---

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

FORM 10-QSB

(Mark One)x QUARTERLY REPORT UNDER SECTION
  13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
  For the quarterly period ended August 31, 2005

 ̈TRANSITION REPORT
  UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
  For the transition period from __________ to __________

Commission file number 333-115637

CASCADE ENERGY, INC.
  (Exact name of small business issuer as specified in its charter)

|Nevada                                                               | 41-2122221                       
|-------------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation
      or organization) | (IRS Employer Identification No.)

5151 E. Broadway, Suite 1600, Tucson, AZ 85711
  (Address of principal executive offices)

520.512.5469
  (Issuers telephone number)

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

Check whether the issuer (1) filed all reports required to
  be filed by Section 13 or 15(d) of the Exchange Act during the past 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  ̈

State the number of shares outstanding of each of the issuers
  classes of common equity, as of the latest practicable date:

48,800,000 shares of common stock, par value of $0.001
  issued and outstanding as of October 6, 2005

Transitional Small Business Disclosure Format (Check one):
  Yes  ̈ No x

Indicate by check mark whether the registrant is a shell company
  (as defined in Rule 12b-2 of the Exchange Act). (Check one): Yes  ̈
  No x

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- 2 -

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B, and, therefore, do not include all information and footnotes
necessary for a complete presentation of financial position, results of
operations, cash flows, and stockholders equity in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations and
financial position have been included and all such adjustments are of a normal
recurring nature. Operating results for the six months ended August 31, 2005 are
not necessarily indicative of the results than can be expected for the year
ended February 28, 2006.

---

CASCADE ENERGY, INC.

(AN EXPLORATION STAGE COMPANY)

INTERIM FINANCIAL STATEMENTS

August 31, 2005

(Stated in US Dollars)

(Unaudited)



F-1

---

CASCADE ENERGY, INC.(AN EXPLORATION STAGE COMPANY) 
  INTERIM BALANCE SHEETS
  August 31, 2005 and February 28, 2005 
  (Stated in US Dollars) (Unaudited)

|                                                                     |   | August 31, |   |   | February 28, |  
|-------------------------------------------------------------------- | - | ---------- | - | - | ------------ | -
|                                                                     |   | 2005       |   |   | 2005         |  
|ASSETS                                                              
|                                                                     |   |            |   |   |              |  
|Current                                                              |   |            |   |   |              |  
|Cash                                                                 | $ | 3,949      |   | $ | 48           |  
|Advance receivable                                                   |   | 5,998      |   |   | 5,998        |  
|Current assets of discontinued operations
       NOTE 6             |   | -          |   |   | 17,377       |  
|                                                                     |   | 9,947      |   |   | 23,423       |  
|                                                                     |   |            |   |   |              |  
|Advance - Property Development Cost 
      NOTE 3                   |   | 374,704    |   |   | -            |  
|                                                                     |   |            |   |   |              |  
|                                                                     | $ | 384,651    |   | $ | 23,423       |  
|                                                                     |   |            |   |   |              |  
|LIABILITIES                                                         
|                                                                     |   |            |   |   |              |  
|Current                                                              |   |            |   |   |              |  
|Accounts payable and accrued liabilities
       NOTE 4              |   | 60,044     |   |   | 23,228       |  
|Due to related parties
       NOTE 4                                |   | 10,263     |   |   | 7,644        |  
|Convertible Debenture Payable  NOTE
      5                         |   | 927,720    |   |   | -            |  
|Current liabilities of
      discontinued operations  NOTE 6        |   | -          |   |   | 199,890      |  
|                                                                     |   | 998,027    |   |   | 230,762      |  
|                                                                     |   |            |   |   |              |  
|STOCKHOLDERS’ DEFICIENCY                                            
|                                                                     |   |            |   |   |              |  
|Capital stock  NOTE 8                                               |   |            |   |   |              |  
|Common stock, $0.001 par
      value, 200,000,000 shares authorized  |   |            |   |   |              |  
|Preferred stock, $0.001 par value, 5,000,000
      shares authorized |   |            |   |   |              |  
|48,800,000 common shares
      issued and outstanding (February 28,  |   | 48,800     |   |   | 72,800       |  
|2005: 72,800,000)                                                    |   |            |   |   |              |  
|Additional paid-in capital                                           |   | 6,300      |   |   | (14,700      | )
|Accumulated other comprehensive loss for discontinued operations     |   | -          |   |   | (10,673      | )
|Accumulated deficit                                                  |   | (84,549    | ) |   | (254,766     | )
|Accumulated deficit during the exploration stage                     |   | (583,927   | ) |   | -            |  
|                                                                     |   |            |   |   |              |  
|                                                                     |   | (613,376   | ) |   | (207,339     | )
|                                                                     |   |            |   |   |              |  
|                                                                     | $ | 384,651    |   | $ | 23,423       |  

SEE ACCOMPANYING NOTES

F-2

---

CASCADE ENERGY, INC.(AN EXPLORATION STAGE COMPANY) 
  INTERIM STATEMENTS OF OPERATIONS 
  for the three and six months ended August 31, 2005 and 2004
  (Stated in US Dollars) (Unaudited)

|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   | From Date    |  
|-------------------------------------- | - | ------------------ | - | - | ---------------- | - | - | ---------- | - | - | ---------- | - | - | ------------ | -
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   | Of Inception |  
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   | Of           |  
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   | Exploration  |  
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   | Stage        |  
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   | (June 1,     |  
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   | 2005)        |  
|                                       |   | Three months ended |   |   | Six months ended |   |   | To         |  
|                                       |   | August 31,         |   |   | August 31,       |   |   | August 31, |  
|                                       |   | 2005               |   |   | 2004             |   |   | 2005       |   |   | 2004       |   |   | 2005         |  
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|Expenses                               |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|Accounting and audit fees              | $ | 3,760              |   | $ | 3,500            |   | $ | 6,964      |   | $ | 15,122     |   | $ | 3,760        |  
|Advertising and promotion              |   | 10,000             |   |   | -                |   |   | 10,000     |   |   | -          |   |   | 10,000       |  
|Bank charges and interest              |   | 177                |   |   | -                |   |   | 241        |   |   | 22         |   |   | 177          |  
|Consulting fees - NOTE
      4         |   | 15,400             |   |   | 4,000            |   |   | 15,400     |   |   | 9,000      |   |   | 15,400       |  
|Filing and listing fees                |   | 3,798              |   |   | -                |   |   | 4,570      |   |   | -          |   |   | 3,798        |  
|Foreign exchange loss                  |   | -                  |   |   | -                |   |   | -          |   |   | 89         |   |   | -            |  
|Interest on long-term debt             |   | 9,480              |   |   | -                |   |   | 9,480      |   |   | -          |   |   | 9,480        |  
|Investor relations                     |   | 32,465             |   |   | -                |   |   | 32,465     |   |   | -          |   |   | 32,465       |  
|Legal fees                             |   | -                  |   |   | 913              |   |   | -          |   |   | 2,600      |   |   | -            |  
|Office and general                     |   | -                  |   |   | 849              |   |   | -          |   |   | 1,717      |   |   | -            |  
|Rent                                   |   | -                  |   |   | 900              |   |   | -          |   |   | 1,500      |   |   | -            |  
|Telephone                              |   | -                  |   |   | -                |   |   | -          |   |   | -          |   |   | -            |  
|Transfer agent fees                    |   | 511                |   |   | -                |   |   | 1,096      |   |   | -          |   |   | 511          |  
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|Loss before other items                |   | (75,591            | ) |   | (10,162          | ) |   | (80,215    | ) |   | (30,050    | ) |   | (75,591      | )
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|Other items                            |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|Exploration costs written off - NOTE 3 |   | (508,336           | ) |   | -                |   |   | (508,336   | ) |   | -          |   |   | (508,336     | )
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|Loss from continuing operations        |   | (583,927           | ) |   | (10,162          | ) |   | (588,551   | ) |   | (30,050    | ) |   | (583,927     | )
|Gain from discontinued                 |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|operations - Schedule
      1          |   | 187,494            |   |   | (24,942          | ) |   | 185,513    |   |   | (53,827    | ) |   | 187,494      |  
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|Net loss                               | $ | (396,433           | ) | $ | (35,104          | ) | $ | (403,038   | ) | $ | (83,877    | ) | $ | (396,433     | )
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|Basic and diluted loss per share       |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|- continuing operations                | $ | (0.01              | ) | $ | (0.00            | ) | $ | (0.00      | ) | $ | (0.00      | ) |   |              |  
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|Basic and diluted loss per share       |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|- discontinued operations              | $ | (0.00              | ) | $ | (0.00            | ) | $ | (0.00      | ) | $ | (0.00      | ) |   |              |  
|                                       |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|Weighted average number of             |   |                    |   |   |                  |   |   |            |   |   |            |   |   |              |  
|common shares outstanding              |   | 62,104,348         |   |   | 72,800,000       |   |   | 67,452,174 |   |   | 72,800,000 |   |   |              |  

SEE ACCOMPANYING NOTES

F-3

---

CASCADE ENERGY, INC.(AN EXPLORATION STAGE COMPANY) 
  INTERIM STATEMENTS OF CASH FLOWS 
  for the six months ended August 31, 2005 and 2004 
  (Stated in US Dollars)

|                                                             |   |                  |   |   |            |   |   | From Date      |  
|------------------------------------------------------------ | - | ---------------- | - | - | ---------- | - | - | -------------- | -
|                                                             |   |                  |   |   |            |   |   | Of Inception   |  
|                                                             |   |                  |   |   |            |   |   | Of Exploration |  
|                                                             |   |                  |   |   |            |   |   | Stage          |  
|                                                             |   |                  |   |   |            |   |   | (June 1, 2005) |  
|                                                             |   | Six months ended |   |   | To         |  
|                                                             |   | August 31,       |   |   | August 31, |   |   | August 31,     |  
|                                                             |   | 2005             |   |   | 2004       |   |   | 2005           |  
|                                                             |   |                  |   |   |            |   |   |                |  
|Operating Activities                                         |   |                  |   |   |            |   |   |                |  
|Net loss for the period                                      | $ | (588,551         | ) | $ | (30,050    | ) | $ | (583,927       | )
|                                                             |   |                  |   |   |            |   |   |                |  
|                                                             |   |                  |   |   |            |   |   |                |  
|Change in non-cash working
      capital items related to    |   |                  |   |   |            |   |   |                |  
|operations:                                                  |   |                  |   |   |            |   |   |                |  
|Prepaid
      expenses and deposits                          |   | -                |   |   | (2,400     | ) |   | -              |  
|Accounts payable
      and accrued liabilities               |   | 36,817           |   |   | 2,490      |   |   | 33,482         |  
|                                                             |   |                  |   |   |            |   |   |                |  
|Cash flows used in operating activities                      |   | (551,734         | ) |   | (29,960    | ) |   | (550,445       | )
|                                                             |   |                  |   |   |            |   |   |                |  
|Financing Activities                                         |   |                  |   |   |            |   |   |                |  
|Increase in due to related
      parties                     |   | 2,619            |   |   | -          |   |   | 841            |  
|Increase in due from Cascade Energy, Inc                     |   | -                |   |   | (5,998     | ) |   | -              |  
|Increase in convertible
      debenture payable              |   | 927,720          |   |   | -          |   |   | 927,720        |  
|                                                             |   |                  |   |   |            |   |   |                |  
|Cash flows provided by (used in) financing
      activities  |   | 930,339          |   |   | (5,998     | ) |   | 928,561        |  
|                                                             |   |                  |   |   |            |   |   |                |  
|Investing Activities                                         |   |                  |   |   |            |   |   |                |  
|Advance  Property Development Cost                          |   | (374,704         | ) |   | -          |   |   | (374,704       | )
|                                                             |   |                  |   |   |            |   |   |                |  
|Increase (decrease) in cash from continuing operations       |   | 3,901            |   |   | (35,958    | ) |   | 3,412          |  
|                                                             |   |                  |   |   |            |   |   |                |  
|Decrease in cash from discontinued operations  NOTE
      7 |   | -                |   |   | (2,192     | ) |   | (555           | )
|                                                             |   |                  |   |   |            |   |   |                |  
|Increase (decrease) in cash during the period                |   | 3,901            |   |   | (38,150    | ) |   | 2,857          |  
|                                                             |   |                  |   |   |            |   |   |                |  
|Cash, beginning of the period                                |   | 48               |   |   | 57,183     |   |   | 1,092          |  
|                                                             |   |                  |   |   |            |   |   |                |  
|Cash, end of the period                                      | $ | 3,949            |   | $ | 19,033     |   | $ | 3,949          |  
|                                                             |   |                  |   |   |            |   |   |                |  
|Supplemental disclosure of cash flow information             |   |                  |   |   |            |   |   |                |  
|Cash paid for:                                               |   |                  |   |   |            |   |   |                |  
|Interest                                                     | $ | -                |   | $ | -          |   | $ | -              |  
|                                                             |   |                  |   |   |            |   |   |                |  
|Income taxes                                                 | $ | -                |   | $ | -          |   | $ | -              |  

