10-Q 1 g7234.txt 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 November 30, 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 Avenue, 11th Floor, Vancouver, BC, Canada V6P 6G5 (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. 33,203,016 shares of common stock are issued and outstanding as of January 14, 2014 (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) 3 CONSOLIDATED BALANCE SHEETS as of November 30, 2013 and May 31, 2013 3 CONSOLIDATED STATEMENTS OF OPERATIONS for the Three Months and Six Months Ended November 30, 2013 and 2012, and for the period since inception 4 CONSOLIDATED STATEMENTS OF CASH FLOWS for the Six Months Ended November 30, 2013 and 2012, and for the period since inception 5 NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3 Quantitative and Qualitative Disclosures About Market Risk 17 Item 4. Controls and Procedures 17 PART II OTHER INFORMATION Item 1. Legal Proceedings 18 Item 1A. Risk Factors 18 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Mine Safety Disclosures 18 Item 5. Other Information 18 Item 6. Exhibits 19 SIGNATURES 21 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (A Development Stage Company) Consolidated Balance Sheets (Expressed in US Dollars) (Unaudited)

~~August~~November 3130, May 31, 2013 2013 ------------ ------------ $ $ ASSETS Current Assets Cash and cash equivalents 4347,~~124~~614 103,439 Other receivables 79,~~530~~951 5,742 Prepaid expenses 113,~~576~~632 1,138 ------------ ------------ Total Current Assets 6261,~~230~~197 110,319 Property and equipment, net (Note 4) 637,~~742~~057 1,400 Intangible assets (Note 5) 193,~~730~~204 -- ------------ ------------ Total Assets ~~262~~291,~~702~~458 111,719 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT Liabilities Accounts payable ~~193~~198,~~019~~022 183,485 Accrued liabilities ~~31,441~~260 347 Due to related parties (Note 8) ~~195~~253,~~517~~936 155,381 Note payable (Note 6) 50,000 50,000 ------------ ------------ Total Liabilities ~~469~~502,~~976~~218 389,213 ------------ ------------ Stockholders' Deficit Preferred Stock: Authorized: 10,000,000 shares, $0.001 par value Issued and outstanding: 1 share (May 31, 2013 - 1 share) -- -- Common Stock: Authorized: 100,000,000 shares, $0.001 par value Issued and outstanding: 33,203,016 shares (May 31, 2013 - 32,553,016 shares) 33,203 32,553 Additional paid-in capital 6,973,627 6,707,278 Common stock subscribed (~~Note~~Notes 9 and 12) 6111,~~750~~796 6,750 Accumulated other comprehensive income (loss) 1522,~~417~~727 (6,098) Deficit accumulated during the development stage (7,~~236~~352,~~272~~113) (7,017,977) ------------ ------------ Total Stockholders' Deficit (~~207~~210,~~275~~760) (277,494) ------------ ------------ Total Liabilities and Stockholders' Deficit ~~262~~291,~~702~~458 111,719 ============ ============

Continuing operations (Note 1) Commitments and contingencies (Note 12) (The accompanying notes are an integral part of these consolidated financial statements) 3 Sky Harvest Energy 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 ~~February~~For ~~25,~~the ~~2005~~For the (Date of Three ~~Months~~months Three ~~Months~~months ~~(Date~~Six ofmonths Six months Inception) to Ended Ended ~~August~~Ended 31Ended November 30, ~~August~~November 3130, ~~August~~November 3130, November 30, November 30, 2013 2013 2012 2013 2012 ------------ ------------ ------------ ------------ ------------ $ $ $ $ $ Expenses Consulting fees ~~504~~514,~~934~~545 549,~~000~~611 -- 63,611 -- Engineering and development ~~613~~615,~~397~~067 1,~~167~~670 1517,~~605~~086 2,837 32,691 Management fees (Note 8) ~~909~~944,~~444~~265 ~~114~~34,~~736~~821 1415,~~838~~184 149,557 30,022 Professional fees ~~566~~583,~~752~~354 1316,~~038~~602 218,~~859~~084 29,640 29,943 General and administrative 1,~~853~~891,~~355~~621 1738,~~909~~266 109,~~583~~588 56,175 20,171 Acquired development costs 242,501 -- -- -- -- ------------ ------------ ------------ ------------ ------------ Operating loss (4,~~690~~791,~~383~~353) (~~200~~100,~~850~~970) (6249,~~885~~942) (301,820) (112,827) Other Income (Loss) Impairment loss (2,618,271) -- -- -- -- Interest income 89,391 -- -- -- 9 Foreign exchange (loss) gain (~~loss~~19,893) (514,~~022~~871) (178,~~445~~633) 50(32,~~571~~316) 41,938 Settlement of debt (11,987) -- -- -- -- ------------ ------------ ------------ ------------ ------------ Net loss (7,~~236~~352,~~272~~113) (~~218~~115,~~295~~841) (1258,~~305~~575) (334,136) (70,880) Other Comprehensive Income (Loss) Foreign currency translation adjustments 1522,~~417~~727 217,~~515~~310 9,902 28,825 (5545,~~434~~532) ------------ ------------ ------------ ------------ ------------ Comprehensive loss (7,~~220~~329,~~855~~386) (~~196~~108,~~780~~531) (6748,~~739~~673) (305,311) (116,412) ============ ============ ============ ============ ============ Net loss per common share - basic and diluted (0.01) (0.00) (0.01) (0.00) ------------ ------------ ------------ ------------ Weighted average number of common stock outstanding 33,203,000 32,~~956~~553,000 33,079,000 32,553,000 ------------ ------------ ------------ ------------

