UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.  20549 FORM 10-KSB (Mark One) xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year endedFebruary 28, 2006 [
        ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from __________ to __________  Commission file number333-115637  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.)  9595 Wilshire Boulevard, Suite 900, Beverly Hills, CA 90212(Address of principal executive offices)  310.300.4063(Issuers telephone number)  5151 E. Broadway, Suite 1600, Tucson, AZ 85711(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.     YesxNo [   ] State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 93,150,000 shares of common stock, par value of $0.001 issued and outstanding as of May 26, 2006 Transitional Small Business Disclosure Format (Check one):
        Yes [
        ]
        Nox Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  (Check one):     Yes [   ]     Nox       TABLE OF CONTENTS   PART I
        
        1Item 1.
        Business
        1Item 1A.
        Risk Factors
        1Item 2.
        Properties
        7Item 3.
        Legal Proceedings
        12Item 4.
        Submission of Matters to a Vote of Security Holders
        13PART II
        
        14Item 5.
        Market for Registrants Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities
        14Item 6.
        Plan of Operation
        15Item 7.
        Managements Discussion and Analysis of Financial Condition and Results of Operation
        16Item 7A.
        Quantitative and Qualitative Disclosures About Market Risks
        20Item 8.
        Financial Statements and Supplementary Data
        21Item 9.
        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
        23Item 9A.
        Controls and Procedures
        23Item 10.
        Directors and Officers of the Registrant
        24Item 11.
        Executive Compensation
        25Item 12.
        Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
        28Item 13.
        Certain Relationships and Related Transactions
        28Item 14.
        Principal Accounting Fees and Services
        19   3       PART I Item 1.  Business. Company History Cascade Energy, Inc. (formerly Pro-Tech Holdings Ltd.) was incorporated under the laws of the State of Nevada on December 23, 2003.  After the Company 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.  The Company was not successful in its plans and in April, 2005, changed the business plan.  The decision was made to pursue opportunities in oil and gas exploration and development, and during the 2nd quarter of the fiscal year ended February 28, 2006, the Company effected the disposition of Power Grow.  On April 28, 2005, the Company changed its name from Pro-Tech Holdings Ltd. to Cascade Energy, Inc. to better reflect the change of direction of our business
operations.  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. The Company is 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.  The Companys 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. Item 1A.  Risk Factors. Much of the information included in this annual 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 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 annual 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 $6,683,038 for the period from June 1, 2006 (inception) to February 28, 2006, and $154,172 for the year ended February 28, 2005.  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  1      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 February 28, 2007, well in excess of the cash on hand of $1,223,074 as at February 28, 2006.  Historically, we have financed these expenditures primarily with proceeds from the sale of debt and equity securities. In order to meet these obligations or acquire any additional business interest, we will have to raise additional funds. We also make offers to acquire oil and natural gas properties in the ordinary course of our business. If these offers are accepted, our capital needs may increase substantially. We have arrangements for limited financing and we can provide no assurance that we will be able to obtain the additional required financing when needed. Obtaining additional financing will be subject to a number of factors, including: 1.
        market conditions; 2.
        investor acceptance of potential business assets; and, 3.
        investor sentiment. These factors may make the timing, amount, terms and conditions of additional financing unattractive or unavailable to us. If we are not successful in achieving financing in the amount necessary to meet our present obligations in connection with the oil and gas interests that we have acquired or business interests that we may acquire, implementation of our business plan may fail or be delayed. 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 March 27, 2006, our independent auditors stated that our financial statements for the fiscal year ended February 28, 2006 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 increase 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 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 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. We do not control all of our operations. We do not operate any of our properties and we therefore have limited influence over the testing, drilling and production operations of our properties. Our lack of control could result in the following:  2       1.
        the operator might initiate exploration or development on a faster or slower pace than we prefer;  2.
        the operator might propose to drill more wells or build more facilities on a project than we have funds for or that we deem appropriate, which could mean that we are unable to participate in the project or share in the revenues generated by the project even though we paid our share of exploration costs, and we could have our working interest ownership in the related lands and petroleum reserves reduced as a result of our failure to participate in development expenditures; and,  3.
        if an operator refuses to initiate a project, we might be unable to pursue the project.  Any of these events could materially reduce the value of our properties. We may not be able to finance future needs or adapt our business plan to changes because of restrictions placed on us by the instruments governing our debt. Our agreements with the selling stockholders who purchased our senior secured convertible promissory notes contain various covenants that limit our ability to, among other things:  1.
        pay dividends on our common stock, redeem or repurchase our common stock or other equity security;  2.
        sell assets; and,  3.
        issue any securities that rank pari passu or senior to the senior secured convertible promissory notes that we issued to the selling stockholders. Our ability to comply with such covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions. Additionally, our agreements with the selling stockholders contain numerous affirmative covenants, including covenants regarding reporting requirements and compliance with applicable laws and regulations. Additional debt we incur in the future may subject us to future covenants. Our failure to comply with these covenants could result in a default under the agreements governing the relevant debt. In addition, if any such default is not cured or waived, the default could result in an acceleration of debt under other debt instruments that contain cross acceleration or cross-default provisions, which could require us to repay or repurchase debt, together with accrued interest, prior to the date it otherwise is due and that could adversely affect our financial condition. If a default occurs under the notes, the selling stockholders could cause all of the outstanding debt obligations under the notes to become due and payable. Upon a default or cross-default, the selling stockholders could proceed against the collateral. Even if we are able to comply with all of the applicable covenants, the restrictions on our ability to manage our business in our sole discretion could adversely affect
our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other corporate opportunities that we believe would be beneficial to us. If we are unable to access our properties or conduct our operations due to surface conditions, our business will be adversely affected. Our exploitation and development of oil and natural gas reserves depends upon access to the areas where our operations are to be conducted. We conduct a portion of our operations in northern regions where we are only able to do so on a seasonal basis. Unless the surface is sufficiently frozen, we are unable to access our properties, drill or otherwise conduct our operations as planned. In addition, if the surface thaws earlier than expected, we must cease our operations for the season earlier than planned. Our operations are affected by road bans imposed from time to time during the break-up and thaw period in the spring. Road bans are also imposed due to snow, mud and rock slides and periods of high water, which can restrict access to our well sites and production facility sites. In recent years, winters in our northern operating areas have been warmer than normally experienced and, as a result, our
operating seasons have been shorter than in the past. Our inability to access our properties or to  3      conduct our operations as planned will result in a shutdown or slow down of our operations, which will adversely affect our business. If we are not able to effectively manage our anticipated expansion and growth, our business and financial condition will be negatively affected. We have recently expanded our business operations. Any future growth in our business may place significant strain on our limited managerial and operational resources. We cannot assure you that we will be able to implement adequate controls over the risks associated with our planned expansion. If we are unable to effectively manage expanded operations, our revenues may not concurrently increase with rising costs of operations and our business will be negatively affected. Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls may be time-consuming, difficult and costly for us. It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires publicly-traded companies to obtain. If we are unable to retain the services of William Scott Marshall 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. Loss of the services of Mr. Marshall could have a material adverse effect on our growth, revenues, and prospective business. We do not maintain key-man insurance on the life of Mr. Marshall.  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. Risks Relating to Our Industry: 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.  4      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 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.  5       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, labour disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labour, 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. 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:  6       - 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. 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 2.  Properties. We have an agreement to lease our executive offices located at 9595 Wilshire Blvd., Suite 900, Beverly Hills, CA 90212, at a monthly cost of approximately $1,900, including utilities and office services.  The term of the lease expires November 30, 2006.  The telephone number at this address is (310) 300-4063.  At the present time, we do not have any real estate holdings and there are no plans to acquire any real property interests. Currently we hold interests in certain exploration properties in the State of California, State of Kansas and Province of Alberta pursuant to various working interests in farm-in agreements as noted above under Description of Properties and below under "Current Business".  Our "working interest" consists of our share of gross production, revenues, burdens, field operating costs and gathering and processing fees before deduction of royalties. As at the date of this report, we have an interest in one production well that has been drilled, cased and completed, and is producing.  "Cased" means that metal casing has been cemented in place in the well to protect the well from fluids, pressures and/or wellbore stability problems in the wells, in anticipation of testing and/or production.  7       Description of Properties Coyote Creek Prospect On May 6, 2005, by an assignment agreement, the Company 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, 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 $510,175 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, accordingly the entire $510,175 was charged to exploration costs. As at