SEE ACCOMPANYING NOTES

F-4

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Schedule 1

CASCADE ENERGY, INC.(AN EXPLORATION STAGE COMPANY) 
  INTERIM STATEMENTS OF OPERATIONS
  FROM DISCONTINUED OPERATIONS OF POWER GROW SYSTEM LTD. 
  for the three and six months ended August 31, 2005 and 2004 
  (Stated in US Dollars) 
  (Unaudited)

|                                        |   | Three Months Ended |   |   | Six Months Ended |  
|--------------------------------------- | - | ------------------ | - | - | ---------------- | -
|                                        |   | August 31,         |   |   | August 31,       |  
|                                        |   | 2005               |   |   | 2004             |  
|                                        |   |                    |   |   |                  |  
|Sales                                   | $ | 20,015             |   | $ | 35,537           |  
|                                        |   |                    |   |   |                  |  
|Cost of sales                           |   | 13,866             |   |   | 22,726           |  
|                                        |   |                    |   |   |                  |  
|Gross profit                            |   | 6,149              |   |   | 12,811           |  
|                                        |   |                    |   |   |                  |  
|Expenses                                |   |                    |   |   |                  |  
|Accounting and
      audit fees         |   | 235                |   |   | (18              | )
|Advertising                             |   | 90                 |   |   | 52               |  
|Auto expenses                           |   | 476                |   |   | 2,771            |  
|Bad debt (recovery)                     |   | (9                 | ) |   | 10,397           |  
|Bank charges and
      interest         |   | 485                |   |   | 2,273            |  
|Consulting fees - NOTE 4                |   | 2,658              |   |   | 11,818           |  
|Investor relations                      |   | -                  |   |   | 285              |  
|Legal fees                              |   | 937                |   |   | 4                |  
|Office and general                      |   | 516                |   |   | 1,962            |  
|Rent - NOTE 4                           |   | 417                |   |   | 5,961            |  
|Salaries and benefits                   |   | 61                 |   |   | 23               |  
|Subcontract                             |   | 3,354              |   |   | -                |  
|Telephone                               |   | 592                |   |   | 2,075            |  
|Travel                                  |   | -                  |   |   | 149              |  
|                                        |   |                    |   |   |                  |  
|                                        |   | (9,812             | ) |   | (37,753          | )
|                                        |   |                    |   |   |                  |  
|Loss before the following               |   | (3,663             | ) |   | (24,942          | )
|Foreign currency translation adjustment |   | 5,396              |   |   | -                |  
|Gain on disposal of subsidiary - NOTE 6 |   | 195,573            |   |   | -                |  
|                                        |   |                    |   |   |                  |  
|Gain (Loss) from discontinued           |   |                    |   |   |                  |  
|operations                              | $ | 187,494            |   | $ | (24,942          | )

SEE ACCOMPANYING NOTES

F-5

---

CASCADE ENERGY, INC.(AN EXPLORATION STAGE COMPANY)
  INTERIM STATEMENT OF STOCKHOLDERS EQUITY (DEFICIENCY) 
  for the period December 23, 2003 (Date of Inception) to August 31, 2005 
  (Stated in US Dollars)

|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   | Accumulated |   |   |          |  
|------------------------------------- | ------------ | - | - | --------- | - | - | ---------- | - | - | ----------- | - | - | -------- | - | - | ----------- | - | - | -------- | -
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   | Deficit     |   |   |          |  
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   | During      |   |   |          |  
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   | Exploration |   |   |          |  
|                                      |              |   |   |           |   |   |            |   |   | Accumulated |   |   |          |   |   | Stage       |   |   |          |  
|                                      |              |   |   |           |   |   |            |   |   | Other       |   |   |          |   |   | (June 1,    |   |   |          |  
|                                      |              |   |   |           |   |   | Additional |   |   | Compre-     |   |   |          |   |   | 2005) To    |   |   |          |  
|                                      | Common Stock |   |   | Paid-in   |   |   | hensive    |   |   | Accumulated |   |   | August   |   |   |             |  
|                                      | Number*      |   |   | Par Value |   |   | Capital    |   |   | Loss        |   |   | Deficit  |   |   | 31, 2005    |   |   | Total    |  
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|Issuance of common stock              |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|for cash - at $0.000125               | 40,800,000   |   | $ | 40,800    |   | $ | (35,700    | ) | $ | -           |   | $ | -        |   | $ | -           |   | $ | 5,100    |  
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|Issuance of common stock              |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|for acquisition of Power              |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|Grow System Ltd.                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|- at $0.000125                        | 24,000,000   |   |   | 24,000    |   |   | (21,000    | ) |   | -           |   |   | -        |   |   | -           |   |   | 3,000    |  
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|Issuance of common stock              |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|for cash                              | 8,000,000    |   |   | 8,000     |   |   | 42,000     |   |   | -           |   |   | -        |   |   | -           |   |   | 50,000   |  
|- at $0.00625                         |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|Net loss for the period               | -            |   |   | -         |   |   | -          |   |   | -           |   |   | (10,441  | ) |   | -           |   |   | (10,441  | )
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   | -           |   |   |          |  
|Balance, February 29, 2004            | 72,800,000   |   |   | 72,800    |   |   | (14,700    | ) |   | -           |   |   | (10,441  | ) |   | -           |   |   | 47,659   |  
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|Other comprehensive loss              |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|for the year                          | -            |   |   | -         |   |   | -          |   |   | (10,673     | ) |   | -        |   |   | -           |   |   | (10,673  | )
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   | -           |   |   |          |  
|Net loss for the year                 | -            |   |   | -         |   |   | -          |   |   | -           |   |   | (244,324 | ) |   | -           |   |   | (244,324 | )
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|Balance, February 28, 2005            | 72,800,000   |   | $ | 72,800    |   | $ | (14,700    | ) | $ | (10,673     | ) | $ | (254,765 | ) |   | -           |   | $ | (207,338 | )
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|Cancellation of common                |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|stock received from disposition       |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|of Power Grow System Ltd.- at         |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|$0.000125                             | (24,000,000  | ) |   | (24,000   | ) |   | 21,000     |   |   | -           |   |   | -        |   |   | -           |   |   | (3,000   | )
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|Net loss from continuing operations   | -            |   |   | -         |   |   | -          |   |   | -           |   |   | (4,624   | ) |   | (583,927    | ) |   | (588,551 | )
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|Net loss from discontinued operations | -            |   |   | -         |   |   | -          |   |   | 10,673      |   |   | 174,840  |   |   |             |   |   | (185,513 | )
|                                      |              |   |   |           |   |   |            |   |   |             |   |   |          |   |   |             |   |   |          |  
|Balance, August 31, 2005              | 48,800,000   |   | $ | 48,800    |   | $ | 6,300      |   | $ | -           |   | $ | (84,549  | ) | $ | (583,927    | ) | $ | (613,376 | )

|* | The common stock
        issued, par value of common stock, and additional paid-in capital have
        been retroactively restated to reflect a forward split of 8 new shares
        for 1 old share effective on April 28, 2005.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|

SEE ACCOMPANYING NOTES

F-6

---

CASCADE ENERGY, INC.(AN EXPLORATION STAGE COMPANY) 
  NOTES TO THE INTERIM FINANCIAL STATEMENTS
  August 31, 2005 
  (Stated in US Dollars) 
  (Unaudited)

NOTE 1  INTERIM FINANCIAL STATEMENTS AND CONTINUANCE OF
  OPERATIONS

While the information presented in the accompanying interim financial
  statements to August 31, 2005 financial statements is unaudited, it includes
  all adjustments which are, in the opinion of management, necessary to present
  fairly the financial position, result of operations and cash flows for the interim
  period presented in accordance with the accounting principles generally accepted
  in the United States of America. In the opinion of management, all adjustments
  considered necessary for a fair presentation of the results of operations and
  financial position have been included and all such adjustments are of a normal
  recurring nature.

Operating results for the quarter ended August 31, 2005 are not
  necessarily indicative of the results that can be expected for the year ending
  February 28, 2006.

These financial statements have been prepared using generally
  accepted accounting principles in the United States of America applicable for
  a going concern which assumes that the Company will realize its assets and discharge
  its liabilities in the ordinary course of business. The Company has a working
  capital deficiency of $988,080 as at August 31, 2005, has not yet attained profitable
  operations and the Company has accumulated losses of $688,476 since inception.
  Its ability to continue as a going concern is dependent upon the ability of
  the company to generate profitable operations in the future and/or to obtain
  the necessary financing to meet its obligations and repay its liabilities arising
  from normal business operations when they come due. The outcome of these matters
  cannot be predicted with any certainty at this time and raise substantial doubt
  that the Company will be able to continue as a going concern. These financial
  statements do not include any adjustments to the amounts and classification
  of assets and liabilities that may be necessary should the Company be unable
  to continue as a going concern. The Company anticipates that additional funding
  will be in the form of equity financing from the sale of common shares. The
  Company may also seek to obtain additional short-term loans from the directors
  of the Company. There are no current arrangements in place for equity funding
  or short-term loans.

NOTE 2  PRINCIPLES OF CONSOLIDATION

The financial statements as at February 28, 2005 and for the
  three and six months ended August 31, 2005, include the accounts of the Company
  and its wholly-owned subsidiary, Power Grow System Ltd. The company disposed
  of Power Grow System Ltd. on June 30, 2005 (NOTE 6). All inter-company transactions
  and account balances have been eliminated.

