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EX-32 - EX 32.1 SECTION 906 CERTIFICATIONS - Pharmagen, Inc.sunpeaks10q123110ex321.htm
EX-31 - EX 31.1 SECTION 302 CERTIFICATIONS - Pharmagen, Inc.sunpeaks10q123110ex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 


 FORM 10-Q

 

  X  .QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2010


      .TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT


For the transition period from ______ to _______


Commission File Number 333-161985

 

SUNPEAKS VENTURES, INC.

 (Name of small business issuer in its charter)

 

Nevada

 

N/A

(State of incorporation)

  

(I.R.S. Employer Identification No.)

 

#106, 505 19 Ave SW

Calgary, Alberta, T2S 0E4

Canada

(Address of principal executive offices)

 

(403) 540-5277

 (Registrant’s telephone number)


with a copy to:

Carrillo, Huettel & Zouvas, LLP

3033 Fifth Ave. Suite 400

San Diego, CA 92103

Telephone (619) 546-6100

Facsimile (619) 546-6060

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   X  . No       . 


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

  Yes       . No       . (Not required)


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


Large accelerated filer

      .

Accelerated filer

      .

Non-accelerated filer

      . (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   X  . No       .


As of February 2, 2011, there were 7,900,000 shares of the registrant’s $0.001 par value common stock issued and outstanding.






SUNPEAKS VENTURES, INC.


TABLE OF CONTENTS

Page

 

 

PART I.                 FINANCIAL INFORMATION

 

  

 

ITEM 1.

FINANCIAL STATEMENTS

3

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

13

ITEM 3.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

16

ITEM 4.

CONTROLS AND PROCEDURES

16

  

 

PART II.               OTHER INFORMATION

 

  

 

ITEM 1.

LEGAL PROCEEDINGS

 

ITEM 1A.

RISK FACTORS

17

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

17

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

17

ITEM 4.

[REMOVED AND RESERVED]

17

ITEM 5.

OTHER INFORMATION

17

ITEM 6.

EXHIBITS

18

  

 

Special Note Regarding Forward-Looking Statements

 

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Sunpeaks Ventures, Inc.   (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.


*Please note that throughout this Quarterly Report, except as otherwise indicated by the context, references in this report to “Company”, “symbol”, “we”, “us” and “our” are references to Sunpeaks Ventures, Inc. 



2






PART I: FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS



SUNPEAKS VENTURES, INC.

(An Exploration Stage Company)


Financial Statements


For the Period Ended December 31, 2010 (unaudited) and June 30, 2010



Balance Sheets (unaudited)

4

Statements of Operations (unaudited)

5

Statements of Cash Flows (unaudited)

6

Notes to the Financial Statements (unaudited)

7




3






SUNPEAKS VENTURES, INC.

(An Exploration Stage Company)

Balance Sheets

(Expressed in US dollars)

(unaudited)



 

December 31, 2010

$

 June 30,

 2010

 $

 

 

 

ASSETS

 

 


Current assets

 

 

 

 

 

Cash

41

5,636

 

 

 

Total Assets

41

5,636

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities

 

 

Accounts payable

37,243

19,561

Accrued liabilities

6,082

4,066

Notes payable

69,245

66,720

Due to related party

30,000

20,000

 

 

 

Total Liabilities

142,570

110,347

 

 

 

STOCKHOLDERS’ DEFICIT

 

 

Preferred Stock

 

 

Authorized: 10,000,000 preferred shares with a par value of $0.001 per share

 

 

Issued and outstanding: nil preferred shares

 –

 –

 

 

 

Common Stock

Authorized: 250,000,000 common shares with a par value of $0.001 per share

 

 

Issued and outstanding: 7,900,000 common shares, respectively

7,900

 7,900

 

 

 

Additional Paid-In Capital

12,100

12,100

 

 

 

Deficit accumulated during the exploration stage

(162,529)

(124,711)

 

 

 

Total Stockholders’ Deficit

(142,529)

(104,711)

 

 

 

Total Liabilities and Stockholders’ Deficit

41

5,636

 

 

 




(The accompanying notes are an integral part of these financial statements)


4






SUNPEAKS VENTURES, INC.