February 28, 2006, no amounts have been capitalized by the Company 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 was 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 ranged 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 Empress Prospect: Sections 5, 6, and 7 On June 1, 2005, the Company 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, the Company will earn 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.  Blue Scorpion has a director in common with the Company. The Company elected not to commence with the drilling of the well, thereby forfeiting its right to a 49% working interest.  As at February 28, 2006, no amounts have been paid or capitalized by the Company with respect to Sections 5, 6, and 7 of the Empress Project.  8       Empress Prospect: Sections 16, 19, 17, and 21 On June 30, 2005, the Company 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, the Company will earn the 21% working interest by agreeing to pay Blue Scorpions portion (51%) of 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 was 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 in November 2005 the Company advanced $146,799 (CAD $174,264) to the Operator of the 11-16 for the Companys 51% pro-rata portion of the estimated cost to connect the 11-16 to the Altagas gathering system. On December 6, 2005, the Company announced the completion of the construction of the pipeline, and the 11-16 commenced commercial production on December 7, 2005.  The Companys pro-rata portion of net income (after royalties and operating expenses) from the 11-16 totalled $5,785 for the year ended February 28, 2006. On October 17, 2005, an amendment to the Section 16 agreement was signed confirming that the Company has 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.  The Company has 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 the Company no later than forty five (45) days after its election, subject to surface access, rig availability and regulatory approvals. The Company 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 the Company 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 the Company elects to drill an option well, the Company will earn 21% of 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. Empress Prospect: Section 15 On July 22, 2005, the Company 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, 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 February 28, 2006, no amounts have been paid or capitalized by the Company with respect to section 15 of the Empress Project. 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.  9       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. Strand Fiord Coal Project 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 on October 3, 2005, the Company and James Bay signed a Mutual Release to terminate the Agreement. As at February 28, 2006, no amounts have been paid or capitalized by the Company with respect to the Strand Fiord Coal 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, the Company 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, 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, the Company 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, 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, the Company 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.  In August, 2005, the Company 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).  In September, 2005, the 7-1 well was spudded and cased. The well reached a total depth of 1,055 metres (3,462 feet) and a suite of electronic logs was run. In December, 2005, the Company advanced $118,000 ($135,830 CAD) to the Operator of the 7-1 for the  10      completion of the well, and during the same quarter the Company paid an additional $7,412 of exploration costs with respect to the 7-1. A completion rig subsequently perforated and swab tested two zones, these being oil in the Leduc, and gas in the Wabamun Formations.  The well was determined to be uneconomical, and the decision has been made to plug and abandon the well.  Subsequent to the year ended February 18, 2006, the Company received a cash call for $50,637 ($58,112 CAD) from the Operator for the cost of abandoning the well.  Total exploration costs of $591,751 have been written off, and as at February 28, 2006, no amounts have been capitalized by the Company with respect to Section 15 of the Empress Project. 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, the Company entered into a data sharing agreement with Silver Star Energy, Inc. and Fidelis Energy, Inc., as purchasers, and Blue Scorpion Energy Inc. (Blue Scorpion, formerly 1048136 Alberta Ltd.), a private Alberta company, as vendor, wherein the Company 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 has a director in common with the Company. 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. The Company received a 25% interest and the other 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  11      to two sections of the 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%. As at February 28, 2006, exploration costs totaling $67,857 have been incurred and capitalized by the Company with respect to the Kansas Prospect Data Sharing Agreement. The data sharing agreement includes participation rights in a large data base that includes a geophysical survey covering approximately one million acres, located in central Kansas, covering parts of Ellsworth, Salina, McPherson, Reno, Harvey, Kingman, and Sedgwick counties.  Total cumulative oil production through 1999  from  these  counties  is more  than  978  million  barrels  of  oil. The geophysical  survey  utilized RAM technology,  owned by Paramount  Energy Corp., which is a  geophysical  methodology  used to  highlight  oil and gas  deposits.   Unlike 2-D and 3-D seismic methods, which gather information based upon artificially induced sonic responses recorded at the surface, RAM technology identifies "unique bright spots" using its proprietary software to process certain aspects of the earth's magnetic field data.  Data is collected by a low flying aircraft equipped with specialized equipment and then analyzed by RAM software.  These "unique bright spot" anomalies can be correlated to near-surface alterations caused by the slow geochemical processes that occur over both oil and gas deposits. The RAM technology is an indirect hydrocarbon indicator independent of structure so it a good tool in areas where seismic is not.  Since RAM data is collected from an aircraft, large acreage surveys can be acquired many times faster and many times less costly than   traditional   seismic.   That makes RAM an ideal first reconnaissance tool. Several identified RAM anomalies interpreted within the survey area are believed to have hydrocarbon potential over multi-sections of lands that have never been tested with a drill bit.  Most nearby production within this region of the Central Kansas Platform produces from Mississippian age and older limestone rocks above the Arbuckle dolomite formation. Some of the accumulations of hydrocarbons are stratagraphically trapped and unrelated to structure and therefore not easily identifiable by traditional seismic.  The magnetic survey and interpretation of the region is of excellent quality. The Central Kansas Platform covered by the survey and interpretation contains some of the most prolific production from shallow depths in that part of the country.  There are many established oil fields within the boundaries of the survey area. The survey indicates "bright spots" that could be hydrocarbon accumulations not yet discovered by traditional seismic or other older exploration technologies. Multiple prospects are expected to be generated after more extensive field tests.  Cascade and partners are proceeding to further evaluate the most prospective oil and gas targets for drilling utilizing complimentary geochemical and geophysical methodologies in their field-testing. The operator will then recommend leases for acquisition and the exploration program will commence. Oil wells will be drilled to test the most promising prospects to the deepest known petroleum formation, the Arbuckle, generally less than 4000' in depth in the Central Kansas Platform.  Drilling costs have been estimated to be in the order of $200,000 for a cased and completed well. Item 3.  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  12      do not believe the potential outcome from these legal proceedings will significantly impact our financial position, operations or cash flows. Item 4.  Submission of Matters to a Vote of Security Holders. None.  13       PART II Item 5.    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Cascades common stock is traded on the Over-the-Counter Bulletin Board under the symbol CSCE. The following table sets forth, for the periods indicated, the high and low bid prices of a share of common stock for the last year. The common stock commenced trading May 6, 2005.  HIGH BID
        LOW BID2006Quarter Ended May 31, 2005
        $0.92
        $0.60Quarter Ended August 31, 2005
        $1.12
        $0.71Quarter Ended November 30, 2005
        $1.26
        $0.21Quarter Ended February 28, 2006
        $0.40
        $0.212005Quarter Ended May 31, 2004
        $0.00
        $0.00Quarter Ended August 31, 2004
        $0.00
        $0.00Quarter Ended November 30, 2004
        $0.00
        $0.00Quarter Ended February 28, 2005
        $0.00
        $0.00 The above quotations are taken from information provided by Yahoo Finance and reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. Holders of Common Equity At February 28, 2006, the Company had 26 shareholders of record, and an unknown number of additional holders whose stock is held in "street name".  The transfer agent of our common stock is Empire Stock Transfer. Dividends The Company has never paid a cash dividend on its Common Stock nor does it anticipate paying cash dividends on its Common Stock in the near future. It is the present policy of the Company not to pay cash dividends on the Common Stock but to retain earnings, if any, to fund growth and expansion. Any payment of cash dividends on the Common Stock in the future will be dependent upon the Companys financial condition, results of operations, current and anticipated cash requirements, plans for expansion, as well as other factors the Board of Directors deems relevant.  The Company issued a stock dividend on April 28th, 2005 to those shareholders of record at the close of trading on December 8, 2004.  The dividend was 8 shares for every 1 share owned.  14       Recent Sales of Unregistered Securities  On November 22, 2005, we closed a private placement consisting of 350,000 units at a price of $0.30 per unit for gross proceeds of $105,000.  Each unit consists of one common share and one non-transferable common share purchase warrant exercisable for a period of twenty-four months from the date of closing at an exercise price of $0.60.  We issued the securities to thirteen non U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933. On November 30, 2005, we entered into a securities purchase agreement with Cornell Capital Partners, LP (Cornell) for an aggregate purchase price of $3,500,000, of which we have issued (i) on November 30, 2005, a $1,750,000 secured convertible debenture, convertible into shares of our common stock, par value $0.001, (ii) on January 10, 2006, another $1,750,000 secured convertible debenture, convertible into shares of our common stock, par value $0.001, and (iii) a warrant to purchase an aggregate of 12,000,000 additional shares of our common stock at an exercise price of $0.2902 per share exercisable until November 30, 2010. Pursuant to the registration rights agreement entered into between our company and the investor, we agreed to file a registration statement registering the shares of our common stock issuable upon conversion of the convertible debentures and liquidated damages, and the
shares of our common stock issuable upon the exercise of the warrants.  The proceeds of the private placement will be used for general corporate purposes.  We issued the securities to an accredited investor pursuant to exemptions from registration as set out in Rule 506 of Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended.  No advertising or general solicitation was employed in offering the securities. On November 29, 2005, the Company issued 44,000,000 common shares as treasury stock that is being held as collateral as part of the convertible debenture with Cornell pending clearance of the SB-2 registration statement filed January 12, 2006.  The shares were recorded at the market value of the stock on the date of issuance, which was $0.215 per share. On November 30, 2005, we also issued to each of H.C. Wainwright & Co., Inc. and 1st SB Partners, Ltd., both broker dealers registered pursuant to section 15 of the Securities Exchange Act of 1934, 2,406,065 warrants to purchase up to 2,406,065 shares of our common stock, exercisable to November 30, 2010, at an exercise price of $0.2902 per share.  We issued these warrants pursuant to Rule 506 of Regulation D under the Securities Act of 1933, in partial payment of placement fees in connection with the sale of our convertible debentures to the other selling stockholders. Item 6.  Plan of Operation We are a junior exploration stage company that has not yet generated or realized material revenues from our business operations. The Company is 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 United Stated.  The Companys 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. There is no assurance that a commercially viable reserves will be discovered on any of our properties, or that we will be able to identify any oil and gas resource on any of these properties that can be developed profitably.  Even if we do discover commercially exploitable levels of  resources on any of our properties, which is unlikely, there can be no assurance that we will be able to enter into commercial production. Purchase of Significant Equipment We do not anticipate the purchase or sale of any plant or significant equipment during the next twelve-month period.  15       Personnel Plan We do not anticipate any significant changes in the number of employees during the next twelve-month period. Off-Balance Sheet Arrangements There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.  The following selected financial data should be read in conjunction with the audited Financial Statements and Notes thereto included in Item 8, with Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation and with other financial data included elsewhere in this Form 10-KSB. The Statements of Operations data for the year ended February 28, 2006 and the Balance Sheets data as of February 28, 2006 are derived from our audited financial statements included in Item 7 of this report, which have been audited by De Leon & Company, P.A. The independent auditors report appearing elsewhere in this document contain disclosures that the Companys losses and negative cash flows from operations raise concern about our ability to continue as a going concern. The financial statements and the selected financial data do not include any adjustments that might result from the outcome of that uncertainty.  Item 7.   Managements Discussion and Analysis of Financial Condition and Results of Operation. Forward-Looking Statements This 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.  16       Corporate Events Cascade Energy, Inc. (formerly Pro-Tech Holdings Ltd.) was incorporated under the laws of the State of Nevada on December 23, 2003.  After the Company 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 pre forward split 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 20, 2005 the Company announced a series of corporate developments.  Mr. Sam Johal was appointed to the position of President, replacing Mr. Robert Hoegler, who remained on the Board of Directors of the Company.  The Board of Directors also appointed Mr. Chris Foster to the positions of Chief Financial Officer, Secretary Treasurer, and Director.  Messrs. Floyd Flaman and Nick Brusatore resigned as Directors of the Company.  The new management team decided to change the direction of Company operations into the energy sector.  Due to historically high prices for oil and gas, management believed that increased shareholder value would come from quality oil and gas projects that have a low risk, high rate of return and could provide the Company cash flow under favourable time frames. 