NOTE 3 - OIL & GAS PROPERTIES

Oil and Gas Project Costs

The Company is in the development stage and has earned no revenues
  from its planned operations. It is primarily engaged in the acquisition, exploration
  and development of oil and gas properties. The Company uses the successful efforts
  method of accounting for these activities. Under this method of accounting,
  geological and geophysical costs and the costs of carrying and retaining undeveloped
  properties are charged to expense when incurred since they do not result in
  the acquisition of assets. Costs incurred to drill exploratory wells and exploratory-type
  stratigraphic test wells that do not find proved reserves are charged to expense
  when it is determined that the wells have not found proved reserves. Costs incurred
  to acquire properties and drill development wells, development-type

F-7

---

Cascade Energy, Inc.
  (An Exploration Stage Company) 
  Notes to the Interim Financial Statements 
  August 31, 2005 
  (Stated in US Dollars)  Page 2

NOTE 3 - OIL & GAS PROPERTIES (Continued)

stratigraphic test wells, successful exploratory wells, and successful
  exploratory-type stratigraphic wells are capitalized. Capitalized costs of wells
  and related equipment will be amortized, depleted, or depreciated using the
  units-of-production method. Costs of unproved properties will be assessed periodically
  to determine if an impairment loss should be recognized.

The Company entered into agreements to acquire interests in various
  unproven oil and gas properties as follows:

Coyote Creek Prospect, California, USA

On May 6, 2005, by an assignment agreement, the Company acquired
  a 33.075% working interest in certain mineral leases situated in Tehama County,
  California, referred to as the Coyote Creek Prospect. As consideration for this
  assignment, the Company assumed complete responsibility for the performance
  of all obligations of the assignor with respect to the farm-out agreement in
  which the assignor purchased its 67.5% working interest in the Coyote Creek
  Prospect. These obligations included $508,336 in geologic, geophysical, administration,
  land fee, dry hole drilling costs, and plugging and abandonment costs. Drilling
  was completed in August 2005 and the well proved to be uneconomical, therefore
  the entire $508,336 was charged to expense. Consequently, at August 31, 2005,
  no amounts have been capitalized by the Company with respect to the Coyote Creek
  Prospect.

Strand Fiord Coal Project, Canada

On June 15, 2005, the Company executed an acquisition proposal
  (the Agreement) with James Bay Energy Inc (James Bay),
  a private company, whereby James Bay, with the subsequent ratification of First
  Nephi International, Inc. (FNI) as appropriate, agreed to grant
  to the Company an option to acquire an undivided 10% ownership interest in five
  coal exploration licenses (the Licenses) to explore and develop
  certain coal properties (collectively the Property) located on Axel
  Hieberg Island in the Canadian Arctic. Pursuant to an agreement (the Underlying
  Agreement) dated April 20, 2005, between James Bay and FNI, James Bay
  and FNI agreed to form a Nova Scotia company (Novaco) for the purposes
  of the joint-venture exploration and development of the Property. In the Underlying
  Agreement it was agreed that the ownership of Novaco would be FNI 90% and James
  Bay 10%, reflecting the respective interest of those parties in the Licenses.

Due to the failure of James Bay and FNI to form Novaco, the Company
  elected not to exercise the Option and subsequent to the quarter ended August
  31, 2005, the Company and James Bay mutually agreed to terminate the Agreement
  (NOTE 9). As at August 31, 2005, no amounts have been paid or capitalized by
  the Company with respect to the Strand Fiord Coal Project.

Empress Project, Alberta, Canada

Option Lands (Sections 5, 6 and 7), Empress Project,
  Alberta, Canada

On May 19, 2005, the Company executed a farm-in agreement (the
  Agreement) with a private company to acquire a 49% working interest
  in the Crown P&NG rights of Sections 5, 6, and 7 (the Option Lands)
  of the Empress Project, located in eastern Alberta, Canada. Under the terms
  of the

F-8

---

Cascade Energy, Inc.
  (An Exploration Stage Company) 
  Notes to the Interim Financial Statements 
  August 31, 2005 
  (Stated in US Dollars)  Page 3

NOTE 3 - OIL & GAS PROPERTIES (Continued)

Agreement, the Company will earn the 49% working interest in
  each of three sections of the project by drilling, casing and completing one
  exploratory gas well in each section.

The Company elected not to commence with the drilling of the
  Option Lands, thereby forfeiting its right to a 49% working interest in these
  properties. As at August 31, 2005, no amounts have been paid or capitalized
  by the Company with respect to the Option Lands of the Empress Project.

Farmout Lands (Sections 16, 9, 17, and 21) Empress
  Project, Alberta, Canada

On June 30, 2005, the Company executed a farm-in agreement (the
  Agreement) with a private company (the Grantor) to acquire
  a 21% working interest in Section 16 of the Empress Project, located in eastern
  Alberta, Canada, including the 11-16-24-2W4M well (11-16). Under
  the terms of the Agreement, the Company will earn the 21% working interest by
  agreeing to pay all additional costs and expenses whatsoever relating to all
  development on Section 16 from the date of the Agreement forward. The interests
  earned by us under the agreement are subject to a 15% over-riding royalty interest
  for the Province of Alberta and an additional 3% over-riding royalty interest
  stipulated in an underlying agreement.

Subsequent to the quarter ended August 31, 2005, the Company
  received a cash call in the amount of approximately $250,000 ($293,469 Canadian
  funds) from the Operator of the 11-16 (NOTE 9). This represents the estimated
  cost to connect the 11-16 to the Altagas gathering system and must be paid by
  the Company in a timely fashion in order to earn the Companys 21% working
  interest in Section 16. The Company expects that it will be able to arrange
  financing in a timely fashion in order to fulfil this cash call. As at August
  31, 2005, no amounts have been paid or capitalized by the Company with respect
  to Section 16 of the Empress Project.

An amendment to the Agreement signed subsequent to the quarter
  ended August 31, 2005, confirms that the Company has also earned a 49% working
  interest in three other sections of the Farmout Lands (sections 9, 17, and 21)
  as a result of the Grantor having completed one well on Section 16 (NOTE 9).

The Company will have the right and option, for thirty (30) days
  from rig release of the last Earning Well drilled on the Farmout Lands in which
  to elect in writing to the Original Farmor to drill a well (hereinafter referred
  to as the Option Well) at a location of its choice on four pre-selected
  unearned sections of the Farmout Lands, which Option Well must be spudded by
  the Company no later than forty five (45) days after its election, subject to
  surface access, rig availability and regulatory approvals. The Company shall
  continuously and diligently drill the Option Well to Contract Depth and complete,
  cap or abandon same at its sole cost, risk and expense. Failure by the Company
  to elect to drill an Option Well shall be deemed to be an election to surrender
  its rights to drill an Option Well and to earn an interest in the unearned Farmout
  Lands.

In the event the Company elects to drill an Option Well, the
  Company will earn 21% of the Grantors Working Interest if the Option Well
  is on Section 16 and 49% of the Grantors Working Interest if the Option
  Well is on any of the other three Sections, subject to the Overriding Royalty
  and rights of conversion reserved by the original farmor.

F-9

---

Cascade Energy, Inc.
  (An Exploration Stage Company) 
  Notes to the Interim Financial Statements 
  August 31, 2005 
  (Stated in US Dollars)  Page 4

NOTE 3 - OIL & GAS PROPERTIES (Continued)

Section 15, Empress Project, Alberta, Canada

On July 22, 2005, the Company executed a farm-in agreement (the
  Agreement) with a private company to acquire a 49% working interest
  in Section 15 of the Empress Project, located in eastern Alberta, Canada. Under
  the terms of the Agreement, the Company will earn the 49% working interest by
  drilling one Earning Well on Section 15 and spudding the Earning Well not later
  than 30-days after the full execution of the Agreement. The Company elected
  not to commence with the drilling of the well, thereby forfeiting its right
  to a 49% working interest. As at August 31, 2005, no amounts have been paid
  or capitalized by the Company with respect to Section 15 of the Empress Project.

Kansas Prospect Database Participation Rights, Kansas, USA

On August 10, 2005, the Company executed a data sharing agreement
  (the Agreement) with Blue Scorpion Energy Inc. (Blue Scorpion,
  formerly 1048136 Alberta Ltd.), a private Alberta company, to acquire
  a 25% working interest in certain proprietary oil and gas engineering data respecting
  several prospective areas in the State of Kansas. The data includes, among other
  things, certain magnetic data acquired by airborne surveys over lands (the Lands)
  in the State of Kansas that cover an area of approximately 1,000,000 acres,
  as well as interpretations of such data (including scaled digital plots defining
  potential prospects, maps and other related data). A five (5%) percent gross
  overriding royalty (the Royalty) has been reserved in an underlying
  agreement.

The Company, with a 25% working interest, will be participating
  in a joint venture with other working interest partners who are Fidelis Energy,
  Inc. (Fidelis) with a 25% working interest, Silver Star Energy,
  Inc.`(Silver Star) with a 20% working interest, and Blue Scorpion
  (collectively the Companies). The Companies agree to pay, in proportion
  to the interests in the data that they are entitled to earn under this Agreement,
  the costs of the acquisition, by way of lease or otherwise, of up to two (2)
  sections of the Lands (the Initial Lands), selected by Blue Scorpion,
  for a two (2) well drilling program on such Initial Lands. The Companies agree
  to advance to Blue Scorpion their respective share of the funds required to
  complete acquisition of the Initial Lands forthwith upon the receipt of written
  notification from Blue Scorpion that it has selected appropriate Initial Lands,
  and negotiated terms with the underlying owners of such Initial Lands, in order
  to secure the Initial Lands.

Upon the completion of the acquisition of the Initial Lands,
  the Companies shall fully fund, drill, abandon, or complete, as the case may
  be, two (2) oil and/or gas wells (collectively the Earning Wells)
  on the Initial Lands in accordance with this Agreement, against the receipt
  of authorizations for expenditure from Blue Scorpion. Prior to the drilling,
  abandonment and or completion of the Earning Wells, the Companies will have
  earned no interest in the Data, the Earning Wells, or any part thereof. Blue
  Scorpion shall be the operator (the Operator) of all aspects the
  selection and acquisition of the Initial Lands and the drilling of the Earning
  Wells.

Upon the drilling, abandonment, or completion, as the case may
  be, of the Earning Wells, the Companies shall have earned the undivided interests
  in the Data, provided that the Data shall only be used by the Companies thereafter
  in the manner set forth in the Agreement. Subject to the Royalty, and any lessor
  royalties or other encumbrances flowing with the Initial Lands, the working
  interests of

F-10

---

Cascade Energy, Inc.
  (An Exploration Stage Company) 
  Notes to the Interim Financial Statements 
  August 31, 2005 
  (Stated in US Dollars)  Page 5

NOTE 3 - OIL & GAS PROPERTIES (Continued)

the parties in the Earning Wells and the Initial Lands shall
  be as follows: the Company  25%; Fidelis  25%; Silver Star 
  20%; Blue Scorpion  30%.

Blue Scorpion will be carried through the drilling and completion
  of the first two exploratory wells. The 70% joint venture working interest partners
  will pay 100% of the costs of drilling and completing the initial two wells.
  Subsequent to those first two wells, all participants in the play will contribute
  on a straight up working interest basis.

