Attached files
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: May 31, 2013
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 ENERGY 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.)
1200 West 73rd Street, 11th Floor, Vancouver, BC, Canada V6P 6G5
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (604) 267-3041
Securities registered pursuant to Section 12(b) of the Act
Title of Each Class Name of each Exchange on which registered
------------------- -----------------------------------------
Nil N/A
Securities registered pursuant to Section 12(g) of the Act
Common Stock, par value $0.001 per share
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
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 Act). Yes [ ] No [X]
The aggregate market value of common stock held by non-affiliates of the
registrant, based upon the last closing price of $0.02 for the registrant's
common stock on November 30, 2012, the last business day of the registrant's
most recently completed second fiscal quarter, as reported for such date by OTC
Markets was approximately $209,956. Common stock held by each executive officer
and director of the registrant and by each person who owns 5% or more of the
outstanding common stock have been excluded from this computation because such
persons may be deemed affiliates of the registrant. This determination of
affiliate status for this purpose does not reflect a determination that any
persons are affiliates for any other purposes.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 33,203,016 shares of common
stock are issued and outstanding as of October 7, 2013 (including 15,680,016
shares of common stock reserved for issuance in exchange for certain outstanding
exchangeable securities of the registrant).
DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable
SKY HARVEST ENERGY CORP.
FORM 10-K FOR THE YEAR ENDED MAY 31, 2013
TABLE OF CONTENTS
PART I
ITEM 1 BUSINESS 4
ITEM 1A RISK FACTORS 11
ITEM 1B UNRESOLVED STAFF COMMENTS 11
ITEM 2 PROPERTIES 12
ITEM 3 LEGAL PROCEEDINGS 12
ITEM 4 MINE SAFETY DISCLOSURES 12
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 13
ITEM 6 SELECTED FINANCIAL DATA 14
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 14
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 17
ITEM 8 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 18
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 37
ITEM 9A CONTROLS AND PROCEDURES 37
ITEM 9B OTHER INFORMATION 38
PART III
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 39
ITEM 11 EXECUTIVE COMPENSATION 42
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS 44
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE 46
ITEM 14 PRINCIPAL ACCOUNTING FEES AND SERVICES 46
PART IV
ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES 48
SIGNATURES 51
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FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. Forward-looking statements are
projections in respect of future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as
"may", "should", "intends", "expects", "plans", "anticipates", "believes",
"estimates", "predicts", "potential", or "continue" or the negative of these
terms or other comparable terminology. These statements are only predictions and
involve known and unknown risks, uncertainties and other factors, including the
risks in Item 1A "Risk Factors" commencing on page 11 of this report, which may
cause our or our industry's actual results, levels of activity or performance to
be materially different from any future results, levels of activity or
performance 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 or performance. Except as required by applicable law, including the
securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.
In this report, unless otherwise specified, all dollar amounts are expressed in
United States dollars and all references to "common shares" refer to the common
shares in our capital stock.
As used in this annual report, the terms "we", "us", "our", the "Company" and
"Sky Harvest" mean Sky Harvest Energy Corp.
FOREIGN CURRENCY AND EXCHANGE RATES
All amounts in this annual report are stated in United States Dollars unless
otherwise indicated.
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PART I
ITEM 1. BUSINESS
CORPORATE OVERVIEW
We are a development stage company in the business of electrical power
generation through the use of wind energy. We currently own leasehold interests
in certain lands located in southwest Saskatchewan, Canada that comprise over
15,000 acres. Our agreements with land owners provide that we are permitted to
erect wind power facilities on these properties for the purpose of generating
and selling electricity. We also hold the right to explore certain additional
lands in southwest Saskatchewan for the purpose of determining whether they
possess wind resources that justify the erection of electrical power generation
facilities on them.
We have not generated any revenue from operations since our incorporation. We do
not anticipate earning any revenue until we have secured a power purchase
agreement to sell electricity that we generate, erected wind turbines on our
properties, connected our wind turbines to the electrical supply grid, and
commenced the production of electricity. There is no assurance that we will be
able to accomplish any or all of these objectives.
We were incorporated as Keewatin Windpower Corp. in the State of Nevada on
February 25, 2005. We changed our name to Sky Harvest Windpower Corp. on
September 1, 2009, and subsequently to Sky Harvest Energy Corp. on September 7,
2012. Our resident agent is Empire Stock Transfer Inc., 1859 Whitney Mesa Drive,
Henderson, NV, 89014. We are a United States and British Columbia reporting
public company, and our shares are quoted on the OTCQB under the symbol "SKYH".
Our head office is located in Vancouver, Canada.
OUR BUSINESS
The business of Sky Harvest Energy Corp. consists of two segments. The first
involves identifying potential wind power project sites in Canada in the range
of 100 to 200 megawatt capacity, collecting wind data on the sites, evaluating
the wind resource, and conducting initial environmental screening studies and
community relations activities. The second segment involves the design,
manufacture, and sale of vertical axis wind turbines. Subsequent to the fiscal
year ended May 31, 2013, we acquired the intellectual property rights relating
to a specific vertical axis wind turbine design, and leasehold interests in both
manufacturing facilities and equipment from a private Canadian company.
TECHNICAL BACKGROUND
Electricity is generated by wind power using a turbine. Wind passing over the
blades of the turbine causes them to rotate, driving a generator which produces
electrical current. A turbine is capable of generating a specified number of
megawatts, referred to as its "nameplate capacity". The total capacity of the
project is calculated as the sum of the nameplate capacities of the turbines
installed on the site. The number of turbines that can economically occupy a
specified area of land depends upon a number of factors including the
predominant wind direction, the topography of the property, the dimensions of
the property, the size of the turbines and their relative positions on the
property.
The most important criteria for the assessment of a wind power project are the
speed of the wind on a property, measured in meters per second, and the number
of hours that the wind moves at various speeds. This calculation is referred to
as the "capacity" of the wind resource.
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In order for a wind power project to be profitable, the area in which it is
located should have a wind resource that yields a net capacity factor of over
30%. The capacity factor (sometimes referred to as the load factor) of a wind
project is the energy produced during a given period divided by the energy that
would have been produced had the project been running continually and at maximum
output, i.e.:
Capacity Factor(CF)= electricity produced during the period (MW x h)
-----------------------------------------------------------
installed capacity (MW) x number of hours in the period (h)
As wind energy output is a cube function of wind speed, the fewer hours at
higher wind speeds are significantly more valuable than more hours at lower wind
speeds.
A significant factor in assessing the viability of a power project is the
proximity of the project to established electrical transmission lines. The
project developer must pay to connect any wind turbines to this transmission
line. These connection costs are typically justified if the property is within
15 miles of the transmission line.
COMPETITIVE BUSINESS CONDITIONS
The alternative energy business is currently experiencing a strong growth phase
in North America. Several developers with existing generating facilities and new
developers with land holdings are engaged in the wind power business in the
province of Saskatchewan. We will be competing with other independent power
producers for transmission and supply contracts. In addition, traditional fossil
fuel producers in the region may be able to generate and supply electricity to
customers at prices below historical levels, depending on market conditions for
oil, coal, and natural gas.
PRINCIPAL SUPPLIERS
Wind, the "fuel" that drives a wind power generating plant is, by definition,
free and inexhaustible. The major cost categories for a wind power project are
the turbines, balance of station costs, which include all necessary
infrastructures, and the cost of connection to the transmission grid. Once in
operation, there are ongoing costs for monitoring, maintenance, repairs and
replacement.
The wind power business is global with the majority of turbines being
manufactured in Europe and the United States. Existing wind power projects in
Canada have generally selected turbines supplied by Vestas Wind Systems Inc. or
General Electric Energy. Both of these companies have corporate offices in
Canada.
DISTRIBUTION METHODS OF THE PRODUCTS OR SERVICES
Any electricity that a project produces will be sold to a public utility located
in the province of Saskatchewan, or in the neighboring Canadian provinces of
Alberta or Manitoba, or in the state of North Dakota. If a public utility other
the Saskatchewan Power Corporation (SaskPower) purchases the electricity, the
Company will be required to make application to SaskPower under the Open Access
Transmission Tariff agreement (OATT) for permission to use its electricity
distribution grid. We have not made application to SaskPower under the OATT. If
we make such an application, there is no assurance that SaskPower will grant us
access to the distribution grid, or that we would achieve access on acceptable
terms.
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POWER PURCHASE AGREEMENT AND DEPENDENCE ON MAJOR CUSTOMERS
We intend to enter into an agreement, known as a power purchase agreement (PPA)
to sell the electricity generated from our proposed wind power projects. PPAs
typically include clauses regarding the price to be paid for the electricity in
cents per kilowatt-hour, the term of the agreement (usually 10 to 20 years),
terms of interconnection costs, and termination provisions. Due to our limited
operations, it is unlikely that we will pursue a PPA independently. Instead, for
each project, we will likely seek one or more potential joint venture partners
that have wind power development experience and significant financial resources.
To date, we have not entered into any joint venture agreements with any third
parties relating to our projects.
If we are able to execute a PPA with a third party, then we intend to undertake
the construction of a wind power project on the properties in which we have a
leasehold interest. Banks and other lenders will typically finance up to 75% of
wind power construction costs subject to review of the wind assessment data and
the PPA. The lender will ensure the project has sound fiscal parameters
necessary to be profitable, namely the price to be received per megawatt hour
and the number of megawatts of rated capacity. We have not had any specific
communications with any representative of a debt financing institution regarding
any proposed wind power project.
Typical PPAs that power utilities in Canada execute provide for the supply of a
specified number of megawatt-hours for a period of between ten and twenty years
at a pre-determined fixed price. We expect that a future PPA will encompass all
of the electricity that a particular project generates. For this reason, once we
have entered into a PPA, we expect to be dependent upon that customer to a
significant extent.