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. On June 1, 2005, we disposed of our wholly owned subsidiary, Power Grow Systems Ltd.,  to Jason Bleuler and Nick Brusatore in consideration of Jason Bleuler and Nick Brusatore assuming all debts and liabilities of the company Power Grow Systems Ltd. Effective July 31, 2005, Messrs. Robert Hoegler and Jason Bleuler resigned from the Board of Directors. Effective September 6, 2005, Mr. Sam Johal resigned as President and Director of the Company, and Mr. William Marshall was appointed to the positions of President of the Company and Director. Mr. Marshall is a financial consultant with over 15 years of venture capital experience in private and public companies. With an extensive history in natural resource markets, Mr. Marshall brings a wealth of experience to the Company in the form of financings, corporate filings, management, and company structure from his duties with several public companies.  He has served on five public company boards as a director, with duties ranging from Chairman and President, to Chief Executive Officer and Corporate Secretary.  17       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, USA.  Working interests in the Empress, Bolloque and Kansas prospects all remain active, and we are reviewing the options for any potential continued exploration on the Coyote Creek prospect.  An agreement to acquire an interest in the Strand Fiord coal project on Axel Heiberg Island in the Canadian Arctic was cancelled by the Company. The Company is primarily in the business of acquiring and operating, as a working interest partner, smaller oil and gas leases, and exploratory oil and gas wells.  The Company maintains relatively low overhead by contracting certain operating and investigative functions out to experienced, licensed geologists, geophysicists and private oil and gas operators. Normally only those projects that are in close proximity to delivery systems such as pipelines or refineries will be pursued. Whereas there are large oil and gas fields that could be aggressively engaged, the management of the Company believes that the production required to warrant the investment into such capital intensive infrastructures is of greater risk than the Company is willing to bear at present, and the necessary capital for such is currently unavailable to the Company.  Hence, in the near future, the Company will only pursue those projects that can be tied into pipelines or trucked from onsite storage facilities to proximate refineries with minimal costs involved. Plan of Operation and Cash Requirements We anticipate that we will expend approximately $2,125,000 during the twelve-month period ending February 28, 2006 to develop our current portfolio of properties, and for working capital.  Our priorities are the identification of additional drill targets of the Empress 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:
        $1,000,000Leasing:
        125,000Operating expenses:General and administrative:
        750,000General working capital:
        250,000Total:
        $2,125,000 Liquidity and Capital Resources Cash and cash equivalents from inception have been insufficient to provide the operating capital necessary to operate the Company. The necessary capital to operate the Company was initially provided by the principals and founders of the Company in the form of both debt and capital stock issuances as set forth in the financial statements incorporated herein. The working capital necessary to operate the Company and provide for acquisition capital came from the proceeds of convertible debentures as previously disclosed.  18       As at February 28, 2006, we had working capital of $1,108,153and our cash on hand was $1,223,074 as at February 28, 2006. During the year ended February 28, 2006, we expensed total exploration costs of $1,101,926 on our Coyote Creek and Bolloque prospects, and capitalized total exploration and development costs of $208,880 (net of amortization of $5,775) with respect to our Empress and Kansas prospects. During the year ended February 28, 2006, we expensed exploration costs of $510,175 with respect to our Coyote Creek Project in California. 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.  During the year ended February 28, 2006, we expensed exploration costs of $591,751 with respect to our Bolloque Project located 60 miles due north of Edmonton, Alberta, Canada, for the drilling, casing and completion of the 7-1 exploratory well.  Swab testing determined that the well is uneconomical, and the decision has been made to plug and abandon the well. During the year ended February 28, 2006, the Company advanced $146,798 ($174,264 Canadian funds) to the Operator of the Companys Empress Prospect 11-16 gas well. This represents the Companys 51% pro-rata portion of the estimated cost to connect the 11-16 to the Altagas gathering system. On December 6, 2005, the Company announced the completion of the construction of the pipeline, and on December 7, 2005, the 11-16 commenced commercial production.  The Companys pro-rata portion of net income (after royalties and operating expenses) from the 11-16 totaled $5,785 for the year ended February 28, 2006. During the year ended February 28, 2006, we capitalized costs totalling $67,857 with respect to our Kansas prospect for leasing and geological activities. In November 2005, the Company closed a private placement financing for gross proceeds of $105,000 from the sale of 350,000 units at $0.30 per unit.  Each unit consists of one common share in the capital of the Company and one common share purchase warrant which shall entitle the holder to purchase one common share of the Company at a price of $0.60 for a period of twenty-four months commencing from the closing of the private placement.  All of the subscribers are Canadian citizens and are close personal friends of either a director or senior officer of the Company. During the year ended February 28, 2006, the Company was advanced $953,241 pursuant to a convertible debenture.  The debenture bears interest at 5% per annum and the principle and interest was convertible, at the holders discretion, into shares of common stock of the Company at $0.50 per share.  The debenture was due and payable in full on or before June 15, 2006.  On December 14, 2005, the Company extinguished this debenture by the payment of $974,968, including interest of $21,727. On November 30, 2005, the Company executed two secured convertible debentures totaling $3,500,000.  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 the lower of $0.2902 per share or 80% of the lowest daily volume weighted average trading price per share for the five trading days prior to conversion, subject to adjustment pursuant to the anti-dilution provisions as set forth in the convertible debentures.  The debentures will mature on November 30, 2008 and January 10, 2009 ($1,750,000 on each date, respectively).  The Company has the right to redeem a portion or all amounts outstanding under this debenture prior to the maturity date provided that the closing bid price of the Companys common shares is less than the fixed conversion price at the time of the redemption notice.  The
Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium equal to 20% of the principal amount being redeemed and accrued interest.  The purchaser of the convertible debentures also received 12,000,000 common share purchase warrants exercisable at $0.2902 per share until November 30, 2010.  The first $1,750,000 debenture closed on November 30, 2005 wherein the Company received net proceeds of $1,435,000 on December 2, 2005.  The remaining $1,750,000 debenture closed on January 10, 2006 wherein the Company received net proceeds of $1,575,000.  The Company also  19      entered in a pledge and escrow agreement dated November 30, 2005, whereby the Company agreed to irrevocably pledge 44,000,000 common shares of the Companys security.  These shares were issued into escrow in the Companys name and will not be released unless the Company defaults on the debentures.  At February 28, 2006, no value has been recorded for the shares, as the company has not defaulted on the debentures, thus not warranting a release of escrowed shares. The receipt of net proceeds of $3,010,000 from the two secured convertible debentures totaling $3,500,000 provides the capital required to meet our immediate short-term needs, but does not provide the balance of our estimated funding requirements for the next twelve months.  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 Year Ended February 28, 2006 Compared to the Year Ended February 28, 2005 Net Loss for the Period. The Company has had only limited operations, and hasnt yet realized any significant revenues from the sale of oil or gas from any of its prospective lands.  The Company has realized a net loss from operations of $6,683,038 since inception.  The majority of this loss is due to the recognition of a non-cash beneficial conversion expense of $4,341,216 and finance fees of $480,688 related to the convertible debenture issued to Cornell Capital Partners, LP,  dry hole costs of $591,751 and $510,175 associated with the Companys Bolloque and Coyote Creek prospects, respectively, and investor relations expense of $272,406.  A gain from discontinued operations of $185,513 helped to offset this loss during the year ended February 28, 2006. Operating Expenses. Operating expenses for the year ended February 28, 2006, totalled $768,831. Operating expenses consist primarily of investor relations, legal fees, and consulting fees. These three items total 84% of total operating expenses.  Investor relations increased to $272,406 (36% of total operating expenses) for the year ended February 28, 2006. This was the result of the Company having executed an investor relations services agreement in June, 2005, at a rate of $10,000 per month. Legal fees increased to $195,688 (26% of total operating expenses).  This was due to an increase in the number of transactions completed and increased operations by the Company.  Consulting fees increased to $170,995 (22% of total operating expenses) for the year ended February 28, 2006,  due to the implementation of a new compensation structure for the Officers and the Board of Directors. The auditors' report on the Company's February 28, 2006 financial statements contains an explanatory paragraph that states that the Company has suffered losses and negative cash flows from operations that raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. The Company has no financial instruments for trading purposes, or derivative or other financial instruments with off balance sheet risk. The fair value of all financial instruments at February 28, 2006 is not materially different from their carrying value. To February 28, 2006, substantially all revenues are incurred in Canadian dollars and cash costs have been realized in both United States dollars and in Canadian dollars and as such, are subject to material foreign currency exchange rate risk. To date, the Company has not entered into foreign currency contracts to hedge against foreign currency risks between the Canadian dollar or other foreign currencies and our reporting currency, the United States dollar.  20       Item 8.  Financial Statements and Supplementary Data.  21               CASCADE ENERGY INC. (An Exploration Stage Company)  Audited Financial Statements (Expressed in U.S. Dollars)  February 28, 2006   Index
        Page NumberReport of Independent Registered Public Accounting Firms
        F-1-2Balance Sheet
        F-3Statements of Operations
        F-4Statements of Cash Flows
        F-5Statement of Changes in Stockholders Equity
        F-6Notes to Financial Statements
        F-7-23   22     F-1      REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   To the Board of Directors and Stockholders of CASCADE ENERGY, INC.  We have audited the accompanying balance sheet of CASCADE ENERGY, INC. (an Exploration Stage Company) as of February 28, 2006, and the related statements of income, stockholders equity, and cash flows for the period from March 1, 2005 to May 31, 2005 and for the period from June 1, 2005 (inception) to February 28, 2006. These financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audits. The statements of operations, stockholders deficit, and cash flows for the year ended February 28, 2005, which were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the year ended February 28, 2005 is based solely on the report of other auditors.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.  In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of CASCADE ENERGY, INC. (an Exploration Stage Company) as of February 28, 2006 and 2005, and the results of its operations and its cash flows for the years then ended and for the period from June 1, 2005 (inception) to February 28, 2006 in conformity with accounting principles generally accepted in the United States of America.  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency. These items raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.  De Leon & Company, P.A. Pembroke Pines, Florida March 24, 2006      F-2    A PARTNERSHIPOFINCORPORATEDPROFESSIONALS
        AMISANOHANSONCHARTEREDACCOUNTANTS  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders of Cascade Energy, Inc. We have audited the statements of operations, cash flows and stockholders equity (deficiency) of Cascade Energy, Inc. for the year ended February 28, 2005.  These financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America).  Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation.  We believe that our audit provide a reasonable basis for our opinion. In our opinion, these financial statements referred to above present fairly, in all material respects, the results of Cascade Energy, Inc.s operations and its cash flows and the changes in stockholders equity (deficiency) for the year ended February 28, 2005 in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements referred to above have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company is dependant on its ability to raise capital from stockholders or other sources to sustain operations.  These factors, as set forth in Note 1, raise substantial doubt that the Company will be able to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.  Vancouver, Canada
        Amisano HansonApril 20, 2005
        Chartered Accountants   750 West Pender Street, Suite 604
        Telephone:  604-689-0188Vancouver Canada
        Facsimile:  604-689-9773V6C 2T7
        E-MAIL:  amishan@telus.net        F-3    CASCADE ENERGY, INC. (AN EXPLORATION STAGE COMPANY) BALANCE SHEET  (Stated in US Dollars) February 28,ASSETS
        
