UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended February 29, 2012
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to _________
Commission file number: 000-52410
SKY HARVEST WINDPOWER CORP.
(Exact name of registrant as specified in its charter)
Nevada N/A
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
890 West Pender Street, Suite 710, Vancouver, BC, Canada V6C 1J9
(Address of principal executive offices) (Zip Code)
(604) 267-3041
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
31,706,016 shares of common stock are issued and outstanding as of April 16,
2012 (including 15,680,016 shares of common stock reserved for issuance in
exchange for certain outstanding exchangeable securities of the registrant).
INDEX
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
CONSOLIDATED BALANCE SHEETS as of February 29, 2012 and
May 31, 2011 3
CONSOLIDATED STATEMENTS OF OPERATIONS for the Three and Nine
Months Ended February 29, 2012 and February 28, 2011, and for the
period since inception 4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY for the period
since inception 5
CONSOLIDATED STATEMENTS OF CASH FLOWS for the Nine Months Ended
February 29, 2012 and February 28, 2011, and for the period
since inception 8
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
Item 4. Controls and Procedures 25
PART II OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 1A. Risk Factors 26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 26
Item 4. (Removed and reserved) 26
Item 5. Other Information 26
Item 6. Exhibits 27
SIGNATURES 29
2
Sky Harvest Windpower Corp.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in US Dollars)
(Unaudited)
February 29, May 31,
2012 2011
---------- ----------
$ $
ASSETS
CURRENT ASSETS
Cash and cash equivalents 101,558 23,465
Other receivables 9,763 10,855
Prepaid expenses 3,100 53,120
---------- ----------
TOTAL CURRENT ASSETS 114,421 87,440
Property and equipment, net (Note 4) 69,916 71,945
---------- ----------
TOTAL ASSETS 184,337 159,385
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Accounts payable 154,575 166,576
Accrued liabilities 1,106 3,156
Due to related parties (Note 7) 106,098 283,023
Note payable (Note 5) 50,000 60,324
---------- ----------
TOTAL LIABILITIES 311,779 513,079
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock:
Authorized: 10,000,000 shares, $0.001 par value
Issued and outstanding: 1 share (May 31, 2011 - 1 share) -- --
Common Stock:
Authorized: 100,000,000 shares, $0.001 par value
Issued and outstanding: 31,702,016 shares (May 31, 2011 -
29,732,016 shares) 31,702 29,732
Additional paid-in capital 6,434,329 5,829,796
Common stock subscribed (Notes 8(b) and 11) 26,750 6,750
Accumulated other comprehensive loss (67,182) (82,445)
Deficit accumulated during the development stage (6,553,041) (6,137,527)
---------- ----------
TOTAL STOCKHOLDERS' DEFICIT (127,442) (353,694)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIT 184,337 159,385
========== ==========
Continuing operations (Note 1)
Commitments and contingencies (Note 11)
(The accompanying notes are an integral part of these
consolidated financial statements)
3
Sky Harvest Windpower Corp.
(A Development Stage Company)
Consolidated Statements of Operations
(Expressed in US Dollars, except number of shares)
(Unaudited)
Accumulated from
February 25, 2005 For the For the For the For the
(Date of Three Months Three Months Nine Months Nine Months
Inception) to Ended Ended Ended Ended
February 29, February 29, February 28, February 29, February 28,
2012 2012 2011 2012 2011
---------- ---------- ---------- ---------- ----------
$ $ $ $ $
EXPENSES
Consulting fees 381,634 -- 3,234 15,187 49,311
Engineering and development 534,391 (2,008) 21,598 121,960 61,612
Management fees (Note 7) 719,932 14,835 15,924 119,352 77,994
Professional fees 472,384 82,885 10,639 118,619 42,048
General and administrative 1,794,165 9,986 23,317 26,653 53,803
Acquired development costs 242,501 -- -- -- --
---------- ---------- ---------- ---------- ----------
Operating loss (4,144,907) (105,698) (74,712) (401,771) (284,768)
OTHER INCOME (LOSS)
Impairment loss (2,551,440) -- -- -- --
Interest income 89,382 -- -- -- 24
Foreign exchange gain (loss) 65,911 30,980 37,031 (17,742) 47,074
Settlement of debt (11,987) -- -- 3,999 --
---------- ---------- ---------- ---------- ----------
NET LOSS (6,553,041) (74,718) (37,681) (415,514) (237,670)
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments (67,182) (34,113) (41,242) 15,263 (51,992)
---------- ---------- ---------- ---------- ----------
Comprehensive loss (6,620,233) (108,831) (78,923) (400,251) (289,662)
========== ========== ========== ========== ==========
Net Loss Per Common Share
- Basic and Diluted (0.00) (0.00) (0.01) (0.01)
---------- ---------- ---------- ----------
Weighted average number of common
stock outstanding 31,702,000 29,732,000 29,883,000 29,732,000
---------- ---------- ---------- ----------
(The accompanying notes are an integral part of these
consolidated financial statements)
4
Sky Harvest Windpower Corp.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
(Expressed in US Dollars, except number of shares)
(Unaudited)
Deficit
Accumulated
Additional Common During the
Preferred Common Paid-in Stock Development
Stock Amount Shares Amount Capital Subscribed Stage Total
# $ # $ $ $ $ $
------ ------ ---------- -------- --------- ------- ---------- --------
Balance - February 25, 2005
(Date of Inception) -- -- -- -- -- -- -- --
Common stock issued on March 2,
2005 to founders for cash at
$0.00167 per share -- -- 6,000,000 6,000 4,000 -- -- 10,000
Common stock issued from
March 4, 2005 to March 20,
2005 for cash at $0.0033
per share -- -- 3,000,000 3,000 7,000 -- -- 10,000
Common stock issued on
March 31, 2005 for cash
at $0.0167 per share -- -- 300,000 300 4,700 -- -- 5,000
Common stock issued from
April 7, 2005 to April 28,
2005 for cash at $0.0167
per share -- -- 480,000 480 7,520 -- -- 8,000
Common stock issued from May 1,
2005 to May 25, 2005 for cash
at $0.0167 per share -- -- 690,000 690 10,810 -- -- 11,500
Common stock issued on May 29,
2005 for cash at $0.0167 per
share -- -- 60,000 60 9,940 -- -- 10,000
Net loss for the period -- -- -- -- -- -- (12,321) (12,321)
------ ------ ---------- -------- --------- ------- ---------- --------
Balance - May, 31 2005
carried forward -- -- 10,530,000 10,530 43,970 -- (12,321) 42,179
------ ------ ---------- -------- --------- ------- ---------- --------
(The accompanying notes are an integral part of these
consolidated financial statements)
5
Sky Harvest Windpower Corp.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
(Expressed in US Dollars, except number of shares)
(Unaudited)
Deficit
Accumulated
Additional Common During the
Preferred Common Paid-in Stock Development
Stock Amount Shares Amount Capital Subscribed Stage Total
# $ # $ $ $ $ $
------ ------ ---------- -------- --------- ------- ---------- ---------
Balance - May, 31, 2005
brought forward -- -- 10,530,000 10,530 43,970 -- (12,321) 42,179
Net loss for the year -- -- -- -- -- -- (57,544) (57,544)
------ ------ ---------- -------- --------- ------- ---------- ---------
Balance - May 31, 2006 -- -- 10,530,000 10,530 43,970 -- (69,865) (15,365)
Common stock subscribed -- -- -- -- -- 500,500 -- 500,500
Stock-based compensation -- -- -- -- 365,508 -- -- 365,508
Net loss for the year -- -- -- -- -- -- (435,426) (435,426)
