SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-KSB





Annual
Report Under Section 13 or 15(d) of


the
Securities Exchange Act of 1934





For the
Fiscal Year Ended: June 30,
2008





Commission
File No. 000-52997





Great Spirits,
Inc.


(Exact
Name of Small Business Issuer as specified in its charter)





Colorado
            0-5572519(State
      or other jurisdiction
            IRS
      Employer File Number)of
      incorporation)215
      N. Washington StreetMonte
      Vista, Colorado
            81144(Address
      of principal executive offices)
            (zip
      code)





(719)
849-8162


(Registrant's
telephone number, including area code)





Securities
to be Registered Pursuant to Section 12(b) of the Act: None





Securities
to be Registered Pursuant to Section 12(g) of the Act:





Common
Stock, $.0.001 per share par value





Check
whether issuer is not required to file reports pursuant to Section 13 or 15(d)
of the Exchange Act [ ]





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: [ ]





Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB.
[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].





Registrant's
revenues for its most recent fiscal year were $-0-. State the aggregate market
value of the voting stock held by nonaffiliates computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within the past 60 days: $-0-.  The
number of shares outstanding of the Registrant's common stock, as of the latest
practicable date, August 1, 2008, was 8,248,020.











FORM
10-KSB


Great
Spirits, Inc.


INDEX


PagePART
      IItem
      1. Description of Business
              3Item
      2. Description of Property
              10Item
      3. Legal Proceedings
              10Item
      4. Submission of Matters to a Vote of Security Holders
              10PART
      IIItem
      5. Market for Common Equity, Related Stockholder Mattersand
      Issuer Purchases of Equity Securities
              10Item
      6. Management's Discussion and Analysis of FinancialCondition
      and Results of Operations
              12Item
      7. Financial Statements
              17Item
      8. Changes in and Disagreements with Accountants onAccounting
      and Financial Disclosures
              28Item
      8A. Controls and Procedures
              28Item
      8B. Other Information
              29PART
      IIIItem
      9. Directors, Executive Officers, Promoters and ControlPersons;
      Compliance with Section 16(a) of the Exchange
              29ActItem
      10. Executive Compensation
              30Item
      11. Security Ownership of Certain Beneficial Owners andManagement
              31Item
      12. Certain Relationships and Related Transactions
              31Item
      13. Exhibits and Reports on Form 8-K
              31Item
      14. Principal Accountant Fees and Services
              32Signatures
              33


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2 -








All
references herein to “we,” “us,” and “our,” refer to Great Spirits, Inc., a
Colorado corporation and its wholly-owned subsidiary, Rocky Mountain
Distilleries, Inc. Except as we might otherwise specifically indicate, all
references us include our subsidiary.





Forward-Looking
Statements




The
following discussion contains forward-looking statements regarding us, our
business, prospects and results of operations that are subject to certain risksand uncertainties posed by many factors and events that could cause our
actual business, prospects and results of operations to differ materially from
those that may be anticipated by such forward-looking statements. Factors that
may affect such forward-looking statements include, without limitation: our
ability to successfully develop new products and services for new markets; the
impact of competition on our revenues, changes in law or regulatory requirements
that adversely affect or preclude clients from using us for certain
applications; delays our introduction of new products or services; and our
failure to keep pace with our competitors.






When used in this
discussion, words such as "believes", "anticipates", "expects", "intends" and
similar expressions are intended to identify forward-looking statements, but are
not the exclusive means of identifying forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this report. We undertake no obligation to revise
any forward-looking statements in order to reflect events or circumstances that
may subsequently arise. Readers are urged to carefully review and consider the
various disclosures made by us in this report and other reports filed with the
Securities and Exchange Commission that attempt to advise interested parties of
the risks and factors that may affect our business.








PART
I





Item
1. DESCRIPTION OF BUSINESS.








(a) 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
are recently formed, have no operating history, have never been profitable, and
may never be profitable.