        2006CurrentCash
        $
        1,223,074Accounts receivable
        
        5,784Prepaids
        
        52,500Due from related parties  Note 4
        
        672Total current assets
        
        1,282,030Fixed Assets  Note 2
        
        2,252Oil and Gas Properties  Note 3
        
        208,880Total assets
        $
        $1,493,162LIABILITIES AND STOCKHOLDERS DEFICIENCYCurrentAccounts payable and accrued liabilities  Note 4
        $
        $173,877Due to related parties  Note 4
        
        -Total current liabilities
        
        173,877Non-CurrentConvertible debenture payable  Note 6
        
        2,541,534Interest payable  Note 6
        
        33,322Beneficial conversion liability  Note 6
        
        5,356,9167,931,772Total liabilities
        
        8,105,649STOCKHOLDERS DEFICIENCYCapital stock  Notes 6 and 9Preferred stock, $0.001 par value, 5,000,000 shares authorized
Common stock, $0.001 par value, 200,000,000 shares authorized93,150,000 common shares issued, 49,150,000 outstanding (February 28, 2005: 72,800,000)
        
        93,150Treasury stock issued (2006 - 44,000,000; 2005  Nil)
        
        (9,460,000)Additional paid-in capital
        
        9,521,950Accumulated deficit
        
        (84,549)Accumulated deficit during the exploration stage
        
        (6,683,038)Total stockholders deficiency
        
        (6,612,487)Total liabilities and stockholders deficiency
        $
        $1,493,162        F-4    CASCADE ENERGY, INC. (AN EXPLORATION STAGE COMPANY) STATEMENTS OF OPERATIONS for the year ended February 28, 2005 and for the period from March 1, 2005 to May 31, 2005 and for the period from June 1, 2005 (inception) through February 28,2006 (Stated in US Dollars) June 1, 2005(Date ofPeriod from
        
        Inception ofMarch 1, 2005      Year Ended
        Exploration Stage)To May 31,           February 28
        to February 28,2005
        2005
        2006)Revenue
        
        
        $                -
        $                -
        $                11,181Production Costs
        
        
        -
        -
        5,396-
        -
        5,785ExpensesAccounting and audit fees
        
        
        3,204
        44,231
        40,339Advertising and promotion
        
        
        -
        
        28,050Amortization
        
        
        -
        -
        6,429Bad debts
        
        
        -
        -
        5,132Bank charges and interest
        
        
        63
        54
        1,834Consulting fees  Note 4
        
        
        -
        8,000
        170,995Filing and listing fees
        
        
        772
        3,112
        9,756Foreign exchange (gain) loss
        
        
        -
        789
        (514)Investor relations
        
        
        -
        -
        272,406Legal fees
        
        
        -
        8,380
        195,688Meals and entertainment
        
        
        -
        -
        2,329Office and general
        
        
        -
        319
        5,660Rent  Note 4
        
        
        -
        3,600
        1,225Transfer agent fees
        
        
        585
        1,000
        1,561Travel
        
        
        -
        -
        27,941(4,624)
        (69,485)
        (768,831)Loss before other items
        
        
        (4,624)
        -
        (763,046)Other itemsBeneficial conversion expense
        
        
        -
        -
        (4,341,216)Exploration costs  Note 3
        
        
        -
        -
        (1,101,926)Interest expense and Finance fees
        
        
        -
        -
        (480,688)Interest income
        
        
        -
        -
        3,838-
        -
        (5,919,992)Loss from continuing operations
        
        
        (4,624)
        (69,485)
        (6,683,038)Gain (loss) from discontinued  operations Note 8
        
        
        185,513
        (174,839)
        -Net income (loss)
        
        
        $        180,889
        $    (244,324)
        $       (6,683,038)Basic and diluted loss per share  continuing operations
        
        
        $              0.00
        $             0.00
        $                 (.12)Basic and diluted loss per share  discontinued operations
        
        
        $              0.00
        $             0.00
        $                 (.12)Weighted average number of common shares outstanding
        
        
        72,848,904
        72,800,000
        58,251,644 The weighted average  number of shares used excludes common stock equivalents since such amounts would cause an antidilutive effect.       F-5   CASCADE ENERGY, INC. (AN EXPLORATION STAGE COMPANY) STATEMENTS OF CASH FLOWS for the years ended February 28, 2006 and 2005 and for the period from June 1, 2005 (inception) to February 28, 2006 (Stated in US Dollars)  June 1, 2005(Date ofInception ofYears ended
        Exploration StageFebruary 28,
        February 28,
        to February 28,2006
        2005
        2006)Operating ActivitiesNet loss for the period
        $        (6,683,038)
        $             (69,485)
        $          (6,683,038)Net loss from continuing operations
        (4,624)Non-cash items:Amortization
        5,775
        -
        5,775Depreciation
        654
        
        654Change in non-cash working capital items related to operations:Accounts receivable
        (5,784)
        -
        (5,784)Beneficial conversion liability
        5,356,916
        -
        5,356,916Discount to convertible debenture
        (958,466)
        
        (958,466)Increase in interest payable
        33,322
        -
        33,322Prepaid expenses and deposits
        (52,500)
        -
        (52,500)Advance receivable
        5,998
        (5,998)
        5,998Accounts payable and accrued liabilities
        150,649
        12,896
        147,313Decrease in due to related parties
        (7,644)
        -
        (9,422)Cash flows used in operating activities
        (2,158,742)
        (62,587)
        (2,159,232)Financing ActivitiesIncrease in due from related parties
        (671)
        7,644
        (671)Proceeds from convertible debenture payable
        3,500,000
        -
        3,500,000Proceeds from share issuance
        100,000
        -
        100,000Cash flows provided by (used in) financing activities
        3,599,329
        7,644
        3,599,329Investing ActivitiesPurchase of fixed assets
        (2,906)
        -
        (2,906)Purchase of oil and gas properties
        (214,655)
        -
        (214,655)Cash flows provided by (used in) investing activities
        (217,561)
        -
        (217,560)Decrease in cash from discontinued operations
        
        (2,192)
        (555)Increase (decrease) in cash during the period
        1,223,026
        (57,135)
        1,221,982Cash, beginning of the period
        48
        57,183
        1,092Cash, end of the period
        $         1,223,074
        $                    48
        $          1,223,074Supplemental disclosure of cash flow informationCash paid for:Interest
        $              60,350
        $                  542
        $               60,288Income taxes
        $                        -
        $                       -
        $                         -         F-6   CASCADE ENERGY, INC. (AN EXPLORATION STAGE COMPANY) STATEMENT OF STOCKHOLDERS EQUITY (DEFICIENCY) For the period December 23, 2003 to February 28, 2006 And for the period from June 1, 2005 (inception) through February 28, 2006 (Stated in US Dollars)   AccumulatedDeficitDuringExplorationAccumulated
        
