Great Spirits Inc - FORM 10-Q

Attached files

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EX-31.1 - EXHIBIT 31.1 - Great Spirits Inc	greatsprt10q123109x31_31910.htm
EX-32.1 - EXHIBIT 32.1 - Great Spirits Inc	greatsprt10q123109x32_31910.htm

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended December 31, 2009

[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-52997

GREAT SPIRITS, INC.

(Exact Name of Registrant as specified in its charter)

Colorado	20-5572519
(State or other jurisdiction	(IRS Employer File Number)
of incorporation)

3230 Fall Creek Highway, Suite 206
Granbury Texas	76049
(Address of principal executive offices)	(zip code)

(817) 736-2900

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(Section 232.405 of this chapter) during the preceding 12 months(or such shorter period that the registrant was required to submit and post such files. Yes [] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “small reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer []	Accelerated filer []
Non-accelerated filer [] (Do not check if a smaller reporting company)	Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [] No [X]

The number of shares outstanding of the registrant's common stock, as of the latest practicable date, December 31, 2009 was 8,248,020.

FORM 10-Q

Great Spirits, Inc.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION	Page
Item 1. Financial Statements for the period ended December 31, 2009
Balance Sheet (Unaudited)	5
Statements of Operations (Unaudited)	6
Statements of Cash Flows (Unaudited)	8
Notes to Financial Statements	9

Item 2. Management’s Discussion and Analysis and Plan of Operation	11
Item 3. Quantitative and Qualitative Disclosures About Market Risk	14
Item 4. Controls and Procedures	14
Item 4T. Controls and Procedures	14

PART II OTHER INFORMATION
Item 1. Legal Proceedings	14
Item 1A. Risk Factors	14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3. Defaults Upon Senior Securities	18
Item 4. Submission of Matters to a Vote of Security Holders	18
Item 5. Other Information	18
Item 6. Exhibits	18

Signatures	19

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PART I FINANCIAL INFORMATION

References in this document to "us," "we," or "Company" refer to Great Spirits, Inc. and its subsidiary.

ITEM 1. FINANCIAL STATEMENTS

GREAT SPIRITS, INC.

(A Development Stage Company)

FINANCIAL STATEMENTS

(Unaudited)

Quarter Ended December 31, 2009

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Great Spirits, Inc.

(A Development Stage Company)

Financial Statements

(Unaudited)

TABLE OF CONTENTS

	Page
FINANCIAL STATEMENTS
Balance sheets	5
Statements of operations	6
Statements of cash flows	8
Notes to financial statements	9

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Great Spirits Inc.

Consolidated Balance Sheet

(A Development Stage Company)

	Unaudited
	December			June 30
		31, 2009			30, 2009
ASSETS

Current Assets:

Cash and cash equivalents	$	0		$	1,543

Total Current Assets		0			1,543


TOTAL ASSETS	$	0		$	1,543

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable	$	0		$	12,187
Advances from officer		0			65

Total current liabilities		0			12,252

Total Liabilities	$	0		$	12,252

SHAREHOLDERS' EQUITY

Preferred stock, $.10 par value per share;
Authorized 1,000,000 Shares; Issued
and outstanding -0- shares.		-			-

Common Stock, $.001 per share;
Authorized 50,000,000 Shares; Issued
and outstanding 8,248,020 shares		8,248			8,248

Capital paid in excess of par value		44,214			33,437

(Deficit) accumulated during the development stage		(52,462	)		(52,394	)

TOTAL SHAREHOLDERS' EQUITY		(0	)		(10,709)

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	0		$	1,543

See Accompanying Notes To These Unaudited Financial Statements.

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Great Spirits Inc.

Unaudited Consolidated Statement Of Operations

(A Development Stage Company)

							Unaudited
	Unaudited			Unaudited			September 26,
	Six month			Six month			2005 Inception
	period ended			period ended			through
	December 31,			December 31,			December 31,
	2009			2008			2009
	(Unaudited)			(Unaudited)			(Unaudited)

Revenue:	$	-		$	-		$	-


General & Administrative Expenses

Accounting		0			5,750			16,250
Bank charges		-			0			27
Consulting		-			0			9,500
Legal		-			-			7,500
Lincenses		-			-			375
Office		0			922			6,159
Research & development		-			-			800
Stock transfer		0			600			8745

Total G & A		0			7,272			49,356
Interest expense		-			-			(3,106)
Net (Loss)	$	(0	)	$	(7,272	)	$	(52,462	)

Basic (Loss) per common share		(0.00	)		(0.00	)		(0.01	)

Weighted Average Common Shares Outstanding		8,248,020			8,248,020			8,248,020

See Accompanying Notes To These Unaudited Financial Statements.