(An Exploration Stage Company)

Statements of Operations

(Expressed in US dollars)

(unaudited)



 



For the Three Months Ended

December 31,

For the Six Months Ended

December 31,



Accumulated from June 25, 2009 (Date of Inception) to

December 31,

2010

$

 

2010

$

2009

$

2010

$

2009

$

 

 

 

 

 

 

Revenues

262

262

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

Consulting fees

23,670

General and administrative

756

531

1,527

1,863

6,682

Impairment of oil and gas property

10,000

Management fees

5,000

5,000

10,000

10,000

35,000

Professional fees

11,625

11,650

24,275

28,650

81,357

 

 

 

 

 

 

Total Operating Expenses

17,381

17,181

35,802

40,513

156,709

 

 

 

 

 

 

Loss Before Other Expense

(17,381)

(17,181)

(35,802)

(40,251)

(156,447)

 

 

 

 

 

 

Other Expense

 

 

 

 

 

 

 

 

 

 

 

Interest expense

(1,008)

(1,008)

(2,016)

(2,016)

(6,082)



 

 

 

 

 

Net Loss

(18,389)

(18,189)

(37,818)

(42,267)

(162,529)


Net Loss per Share – Basic and Diluted



 


Weighted Average Shares Outstanding – Basic and Diluted


7,900,000

7,900,000


7,900,000

7,096,196

 

 

 

 

 

 

 












(The accompanying notes are an integral part of these financial statements)


5






SUNPEAKS VENTURES, INC.

(An Exploration Stage Company)

Statements of Cash Flows

(Expressed in US dollars)

(unaudited)



 

For the Six Months Ended  December 31, 2010

$



For the Six

Months Ended

December 31,

2009

$


Accumulated from

June 25, 2009

(Date of Inception) to

 December 31,

2010
$

 

 

 

 

Operating Activities

 

 

 

 

 

 

 

Net loss for the period

(37,818)

(42,267)

(162,529)

 

 

 

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Shares issued for services

5,000

Impairment of oil and gas property

10,000

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts payable

17,682

5,133

37,243

Accrued liabilities

2,016

2,016

6,082

 

 

 

 

Net Cash Used In Operating Activities

(18,120)

(35,118)

(104,204)

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

Acquisition of oil and gas properties

(10,000)

 

 

 

 

Net Cash Used In Investing Activities

(10,000)

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

Repayment of note payable

(1,000)

(1,000)

Proceeds from related party

10,000

10,000

30,000

Proceeds from note payable

3,525

10,000

70,245

   Proceeds from issuance of shares

15,000

15,000

 

 

 

 

Net Cash Provided By Financing Activities

12,525

35,000

114,245

 

 

 

 

Increase (Decrease) in Cash

(5,595)

(118)

41

 

 

 

 

Cash – Beginning of Period

5,636

6,109

­–

 

 

 

Cash – End of Period

41

5,991

41

 

 

 

 

Supplemental Disclosures

 

 

 

 

 

 

 

Interest paid

Income tax paid



(The accompanying notes are an integral part of these financial statements)


6




SUNPEAKS VENTURES, INC.

(An Exploration Stage Company)

Notes to the Financial Statements

(Expressed in US dollars)

(unaudited)





1.

Organization and Nature of Operations


Sunpeaks Ventures Inc. (the “Company”) was incorporated in the State of Nevada on June 25, 2009 and is a natural resource exploration and production company engaged in the exploration, acquisition, and development of oil and gas properties in the United States. The Company is an exploration stage company as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, Development Stage Entities. In June 2009, the Company acquired a 1.28571% interest in three wells located in Pottawatomie, Oklahoma (the “Pottawatomie Wells”) in exchange for $10,000.  The Company’s plan of operations over the next twelve months is to raise financing to explore and develop the Pottawatomie Wells acquired by the Company.


Going Concern


These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at December 31, 2010, the Company has a working capital deficit of $142,529 and an accumulated deficit of $162,529. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  


2.

Summary of Significant Accounting Policies


a)

Basis of Presentation


The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is June 30.


b)

Use of Estimates


The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the 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. The Company regularly evaluates estimates and assumptions related to the recoverability of oil and gas properties, stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.


c)

Cash and Cash Equivalents


The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As of December 31, 2010 and June 30, 2010, there were no cash equivalents.




7




SUNPEAKS VENTURES, INC.

(An Exploration Stage Company)

Notes to the Financial Statements

(Expressed in US dollars)

(unaudited)



2.