We intend to enter into a PPA with a public utility in the province of
Saskatchewan. As the public utilities in Saskatchewan are government entities,
counterparty risk is expected to be significantly lower than it would be if the
customer were a for-profit entity.
If we are unable to enter into a PPA with a Saskatchewan provincial utility, we
will consider executing a PPA with a similar utility in Manitoba, Canada, or
with a for-profit utility in Alberta, Canada, or in the United States. If we
enter into a PPA with a for-profit entity, counterparty risk will be increased.
As of the date of this report, we have not commenced substantive negotiations
with any prospective purchaser, and there is no assurance that we will be able
to successfully conclude a PPA on acceptable terms.
CURRENT PROJECTS
We initially decided to focus on the acquisition and development of potential
wind power projects in the Canadian province of Saskatchewan for several
reasons, including the high quality wind resource, the paucity of existing wind
power installations, aging fossil fuel generating infrastructure, growing public
and political support for green energy in the province, and the participation of
that province in the OATT. The OATT is an agreement which allows independent
power producers to transmit electricity via the province's electrical grid to
public utilities in Saskatchewan and to neighboring jurisdictions in Canada and
the United States.
KEEWATIN PROJECT
In June 2005, we identified a potential wind resource location, and in August
2005, we entered into an agreement with a land owner allowing the Company to
erect a meteorological tower on land located in southwestern Saskatchewan. We
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erected a tower on the property in early October 2005 and commenced gathering
wind data.
As of the date of this report, we have assessed wind speed data from the
Keewatin site and have determined that the property has a wind resource that
warrants the further collection and evaluation of wind data, and the
commencement of initial engineering studies, environmental screening, and
community relations activities.
Based on the wind data collected, we have identified the area in which we desire
to acquire the rights to erect wind turbines. We believe that this area is
ideally situated as it is removed from population centers, and is less than five
miles from the nearest provincial electricity transmission line.
We have commenced initial negotiations with additional land owners in the region
to acquire the rights to erect wind turbines at identified locations. However,
no land lease agreements have been concluded and there is no assurance that we
will be able to acquire the necessary rights on acceptable terms. As of the date
of this report, we have not applied for any government permits or approvals for
this project.
Prior to generating any revenue from the Keewatin project, we must accomplish
the following business objectives:
* Identify the lands over which we wish to acquire lease rights, and
enter into lease agreements with the owners of those lands,
* Complete initial engineering and environmental screening studies on
the leased lands;
* Identify a joint venture partner with the financial and operational
resources necessary to construct and operate the project, and conclude
a joint venture and development agreement with the joint venture
partner on terms acceptable to both parties;
* In concert with the joint venture partner, complete the necessary
engineering and environmental studies, and obtain all necessary
permits;
* In concert with the joint venture partner, negotiate a PPA with a
public utility;
* In concert with the joint venture partner, arrange the equity and debt
financing to fund the construction of the project;
* Complete the construction of the project;
* Arrange for the connection of the project to the provincial
electricity transmission grid; and
* Commence the generation of electricity.
SKY HARVEST PROJECT
In October 2005, Sky Harvest - Saskatchewan, which subsequently became our
subsidiary, identified a potential wind power project site in southwestern
Saskatchewan and commenced the collection of wind data. Analysis of the data
collected indicates that the potential wind resource on the property exceeds the
minimum capacity factor necessary to justify the planning and construction of a
150 megawatt wind power project on the site. We acquired Sky Harvest -
Saskatchewan in July as we believe that in addition to being located in an
excellent wind resource area, the project is ideally situated as it is removed
from population centers, and is less than five miles from the nearest provincial
electricity transmission line. At the time of our acquisition of Sky Harvest -
Saskatchewan, its principal shareholders were two of our current directors,
William Iny and Greg Yanke, as well as a former director of the Company.
Sky Harvest - Saskatchewan has concluded land lease agreements with landowners
allowing us to erect wind turbines on approximately 15,000 acres. We have also
completed initial engineering and environment screening studies on the site. At
the initiation of the project, Sky Harvest - Saskatchewan committed to involve
7
the local community in the development process and has fully briefed local
council members on the details of the proposed development. The local municipal
authority responded positively to the proposed project and voted unanimously to
amend a by-law allowing wind power development in the rural municipality. As of
the date of this report, we have not applied for any government permits or
approvals for the project.
Prior to generating any revenue from the Sky Harvest project, we must accomplish
the following business objectives:
* Identify a joint venture partner with the financial and operational
resources necessary to construct and operate the project, and conclude
a joint venture and development agreement with the joint venture
partner on terms acceptable to both parties;
* In concert with the joint venture partner, complete the necessary
engineering and environmental studies, and obtain all necessary
permits;
* In concert with the joint venture partner, negotiate a PPA with a
public utility;
* In concert with the joint venture partner, arrange the equity and debt
financing to fund the construction of the project;
* Complete the construction of the project;
* Arrange for the connection of the project to the provincial
electricity transmission grid; and
* Commence the generation of electricity.
MATADOR PROJECT
In 2007, we identified an additional potential wind power generation location
near Beechy, Saskatchewan known as the Matador Pasture and entered into an
agreement under permit with the Government of Saskatchewan allowing us to erect
a meteorological on certain land located in southwestern Saskatchewan. We
erected this tower in autumn of 2007 and commenced gathering wind data. We have
determined that the Matador project hosts a wind resource that warrants the
additional collection and evaluation of wind data, as well as the commencement
of initial engineering studies, environmental screening, and community relations
activities. The project is removed from population centers and is traversed by a
230 kilovolt provincial electricity transmission line.
The agreement with the Government of Saskatchewan respecting the lands that
comprise the Matador project states that the government has no intention of
permitting the study or development of wind power by another entity
We have not entered into any land lease agreements relating to the Matador
project.
VERTICAL AXIS WIND TURBINE BUSINESS
On July 19, 2013, we announced our acquisition of a vertical axis wind turbine
manufacturing and sales business from a private Canadian company in
consideration of the issuance of 650,000 shares of our common stock, cash
payments totaling $65,000, and the grant of an option to the vendor to acquire
up to 550,000 shares of our common stock at a price of $0.10 for a period of
five years. This grant is pursuant to the Company's previously announced 2011
Stock Option Plan. In addition, we agreed to pay the vendor a royalty of $200
for every vertical axis wind turbine that we sell for a period of ten years. The
vendor will also receive 500,000 voting shares of Sky Vertical Technologies
Inc., our wholly-owned subsidiary that we incorporated for the purpose of
holding the turbine assets, if that company's shares trade publicly on a
recognized stock exchange or quotation system. As part of the agreement, we have
8
acquired the intellectual property rights relating to the turbine design, and
leasehold interests in both manufacturing facilities and equipment.
To date, we have received written expressions of interest for the purchase of
over 13,000 vertical axis turbines from parties in four different countries. The
sale of such number of turbines would generate revenue of approximately $250
million. Sky Harvest has also entered into discussions with additional parties
with compatible technology regarding the potential joint venture development of
additional wind turbine products. However, there is no guarantee that such sales
will be completed or that we will enter into any agreement regarding the joint
venture development of additional wind turbine technologies.
Unlike traditional turbines, a vertical axis wind turbine has blades that spin
around a vertical mast. They are primarily used in remote areas to provide
electricity to communication towers, mines, and communities that typically rely
on diesel or propane for power generation, which results in reduced costs to the
user, as well as a smaller environmental impact through the reduced use of
fossil fuels and no risk of on-site diesel spills. These turbines are also
suitable for rural areas of developing countries where grid infrastructure is
minimal or non-existent. They can also be mounted near the upper portion of
commercial smoke stacks and are powered by the updraft.
The principal advantages of a vertical axis wind turbine include low noise
levels, minimal vibrations due to low RPM, the ability to utilize wind from any
direction, ease of installation and maintenance, durability, and very low impact
to wildlife. In addition, the Sky Harvest turbine is self-starting and begins to
move at wind speeds as low as two meters per second and commence generating
power at wind speeds of three meters per second. The additional advantages of
the Sky Harvest turbine when compared to its competitors are its ability to
withstand temperatures well below freezing and to operate without a driveshaft
or gearbox.
In addition to planned manufacturing and sales activities, we will also focus on
further turbine research and development in order to introduce new products for
commercial use. The company expects that this may include grant or joint venture
opportunities with government entities, universities, and private corporations,
though no such arrangements have been made and there is no guarantee that such
joint ventures will materialize.
The Board of Directors of Sky Vertical Technologies Inc., our wholly-owned
subsidiary that holds the assets and will undertake operations, consists of Kyle
Loney and Harry Bauskin. Mr. Loney acts as the subsidiary's President and Chief
Executive Officer while Patricia J. Shorr will act as the Chief Financial
Officer. Mr. Loney has acted as our project acquisition consultant since 2011.
Mr. Bauskin and Ms. Shorr both act as directors of Sky Harvest since 2011.
GOVERNMENT APPROVALS AND ENVIRONMENTAL LAWS
In order to erect turbines on a property, the Company may need to apply for, and
obtain, municipal permits relating to zoning and building. Until the Company
determines the exact locations of the sites within the property upon which it
intends to erect turbines, it will not be able to determine the specific
permitting requirements for its project. However, the potential turbine sites
for the Company's wind power project are located in areas well removed from
significant population centers.
The creation of a wind power project will also involve the excavation of
portions of the land and the construction of concrete platforms below the land
surface. Any development project of this nature is subject to the provisions of
the Saskatchewan Environmental Assessment Act. Before excavation and
construction can be commenced, the Company will need to obtain environmental
approval from the Saskatchewan provincial government Ministry of the
Environment. The Company must apply for approval by completing an environmental
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impact assessment and statement, as well as by providing public notice of the
proposed development. After the public review, usually a 30 day period which may
involve public meetings, the Ministry of the Environment will make a final
decision regarding the project. An approval may include a number of conditions
to mitigate any identified environmental impacts.