We were
formed as a Colorado business entity in August, 2007. Our wholly-owned
subsidiary was formed in September, 2005. At the present time, we are a
development stage company which is only minimally capitalized, has not engaged
in any substantial business activity, and has no successful operating
history. There can be no guarantee that we will ever be
profitable. From our inception on September 26, 2005 through June 30, 2008,
we have generated no revenue. From our inception on September 26, 2005 through
June 30, 2008 we had a net loss of $34,857.





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3 -











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, 2008, 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 Ms. Hyde, our President. In the event that we need additional
capital, Ms. Hyde has agreed to loan such funds as may be necessary through
December 31, 2008 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 no operating history, we are inherently a risky
investment.





We have
no operating history. Because we are a company with no 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.





-
4 -











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.





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 Ms. Hyde. We have not
obtained key man life insurance on the lives of any of our officers or
directors.





-
5 -








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





There has
been, and continues to be, no public market for our common stock. 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:





*    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  August 1, 2008, 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.





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6 -








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.





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.




(b)
NARRATIVE DESCRIPTION OF THE BUSINESS





General
Information.




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 which will be 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 215 N. Washington Street, Monte Vista, Colorado 81144Our telephone number is
(719) 849-8162.





Organization.





As of
June 30, 2008, we are comprised of one corporation with one wholly-owned
subsidiary, Rocky Mountain Distilleries, Inc., which was incorporated in
September, 2005 and which will be the actual operating company. All of our
operations will be conducted through Rocky Mountain Distilleries,
Inc.








-
7 -





(c)
PROPOSED OPERATIONS





Overview
of our Operations.




Our
principal effort at this point will be to develop a market for our
premium-priced vodka. We see our niche as being in the premium-priced potato
vodka business, as opposed to the distilled grain spirits market in general. No
single company currently dominates the premium-priced vodka
business.





We plan
to begin our operations by marketing potato vodka which has been distilled for
us by third party contractors. Eventually, we plan to construct a distillery in
Monte Vista, Colorado and to distill and market a premium-priced potato vodka
produced at the distillery. Our initial marketing focus will be nationwide. We
plan to sell its product directly to the public through distributors of
alcoholic beverages.





At the
present time, we have limited active operations. Through our subsidiary, we have
always been in the development phase. These operations consist of developing the
vodka formula and labeling and acquiring the distillery property. We plan to
finance the distillery through a real estate loan on the property guaranteed by
our principal officers.





We are
not yet marketing any product. When the vodka has been produced, we expect to
utilize the expertise and existing business relationships of our principal
officers to develop our opportunities. Operational decisions will be made
solely by our management. Our management has had limited experience in the
distilled spirits business.





It should
also be noted, however, that we do not have any history of operations. To
the extent that management is unsuccessful in keeping expenses in line with
income, failure to effect the events and goals listed herein would result in a
general failure of the business. This would cause management to consider
liquidation or merger.





Industry
Overview.




We see
our principal competitors as all other premium vodka producers. The distilled
spirits business is a large market. However, we seek to develop a niche in the
premium vodka segment. We believe that this niche is substantial enough a new
product such as ours. There are a number of companies which market premium
vodka, but no single company dominates. There are recognized brand names such as
Absolut, Grey Goose, Stolichnaya, and Kettle One. However, consumer tastes are
very dynamic and subject to sudden change. In any event, almost all of the
companies in this industry have greater resources and expertise than we do. Our
principal effort at this point will be to develop a market for our
premium-priced vodka.





(d)
MARKETING AND PROMOTION





Our initial
marketing plan is to focus completely on developing a market niche. To that end,
we plan to develop a marketing program to differentiate ourselves from our
competitors’ products. The target market is anticipated to be professional and
wealthy males and females, twenty-five to seventy years old. We plan to
markets its product directly to the public through sales to liquor distributors.
We plan to utilize the expertise of our principal officers to develop our
business. Each individual will utilize previous contacts in business to develop
potential opportunities. As of the date of this prospectus, we have not yet
begun or marketing activity.