        StageOther
        
        (June 1,Additional
        
        Compre-
        Accumu-
        2005) ToCommon Stock
        Paid-in
        Treasury
        hensive
        lated
        FebruaryNumber*
        Par Value
        Capital
        Stock
        Loss
        Deficit
        28, 2006
        TotalIssuance of common stock
for cash  at $0.000125
        40,800,000
        $40,800
        $(35,700)
        $-
        $-
        $-
        $-
        $         5,100Issuance of common stock
for acquisition of Power
Grow System Ltd.at 0.00125
        24,000,000
        24,000
        (21,000)
        -
        -
        -
        -
        3,000Issuance of common stock
for cash  at $0.00625
        8,000,000
        8,000
        42,000
        -
        -
        -
        -
        50,000Net loss for the period
        -
        -
        -
        -
        -
        (10,441)
        -
        (10,441)Balance, February 29, 2004
        72,800,000
        72,800
        (14,700)
        -
        -
        (10,441)
        -
        47,659Other 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 issued from acquisition of Power Grow System Ltd. at $0.001 June 30, 2005
        (24,000,000)
        (24,000)
        21,000
        -
        -
        -
        -
        (3,000)Issuance of common stock for cash
 at $0.30 net of issuance cost
        350,000
        350
        99,650
        -
        -
        -
        -
        100,000Issuance of treasury stock
 at $0.215
        44,000,000
        44,000
        9,416,000
        (9,460,000)
        -
        -
        -
        -Net loss from continuing operations
        -
        -
        -
        -
        -
        (4,624)
        (6,683,038)
        (6,687,662)Net loss from discontinued operations
        -
        -
        -
        -
        10,673
        174,840
        -
        185,513Balance, February 28, 2006
        93,150,000
        $93,150
        $9,521,950
        $(9,460,000)
        $-
        $(84,549)
        $(6,683,038)
        $(6,612,487)  * 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.       F-7   CASCADE ENERGY, INC. (AN EXPLORATION STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENTS February 28, 2006 (Stated in US Dollars)   Note 1
        Nature and Continuance of Operations  The Company is in the business of exploring and developing oil and gas properties in Alberta, Canada and in Kansas and California, United States of America (Note 3).  The Company is a public company, having filed an SB2 Registration Statement with the United States Securities and Exchange Commission during the year ended February 28, 2005, whose shares trade on the OTC Bulletin Board.  At February 28, 2006, the Company has working capital of $1,149,151, but has incurred losses since inception totalling $7,685,055 and has yet to achieve profitable operations.  The Companys ability to continue as a going concern is dependent on raising additional capital to fund future operations and ultimately to attain profitable operations.  Accordingly, these factors raise substantial doubt as to the Companys ability to continue as a going concern.  These financial statements do not give affect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.  Management plans to continue to provide for its capital needs during the year ended February 28, 2007 by the development of its properties, by issuing equity securities or by pursuing alternative financing.  The Company was incorporated on December 23, 2003 in the State of Nevada and has adopted February 28 as its fiscal year end.  Note 2
        Summary of Significant Accounting Policies  Cash  For purposes of the statement of cash flows, the Company considers all investment instrument purchased with a maturity of three months or less to be cash equivalents. At February 28, 2006 the Company had uninsured demand deposits in banks of $1,123,026 in excess of the $100,000 insurance limit.  Change in Reporting Entity  On May 31, 2005 the Company sold its Power Growth System Ltd. (PGS) which it had acquired in February 29, 2004. The sale resulted in the discontinuance of the hydroponics operations of the Company and the effects are recorded as discontinued operations in the financial statements. As a result of such sale the Company ceased to have any subsidiaries and no longer reports as a consolidated group.  Accounting Estimates  These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America.  Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgement.  Actual results may differ from these estimates.  The financial statements, in managements opinion, have been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:       F-8   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 2  Financial Instruments  The carrying values of the Companys financial instruments, consisting of cash, accounts receivable, due from related parties, accounts payable and note payable approximate their fair value due to the short maturity of such instruments.  Unless otherwise noted, it is managements opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.  a)
        Credit Risk:  The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits. For accounts receivable, the Company estimates, on a continuing basis, the probable losses and provides a provision for losses based on the estimated realizable value.  b)
        Foreign Currency Risk:  The Company is exposed to fluctuations in foreign currencies through its operations in the United States.  The Company monitors this exposure, but has no hedge positions.  As at February 28, 2006, the Company had cash totalling $1,223,074 (2005:  $48) held in US dollars.  Fixed Assets Fixed Assets are stated at cost.  Amortization is calculated on a declining-balance basis at the following rates:  Asset
        RateComputer hardware
        45% Maintenance and repairs are charged to operations; betterments are capitalized.  The cost of fixed assets sold or otherwise disposed of and the accumulated amortization thereon is eliminated from the fixed asset and related accumulated amortization accounts, and any resulting gain or loss is credited or charged to income.  Amortization expense for the years ended February 28, 2006 and 2005 was $6,429 and $Nil, respectively.  Income Taxes  The Company follows Statement of Financial Accounting Standards (FAS) No. 109, Accounting for Income Taxes which requires the use of the asset and liability method of accounting of income taxes. Under the assets and liability method of FAS 109, deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled.       F-9   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 3  Note 2
        Summary of Significant Accounting Policies (contd)  Basic and Diluted Loss Per Share  The Company reports basic loss per share in accordance with the FAS No. 128, Earnings Per Share.  Basic loss per share is computed using the weighted average number of shares outstanding during the period.  Instruments that can be converted to common stock have not been included in the fully diliuted computations since the result would be antidilutive.  Oil and Gas Activities - Successful Efforts Method of Accounting  On April 4, 2005, the FASB adopted FASB Staff Position FSP FAS 19-1 that amends Statement of Financial Accounting Standards No. 19 (FAS 19), Financial Accounting and Reporting by Oil and Gas Producing Companies, to permit the continued capitalization of exploratory well costs beyond one year if (a) the well found a sufficient quantity of reserves to justify its completion as a producing well and (b) the entity is making sufficient progress assessing the reserves and the economic and operating viability of the project.  The Company accounts for its crude oil exploration and natural gas development activities utilizing the successful efforts method of accounting. Under this method, costs of productive exploratory wells, development dry holes and productive wells and undeveloped leases are capitalized. Oil and gas lease acquisition costs are also capitalized. Exploration costs, including personnel costs, certain geological and geophysical expenses and delay rentals for oil and gas leases, are charged to expense as incurred. Exploratory drilling costs are initially capitalized, but charged to expense if and when the well is determined not to have found reserves in commercial quantities. The sale of a partial interest in a proved property is accounted for as a cost recovery and no gain or loss is recognized as long as this treatment does not significantly affect the unit-of-production amortization rate. A gain or loss is
recognized for all other sales of producing properties. During the year $1,078,487 was charged to exploration expense for dry hole costs.  The application of the successful efforts method of accounting requires managerial judgment to determine that proper classification of wells designated as developmental or exploratory which will ultimately determine the proper accounting treatment of the costs incurred. The results from a drilling operation can take considerable time to analyze and the determination that commercial reserves have been discovered requires both judgment and industry experience. Wells may be completed that are assumed to be productive and actually deliver oil and gas in quantities insufficient to be economic, which may result in the abandonment of the wells at a later date. Wells are drilled that have targeted geologic structures that are both developmental and exploratory in nature and an allocation of costs is required to properly account for the results. Delineation seismic incurred to select development locations within an
oil and gas field is typically considered a development cost and capitalized, but often these seismic programs extend beyond the reserve area considered proved and management must estimate the portion of the seismic costs to expense. The evaluation of oil and gas leasehold acquisition costs requires managerial judgment to estimate the fair value of these costs with reference to drilling activity in a given area. Drilling activities in an area by other companies may also effectively condemn leasehold positions.       F-10   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 4  Note 2
        Summary of Significant Accounting Policies (contd)  Oil and Gas Activities - Successful Efforts Method of Accounting (contd)  The successful efforts method of accounting can have a significant impact on the operational results reported when the Company is entering a new exploratory area in hopes of finding an oil and gas field that will be the focus of future development drilling activity. The initial exploratory wells may be unsuccessful and will be expensed. Seismic costs can be substantial which will result in additional exploration expenses when incurred.  Revenues  The Company recognizes oil and gas revenue from its interests in producing wells as oil and gas   is produced and sold from those wells.  Oil and gas sold is not significantly different from the Companys share of production.  Revenues from the purchase, sale and transportation of natural gas are recognized upon completion of the sale and when transported volumes are delivered.    Shipping and handling costs in connection with such deliveries are included in production costs.  Revenue under carried interest agreements is recorded in the period when the net proceeds become receivable, measureable and collection is reasonably assured. The time the net revenues become receivable and collection is reasonably assured and depends on the terms and conditions of the relevant agreements and the practices followed by the operator.  As a result, net revenues may lag the production
month by one or more months.  New Accounting Standards  Management does not believe that any recently issued but not effective accounting standards if currently adapted could have a material affect on the accompanying financial statements.  Note 3
        Oil and Gas Properties  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 $510,175 in geologic, geophysical, administration, land fee, dry hole drilling costs, and plugging and abandonment costs.  Drilling completed in August 2005 proved that the well was uneconomical, and the entire $510,175 was allocated to exploration costs. Consequently, no amounts have been capitalized by the Company with respect to the Coyote Creek Prospect as at February 28, 2006.        F-11   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 5  Note 3
        Oil and Gas Properties- (contd)  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 during the quarter ended November 30, 2005, the Company and James Bay mutually agreed to terminate the Agreement (Note 9). As at February 28, 2006, 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 Blue Scorpion  Energy Inc. (Blue Scorpion, formerly 1048136 Alberta Ltd.), a private Alberta 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 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 February 28, 2006, 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 Blue Scorpion  Energy Inc. (Blue Scorpion, formerly 1048136 Alberta Ltd.), a private Alberta company, 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 the Grantors portion (51%) of all additional costs and expenses whatsoever relating to all development on Section 16 from the date of the Agreement forward. The interests earned by the Company under the agreement are subject to a 15% over-riding royalty interest for the original farmor of the property and an additional 3% over-riding royalty interest stipulated in an underlying agreement.        F-12   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 6  Note 3
        Oil and Gas Properties- (contd)  In November, 2005, the Company advanced $146,798 and capitalized such amounts ($174,264 Canadian funds) to the Operator of the 11-16. This represents the Companys 51% pro-rata portion of the cost to connect the 11-16 to the Altagas gathering system. On December 6, 2005, the Company announced the completion of the construction of the pipeline, and the 11-16 commenced commercial production on December 7, 2005.  An amendment to the Agreement signed during the quarter ended November 30, 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).  Farmout Lands (Sections 16, 9, 17, and 21) Empress Project, Alberta, Canada- (contd)  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.  Section 15, Empress Project, Alberta, Canada  On July 22, 2005, the Company executed a farm-in agreement (the Agreement) with Blue Scorpion  Energy Inc. (Blue Scorpion, formerly 1048136 Alberta Ltd.), a private Alberta 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 February 28, 2006, 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.  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.  During the year ended February 28, 2006, $67,857 of exploration costs have been incurred and capitalized by the Company with respect to the Kansas Prospect Data Sharing Agreement.       F-13   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 7  Note 3
        Oil and Gas Properties- (contd)  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. In August, 2005, the Company advanced $374,704 ($450,000 Canadian funds) to the Operator of the property to finance the drilling of the Test Well. In December, 2005, the Company advanced $118,000 ($135,830 Canadian funds) to the Operator of the 7-1 for the completion of the well, and during the quarter ended February 28, 2006, the Company paid an additional $7,412 of exploration costs with respect to this well. The well was determined to be uneconomical and an accrual of $50,637 was recorded at February 28, 2006, for the abandonment of the well. Total cost of the well of $550,753 was allocated to exploration costs. Consequently, no amounts have been capitalized by the Company with respect to the Bolloque Prospect as at February 28, 2006.  Note 4
        Related Party Transactions  During the year ended February 28, 2006 the Company incurred consulting fees of $127,977 (2005 - $45,028 included in loss from discontinued operations) paid or accrued to directors of the Company.  During the year ended February 28, 2006, the Company incurred rent of $1,693 (2005 - $5,994 included in loss from discontinued operations) charged by a former 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 February 26, 2006 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.  Due from related parties at February 28, 2006, is $672 (February 28, 2005 - $7,644)  comprised of $306 owing to directors for out-of-pocket expenses paid on behalf of the Company and $978 advanced to a director of the Company for travel expenses.  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
        Income Taxes  As at February 28, 2006 and 2005 the Company has non-capital losses and undepreciated capital cost of approximately $ 6,683,038 and $ 69,485, respectively, which can be carried forward for tax purposes and are available to reduce taxable income of future years. The non-capital losses expire commencing in 2006 through 2010.       F-14   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 8  Note 5
        Income Taxes (continued)  The tax effect of temporary differences that give rise to the Companys deferred tax assets are as follows:2005
        2006Undepreciated capital cost of capital assets
over their net book value
        $   6,683,038
        $   69,485Estimated tax loss carryforward
        2,272,233
        23,625Less: valuation allowance
        (2,272,233)
        (23,625)-
        -The valuation allowance reflects the realization of the tax assets is unlikely.  Note 6
        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 November 30, 2005, $508,336 has been advanced directly to the operator of the Coyote Creek Prospect (Note 3), $374,704 has been advanced directly to the operator of the Bolloque Project (Note 3), and $70,000 has been advanced for sundry amounts, for a total advanced of $953,040.  This debenture was closed during the quarter ended November 30, 2005, and interest of $20,402 accrued as at November 30, 2005. The other two debentures were cancelled during the quarter ended November 30, 2005, as the Company has elected to pursue alternative sources of financing.  On November 30, 2005, we entered into a securities purchase agreement with Cornell Capital for an aggregate purchase price of $3,500,000, of which we have issued (i) on November 30, 2005, a $1,750,000 secured convertible debenture, convertible into shares of our common stock, par value $0.001, (ii) on January 10, 2006, another $1,750,000 secured convertible debenture, convertible into shares of our common stock, par value $0.001, and (iii) a warrant to purchase an aggregate of 12,000,000 additional shares of our common stock at an exercise price of $0.2902 per share exercisable until November 30, 2010.  The secured convertible debenture is convertible into shares of our common stock at any time by dividing the dollar amount being converted by the lower of $0.2902 or 80% of the lowest volume weighted average trading price per share of our common stock for five trading days immediately preceding the conversion date. The interest on the convertible debenture shall accrue on the outstanding principal balance at a rate of 5% per annum. As at February 28, 2006 $33,322 has been charged as an interest expense.  The Warrants to purchase 12,000,000 of the Companys common stock will expire on November 30, 2010. The exercise price of the warrant is $0.2902 and an exercise period of five years. The Company accounts for the fair value of these outstanding warrants to purchase common stock and the conversion feature of its convertible notes in accordance with SFAS No. 133 "Accounting For Derivative       F-15   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 9  Note 6
        Convertible Debentures (contd)  Instruments And Hedging Activities" and EITF Issue No. 00-19 "Accounting For Derivative Financial Instruments Indexed To And Potentially Settled In A Company's Own Stock" which requires the Company to bifurcate and separately account for the conversion feature and warrants as embedded derivatives contained in the Company's convertible notes.  Pursuant to SFAS No. 133, the Company bifurcated the fair value of the conversion feature from the convertible notes, since the conversion feature was determined to not be clearly and closely related to the debt host. In addition, since the effective registration of the securities underlying the conversion feature is an event outside of the control of the Company, pursuant to EITF Issue No. 00-19, the Company recorded the fair value of the conversion feature as a long-term liability as it was assumed that the Company would be required to net-cash settle the underlying securities.  The value of the warrants have been calculated using the BlackScholes method as of the date of grant based on the following assumptions: an average risk free rate of 3.25; a dividend yield of 0.00%; an average volatility factor of the expected market price of the Companys common stock of 348% for 2005; and an expected life of 5 years.  In addition, 4,812,130 warrants have been issued (2,406,065 each to H.C. Wainwright & Co., Inc. and 1st SB Partners, Ltd.), and, 12,000,000 warrants have been issuer to Cornel Capital Partners, LP., each exercisable at $0.2902 with terms of 5 years from November 30, 2005.  The value of these warrants have also been calculated using the BlackScholes method as of the date of grant based on the following assumptions: an average risk free rate of 3.25; a dividend yield of 0.00%; an average volatility factor of the expected market price of the Companys common stock of 348%; and an expected life of 5 years.  The Company is required to carry these embedded derivatives on its balance sheet at fair value and unrealized changes in the values of these embedded derivatives are reflected in the consolidated statement of operation as "Gain (loss) on value of warrants and conversion feature.  The Company bifurcated the debenture and based on a 12% discount to maturity is amortizing a discount of $958,466 in interest expense to maturity.  Beneficial conversion expense of the debenture was calculated by the Company based upon the   difference between the market price of shares of the Companys stock as of the date of issuance and the conversion price applicable to the convertible debentures. WARRANTSCornell Capital Partners, LP
        $
        (3,152,642.98)H.C. Wainwright
        