(The accompanying notes are an integral part of these consolidated financial statements) 4 Sky Harvest Energy Corp. (A Development Stage Company) Consolidated Statements of Cash Flows (Expressed in US Dollars) (Unaudited)

Accumulated from ~~For the For the~~ February 25, 2005 ~~Three~~For ~~Months~~the ~~Three~~For ~~Months~~the (Date of Six months Six months Inception) to Ended Ended ~~August~~November 3130, ~~August~~November 3130, ~~August~~November 3130, 2013 2013 2012 ------------ ------------ ------------ $ $ $ Operating activities Net loss for the period (7,~~236~~352,~~272~~113) (~~218~~334,~~295~~136) (1270,~~305~~880) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 2425,~~892~~076 ~~187~~371 ~~215~~516 Stock-based compensation 1,744,564 134,999 -- Impairment loss 2,618,271 -- -- Loss ~~(gain)~~ on settlement of debt 11,987 -- -- Acquired development costs 242,501 -- -- Changes in operating assets and liabilities: Prepaid expenses ~~558~~8,503 (102,~~438~~493) --(6,627) Accrued interest 244 -- ~~774~~-- Accounts payable and accrued liabilities ~~181~~154,~~152~~973 14(11,~~987~~192) 1732,~~724~~115 Account receivable (2528,~~887~~308) (14,~~788~~209) 9,329 Note receivable (280,000) -- -- Due to related parties ~~134~~188,~~039~~004 4094,~~593~~558 1941,~~240~~072 ------------ ------------ ------------ Net cash flows (used in) provided by operating activities (2,~~583~~666,~~951~~298) (39122,~~755~~102) 345,~~977~~575 ------------ ------------ ------------ Investing activities Purchase of equipment (3061,~~709~~216) (536,~~545~~052) (1,660) Purchase of intangible assets (3635,~~089~~562) (3635,~~089~~562) -- 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 used in investing activities (2555,~~137~~117) (4171,~~634~~614) (1,660) ------------ ------------ ------------ Financing activities Proceeds from common stock issuances 2,415,249 -- 49,500 Proceeds from ~~(repayment~~common ~~of)~~stock subscribed 105,046 105,046 -- Proceeds from related party loans 62,854 -- -- Proceeds from ~~(repayment of)~~ note payable 50,000 -- -- Proceeds from swing sale disgorgement 118,900 -- -- ------------ ------------ ------------ Net cash flows provided by financing activities 2,~~647~~752,~~003~~049 --105,046 49,500 ------------ ------------ ------------ Effect of exchange rate changes on cash 516,~~209~~980 2132,~~074~~845 (5746,~~200~~983) ------------ ------------ ------------ Increase (Decrease) in cash and cash equivalents 4347,~~124~~614 (6055,~~315~~825) 256,~~617~~432 Cash and cash equivalents - beginning of period -- 103,439 144,686 ------------ ------------ ------------ Cash and cash equivalents - end of period 4347,~~124~~614 4347,~~124~~614 ~~170~~151,~~303~~118 ============ ============ ============