Summary of Significant Accounting Policies (continued)


d)

Interim Financial Statements


These interim financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.


e)

Oil and Gas Properties


The Company utilizes the full-cost method of accounting for petroleum and natural gas properties. Under this method, the Company capitalizes all costs associated with acquisition, exploration and development of oil and natural gas reserves, including leasehold acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling of productive and non-productive wells into the full cost pool on a country by country basis. When the Company obtains proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves proved and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates of proved reserves. The costs of unproved properties are not amortized until it is determined whether or not proved reserves can be assigned to the properties. Until such determination is made the Company assesses annually whether impairment has occurred, and includes in the amortization base drilling exploratory dry holes associated with unproved properties.


The Company applies a ceiling test to the capitalized cost in the full cost pool. The ceiling test limits such cost to the estimated present value, using a ten percent discount rate, of the future net revenue from proved reserves, based on current economic and operating conditions. Specifically, the Company computes the ceiling test so that capitalized cost, less accumulated depletion and related deferred income tax, do not exceed an amount (the ceiling) equal to the sum of: (A) The present value of estimated future net revenue computed by applying current prices of oil and gas reserves (with consideration of price changes only to the extent provided by contractual arrangements) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on current cost) to be incurred in developing and producing the proved reserves computed using a discount factor of ten percent and assuming continuation of existing economic conditions; plus (B) the cost of property not being amortized; plus (C) the lower of cost or estimated fair value of unproven properties included in the costs being amortized; less (D) income tax effects related to differences between the book and tax basis of the property.


For unproven properties, the Company excludes from capitalized costs subject to depletion, all costs directly associated with the acquisition and evaluation of the unproved property until it is determined whether or not proved reserves can be assigned to the property. Until such a determination is made, the Company assesses the property at least annually to ascertain whether impairment has occurred. In assessing impairment the Company considers factors such as historical experience and other data such as primary lease terms of the property, average holding periods of unproved property, and geographic and geologic data. The Company adds the amount of impairment assessed to the cost to be amortized subject to the ceiling test.




8




SUNPEAKS VENTURES, INC.

(An Exploration Stage Company)

Notes to the Financial Statements

(Expressed in US dollars)

(unaudited)



2.

Summary of Significant Accounting Policies (continued)


f)

Asset Retirement Obligations


The Company follows the provisions of ASC 410, Asset Retirement and Environmental Obligations, which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.


g)

Basic and Diluted Net Loss per Share

 

The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.


h)

Foreign Currency Translation


The Company’s functional currency is the Canadian dollar and its reporting currency is the United States dollar. The financial statements of the Company are translated to United States dollars in accordance with ASC 830, Foreign Currency Translation Matters, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars.


i)

Financial Instruments


Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value:


Level 1


Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.


Level 2


Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.




9




SUNPEAKS VENTURES, INC.

(An Exploration Stage Company)

Notes to the Financial Statements

(Expressed in US dollars)

(unaudited)



2.

Summary of Significant Accounting Policies (continued)


j)

Financial Instruments (continued)


Level 3


Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.


The Company’s financial instruments consist principally of cash, accounts payable, and accrued liabilities, and amounts due to related party. Pursuant to ASC 820 and 825, the fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.


k)

Income Taxes


The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.


l)

Comprehensive Loss


ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at December 31, 2010, the Company has no items representing comprehensive income or loss.


m)

Stock-based Compensation


The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.


The Company did not grant any stock options or warrants during the period ended December 31, 2010.


n)

Recent Accounting Pronouncements


In March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.”  The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010.  Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update.  The Company does not expect the provisions of ASU 2010-11 to have a material effect on the financial position, results of operations or cash flows of the Company.




10




SUNPEAKS VENTURES, INC.

(An Exploration Stage Company)

Notes to the Financial Statements

(Expressed in US dollars)

(unaudited)




2.   Summary of Significant Accounting Policies (continued)


m)

Recent Accounting Pronouncements (continued)


In February 2010, the FASB Accounting Standards Update 2010-10 (ASU 2010-10), “Consolidation (Topic 810): Amendments for Certain Investment Funds.”  The amendments in this Update are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009 and for interim periods within that first reporting period. Early application is not permitted.  The Company’s adoption of provisions of ASU 2010-10 did not have a material effect on the financial position, results of operations or cash flows.