------ ------ ---------- -------- --------- ------- ---------- ---------
Balance - May 31, 2007
carried forward -- -- 10,530,000 10,530 409,478 500,500 (505,291) 415,217
------ ------ ---------- -------- --------- ------- ---------- ---------
Common stock issued on July
11, 2007 for cash at $0.70
per share -- -- 715,000 715 499,785 (500,500) -- --
Common stock issued on July
11, 2007 for finders' fees -- -- 71,500 71 49,979 -- -- 50,050
Common stock issued on July
27, 2007 for cash at $1.20
per share -- -- 1,075,000 1,075 1,288,925 -- -- 1,290,000
One million share purchase
warrants issued for finders'
fee -- -- -- -- 321,279 -- -- 321,279
Finders' fees -- -- -- -- (498,080) -- -- (498,080)
Net loss for the year -- -- -- -- -- -- (256,830) (256,830)
------ ------ ---------- -------- --------- ------- ---------- ---------
Balance - May 31, 2008 -- -- 12,391,500 12,391 2,071,366 -- (762,121) 1,321,636
Common stock subscribed -- -- -- -- -- 6,750 -- 6,750
Net loss for the year -- -- -- -- -- -- (341,733) (341,733)
------ ------ ---------- -------- --------- ------- ---------- ---------
Balance - May 31, 2009
carried forward -- -- 12,391,500 12,391 2,071,366 6,750 (1,103,854) 986,653
------ ------ ---------- -------- --------- ------- ---------- ---------
(The accompanying notes are an integral part of these
consolidated financial statements)
6
Sky Harvest Windpower Corp.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
(Expressed in US Dollars, except number of shares)
(Unaudited)
Deficit
Accumulated
Additional Common Accumulated During the
Preferred Common Paid-in Stock Other Development
Stock Amount Shares Amount Capital Subscribed Comprehensive Stage Total
# $ # $ $ $ Loss $ $
---- ------ ---------- -------- --------- ------- ---------- ---------- ----------
Balance - May 31, 2009
carried forward -- -- 12,391,500 12,391 2,071,366 6,750 -- (1,103,854) 986,653
Common stock issued
pursuant to business
acquisition -- -- 17,340,516 17,341 2,583,736 -- -- -- 2,601,077
Preferred stock issued
pursuant to business
acquisition 1 -- -- -- -- -- -- -- --
Stock-based compensation -- -- -- -- 589,514 -- -- -- 589,514
Accumulated other
comprehensive loss -- -- -- -- -- -- (28,257) -- (28,257)
Net loss for year -- -- -- -- -- -- -- (1,549,409) (1,549,409)
---- ------ ---------- -------- --------- ------- ---------- ---------- ----------
Balance - May 31, 2010 1 -- 29,732,016 29,732 5,244,616 6,750 (28,257) (2,653,263) 2,599,578
Stock-based compensation -- -- -- -- 585,180 -- -- -- 585,180
Accumulated other
comprehensive loss -- -- -- -- -- -- (54,188) -- (54,213)
Net loss for the year -- -- -- -- -- -- -- (3,484,264) (917,550)
---- ------ ---------- -------- --------- ------- ---------- ---------- ----------
Balance - May 31, 2011 1 -- 29,732,016 29,732 5,829,796 6,750 (82,445) (6,137,527) (353,694)
Stock-based compensation -- -- -- -- (4,897) -- -- -- (4,897)
Accumulated other
comprehensive loss -- -- -- -- -- -- 15,263 -- 15,263
Common stock issued on
June 21, 2011 for cash
at $0.25 per share -- -- 1,970,000 1,970 490,530 -- -- -- 492,500
Stock subscriptions
received -- -- -- -- -- 20,000 -- -- 20,000
Disgorgement of swing
trading profits -- -- -- -- 118,900 -- -- -- 118,900
Net loss for the period -- -- -- -- -- -- -- (415,514) (415,514)
---- ------ ---------- -------- --------- ------- ---------- ---------- ----------
Balance - February 29, 2012 1 -- 31,702,016 31,702 6,434,329 26,750 (67,182) (6,553,041) (127,442)
==== ====== ========== ======== ========= ======= ========== ========== ==========
(The accompanying notes are an integral part of these
consolidated financial statements)
7
Sky Harvest Windpower Corp.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Expressed in US Dollars)
(Unaudited)
Accumulated from
February 25, 2005 For the For the
(Date of Nine Months Nine Months
Inception) to Ended Ended
February 29, February 29, February 28,
2012 2012 2011
---------- ---------- ----------
$ $ $
OPERATING ACTIVITIES
Net loss for the period (6,553,041) (415,514) (237,670)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 23,533 522 3,637
Stock-based compensation 1,540,265 (4,897) (13,504)
Impairment loss 2,551,440 -- --
Loss (Gain) on settlement of debt 11,987 (3,999) --
Acquired development costs 242,501 -- --
Changes in operating assets and liabilities:
Prepaid expenses 9,034 50,020 17,879
Accrued interest 244 -- 31
Accounts payable and accrued liabilities 138,014 (10,053) 124,945
Account receivable (28,120) 1,093 (21,658)
Note receivable (280,000) -- --
Due to related parties 42,736 (31,712) 61,313
---------- ---------- ----------
NET CASH FLOWS USED IN OPERATING ACTIVITIES (2,301,407) (414,540) (65,027)
---------- ---------- ----------
INVESTING ACTIVITIES
Purchase of equipment (23,504) -- --
Purchase of short-term investments (2,472,839) -- --
Redemption of short-term investments 2,493,484 -- 22,840
Cash acquired from acquisition 21,016 -- --
---------- ---------- ----------
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES 18,157 -- 22,840
---------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from common stock issuances 2,210,749 492,500 --
Proceeds from common stock subscribed 20,000 20,000 --
Proceeds from (Repayment of) related party loans 62,854 (144,536) 61,741
Proceeds from (Repayment of) note payable 50,000 (10,324) 50,000
Proceeds from swing sale disgorgement 118,900 118,900 --
---------- ---------- ----------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 2,462,503 476,540 111,741
---------- ---------- ----------
Effect of exchange rate changes on cash (77,695) 16,093 (56,912)
Increase in cash and cash equivalents 101,558 78,093 12,642
Cash and cash equivalents - beginning of period -- 23,465 234
---------- ---------- ----------
CASH AND CASH EQUIVALENTS - END OF PERIOD 101,558 101,558 12,876
========== ========== ==========
SUPPLEMENTARY DISCLOSURES:
Interest paid -- -- --
Income taxes paid -- -- --
---------- ---------- ----------
SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES:
Stock issuance for acquisition 2,601,077 -- --
Increase intangible asset due to acquisition 2,551,400 -- --
Accounts payable increased due to acquisition 30,986 -- --
(The accompanying notes are an integral part of these
consolidated financial statements)
8
Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2012
(Expressed in US Dollars)
(Unaudited)
1. Organization and Description of Business
Sky Harvest Windpower Corp. (the "Company") was incorporated in the State
of Nevada on February 25, 2005. The Company is a Development Stage Company,
as defined by Financial Accounting Standards Board ("FASB") Accounting
Standards Codification ("ASC") 915, DEVELOPMENT STAGE ENTITIES. Its
activities to date have been limited to capital formation, organization,
and development of its business plan for the exploration and development of
wind power projects in Canada.
Effective July 13, 2009, the Company acquired all the outstanding common
stock of Sky Harvest Windpower (Saskatchewan) Corp. ("Sky Harvest -
Saskatchewan"), a private company incorporated under the laws of Canada.
On September 1, 2009, the Company completed a merger with its wholly-owned
inactive subsidiary, Sky Harvest Windpower Corp., a Nevada corporation,
which was incorporated solely to effect a change in the Company's name. As
a result, the Company changed its name from Keewatin Windpower Corp. to Sky
Harvest Windpower Corp.