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Great Spirits Inc.

Unaudited Consolidated Statement Of Operations

(A Development Stage Company)

	Unaudited			Unaudited
	3 Months			3 Months
	Ended			Ended
	December			December
		31, 2009			31, 2008

Revenue:	$	-		$	-


General & Administrative Expenses

Accounting		0			25,00
Licensing		-			0
Office		0			365
Stock transfer		0			450

Total G & A		0			3,315

Net (Loss)	$	(0	)	$	(3,315	)

Basic (Loss) per common share		(0.00	)		(0.00	)

Weighted Average Common Shares Outstanding		8,248,020			8,248,020

See Accompanying Notes To These Unaudited Financial Statements.

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Great Spirits, Inc.

(A Development Stage Company)

Unaudited Consolidated Statements of Cash Flows

							Unaudited
	Unaudited			Unaudited			September 26,
	Six month			Six month			2005 Inception
	period ended			period ended			through
	December 31,			December 31,			December 31,
	2009			2008			2009
	(Unaudited)			(Unaudited)			(Unaudited)

Net (Loss)	$	(0	)	$	(7,272	)	$	(52,462	)
Adjustments to reconcile decrease in net assets to net cash
provided by operating activities:
Interest accretion								3,000
Stock issued for services		-			-			7,500
Increase (Decrease) in accounts payable		0			1,635	)		7,712

Net cash (used) in operation activities		(0	)		(5,637	)		(34,250	)

Cash flows from investing activities:
Advances received from officer		0			-			1,065
Advances paid to officer		-			0			(1,000	)

Net cash (used) in investing activities		-			0			65

Cash flows from financing activities:
Issuance of common stock		-			-			45,251
Deferred offering costs		-			(0	)		(11,066	)

Net cash provided from financing activities		-			0	)		34,185

Net increase in cash		(0	)		(5,637	)		0
Cash at beginning of period		0			9,130			-

Cash at end of period	$	0		$	3,493		$	0

Supplemental disclosure information:
Stock issued for services	$	-		$	-		$	7,500

Cash paid for:
Interest	$	-		$	-		$	-
Income taxes	$	-		$	-		$	-
Cash paid for interest	$	-		$	-		$	-
Cash paid for income taxes	$	-		$	-		$	-

See Accompanying Notes To These Unaudited Financial Statements.

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GREAT SPIRITS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Great Spirits, Inc. (the “Company”), was incorporated in the State of Colorado on August 31, 2006. The Company was formed to distill and market a premium priced potato vodka to the public.

Development stage company

The Company is currently in the development stage, and has commenced operations but has not yet generated significant revenues.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of operations for a full year.

Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.

Accounts receivable

The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary.

Property and equipment

Property and equipment are recorded at cost and depreciated under straight line methods over each item's estimated useful life.

Revenue recognition

Revenue is recognized on an accrual basis after services have been performed under contract terms, the event price to the client is fixed or determinable, and collectibility is reasonably assured.

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GREAT SPIRITS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Income tax

The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net income (loss) per share

The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share.

Financial Instruments

The carrying value of the Company’s financial instruments, including cash and cash equivalents and accrued payables, as reported in the accompanying balance sheet, approximates fair value.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included in, Item 1 in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements.

Forward-Looking Statements

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements. Such forward-looking statements are based on current expectations, estimates, and projections about our industry, management beliefs, and certain assumptions made by our management. Words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth herein and in other reports and documents that we file from time to time with the Securities and Exchange Commission, particularly the Annual Reports on Form 10-K, Quarterly reports on Form 10-Q and any Current Reports on Form 8-K.

Overview and History

We are a Colorado corporation. We were incorporated on August 31, 2006. Our wholly-owned subsidiary was formed in September, 2005. Our proposed business is to distill and market to the public a premium-priced potato vodka. We are a holding company to Rocky Mountain Distilleries, Inc., a wholly-owned subsidiary, which was incorporated in September, 2005 and is the actual operating company. Both we and our subsidiary are headquartered in Monte Vista, Colorado. We acquired the capital stock of Rocky Mountain Distilleries, Inc. in a tax-free exchange under the Internal Revenue Code in September, 2006.