(e) RAW
MATERIALS





The use
of raw materials is not a material factor in our operations at the present time.
The use of raw materials may become a material factor in the future as we
develop operations.





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8 -







(f)
COMPETITION





We see
our principal competitors as all other premium vodka
producers.  All of our competitors are larger than us and have
substantially greater financial, marketing and other resources than we do. Our
business is highly competi­tive. We will be competing with numerous
established companies having substantially greater financial resources and
experience than we do. There can be no guarantee that we will ever be able
to compete successfully.





(g)
BACKLOG





At June
30, 2008, we had no backlogs.





(h)
EMPLOYEES





We have
one full-time employee: Ms. Hyde, our President. Ms. Hyde does not draw a salary
or receive any other kind of compensation. However, we reimburse our employee
for all necessary and customary business related expenses.  We have no
plans or agreements which provide health care, insurance or compensation on the
event of termination of employment or change in our control.  We do
not pay our Directors separately for any Board meeting they attend.





(i)
PROPRIETARY INFORMATION





We do not
currently have any patent or trademark protection for our proposed product but
plan to file for trademark protection.





(j)
GOVERNMENT REGULATION





Our product will be regulated by the Federal
law regarding the production and sale of alcohol. Otherwise, we are not expected
to be subject to material governmental regulation. However, it is our policy to
fully comply with all governmental regulation and regulatory
authorities.





(k)
RESEARCH AND DEVELOPMENT





We have
not incurred any material research and development costs during the twelve
months ended June 30, 2008





(l)
ENVIRONMENTAL COMPLIANCE





We do not
expect environmental laws to have any material impact on us.





(m) HOW
TO OBTAIN OUR SEC FILINGS





We file
annual, quarterly, and special reports, proxy statements, and other information
with the Securities Exchange Commission (SEC). Reports, proxy statements and
other information filed with the SEC can be inspected and copied at the public
reference facilities of the SEC at 100 F Street N.E., Washington, DC 20549. Such
material may also be accessed electronically by means of the SEC's website at
www.sec.gov.





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9 -








Our
investor relations department can be contacted at our principal executive office
located at our principal office, 215 N. Washington Street, Monte Vista, Colorado
81144Our telephone
number is. Our phone number at our headquarters is (719) 849-8162. We currently
have no website.





ITEM
2. DESCRIPTION OF PROPERTY.





We occupy
a total of 19,000 square feet of office and manufacturing space on a rent-free
basis from one of our officers, Mrs. Hyde. This space is considered to be
sufficient for us at the present time. We have no plans to acquire additional
space.





ITEM
3. LEGAL PROCEEDINGS.





We are
not a party to any material legal proceedings, nor is our property the subject
of any material legal proceeding.





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





We held
no shareholders meeting in the fourth quarter of our fiscal year.





PART
II





ITEM
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.





(a)
PRINCIPAL MARKET OR MARKETS





No public market currently exists for shares of our
common stock. We applied to have our common stock listed for quotation on the
Over-the-Counter Bulletin Board. Subsequent to our fiscal year end, in September
2008, we were approved for trading on the Over-the-Counter Bulletin Board under
the trading symbol GSPS.





We have
no outstanding stock optionsor other equity
compensation plans.




(b)
APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK





As of
June 30, 2008, there were 97 record holders of our common stock and there were
8,248,020 shares of our common stock outstanding.





(c)
DIVIDENDS





We have
not previously declared or paid any dividends on our common stock and do not
anticipate declaring any dividends in the foreseeable future. The payment of
dividends on our common stock is within the discretion of our board of
directors. We intend to retain any earnings for use in our operations and the
expansion of our business. Payment of dividends in the future will depend on our
future earnings, future capital needs and our operating and financial condition,
among other factors that our board of directors may deem relevant. We are not
under any contractual restriction as to our present or future ability to pay
dividends.