Supplemental Cash Flow and Other Disclosures (Note 13) (The accompanying notes are an integral part of these consolidated financial statements) 5 Sky Harvest Energy Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements November 30, 2013 (Expressed in US Dollars) (Unaudited) 1. Organization and Description of Business Sky Harvest Energy 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, development of its business plan for the exploration and development of wind power projects in Canada and manufacturing and selling wind turbines. 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. On July 5, 2013, the Company entered into an asset purchase agreement 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 asset 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. 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 November 30, 2013, the Company has accumulated losses of $7,352,113 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., Sky Harvest - Saskatchewan and Sky Vertical. All significant intercompany transactions and balances have been eliminated. The Company has elected a May 31 year-end. b. Interim Financial Statements The interim unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Securities and Exchange Commission ("SEC") Form 10-Q. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended May 31, 2013, included in the Company's Annual Report on Form 10-K filed on October 16, 2013, with the SEC. 6 Sky Harvest Energy Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements November 30, 2013 (Expressed in US Dollars) (Unaudited) 2. Significant Accounting Polices (continued) b. Interim Financial Statements (continued) The consolidated financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the option of management, are necessary to present fairly the Company's financial position at November 30, 2013, and the results of its operations and cash flows for the six months ended November 30, 2013. The results of operations for the six months ended November 30, 2013, are not necessarily indicative of the results to be expected for future quarters or the full year. 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 November 30, May 31, 2013 2013 Accumulated Net Carrying Net Carrying Cost Depreciation Value Value ------- ------- ------- ------- $ $ $ $ Computer equipment 7,251 (6,311) 940 1,205 Asset under construction 36,052 -- 36,052 -- Wind tower equipment 22,116 (22,051) 65 195 ------- ------- ------- ------- 65,419 (28,362) 37,057 1,400 ======= ======= ======= ======= 5. Intangible Assets On July 5, 2013, the Company entered into an asset purchase agreement whereby the Company acquired various assets related to vertical axis wind turbine manufacturing. In connection with the acquisition, the Company has incorporated a wholly-owned subsidiary under the name 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 Cdn$65,000 (paid), issue 650,000 shares (issued) of common stock of the Company, and grant incentive stock options to acquire up to 550,000 shares (issued) 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. The Company has recorded the assets at the cost of acquiring the assets of $193,204. 6. 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 November 30, 2013, advances of $50,000 remain outstanding. The amount is unsecured, non-interest bearing and due on demand. 7 Sky Harvest Energy Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements November 30, 2013 (Expressed in US Dollars) (Unaudited) 7. 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 November 30, 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 November 30, 2013, there were 15,680,016 outstanding exchangeable shares (May 31, 2013 - 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. 8. Related Party Transactions a) During the six months ended November 30, 2013, the Company incurred $28,875 (2012 - $30,023) to a company controlled by the President and principal shareholder of the Company for management services. As at November 30, 2013, the Company is indebted to that company and the Company's President for $117,528 (May 31, 2013 - $86,520), 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 six months a written demand is received from the note holder. The amount is unsecured and bears interest at 15% per annum. As at November 30, 2013, accrued interest of $13,992 was recorded. During the year ended May 31, 2011, the Company received an advance of $66,854 (CDN$71,000) from the same director. During the year ended May 31, 2012, the Company repaid $37,664 (CDN$40,000). During the six months ended November 30, 2013, the Company received an additional advance of $9,708 (CDN$10,310). At November 30, 2013, $38,898 (CDN$41,310) is unsecured, non-interest bearing and has no terms of repayment. c) During the six months ended November 30, 2013, the Company incurred $38,444 (Cdn$40,000) (2012 - $nil) to the former manager of operations of Sky Vertical for management services. As at November 30, 2013, the Company is indebted to the former manager of operations for $24,011 (Cdn$25,500), which is non-interesting bearing, unsecured and due on demand. d) As at November 30, 2013, the Company is indebted to the President of Sky Vertical for $8,982, which represents asset purchase cost and other general and administration expense paid on behalf of the Company. The amount is non-interest bearing, unsecured and due on demand. e) As at November 30, 2013, the Company is indebted to a Director of Sky Vertical for an advance of $23,527 (CDN$25,000), which is non-interest bearing, unsecured and due on demand. f) On July 9, 2013, the Company issued 300,000 stock options to the President of Sky Vertical at a fair value of $81,000. These related party transactions are recorded at the exchange amount, being the amount established and agreed to by the related parties. 