As of the date of this report, the Company is not aware of any archaeologically
significant or ecologically sensitive areas within the locations on which the
Company is contemplating the erection of turbines. However, the Company is
unable to predict if the requisite permits will be granted; or, if they are
granted, what, if any, conditions may be imposed by the provincial government,
and the costs associated with compliance therewith. If such permits are granted
subject to certain conditions, there is no assurance that it will be
economically or practically feasible for the Company to comply with those
conditions.
As of the date of this report, the Company has not applied for any government
permits or approvals for either location.
RESEARCH AND DEVELOPMENT, PATENTS AND TRADEMARKS
The Company has filed provisional patent applications relating to its vertical
axis wind turbine design..
DIRECTORS, OFFICERS AND EMPLOYEES
The Company has four directors, one of whom also serves as Chief Executive
Officer and Chief Financial Officer. As of the date of this report, the Company
has one employee who acts as the manager of our vertical axis wind turbine
manufacturing business. The Company also engages consultants and professional
service firms to perform all the work necessary to advance the Company's
projects. Additional employees will be engaged as and when the Company's
activities warrant this.
PLAN OF OPERATIONS - YEAR ENDING MAY 31, 2013
During the fiscal year ending May 31, 2013, the Company intends to achieve the
following business objectives:
CORPORATE ACTIVITIES
* Raise additional financing to fund the continued operations of the Company.
KEEWATIN PROJECT
* Commence a Wind Resource Report and Site Engineering Assessment,
* Commence assessment of potential environmental impacts of the proposed
project,
* Commence a community relations program,
* Commence negotiation of land lease agreements with landowners.
SKY HARVEST PROJECT
* Continue to monitor wind data and update the Wind Resource Report and Site
engineering Assessment accordingly,
* Continue discussions with a potential joint venture and development partner
and reach a joint venture agreement in a form acceptable to both parties,
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* Continue the Community Development program to provide residents in the area
with information on the project, and to allow for comments and mitigation,
* Consult with First Nations groups that may be impacted by project
development.
VERTICAL AXIS WIND TURBINE BUSINESS
* Raise necessary financing for the manufacture of approximately ten test
turbines
* Solicit and fulfill orders for vertical axis wind turbines based on the
successful operation of the test turbines
The Company will also consider the potential acquisition of additional
alternative energy projects.
As of the date of this report, there is no assurance that the Saskatchewan
utility will issue another RFQ, an RFP or a power call. If a RFP or power call
is issued, there is no assurance that the Company will be successful in
negotiating a PPA for the full capacity of either of its potential projects. At
present, only the Sky Harvest project is at a stage of development that would
justify participation in an RFQ, RFP or a power call.
In addition, there is no guarantee that the vertical axis wind turbines will
perform as expected and that we will be able to generate sufficient sales to
realize profitable operations.
During the fiscal year, our management decided that we will not be proceeding
with the Levant natural gas storage project in order that we may focus Company
efforts on our vertical axis wind turbine business.
The Company will require additional funding in order to complete the plan of
operations as set out above. While the Company does not have any commitments for
future funding, it anticipates that additional cash requirements will be met by
debt or equity financings. There is no assurance, however, that additional
funding can be obtained, or if obtained, on terms that are acceptable to the
Company.
REPORTS TO SECURITY HOLDERS
We file reports and other information with the SEC. Historical information about
our company and other information can be inspected and copied at the Public
Reference Room of the SEC located at Room 1580, 100 F Street, N.E., Washington
D.C. 20549. Copies of such materials, including copies of any portion of the
registration statement, can be obtained from the Public Reference Room of the
SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain
information on the operation of the Public Reference Room. Such materials may
also be accessed electronically by means of the SEC's home page on the Internet
(http://www.sec.gov).
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable
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ITEM 2. PROPERTIES
Our executive and head office is located at 1200 West 73rd Avenue, 11th Floor,
Vancouver, BC, Canada. We also hold leasehold interests in approximately 15,000
acres in southwestern Saskatchewan and agreements with a land owner and the
Government of Saskatchewan, which provide the right to erect a meteorological
tower on certain additional land located in southwestern Saskatchewan. In
addition, we hold leasehold interests in one manufacturing facility and one test
facility, located in the Canadian provinces of Saskatchewan and Manitoba, for
our vertical axis wind turbine. We do not have an interest in any other real
property.
ITEM 3. LEGAL PROCEEDINGS
During the fiscal year ended May 31, 2012, a shareholder commenced a legal
action against us, and two of our directors, alleging that the directors had
earned short swing trading profits as a result of trading in our shares and were
required to disgorge those profits and pay them to us. The lawsuit was amended
to dismiss the claims against the directors, who provided the shareholder with
evidence that profits were disgorged. The shareholder's legal counsel continues
to seek compensation in the amount of $29,750 for the benefit that we received
from the disgorgement, which the Company disputes. The Company has not had any
contact from the shareholder's legal counsel in 2013.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
Our common stock is quoted on the OTCQB under the symbol "SKYH". However, due to
sporadic trading, there is no established public trading market for our shares
of common stock.
The following table shows the quarterly range of high and low closing prices for
our common stock over the fiscal quarters for the last two fiscal years as
quoted on the OTCQB. Investors should not rely on historical prices of our
common stock as an indication of its future price performance. The last sale
price of our common stock occurred on October 4, 2013 at a price of $0.25. The
high and low trading prices for our common stock through the facilities of the
OTCQB for the past eight quarters were:
Quarter Ended High Low
------------- ---- ---
August 31, 2011 $0.55 $0.30
November 30, 2011 $0.43 $0.05
February 29, 2012 $0.45 $0.06
May 31, 2012 $0.38 $0.07
August 31, 2012 $0.10 $0.09
November 30, 2012 $0.02 $0.015
February 28, 2013 $0.048 $0.025
May 31, 2013 $0.2477 $0.025
TRANSFER AGENT
The transfer agent and registrar for our common stock is:
Empire Stock Transfer Inc.
1859 Whitney Mesa Drive
Henderson, NV 89014
Phone: 702.818.5898
Fax: 702.974.1444
Website: www.empirestock.com.
HOLDERS OF COMMON STOCK
As of May 31, 2013, our 38 shareholders of record held 33,203,016 shares of our
common stock.
DIVIDENDS
We have never declared or paid any cash dividends or distributions on our
capital stock. We currently intend to retain our future earnings, if any, to
support operations and to finance expansion and therefore we do not anticipate
paying any cash dividends on our common stock in the foreseeable future.
13
RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED
SECURITIES
Other than as previously disclosed in our periodic filings pursuant to the
Exchange Act during the fiscal year ended May 31, 2013, we did not sell any
equity securities that were not registered under the Securities Act of 1933.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following discussion and analysis should be read together with our
Consolidated Financial Statements and the Notes to those statements included
elsewhere in this Annual Report on Form 10-K and the Consolidated Financial
Statements and the Notes to those statements included in our Form 10-K for the
year ended May 31, 2013. The following discussion contains forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results
could differ materially from those discussed in the forward looking statements.
Factors that could cause or contribute to such differences include those
discussed below and elsewhere in this prospectus and registration statement.
Our audited consolidated annual financial statements are stated in United States
Dollars and are prepared in accordance with United States Generally Accepted
Accounting Principles.
RESULTS OF OPERATIONS
The following summary of our results of operations should be read in conjunction
with our audited consolidated annual financial statements for the year ended May
31, 2013 which are included herein.
Year Ended May 31, Increase/(Decrease)
2013 2012 $ %
---------- ---------- ---------- ----------
Revenue $ -- -- -- N/A
Expenses 193,890 552,507 (358,617) (65%)
Foreign exchange loss (gain) 5,729 65,501 (59,772) (91%)
Impairment loss (income) 66,831 -- 66,831 N/A
Interest and Dividend (Income) (9) -- (9) N/A
Settlement of Debt (gain) -- (3,999) 3,999 (100%)
--------- --------- --------- ---------
Net Loss $ 266,441 614,009 (347,568) (57%)
========= ========= ========= =========
14
REVENUE
We recorded a net operating loss of $266,441 for the twelve months ended May 31,
2013 and have an accumulated deficit of $7,024,075 since inception. We have had
no operating revenues since our inception on February 25, 2005 through to the
period ended May 31, 2013. We do not anticipate that we will generate any
revenues during the period in which we are a development stage company.
EXPENSES
Our expenses for the years ended May 31, 2013 and 2012 are outlined below:
Year Ended May 31, Increase/(Decrease)
2013 2012 $ %
---------- ---------- ---------- ----------
Consulting fees $ -- 84,487 (84,487) (100%)
Engineering and development 59,307 140,592 (81,285) (58%)
Management fees 59,761 134,367 (74,606) (56%)
Professional fees 41,938 158,011 116,073 (73%)
General and administrative 32,884 35,050 (2,166) (6%)
-------- -------- -------- --------
Total Operating Expenses $ 193,890 552,507 (358,617) (65%)
======== ======== ======== ========
Consulting fees decreased by $84,487 from $84,487 in the year ended May 31, 2012
to NIL in the year ended May 31, 2013. Consulting fees in fiscal 2012 related to
the recorded value of stock options that we granted to members of our advisory
board.
Engineering and development expenses decreased by $81,285 from $140,592 in the
year ended May 31, 2012 to $59,307 in the year ended May 31, 2013. This decrease
is a result of a drop in engineering costs relating to our leased Saskatchewan
properties.
Management fees decreased by $74,606 from $134,367 for the year ended May 31,
2012 to $59,761 for the year ended May 31, 2013. This decrease is a result of a
management bonus that we paid during fiscal 2012.
Professional fees decreased by $116,073 from $158,011 in the year ended May 31,
2013 to $41,938 in the year ended May 31, 2013 due to higher legal fees in
fiscal 2012.
General and administrative expenses decreased by $2,166 from $35,050 in the year
ended May 31, 2012 to $32,884 in the year ended May 31, 2013.