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10 -





(d) THE
SECURITIES ENFORCEMENT AND PENNY STOCK REFORM ACT OF 1990





The
Securities Enforcement and Penny Stock Reform Act of 1990 requires additional
disclosure and documentation related to the market for penny stock and for
trades in any stock defined as a penny stock. Unless we can acquire substantial
assets and trade at over $5.00 per share on the bid, it is more likely than not
that our securities, for some period of time, would be defined under that Act as
a "penny stock." As a result, those who trade in our securities may be required
to provide additional information related to their fitness to trade our shares.
These requirements present a substantial burden on any person or brokerage firm
who plans to trade our securities and would thereby make it unlikely that any
liquid trading market would ever result in our securities while the provisions
of this Act might be applicable to those securities.





Any
broker-dealer engaged by the purchaser for the purpose of selling his or her
shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities and
Exchange Act. Rather than creating a need to comply with those rules, some
broker-dealers will refuse to attempt to sell penny stock.





The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from those rules, to deliver a standardized risk disclosure
document prepared by the Commission, which:





-
            contains
      a description of the nature and level of risk in the market for penny
      stocks in both public offerings and secondary
  trading;





-
            contains
      a description of the broker's or dealer's duties to the customer and of
      the rights and remedies available to the customer with respect to a
      violation to such duties or other requirements of the Securities Act of
      1934, as amended;





-
            contains
      a brief, clear, narrative description of a dealer market, including "bid"
      and "ask" prices for penny stocks and the significance of the spread
      between the bid and ask price;





-
            contains
      a toll-free telephone number for inquiries on disciplinary
      actions;





-
            defines
      significant terms in the disclosure document or in the conduct of trading
      penny stocks; and





-
            contains
      such other information and is in such form (including language, type, size
      and format) as the Securities and Exchange Commission shall require by
      rule or regulation;





The
broker-dealer also must provide, prior to effecting any transaction in a penny
stock, to the customer:





-
            the
      bid and offer quotations for the penny
stock;





-
            the
      compensation of the broker-dealer and its salesperson in the
      transaction;





-
            the
      number of shares to which such bid and ask prices apply, or other
      comparable information relating to the depth and liquidity of the market
      for such stock; and





-
            monthly
      account statements showing the market value of each penny stock held in
      the customer's account.





In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability
statement.





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11 -








These
disclosure requirements will have the effect of reducing the trading activity in
the secondary market for our stock because it will be subject to these penny
stock rules. Therefore, stockholders may have difficulty selling their
securities.





ITEM
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





This
Management’s Discussion and Analysis or Plan of Operation contains
forward-looking statements that involve future events, our future performance
and our expected future operations and actions. In some cases, you can identify
forward-looking statements by the use of words such as “may”, “will”, “should”,
“anticipate”, “believe”, “expect”, “plan”, “future”, “intend”, “could”,
“estimate”, “predict”, “hope”, “potential”, “continue”, or the negative of these
terms or other similar expressions. These forward-looking statements are only
our predictions and involve numerous assumptions, risks and uncertainties. Our
actual results or actions may differ materially from these forward-looking
statements for many reasons, including, but not limited to, the matters
discussed in this report under the caption “Risk Factors”. We urge you not to
place undue reliance on these forward-looking statements, which speak only as of
the date of this prospectus. We undertake no obligation to publicly update any
forward-looking statements, whether as a result of new information, future
events, or otherwise.





The
following discussion of our financial condition and results of operations should
be read in conjunction with our financial statements and the related notes
included in this report.





Results
of Operations.





From our
inception on September 26, 2005 through June 30, 2008, we generated no revenue
and, therefore, had no cost of goods sold or gross profit. In addition, we have
a history of losses. We had a net loss of $34,857 for this
period.





As of
June 30, 2008, our accountants have expressed doubt about our ability to
continue as a going concern as a result of our history of net loss. Our ability
to achieve and maintain profitability and positive cash flow is dependent upon
our ability to successfully distill and market our premium-priced potato vodka
and our ability to generate revenues.