In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events (ASC Topic 855) “Amendments to Certain Recognition and Disclosure Requirements” (“ASU No. 2010-09”). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption did not have an impact on the Company’s financial position and results of operations.


In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06, “Improving Disclosures about Fair Value Measurements.” ASU No. 2010-06 amends FASB Accounting Standards Codification (“ASC”) 820 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements and employers’ disclosures about postretirement benefit plan assets. This ASU is effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of ASU 2010-06 did not have a material impact on the Company’s financial statements.


In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis.  This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.  The adoption of this standard is not expected to have a significant impact on the Company’s financial statements.


In October 2009, FASB issued an amendment to the accounting standards related to the accounting for revenue in arrangements with multiple deliverables including how the arrangement consideration is allocated among delivered and undelivered items of the arrangement. Among the amendments, this standard eliminated the use of the residual method for allocating arrangement considerations and requires an entity to allocate the overall consideration to each deliverable based on an estimated selling price of each individual deliverable in the arrangement in the absence of having vendor-specific objective evidence or other third party evidence of fair value of the undelivered items. This standard also provides further guidance on how to determine a separate unit of accounting in a multiple-deliverable revenue arrangement and expands the disclosure requirements about the judgments made in applying the estimated selling price method and how those judgments affect the timing or amount of revenue recognition. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.


 




11




SUNPEAKS VENTURES, INC.

(An Exploration Stage Company)

Notes to the Financial Statements

(Expressed in US dollars)

(unaudited)



2.

Summary of Significant Accounting Policies (continued)


m)

Recent Accounting Pronouncements (continued)


In October 2009, the FASB issued an amendment to the accounting standards related to certain revenue arrangements that include software elements. This standard clarifies the existing accounting guidance such that tangible products that contain both software and non-software components that function together to deliver the product’s essential functionality, shall be excluded from the scope of the software revenue recognition accounting standards. Accordingly, sales of these products may fall within the scope of other revenue recognition standards or may now be within the scope of this standard and may require an allocation of the arrangement consideration for each element of the arrangement. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.


The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.


3.

Oil and Gas Property


On June 25, 2009, the Company acquired a 1.28571% working interest in three wells located in Pottawatomie, Oklahoma in exchange for $10,000.  On June 30, 2010, the Company impaired the acquisition cost of the oil and gas property.


4.

Note Payable


a)

In June 2009, the Company issued a $40,000 convertible promissory note (the “Note”) to a third-party investor. Under the terms of the Note, the amount is unsecured, due interest at 10% per annum, due on demand, and convertible into common shares of the Company at the option of the note holders at $0.06 per common share. As at December 31, 2010, the Company recorded accrued interest of $6,082 which has been recorded as accrued liabilities. The Company evaluated the conversion feature related to this note and determined no derivative or beneficial conversion feature existed.


b)

As at December 31, 2010, the Company owes $29,245 (June 30, 2010 - $26,720) to a creditor for operating expenditures incurred by the Company. This amount owing is unsecured, non-interest bearing, and due on demand. Imputed interest is not considered to be material.  


5.

Related Party Transaction


As at December 31, 2010, the Company owes $30,000 (June 30, 2010 - $20,000) to the Company’s President for management fees incurred on behalf of the Company.  The amount owing is unsecured, non-interest bearing, and due on demand.  





12






ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION


FORWARD-LOOKING STATEMENTS


This Management's Discussion and Analysis or Plan of Operation (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our 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 those forward-looking statements.  You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms.  These statements are only predictions. In evaluating these statements, you should specifically consider various factors, including the risk factors outlined below.  These factors may cause our actual results to differ materially from any forward-looking statements.  Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.  We undertake no obligation to revise or update publicly any forward-looking statements for any reason.


RESULTS OF OPERATIONS


Working Capital


 

December 31,

 

June 30,

  

2010

$

 

2010

$

Current Assets

41

 

5,636

Current Liabilities

142,570

 

110,347

Working Capital Deficit

(142,529)

 

(104,711)



Cash Flows

  

Six Months Ended

 

Six Months Ended

  

December 31, 2010

$

 

December 31, 2009

$

Cash Flows from (used in) Operating Activities

(18,120)

 

(35,118)

Cash Flows from (used in) Financing Activities

12,525

 

35,000

Net Increase (decrease) in Cash During Period

(5,595)

 

(118)


Operating Revenues


We have not generated any revenues since inception.