LIQUIDITY AND CAPITAL RESOURCES
Our financial condition for the year ended May 31, 2013 and 2012 and the changes
between those periods for the respective items are summarized as follows:
15
WORKING CAPITAL
Year Ended May 31, Increase/(Decrease)
2013 2012 $ %
---------- ---------- ---------- ----------
Current Assets $ 110,319 157,125 (46,806) (30%)
Current Liabilities 389,213 295,323 93,890 32%
--------- --------- --------- ---------
Working Capital $ (278,894) (138,198) (140,696) N/A
========= ========= ========= =========
The $140,696 increase in our working capital deficit from ($138,198) as of May
31, 2012, to ($278,894) as of May 31, 2013 was primarily due to a $69,378
increase in amounts due to related parties that were incurred in the course of
our normal business operations and a $24,415 increase in our accounts payable.
In addition, our cash position fell from $144,686 at May 31, 2012 to $103,439 at
May 31, 2013.
CASH FLOWS
Year Ended May 31, Increase/(Decrease)
2013 2012 $ %
---------- ---------- ---------- ----------
Cash Flows (used in) Operating
Activities $ (99,054) (558,274) 459,220 N/A
Cash Flows provided by (used in)
Investing Activities (1,660) -- (1,660) N/A
Cash Flows provided by Financing
Activities 49,500 611,540 (562,040) (92%)
Effect of exchange rate changes
on cash 9,968 67,955 (57,987) (85%)
--------- --------- --------- ---------
Net increase (decrease) in cash
during year $ (41,247) 121,221 (162,468) N/A
========= ========= ========= =========
CASH USED IN OPERATING ACTIVITIES
During the year ended May 31, 2012 we used net cash in operating activities in
the amount of 99,054 (year ended May 31, 2012 - $558,274). The cash was used to
fund our corporate activities and operations on our wind power projects.
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
During the year ended May 31, 2013 we purchased computer equipment for $1,660.
CASH FROM FINANCING ACTIVITIES
In the year ended May 31, 2013, we raised $49,500 through a private placement
sale of our common stock. In the year ended May 31, 2012, we raised $647,500
through private placement sales of our common stock. We also received $118,900
in proceeds from two of our directors relating to their payment of short-swing
trading profits to us. As well, we repaid $154,860 in loans that we received
from various parties.
16
FUTURE FINANCINGS
As of the date of this report, we do not have any arrangements in place for
additional debt financing or for the sale of our securities, and there is no
assurance that we will be able to raise funds through either means.
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
economic wind resource exists on a property that is acquired 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. 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 development
activities.
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Sky Harvest Energy Corp.
Formerly Sky Harvest Windpower Corp.
(A Development Stage Company)
May 31, 2013
Report of Independent Registered Public Accounting Firm .................... 19
Consolidated Balance Sheets as of May 31, 2013 and May 31, 2012............. 20
Consolidated Statements of Operations for the years ended May 31, 2013
and May 31, 2012, and for the period since inception........................ 21
Consolidated Statement of Stockholders' Equity for period ended
May 31, 2013, and the period since inception................................ 22
Consolidated Statements of Cash Flows for the years ended May 31, 2013
and May 31, 2012, and for the period since inception........................ 26
Notes to the Consolidated Financial Statements.............................. 27
18
PLS CPA, A Professional Corp.
* 4725 MERCURY STREET SUITE 210 * SAN DIEGO * CALIFORNIA 92111 *
* TELEPHONE (858) 722-5953 * FAX (858) 761-0341 * FAX (858) 764-5480
* E-MAIL changgpark@gmail.com *
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Sky Harvest Energy Corp.
(formerly Sky Harvest Windpower Corp.)
(A Development Stage Company)
We have audited the accompanying consolidated balance sheets of Sky Harvest
Energy Corp. (formerly Sky Harvest Windpower Corp.) (A Development Stage
"Company") as of May 31, 2013 and 2012 and the related consolidated statements
of operation, changes in shareholders' equity and cash flows for the years then
ended and for the period February 25, 2005 (inception) to May 31, 2013. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial positions of Sky
Harvest Energy corp. as of May 31, 2013 and 2012, and the consolidated results
of its operation and its cash flows for the years then ended and for the period
February 25, 2005 (inception) to May 31, 2013 in conformity with U.S. generally
accepted accounting principles.
The consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company's losses from operations raise
substantial doubt about its ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ PLS CPA
------------------------------------
PLS CPA, A Professional Corp.
October 15, 2013
San Diego, CA 92111
Registered with the Public Company Accounting Oversight Board
19
Sky Harvest Energy Corp.
Formerly Sky Harvest Windpower Corp.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in US Dollars)
May 31, 2013 May 31, 2012
------------ ------------
$ $
ASSETS
Current Assets
Cash and cash equivalents 103,439 144,686
Other receivables 5,742 11,557
Prepaid expenses 1,138 882
------------ ------------
Total Current Assets 110,319 157,125
Property and equipment, net (Note 4) 1,400 66,826
------------ ------------
Total Assets 111,719 223,951
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities
Accounts payable 183,485 159,070
Accrued liabilities 347 250
Due to related parties (Note 7) 155,381 86,003
Note payable (Note 5) 50,000 50,000
------------ ------------
Total Liabilities 389,213 295,323
------------ ------------
Stockholders' Deficit
Preferred Stock:
Authorized: 10,000,000 shares, $0.001 par value
Issued and outstanding: 1 share (May 31, 2012 - 1 share) -- --
Common Stock:
Authorized: 100,000,000 shares, $0.001 par value
Issued and outstanding: 32,553,016 shares
(May 31, 2012 - 32,553,016 shares) 32,553 32,553
Additional paid-in capital 6,707,278 6,707,278
Common stock subscribed (Note 11) 6,750 6,750
Stock subscriptions receivable -- (49,500)
Accumulated other comprehensive loss (6,098) (16,917)
Deficit accumulated during the development stage (7,017,977) (6,751,536)
------------ ------------
Total Stockholders' Deficit (277,494) (71,372)
------------ ------------
Total Liabilities and Stockholders' Deficit 111,719 223,951
============ ============
Continuing operations (Note 1)
Commitments and contingencies (Note 11)
(The accompanying notes are an integral part of these
consolidated financial statements)
20
Sky Harvest Energy Corp.
Formerly Sky Harvest Windpower Corp.
(A Development Stage Company)
Consolidated Statements of Operations
(Expressed in US Dollars, except number of shares)
Accumulated from
February 25, 2005 For the For the
(Date of Inception) to Year Ended Year Ended
May 31, 2013 May 31, 2013 May 31, 2012
------------ ------------ ------------
$ $ $
Expenses
Consulting fees 450,934 -- 84,487
Engineering and development 612,230 59,307 140,592
Management fees (Note 7) 794,708 59,761 134,367
Professional fees 553,714 41,938 158,011
General and administrative 1,835,446 32,884 35,050
Acquired development costs 242,501 -- --
------------ ------------ ------------
Operating loss (4,489,533) (193,890) (552,507)
Other Income (Loss)
Impairment loss (2,618,271) (66,831) --
Interest income 89,391 9 --
Foreign exchange gain (loss) 12,423 (5,729) (65,501)
Settlement of debt (11,987) -- 3,999
------------ ------------ ------------
Net loss (7,017,977) (266,441) (614,009)
Other Comprehensive Income (Loss)
Foreign currency translation adjustments (6,098) 10,819 65,528
------------ ------------ ------------
Comprehensive loss (7,024,075) (255,622) (548,481)
============ ============ ============
Net loss per common share - basic and diluted (0.01) (0.02)
------------ ------------
Weighted average number of common stock outstanding 32,553,000 31,594,000
------------ ------------
(The accompanying notes are an integral part of these
consolidated financial statements)
21
Sky Harvest Energy Corp.
Formerly Sky Harvset Windpower Corp.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
(Expressed in US Dollars, except number of shares)
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)
22
Sky Harvest Energy Corp.
Formerly Sky Harvest Windpower Corp.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
(Expressed in US Dollars, except number of shares)
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)
23
Sky Harvest Energy Corp.
Formerly Sky Harvest Windpower Corp.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
(Expressed in US Dollars, except number of shares)
Deficit
Accumulated Accumulated
Additional Common Stock Other During the
Preferred Common Paid-in Stock Subscriptions Comprehensive Development
Stock Amount Shares Amount Capital Subscribed Receivable Loss Stage Total
---- ------ ---------- -------- --------- ------- ------ ---------- ---------- ----------
# $ # $ $ $ $ $ $ $
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 -- -- -- -- 64,403 -- -- -- -- 64,403
Accumulated
other
comprehensive
loss -- -- -- -- -- -- -- 65,528 -- 65,528
(The accompanying notes are an integral part of these
consolidated financial statements)
24
Sky Harvest Energy Corp.