        (   594,225.95)1st SB Partners Ltd.
        
        (   594,225.95)TOTAL BENEFICIAL CONVERSION EXPENSE
        $
        (4,341,094.88)        F-16   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 10  Note 7
        Discontinued Operations  On June 1, 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) common shares in the capital of the Company registered and beneficially owned by the purchasers.  In conjunction with the closing of the agreement on June 1, 2005, Power Grow Systems Ltd. will assume all current and future 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
        
        $              3,000Net assets of subsidiary:Cash
        
        501Accounts receivable
        
        5,639Inventory
        
        6,893Accounts 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.               F-17   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 11  Note 7
        Discontinued Operations   February 28,
2006
        February 28,
2005Accounts receivable
        $                -
        $         10,568Inventory
        -
        6,809Current assets of discontinued operations
        $                -
        $         17,377Bank overdraft
        $                -
        $           9,501Accounts payable
        -
        104,776Due to related parties
        -
        62,805Due to Cascade Energy, Inc.
        -
        5,998Loan payable
        -
        16,810Current liabilities of discontinued operations
        $                -
        $         99,890Accumulated other comprehensive loss from discontinued operations
        $                -
        $         10,673        F-18   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 12  Note 8
        Statement of Cash Flows and Operations from Discontinued Operations of Power Grow System Ltd.  Cash flows from discontinued operations are as follows:  Year endedFebruary 28,2006
        2005Cash flows used in operating activitiesGain (Loss) from discontinued operations
        $          185,513
        $       (174,839)Items not affecting cash:Gain on disposal of subsidiary
        (195,573)
        -Write off Goodwill
        
        90,152Changes in non-cash working capital items:Accounts receivable
        4,929
        25,073Prepaid
        -
        636Inventory
        (84)
        5,652Accounts payable
        (3,527)
        29,740Cash used in operating activities
        (8,742)
        (23,586)Cash flows used by financing activitiesBank overdraft
        (9,501)
        9,501Loan payable
        (10,940)
        6,855Due to related parties
        29,684
        9,712Due to Cascade Energy, Inc.
        -
        5,998Cash provided by financing activities
        9,243
        32,066Effect of foreign exchange rate changes on cash
        -
        (10,673)Increase (decrease) in cash from discontinued
operations prior to disposal
        501
        (2,192)Cash balance of subsidiary on disposal
        (501)
        -Increase (decrease) in cash from discontinued
operations during the period
        $                  -
        $          (2,192)             F-19   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 13  STATEMENTS OF OPERATIONS FROM DISCONTINUED OPERATIONS OF POWER GROW SYSTEM LTD. for the years ended February 28, 2006 and 2005 (Stated in US Dollars)   Year EndedFebruary 28,2006
        2005Sales
        
        
        $            70,077
        $           189,139Cost of sales
        
        
        54,063
        128,614Gross profit
        
        
        16,014
        60,526ExpensesAccounting and audit fees
        
        
        1,610
        3,299Advertising
        
        
        6,315
        16,172Auto expenses
        
        
        1,899
        12,789Bad debt (recovery)
        
        
        (11,402)
        16,115Bank charges and interest
        
        
        1,609
        6,697Consulting fees  NOTE 4
        
        
        13,585
        48,732Investor relations
        
        
        -
        2,358Legal fees
        
        
        1,084
        736Office and general
        
        
        1,722
        8,525Rent  NOTE 4
        
        
        1,695
        15,956Salaries and benefits
        
        
        237
        3,107Telephone
        
        
        -
        8,577Travel
        
        
        3,354
        2,150(23,794)
        (145,213)Loss before the following
        
        
        (7,780)
        (84,687)Write off of Goodwill
        
        
        