In June, 2007, we completed a registered offering of our common shares under the provisions of the Colorado securities laws and under an exemption from the federal securities laws. We sold a total of 181,000 common shares at a price of $0.25 per share to a total of forty investors. We raised a total of $45,250 in this offering.

We have not been subject to any bankruptcy, receivership or similar proceeding.

Our address is 3230 Fall Creek Highway, Suite 206, Granbury Texas 76049. Our telephone number is (817) 736-2900.

On October 23, 2009, we entered into a Securities Purchase Agreement (the “Agreement”), dated as of October 20, 2009 (the “Closing”), with Brian Leftwich, Steven Free, and Jack Minter (collectively, the “Buyers”) and Dana Hyde and other sellers named therein (the “Sellers”), whereby the Sellers sold an aggregate of 7,998,020 shares (the “Shares”) of our common stock, par value $0.001 per share (the “Common Stock”), to the Buyers for cash consideration in the net aggregate amount of $190,000 (“Transaction”). The Shares include substantially all shares of Common Stock owned beneficially or of record by the Sellers, or issuable upon the exercise, conversion, or exchange of securities or obligations held by, or owed to, the Sellers.

As a result of the Closing of the Transaction, Mr. Leftwich now owns 2,666,020 shares of our Common Stock representing 32.3% of the outstanding Common Stock on a beneficial basis, and each of Messrs. Free and Minter now own 2,666,000 shares of our Common Stock representing 32.3% of the outstanding Common Stock on a beneficial basis.

Before the Closing of the Transaction, the Board consisted of one member, Dana Hyde. In connection with the Transaction and pursuant to the Agreement, the director voted to expand the Board thereby creating one vacancy, to which vacancy Mr. Leftwich was appointed upon Closing. Ms. Hyde resigned from all offices and other positions with us.

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Effective October 30, 2009, we placed all of the common shares of our wholly owned subsidiary, Rocky Mountain Distilleries, Inc., into a trust in anticipation of a spin off to our shareholders of record as of October 19, 2009. The trustee has the authority to complete the spin off to our shareholders as soon as an effective registration statement with the SEC is in place for the transaction.

Results of Operations

Revenue. We had no revenue for the three months or six months ended December 31, 2009 and for the three months or six months ended December 31, 2008.

Operating Expenses. We incurred operating expenses of $-0- for the three months ended December 31, 2009 compared to operating expenses of $3,315 for the three months ended December 31, 2008. We incurred operating expenses of $-0- for the six months ended December 31, 2009 compared to operating expenses of $7,272 for the six months ended December 31, 2008.

Our operating expenses are comprised solely of general and administrative expenses. The primary components of general and administrative expenses are the expenses of our corporate office, professional fees, general and administrative expenses. The increase in operating expenses is directly related to the increase in salaries during the relevant periods.

Gross Profit (Loss). We had no gross profit for the three months or six months ended December 31, 2009 and for the three months or six months ended December 31, 2008.

Net Loss. We incurred a net loss of $-0- for the three months ended December 31, 2009 compared to a net loss of $3,315 for the three months ended December 31, 2008. We incurred a net loss of $-0- for the six months ended December 31, 2009 compared to a net loss of $7,272 for the six months ended December 31, 2008.

Liquidity and Capital Resources

As of December 31, 2009, we had cash totaling $-0-. As of December 31, 2008, we had cash totaling $3,493.

For the six months ended December 31, 2009, we had net cash of $-0- provided or used for operating activities, compared to $5,637 used for operating activities for the six months ended December 31, 2008.

For the six months ended December 31, 2009, we had net cash of $-0- provided or used for investing activities, compared to $-0- provided or used for investing activities for the six months ended December 31, 2008.

For the six months ended December 31, 2009, we had net cash of $-0- provided or used by financing activities, compared to $-0- provided or used by financing activities for the six months ended December 31, 2008.