These consolidated financial statements have been prepared on a going
concern basis, which implies the Company will continue to realize its
assets and discharge its liabilities in the normal course of business. The
Company has never generated revenues since inception and has never paid any
dividends and is unlikely to pay dividends or generate earnings in the
immediate or foreseeable future. The continuation of the Company as a going
concern is dependent upon the continued financial support from its
shareholders, the ability of the Company to obtain necessary equity
financing to continue operations, the successful exploitation of
economically recoverable electricity in its wind power projects, and the
attainment of profitable operations. As at February 29, 2012, the Company
has accumulated losses of $6,553,041 since inception. These factors raise
substantial doubt regarding the Company's ability to continue as a going
concern. These consolidated financial statements do not include any
adjustments to the recoverability and classification of recorded asset
amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
Management plans to raise additional funds through debt and equity
offerings. Management has yet to decide what type of offering the Company
will use or how much capital the Company will attempt to raise and on what
terms. There is however no assurance that the Company will be able to raise
any additional capital through any type of offering on terms acceptable to
the Company.
2. Significant Accounting Polices
a. Basis of Accounting
The Company's consolidated financial statements are prepared using the
accrual method of accounting. These consolidated statements include the
accounts of the Company and its wholly-owned subsidiaries Keewatin
Windpower Inc. and Sky Harvest - Saskatchewan. All significant intercompany
transactions and balances have been eliminated. The Company has elected a
May 31 year-end.
b. Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
c. Fair Value Measurements
ASC 820, FAIR VALUE MEASUREMENTS AND DISCLOSURES, defines fair value as the
price that would be received from selling an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. In determining fair value for assets and liabilities
required or permitted to be recorded at fair value, the Company considers
the principal or most advantageous market in which it would transact and it
considers assumptions that market participants would use when pricing the
asset or liability.
9
Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2012
(Expressed in US Dollars)
(Unaudited)
2. Significant Accounting Polices (continued)
c. Fair Value Measurements (continued)
FAIR VALUE HIERARCHY
ASC 820 establishes a fair value hierarchy that requires an entity to
maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. A financial instrument's categorization
within the fair value hierarchy is based upon the lowest level of input
that is significant to the fair value measurement. ASC 820 establishes
three levels of inputs that may be used to measure fair value:
LEVEL 1
Level 1 applies to assets and liabilities for which there are quoted prices
in active markets for identical assets or liabilities. Valuations are based
on quoted prices that are readily and regularly available in an active
market and do not entail a significant degree of judgment.
LEVEL 2
Level 2 applies to assets and liabilities for which there are other than
Level 1 observable inputs such as quoted prices for similar assets or
liabilities in active markets, quoted prices for identical assets or
liabilities in markets with insufficient volume or infrequent transactions
(less active markets), or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated
by, observable market data. Level 2 instruments require more management
judgment and subjectivity as compared to Level 1 instruments. For instance:
* Determining which instruments are most similar to the instrument being
priced requires management to identify a sample of similar securities
based on the coupon rates, maturity, issuer, credit rating and
instrument type, and subjectively select an individual security or
multiple securities that are deemed most similar to the security being
priced; and
* Determining whether a market is considered active requires management
judgment.
LEVEL 3
Level 3 applies to assets and liabilities for which there are unobservable
inputs to the valuation methodology that are significant to the measurement
of the fair value of the assets or liabilities. The determination of fair
value for Level 3 instruments requires the most management judgment and
subjectivity.
The Company believes the fair value of its financial instruments consisting
of cash, other receivables, accounts payable, amounts due to related
parties and notes payable approximate their carrying values due to the
relatively short maturity of these instruments.
d. Equipment
(i) Amortization Methods and Rates
Equipment is carried at cost. Depreciation is computed using a
straight-line method over the estimated useful lives of the
depreciable property, which range from 3 to 5 years. Management
evaluates useful lives regularly in order to determine recoverability
taking into consideration current technological conditions.
Maintenance and repairs are charged to expenses as incurred; additions
and betterments are capitalized. Upon retirement or disposal of any
item of equipment, the cost and related accumulated depreciation of
the disposed assets is removed, and any resulting gain or loss is
credited or charged to operations. Costs included in wind equipment
are under construction and will be amortized over their useful life on
a straight-line basis once they are put into use.
10
Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2012
(Expressed in US Dollars)
(Unaudited)
2. Significant Accounting Polices (continued)
d. Equipment (continued)
(ii) Asset Impairment
The Company performs impairment tests on its property and equipment
when events or changes in circumstances occur that indicate the
carrying value of an asset may not be recoverable. Estimated future
cash flows are calculated using estimated future prices and operating
and capital costs on an undiscounted basis. When the carrying value of
the property and equipment exceeds estimated future cash flows, the
asset is impaired. An impairment loss is recorded to the extent the
carrying value exceeds the discounted value of the estimated future
cash flows.
(iii)Repairs and Maintenance
Repairs and maintenance costs are charged to expense as incurred,
except when these repairs significantly extend the life of an asset or
result in an operating improvement. In these instances, the portion of
these repairs relating to the betterment is capitalized as part of
property and equipment.
e. Long Lived Assets
INTANGIBLE ASSETS
In accordance with ASC 350, INTANGIBLES - GOODWILL AND OTHER, goodwill is
required to be tested for impairment on an annual basis, or more frequently
if certain indicators arise, using the guidance specifically provided, and
purchased intangible assets other than goodwill are required to be
amortized over their useful lives unless there lives are determined to be
indefinite.
Management reviews intangible assets at least annually, and on an interim
basis when conditions require, evaluates events or changes in circumstances
that may indicate impairment in the carrying amount of such assets. An
impairment loss is recognized in the statement of operations in the period
that the related asset is deemed to be impaired.
In accordance with ASC 360, PROPERTY, PLANT AND EQUIPMENT, the Company
tests long-lived assets or asset groups for recoverability when events or
changes in circumstances indicate that their carrying amount may not be
recoverable. Circumstances which could trigger a review include, but are
not limited to: significant decreases in the market price of the asset;
significant adverse changes in the business climate or legal factors;
accumulation of costs significantly in excess of the amount originally
expected for the acquisition or construction of the asset; current period
cash flow or operating losses combined with a history of losses or a
forecast of continuing losses associated with the use of the asset; and
current expectation that the asset will more likely than not be sold or
disposed significantly before the end of its estimated useful life.
Recoverability is assessed based on the carrying amount of the asset and
its fair value which is generally determined based on the sum of the
undiscounted cash flows expected to result from the use and the eventual
disposal of the asset, as well as specific appraisal in certain instances.
An impairment loss is recognized when the carrying amount is not
recoverable and exceeds fair value.
f. Income Taxes
Income taxes are provided in accordance with ASC 740, INCOME TAXES. A
deferred tax asset or liability is recorded for all temporary differences
between financial and tax reporting and net operating loss carry forwards.
Deferred tax expense (benefit) results from the net change during the year
of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
11
Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2012
(Expressed in US Dollars)
(Unaudited)
2. Significant Accounting Polices (continued)
g. Foreign Currency Translation
The functional currency of the Company's Canadian subsidiaries is the
applicable local currency. The functional currency is translated into U.S.
dollars for balance sheet accounts using current exchange rates in effect
as of the balance sheet date and for revenue and expense accounts and cash
flow items using a weighted-average exchange rate during the reporting
period. Adjustments resulting from translation are included in accumulated
comprehensive income (loss), a separate component of shareholders' equity
(deficit).
Monetary assets and liabilities denominated in foreign currencies are
translated using the exchange rate prevailing at the balance sheet date.