As at August 31, 2005, no amounts have been paid or capitalized
  by the Company with respect to the Kansas Prospect Data Sharing Agreement.

Bolloque Prospect, Alberta, Canada

On August 26, 2005, the Company executed a farm-in agreement
  (the Agreement) with a private company (the Grantor)
  to acquire the right to earn 49% of the interests that the Grantor can otherwise
  earn in the Farmout Lands, six sections of the Bolloque Project
  located 60 miles due north of Edmonton, Alberta, Canada.

Under the terms of the Agreement, the Company will earn the 49%
  working interest by drilling one Test Well on one of the sections comprising
  the Farmout Lands. If the Company fulfills its obligations with respect to the
  Test Well, it shall have the right to drill a like well (First Option
  Well) on any undrilled section of the Farmout Lands provided that written
  election is made to the original farmor within 45 days after the rig release
  date of the Test Well. If the Company elects to drill the First Option Well
  it shall commence to drill on or within 45 days of the written election to the
  original farmor to drill subject to rig availability, regulatory approval and
  suitable surface access. In like manner the Company shall have the continuing
  rolling option to elect to drill, thereafter drill further Option Wells and
  earn on any undrilled section of the Farmout Lands on the same timing and earning
  basis as the First Option Well utilizing the rig release date of the then most
  immediately preceding Earning Well.

In August 2005, the Company received a cash call in the amount
  of $374,704 ($450,000 Canadian funds) to finance the drilling of the Test Well,
  and that amount was advanced by the Company to the Operator of the property
  as at August 31, 2005.

Subsequent to the quarter ended August 31, 2005, in September,
  the 7-1 well was spudded and cased on section 1 of the Bolloque
  Farmout Lands. The well reached a total depth of 1,055 metres (3,462 feet) and
  a suite of electronic logs was run. The logging indicates the presence of oil
  on logs within the targeted Leduc (D-3) Formation. Based on this positive development,
  the well was cased to depth. The testing phase of the well has now commenced.

We have called for a completion rig that will perforate and swab
  test this promising section of the Leduc Formation, and in October, 2005, we
  received a cash call from the operator of the 7-1 for approximately $115,000
  ($134,375 Canadian funds) for the cost of completion of the well. The testing
  phase of the well is anticipated to take approximately 10 days, dependant on
  rig availability. The "7-1" well has confirmed the presence of a Leduc Pinnacle
  Reef buildup under the Company's leases and that

F-11

---

Cascade Energy, Inc.
  (An Exploration Stage Company) 
  Notes to the Interim Financial Statements 
  August 31, 2005 
  (Stated in US Dollars)  Page 6

NOTE 3 - OIL & GAS PROPERTIES (Continued)

the presence of hydrocarbons is indicated on the logs. A 3% gross
  over-riding royalty has been reserved in the underlying agreement.

NOTE 4  RELATED PARTY TRANSACTIONS

During the six months ended August 31, 2005 the Company incurred
  consulting fees of $18,977 (2004 - $23,155) charged by companies with directors
  that are former directors of the Company.

During the six months ended August 31, 2005, the Company incurred
  rent of $1,693 (2004 - $Nil) charged by a director and a company with a director
  that is a former director of the Company.

These charges were measured by the exchange amount which is the
  amount agreed upon by the transacting parties.

Included in accounts payable at August 31, 2005 is $Nil (February
  28, 2005 - $6,577) owing to former directors of the Company and to companies
  with directors that are former directors of the Company.

The amounts due to related parties represent advances and unpaid
  charges due to directors of the Company or to companies with directors in common
  with the Company and such advances are unsecured, non-interest bearing and have
  no specific terms of repayment.

NOTE 5 - CONVERTIBLE DEBENTURES

On June 15, 2005, the Company executed three secured convertible
  debentures for a total of $3,000,000. The debentures bear interest at 5% per
  annum and the principle and interest is convertible, at the holders discretion,
  into shares of common stock of the Company at $0.50 per share. The debentures
  are due and payable in full on or before June 15, 2006. As at August 31, 2005,
  $508,336 has been advanced directly to the Coyote Creek Prospect (Note 3), $374,704
  has been advanced directly to the Bolloque Project (Note 3), and $35,200 has
  been advanced for sundry amounts, for a total advanced of $918,240 as at August
  31, 2005. Subsequent to the quarter ended August 31, 2005, one of the debentures
  has been closed at a principal amount of $953,021, and the other two debentures
  cancelled as the Company has elected to pursue alternative sources of financing
  under more favorable terms. Interest accrued on the convertible debenture as
  at August 31, 2005 was $9,480.

NOTE 6  DISCONTINUED OPERATIONS

On June 30, 2005, the Company executed an Acquisition/Disposition
  Agreement (the Agreement) whereby the Company agreed to dispose
  of 100% of the issued and outstanding shares in the common stock of its wholly-owned
  subsidiary, Power Grow Systems Ltd., to its two original shareholders in consideration
  of the purchasers delivering to the Company share certificates, accompanied
  by duly executed Irrevocable Powers of Attorney to transfer the share certificates,
  representing a total of 3,000,000 (pre-forward split, 24,000,000 post-forward
  split  NOTE 8) common shares in the capital of the Company registered
  and beneficially owned by the purchasers. In conjunction with the closing of
  the agreement on July 20, 2005, Power Grow Systems Ltd. will assume all current
  and future

F-12

---

Cascade Energy, Inc.
  (An Exploration Stage Company) 
  Notes to the Interim Financial Statements 
  August 31, 2005 
  (Stated in US Dollars)  Page 7

NOTE 6  DISCONTINUED OPERATIONS (Continued)

liabilities, tangible and intangible assets, intellectual and
  proprietary information relating to the hydroponics plant growing equipment
  operation.

The net loss on disposal was determined as follows:

|Proceeds on disposal of subsidiary | $ | 3,000    |  
|---------------------------------- | - | -------- | -
|                                   |   |          |  
|Net assets of subsidiary:          |   |          |  
|Cash                               |   | 501      |  
|Accounts receivable                |   | 5,639    |  
|Inventory                          |   | 6,893    |  
|Accounts payable                   |   | (101,249 | )
|Due to related parties             |   | (92,489  | )
|Due to Cascade Energy, Inc.        |   | (5,998   | )
|Loan payable                       |   | (5,870   | )
|                                   |   | (192,573 | )
|                                   |   |          |  
|Net gain on disposal of subsidiary | $ | 195,573  |  

The consolidated balance sheets include the following amounts
  related to the discontinued operations of the subsidiary.

|                                                       |   | August 31, |  |   | February 28, | 
|------------------------------------------------------ | - | ---------- |  | - | ------------ | 
|                                                       |   | 2005       |  |   | 2005         | 
|                                                       |   |            |  |   |              | 
|Accounts receivable                                    | $ | -          |  | $ | 10,568       | 
|Inventory                                              |   | -          |  |   | 6,809        | 
|                                                       |   |            |  |   |              | 
|Current assets of discontinued operations              | $ | -          |  | $ | 17,377       | 
|                                                       |   |            |  |   |              | 
|                                                       |   |            |  |   |              | 
|Bank overdraft                                         | $ | -          |  | $ | 9,501        | 
|Accounts payable                                       |   | -          |  |   | 104,776      | 
|Due to related parties                                 |   | -          |  |   | 62,805       | 
|Due to Cascade Energy, Inc.                            |   | -          |  |   | 5,998        | 
|Loan payable                                           |   | -          |  |   | 16,810       | 
|                                                       |   |            |  |   |              | 
|Current liabilities of discontinued operations         | $ | -          |  | $ | 199,890      | 
|                                                       |   |            |  |   |              | 
|                                                       |   |            |  |   |              | 
|Accumulated other comprehensive loss from discontinued |   |            |  |   |              | 
|operations                                             | $ | -          |  | $ | 10,673       | 

F-13

---

Cascade Energy, Inc.
  (An Exploration Stage Company) 
  Notes to the Interim Financial Statements 
  August 31, 2005 
  (Stated in US Dollars)  Page 8

NOTE 6  DISCONTINUED OPERATIONS (Continued)

Subsequent to the closing of the disposition, and during the
  quarter ended August 31, 2005, the Company returned to treasury and cancelled
  the 24,000,000 (post-forward split) common shares in its capital stock that
  were purchased in consideration of the disposition of its wholly owned subsidiary.

NOTE 7  STATEMENT OF CASH FLOWS

Cash flows from discontinued operations are as follows:

|                                                 |   | Six months ended |  
|------------------------------------------------ | - | ---------------- | -
|                                                 |   | August 31,       |  
|                                                 |   | 2005             |  
|                                                 |   |                  |  
|Cash flows used in operating activities          |   |                  |  
|Gain (Loss) from discontinued operations         | $ | 185,513          |  
|Items not affecting cash:                        |   |                  |  
|Gain on disposal of
      subsidiary             |   | (195,573         | )
|Changes in non-cash working
      capital items: |   |                  |  
|Bank overdraft                                   |   | (9,501           | )
|Accounts
      receivable                        |   | 4,929            |  
|Prepaid                                          |   | -                |  
|Inventory                                        |   | (84              | )
|Accounts payable                                 |   | (3,527           | )
|                                                 |   |                  |  
|Cash used in operating activities                |   | (18,243          | )
|                                                 |   |                  |  
|Cash flows used by financing activities          |   |                  |  
|Loan payable                                     |   | (10,940          | )
|Due to related parties                           |   | 29,684           |  
|Due to Cascade Energy,
      Inc.                |   | -                |  
|Cash provided by financing activities            |   | 18,744           |  
|                                                 |   |                  |  
|Effect of foreign exchange rate changes on cash  |   | -                |  
|                                                 |   |                  |  
|Increase (decrease) in cash from discontinued    |   |                  |  
|operations prior to disposal                     |   | 501              |  
|                                                 |   |                  |  
|Cash balance of subsidiary on disposal           |   | (501             | )
|                                                 |   |                  |  
|Increase (decrease) in cash from discontinued    |   |                  |  
|operations during the
      period               | $ | -                |  

F-14

---

Cascade Energy, Inc.
  (An Exploration Stage Company) 
  Notes to the Interim Financial Statements 
  August 31, 2005 
  (Stated in US Dollars)  Page 9

NOTE 8  CAPITAL STOCK

On April 28, 2005, the Company approved a forward split of its
  common stock on the basis of 8 new shares for 1 old share and increased its
  authorized capital stock to 200,000,000 common shares. The number of shares
  referred to in these financial statements have been restated wherever applicable
  to give retroactive effect to the forward stock split. The par value of common
  stock and additional paid-in capital has also been restated.

The Company's capitalization is 200,000,000 common shares, with
  a par value of $0.001 per share and 5,000,000 preferred shares with a par value
  of $0.001 per share.

On June 30, 2005, the Company disposed of 100% of the issued
  and outstanding shares in the common stock of its wholly-owned subsidiary, Power
  Grow Systems Ltd., in consideration of the delivery to the Company of share
  certificates, accompanied by duly executed Irrevocable Powers of Attorney to
  transfer the share certificates, representing a total of 3,000,000 (pre-forward
  split, 24,000,000 post-forward split) common shares in the capital of the Company
  (NOTE 6). Subsequent to the closing of the disposition, and during the quarter
  ended August 31, 2005, the Company returned to treasury and cancelled the 24,000,000
  (post-forward split) common shares in its capital stock that were purchased
  in consideration of the disposition of its wholly owned subsidiary.