Over the next twelve months our capital costs will be approximately $10,000 to $12,000 primarily to develop operations. We plan to buy office equipment to be used in our operations. In the next three months, we plan to develop a relationship with a contract distiller to begin distilling our potato vodka. At the present time, we have no definitive agreement in place for any contract distiller. We do not anticipate an extensive capital cost to develop this relationship. Eventually, we want to distill our own vodka at our own distillery. However, we have no definite plans to do so at this time and do not know what, if any, capital costs would be involved for us.

We believe that we have sufficient capital in the short term for our current level of operations. This is because we believe that we can attract sufficient product sales and services within our present organizational structure and resources to become profitable in our operations. Additional resources would be needed to expand into additional locations, which we have no plans to do at this time. We do not anticipate needing to raise additional capital resources in the next twelve months. In the event that we need additional capital, Mr. Leftwich has agreed to loan such funds as may be necessary through December 31, 2010 for working capital purposes.

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Our principal source of liquidity will be our operations. We expect variation in revenues to account for the difference between a profit and a loss. Also business activity is closely tied to the U.S. economy. Because we plan to market a vodka product, a slow down in purchases of consumer goods could have a negative impact to our business in the future. We have no idea to what extent this may affect us. In any case, we try to operate with minimal overhead. Our primary activity will be to seek to develop customers and, consequently, our sales. If we succeed in developing customers for our vodka and generating sufficient sales, we will become profitable. We cannot guarantee that this will ever occur. Our plan is to build our company in any manner which will be successful.

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

Critical Accounting Policies

Our discussion and analysis of results of operations and financial condition are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to provisions for uncollectible accounts receivable, inventories, valuation of intangible assets and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results May differ from these estimates under different assumptions or conditions.

The accounting policies that we follow are set forth in Note 2 to our financial statements as included in this prospectus. These accounting policies conform to accounting principles generally accepted in the United States, and have been consistently applied in the preparation of the financial statements.

Recently Issued Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 123R "Share Based Payment." This statement is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS No. 123R addresses all forms of share based payment ("SBP") awards including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. Under SFAS No. 123R, SBP awards result in a cost that will be measured at fair value on the awards' grant date, based on the estimated number of awards that are expected to vest. This statement is effective for public entities that file as Registrants, as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. We adopted this pronouncement during the first quarter of 2005.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets - An Amendment of APB Opinion No. 29. The amendments made by SFAS No. 153 are based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for non-monetary exchanges of similar productive assets and replace it with a broader exception for exchanges of non-monetary assets that do not have "commercial substance." SFAS No. 153 is effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of SFAS No. 153 on its effective date did not have a material effect on our consolidated financial statements.

In December 2005, the FASB issued Financial Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations - an Interpretation of FASB Statement No. 143", which specifies the accounting treatment for obligations associated with the sale or disposal of an asset when there are legal requirements attendant to such a disposition. We adopted this pronouncement in 2005, as required, but there was no impact as there are no legal obligations associated with the future sale or disposal of any assets.

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In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections — A Replacement of APB Opinion No. 20 and SFAS Statement No. 3". SFAS No. 154 changes the requirements for the accounting and reporting of a change in accounting principle by requiring retrospective application to prior periods' financial statements of the change in accounting principle, unless it is impracticable to do so. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not expect the adoption of SFAS No. 154 to have any impact on our consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

None.

ITEM 4. CONTROLS AND PROCEDURES

Not applicable

ITEM 4T. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, based on an evaluation of our disclosure controls and procedures (as defined in Rules 13a -15(e) and 15(d)-15(e) under the Exchange Act), our Chief Executive Officer and the Chief Financial Officer has concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the applicable time periods specified by the SEC’s rules and forms.

There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal three months that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no legal proceedings, to which we are a party, which could have a material adverse effect on our business, financial condition or operating results.

ITEM 1A. RISK FACTORS

You should carefully consider the risks and uncertainties described below and the other information in this document before deciding to invest in shares of our common stock.

The occurrence of any of the following risks could materially and adversely affect our business, financial condition and operating result. In this case, the trading price of our common stock could decline and you might lose all or part of your investment.

We have a limited operating history, have never been profitable, and may never be profitable. We have a history of losses.

We were formed as a Colorado business entity in August, 2006. Our wholly-owned subsidiary was formed in September, 2005. At the present time, have a limited operating history. There can be no guarantee that we will ever be profitable. From our inception on September 26, 2005 through December 31, 2009, we have a history of losses.