Gains and losses arising on translation or settlement of foreign currency
denominated transactions or balances are included in the determination of
income. Foreign currency transactions are primarily undertaken in Canadian
dollars. The Company has not, to the date of these consolidated financial
statements, entered into derivative instruments to offset the impact of
foreign currency fluctuations.
h. Basic Earnings (Loss) per Share
The Company computes net income (loss) per share in accordance with ASC
260, EARNINGS PER SHARE. ASC 260 specifies the computation, presentation
and disclosure requirements for earnings (loss) per share for entities with
publicly held common stock. Basic net earnings (loss) per share amounts are
computed by dividing the net earnings (loss) by the weighted average number
of common shares outstanding. Diluted earnings (loss) per share are the
same as basic earnings (loss) per share due to the lack of dilutive items
in the Company.
i. Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make certain estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenue and expenses during the periods
presented. Actual results could differ from those estimates.
Significant estimates made by management are, among others, realizability
of long-lived assets, deferred taxes and stock option valuation. Management
reviews its estimates on a quarterly basis and, where necessary, makes
adjustments prospectively.
j. Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC 718,
COMPENSATION - STOCK BASED COMPENSATION, and ASC 505-50, EQUITY BASED
PAYMENTS TO NON-EMPLOYEES, using the fair value method. All transactions in
which goods or services are the consideration received for the issuance of
equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable. Equity instruments issued to
employees and the cost of the services received as consideration are
measured and recognized based on the fair value of the equity instruments
issued.
k. Website Development Costs
The Company capitalizes website development costs in accordance with ASC
350, INTANGIBLES - GOODWILL AND OTHER, whereby costs related to the
preliminary project stage of development are expensed and costs related to
the application development stage are capitalized. Any additional costs for
upgrades and enhancements which result in additional functionality will be
capitalized. Capitalized costs will be amortized based on their estimated
useful life over three years. Internal costs related to the development of
website content are charged to operations as incurred.
12
Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2012
(Expressed in US Dollars)
(Unaudited)
2. Significant Accounting Polices (continued)
l. Comprehensive Income
ASC 220, COMPREHENSIVE INCOME, establishes standards for the reporting and
display of comprehensive income and its components in the consolidated
financial statements. As at February 29, 2012 and February 28, 2011, the
Company`s only component of comprehensive income (loss) was foreign
currency translation adjustments.
3. Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in
effect and that may impact its financial statements and does not believe
that there are any other new accounting pronouncements that have been
issued that might have a material impact on its financial position or
results of operations.
4. Property and equipment
`
February 29, 2012 May 31, 2011
Accumulated Net Carrying Net Carrying
Cost Depreciation Value Value
---- ------------ ----- -----
$ $ $ $
Computer equipment 6,100 (5,665) 435 781
Asset under construction 68,960 -- 68,960 70,447
Wind tower equipment 22,116 (21,595) 521 717
------- ------- ------- -------
97,176 (27,260) 69,916 71,945
======= ======= ======= =======
5. Note Payable
During the year ended May 31, 2011, the Company received advances from
third parties in the amount of $60,324. During the nine months ended
February 29, 2012, the Company repaid $10,324. At February 29, 2012,
advances of $50,000 remain outstanding. The amount is unsecured,
non-interest bearing and due on demand.
6. Preferred Stock
On July 11, 2009, the Company entered into a voting and exchange trust
agreement among its subsidiary, Keewatin Wind Power Corp., and Valiant
Trust Company (Valiant Trust) whereby the Company issued and deposited with
Valiant Trust one special preferred voting share of the Company in order to
enable Valiant Trust to execute certain voting and exchange rights as
trustee from time to time for and on behalf of the registered holders of
the preferred shares of Keewatin Wind Power Corp. Each preferred share of
Keewatin Wind Power Corp. is exchangeable into one share of common stock of
the Company at the election of the shareholder, or, in certain
circumstances, of the Company.
As of February 29, 2012, the Company had issued 885,000 shares of common
stock to holders of 885,000 shares of exchangeable preferred shares of its
subsidiary Keewatin Wind Power Corp., pursuant to them exercising their
exchange rights. As of February 29, 2012, there were 15,680,016 outstanding
exchangeable shares (May 31, 2011 - 15,680,016 shares).
As the exchangeable shares have already been recognized in connection with
the acquisition of Sky Harvest - Saskatchewan, the value ascribed to these
shares on exchange is $Nil.
13
Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2012
(Expressed in US Dollars)
(Unaudited)
7. Related Party Transactions
a) During the nine months ended February 29, 2012, the Company incurred
$Nil (February 28, 2011 - $30,903) for management services provided by
a former director and a principal shareholder of the Company.
b) During the nine months ended February 29, 2012, the Company incurred
$45,492 (February 28, 2011 - $47,092) to a company controlled by the
President and principal shareholder of the Company for management
services. During the nine months ended February 29, 2012, the Company
paid a bonus of $73,860 (Cdn$75,000) (2010 - $nil) to the President
and principal shareholder of the Company for management services. As
at February 28, 2012, the Company is indebted to that company and the
Company's President for $40,879 (May 31, 2011 - $178,872), which is
non-interest bearing, unsecured and due on demand.
c) On June 18, 2010, the Company entered into a loan agreement with a
director for $27,000 which is payable within three months a written
demand is received from the note holder. The amount is unsecured and
bears interest at 15% per annum. As at February 29, 2012, accrued
interest of $6,891 was recorded. During the year ended May 31, 2011,
the Company received an advance of $71,753 (CDN$71,000) from the same
director. During the nine months ended February 29, 2012, the Company
repaid $40,424 (CDN$40,000). At February 29, 2012, $31,329
(CDN$31,000) is unsecured, non-interest bearing and has no terms of
repayment.
d) During the nine months ended February 29, 2012, the Company incurred
$75,330 to a company controlled by a director of the Company for legal
services.
e) On August 31, 2011, the Company received a disgorgement of swing
trading profits of $59,450 from the President of the Company. This
amount has been credited to additional paid-in capital.
f) On January 7, 2012, the Company received a disgorgement of swing
trading profits of $59,450 from a director of the Company. This amount
has been credited to additional paid-in capital.
These related party transactions are recorded at the exchange amount, being
the amount established and agreed to by the related parties.
8. Common Stock
a) On June 21, 2011, the Company closed a private placement consisting of
1,970,000 shares of common stock at a price of $0.25 per share for
gross proceeds of $492,500.
b) During the nine months ended February 29, 2012, the Company received
stock subscriptions for 80,000 shares of common stock at $0.25 per
share for cash proceeds of $20,000. At February 29, 2012, the amount
is included in common stock subscribed.
9. Stock Based Compensation
On September 11, 2009, the Company's board of directors adopted the 2009
Stock Option Plan which provides for the granting of stock options to
acquire up to 2,900,000 common shares of the Company to eligible employees,
officers, directors and consultants of the Company. At February 29, 2012,
the Company had 1,650,000 shares of common stock available to be issued
under the Plan.