        (90,152)Foreign currency translation adjustment
        
        
        (2,280)
        -Gain on disposal of subsidiary  Note 7
        
        
        195,573
        -Gain (loss) from discontinued operations
        
        
        $         185,513
        $         (174,839)  Note 9
        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.        F-20   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 14  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. Note 9
        Capital Stock(continued)  On June 1, 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 debts and liabilities being assumed.  During the quarter ended September 30, 2005, the Company returned to treasury and cancelled  24,000,000 (post-forward split) common shares in its capital stock.  On November 22, 2005, the Company closed a private placement consisting of 350,000 units at a price of $0.30 per unit for gross proceeds of $105,000. Each unit consists of one common share and one non-transferable common share purchase warrant exercisable for a period of twenty-four months from the date of closing at an exercise price of $0.60. The Company issued the securities to thirteen non U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.received $105,000 in share subscription proceeds for 350,000 units of a private placement financing.  A finders fee of $5,000 was paid to a senior officer and director of the Company with respect to this private placement.  On November 29, 2005, the Company issued 44,000,000 common shares as treasury stock held as collateral on the convertible debenture.  The shares were recorded at the market value of the stock on the date of issuance, which was $0.215 per share.  Note 10
        Commitments and Contingencies  On February 1, 2006, the Company entered into consulting agreements with three independent consultants to consult with the Company with respect to the Companys business and strategic planning and to assist the Companys President and Board of Directors on an as-requested basis.   In consideration for their services, each consultant will be issued 2,000,000 common shares of the Company.  The agreements are for a one-year term ending on February 1, 2007, subject to termination as provided in the agreements.  All of the 6,000,000 common shares will be registered under a registration statement on Form S-8, filed in March, 2006, at an estimated price of $0.30 per common share.  None of the shares under these agreements have been issued as at February 28, 2006.             F-21   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 15   Note 11
        Oil and Gas Activities  As of February 28, 2006, the Company had net revenues of $5,785 from the Empress property.  In December of 2005, the Company completed the tie-in of the pipeline for the first Empress Gas Well in Alberta, Canada.  The Well has been in production for three months now.   Property
        Reserve
        Revenue
        Amortization
        Capitalized Costs
        Dry HoleEmpress
        Proved
        $    5,785
        $     5,775
        $  141,023
        $             -Kansas
        Unproved
        -
        -
        67,857
        -Bolloque
        Expensed
        -
        -
        -
        591,751Coyote Creek
        Expensed
        -
        -
        -
        510,175$    5,785
        $     5,775
        $  208,880
        $1,108,153   The reserve information presented below is based on reports prepared by independent petroleum engineers, Chapman Petroleum Engineering Ltd., for the proved property, Empress.  The information is presented in accordance with regulations prescribed by the Securities and Exchange Commission and based on Reserve definitions found in Rule 4-10(a) of Regulation S-X. Reserve estimates are inherently imprecise.  Proved oil and gas reserves are the estimated quantities of crude oil, natural gas and gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, ie., prices and costs as of the date the estimate is made.  Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions.  Reservoirs are considered proved if economic producibilty is supported by either actual production or conclusive formation test. The area of a reservoir considered proved includes (A) that portion  delineated by drilling and defined by gas-oil and/or oil-water contacts,  if any; and (B) the immediately  adjoining portions not yet drilled,  but which can be  reasonably  judged as economically productive  on the  basis  of available geological and engineering data.  In the absence of information on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limit of the reservoir.            F-22   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 16   Note 11
        Oil and Gas Activities(contd)  Summary of Company Reserves (Unaudited)Proved Developed
        OIL
MSTB
        SALES GAS
MMscf
        NGL
MbblsGross
        Net
        Gross
        Net
        Gross
        NetEmpress Detrital
        -
        -
        6
        3
        -
        -Empress Viking
        -
        -
        90
        48
        -
        --
        -
        96
        51
        -
        -   The standardized measure of discounted future net cash flows, related to the above oil and gas reserves, is calculated in accordance with the requirements of SFAS No 69. Estimated future cash inflows from production are computed by applying year-end prices for oil and gas to year-end quantities of estimated proved reserves.  Adjustment in this calculation for future price changes is limited to those required by contractual arrangements in existence at the end of each reporting period. Future development and production costs are those estimated future expenditures necessary to develop and produce year-end proved reserves based on year-end  cost  indices,  assuming  continuation  of year end economic  conditions.  Estimated future income taxes are calculated by applying appropriate   year-end statutory tax rates.  These rates reflect allowable deductions and tax credits and are applied to estimated future
pre-tax cash flows, less the tax bases of related assets.  Discounted future net cash flows have been calculated using a 10% discount factor.  Discounting requires a year-by-year estimate of when future expenditures will be incurred and when reserves will be produced.  The information provided in tables set out below does not represent management's estimate of the Company's expected future cash flows or of the value Company's proved oil and gas reserves.  Estimates of proved reserves quantities are imprecise and change over time, as new information becomes available.  Moreover, probable and possible reserves, which may become proved in the future, are excluded from the calculations.  The arbitrary valuation prescribed under SFAS No.69 requires assumptions as to the timing and the amount of future development and production costs.  The calculations should not be relied upon as an indication of the Company's future cash flows or of the value of its oil and gas reserves.             F-23   Cascade Energy, Inc. (An Exploration Stage Company) Notes to the Financial Statements February 28, 2006 (Stated in US Dollars)  Page 17   Note 11
        Oil and Gas Activities(contd)  (Unaudited)
        (Unaudited)2006
        2005Future cash inflows
        $       45,000
        $              -Future production and development costs
        (22,000)
        -Future income tax expenses
        -
        -Future net cash flows
        23,000
        -Less effect of a 10% discount factor
        (2,300)
        -Discounted future net cash flows
        20,700
        -   Principal sources of changes in standardized measure of discounted future net cash flows:  (Unaudited)
        (Unaudited)2006
        2005Discounted present value as at beginning of year
        $               -
        $              -Sales and transfers of oil and gas, net of production costs
        (5,775)
        -Changes in future development costs
        -
        -Extensions and discoveries and revisions, net of future production and development costs
        26,475
        -Accretion of discount
        -
        -Standardized measure, end of period
        20,700
        -   Costs incurred in Oil and Gas Acquisition, Exploration and Development:  (Unaudited)
        (Unaudited)2006
        2005Development costs
        $                146,798
        $                  -Exploration costs
        1,101,926
        -Acquisition costsProved
        -
        -Unproved
        67,857
        -$            1,316,581
        $                  -   Note 12
        Non-Cash Activities  During the year ended February 28, 2006, the Company recognized a beneficial conversion expense of $5,356,916 related to a convertible debenture (see Note 6) issued to Cornell Capital Partners, LP and the associated warrants issued.         Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None. Item 9A.  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 this   report, being February 28, 2006, 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.   23       PART III Item 10.  Directors and Executive Officers of the Registrant All directors of our company hold office until the next annual meeting of the stockholders or until their successors have been elected and qualified.  The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office.  Our directors and executive officers, their ages, positions held, and duration as such, are as follows:  Name
        Position Held  with theCompany
        Age
        Date First  Electedor AppointedWilliam Scott Marshall
        President and Director
        46
        September 6, 2005Dane Brown
        V.P. Corporate Developmentand Director
        33
        November 25, 2005Chris Foster
        Director
        39
        April 21, 2005Gordon Samson
        Chief Financial Officer and Director
        47
        January 31, 2006 Business Experience The following is a brief account of the education and business experience of each director, executive officer and key employee during at least the past five years, indicating each persons principal occupation during the period, and the name and principal business of the organization by which he was employed. William Scott Marshall, President, Chief Executive Officer and Director Mr. Marshall is a financial consultant with over 15 years of venture capital experience in private and public companies.  From 2000 to 2003, Mr. Marshall was a self-employed venture capital consultant providing management and financial consulting services primarily to small and medium-sized natural resource exploration and development entities.  In June 2005, Mr. Marshall was reappointed as President and Director of Fidelis Energy, Inc., a public oil and gas developer and producer, where he previously served as President and Director for the June 2003 to February 2004 period. Mr. Marshall currently also serves as President of Blue Scorpion Energy Ltd. (since May 2003), a private oil and gas developer and producer, and as President of Stormlight Consulting (since December 2003), a private venture capital consulting service. With an extensive history in natural resource markets, Mr. Marshall brings a wealth
of experience to Cascade in the form of financings, corporate filings, management, and company structure from his duties with several public companies. Mr. Marshall was responsible for bringing the Alberta properties to Cascade. Dane Brown, V.P. Corporate Development and Director Mr. Brown has work experience in film and commercial productions to business administration. He has assisted a number of publicly reporting companies in British Columbia, namely Horse Power Holdings Ltd., a financial consulting/film industry company, where he is the President; has been an investor relations consultant to First Goldwater Resources Inc. from April 1 to July 1, 2001; Condor Gold Fields Inc. from February 1 to April 1, 2001; and Habanero Resources Inc. where he served as Vice President of Corporate Development during the period December 2000 to May 2003.  In November of 2004, he obtained a diploma in Business Administration from the Capilano College in North Vancouver, BC. Chris Foster, Director Mr. Foster was also our Chief Financial Officer from April 21, 2005 to November 25, 2005.  24       Mr. Foster is a seasoned financial professional with a proven track record in accounting, financial analysis and administration. From November 2000 to July 2005, Mr. Foster was employed as a senior accountant at Pacific Opportunity Capital Ltd., a venture capital firm facilitating IPOs and conducting financial and administrative management for primarily development stage resource companies. Prior to that, from February 1996 to November 2000, Mr. Foster was employed as an Accountant for a chartered accounting firm located in British Columbia.  Mr. Foster received his professional accounting designation from the Certified General Accountants Association in 2003, and holds a diploma in Financial Management from the British Columbia Institute of Technology. Gordon Samson, Chief Financial Officer and Director Mr. Samson is an accredited accountant with approximately 20 years of experience in the financial arena.  From April 1997 to March 2000, Mr. Samson was an Account Manager and Investment Advisor with Global Securities Corporation and provided controller services to a variety of publicly held companies.  From March 2000 to November 2000, Mr. Samson was a Controller and Consultant for American Resource Managements Consultant, Ltd. and provided CFO services to several companies.  During that time, Mr. Samson was on the Board of Directors of Manu Forti Group, Inc. (OTCBB - "MNFG"), Data Fortress Systems Group, Ltd. (OTCBB - "DFGRF") and CYOP Systems International, Inc. (OTCBB - "CYOI") among others.  From November 2000 to April 2001, Mr. Samson was a Corporate Finance Associate with Moore Consulting Services, Inc. and provided operational, due diligence, and business plan services for
corporate and business sponsor use.  Subsequent to that time, Mr. Samson has provided contract CFO services to a variety of companies. Family Relationships There are no family relationships among our directors or officers. Involvement in Certain Legal Proceedings Our directors, executive officers and control persons have not been involved in any of the following events during the past five years: 1.
        any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; 2.
        any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences); 3.
        being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or 4.
        being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. Item 11.  Executive Compensation. The particulars of compensation paid to the following persons: 
        our chief executive officer; 
        each of our four most highly compensated executive officers who were serving as executive officers at the end of the year ended February 28, 2006, and whose total salary and bonus exceeds $100,000 per year; and  25       
        any additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the most recently completed financial year, who we will collectively refer to as the named executive officers, of our three most recently completed fiscal years ended February 28, 2006, are set out in the following summary compensation table.  SUMMARY COMPENSATION TABLEAnnual Compensation
        Long Term Compensation (1)Awards
        PayoutsName and PrincipalPosition
        Year
        Salary
        Bonus
        OtherAnnualCompen-sation (1)
        SecuritiesUnderlyingOptions/SARsGranted
        RestrictedShares orRestrictedShareUnits
        LTIPPayouts
        All OtherCompen-sationRobert HoeglerPresident and Director(2)
        200620052004
        $0$0$0
        NilNilNil
        NilNilNil
        000
        000
        NilNilNil
        NilNilNilFloyd FlamanChief Financial Officerand Director(3)
        200620052004
        $0$0$0
        NilNilNil
        NilNilNil
        000
        000
        NilNilNil
        NilNilNilSam JohalPresidentand Director(4)
        2006
        $0
        Nil
        Nil
        0
        0
        Nil
        NilChris FosterDirector(5)
        2006
        $42,977
        Nil
        Nil
        0
        0
        Nil
        NilWilliam MarshallPresident and Director
        2006
        $52,000
        Nil
        Nil
        0
        0
        Nil
        NilDane Brown
Vice President Corporate Development,
Secretary Treasurerand Director
        2006
        $24,000
        Nil
        Nil
        0
        0
        Nil
        NilGordon A. SamsonChief Financial Officerand Director
        200620052004
        $9,000
        Nil
        Nil
        0
        0
        Nil
        Nil (1)The value of perquisites and other personal benefits, securities and property for the Named Executive Officers that do not exceed the lesser of $50,000 or 10% of the total of the annual salary and bonus is not reported herein. (2)
        Robert Hoegler resigned as President on April 21, 2005.(3)
        Floyd Flaman resigned as CFO on April 21, 2005.(4)
        Sam Johal resigned as President on September 6, 2005.(5)
        Chris Foster resigned as CFO and Secretary Treasurer on November 25, 2005.   26       Stock Options and Stock Appreciation Rights During the year ended February 28, 2006, we did not grant any stock options to any of our executive officers. Aggregated Option/SAR exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values  Name
        SharesAcquired onExercise (#)
        AggregateValueRealized
        Number of Securities UnderlyingUnexercised Options/SARs atFY-End (#)Exercisable /Unexercisable
        Value of Unexercised In-the-Money Options/SARs at FY-end ($)Exercisable / UnexercisableExercisable
        Unexercisable
        Exercisable
        UnexercisableN/A
        Nil
        Nil
        Nil
        Nil
        N/A
        N/A Compensation of Directors Except as noted below, we have no formal plan for compensating our directors for their service in their capacity as directors, although such directors are expected in the future to receive stock options to purchase common shares as awarded by our board of directors or (as to future stock options) a compensation committee which may be established.  Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors.  Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. Employment Contracts and Termination of Employment and Change in Control Arrangements We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer. On January 1, 2006, we entered into a consulting agreement with Dane Brown, our Vice President, Corporate Development and one of our directors, wherein we have agreed to pay him a monthly fee of $8,000 per month as well as reasonable out-of-pocket expenses incurred in performing the duties described in Schedule A of the agreement.  The agreement commences January 1, 2006 and terminates December 31, 2006, and will automatically renew for an additional one year unless otherwise stipulated. On January 1, 2006, we entered into a consulting agreement with Scott Marshall, our President and one of our directors, wherein we have agreed to pay him a monthly fee of $15,000 per month as well as reasonable out-of-pocket expenses incurred in performing the duties described in Schedule A of the agreement.  The agreement commences January 1, 2006 and terminates December 31, 2006, and will automatically renew for an additional one year unless otherwise stipulated. On January 1, 2006, we entered into a consulting agreement with Chris Foster, one of our directors, wherein we have agreed to pay him a monthly fee of $6,500 per month as well as reasonable out-of-pocket expenses incurred in performing the duties described in Schedule A of the agreement.  The agreement commences January 1, 2006 and terminates December 31, 2006, and will automatically renew for an additional one year unless otherwise stipulated. On January 1, 2006, we entered into a consulting agreement with Gord Samson, our Chief Financial Officer and one of our directors, wherein we have agreed to pay him a monthly fee of $4,500 per month as well as reasonable out-of-pocket expenses incurred in performing the duties described in Schedule A of the agreement.  The agreement  27      commences January 1, 2006 and terminates December 31, 2006, and will automatically renew for an additional one year unless otherwise stipulated. Pension, Retirement or Similar Benefit Plans There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.  We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof. Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table sets forth, as of April 3, 2006, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers.  Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated.  Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.  Name and Address ofBeneficial Owner
        Amount and  Nature ofBeneficial Ownership
        Percentageof Class(1)William Scott Marshall5151 E. Broadway, Suite 1600Tucson, AZ 85711
        17,000,000
        34.6%Dane Brown3164 Mountain HighwayNorth Vancouver, BC V7K 2H5
        Nil
        NilChris Foster#3106-1408  Strathmore MewsVancouver, BC V6Z 3A9
        3,000,000
        6.1%Gordon SamsonSuite 900, 9595 Wilshire Blvd.Beverly Hills, CA 90212
        Nil
        NilDirectors and Officers(as a group)
        20,000,000
        40.7% (1)            Based on 49,150,000 shares issued and outstanding as of April 3, 2006 and, as to a specific person, shares issuable pursuant to the exercise of share purchase warrants exercisable within 60 days. Changes in Control We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change of control of our company. Item 13.  Certain Relationships and Related Transactions. Other than as listed below, we have not been a party to any transaction, proposed transaction, or series of transactions in which the amount involved exceeds $60,000, and in which, to our knowledge, any of our directors, officers, five percent beneficial security holder, or any member of the immediate family of the foregoing persons has had or will have a direct or indirect material interest.  28       Our President and one of our directors, William Scott Marshall, is also the Managing Director of Blue Scorpion Energy Inc., a private Alberta company, and is the President and a director of Fidelis Energy, Inc.  We have entered into the following agreements with Fidelis Energy, Inc. and/or Blue Scorpion Energy Inc: - On June 1, 2005, we executed a farm-in agreement with Blue Scorpion to acquire a 49% working interest in Sections 5, 6, and 7 of the Empress Project, in 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. - 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.  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.  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. - 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 our right to a 49% working interest. - 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, 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.  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 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%. Item 14.  Principal Accounting Fees and Services. The following table sets forth the fees billed to the Company for professional services rendered by the Company's principal accountant, for the years ended February 28, 2006 and February 28, 2005:  Services
        2006
        2005Audit fees
        $53,500
        $ 32,126Audit related fees
        -
        -Tax fees
        -
        -All other fees
        -
        -Total fees
        $53,500
        $ 32,126   29       Audit Fees. Consists of fees billed for professional services rendered for the audits of our financial statements, reviews of our interim consolidated financial statements included in quarterly reports, services performed in connection with filings with the Securities & Exchange Commission and related comfort letters and other services that are normally provided by the Companys principal accountant in connection with statutory and regulatory filings or engagements. Tax Fees.Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions. Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors The Audit Committee is to pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services as allowed by law or regulation. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specifically approved amount. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval and the fees incurred to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. The Audit Committee pre-approved 100% of the Companys 2004 audit fees, audit-related fees, tax fees, and all other fees to the extent the services occurred after May 6, 2004, the effective date of the Securities and Exchange Commissions final pre-approval rules.   30        PART IV  Item15.Exhibitsand Reports on 8-K. Exhibits required by Item 601 of Regulation S-B The following documents are filed herewith or have been included as exhibits to previous filings with the Commission and are incorporated herein by this reference: (A)
        Exhibits  Exhibit  No.
        