F-15

---

- 3 -

Item 2. Plan of Operation.

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements as
that term is defined in the Private Securities Litigation Reform Act of 1995.
These statements relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as
may, should, expects, plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled Risk Factors, that may cause our 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 do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

Our 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 dollar
amounts are expressed in United States dollars. All references to common
shares refer to the common shares in our capital stock.

As used in this quarterly report, the terms we, us, our
company, and Cascade mean Cascade Energy, Inc., a Nevada corporation, unless
otherwise indicated.

Corporate History

Cascade Energy, Inc. (formerly Pro-Tech Holdings Ltd.) was
incorporated under the laws of the State of Nevada on December 23, 2003. After
we effected the acquisition of Power Grow System Ltd. (Power Grow), a private
British Columbia company, on February 29, 2004, its focus was on identifying and
securing business opportunities in the hydroponics plant growing equipment
manufacturing industry.

Power Grow was incorporated pursuant to the laws of British
Columbia on August 20, 2001 for the purpose of designing, manufacturing and
marketing sophisticated hydroponics plant growing equipment to be marketed in
Canada and the United States to nurseries, garden centers, specialized
hydroponics equipment shops, gardeners and home hobbyists who wish to grow their
own fresh fruits, flowers, herbs and vegetables, year round, faster than
conventional gardening, organically and free of outdoor pollutants, pests and
weeds.

On February 2, 2004, Cascade entered into a share purchase
agreement with Power Grow, Jason Bleuler and Nick Brusatore to acquire 100% of
the issued and outstanding shares of voting stock of Power Grow. In
consideration of the transfer of all of the outstanding shares of Power Grow,
Cascade issued a total of 3,000,000 shares of common stock to the two Power Grow
shareholders of which 1,500,000 were issued to Jason Bleuler and 1,500,000 to
Nick Brusatore. Mr. Bleuler was appointed to the board of directors of Cascade.
Messrs. Bleuler and Brusatore remained on the board of directors of Power Grow.
On February 29, 2004, Cascade acquired Power Grow, and Power Grow became its
wholly-owned subsidiary.

On April 28, 2005, we changed our name from Pro-Tech Holdings
Ltd. to Cascade Energy, Inc. to better reflect the change of direction of our
business operations. On May 5, 2005, we effected a forward split of our issued
and outstanding shares of common stock on a one-for-eight basis. This forward
split resulted in the increase of our authorized capital stock to 200,000,000
shares of common stock at a par value of $0.001 per share and our shares of
preferred stock remained unchanged at 5,000,000 shares of preferred stock at a
par value of $0.001 per share. The name change was recorded by the Nevada
Secretary of State on April 27, 2005 and took effect with the Over-the-Counter
Bulletin Board at the opening for trading on May 5, 2005 under the new stock
symbol, CSCE.

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On June 30, 2005, we entered into an acquisition/disposition
agreement with Power Grow, Jason Bleuler and Nick Brusatore to acquire
24,000,000 (post-split) shares of common stock of Cascade from Jason Bleuler, as
to 12,000,000 shares of common stock and Nick Brusatore, as to 12,000,000 shares
of common stock in exchange for the shares of common stock of Power Grow.

Current Business

We are an exploration stage company engaged in the exploration
and development of natural gas and oil properties in the province of Alberta,
Canada, and in the States of California and Kansas, U.S.A. Our primary objective
is to acquire, discover, upgrade and expand North American energy reserves
towards near-term production and cash flow, together with identifying and
participating in exploration opportunities.

To date we have acquired initial working interests in the
Coyote Creek gas prospect in the Sacramento basin of California, USA, the
Empress gas and Bolloque oil prospects in Alberta, Canada, and a data sharing
agreement respecting several prospective areas in the State of Kansas, U.S.A.
The rights to the Coyote Creek prospect have been forfeited, but working
interests in the Empress, Bolloque and Kansas prospects all remain active. An
agreement to acquire an interest in the Strand Fiord coal project on Axel
Heiberg Island in the Canadian Arctic was cancelled by our company.

Coyote Creek Prospect

On May 6, 2005, by an assignment agreement, we acquired a
33.075% working interest in certain mineral leases (comprising sections 14, 15,
16, 22, 23, 24, 25, 26, 35 and 36 in Township 26 North Range 3 West and sections
1 and 2 in Township 25 North Range 3 West) situated in Tehama County,
California, referred to as the Coyote Creek Prospect. As consideration for this
assignment, we assumed complete responsibility for the performance of all
obligations of the assignor with respect to the farm-out agreement in which the
assignor purchased its 67.5% working interest in the Coyote Creek Prospect.
These obligations included $508,336 in geologic, geophysical, administration,
land fee, dry hole drilling costs, and plugging and abandonment costs. Drilling
was completed in August 2005 and the well proved to be uneconomical, so the
entire $508,336 was charged to expense. As at August 31, 2005, no amounts have
been capitalized by us with respect to the Coyote Creek Prospect.

The Coyote Creek natural gas prospect is located at the
northern end of Sacramento Valley in Tehama County, California. It is north of
the Corning Gas Field; approximately 8 Bcf is produced from the post-Eocene,
non-marine, Tehama Formation. The Upper Cretaceous Forbes Formation was the
primary objective of this prospect, with over 1,000 feet of continuous and
discontinuous sand/silt units present locally.

The Coyote Creek prospect is based on 2D seismic and well
control. The seismic data and well tops constrain the location of key faults and
structural closure. The nearby 1956 Shell Cox #1 well established the presence
of gas and reservoir quality sands with a 1000 MCF/D DST test at 4100'.
Potential closure size in the main fault block is 390 acres. Estimated
recoverable gas reserves range from a low-end case with one well of about 2 Bcf
(25' of net pay, 100 acre closure, 750 Mcf/Ac.Ft recovery) to a high-end case,
with multiple wells/pay zones, of about 28 Bcf (75' of net pay, 500 acre
closure, 750 Mcf/D recovery).

The Coyote Creek prospect is a NW  SE trending faulted
anticline with three-way dip closure and fault closure to the southwest. The
prospect is situated on the eastern, up-thrown block of the Corning reverse
fault, which is also a key structural element at the Corning Gas Field. The
upthrown block (hanging wall) is associated with gently undulating
fault-parallel folding and also northerly trending splay faults, which do not
apparently penetrate the shallower, post-Forbes, section. The combination of the
Corning Fault and associated folding and splay faults sets up the structural
trap at the Coyote Creek prospect.

The Corning Fault is part of a system of en echelon reverse
faults that are key controlling structural features in the Malton-Black Butte
Gas Field (~140 Bcf), the Willows-Beehive Bend Gas Field (~420 Bcf) and the
Arbuckle Gas Field (~80 Bcf), all located south of Coyote Creek.

Empress Prospect

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The Empress natural gas exploration project is located in
eastern Alberta, Canada approximately 160 miles east of the City of Calgary.

Empress Prospect : Sections 5, 6, and 7

On June 1, 2005, we executed a farm-in agreement with Blue
Scorpion Energy Inc. (Blue Scorpion, formerly 1048136 Alberta Ltd.), a
private Alberta company, to acquire a 49% working interest in Sections 5, 6, and
7 of the Empress Project, Alberta Canada. Under the terms of the Agreement, we
would have earned a 49% working interest in each of the three (3) sections by
drilling, casing and completing one exploratory gas well in each section. Well
spacing in Alberta allows only one well per section.

We elected not to commence with the drilling of these sections,
thereby forfeiting our right to a 49% working interest in these properties. As
at August 31, 2005, no amounts have been paid or capitalized by our company with
respect to sections 5, 6, and 7 of the Empress Project.

Empress Prospect : Sections 16,19, 17, and 21

On June 30, 2005, we entered into an agreement with Blue
Scorpion to acquire a 21% working interest in section 16 of the Empress Project,
including the 11-16-24-2W4M well (the 11-16). Under the terms of the
agreement, we will earn the 21% working interest by paying all additional costs
and expenses whatsoever relating to all development on Section 16 from the date
of the agreement forward. The interests earned by us under the agreement are
subject to a 15% over-riding royalty interest for the Province of Alberta and an
additional 3% over-riding royalty interest stipulated in an underlying
agreement.

The 11-16 was drilled and cased on June 20, 2005 after
intersecting three potential hydrocarbon pay zones, and the well was completed
in late July, 2005. Following the testing program, third-party engineers
reported that the well is projected to produce 500 to 600 Mcf (thousand`cubic
feet) gas per day as a stable production rate.

In October 2005 the pipeline route survey was completed and as
at the date of this report the last permitting and right of way agreements are
being finalized so that pipeline construction can begin. The installation of the
pipeline is scheduled to begin in early November 2005 with the goal of finishing
and commencement of commercial production and sales by mid-November. Cascade and
partners will tie-in to existing infrastructure at the Alta Gas gathering
system. This tie-in point is 1.5 miles from the well and is the best logistical
point for connection. We have received a cash call in the amount of
approximately $250,000 ($293,469 Canadian funds) from the Operator of the 11-16.
This represents the estimated cost to connect the 11-16 to the Altagas gathering
system and must be paid by us in a timely fashion in order to earn our companys
21% working interest in Section 16. We expect that it will be able to arrange
financing in a timely fashion in order to fulfil this cash call. As at August
31, 2005, no amounts have been paid or capitalized by our company with respect
to Section 16 of the Empress Project.

An amendment to the section 16 agreement was signed subsequent
to the quarter ended August 31, 2005, confirming that we have also earned a 49%
working interest in three other sections (sections 9, 17, and 21) of the farmout
lands near to section 16 as a result of Blue Scorpion having completed the 11-16
well. We have the right and option, for thirty (30) days from rig release of the
last earning well drilled on the farmout lands in which to elect in writing to
the original farmor to drill an option well at a location of its choice on four
pre-selected unearned sections of the farmout lands, which option well must be
spudded by us no later than forty five (45) days after its election, subject to
surface access, rig availability and regulatory approvals. We would be required
to continuously and diligently drill the option well to contract depth and
complete, cap or abandon same at our sole cost, risk and expense. Failure by us
to elect to drill an option well shall be deemed to be an election to surrender
our rights to drill an option well and to earn an interest in the unearned
farmout lands.

In the event we elect to drill an option well, we will earn 21%
of the Blue Scorpions working interest if the option well is on Section 16 and
49% of Blue Scorpions working interest if the option well is on any of the
other three sections, subject to the overriding royalty and rights of conversion
reserved by the original farmor.

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The Empress natural gas exploration project is located in
eastern Alberta, Canada approximately 160 miles east of the City of Calgary. The
surface consists of gently rolling farm and ranch land with year round access
and an established production and equipment infrastructure.

The Bakken zone of the project has oil shows in Drill Stem
Tests (D.S.T.) offsetting the land. Seismic indicates a Bakken high under the
project. Seismic indicates a Banff limestone high under the license, overlying
the Bakken high. This zone does not produce in the area but produces oil in
other areas. The Colony sand has tested gas in the area. The Colony sand is
above the Banff .