9. Common Stock a) On July 5, 2013, the Company issued 650,000 shares of common stock at a fair value of $71,500 pursuant to the asset purchase agreement described in Note 5. b) During the six months ended November 30, 2013, the Company received $105,046 in subscriptions for 420,184 shares of common stock at $0.25 per share. At November 30, 2013, the shares have not been issued and the amount is included in common stock subscribed. 8 Sky Harvest Energy Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements November 30, 2013 (Expressed in US Dollars) (Unaudited) 10. 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 November 30, 2013, the Company had 360,000 shares of common stock available to be issued under the Plan. On July 5, 2013, pursuant to the asset purchase agreement as described in Note 5, the Company granted 550,000 options under the 2011 Plan with immediate vesting to acquire 550,000 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 $60,500, as cost of acquiring the intangible assets. On July 9, 2013, the Company granted 200,000 stock options to an advisor of the Company and 300,000 stock options to the President of Sky Vertical with an exercise price of $0.10 per share and exercisable for a period of five years. This grant is pursuant to the Company's 2011 Stock Option Plan. The Company recorded stock-based compensation of $54,000 as consulting fees and $81,000 as management fees. The fair value for stock options vested during the three month period ended November 30, 2013 and 2012 were estimated at the vesting and granting date using the Black-Scholes option-pricing model. The weighted average assumptions used are as follows: Six months Six months Ended Ended November 30, November 30, 2013 2012 -------- -------- Expected dividend yield 0% -- Risk-free interest rate 1.55% -- Expected volatility 400% -- Expected option life (in years) 5.00 -- The following table summarizes the continuity of the Company's stock options: Weighted- Weighted Average Aggregate Average Contractual Remaining Number of Exercise Term Intrinsic Options Price (years) Value ------- ----- ------- ----- $ $ Outstanding: May 31, 2013 4,173,334 0.20 Granted 1,050,000 0.10 --------- ---- Outstanding: November 30, 2013 5,223,334 0.18 2.80 249,550 ========= ==== ==== ======= Outstanding: November 30, 2013 5,223,334 0.18 2.80 249,550 ========= ==== ==== ======= At November 30, 2013, there was $nil of unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the 2009 Plan and 2011 Plan. 9 Sky Harvest Energy Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements November 30, 2013 (Expressed in US Dollars) (Unaudited) 11. 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 November 30, 2013, the Company and its joint venture partner have not made any contribution to Levant and operations have not yet begun. 12. 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 November 30, 2013, the Company has accrued $110,085 (May 31, 2013 - $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. 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 November 30, 2013, the Company has accrued $40,000 (May 31, 2013 - $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 November 30, 2013, and May 31, 2013, the fair value of the 15,000 shares issuable was $6,750 and is included in common stock subscribed. 10 Sky Harvest Energy Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements November 30, 2013 (Expressed in US Dollars) (Unaudited) 12. Commitments and Contingencies (continued) 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. e) 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. The employment agreement was terminated effective November 4, 2013. f) On November 12, 2013, the Company commenced legal action against the vendors of the asset purchase agreement, as described in Note 5, seeking a declaration that it owns the assets described in the agreement and that the vendors have breached the agreement, as well as seeking general damages. At November 30, 2013, the vendors have assigned one of the four patent applications to the Company in accordance with the terms of the agreement, but have failed to assign the second, third and fourth patents and have not delivered all equipment related to the vendors' vertical axis turbine business that was sold to the Company pursuant to the agreement. g) On October 31, 2013, the Company entered into a sale agreement, whereby the Company agreed to sell its interest in assets relating to its wind power project located in Southwestern Saskatchewan, including its leasehold interests in approximately 15,000 acres of land, accumulated wind power data, environmental assessment studies, and meteorological tower. In consideration for the assets, the purchaser has agreed to pay a purchase price in three instalments comprised of $672,000, representing third party development costs incurred, payable within 30 days following execution of a power purchase agreement ("PPA"), a first success fee of $25,000 per megawatt of contracted capacity under the PPA and payable upon financial close, and a second success fee of $25,000 per megawatt of contracted capacity under the PPA and payable within 30 days of the commencement of commercial operations. If the purchaser is unable to execute a PPA by December 19, 2019, it will return the assets to the Company for nominal consideration. 13. Supplemental Cash Flow and Other Disclosures