        Exhibit3.1
        
        Articles of Incorporation3.2
        
        Bylaws3.3
        
        Articles of Amendment14.1
        
        Code of Business Conduct and Ethics31.1
        
        Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
        
        Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
        
        Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
        
        Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(B)
        Plan of Purchase, Sale, Reorganization, Arrangement, Liquidation or Succession 2.1           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). (C)
        Reports on Form 8-K 1.
        On May 12, 2005 the Company filed a Form 8-K relating to the purchase of a 49% working interest in certain mineral leases (Coyote Creek) located in Tehama County, Ca., USA. 2.
        On June 20, 2005 the Company filed a Form 8-K relating to the acquisition of a 49% working interest in the Empress Project, Alberta, Canada. 3.
        On July 6, 2005 the Company filed a Form 8-K relating to the execution of three secured convertible debentures issued to international investors totalling $3,000,000. 4.
        On September 9, 2005 the Company filed a Form 8-K relating to the resignation and appointment of certain directors. 5.
        On October 3, 2005, the Company filed a Form 8-K relating to (i) the acquisition of the right to earn 21% of the rights to a particular section of land of the Empress Project, Alberta, Canada; and (ii) the signing of a data sharing agreement whereby the Company 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 located in Central Kansas, USA, about which the data was compiled. 6.
        On October 18, 2005 the Company filed a Form 8-K relating to the acquisition of the right to earn a 49% working interest in certain lands in the Bolloque Prospect, located in the Province of Alberta, Canada.  31       7.
        On December 21, 2005 the Company filed a Form 8-K relating to the closing of a private placement consisting of 350,000 units at a price of $0.30 per unit for gross proceeds of $105,000. 8.
        On November 22, 2005 the Company filed a Form 8-K relating to the resignation of Mr. Chris Foster as the Companys Chief Financial Officer and Secretary Treasurer, and the addition of Mr. Dane Brown as a new member of the Board of Directors. 9.
        On December 21, 2005 the Company filed a Form 8-K relating to the Company having entered into a securities purchase agreement with an institutional investor for an aggregate purchase price of $3,500,000, and the related issuance of the first of two $1,750,000 secured convertible debentures. 10.
        On January 10, 2006 the Company filed a Form 8-K relating to the issuance to an institutional investor of the second of two $1,750,000 secured convertible debentures, and a warrant to purchase an aggregate of 12,000,000 additional shares of our common stock at an exercise price of $0.2902 per share exercisable until November 30, 2010, relating to the private placement that was originally announced in our Form 8-K filed on December 21, 2005. 11.
        On January 23, 2006 the Company filed a Form 8-K relating to the signing of consulting agreements with Scott Marshall, a director and President of the Company, Dane Brown, a director and the Companys Vice President Corporate Development, and Chris Foster, a director of the Company. 12.
        On February 17, 2006 the Company filed a Form 8-K relating to the appointment of Gordon Samson as our Chief Financial Officer and to our Board of Directors. 13.
        On March 7, 2006 the Company filed a Form 8-K relating to the decision to engage new auditors as our independent accountants to audit our financial statements.  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/ Scott Marshall Scott Marshall, President and Director (Principal Executive Officer) Date:  June 14, 2006 By:  /s/ Gordon Samson Gordon Samson, Chief Financial Officer and Director Date:  June 14, 2006 By: /s/ Chris Foster Chris Foster, Director Date:  June 14, 2006 By: /s/ Dane Brown Dane Brown, Vice President, Corporate Development, and Director Date:  June 14, 2006   32