The Viking zone, 85 meters above the Colony, contains natural
gas in wells contiguous to both southwest and north sides of the project.
Mapping indicates that the reservoir continues under the project land. Pressure
analysis of producing gas wells shows that 16 billion cubic feet (Bcf) of
natural gas were originally in place in the Viking reservoir contiguous to the
project on the north side. Over 2 Bcf of that gas has been produced from 6 gas
wells leaving over 13 Bcf in the reservoir. Gas is present in two wells
immediately south of the leases.

Initial production rates from the existing wells have been just
under 1 Mmcf per day. Absolute Open Flow Rates (A.O.F.) are in the order of 3 to
5 Mmcf per day with one as high as 14 Mmcf per day. Production is held back to
minimize condensate production. Three wells have a cumulative of over 0.4 Bcf
each, with one of these having produced 0.9 Bcf.

Empress Prospect : Section 15

On July 22, 2005, we executed a farm-in agreement with Blue
Scorpion to acquire a 49% working interest in Section 15 of the Empress Project.
Under the terms of the agreement, we would have earned the 49% working interest
by drilling one earning well on section 15 and spudding the earning well not
later than 30-days after the full execution of the agreement. We elected not to
commence with the drilling of the well, thereby forfeiting its right to a 49%
working interest. As at August 31, 2005, no amounts have been paid or
capitalized by our company with respect to section 15 of the Empress
Project.

Bolloque Prospect

The Bolloque project is located 60 miles north of Edmonton,
Alberta and is approximately 40% of the way to Lesser Slave Lake, Alberta.

On August 26, 2005, we entered into a farmout agreement with
Salida Capital, Inc. (Salida), a private Nevada Corporation, to acquire the
right to earn 49% of the interests that Salida can otherwise earn in six
sections of the Bolloque Project located 60 miles due north of Edmonton,
Alberta, Canada. Salida acquired its interest in the lands under a participation
agreement, dated March 14, 2005, with Vega Resources Ltd. (Vega). Pursuant to
the participation agreement, Salida can earn 100% of the interests that Vega has
a right to earn in the lands, subject to a 3% gross overriding royalty reserved
for Vega in the participation agreement.

Under the terms of the farmout agreement, we will earn the 49%
working interest by drilling one test well on one of the sections comprising the
farmout lands. If we fulfill our obligations with respect to the test well, we
shall have the right to drill a like well (first option well) on any undrilled
section of the farmout lands provided that written election is made to the
original farmor within 45 days after the rig release date of the test well. If
we elect to drill the first option well, drilling shall commence within 45 days
of the written election to the original farmor to drill, subject to rig
availability, regulatory approval and suitable surface access. In like manner,
we shall have the continuing rolling option to elect to drill further option
wells and earn on any undrilled section of the Farmout Lands on the same timing
and earning basis as the first option well utilizing the rig release date of the
then most immediately preceding earning well.

As at August 31, 2005, we had advanced $374,704 ($450,000 CAD)
to the operator of the Bolloque oil play for the drilling and casing of the test
well on section 1 (the 7-1 well).

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In September, 2005, the 7-1 well was spudded and cased on
section 1 of the Bolloque Farmout Lands. The well reached a total depth of 1,055
metres (3,462 feet) and a suite of electronic logs was run. The logging
indicates the presence of oil on logs within the targeted Leduc (D-3) Formation.
Based on this positive development, the well was cased to depth.

We have called for a completion rig that will perforate and
swab test this promising section of the Leduc Formation, and in October, 2005,
we received a cash call from the operator of the 7-1 for approximately $115,000
($134,375 Canadian funds) for the cost of completion of the well. The testing
phase of the well is anticipated to take approximately 10 days, dependant on rig
availability. The "7-1" well has confirmed the presence of a Leduc Pinnacle Reef
buildup under our leases and that the presence of hydrocarbons is indicated on
the logs.

The project consists of a Leduc (Devonian) reef target
underlying three sections of petroleum and natural gas (P&NG) leases. Three
other P&NG leases are included in the project area. The project lands
consist of six sections of P&NG rights leased from the Crown, and three
sections are thought to overlie a Leduc reef build-up on the edge of the Cooking
Lake platform. Oil well spacing is normally 4 wells per section. Wells in the
area that have penetrated the flanks of the reef have tested water, showing that
there is porosity and permeability within the Leduc zone. The play is predicated
on there being oil trapped in the top of the reef.

Most wells in the area were drilled for Mannville sands and
natural gas. Gas production is occurring from these sands under the project
lands. These gas rights are excluded from the project farm-in lands, as other
oil companies own them but show the presence of economic hydrocarbons. Mapping
of the shallower zones indicate that there is structural drape over an
underlying reef, the Leduc target horizon. A seismic line has been purchased and
is being reprocessed to confirm that the reef is present.

The Wabamun Formation, about 200 meters shallower than the
Leduc, is often productive where there is an underlying Leduc reef. The Wabamun
tends to be more uniform in thickness but drape across the underlying reef
creates a trap and a reservoir if porosity has been developed in the zone. The
Wabamun thus is a secondary target in this project. The Nisku Formation, about
100 meters shallower than the Leduc also forms reservoirs in the same way.

The Leduc D-3 field is situated in the Western Canadian
Sedimentary Basin and is named after the central Alberta town of Leduc (1991
pop. 13,970). Located amongst Canada's largest region of sedimentary rocks, and
the largest source of current oil and gas production the Province of Alberta it
makes up the majority of this Basin. The Leduc pool dates to the Devonian period
and its principal lithology is Dolomite.

The discovery of the Leduc oil field in 1947 fostered the
revelation that oil could be recovered from the Plains of Alberta. This
discovery became the base upon which Alberta and Canada built its oil industry,
and the nation would ultimately become an exporter of oil. By the time Imperial
Oil completed its exploitation program of the Leduc oil field in 1984, it had
produced in excess of 240 million barrels. With the advent of new tools such as
seismic imaging along with the increased cost of oil, the field continues to
return significant revenues for many mid-size exploration and development
companies.

Kansas Prospects Data Sharing Agreement

On August 10, 2005, we entered into a data sharing agreement
with Silver Star Energy, Inc. and Fidelis Energy, Inc., as purchasers, and Blue
Scorpion Energy Inc. (Blue Scorpion, formerly1048136 Alberta Ltd.), a private
Alberta company, as vendor, wherein we acquired an interest in data and the
interpretation of that data and a 25% working interest in the use of the data to
develop the lands about which the data was compiled. Blue Scorpion purchased the
data pursuant to an agreement with Wildes Exploration LLC dated June 5, 2005.
The data was gathered by airborne surveys over lands in the State of Kansas that
cover approximately 1,000,000 acres. The lands are located in central Kansas,
covering parts of Ellsworth, Salina, McPherson, Reno, Harvey, Kingman, and
Sedgwick counties.

We received a 25% interest and the purchasers received their
interests in consideration for the conduct and completion of development
programs of the lands and payment for the following two expenses in proportion
to each partys interests in the data: 1) the costs of the acquisition, by way
of leases or otherwise, of up to two sections of the

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lands selected by Blue Scorpion for drilling two initial wells;
and 2) the costs of drilling and completing the initial two wells.The working
interests of the initial two wells will be as follows: Cascade Energy, Inc. 
25%, Fidelis Energy, Inc.  25%, Silver Star Energy, Inc. - 20%, and Blue
Scorpion  30%.

Strand Fiord Coal Project

On June 15, 2005, we executed an acquisition proposal (the
Agreement) with James Bay Energy Inc. (James Bay), a private company,
whereby James Bay, with the subsequent ratification of First Nephi
International, Inc. (FNI) as appropriate, agreed to grant to us an option to
acquire an undivided 10% ownership interest in five coal exploration licenses
(the Licenses) to explore and develop certain coal properties (collectively
the Property) located on Axel Hieberg Island in the Canadian Arctic. Pursuant
to an agreement (the Underlying Agreement) dated April 20, 2005, between James
Bay and FNI, James Bay and FNI agreed to form a Nova Scotia company (Novaco)
for the purposes of the joint-venture exploration and development of the
Property. In the Underlying Agreement it was agreed that the ownership of Novaco
would be FNI 90% and James Bay 10%, reflecting the respective interest of those
parties in the Licenses.

Due to the failure of James Bay and FNI to form Novaco, we
elected not to exercise the Option and subsequent to the Quarter ended August
31, 2005, our company and James Bay mutually agreed to terminate the Agreement.
As at August 31, 2005, no amounts have been paid or capitalized by our company
with respect to the Strand Fiord Coal Project.

Plan of Operation And Cash Requirements

We anticipate that we will expend approximately $2,125,000
during the twelve-month period ending August 31, 2006 to develop our current
portfolio of properties, possibly make further acquisitions, and for working
capital. Our priorities are the construction of the pipeline to tie-in the 11-16
well of the Empress Prospect, the completion and testing of the 7-1 well of the
Bolloque Prospect, and the analysis of the Kansas data for identification of
potential lease acquisitions and subsequent drill targets.. These expenditures
are broken down as follows:

Major expenditures expected for the next 12 months include the
following:

|Exploration and drilling   | $1,000,000
|-------------------------- | ----------
|Leasing                    | 125,000   
|Operating expenses         |           
|General and administrative | 750,000   
|General working capital    | 250,000   
|Total:                     | $2,125,000

Liquidity and Capital Resources

As at August 31, 2005, we had a working capital deficit of $988,080,
  compared to a working capital deficit of $212,961 as at May 31, 2005. Our cash
  on hand was $3,949 as at August 31, 2005 compared to $1,092 at May 31, 2005.We
  plan to raise additional capital required to meet these immediate short-term
  needs and to meet the balance of our estimated funding requirements for the
  twelve months, primarily through the private placement of our securities. .

During the six months ended August 31, 2005, we incurred
exploration costs written off of $508,336 with respect to our Coyote Creek
project in California compared to $Nil during the comparable period in 2004.
This was primarily for drilling costs of the 5,000 foot natural gas test well
drilled by the operator of the project. Gas shows were present on logs over
significant intervals, but the sands did not contain sufficient permeability and
porosity to produce gas at economic rates. The well has been plugged and
abandoned, and we are reviewing the options for any potential continued
exploration on the project.

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In September 2005 we received a cash call in the amount of
approximately $250,000 ($293,469 Canadian funds) from the operator of the 11-16
well of the Empress Project. This represents the estimated cost to connect the
11-16 to the Altagas gathering system and we must be pay this amount in a timely
fashion in order to earn our companys 21% working interest in Section 16. We
expect that it will be able to arrange financing in a timely fashion in order to
fulfil this cash call.

During the six months ended August 31, 2005, we advanced
$374,704 ($450,000 CAD) to the operator of our Bolloque Project located 60 miles
due north of Edmonton, Alberta, Canada. This amount was for the drilling and
casing of one exploratory well on the project leases, and the 7-1 well was cased
in September 2005. In October 2005 the operator called for a completion rig that
will perforate and swab test, and the testing phase of the well is anticipated
to take approximately ten days, dependent upon rig availability. We have
received a cash call from the operator for approximately $115,000 ($134,375 CAD)
for the completion of the 7-1, and we anticipate that we will be able to arrange
financing in the short-term to make this payment.