The fair value for stock options vested during the nine month periods ended
February 29, 2012 and February 28, 2011 were estimated at the vesting and
granting date using the Black-Scholes option-pricing model. The weighted
average assumptions used are as follows:
Nine Months Nine Months
Ended Ended
February 29, February 28,
2012 2011
------ ------
Expected dividend yield 0% 0%
Risk-free interest rate 0.51% 1.87%
Expected volatility 573% 371%
Expected option life (in years) 3.13 4.00
14
Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2012
(Expressed in US Dollars)
(Unaudited)
9. Stock Based Compensation (continued)
The following table summarizes the continuity of the Company's stock
options:
Weighted-
Average
Remaining
Average Contractual Aggregate
Number of Exercise Term Intrinsic
Options Price (years) Value
------- ----- ------- -----
$ $
Outstanding: May 31, 2010 1,250,000 0.51
Granted 2,600,000 0.16
Expired (666,666) 0.51
--------- ----
Outstanding: May 31, 2011
and February 29, 2012 3,183,334 0.23 3.80 --
---------- ---- ---- -----
Exercisable: February 29, 2012 3,183,334 0.23 3.80 --
========= ==== ==== =====
A summary of the status of the Company's non-vested stock options as of
February 29, 2012, and changes during the nine months ended February 29,
2012, is presented below:
Weighted Average
Number of Grant Date
Non-vested options Options Fair Value
------------------ ------- ----------
$
Non-vested at May 31, 2011 62,500 0.42
Granted -- --
Forfeited/Cancelled -- --
Vested (62,500) 0.42
------- ----
Non-vested at February 29, 2012 -- --
======= ====
At February 29, 2012, there was $nil of unrecognized compensation costs
related to non-vested share-based compensation arrangements granted under
the Plan.
10. Joint Venture
On February 3, 2012, the Company and its joint venture partner incorporated
a British Columbia corporation under the name Levant Energy Inc.
("Levant"). The Company will initially hold a 65% interest in Levant by
investing $500,000. The investment is subject to certain conditions,
including completion of further equity or debt funding in order to finance
acquisition. The Company's joint venture partner will hold the remaining
35% interest in Levant. At February 29, 2012, the Company and its joint
venture partner have not made any contribution to Levant and operations
have not yet begun.
11. Commitments and Contingencies
a) On February 23, 2009, the Company entered into a consulting agreement
with a consultant (the "Consultant"). Pursuant to the agreement, the
Consultant provided investor relations services for the Company from
February 24, 2009 to July 5, 2009. In consideration for the investor
relations services, the Company agreed to pay the Consultant $5,000
per month and to issue 15,000 shares of the Company's common stock. At
February 29, 2012, the fair value of the 15,000 shares issuable was
$6,750 and is included in common stock subscribed.
15
Sky Harvest Windpower Corp.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
February 29, 2012
(Expressed in US Dollars)
(Unaudited)
11. Commitments and Contingencies (continued)
b) On February 3, 2012, the Company and its joint venture partner incorporated
a British Columbia corporation called Levant Energy Inc., for the purposes
of developing underground natural gas storage plants in the Republic of
Turkey. The Company intends to invest $500,000 to hold a 65% interest in
Levant. The investment is subject to certain conditions, including the
Company's completion of further equity or debt funding in order to finance
the acquisition.
c) On February 3, 2012, the Company entered into a consulting agreement with a
consultant. Pursuant to the agreement, the consultant will introduce the
Company potential acquisition and investment opportunities in the energy
sector, as well as any related sectors. If the Company completes an
acquisition of any interest in any company or assets as a result of the
consultant's introduction to investment opportunity, the Company shall pay
the consultant a success fee equal to 10% of the value of the transaction
in shares of the Company's common stock. The Company may also pay such
success fees in cash, or a combination of shares and cash. If the Company
completes transactions as a result of the consultant's introductions with
an aggregate value of at least $3,000,000, including any concurrent
financings, the consultant shall have the option to cause the Company to
enter into an employment agreement with him, join the Company's Board of
Directors, and be appointed as the Company's President and Chief Executive
Officer. The term of the agreement is three years.
12. Subsequent Events
In accordance with ASC 855, SUBSEQUENT EVENTS, the Company has evaluated
subsequent events through the date of issuance of the audited consolidated
financial statements. Subsequent to the fiscal period ended February 29,
2012, the Company did not have any material recognizable subsequent events.
16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read together with our
Consolidated Financial Statements and the Notes to those statements included
elsewhere in this quarterly report on Form 10-Q and the Consolidated Financial
Statements and the Notes to those statements included in our Form 10-K for the
year ended May 31, 2011. Certain statements contained herein constitute
"forward-looking statements" as defined in the U.S. Private Securities
Litigation Reform Act of 1995. In some cases forward-looking statements can be
identified by terminology, such as "believes," "anticipates," "expects,"
"estimates," "plans," "may," "intends," or similar terms. These statements
appear in a number of places in this Form 10-Q and include statements regarding
the intent, belief or current expectations of our company, its directors or its
officers with respect to, among other things: (i) trends affecting our financial
condition or results of operations, (ii) our business and growth strategies and
(iii) our financing plans. Investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve significant
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements. These statements are only
predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled "Risk Factors", that may
cause our company's or our industry's actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by these
forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we undertake no obligation
to update publicly any forward-looking statements for any reason, even if new
information becomes available or other events occur.
Our consolidated financial statements are stated in United States dollars and
are prepared in accordance with United States generally accepted accounting
principles. In this quarterly report, unless otherwise specified, all references
to "common shares" refer to the common shares in our capital stock and the terms
"we", "us" and "our", "the Company" and "Sky Harvest" mean Sky Harvest Windpower
Corp., a Nevada Corporation and its subsidiaries.
CORPORATE OVERVIEW
We were incorporated in the State of Nevada on February 25, 2005. We are a
development stage company in the business of electrical power generation through
the use of wind energy. We have not generated any revenue from operations since
our incorporation. We do not anticipate earning any revenue until the completion
of an environmental assessment on our properties, securing a power purchase
agreement and erecting and commissioning wind turbines on our properties, of
which there is no guarantee.
RECENT CORPORATE DEVELOPMENTS
On February 6, 2012, we announced that we had formed a British Columbia joint
venture corporation, named Levant Energy Inc., for the purpose of developing
underground natural gas storage plants in the Republic of Turkey. Pursuant to an
agreement with Mr. Bertan Atalay, we can earn a 65% initial interest in the
corporation by investing $500,000 to fund operations. Mr. Atalay will act as
President and CEO of Levant Energy Inc.
On February 6, 2012, we entered into an agreement with Mr. Atalay whereby he
will act as our consultant for the purpose of introducing us to additional
acquisition opportunities in renewable energy and related sectors, including
wind power development opportunities in North America, Turkey, and other regions
17
of Europe. We will compensate Mr. Atalay based on the successful completion of
such transactions with a success fee equal to 10% of the transaction's value.
On March 19, 2012, we announced that we had formed an advisory board that will
be responsible for providing guidance to our Board of Directors as it proceeds
with the development of its anticipated gas storage project in Turkey.
Initially, the advisory board consists of the following members: Noah Cohen,
Bertan Atalay, Martin Bernholtz, and William Lister.
On March 19, 2012, we granted incentive stock options on an aggregate of 990,000
shares of our common stock to members of our advisory board, as well as an
eligible consultant. These stock options are exercisable at a price of $0.10 per
share for a period of five years.
RESULTS OF OPERATIONS
The following summary of our results of operations should be read in conjunction
with our unaudited interim consolidated financial statements for the fiscal
quarter ended February 28, 2011, which are included herein.
Three months ended February 28/29,
2012 2011 Increase/(Decrease)
-------- -------- -------------------
$ $ $ %
Revenue 0 0 0 N/A
Expenses 105,698 74,712 30,986 41.5%
Foreign exchange (gain) loss (30,980) (37,031) 6,051 N/A
Interest income 0 0 0 N/A
-------- -------- -------- ----
Net Loss 74,718 37,681 37,037 98.3%
======== ======== ======== ====
Nine months ended February 28/29,
2012 2011 Increase/(Decrease)
-------- -------- -------------------
$ $ $ %
Revenue 0 0 0 N/A
Expenses 401,771 284,768 117,003 41.1%
Foreign exchange (gain) loss 17,742 (47,074) 64,816 N/A
Settlement of Debt (3,999) 0 (3,999) N/A
Interest income 0 (24) 24 N/A
-------- -------- -------- ----
Net Loss 415,514 237,670 177,844 74.8%
======== ======== ======== ====
REVENUES
We recorded a net operating loss of $105,698 for the fiscal quarter ended
February 29, 2012 and have an accumulated deficit of $6,620,233 since inception.