Accumulated from For the For the February 25, 2005 ~~Three~~Six ~~Months~~months ~~Three~~Six ~~Months~~months (Date of Inception) to Ended Ended ~~August~~to 31November 30, ~~August~~November 3130, ~~August~~November 3130, 2013 2013 2012 ------------ ------------ ------------ $ $ $ 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 -- -- Stock issuance for intangible assets 71,500 71,500 -- Stock options issued for intangible assets 60,500 60,500 -- ------------ ------------ ------------

11 Sky Harvest Energy Corp. (A Development Stage Company) Notes to the Consolidated Financial Statements November 30, 2013 (Expressed in US Dollars) (Unaudited) 14. 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 November 30, 2013, the Company did not have any material recognizable subsequent events. 12 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, 2013. 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 Energy 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 manufacturing and selling vertical axis wind turbines, as well as acquiring interests in land for the purpose 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 we commence selling vertical axis wind turbines, which will require additional funding. 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 November 30, 2013, which are included herein. Three months ended November 30, 2013 2012 Increase/(Decrease) -------- -------- ------------------- $ $ $ % Revenue 0 0 0 N/A Expenses 100,970 49,942 51,028 102.2% Foreign exchange (gain) loss 14,871 8,633 6,238 72.3% Interest income 0 0 0 N/A -------- -------- -------- ------ Net Loss 115,841 58,575 57,266 97.8% ======== ======== ======== ====== 13 Six months ended November 30, 2013 2012 Increase/(Decrease) -------- -------- ------------------- $ $ $ % Revenue 0 0 0 N/A Expenses 301,820 112,827 188,993 167.5% Foreign exchange (gain) loss 32,316 (41,938) 74,254 N/A Interest income 0 (9) 9 N/A -------- -------- -------- ------ Net Loss 334,136 70,880 263,256 371.4% ======== ======== ======== ====== REVENUES We recorded a net operating loss of $115,841 for the fiscal quarter ended November 30, 2013 and have a comprehensive loss of $7,329,386 since inception. We have had no operating revenue since our inception on February 25, 2005 through to the fiscal quarter ended November 30, 2013. We anticipate that we will not generate any revenue while we are a development stage company. EXPENSES Our expenses for the three and six months ended November 30, 2013 and 2012 are outlined below: Three months ended November 30, 2013 2012 Increase/(Decrease) -------- -------- ------------------- $ $ $ % Consulting fees 9,611 0 9,611 N/A Engineering and development 1,670 17,086 (15,416) (90.2%) Management fees 34,821 15,184 19,637 129.3% Professional fees 16,602 8,084 8,518 105.4% General and administrative 38,266 9,588 28,678 299.1% -------- -------- -------- ----- Net Operating Loss 100,970 49,942 51,028 102.2% ======== ======== ======== ===== Six months ended November 30, 2013 2012 Increase/(Decrease) -------- -------- ------------------- $ $ $ % Consulting fees 63,611 0 63,611 N/A Engineering and development 2,837 32,691 (29,854) (91.3%) Management fees 149,557 30,022 119,535 398.2% Professional fees 29,640 29,943 (303) (1.0%) General and administrative 56,175 20,171 36,004 178.5% -------- -------- -------- ----- Net Operating Loss 301,820 112,827 188,993 167.5% ======== ======== ======== ===== Consulting expenses increased by $9,611 in the three month period ended November 30, 2013 compared to the three month period ended November 30, 2012, and by $63,611 in the six month period ended November 30, 2013 compared to the six month period ended November 30, 2011. The increase in consulting fees relates to the commencement of our vertical axis wind turbine manufacturing business. Engineering and development expenses decreased by $15,416 in the three month period ended November 30, 2013 compared to the three month period ended November 30, 2012, and by $29,854 in the six month period ended November 30, 2013 compared to the six month period ended November 30, 2012. This increase is a result of a decline in development and maintenance work on our Saskatchewan wind power projects. 14 Management fees increased by $19,637 in the three month period ended November 30, 2013 compared to the three month period ended November 30, 2012, and by $119,535 in the six month period ended November 30, 2013 compared to the six month period ended November 30, 2012. This increase relates to the commencement of our vertical axis wind turbine manufacturing business. Professional fees, consisting primarily of legal and accounting costs, increased by $8,518 in the three month period ended November 30, 2013 compared to the three month period ended November 30, 2012, and decreased by $303 in the six month period ended November 30, 2013 compared to the six month period ended November 30, 2012. Thus, for the six month period, our professional fees have remained virtually unchanged from the comparable period in the prior fiscal year. General and administrative expenses increased by $28,678 in the three month period ended November 30, 2013 compared to the three month period ended November 30, 2012, and by $36,004 in the six month period ended November 30, 2013 compared to the six month period ended November 30, 2012. The increase in general and administrative expenses relates to the commencement of our vertical axis wind turbine manufacturing business. 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 generated nominal interest of $9 in the six month period ended November 30, 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 November 30, 2013, and May 31, 2012, our fiscal year end, and the changes for on those dates are summarized as follows: WORKING CAPITAL November 30, May 31, 2013 2013 Increase/(Decrease) -------- -------- ------------------- $ $ $ % Current Assets 61,197 110,319 (49,122) (44.5%) Current Liabilities 502,218 389,213 113,005 29.0% -------- -------- -------- ------ Working Capital (441,021) (278,894) (162,127) N/A ======== ======== ======== ====== The $162,127 decrease in our working capital position from May 31, 2013, the date of our most recently fiscal year end, to November 30, 2013 was primarily due to a decrease in our cash position and an increase in amounts due to our directors and officers. 15 CASH FLOWS