Formerly Sky Harvest Windpower Corp.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
(Expressed in US Dollars, except number of shares)
Deficit
Accumulated Accumulated
Additional Common Stock Other During the
Preferred Common Paid-in Stock Subscriptions Comprehensive Development
Stock Amount Shares Amount Capital Subscribed Receivable Loss Stage Total
---- ------ ---------- -------- --------- ------- ------ ---------- ---------- ----------
# $ # $ $ $ $ $ $ $
Common stock
issued on
June 21, 2011
for cash at
$0.25 per share -- -- 1,970,000 1,970 490,530 -- -- -- -- 492,500
Common stock
issued on
May 29, 2012
for cash at
$0.25 per share -- -- 818,000 818 203,682 -- (49,500) -- -- 155,000
Common stock
issued on
May 29, 2012
for finders
fees at $0.25
per share -- -- 33,000 33 (33) -- -- -- -- --
Disgorgement of
swing trading
profits -- -- -- -- 118,900 -- -- -- -- 118,900
Net loss for
the year -- -- -- -- -- -- -- -- (614,009) (614,009)
---- ------ ---------- -------- --------- ------- ------- ---------- ---------- ----------
Balance -
May 31, 2012 1 -- 32,553,016 32,553 6,707,278 6,750 (49,500) (16,917) (6,751,536) (71,372)
---- ------ ---------- -------- --------- ------- ------- ---------- ---------- ----------
Balance -
May 31, 2012 1 -- 32,553,016 32,553 6,707,278 6,750 (49,500) (16,917) (6,751,536) (71,372)
Stock
subscriptions
received -- -- -- -- -- -- 49,500 -- -- 49,500
Accumulated
other
comprehensive
loss -- -- -- -- -- -- -- 10,819 -- 10,819
Net loss for
the year -- -- -- -- -- -- -- -- (266,441) (266,441)
---- ------ ---------- -------- --------- ------- ------- ---------- ---------- ----------
Balance -
May 31, 2013 1 -- 32,553,016 32,553 6,707,278 6,750 -- (6,098) (7,017,977) (277,494)
==== ====== ========== ======== ========= ======= ======= ========== ========== ==========
(The accompanying notes are an integral part of these
consolidated financial statements)
25
Sky Harvest Energy Corp.
Formerly Sky Harvest Windpower Corp.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Accumulated from
February 25, 2005 For the For the
(Date of Inception) to Year Ended Year Ended
May 31, 2013 May 31, 2013 May 31, 2012
------------ ------------ ------------
$ $ $
Operating activities
Net loss for the period (7,017,977) (266,441) (614,009)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 24,705 997 697
Stock-based compensation 1,609,565 -- 64,403
Impairment loss 2,618,271 66,831 --
Loss (gain) on settlement of debt 11,987 -- (3,999)
Acquired development costs 242,501 -- --
Changes in operating assets and liabilities:
Prepaid expenses 10,996 (256) 52,238
Accrued interest 244 -- --
Accounts payable and accrued liabilities 166,165 24,511 (6,413)
Account receivable (24,099) 5,815 (701)
Note receivable (280,000) -- --
Due to related parties 93,446 69,488 (50,490)
------------ ------------ ------------
Net cash flows used in operating activities (2,544,196) (99,054) (558,274)
------------ ------------ ------------
Investing activities
Purchase of equipment (25,164) (1,660) --
Purchase of short-term investments (2,472,839) -- --
Redemption of short-term investments 2,493,484 -- --
Cash acquired from acquisition 21,016 -- --
------------ ------------ ------------
Net cash flows provided by (used in) investing activities 16,497 (1,660) --
------------ ------------ ------------
Financing activities
Proceeds from common stock issuances 2,415,249 49,500 647,500
Proceeds from (repayment of) related party loans 62,854 -- (144,536)
Proceeds from (repayment of) note payable 50,000 -- (10,324)
Proceeds from swing sale disgorgement 118,900 -- 118,900
------------ ------------ ------------
Net cash flows provided by financing activities 2,647,003 49,500 611,540
------------ ------------ ------------
Effect of exchange rate changes on cash (15,865) 9,968 67,955
------------ ------------ ------------
Increase (Decrease) in cash and cash equivalents 103,439 (41,247) 121,221
Cash and cash equivalents - beginning of period -- 144,686 23,465
------------ ------------ ------------
Cash and cash equivalents - end of period 103,439 103,439 144,686
============ ============ ============
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 -- --
Stock issuance for finders fee 8,250 -- 8,250
------------ ------------ ------------
(The accompanying notes are an integral part of these
consolidated financial statements)
26
Sky Harvest Energy Corp.
Formerley Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2013
(Expressed in US Dollars)
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. On August 13, 2013, the Company changed its name from "Sky Harvest
Windpower Corp." to "Sky Harvest Energy Corp."
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 May 31, 2013, the Company has
accumulated losses of $7,017,977 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.
27
Sky Harvest Energy Corp.
Formerley Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2013
(Expressed in US Dollars)
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.
28
Sky Harvest Energy Corp.
Formerley Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2013
(Expressed in US Dollars)
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.
29
Sky Harvest Energy Corp.
Formerley Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2013
(Expressed in US Dollars)
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. 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 May 31, 2013 and May 31, 2012, the Company`s only component of
comprehensive income (loss) was foreign currency translation adjustments.
30
Sky Harvest Energy Corp.
Formerley Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2013
(Expressed in US Dollars)
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
May 31, 2013 May 31, 2012
Accumulated Net Carrying Net Carrying
Cost Depreciation Value Value
------- ------- ------- -------
$ $ $ $
Computer equipment 7,428 (6,223) 1,205 310
Asset under construction -- -- -- 66,060
Wind tower equipment 22,116 (21,921) 195 456
------- ------- ------- -------
29,544 (28,144) 1,400 66,826
======= ======= ======= =======
During the year ended May 31, 2013, the Company recorded an impairment loss of
$66,831 on its Assets under construction.
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 year ended May 31, 2012, the
Company repaid $10,324. At May 31, 2013, 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 May 31, 2013, 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 May 31, 2013, there were 15,680,016 outstanding exchangeable shares (May 31,
2012 - 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.
31
Sky Harvest Energy Corp.
Formerley Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2013
(Expressed in US Dollars)
7. Related Party Transactions
a) During the year ended May 31, 2013, the Company incurred $59,761 (2012 -
$60,507) to a company controlled by the President and principal shareholder
of the Company for management services. During the year ended May 31, 2013,
the Company paid a bonus of $nil (2012 - $73,860 (Cdn$75,000)) to the
President and principal shareholder of the Company for management services.
As at May 31, 2013, the Company is indebted to that company and the
Company's President for $86,520 (May 31, 2012 - $21,080), which is
non-interest bearing, unsecured and due on demand.
b) 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 May 31, 2013, accrued interest of $11,961 was
recorded. During the year ended May 31, 2011, the Company received an
advance of $68,480 (CDN$71,000) from the same director. During the year
ended May 31, 2012, the Company repaid $38,580 (CDN$40,000). At May 31,
2013, $29,900 (CDN$31,000) is unsecured, non-interest bearing and has no
terms of repayment.
c) During the year ended May 31, 2013, the Company incurred $nil (2012 -
$104,538) to a company controlled by a director of the Company for legal
services.
d) 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.
e) 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) During the year ended May 31, 2013, the Company received stock
subscriptions of $49,500 for 198,000 shares of common stock issued on May
29, 2012.
b) 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.
c) On May 29, 2012, the Company closed a private placement consisting of
818,000 shares of common stock at a price of $0.25 per share for gross
proceeds of $204,500, of which $49,500 is recorded in stock subscriptions
receivable at May 31, 2012. In connection with the private placement, the
Company issued 33,000 shares of common stock as finders fees. The Company
received the remaining proceeds of $49,500 during the fiscal year ended May
31, 2013.
9. Stock Based Compensation
On September 11, 2009, the Company's board of directors adopted the 2009 Stock
Option Plan ("2009 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 May 31, 2013, the Company
had 1,650,000 shares of common stock available to be issued under the Plan.
On March 10, 2011, the Company's board of directors adopted the 2011 Stock
Option Plan ("2011 Plan") which provides for the granting of stock options to
acquire up to 5,000,000 common shares of the Company to eligible employees,
officers, directors and consultants of the Company. At May 31, 2013, the Company
had 1,410,000 shares of common stock available to be issued under the Plan.
On March 19, 2012, pursuant to the 2011 Plan, the Company granted 990,000
options with immediate vesting to consultants to acquire 990,000 common shares
at an exercise price of $0.10 per share exercisable for 5 years and recorded
stock-based compensation for the vested options of $69,300, as general and
administrative expense.
32
Sky Harvest Energy Corp.
Formerley Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2013
(Expressed in US Dollars)
9. Stock Based Compensation (continued)
The fair value for stock options vested during the years ended May 31, 2013 and
May 31, 2012 were estimated at the vesting and granting date using the
Black-Scholes option-pricing model. The weighted average assumptions used are as
follows:
Year Ended Year Ended
May 31, 2013 May 31, 2012
------------ ------------
Expected dividend yield -- 0%
Risk-free interest rate -- 1.16%
Expected volatility -- 702%
Expected option life (in years) -- 4.89
The following table summarizes the continuity of the Company's stock options:
Weighted-Average
Weighted Remaining
Average Contractual Aggregate
Number of Exercise Term Intrinsic
Options Price (years) Value
------- ----- ------- -----
$ $
Outstanding: May 31, 2011 3,183,334 0.23
Granted 990,000 0.10
---------- ----
Outstanding: May 31, 2012
and May 31, 2013 4,173,334 0.20 2.84 251,500
========== ==== ==== =======
Exercisable: May 31, 2013 4,173,334 0.20 2.84 251,500
========== ==== ==== =======
At May 31, 2013, there was $nil of unrecognized compensation costs related to
non-vested share-based compensation arrangements granted under the 2009 Plan and
2011 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") for
the purposes of developing underground natural gas storage plants in the
Republic of Turkey. 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 May 31, 2013, the Company and its joint venture partner have not made
any contribution to Levant and operations have not yet begun.
33
Sky Harvest Energy Corp.
Formerley Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2013
(Expressed in US Dollars)
11. Commitments and Contingencies
a) On April 5, 2006, the Company's wholly-owned subsidiary, Sky Harvest -
Saskatchewan, entered into a Saskatchewan Wind Energy Lease agreement,
whereby the lessor granted to Sky Harvest - Saskatchewan the right to use
certain lands for development and operation of a wind powered electrical
generating facility for the conversion of wind energy into electrical
energy. The Company agreed to pay the lessors $2,500 per turbine installed
on the land and a 1% royalty on all revenue generated from wind energy on
the leased lands. Pursuant to the agreement, the term of the lease shall
commence on that date (the "Commencement Date") upon which the Company
commences generating and selling electricity through the operation of
turbines on the leased lands, and shall end on the 25th anniversary of the
Commence Date. The agreement was amended on November 1, 2011. Pursuant to
the amendment, in the event that the Commencement Date has not occurred by
September 30, 2008, then the Company shall either abandon the lease or pay
the sum of Cdn$5,000 per month as a delay rental to keep the lease in good
standing up to and including the month in which the Commencement date
occurs. The Cdn$5,000 monthly delay rental is only payable when the Company
commences generating and selling electricity and will not be accrued until
the Commencement Date. . All payments due and owing as of November 1, 2011
shall accrue and be paid in full within 30 days of the Commencement Date.