We have had no operating revenues since our inception on February 25, 2005
through to the fiscal quarter ended February 29, 2012. We anticipate that we
will not generate any revenues while we are a development stage company.
EXPENSES
Our expenses for the three and nine months ended February 29, 2012 and February
28, 2011 are outlined below:
18
Three months ended February 28/29,
2012 2011 Increase/(Decrease)
-------- -------- -------------------
$ $ $ %
Consulting fees 0 3,234 (3,234) (100.0%)
Engineering and development (2,008) 21,598 (23,606) N/A
Management fees 14,835 15,924 (1,089) (6.8%)
Professional fees 82,885 10,639 72,246 87.2%
General and administrative 9,986 23,317 (13,331) (57.2%)
-------- -------- -------- ------
Net Operating Loss 105,698 74,712 30,986 41.5%
======== ======== ======== ======
Nine months ended February 28/29,
2012 2011 Increase/(Decrease)
-------- -------- -------------------
$ $ $ %
Consulting fees 15,187 49,311 (34,124) (69.2%)
Engineering and development 121,960 61,612 60,348 97.9%
Management fees 119,352 77,994 41,358 53.0%
Professional fees 118,619 42,048 76,571 182.1%
General and administrative 26,653 53,803 (27,150) (50.4%)
-------- -------- -------- ------
Net Operating Loss 401,771 284,768 117,003 41.1%
======== ======== ======== ======
Consulting expenses decreased by $3,234 in the three month period ended February
29, 2012 compared to the three month period ended February 28, 2011, and by
$34,124 in the nine month period ended February 29, 2012 compared to the nine
month period ended February 28, 2011. These decreases primarily related to a
reduction in fees paid for investor relations services.
Engineering and development expenses decreased by $23,606 in the three month
period ended February 29, 2012 compared to the three month period ended February
28, 2011, and by $60,348 in the nine month period ended February 29, 2012
compared to the nine month period ended February 28, 2011. This decrease is a
result of reduced development work on our wind power projects.
Management fees decreased by $1,089 in the three month period ended February 29,
2012 compared to the three month period ended February 28, 2011, and increased
by $41,358 in the nine month period ended February 29, 2012 compared to the nine
month period ended February 28, 2011. This increase relates to fees paid to
William Iny, our president and sole director, for management services. Until
this quarter, Mr. Iny had not received any payments for his services since he
became our president in September 2010.
Professional fees, consisting primarily of legal, audit, and accounting costs,
increased by $72,246 in the three month period ended February 29, 2012 compared
to the three month period ended February 28, 2011, and by $76,571 in the nine
month period ended February 29, 2012 compared to the nine month period ended
February 28, 2011. These increases relate to legal fees that we paid to our
director, Greg Yanke, during the quarter.
General and administrative expenses decreased by $13,331in the three month
period ended February 29, 2012 compared to the three month period ended February
28, 2011, and by $27,150 in the nine month period ended February 29, 2012
compared to the nine month period ended February 28, 2011. The decrease relates
primarily to cost reduction initiatives that management has implemented during
the current fiscal year.
19
FOREIGN EXCHANGE (GAIN) LOSS
Foreign currency transactions are primarily undertaken in Canadian dollars.
Foreign exchange gains and losses arise from the translation of transactions in
Canadian dollars into US dollars. Foreign currency exchange rates fluctuate, and
gains and losses resulting from these fluctuations recognized as they occur.
Company has not, to the date of this report, utilized derivative instruments to
offset the impact of foreign currency fluctuations.
INTEREST INCOME
We did not generate interest in the three month period ended February 29, 2012.
The Company has redeemed funds previously held in term deposits in order to fund
development of its wind power projects and continued corporate operations.
LIQUIDITY AND CAPITAL RESOURCES
Our financial condition as at February 29, 2012, and May 31, 2011, our fiscal
year end, and the changes for on those dates are summarized as follows:
WORKING CAPITAL
February 29, May 31,
2012 2011 Increase/Decrease
-------- -------- --------------------
$ $ $ %
Current Assets 114,421 87,440 26,981 30.9%
Current Liabilities 311,779 513,079 (201,300) (39.2%)
-------- -------- -------- -----
Working Capital (197,358) (425,639) 228,281 N/A
======== ======== ======== =====
The increase in our working capital position of $228,281 from May 31, 2011, the
date of our most recently fiscal year end, to February 29, 2012 was primarily
due to our completion of a private placement in June 2011 consisting of the sale
of 1,970,000 shares of our common stock at $0.25 each for aggregate proceeds of
$492,000 and the payment of current liabilities with those funds.
CASH FLOWS
Nine months ended February 28/29,
2012 2011 Increase/(Decrease)
-------- -------- -------------------
$ $ $ %
Cash Flows from (used in) Operating Activities (414,540) (65,027) N/A
Cash Flows provided by (used in) Investing Activities 0 22,840 (22,840) (100.0%)
Cash Flows provided by Financing Activities 476,540 111,741 364,799 326.5%
Effect of exchange rate changes on cash 16,093 (56,912) 73,005 N/A
-------- -------- -------- ------
Net increase (decrease) in cash during period 78,093 12,642 65,451 517.7%
======== ======== ======== ======
During the nine months ended February 29, 2012, we used net cash in operating
activities in the amount of $414,540. This cash outflow primarily consisted of
payments for professional fees, management fees, and general and administrative
expenses.
20
The $22,840 in cash flows provided by investing activities during the nine
months ended February 28, 2011 represents funds we received by redeeming
short-term investments in the form of term deposits. We did not receive any cash
flows from investing activities during the current fiscal year.
The $476,540 in cash flows provided by financing activities during the nine
months ended February 29, 2012 represents private placement proceeds and
proceeds we received from the disgorgement of short swing trade profits.
DISCLOSURE OF OUTSTANDING SHARE DATA
WARRANTS
None
SHARE OPTIONS
Subsequent to the quarter, on March 19, 2012, we granted stock options to key
advisors and consultants to acquire up to 990,000 shares of common stock
exercisable at $0.10 per share on or before March 19, 2017.
A summary of our stock option activity as at February 29, 2012 is as follows:
Weighted
Average
Number of Exercise
Options Price
------- -----
$
Balance as at May 31, 2010 1,250,000 0.51
Granted 2,600,000 0.16
Cancelled -- --
Expired (666,666) 0.51
Exercised -- --
---------- ----
Balance, as at February 29, 2012 3,183,334 0.23
---------- ----
LIQUIDITY POSITION
We recorded a net loss of $415,514 for the nine month period ended February 29,
2012 and have an accumulated deficit of $6,620,233 since inception. As of
February 29, 2012 we had cash and cash equivalents totaling $101,558 (May 31,
2011: $23,465).
As of the date of this report, management anticipates that we will require at
least $750,000 to fund our corporate operations and proposed development of gas
storage operations in Turkey during the next 12 months. As well, we will require
approximately an additional $350,000 to cover our current outstanding
liabilities. Accordingly, we do not have sufficient funds to meet our planned
expenditures over the next 12 months. In addition, we will require further
financing in order to fund our anticipated expenses for the construction of our
proposed wind turbine project.
We have begun sourcing additional debt or equity financing to cover the balance
of the anticipated costs for the next 12 months. However, there is no assurance
that we will successfully complete this financing.
We have not had any specific communications with any representative of a debt
financing institution regarding our proposed wind power project. We will only be
able to secure debt financing for wind turbines if we are able to prove that an
21
economic wind resource exists on a site over which we have acquired the rights
to erect turbines and that we have negotiated a power purchase agreement with a
credit-worthy counter-party.