Operating Expenses and Net Loss


Operating expenses for the three months ended December 31, 2010 was $17,381 compared with $17,181 for the three months ended December 31, 2009.  Overall, operating expenditures were consistent on a year-to-year basis, as the Company had minimal activity since its’ inception date as it continues to seek additional financing to continue exploration of its oil and gas properties.     


Net loss for the six months ended December 31, 2010 was $37,818 compared with $42,267 for the six months ended December 31, 2009.  The decrease in net loss was attributed to the fact that the Company incurred lower professional fees in the current year.  


 Liquidity and Capital Resources


As at December 31, 2010, the Company’s cash balance and total assets were $41 compared to $5,636 as at June 30, 2010.  The decrease in cash and total assets were attributed to the fact that the Company incurred cash to settle outstanding obligations during the fiscal year and did not raise any new equity financing.      





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As at December 31, 2010, the Company had total liabilities of $142,570 compared with total liabilities of $110,347 as at June 30, 2010.  The increase in total liabilities was attributed to increases in accounts payable and accrued liabilities of $19,698 due to the lack of sufficient cash flow for the Company to repay its obligations on a timely basis, increase in amounts due to related parties of $10,000 relating to the quarterly management fee owed to the President and Director of the Company, and $2,525 relating to additional notes payable issued by the Company to repay outstanding obligations.     


As at December 31, 2010, the Company had a working capital deficit of $142,529 compared with a working capital deficit of $104,711 as at June 30, 2010.  The increase in working capital deficit was attributed to day-to-day obligations of the Company that are unpaid given the fact that the Company lacks sufficient cash flow to repay its debts on a timely basis.        


Cashflow from Operating Activities


During the six months ended December 31, 2010, the Company used $18,120 of cash for operating activities compared to the use of $35,118 of cash for operating activities during the six months ended December 31, 2009. The decrease in cash used for operating activities were based on the fact that the Company did not raise any new financing during the year, therefore the number and amount of actual operating expenditures being repaid were significantly lower than prior year.    


Cashflow from Investing Activities


During the six months ended December 31, 2010 and 2009, the Company did not have any cash transactions related to investing activities.


Cashflow from Financing Activities


During the six months ended November 30, 2010, the Company received $12,525 of cash from financing activities compared to $35,000 for the six months ended December 31, 2010.  The decrease in proceeds received from financing activities is due to the fact that the Company only raised $3,525 of additional debt financing during the current year and did not raise any new financing from equity purposes whereas the Company raised $15,000 from share issuances in the prior year in addition to $10,000 in notes payables.      


Going Concern


We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing. 


Future Financings


We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.


Off-Balance Sheet Arrangements


We have no significant 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 are material to stockholders.





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Critical Accounting Policies


Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in note 1 of the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.


Recently Issued Accounting Pronouncements


In March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.”  The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010.  Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update.  The Company does not expect the provisions of ASU 2010-11 to have a material effect on the financial position, results of operations or cash flows of the Company.


In February 2010, the FASB Accounting Standards Update 2010-10 (ASU 2010-10), “Consolidation (Topic 810): Amendments for Certain Investment Funds.”  The amendments in this Update are effective as of the beginning of a reporting entity’s first annual period that begins after November 15, 2009 and for interim periods within that first reporting period. Early application is not permitted.  The Company’s adoption of provisions of ASU 2010-10 did not have a material effect on the financial position, results of operations or cash flows.


In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events (ASC Topic 855) “Amendments to Certain Recognition and Disclosure Requirements” (“ASU No. 2010-09”). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption did not have an impact on the Company’s financial position and results of operations.


In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06, “Improving Disclosures about Fair Value Measurements.” ASU No. 2010-06 amends FASB Accounting Standards Codification (“ASC”) 820 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements and employers’ disclosures about postretirement benefit plan assets. This ASU is effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of ASU 2010-06 did not have a material impact on the Company’s financial statements.


In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend.  This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis.  The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.  


In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis.  This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.  The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.  