On June 15, 2005, we executed three secured convertible debentures
  for a total of $3,000,000. The debentures bear interest at 5% per annum and
  the principle and interest is convertible, at the holders discretion,
  into shares of our common stock at $0.50 per share. The debentures are due and
  payable in full on or before June 15, 2006. As at August 31, 2005, $508,336
  has been advanced directly to the Coyote Creek Prospect, $374,704 has been advanced
  directly to the Bolloque Project, and $35,200 has been advanced for sundry amounts,
  for a total advanced of $918,240 as at August 31, 2005. Subsequent to the quarter
  ended August 31, 2005, one of the debentures has been closed at a principal
  amount of $953,021, and the other two debentures cancelled as we elected to
  pursue alternative sources of financing under more favorable terms. Interest
  accrued on the convertible debenture as at August 31, 2005 was $9,480.There
  can be no assurance that additional financing will be available to us when needed
  or, if available, that it can be obtained on commercially reasonable terms.
  If we are not able to obtain the additional financing on a timely basis, if
  and when it is needed, we will be forced to scale down or perhaps even cease
  the operation of our business.

Results of Operations

For the Six Months Ended August 31, 2005 Compared to the Six
Months Ended August 31, 2004

Our company has had only limited operations, and hasnt yet
realized any revenue from the sale of oil or gas from any of its prospective
lands. We realized a net loss from operations of $668,476 since inception. This
loss is due primarily to the $508,336 of exploration costs associated with the
unsuccessful development of its Coyote Creek prospect written-off in the quarter
ended August 31, 2005.

Operating Expenses. Operating expenses for the six
months ended August 31, 2005, totalled $80,215 compared to $30,050 for the same
period in the prior year, an increase of $50,165. Investor relations increased
to $32,465 for the six months ended August 31, 2005 from $Nil during the same
period in the prior year. This was as a result of our company executing an
investor relations services agreement in June of 2005 at a rate of $10,000 per
month. Advertising and promotion increased to $10,000 for the six month period
ended August 31, 2005, compared to $Nil for the same period in the prior year,
as we contracted for the design, implementation and maintenance of our Company
website, www.cascadeenergyinc.com. Interest on long-term debt increased to
$9,480 for the six month period ended August 31, 2005, compared to $Nil for the
same period in the prior year, due to the recent execution and closing of a 5%
convertible debenture in the amount of $953,021.

Net Loss for the Period.We recorded a net loss of $403,038
  for the six months ended August 31, 2005, compared with a net loss of $83,877
  for the six months ended August 31, 2004.

RISK FACTORS

Much of the information included in this quarterly report
includes or is based upon estimates, projections or other forward-looking
statements. Such forward-looking statements include any projections or
estimates made by us and our management in connection with our business
operations. While these forward-looking statements, and any assumptions upon
which they are based, are made in good faith and reflect our current judgment
regarding the

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direction of our business, actual results will almost always
vary, sometimes materially, from any estimates, predictions, projections,
assumptions, or other future performance suggested herein. We undertake no
obligation to update forward-looking statements to reflect events or
circumstances occurring after the date of such statements.

Such estimates, projections or other forward-looking
statements involve various risks and uncertainties as outlined below. We
caution readers of this quarterly report that important factors in some cases
have affected and, in the future, could materially affect actual results and
cause actual results to differ materially from the results expressed in any such
estimates, projections or other forward-looking statements. In evaluating us,
our business and any investment in our business, readers should carefully
consider the following factors.

Our new business operations will be subject to a number of
risks and uncertainties, including those set forth below:

Risks Relating to Our Business:

We have a history of losses which may continue, which may
negatively impact our ability to achieve our business objectives.

We incurred net losses of $403,038 for the period ended August
  31, 2005 and $83,877 for the period ended August 31, 2004. We cannot be assured
  that we can achieve or sustain profitability on a quarterly or annual basis
  in the future. Our operations are subject to the risks and competition inherent
  in the establishment of a business enterprise. There can be no assurance that
  future operations will be profitable. We may not achieve our business objectives
  and the failure to achieve such goals would have an adverse impact on us.

If we are unable to obtain additional funding our business
operations will be harmed and if we do obtain additional financing our then
existing shareholders may suffer substantial dilution.

We will require additional funds to sustain and expand our oil
and gas exploration activities. We anticipate that we will require up to
approximately $2,125,000 to fund our continued operations for the twelve month
period ending August 31, 2006. Additional capital will be required to
effectively support the operations and to otherwise implement our overall
business strategy. There can be no assurance that financing will be available in
amounts or on terms acceptable to us, if at all. The inability to obtain
additional capital will restrict our ability to grow and may reduce our ability
to continue to conduct business operations. If we are unable to obtain
additional financing, we will likely be required to curtail our exploration
plans and possibly cease our operations. Any additional equity financing may
involve substantial dilution to our then existing shareholders.

Our independent auditors have expressed substantial doubt
about our ability to continue as a going concern, which may hinder our ability
to obtain future financing.

In their report dated April 20, 2005, our independent auditors
stated that our financial statements for the fiscal year ended February 28, 2005
were prepared assuming that we would continue as a going concern. Our ability to
continue as a going concern is an issue raised as a result of recurring losses
from operations. We continue to experience net operating losses. Our ability to
continue as a going concern is subject to our ability to obtain necessary
funding from outside sources, including obtaining additional funding from the
sale of our securities. Our continued net operating losses increases the
difficulty in meeting such goals and there can be no assurances that such
methods will prove successful.

We have a limited operating history and if we are not
successful in continuing to grow our business, then we may have to scale back or
even cease our ongoing business operations.

We have no history of revenues from operations and have no
significant tangible assets. We have yet to generate positive earnings and there
can be no assurance that we will ever operate profitably. Our company has a
limited operating history in the business of oil and gas exploration and must be
considered in the development stage. Our success is significantly dependent on a
successful acquisition, drilling, completion and production program. Our
operations will be subject to all the risks inherent in the establishment of a
developing enterprise and the uncertainties arising from the absence of a
significant operating history. We may be unable to locate recoverable

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- 11 -

reserves or operate on a profitable basis. We are in the
development stage and potential investors should be aware of the difficulties
normally encountered by enterprises in the development stage. If our business
plan is not successful, and we are not able to operate profitably, investors may
lose some or all of their investment in our company.

If we are unable to retain the services of William Scott
Marshall and Chris Foster or if we are unable to successfully recruit qualified
managerial and field personnel having experience in oil and gas exploration, we
may not be able to continue our operations.

Our success depends to a significant extent upon the continued
service of William Scott Marshall, our president and director, and Chris Foster,
our chief executive officer, secretary, treasurer and director. Loss of the
services of Messrs. Marshall and Foster could have a material adverse effect on
our growth, revenues, and prospective business. We do not maintain key-man
insurance on the life of Messrs. Marshall or Foster. In addition, in order to
successfully implement and manage our business plan, we will be dependent upon,
among other things, successfully recruiting qualified managerial and field
personnel having experience in the oil and gas exploration business. Competition
for qualified individuals is intense. There can be no assurance that we will be
able to find, attract and retain existing employees or that we will be able to
find, attract and retain qualified personnel on acceptable terms.

As our properties are in the exploration stage, there can be
no assurance that we will establish commercial discoveries on our properties.

Exploration for economic reserves of oil and gas is subject to
a number of risk factors. Few properties that are explored are ultimately
developed into producing oil and/or gas wells. Our properties are in the
exploration stage only and are without proven reserves of oil and gas. We may
not establish commercial discoveries on any of our properties.

Even if we are able to, the potential profitability of oil
and gas ventures depends upon factors beyond the control of our company.

The potential profitability of oil and gas properties is
dependent upon many factors beyond our control. For instance, world prices and
markets for oil and gas are unpredictable, highly volatile, potentially subject
to governmental fixing, pegging, controls or any combination of these and other
factors, and respond to changes in domestic, international, political, social
and economic environments. Additionally, due to worldwide economic uncertainty,
the availability and cost of funds for production and other expenses have become
increasingly difficult, if not impossible, to project. In addition, adverse
weather conditions can also hinder drilling operations. These changes and events
may materially affect our future financial performance. These factors cannot be
accurately predicted and the combination of these factors may result in our
company not receiving an adequate return on invested capital.

Even if we are able to discover and generate a gas or oil
well, there can be no assurance the well will become profitable.

We have not yet made a discovery of economically recoverable
reserves. Even if we are able to, a productive well may become uneconomic in the
event water or other deleterious substances are encountered which impair or
prevent the production of oil and/or gas from the well. In addition, production
from any well may be unmarketable if it is impregnated with water or other
deleterious substances. In addition, the marketability of oil and gas which may
be acquired or discovered will be affected by numerous factors, including the
proximity and capacity of oil and gas pipelines and processing equipment, market
fluctuations of prices, taxes, royalties, land tenure, allowable production and
environmental protection, all of which could result in greater expenses than
revenue generated by the well.

Competition in the oil and gas industry is highly
competitive and there is no assurance that we will be successful in acquiring
the leases.

The oil and gas industry is intensely competitive. We compete
with numerous individuals and companies, including many major oil and gas
companies which have substantially greater technical, financial and operational
resources and staffs. Accordingly, there is a high degree of competition for
desirable oil and gas leases, suitable properties for drilling operations and
necessary drilling equipment, as well as for access to funds. We cannot predict
if the

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- 12 -

necessary funds can be raised or that any projected work will
be completed. Our budget anticipates our acquisition of additional acreage of
lease in the Coos Bay basin. This acreage may not become available or if it is
available for leasing, that we may not be successful in acquiring the leases.

The marketability of natural resources will be affected by
numerous factors beyond our control which may result in us not receiving an
adequate return on invested capital to be profitable or viable.

The marketability of natural resources which may be acquired or
discovered by us will be affected by numerous factors beyond our control. These
factors include market fluctuations in oil and gas pricing and demand, the
proximity and capacity of natural resource markets and processing equipment,
governmental regulations, land tenure, land use, regulation concerning the
importing and exporting of oil and gas and environmental protection regulations.
The exact effect of these factors cannot be accurately predicted, but the
combination of these factors may result in us not receiving an adequate return
on invested capital to be profitable or viable.

Oil and gas operations are subject to comprehensive
regulation which may cause substantial delays or require capital outlays in
excess of those anticipated causing an adverse effect on our company.

Oil and gas operations are subject to federal, state, and local
laws relating to the protection of the environment, including laws regulating
removal of natural resources from the ground and the discharge of materials into
the environment. Oil and gas operations are also subject to federal, state, and
local laws and regulations which seek to maintain health and safety standards by
regulating the design and use of drilling methods and equipment. Various permits
from government bodies are required for drilling operations to be conducted; no
assurance can be given that such permits will be received. Environmental
standards imposed by federal, provincial, or local authorities may be changed
and any such changes may have material adverse effects on our activities.
Moreover, compliance with such laws may cause substantial delays or require
capital outlays in excess of those anticipated, thus causing an adverse effect
on us. Additionally, we may be subject to liability for pollution or other
environmental damages. To date, we have not been required to spend any material
amount on compliance with environmental regulations. However, we may be required
to do so in the future and this may affect our ability to expand or maintain our
operations.

Exploration and production activities are subject to certain
environmental regulations which may prevent or delay the commencement or
continuation of our operations.