We anticipate continuing to rely on equity sales of our common shares in order
to continue to fund our business operations. Issuances of additional shares will
result in dilution to our existing shareholders. We may also seek to raise
additional cash by the issuance of debt instruments. As of the date of this
report, there is no assurance that we will achieve any additional sales of our
equity securities or arrange for debt or other financing to fund our exploration
and development activities during the next 12 month period.
OFF BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to stockholders.
RISKS RELATED TO OUR BUSINESS
IF WE DO NOT OBTAIN ADDITIONAL FINANCING OUR BUSINESS WILL FAIL.
Over the next 12 months, we expect to spend approximately $250,000 on
administrative costs, including management fees payable to our President,
professional fees and general business expenses, including costs related to
complying with our filing obligations as a reporting company. As our operations
become more complex, it is anticipated that these costs will increase. We also
expect incur a further $50,000 in pre-development costs related to our wind
power projects.
As of the date of this report, we do not have sufficient cash on hand to fund
these expenditures. We will need to raise additional debt or equity financing in
order to cover remaining business costs.
BECAUSE WE HAVE NOT COMMENCED BUSINESS OPERATIONS, WE FACE A HIGH RISK OF
BUSINESS FAILURE.
We have not yet commenced business operations as an independent power producer;
accordingly, we have no way to evaluate the likelihood that our business will be
successful. We were incorporated on February 25, 2005 and to date have been
involved in conducting land assessments, acquiring leasehold interests in
properties having the potential for wind power development, raising financing
and completing wind, environmental and community assessments.
Potential investors should be aware of the difficulties normally encountered by
development stage companies and the high rate of failure of such enterprises.
Prior to earning revenue, of which there is no assurance, we will likely incur
significant costs and expect to incur significant losses in the foreseeable
future. If we are unable to acquire a property interest and erect a wind farm on
our property, we will not earn profits nor be able to continue operations.
BECAUSE OUR CONTINUATION AS A GOING CONCERN IS IN DOUBT, WE WILL BE FORCED TO
CEASE BUSINESS OPERATIONS UNLESS WE CAN GENERATE PROFITABLE OPERATIONS IN THE
FUTURE.
We have incurred losses since our inception. Further losses are anticipated in
the development of our business. As a result, there is substantial doubt about
our ability to continue as a going concern. Our ability to continue as a going
concern is dependent in the short to medium term on our ability to obtain the
necessary financing to meet our obligations and repay our liabilities arising
from normal business operations when they come due, and in the longer term, on
22
upon our ability to generate profitable operations in the future. If we cannot
raise financing to meet our obligations, we will be insolvent and will cease
business operations.
IF WE ARE NOT ABLE TO OBTAIN AN INTEREST IN A SUITABLE PROPERTY WITH A POTENTIAL
WIND RESOURCE, OUR BUSINESS WILL FAIL.
Third parties own the lands on which we will seek to construct wind projects. We
have entered into land lease agreements covering approximately 15,520 acres that
relate to our primary project, which is located in southwestern Saskatchewan,
which we refer to as the Sky Harvest Project. These agreements allow us to erect
wind turbines and install ancillary equipment, subject, in certain
circumstances, to the payment of lease payments prior to construction of the
project. Even though we own leasehold interests in these properties, we may not
be able to obtain the financing necessary to complete lease obligations. If we
are unable to maintain our property interests, our business will fail.
We will need to enter into land leases or other appropriate agreements in order
to erect wind turbines and install ancillary equipment on the Keewatin Project
and Matador Project sites, which are also located in southwestern Saskatchewan.
We have entered into agreements to operate meteorological towers on the
properties comprising the Keewatin and Matador Projects in southwestern
Saskatchewan. However, we do not yet have an arrangement whereby we may erect
turbines on the properties.
FUTURE CHANGES IN WEATHER PATTERNS COULD NEGATIVELY IMPACT OUR BUSINESS,
REDUCING POTENTIAL PROFITABILITY OR CAUSING OUR BUSINESS TO FAIL.
Changes in weather patterns may affect our ability to operate a wind power
project on any property we acquire. Wind data that we collect from a
meteorological tower may vary from results actually achieved when a wind turbine
is installed. Changing global environmental and weather conditions may also
affect the reliability of the data relating to a property.
Any wind farm that we develop, no matter where it is located, would be subject
to variations in wind and changes in worldwide climatic conditions. Sudden or
unexpected changes in environmental and meteorological conditions could reduce
the productivity of any wind farm we construct. Climatic weather patterns,
whether seasonal or for an extended period of time, resulting in lower,
inadequate and/or inconsistent wind speed to propel the wind turbines may render
our wind parks incapable of generating adequate, or any, electrical energy.
OUR ABILITY TO ERECT TURBINES ON A PROPERTY IN SASKATCHEWAN WILL BE CONTINGENT
UPON IT OBTAINING ENVIRONMENTAL AND MUNICIPAL PERMITS. IF IT CANNOT ACQUIRE
THESE PERMITS, OUR BUSINESS WILL FAIL.
In order to erect turbines on the Saskatchewan property, we must excavate
portions of the land and install concrete platforms below surface. Before we
commence this, we will need to obtain environmental and municipal permits from
the Saskatchewan provincial government and the town responsible for the property
interest it acquires. Depending on environmental impact, our proposed land
disturbance may be unacceptable to these government bodies. In addition, the
turbines themselves may be seen to have a negative impact on the aesthetics of
the region. These factors may prevent us from obtaining necessary permits. In
such circumstances, we would be forced to abandon our business plan.
IF WE CANNOT REACH AN AGREEMENT WITH A JOINT VENTURE DEVELOPER AND OPERATOR OUR
BUSINESS WILL FAIL.
As presently constituted, we do not have the skills and expertise necessary to
build and operate a wind farm. Our management has never been involved in the
construction or operation of a wind power project and does not have any
technical background in the sector.
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IF WE CANNOT FIND A JOINT VENTURE PARTNER FOR OUR PROJECTS OR A PARTY WHICH WILL
PURCHASE OUR ELECTRICITY ON ACCEPTABLE TERMS, WE WILL NOT BE ABLE TO ESTABLISH A
WIND POWER PROJECT AND OUR BUSINESS WILL FAIL.
Even if we demonstrate a significant wind resource on a property that we
acquire, we may not be able to secure a joint venture partner to further develop
a project or a purchaser for any electricity that we produce on acceptable
terms. Without a purchaser for electricity from a property, we will not be able
to proceed with our business plan.
BECAUSE ALL OF OUR ASSETS, AND OUR DIRECTORS AND OFFICERS ARE LOCATED IN CANADA,
U.S. RESIDENTS' ENFORCEMENT OF LEGAL PROCESS MAY BE DIFFICULT.
All of our assets are located in Canada. In addition, our sole director and
officer resides in Canada. Accordingly, service of process upon our company, or
upon individuals related to Sky Harvest, may be difficult or impossible to
obtain within the United States. As well, any judgment obtained in the United
States against us may not be collectible within the United States.
RISKS RELATED TO OUR COMMON STOCK
A DECLINE IN THE PRICE OF OUR COMMON STOCK COULD AFFECT OUR ABILITY TO RAISE
FURTHER WORKING CAPITAL, IT MAY ADVERSELY IMPACT OUR ABILITY TO CONTINUE
OPERATIONS AND WE MAY GO OUT OF BUSINESS.