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Because we had incurred operating losses from our inception, our accountants have expressed doubts about our ability to continue as a going concern.

For the period ended June 30, 2009, our accountants have expressed doubt about our ability to continue as a going concern as a result of our continued net losses. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:

●	our ability to begin active operations;

●	our ability to locate clients who will purchase our vodka products; and

●	our ability to generate revenues.

Based upon current plans, we may incur operating losses in future periods because we may, from time to time, be incurring expenses but not generating sufficient revenues. We expect approximately $50,000 in operating costs over the next twelve months. We cannot guarantee that we will be successful in generating sufficient revenues or other funds in the future to cover these operating costs. Failure to generate sufficient revenues will cause us to go out of business.

We have a lack of liquidity and will need additional financing in the future. Additional financing may not be available when needed, which could delay our development or indefinitely postponed.

We are only minimally capitalized. Because we are only minimally capitalized, we expect to experience a lack of liquidity for the foreseeable future in our proposed operations. We will adjust our expenses as necessary to prevent cash flow or liquidity problems. However, we expect we will need additional financing of some type, which we do not now possess, to fully develop our operations. We expect to rely principally upon our ability to raise additional financing, the success of which cannot be guaranteed. We will look at both equity and debt financing, including loans from our principal shareholder. However, at the present time, we have no definitive plans for financing in place, other than the funds which may be loaned to us by Mr. Leftwich, our President. In the event that we need additional capital, Mr. Leftwich has agreed to loan such funds as may be necessary through December 31, 2010 for working capital purposes. To the extent that we experience a substantial lack of liquidity, our development in accordance with our proposed plan may be delayed or indefinitely postponed, our operations could be impaired, we may never become profitable, fail as an organization, and our investors could lose some or all of their investment.

As a company with limited operating history, we are inherently a risky investment.

We have limited operating history. Because we are a company with limited history, the operations in which we engage in, to distill and market to the public a premium-priced potato vodka, is an extremely risky business. An investor could lose his entire investment.

Our operations are subject to our ability to successfully market our products. We have no substantial history of being able to successfully market our products.

Our operations will depend, among other things, upon our ability to develop and to market our vodka product for sale to consumers. Further, there is the possibility that our operations will not generate income sufficient to meet operating expenses or will generate income and capital appreciation, if any, at rates lower than those anticipated or necessary to sustain the investment. An investor could lose his entire investment.

There are factors beyond our control which may adversely affect us.

Our operations may also be affected by factors which are beyond our control, principally general market conditions and changing consumer tastes. Any of these problems, or a combination thereof, could have affect on our viability as an entity. We may never become profitable, fail as an organization, and our investors could lose some or all of their investment.

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Intense competition in our market could prevent us from developing revenue and prevent us from achieving annual profitability. In either situation, we may never become profitable, fail as an organization, and our investors could lose some or all of their investment.

We plan to distill and market to the public a premium-priced potato vodka. While the barriers to entry are significant, more importantly, it is necessary to gain a share of the potato vodka market. The barriers to gaining a market share are significant. We face strong competitors in all areas of our business. All aspects of our business are highly competitive. All of our competitors are larger than us and have greater financial resources than we do. All of our competitors have substantially greater experience distilling and marketing to the public premium-priced vodka, including potato vodka. Competition with these companies could curtail price increases or could require price reductions or significant spending on marketing and sales, any of which could adversely affect our results of operations. Competition from larger and more established companies is a significant threat and is expected to increase.

Our products could be rendered noncompetitive or obsolete. Any competition may cause us to fail to gain or to lose market share, which could result in reduced margins for our products. Competitive pressures may not only impair our margins but may also impact our revenues and our growth.

We currently have no suppliers or third party distillery contracts and may never acquire any suppliers or third party contracts.

We currently have no contracts with any suppliers or third party distilleries for the production of our product. We may never acquire either suppliers or third party distilleries, either of which could cause our business to fail.

Fluctuations in the supply and prices of raw materials could negatively impact our financial results.

Under normal market conditions, raw materials for our proposed product are generally available on the open market. From time to time, however, the prices and availability of these raw materials may fluctuate significantly, which could impair our ability to procure necessary products, or increase the cost of our product. If material costs increase, and we are unable to pass along, or are delayed in passing along, those increases to our customers, we will experience reductions to our profit margins and our ability to generate a profit will be reduced or eliminated completely.