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In October 2009, FASB issued an amendment to the accounting standards related to the accounting for revenue in arrangements with multiple deliverables including how the arrangement consideration is allocated among delivered and undelivered items of the arrangement. Among the amendments, this standard eliminated the use of the residual method for allocating arrangement considerations and requires an entity to allocate the overall consideration to each deliverable based on an estimated selling price of each individual deliverable in the arrangement in the absence of having vendor-specific objective evidence or other third party evidence of fair value of the undelivered items. This standard also provides further guidance on how to determine a separate unit of accounting in a multiple-deliverable revenue arrangement and expands the disclosure requirements about the judgments made in applying the estimated selling price method and how those judgments affect the timing or amount of revenue recognition. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.


In October 2009, the FASB issued an amendment to the accounting standards related to certain revenue arrangements that include software elements. This standard clarifies the existing accounting guidance such that tangible products that contain both software and non-software components that function together to deliver the product’s essential functionality, shall be excluded from the scope of the software revenue recognition accounting standards. Accordingly, sales of these products may fall within the scope of other revenue recognition standards or may now be within the scope of this standard and may require an allocation of the arrangement consideration for each element of the arrangement. This standard, for which the Company is currently assessing the impact, will become effective on January 1, 2011.


In June 2009, the FASB issued guidance now codified as FASB ASC Topic 105, Generally Accepted Accounting Principles, as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP, aside from those issued by the SEC. ASC 105 does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all authoritative literature related to a particular topic in one place. The adoption of ASC 105 did not have a material impact on the Company’s consolidated financial statements, but did eliminate all references to pre-codification standards.


In May 2009, FASB issued ASC 855, Subsequent Events, which establishes general standards of for the evaluation, recognition and disclosure of events and transactions that occur after the balance sheet date. Although there is new terminology, the standard is based on the same principles as those that currently exist in the auditing standards. The standard, which includes a new required disclosure of the date through which an entity has evaluated subsequent events, is effective for interim or annual periods ending after June 15, 2009. The adoption of ASC 855-10 did not have a material effect on the Company’s consolidated financial statements. Refer to Note 5.


The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.


ITEM 4. CONTROLS AND PROCEDURES


Disclosure Controls and Procedures


We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.





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We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2010. Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of December 31, 2010, due to the material weaknesses resulting from not having an Audit Committee or a financial expert on our Board of Directors and our failure to maintain appropriate cash controls.


Management's Report on Internal Control over Financial Reporting


Our management is responsible for establishing and maintaining adequate control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2010, our internal control over financial reporting is not effective based on these criteria, due to material weaknesses resulting from not having an Audit Committee or financial expert on our Board of Directors and our failure to maintain appropriate cash controls.  


Changes in Internal Controls over Financial Reporting

 

Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.


The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.


PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS.


We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.


ITEM 1A. RISK FACTORS.


We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.


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


1.

Quarterly Issuances:


During the quarter, we did not issue any unregistered securities other than as previously disclosed.


2.

Subsequent Issuances:


Subsequent to the quarter, we did not issue any unregistered securities other than as previously disclosed.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES.


None.


ITEM 4. [REMOVED AND RESERVED].


ITEM 5. OTHER INFORMATION.

 

None




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ITEM 6. EXHIBITS


The following exhibits are filed with this Quarterly Report on Form 10-Q:


Exhibit Number

Description of Exhibit

Filing

3.1

Articles of Incorporation

Filed with the SEC on September 18, 2009 as part of our Registration Statement on Form S-1.

3.2

Bylaws

Filed with the SEC on September 18, 2009 as part of our Registration Statement on Form S-1.

10.1

Form of Subscription Agreement

Filed with the SEC on September 18, 2009 as part of our Registration Statement on Form S-1.

10.2

Convertible Promissory Note issued to Blue Lagoon Capital dated June 25, 2009

Filed with the SEC on September 18, 2009 as part of our Registration Statement on Form S-1.

10.3

Management Agreement between Sunpeaks Ventures, Inc. and Scott Beaudette

Filed with the SEC on December 30, 2009 as part of our Registration Statement on Form S-1/A.

10.4

Lease Agreement between Nitro Petroleum, Inc. and Sunpeaks Ventures dated November 21, 2008

Filed with the SEC on May 5, 2010 as part of our Registration Statement on Form S-1/A.

31.01

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14

Filed herewith.

32.01

CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act

Filed herewith.

 

 

 






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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.


SUNPEAKS VENTURES, INC.



Dated: February 2, 2011

By:

/s/ Scott Beaudette         

Scott Beaudette

Chief Executive Officer, Chief Financial Officer, President, Secretary and Treasurer




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