If the Commencement Date has not occurred by December 31, 2016, then the
lessors have the right to terminate the agreement upon notice in writing to
the Company. At May 31, 2013, the Company has accrued $110,085 of lease
payments.
b) On April 15, 2009, the Company's wholly-owned subsidiary, Sky Harvest -
Saskatchewan, entered into a Saskatchewan Wind Energy Lease agreement,
whereby the lessor granted to Sky Harvest - Saskatchewan the right to use
certain lands for development and operation of a wind powered electrical
generating facility for the conversion of wind energy into electrical
energy. The Company agreed to pay the lessors a 1% royalty on all revenue
generated from wind energy on the leased lands. Pursuant to the agreement,
the term of the lease shall commence on that date (the "Commencement Date")
upon which the Company commences generating and selling electricity through
the operation of turbines on the leased lands, and shall end on the 25th
anniversary of the Commence Date. The agreement was amended on November 1,
2011. In the event that the Commencement Date has not occurred by September
30, 2010, the Company shall either abandon the lease or pay the sum of
Cdn$5,000 per month as a delay rental to keep the lease in good standing up
to the and including the month in which the Commencement Date occurs. The
Cdn$5,000 monthly delay rental is only payable when the Company commences
generating and selling electricity and will not be accrued until the
Commencement Date. All payments due and owing as of November 1, 2011 shall
accrue and be paid in full within 30 days of the Commencement Date. If the
Commencement Date has not occurred by December 31, 2016, then the lessors
have the right to terminate the agreement upon notice in writing to the
Company. At May 31, 2013, the Company has accrued $40,000 of lease
payments.
c) 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 May 31, 2013, the fair value of
the 15,000 shares issuable was $6,750 and is included in common stock
subscribed.
d) 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.
34
Sky Harvest Energy Corp.
Formerley Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2013
(Expressed in US Dollars)
12. Income Taxes
The Company has net operating losses carried forward of $2,793,300 (2012 -
$2,594,600) available to offset taxable income in future years which expire
beginning in fiscal 2021.
The Company is subject to United States federal and state income taxes at an
approximate rate of 35%. The reconciliation of the provision for income taxes at
the United States federal statutory rate compared to the Company's income tax
expense as reported is as follows:
May 31, 2013 May 31, 2012
------------ ------------
$ $
Net loss before income taxes per
financial statements (266,441) (614,009)
Income tax rate 35% 35%
Income tax recovery (93,254) (214,903)
Permanent differences -- 21,141
Temporary differences 23,740 244
Change in valuation allowance 69,514 193,518
--------- ---------
Provision for income taxes -- --
========= =========
The significant components of deferred income tax assets and liabilities at May
31, 2013 and 2012 are as follows:
May 31, 2013 May 31, 2012
------------ ------------
$ $
Net operating loss carry-forward 977,641 908,127
Valuation allowance (977,641) (908,127)
--------- ---------
Net deferred income tax asset -- --
========= =========
13. Subsequent Events
In accordance with ASC 855, Subsequent Events, the Company has evaluated
subsequent events through the date of issuance of the unaudited interim
consolidated financial statements. Subsequent to the fiscal period ended May 31,
2013, the Company did not have any material recognizable subsequent events
except the following:
a) On July 5, 2013, the Company entered into an asset purchase agreement with
Kelso Energy Ltd. and Barry Ireland (the "Vendors") whereby the Company
acquired all the property, assets and undertaking of the vertical axis wind
turbine manufacturing and sales business as a going concern, including all
intellectual property rights, leasehold interests in two manufacturing
facilities and related equipment, client and contact lists, and unfulfilled
purchase orders.
In connection with the acquisition, the Company has incorporated a
wholly-owned subsidiary under the name "Sky Vertical Technologies Inc."
("Sky Vertical") which holds the assets and will undertake operations.
In consideration of the transfer of these assets, the Company agreed to pay
a total of $65,000, issue 650,000 shares of common stock of the Company,
and grant incentive stock options to acquire up to 550,000 shares of common
stock of the Company at a price of $0.10 per share for a period of five
years. In addition, the Vendors will receive 500,000 voting shares of Sky
Vertical by the date that Sky Harvest files a prospectus or registration
statement in any jurisdiction with a view to having its shares trade
publicly on a recognized stock exchange or quotation system. As well, the
Vendors are entitled to a royalty from the Company of $200 for every
vertical axis wind turbine that the Company sells for a period of ten
years.
35
Sky Harvest Energy Corp.
Formerley Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2013
(Expressed in US Dollars)
13. Subsequent Events (continued)
b) On July 5, 2013, the Company's wholly-owned subsidiary, Sky Vertical,
entered into an employment agreement with its manager of operations whereby
Sky Vertical agreed to pay a monthly salary of Cdn$10,000. The base salary
will increase effective on each anniversary of the effective date of this
agreement by at least 2% of the base salary in effect at the time. The
manager of operations shall be entitled to participate in Sky Vertical's
incentive stock option plan when adopted and be entitled to be granted 20%
of the total stock options available.
c) On July 9, 2013, the Company granted stock options to two consultants of
the Company to acquire up to 500,000 shares of its common stock at a price
of $0.10 per share for a period of five years. This grant is pursuant to
the Company's 2011 Stock Option Plan.
d) On August 13, 2013, the Company changed its name from "Sky Harvest
Windpower Corp." to "Sky Harvest Energy Corp."
36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL MATTERS
None
ITEM 9A. CONTROLS AND PROCEDURES
A. DISCLOSURE CONTROLS AND PROCEDURES
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Securities
Exchange Act of 1934, the Company's principal executive officer and principal
financial officer evaluated the Company's disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) for the period
covered by this Annual Report on Form 10-K as of our fiscal year end, May 31,
2013. Based on this evaluation, this officer concluded that as of the end of the
period covered by this Annual Report on Form 10-K, these disclosure controls and
procedures were adequate to ensure that the information required to be disclosed
by the Company in reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission and include
controls and procedures designed to ensure that such information is accumulated
and communicated to the Company's management, including the Company's principal
executive officer and principal financial officer, to allow timely decisions
regarding required disclosure.
Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues, if any, within
the Company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake.
B. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal
control over our financial reporting. In order to evaluate the effectiveness of
internal control over financial reporting, as required by Section 404 of the
Sarbanes-Oxley Act, management has conducted an assessment, including testing,
using the criteria in the Internal Control - Integrated Framework, issued by the
Committee of Sponsoring Organizations of the Treadway Commission ("COSO").
Our system of internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements.
Based on our evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our internal controls over financial reporting were not effective
as of May 31, 2013 and were subject to material weaknesses.
A material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the company's annual or interim
financial statements will not be prevented or detected on a timely basis. We
have identified the following material weaknesses in our internal control over
financial reporting using the criteria established in the COSO:
1. Failing to have an audit committee or other independent committee that
is independent of management to assess internal control over financial
reporting; and
37
2. Failing to have a director that qualifies as an audit committee
financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. In addition, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions and that the
degree of compliance with the policies or procedures may deteriorate.
This Annual Report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. Our internal control over financial reporting was not subject to
attestation by our independent registered public accounting firm pursuant to
temporary rules of the SEC that permit us to provide only management's report in
this Annual Report.
C. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
During the fiscal year ended May 31, 2013, there were no changes in internal
control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
38
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
As of the date of this report, our directors and executive officers, their ages,
positions held, and date of election or appointment, are as follows:
Date First Elected or
Name Position Held with our Company Age Appointed
---- ------------------------------ --- ---------
William Iny President, CEO, CFO, Secretary 63 September 1, 2010
and Treasurer
Director May 23, 2006
Harry Bauskin Director 62 April 14, 2011
Patricia J. Shorr Director 54 April 28, 2011
Greg Yanke Director 43 June 14, 2011
FAMILY RELATIONSHIPS
There are no family relationships with any of our other directors and officers.
BUSINESS EXPERIENCE
The following is a brief account of the education and business experience of our
directors and executive officer during at least the past five years, indicating
their business experience, principal occupations during the period, and the
names and principal businesses of the organizations by which they were employed.
WILLIAM INY has acted as our director since May 23, 2006 and as our president,
CEO, CFO, secretary and treasurer since September 1, 2010. Since 1981, Mr. Iny
has acted as the Principal of Abra Management Corporation, a private company
involved in real estate development, franchising and in providing consulting and
financing services to private and public companies. He was also a co-founder and
director of Empire Stock Transfer Inc., a Las Vegas, Nevada based registrar and
transfer agent registered with the United States Securities & Exchange
Commission.
HARRY BAUSKIN has acted as our director since April 14, 2011. Mr. Bauskin
previously held various positions with Bank Hapoalim, Israel's largest bank,
over a 30 year period. These positions included acting as head of the bank's
Toronto and Canadian divisions and head of the Investment Advice Division in
Jerusalem. Mr. Bauskin has also acted as Deputy Managing Director for Israel
Halutz Ltd., a portfolio management company based in Israel, and as Senior
Portfolio Manager/Analyst for Afikim Investments Limited. He holds a Bachelor of
Commerce degree from Durban University in South Africa where he specialized in
economics and accountancy.
