we are unable to raise the funds we require for all of our planned operations, we may force us to reallocate funds from other planned uses which may have a significant negative effect on our business plan and operations, including our ability to develop new products and continue our current operations. As a result, our business may suffer and not be successful and we may go out of business. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale of our common stock and we may be forced to go out of business. IF WE ISSUE ADDITIONAL SHARES IN THE FUTURE, IT WILL RESULT IN THE DILUTION OF OUR EXISTING SHAREHOLDERS. Our certificate of incorporation authorizes the issuance of up to 100,000,000 shares of common stock with a par value of $0.001. Our board of directors may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future. The issuance of any such shares will result in a reduction of the book value and market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will cause a reduction in the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our corporation. TRADING ON THE OTC BULLETIN BOARD MAY BE VOLATILE AND SPORADIC, WHICH COULD DEPRESS THE MARKET PRICE OF OUR COMMON STOCK AND MAKE IT DIFFICULT FOR OUR STOCKHOLDERS TO RESELL THEIR SHARES. Our common stock is quoted on the OTC Bulletin Board service of the Financial Industry Regulatory Authority ("FINRA"). Trading in stock quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading prices due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a 24
quotation system like NASDAQ or a stock exchange like the American Stock Exchange. Accordingly, our shareholders may have difficulty reselling any of their shares. OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S PENNY STOCK REGULATIONS AND FINRA'S SALES PRACTICE REQUIREMENTS, WHICH MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK. Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock. FINRA SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK. In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission (see above for a discussion of penny stock rules), FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable ITEM 4. CONTROLS AND PROCEDURES. As required by Rule 13a-15 under the Exchange Act, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures at February 29, 2012, which is the end of the period covered by this report. This evaluation was carried out by our principal executive officer and 25
principal financial officer. Based on this evaluation, our principal executive officer and principal financial officer has concluded that our disclosure controls and procedures were effective as at the end of the period covered by this report. In Rule 13a-15, "DISCLOSURE CONTROLS AND PROCEDURES" means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. During the three months ended February 29, 2012, our internal control over financial reporting was not subject to any changes. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. The Company is not a party to any material legal proceedings that have been commenced or are pending. ITEM 1A. RISK FACTORS. Not applicable ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. None ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None ITEM 4. REMOVED AND RESERVED. ITEM 5. OTHER INFORMATION. None 26
ITEM 6. EXHIBITS. Filed Exhibit with this Description No. Form Filing date Form 10-Q ----------- --- ---- ----------- --------- ARTICLES OF INCORPORATION AND BYLAWS Articles of Incorporation 3.1 SB-2 July 14, 2005 Bylaws 3.2 SB-2 July 14, 2005 Certificate of designation 3.3 8-K July 13, 2009 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS Form of Warrant Certificate for July 13, 2007 Private 4.1 10-QSB January 14, 2008 Placement MATERIAL CONTRACTS--FINANCING AGREEMENTS Form of Subscription Agreement for July 13, 2007 10.2 10-QSB January 14, 2008 Private Placement for US Subscribers Form of Subscription Agreement for July 13, 2007 10.3 10-QSB January 14, 2008 Private Placement for Non-US Subscribers MATERIAL CONTRACTS--OTHER Consent to Entry/Right of Access Agreement between 10.4 SB-2 September 29, 2005 Keewatin Windpower Corp. and Edward and Charlotte Bothner, dated August 23, 2005 Letter of Intent between Keewatin Windpower Corp. and 10.5 10-QSB January 14, 2008 Sky Harvest Windpower Corp. dated March 27, 2007 Loan Agreement between Sky Harvest Windpower Corp. 10.6 10-QSB January 14, 2009 and Keewatin Windpower Corp. dated September 23, 2008 Promissory Note of Sky Harvest Windpower Corp. dated 10.7 10-QSB January 14, 2009 September 23, 2008 Financial Communications and Strategic Consulting 10.8 8-K March 3, 2009 Agreement with Aspire Clean Tech Communications, Inc. dated February 23, 2009 Promissory Note of Sky Harvest Windpower Corp. dated 10.9 10-Q August 31, 2009 September 23, 2008 Loan Agreement between Sky Harvest Windpower Corp. 10.10 10-Q August 31, 2009 and Keewatin Windpower Corp. dated January 28, 2009 Share exchange agreement between Keewatin Windpower 10.11 8-K July 10, 2009 Corp. and Sky Harvest Windpower Corp. dated May 11, 2009 Exchangeable share support agreement between Keewatin 10.12 8-K July 10, 2009 Windpower Corp. and Keewatin Windpower Inc. dated May 11, 2009 Voting and exchange trust agreement between Keewatin 10.13 8-K July 10, 2009 Windpower Corp., Keewatin Windpower Inc. and Valiant Trust Company dated May 11, 2009 27
Articles of Merger filed between Keewatin Windpower 10.14 8-K September 17, 2009 Corp. and Sky Harvest Windpower Corp. filed September 1, 2009 Adoption of 2009 Stock Option Plan dated September 10.15 8-K September 23, 2009 11, 2009 CODE OF ETHICS Code of Ethics 14.1 10-K August 31, 2009 Certification Statement of the Chief Executive 31.1 * Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 Certification Statement of the Chief Executive 32.1 * Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002 Interactive Data Files pursuant to Rule 405 of 101 * Regulation S-T. 28
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SKYHARVEST WINDPOWER CORP. /s/ William Iny ------------------------------------------- William Iny Chief Executive Officer and Chief Financial Officer Principal Executive Officer, Principal Accounting Officer and Principal Financial Officer Date: April 16, 2012 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: /s/ William Iny ------------------------------------------- William Iny Chief Executive Officer, Chief Financial Officer, President, Treasurer, Secretary, and Director ,Principal Executive Officer, Principal Accounting Officer and Principal Financial Officer Date: April 16, 2012 29