Our success will be dependent upon our management’s efforts. We cannot sustain profitability without the efforts of our management.

Our success will be dependent upon the decision making of our directors and executive officers. These individuals intend to commit as much time as necessary to our business, but this commitment is no assurance of success. The loss of any or all of these individuals, particularly Ms. Dana Hyde our President, could have a material, adverse impact on our operations. We have no written employment agreements with any officers and directors, including Mr. Leftwich. We have not obtained key man life insurance on the lives of any of our officers or directors.

Our stock has a limited public trading market and there is no guarantee a trading market will ever develop for our securities.

There has been, and continues to be, a limited public market for our common stock. We trade on the Over-the-Counter Bulletin Board under the trading symbol GSPS.OB. An active trading market for our shares has not, and may never develop or be sustained. If you purchase shares of common stock, you may not be able to resell those shares at or above the initial price you paid. The market price of our common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, including the following:

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*	actual or anticipated fluctuations in our operating results;

*	changes in financial estimates by securities analysts or our failure to perform in line with such estimates;

*	changes in market valuations of other companies, particularly those that market services such as ours;

*	announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;

*	introduction of product enhancements that reduce the need for our products;

*	departures of key personnel.

Of our total outstanding shares as of December 31, 2009, a total of 8,067,020, or approximately 98%, will be restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

As restrictions on resale end, the market price of our stock could drop significantly if the holders of restricted shares sell them or are perceived by the market as intending to sell them.

Applicable SEC rules governing the trading of “Penny Stocks” limit the liquidity of our common stock, which may affect the trading price of our common stock.

Our common stock is currently not quoted on in any market. If our common stock becomes quoted, we anticipate that it will trade well below $5.00 per share. As a result, our common stock is considered a “penny stock” and is subject to SEC rules and regulations that impose limitations upon the manner in which our shares can be publicly traded. These regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination for the purchaser and receive the written purchaser’s agreement to a transaction prior to purchase. These regulations have the effect of limiting the trading activity of our common stock and reducing the liquidity of an investment in our common stock.

The over-the-counter market for stock such as ours is subject to extreme price and volume fluctuations.

The securities of companies such as ours have historically experienced extreme price and volume fluctuations during certain periods. These broad market fluctuations and other factors, such as new product developments and trends in the our industry and in the investment markets generally, as well as economic conditions and quarterly variations in our operational results, may have a negative effect on the market price of our common stock.

Buying low-priced penny stocks is very risky and speculative.

The shares being offered are defined as a penny stock under the Securities and Exchange Act of 1934, and rules of the Commission. The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 jointly with spouse, or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker-dealer must make a suitability determination for each purchaser and receive the purchaser's written agreement prior to the sale. In addition, the broker-dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and deliver certain disclosures required by the Commission. Consequently, the penny stock rules may affect the ability of broker-dealers to make a market in or trade our common stock and may also affect your ability to resell any shares you may purchase in the public markets.

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We do not expect to pay dividends on common stock.

We have not paid any cash dividends with respect to our common stock, and it is unlikely that we will pay any dividends on our common stock in the foreseeable future. Earnings, if any, that we may realize will be retained in the business for further development and expansion.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibits

3.1*	Articles of Incorporation
3.2*	Bylaws
10.1**	Form of Securities Purchase Agreement, dated October 20, 2009, among the Buyers identified therein, the Sellers identified therein, and Great Spirits, Inc	.
21 *	List of Subsidiaries.
31.1	Certification of Chief Executive and Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a)
32.1	Certification of Chief Executive and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Previously filed under cover of Form SB-2 on November 1, 2007.

** Previously filed under cover of Form 8-K on November 2, 2009.

Reports on Form 8-K

We had one filing under cover of Form 8K for the fiscal quarter ended December 31, 2009 on November 2, 2009, relating to change of control and new officers.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on March 19, 2010.

	GREAT SPIRITS, INC.

	By:	/s/ Brian Leftwich
		Brian Leftwich,
		Chief Executive Officer and President (principal executive officer) Chief Financial Officer (principal financial and accounting officer)

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Great Spirits Inc - FORM 10-Q - March 19, 2010

Attached files

Great Spirits Inc Reports