A prolonged decline in the price of our common stock could result in a reduction
in the liquidity of our common stock and a reduction in our ability to raise
capital. Because we may attempt to acquire a significant portion of the funds we
need in order to conduct our planned operations through the sale of equity
securities, a decline in the price of our common stock could be detrimental to
our liquidity and our operations because the decline may cause investors not to
choose to invest in our stock. If we are unable to raise the funds we require
for all of our planned operations, we may force us to reallocate funds from
other planned uses which may have a significant negative effect on our business
plan and operations, including our ability to develop new products and continue
our current operations. As a result, our business may suffer and not be
successful and we may go out of business. We also might not be able to meet our
financial obligations if we cannot raise enough funds through the sale of our
common stock and we may be forced to go out of business.
IF WE ISSUE ADDITIONAL SHARES IN THE FUTURE, IT WILL RESULT IN THE DILUTION OF
OUR EXISTING SHAREHOLDERS.
Our certificate of incorporation authorizes the issuance of up to 100,000,000
shares of common stock with a par value of $0.001. Our board of directors may
choose to issue some or all of such shares to acquire one or more businesses or
to provide additional financing in the future. The issuance of any such shares
will result in a reduction of the book value and market price of the outstanding
shares of our common stock. If we issue any such additional shares, such
issuance will cause a reduction in the proportionate ownership and voting power
of all current shareholders. Further, such issuance may result in a change of
control of our corporation.
TRADING ON THE OTC BULLETIN BOARD MAY BE VOLATILE AND SPORADIC, WHICH COULD
DEPRESS THE MARKET PRICE OF OUR COMMON STOCK AND MAKE IT DIFFICULT FOR OUR
STOCKHOLDERS TO RESELL THEIR SHARES.
Our common stock is quoted on the OTC Bulletin Board service of the Financial
Industry Regulatory Authority ("FINRA"). Trading in stock quoted on the OTC
Bulletin Board is often thin and characterized by wide fluctuations in trading
prices due to many factors that may have little to do with our operations or
business prospects. This volatility could depress the market price of our common
stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin
Board is not a stock exchange, and trading of securities on the OTC Bulletin
Board is often more sporadic than the trading of securities listed on a
24
quotation system like NASDAQ or a stock exchange like the American Stock
Exchange. Accordingly, our shareholders may have difficulty reselling any of
their shares.
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S
PENNY STOCK REGULATIONS AND FINRA'S SALES PRACTICE REQUIREMENTS, WHICH MAY LIMIT
A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK.
Our stock is a penny stock. The Securities and Exchange Commission has adopted
Rule 15g-9 which generally defines "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
customers and "accredited investors". The term "accredited investor" refers
generally to institutions with assets in excess of $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document in a form prepared
by the SEC which provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker-dealer also must provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.
FINRA SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY
AND SELL OUR STOCK.
In addition to the "penny stock" rules promulgated by the Securities and
Exchange Commission (see above for a discussion of penny stock rules), FINRA
rules require that in recommending an investment to a customer, a broker-dealer
must have reasonable grounds for believing that the investment is suitable for
that customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customer's financial status, tax status, investment
objectives and other information. Under interpretations of these rules, FINRA
believes that there is a high probability that speculative low priced securities
will not be suitable for at least some customers. FINRA requirements make it
more difficult for broker-dealers to recommend that their customers buy our
common stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable
ITEM 4. CONTROLS AND PROCEDURES.
As required by Rule 13a-15 under the Exchange Act, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures at February 29, 2012, which is the end of the period covered by this
report. This evaluation was carried out by our principal executive officer and
25
principal financial officer. Based on this evaluation, our principal executive
officer and principal financial officer has concluded that our disclosure
controls and procedures were effective as at the end of the period covered by
this report.
In Rule 13a-15, "DISCLOSURE CONTROLS AND PROCEDURES" means controls and other
procedures of an issuer that are designed to ensure that information required to
be disclosed by the issuer in the reports that it files or submits under the Act
is recorded, processed, summarized and reported, within the time periods
specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Act is accumulated and communicated to the
issuer's management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.
During the three months ended February 29, 2012, our internal control over
financial reporting was not subject to any changes.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings that have been
commenced or are pending.
ITEM 1A. RISK FACTORS.
Not applicable
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. REMOVED AND RESERVED.
ITEM 5. OTHER INFORMATION.
None
26
ITEM 6. EXHIBITS.
Filed
Exhibit with this
Description No. Form Filing date Form 10-Q
----------- --- ---- ----------- ---------
ARTICLES OF INCORPORATION AND BYLAWS
Articles of Incorporation 3.1 SB-2 July 14, 2005
Bylaws 3.2 SB-2 July 14, 2005
Certificate of designation 3.3 8-K July 13, 2009
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
Form of Warrant Certificate for July 13, 2007 Private 4.1 10-QSB January 14, 2008
Placement
MATERIAL CONTRACTS--FINANCING AGREEMENTS
Form of Subscription Agreement for July 13, 2007 10.2 10-QSB January 14, 2008
Private Placement for US Subscribers
Form of Subscription Agreement for July 13, 2007 10.3 10-QSB January 14, 2008
Private Placement for Non-US Subscribers
MATERIAL CONTRACTS--OTHER
Consent to Entry/Right of Access Agreement between 10.4 SB-2 September 29, 2005
Keewatin Windpower Corp. and Edward and Charlotte
Bothner, dated August 23, 2005
Letter of Intent between Keewatin Windpower Corp. and 10.5 10-QSB January 14, 2008
Sky Harvest Windpower Corp. dated March 27, 2007
Loan Agreement between Sky Harvest Windpower Corp. 10.6 10-QSB January 14, 2009
and Keewatin Windpower Corp. dated September 23,
2008
Promissory Note of Sky Harvest Windpower Corp. dated 10.7 10-QSB January 14, 2009
September 23, 2008
Financial Communications and Strategic Consulting 10.8 8-K March 3, 2009
Agreement with Aspire Clean Tech Communications, Inc.
dated February 23, 2009
Promissory Note of Sky Harvest Windpower Corp. dated 10.9 10-Q August 31, 2009
September 23, 2008
Loan Agreement between Sky Harvest Windpower Corp. 10.10 10-Q August 31, 2009
and Keewatin Windpower Corp. dated January 28, 2009
Share exchange agreement between Keewatin Windpower 10.11 8-K July 10, 2009
Corp. and Sky Harvest Windpower Corp. dated May 11,
2009
Exchangeable share support agreement between Keewatin 10.12 8-K July 10, 2009
Windpower Corp. and Keewatin Windpower Inc. dated May
11, 2009
Voting and exchange trust agreement between Keewatin 10.13 8-K July 10, 2009
Windpower Corp., Keewatin Windpower Inc. and Valiant
Trust Company dated May 11, 2009
27
Articles of Merger filed between Keewatin Windpower 10.14 8-K September 17, 2009
Corp. and Sky Harvest Windpower Corp. filed September
1, 2009
Adoption of 2009 Stock Option Plan dated September 10.15 8-K September 23, 2009
11, 2009
CODE OF ETHICS
Code of Ethics 14.1 10-K August 31, 2009
Certification Statement of the Chief Executive 31.1 *
Officer and Chief Financial Officer pursuant to
Section 302 of the Sarbanes- Oxley Act of 2002
Certification Statement of the Chief Executive 32.1 *
Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act Of 2002
Interactive Data Files pursuant to Rule 405 of 101 *
Regulation S-T.
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SKYHARVEST WINDPOWER CORP.
/s/ William Iny
-------------------------------------------
William Iny
Chief Executive Officer and Chief Financial
Officer Principal Executive Officer,
Principal Accounting Officer and Principal
Financial Officer
Date: April 16, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
/s/ William Iny
-------------------------------------------
William Iny
Chief Executive Officer, Chief Financial
Officer, President, Treasurer, Secretary,
and Director ,Principal Executive Officer,
Principal Accounting Officer and Principal
Financial Officer
Date: April 16, 2012
29