PATRICIA J. SHORR has acted as our director since April 28, 2011. Since 1999,
Ms. Shorr has acted as a principal of Spectrum Capital Corporation, a company
that consults to wind and solar energy developers and is involved in the
commercial mortgage brokerage sector. In this role, she has been involved in all
aspects of permitting wind energy farms and solar projects including
39
coordinating all legal documentation for land leases and permitting, securing
state sponsored financing and economic incentives, liaising and negotiating with
transmission conglomerates and regional utilities, participating in turbine
acquisition and balance of plant procurement, and securing transmission and
utility participation. Ms. Shorr's previous employment positions include acting
as an Assistant Vice-President of First City Bank in Columbus, Ohio; as a
Financial Analyst for W.R. Grace & Co. in New York; and as Staff Auditor for
Touche Ross & Co. in Washington, DC. She holds a Bachelor's of Business
Administration degree specializing in marketing and a Master of Accounting
degree both from The George Washington University.
GREG YANKE has acted as our director since June 14, 2011. Since 2000, Mr. Yanke
has been a self-employed corporate and securities lawyer and the principal of
Gregory S. Yanke Law Corporation. Mr. Yanke is a graduate of the University of
British Columbia, receiving Bachelor degrees in Political Science (1991) and Law
(1994), as well as Arizona State University, where he obtained an MBA,
specializing in Financial Management and Markets (2009). He is a member in good
standing with the Law Society of British Columbia.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Our director, executive officer and control persons have not been involved in
any of the following events during the past five years:
1. any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
3. being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities;
4. being the subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any Federal or State authority
barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any activity described in paragraph
(f)(3)(i) of this section, or to be associated with persons engaged in
any such activity;
5. being found by a court of competent jurisdiction in a civil action or
by the Commission to have violated any Federal or State securities
law, and the judgment in such civil action or finding by the
Commission has not been subsequently reversed, suspended, or vacated;
or
6. being found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended, or
vacated.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires our executive officers and directors
and persons who own more than 10% of a registered class of our equity securities
to file with the SEC initial statements of beneficial ownership, reports of
changes in ownership and annual reports concerning their ownership of our common
stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive
40
officers, directors and greater than 10% shareholders are required by the SEC
regulations to furnish us with copies of all Section 16(a) reports that they
file.
Based solely on our review of the copies of such forms received by us, or
written representations from certain reporting persons, we believe that all
filing requirements applicable to our officers, directors and greater than 10%
beneficial owners were complied with.
CODE OF ETHICS
We adopted a Code of Ethics applicable to all of our directors, officers,
employees and consultants, which is a "code of ethics" as defined by applicable
rules of the SEC. If we make any amendments to our Code of Ethics other than
technical, administrative, or other non-substantive amendments, or grant any
waivers, including implicit waivers, from a provision of our Code of Ethics to
our chief executive officer, chief financial officer, or certain other finance
executives, we will disclose the nature of the amendment or waiver, its
effective date and to whom it applies in a Current Report on Form 8-K filed with
the SEC.
CORPORATE GOVERNANCE
NOMINATING AND COMPENSATION COMMITTEES
We do not have standing nominating or compensation committees, or committees
performing similar functions. Our board of directors believes that it is not
necessary to have a standing compensation committee at this time because the
functions of such committee are adequately performed by our board of directors.
Our board of directors also is of the view that it is appropriate for us not to
have a standing nominating committee because our board of directors has
performed and will perform adequately the functions of a nominating committee.
Our board of directors has not adopted a charter for the nomination committee.
There has not been any defined policy or procedure requirements for stockholders
to submit recommendations or nomination for directors. Our board of directors
does not believe that a defined policy with regard to the consideration of
candidates recommended by stockholders is necessary at this time because we
believe that, given the early stages of our development, a specific nominating
policy would be premature and of little assistance until our business operations
are at a more advanced level. There are no specific, minimum qualifications that
our board of directors believes must be met by a candidate recommended by our
board of directors. The process of identifying and evaluating nominees for
director typically begins with our board of directors soliciting professional
firms with whom we have an existing business relationship, such as law firms,
accounting firms or financial advisory firms, for suitable candidates to serve
as directors. It is followed by our board of directors' review of the
candidates' resumes and interview of candidates. Based on the information
gathered, our board of directors then makes a decision on whether to recommend
the candidates as nominees for director. We do not pay any fee to any third
party or parties to identify or evaluate or assist in identifying or evaluating
potential nominee.
AUDIT COMMITTEE
We do not have a standing audit committee at the present time. Our board of
directors has determined that we do not have a board member that qualifies as an
"audit committee financial expert" as defined in Item 407(d)(5)(ii) of
Regulation S-K.
We believe that our board of directors is capable of analyzing and evaluating
our financial statements and understanding internal controls and procedures for
financial reporting. The board of directors of our company does not believe that
41
it is necessary to have an audit committee because we believe that the functions
of an audit committee can be adequately performed by the board of directors. In
addition, we believe that retaining an independent director who would qualify as
an "audit committee financial expert" would be overly costly and burdensome and
is not warranted in our circumstances given the early stages of our development
and the fact that we have not generated any revenues from operations to date.
OTHER COMMITTEES
All proceedings of our board of directors for the year ended May 31, 2013 were
conducted by telephone conference or by resolutions consented to in writing by
our directors and filed with the minutes of the proceedings of the board of
directors. Our company currently does not have nominating, compensation or audit
committees or committees performing similar functions nor does our company have
a written nominating, compensation or audit committee charter. Our board of
directors believes that it is not necessary to have such committees, at this
time, because they can adequately perform the functions of such committees.
Our company does not have any defined policy or procedural requirements for
shareholders to submit recommendations or nominations for directors. Our
director believes that, given the stage of our development, a specific
nominating policy would be premature and of little assistance until our business
operations develop to a more advanced level. Our company does not currently have
any specific or minimum criteria for the election of nominees to the Board of
Directors and we do not have any specific process or procedure for evaluating
such nominees. Our board of directors will assess all candidates, whether
submitted by management or shareholders, and make recommendations for election
or appointment.
A shareholder who wishes to communicate with our board of directors may do so by
directing a written request addressed to our President, at the address appearing
on the first page of this annual report.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The particulars of compensation paid over the past two fiscal years to the
following persons:
* All individuals serving as our principal executive officer;
* All individuals serving as our principal financial officer;
* our three most highly compensated executive officers who were serving
as executive officers at the end of the year ended May 31, 2013 whose
total annual compensation exceeded $100,000; and
* up to two additional individuals for whom disclosure would have been
provided above but for the fact that the individual was not serving as
our executive officer at the end of the most recently completed
financial year,
whom we refer to collectively as the "named executive officers", for the year
ended May 31, 2013, are set out in the following summary compensation table:
42
Non-Equity Nonqualified
Name and Incentive Deferred
Principal Stock Option Plan Compensation All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Totals($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- ---------
William 2013 Nil Nil Nil Nil Nil Nil 59,761 (1) 59,761
Iny 2012 Nil Nil Nil Nil Nil Nil 134,367 (1) 134,367
President, 2011 Nil Nil Nil 152,500 Nil Nil 63,241 (1) 215,741
CEO, CFO,
Secretary
& Treasurer
----------
1. Management fees and bonus paid to a company controlled by Mr. Iny.
DIRECTOR COMPENSATION POLICY
Our board of directors does not receive compensation for acting in such
capacity. On occasion, our directors will receive compensation for services that
they provide to us. The following table provides information regarding
compensation that we have provided to our directors during the fiscal year ended
May 31, 2011:
Change in
Pension
Value and
Fees Non-Equity Nonqualified
Earned Incentive Deferred
Paid in Stock Option Plan Compensation All Other
Name Cash($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Total($)
---- ------- --------- --------- --------------- ----------- --------------- --------
William Iny Nil Nil Nil Nil Nil 59,761 (1) Nil
Harry Bauskin Nil Nil Nil Nil Nil Nil Nil
Patricia J. Shorr Nil Nil Nil Nil Nil Nil Nil
Greg Yanke Nil Nil Nil Nil Nil Nil Nil
----------
1. Management fees and bonus paid to a company controlled by Mr. Iny.
43
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Below is a summary of unexercised options; stock that has not vested; and equity
incentive plan awards for each named executive officer outstanding as of the end
of our last completed fiscal year.
Option Awards Stock Awards
----------------------------------------------------------------- -----------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market or
Awards: Payout
Equity Number of Value of
Incentive Number Unearned Unearned
Plan Awards; of Market Shares, Shares,
Number of Number of Number of Shares Value of Units or Units or
Securities Securities Securities or Units Shares or Other Other
Underlying Underlying Underlying of Stock Units of Rights Rights
Unexercised Unexercised Unexercised Option Option That Stock That That That
Options Options Unearned Exercise Expiration Have Not Have Not Have Not Have Not
Name Exercisable(#) Unexercisable(#) Options(#) Price($) Date Vested(#) Vested($) Vested(#) Vested(#)
---- -------------- ---------------- ---------- ----- ---- --------- --------- --------- ---------
William 333,334 Nil Nil $0.51 2014 Nil Nil Nil Nil
Iny 900,000 Nil Nil $0.10 2016 Nil Nil Nil Nil
OPTION EXERCISES AND STOCK VESTED TABLE
OPTION AWARDS STOCK AWARDS
------------------------------ ----------------------------
Number of Number of
Shares Value Shares Value
Acquired On Realized On Acquired On Realized On
Name Exercise(#) Exercise($) Vesting(#) Vesting($)
---- ----------- ----------- ---------- ----------
William Iny Nil Nil Nil Nil
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table reflects, as of September 2, 2013, the beneficial common
stock ownership of: (a) each of our directors, (b) each executive officer, (c)
each person known by us to be a beneficial holder of five percent (5%) or more
of our common stock, and (d) all of our executive officers and directors as a
group:
44
Beneficial ownership is determined in accordance with the rules of the SEC.