~~Three~~Six months ended ~~August~~November 3130, 2013 2012 Increase/(Decrease) -------- -------- --------------------- $ $ $ % Cash Flows ~~provided~~from by (used in) Operating Activities (39122,~~755~~102) 345,~~977~~575 (74127,~~732~~677) N/A Cash Flows provided by (used in) Investing Activities (4171,~~634~~614) (1,660) (3969,~~974~~954) N/A Cash Flows provided by Financing Activities 0105,046 49,500 ~~(49~~55,~~500)~~546 ~~(100~~112.02%) Effect of exchange rate changes on cash 2132,~~074~~845 (5746,~~200~~983) ~~(78~~79,~~274)~~828 N/A -------- -------- -------- ------ Net increase (decrease) in cash during period (6055,~~315~~825) 256,~~617~~432 ~~(85~~62,~~932)~~257 N/A ======== ======== ======== ======

During the six months ended November 30, 2013, we used net cash flows from operating activities in the amount of $122,102. The $105,046 in cash flows provided by financing activities during the six months ended November 30, 2013 consisted of private placement subscription funds advanced to us. DISCLOSURE OF OUTSTANDING SHARE DATA WARRANTS None SHARE OPTIONS From time to time, we have granted stock options to directors, officers and key advisors to acquire shares of our common stock. A summary of our stock option activity is as follows: Weighted Average Number of Exercise Options Price ------- ----- $ Balance as at May 31, 2013 4,173,334 0.20 Granted 1,050,000 0.10 --------- ------ Outstanding: November 30, 2013 5,233,334 0.18 --------- ------ Exercisable: November 30, 2013 5,233,334 0.18 ========= ====== FUTURE FINANCINGS We recorded a comprehensive loss of $108,531 for the three month period ended November 30, 2013 and have an accumulated deficit of $7,329,386 since inception. As of November 30, 2013 we had cash and cash equivalents totaling $47,614 (May 31, 2014 - $103,439). As of the date of this report, management anticipates that we will require approximately $750,000 to fund our corporate operations and wind power property development program for the next 12 months. As well, we will require approximately an additional $500,000 to cover our current outstanding liabilities. Accordingly, we do not have sufficient funds to meet our planned expenditures over the next 12 months. 16 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 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. 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 November 30, 2013, which is the end of the period covered by this report. This evaluation was carried out by our principal executive officer and principal financial officer. Based on this evaluation, our principal executive officer and principal financial officer has concluded that the design and operation of our disclosure controls and procedures were effective as at the end of the period covered by this report. Based on his evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our internal controls over financial reporting were not effective as of November 30, 2013 and were subject to material weakness. 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, namely: 1. Failing to have an audit committee or other independent committee that is independent of management to assess internal control over financial reporting; and 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. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by our company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required 17 to be disclosed by our company in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. During the three months ended November 30, 2013, our internal control over financial reporting was not subject to any changes. PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS During the quarter, the Company commenced a legal action in the Supreme Court of British Columbia against the vendors of the vertical axis wind turbine business that it acquired seeking a declaration that it owns the assets described in the asset purchase agreement and that the vendors have breached the agreement. The Company also seeks general damages. The vendors have assigned one of the four patent applications to the Company in accordance with the terms of the Asset Purchase Agreement, but have failed to assign the three other patents and have not delivered all equipment related to the vendors' vertical axis wind turbine business that was sold to us pursuant to the asset purchase agreement. One of the vendors, Barry Ireland, has terminated his employment agreement with the Company and takes the position that the Company breached the asset purchase agreement by failing to provide the required consideration. The Company's position is that all consideration due to the vendors pursuant to the asset purchase agreement has been paid. 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. MINE SAFETY DISCLOSURES Not applicable ITEM 5. OTHER INFORMATION None 18 ITEM 6. EXHIBITS

20 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 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: January 14, 2014 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 21

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