In general, our exploration and production activities are
subject to certain federal, state and local laws and regulations relating to
environmental quality and pollution control. Such laws and regulations increase
the costs of these activities and may prevent or delay the commencement or
continuation of a given operation. Compliance with these laws and regulations
has not had a material effect on our operations or financial condition to date.
Specifically, we are subject to legislation regarding emissions into the
environment, water discharges and storage and disposition of hazardous wastes.
In addition, legislation has been enacted which requires well and facility sites
to be abandoned and reclaimed to the satisfaction of state authorities. However,
such laws and regulations are frequently changed and we are unable to predict
the ultimate cost of compliance. Generally, environmental requirements do not
appear to affect us any differently or to any greater or lesser extent than
other companies in the industry. We believe that our operations comply, in all
material respects, with all applicable environmental regulations. Our operating
partners maintain insurance coverage customary to the industry; however, we are
not fully insured against all possible environmental risks.

Exploratory drilling involves many risks and we may become
liable for pollution or other liabilities which may have an adverse effect on
our financial position.

Drilling operations generally involve a high degree of risk.
Hazards such as unusual or unexpected geological formations, power outages,
labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain
suitable or adequate machinery, equipment or labor, and other risks are
involved. We may become subject to liability for pollution or hazards against
which it cannot adequately insure or which it may elect not to insure. Incurring
any such liability may have a material adverse effect on our financial position
and operations.

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- 13 -

Risks Relating to Our Shares of Common Stock:

If we fail to remain current in our reporting requirements,
we could be removed from the OTC Bulletin Board which would limit the ability of
broker-dealers to sell our securities and the ability of stockholders to sell
their securities in the secondary market.

Companies trading on the OTC Bulletin Board, such as us, must
be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as
amended, and must be current in their reports under Section 13, in order to
maintain price quotation privileges on the OTC Bulletin Board. If we fail to
remain current on our reporting requirements, we could be removed from the OTC
Bulletin Board. As a result, the market liquidity for our securities could be
severely adversely affected by limiting the ability of broker-dealers to sell
our securities and the ability of stockholders to sell their securities in the
secondary market.

Our shares of common stock is subject to the penny stock
rules of the Securities and Exchange Commission and the trading market in our
securities is limited, which makes transactions in our shares of common stock
cumbersome and may reduce the value of an investment in our shares of common
stock.

The Securities and Exchange Commission has adopted Rule 15g-9
which establishes the definition of a penny stock, for the purposes relevant
to us, as any equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require:

> - that a broker or dealer approve a persons account
>     for transactions in penny stocks; and
>   - the broker or dealer receive from the investor a written
>     agreement to the transaction, setting forth the identity and quantity of the
>     penny stock to be purchased.

In order to approve a persons account for transactions in
penny stocks, the broker or dealer must:

> - obtain financial information and investment experience
>     objectives of the person; and
>   - make a reasonable determination that the transactions in
>     penny stocks are suitable for that person and the person has sufficient knowledge
>     and experience in financial matters to be capable of evaluating the risks
>     of transactions in penny stocks.

The broker or dealer must also deliver, prior to any
transaction in a penny stock, a disclosure schedule prescribed by the Securities
and Exchange Commission relating to the penny stock market, which, in highlight
form:

> - sets forth the basis on which the broker or dealer made
>     the suitability determination; and
>   - that the broker or dealer received a signed, written agreement
>     from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions
in securities subject to the penny stock rules. This may make it more
difficult for investors to dispose of our shares of common stock and cause a
decline in the market value of our shares of common stock.

Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.

National Association of Securities Dealers Inc. sales
practice requirements may also limit a stockholders ability to buy and sell our
shares of common stock.

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- 14 -

In addition to the penny stock rules described above, the
National Association of Securities Dealers Inc. has adopted rules that 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, the
National Association of Securities Dealers Inc. believes that there is a high
probability that speculative low priced securities will not be suitable for at
least some customers. The National Association of Securities Dealers Inc.
requirements make it more difficult for broker-dealers to recommend that their
customers buy our shares of common stock, which may limit your ability to buy
and sell our shares of common stock and have an adverse effect on the market for
its shares.

Item 3. Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of
1934, as of the end of the period covered by the quarterly report, being August
31, 2005, we have carried out an evaluation of the effectiveness of the design
and operation of our companys disclosure controls and procedures. This
evaluation was carried out under the supervision and with the participation of
our companys management, including our companys president and our chief
financial officer. Based upon that evaluation, our companys president and our
chief financial officer concluded that our companys disclosure controls and
procedures are effective as at the end of the period covered by this report.
There have been no significant changes in our internal controls over financial
reporting that occurred during our most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect our internal
controls over financial reporting.

Disclosure controls and procedures and other procedures that
are designed to ensure that information required to be disclosed in our reports
filed or submitted under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time period specified in the
Securities and Exchange Commissions rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our reports filed under the
Securities Exchange Act of 1934 is accumulated and communicated to management,
including our president and our chief financial officer as appropriate, to allow
timely decisions regarding required disclosure.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We know of no material, existing or pending legal proceedings
against our company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial stockholder,
is an adverse party or has a material interest adverse to our interest. The
outcome of open unresolved legal proceedings is presently indeterminable. Any
settlement resulting from resolution of these contingencies will be accounted
for in the period of settlement. We do not believe the potential outcome from
these legal proceedings will significantly impact our financial position,
operations or cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

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- 15 -

Item 4. Submission of Matters to a Vote of Security
Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits.

Exhibits required by Item 601 of Regulation S-B

Exhibit Number/Description

|(2) | Plan of Purchase, Sale, Reorganization, Arrangement, Liquidation or
      Succession                                                                                                                                                                         
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                              
|2.1 | Share Purchase Agreement dated February 2, 2004
        among Pro-Tech Holdings Ltd. Power Grow System Ltd., Jason Bleuler and
        Nick Brusatore (incorporated by reference from our Registration Statement
        on Form SB-2 filed on May 19, 2004).
|    |                                                                                                                                                                                                                                                              
|2.2 | Acquisition/Disposition Agreement dated June 30,
        2005 among Pro-Tech Holdings Ltd., Power Grow System Ltd., Jason Bleuler
        and Nick Brusatore (incorporated by reference from our Current Report
        on Form 8-K filed on July 22, 2005). 

|(3) | Articles of Incorporation and Bylaws                                                                                           
|--- | -------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                
|3.1 | Articles of Incorporation (incorporated by reference
      from our Registration Statement on Form SB-2 filed on May 19, 2004).
|    |                                                                                                                                
|3.2 | By-laws (incorporated by reference from our Registration
      Statement on Form SB-2 filed on May 19, 2004).                  
|    |                                                                                                                                
|3.3 | Articles of Amendment (filed
      herewith).                                                                                  

|(10) | Material Contracts                                                                                                                                                                                                                                                                                                
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                   
|10.1 | Assignment of Interest Agreement dated May 6, 2005
        between Cascade Energy, Inc. and Calcor Energy Partners, LLC (incorporated
        by reference from our Current Report on Form 8-K filed on May 12, 2005).                                                                                            
|     |                                                                                                                                                                                                                                                                                                                   
|10.2 | Farm-in Agreement dated June 1, 2005 between Cascade
        Energy, Inc. and Blue Scorpion Energy Inc. (formerly 1048136 Alberta
        Ltd.) (incorporated by reference from our Current Report on Form
        8-K filed on June 20, 2005).                                                                 
|     |                                                                                                                                                                                                                                                                                                                   
|10.3 | Farmout Agreement dated June 30, 2005 between Cascade
        Energy, Inc. and Blue Scorpion Energy Inc. (formerly 1048136 Alberta
        Ltd.) (incorporated by reference from our Current Report on Form
        8-K filed on September 30, 2005).                                                           
|     |                                                                                                                                                                                                                                                                                                                   
|10.4 | Farmout Proposal - Empress
        Prospect, Section 15, dated July 22, 2005 between Cascade Energy, Inc.
        and Blue Scorpion Energy Inc. (formerly 1048136 Alberta Ltd.)
        (filed herewith).                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                   
|10.5 | Amendment to Farmout Agreement
        originally dated June 30, 2005, dated October 17, 2005 between Cascade
        Energy, Inc. and Blue Scorpion Energy Inc. (formerly 1048136 Alberta
        Ltd.) (filed herewith).                                                                                      
|     |                                                                                                                                                                                                                                                                                                                   
|10.6 | Data Sharing Agreement dated August 10, 2005 among
        Cascade Energy, Inc., Silver Star Energy Inc., Fidelis Energy Inc. and
        Blue Scorpion Energy Inc. (formerly 1048136 Alberta Ltd.)
        (incorporated by reference from our Current Report on Form 8-K filed on
        September 30, 2005).

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- 16 -

|10.7  | Farmout Agreement dated August 26, 2005 between
        Cascade Energy, Inc. and Salida Capital, Inc. (incorporated by reference
        from our Current Report on Form 8-K filed on October 18, 2005).
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                         
|10.8  | Acquisition Proposal 
        Strand Fiord Coal Project, Canadian Arctic, dated June 15, 2005 between
        Cascade Energy, Inc. and James Bay Energy Inc. (filed herewith).                         
|      |                                                                                                                                                                                                         
|10.9  | Mutual Release  Strand
        Fiord Coal Project, Canadian Arctic, dated October 3, 2005 between Cascade
        Energy, Inc. and James Bay Energy Inc. (filed herewith).                             
|      |                                                                                                                                                                                                         
|10.10 | 5% Secured Debenture dated
        June 15, 2005 between Cascade Energy, Inc. and Salifolia Invest and Trade
        Inc. (filed herewith).                                                             
|      |                                                                                                                                                                                                         
|10.11 | 5% Secured Debenture dated
        June 15, 2005 between Cascade Energy, Inc. and Ratan Consulting Inc. (filed
        herewith).                                                                       
|      |                                                                                                                                                                                                         
|10.12 | 5% Secured Debenture dated
        June 15, 2005 between Cascade Energy, Inc. and Perosa Management S.A.
        (filed herewith).                                                                      
|      |                                                                                                                                                                                                         
|10.13 | Investor Relations Agreement
        dated June 1, 2005 between Cascade Energy, Inc. and The Catalyst Shareholder
        Services Company (filed herewith).                                            

|(14) | Code of Ethics                                             
|---- | -----------------------------------------------------------
|     |                                                            
|14.1 | Code of Business Conduct
      and Ethics (filed herewith).

|(31) | Section 302 Certifications                       
|---- | -------------------------------------------------
|     |                                                  
|31.1 | Section 302 Certification
      (filed herewith).
|     |                                                  
|31.2 | Section 302 Certification
      (filed herewith).

|(32) | Section 906 Certification                        
|---- | -------------------------------------------------
|     |                                                  
|32.1 | Section 906 Certification
      (filed herewith).
|     |                                                  
|32.2 | Section 906 Certification
      (filed herewith).

---

SIGNATURES

In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

CASCADE ENERGY, INC.

By:/s/ William Scott Marshall
  William Scott Marshall, 
  President and Director 
  (Principal Executive Officer)

By:/s/ Chris Foster
  Chris Foster,
  Chief Financial Officer, Secretary, Treasurer and Director
  (Principal Financial Officer and Principal Accounting Officer)

Date: October 24, 2005

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