Shares of common stock subject to options currently exercisable or exercisable
within 60 days of September 2, 2013, are deemed outstanding for computing the
percentage ownership of the stockholder holding the options or warrants, but are
not deemed outstanding for computing the percentage ownership of any other
stockholder. Unless otherwise indicated in the footnotes to this table, we
believe stockholders named in the table have sole voting and sole investment
power with respect to the shares set forth opposite such stockholder's name.
Percentage of ownership is based on 33,203,016 shares of common stock
outstanding as of September 2, 2013.
Amount and
Nature of
Beneficial Percent of
Name and Address of Beneficial Shareholder Ownership (1) Class (2)
------------------------------------------ ------------- ---------
William Iny 10,347,447 (3) 31.8%
1200 West 73rd Street, 11th Floor
Vancouver, British Columbia
Greg Yanke 9,882,128 (4) 30.4%
1200 West 73rd Street, 11th Floor
Vancouver, British Columbia
Harry Bauskin 4,759,000 (5) 14.6%
1200 West 73rd Street, 11th Floor
Vancouver, British Columbia
Patricia J. Shorr 350,000 (6) 1.1%
1200 West 73rd Street, 11th Floor
Vancouver, British Columbia
Directors and officers as a
group (4 persons) 25,338,575 77.8%
----------
1. Under Rule 13d-3, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares: (i) voting power, which includes
the power to vote, or to direct the voting of shares; and (ii) investment
power, which includes the power to dispose or direct the disposition of
shares. Certain shares may be deemed to be beneficially owned by more than
one person (if, for example, persons share the power to vote or the power
to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the
shares (for example, upon exercise of an option) within 60 days of the date
as of which the information is provided. In computing the percentage
ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only
such person) by reason of these acquisition rights.
2. The percentage of class is based on 33,203,016 shares of common stock
issued and outstanding as of September 2, 2013. This total includes
15,680,016 shares of common stock that are reserved for issuance in
exchange for certain exchangeable securities of the Company's subsidiary
Keewatin Windpower Inc.
3. Total consists of: 9,114,113 shares of the Company's common stock
beneficially owned by Mr. Iny and incentive stock options to purchase up to
1,233,334 shares of the Company's common stock.
4. Total consists of: 9,357,128 shares of the Company's common stock
beneficially owned by Mr. Yanke and incentive stock options to purchase up
to 525,000 shares of the Company's common stock.
5. Total consists of: 1,334,000 shares of the Company's common stock
beneficially owned by Mr. Bauskin, 2,900,000 shares of the Company's common
stock owned by Plein Sprung Energy Partnership, of which Mr. Bauskin is a
limited partnership, and incentive stock options to purchase up to 525,000
shares of the Company's common stock.
6. Total consists of incentive stock options to purchase up to 350,000 shares
of the Company's common stock.
45
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
Other than as listed below, we have not entered into or participated in any
transactions or a series of similar transactions, wherein the amount involved
exceeded $120,000 or one percent of our total assets at year end for the last
three completed fiscal years, in which any of our officers, directors, persons
nominated for these positions, beneficial owners of 5% or more of our common
stock, family members of these persons or any related person of our company had
a direct or indirect material interest.
1. During the year ended May 31, 2013, the Company paid or accrued
$59,761 (year ended May 31, 2012 - $60,507) in management fees to a
company owned by William Iny, our president.
2. During the year ended May 31, 2010, one of our directors, Greg Yanke,
loaned the Company $27,000. The amount is unsecured and accrues
interest at an annual rate of 15%. As at May 31, 2013, accrued interst
of $11,961 on the loan has been recorded.
DIRECTOR INDEPENDENCE
Our common stock is quoted on the FINRA bulletin board interdealer quotation
system, which does not have director independence requirements. Under NASDAQ
rule 4200(a)(15), a director is not considered to be independent if he or she is
also an executive officer or employee of the corporation. Three of our four
directors are considered independent.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
We have not entered into an employment agreement or consulting agreement with
our board of directors and executive officers.
PENSION, RETIREMENT OR SIMILAR BENEFIT PLANS
There are no arrangements or plans in which we provide pension, retirement or
similar benefits for directors or executive officers. We have no material bonus
or profit sharing plans pursuant to which cash or non-cash compensation is or
may be paid to our directors or executive officers, except that stock options
may be granted at the discretion of the Board of Directors or a committee
thereof.
We have no plans or arrangements in respect of remuneration received or that may
be received by our executive officers to compensate such officers in the event
of termination of employment (as a result of resignation, retirement, change of
control) or a change of responsibilities following a change of control, where
the value of such compensation exceeds $60,000 per executive officer.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
AUDIT FEES
For the years ended May 31, 2013 and 2012, the aggregate fees billed by PLS CPA,
our independent accountant, for professional services rendered for the audit of
our annual consolidated financial statements included in our annual report on
Form 10-K were:
2013 $24,000
2012 $24,000
46
AUDIT RELATED FEES
For the years ended May 31, 2013 and 2012, the aggregate fees billed for
assurance and related services by PLS CPA relating to the performance of the
audit of our financial statements which are not reported under the caption
"Audit Fees" above, was:
2013 Nil
2012 Nil
TAX FEES
For the years ended May 31, 2013 and 2012, the aggregate fees billed by PLS CPA
for other non-audit professional services, other than those services listed
above, totalled:
2013 Nil
2012 Nil
We do not use PLS CPA for financial information system design and
implementation. These services, which include designing or implementing a system
that aggregates source data underlying the financial statements or generates
information that is significant to our financial statements, are provided
internally or by other service providers. We do not engage PLS CPA to provide
compliance outsourcing services.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that
require that before PLS CPA is engaged by us to render any auditing or permitted
non-audit related service, the engagement be:
* approved by our board of directors who are capable of analyzing and
evaluating financial information; or
* entered into pursuant to pre-approval policies and procedures
established by the board of directors, provided the policies and
procedures are detailed as to the particular service, the board of
directors is informed of each service, and such policies and
procedures do not include delegation of the board of directors'
responsibilities to management.
The board of directors pre-approves all services provided by our independent
auditors. All of the above services and fees were reviewed and approved by the
board of directors either before or after the respective services were rendered.
47
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Sky Harvest Energy Corp. and
its subsidiary are filed as part of this Form 10-K:
Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of May 31, 2013 and 2012
Consolidated Statements of Operations for the years ended May 31, 2013 and 2012
and for the period since inception
Consolidated Statements of Cash Flows for the years ended May 31, 2013 and 2012
and for the period since inception
Consolidated Statement of Stockholders' Equity for the years ended May 31, 2013
and 2012 and for the period since inception
Notes to the Consolidated Annual Financial Statements
All schedules are omitted because they are not applicable or the required
information is shown in the Financial Statements or notes thereto.
48
EXHIBITS
Filed with
Description Exhibit No. Form Filing date this Form 10-K
----------- ----------- ---- ----------- --------------
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 Placement 4.1 10-QSB January 14, 2008
MATERIAL CONTRACTS--MANAGEMENT CONTRACTS AND COMPENSATORY PLANS
Management Agreement between Keewatin Windpower Corp. 10.1 SB-2 July 14, 2005
and Christopher Craddock, dated March 1, 2005
MATERIAL CONTRACTS--FINANCING AGREEMENTS
Form of Subscription Agreement for July 13, 2007 Private Placement
for US Subscribers 10.2 10-QSB January 14, 2008
Form of Subscription Agreement for July 13, 2007 Private Placement
for Non-US Subscribers 10.3 10-QSB January 14, 2008
MATERIAL CONTRACTS--OTHER
Consent to Entry/Right of Access Agreement between Keewatin
Windpower Corp. and Edward and Charlotte Bothner, dated
August 23, 2005 10.4 SB-2 September 29, 2005
Letter of Intent between Keewatin Windpower Corp. and Sky
Harvest Windpower Corp. dated March 27, 2007 10.5 10-QSB January 14, 2008
Loan Agreement between Sky Harvest Windpower Corp. and
Keewatin Windpower Corp. dated September 23, 2008 10.6 10-QSB January 14, 2009
Promissory Note of Sky Harvest Windpower Corp. dated
September 23, 2008 10.7 10-QSB January 14, 2009
Financial Communications and Strategic Consulting Agreement with
Aspire Clean Tech Communications, Inc. dated February 23, 2009 10.8 8-K March 3, 2009
Promissory Note of Sky Harvest Windpower Corp. dated
September 23, 2008 10.9 10-Q February 28, 2009
Loan Agreement between Sky Harvest Windpower Corp. and
Keewatin Windpower Corp. dated January 28, 2009 10.10 10-Q February 28, 2009
Share exchange agreement between Keewatin Windpower Corp. and
Sky Harvest Windpower Corp. dated May 11, 2009 10.11 8-K July 10, 2009
49
Exchangeable share support agreement between Keewatin Windpower
Corp. and Keewatin Windpower Inc. dated May 11, 2009 10.12 8-K July 10, 2009
Voting and exchange trust agreement between Keewatin Windpower
Corp., Keewatin Windpower Inc. and Valiant Trust Company dated
May 11, 2009 10.13 8-K July 10, 2009
2010 Share Option plan 10.14 8-K September 23, 2009
CODE OF ETHICS
Code of Ethics 14.1 10-K August 31, 2009
CERTIFICATES
Certification Statement of the Chief Executive Officer and
Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 31.1 ` *
Certification Statement of the Chief Executive 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 32.1 *
Interactive Data Files pursuant to Rule 405 of Regulation S-T. 101 *
50
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.
SKY HARVEST ENERGY CORP.
/s/ William Iny
--------------------------------------------
William Iny
Chief Executive Officer and Chief Financial
Officer Principal Executive Officer,
Principal Accounting Officer and Principal
Financial Officer
Date: October 16, 2013
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
President, Chief Executive Officer, Chief
Financial Officer , President, Treasurer,
Secretary, and Director, Principal Executive
Officer, Principal Accounting Officer and
Principal Financial Officer
Date: October 16, 2013
5