Operating
expenses, which consisted solely of general and administrative expenses, for the
period from September 26, 2005 through June 30, 2008 were $34,857. Operating
expenses for the period from ended June 30, 2007 were $21,576. Operating
expenses for the period ended June 30, 2008 were $13,281. The major components
of general and administrative expenses include accounting, consulting and stock
transfer fees.





As a
result of the foregoing, we had a net loss of $34,857 for the period from
September 26, 2005 through June 30, 2008. We had a net loss for the period from
ended June 30, 2008 of $21,576. We had a net loss for the period ended June 30,
2007 of $13,281. We currently have no revenue but continue to develop our plan
to market vodka through a third party contractor.





Because
we do not pay salaries, and our major professional fees have been paid for the
year, operating expenses are expected to remain fairly constant. In the next
twelve 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.





-
12 -








To try to
operate at a break-even level based upon our current level of proposed business
activity, we believe that we must generate approximately $50,000 in revenue per
year. However, if our forecasts are inaccurate, we will need to raise additional
funds. In the event that we need additional capital, Ms. Hyde has agreed to loan
such funds as may be necessary through December 31, 2008 for working capital
purposes.




On the
other hand, we may choose to scale back our operations to operate at break-even
with a smaller level of business activity, while adjusting our overhead to meet
the revenue from current operations. In addition, we expect that we will need to
raise additional funds if we decide to pursue more rapid expansion, the
development of new or enhanced products, appropriate responses to competitive
pressures, or the acquisition of complementary businesses or technologies, or if
we must respond to unanticipated events that require us to make additional
investments. We cannot assure that additional financing will be available when
needed on favorable terms, or at all.





We expect
to incur operating losses in future periods because we will be incurring
expenses and 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 or
additional financing when needed could cause us to go out of
business.





Liquidity
and Capital Resources.





As of
June 30, 2008, we had cash or cash equivalents of $9,130.





Net cash
used for operating activities was $25,120 from our inception on September 26,
2005 through June 30, 2008. Net cash used for operating activities was $23,974
for the period ended June 30, 2008. Net cash used for operating activities was
$1,146 for the period ended June 30, 2007.





Cash
flows used for investing activities were $65 from our inception on September 26,
2005 through June 30, 2008 and for the period ended June 30, 2008. Cash flows
used for investing activities were $-0- for the period ended June 30,
2007.





Cash
flows provided by financing activities were $34,185 from our inception on
September 26, 2005 through June 30, 2008.  Net cash used for financing
activities was $566 for the period ended June 30, 2008. Net cash provided by
financing activities was $34,751 for the period ended June 30, 2007. These cash
flows were all related to sales of stock and deferred offering
costs.




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 six 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, Ms. Hyde has agreed
to loan such funds as may be necessary through December 31, 2008 for working
capital purposes.





-
13 -








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
no off-balance sheet arrangements with any party.





Plan
of Operation.





At the
present time, we have no cash flow. However, we will adjust our expenses as
necessary to prevent cash flow or liquidity problems. We are not presently in
default or breach on any indebtedness. At the present time, we have no trade
payables or judgments.





Currently,
we are in the development stage and have not begun active operations. In the
next six 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.





Once
we develop a relationship with a contract distiller to begin distilling our
potato vodka, we will begin marketing our vodka through liquor distributors. We
have not identified any specific distributors at this time, but do not believe
that there will be a substantial cost involved in the relationship with the
distributors. Our principal cost will be marketing our product. At this point,
we do not know the scope of our potential marketing costs but will use our
existing resources to market our product. Our resources consist of our available
cash and advances from Ms. Hyde, who has agreed to loan such funds as may be
necessary through December 31, 2008 for working capital purposes.




We
believe that once we begin generating revenues, we can become profitable within
one year, given sufficient sales. We believe that the timing of the completion
of the milestones needed to become profitable can be achieved as we are
presently organized with sufficient business.





Other
than the shares offered by our last offering and advances from Ms. Hyde, no
other source of capital has been identified or sought.




-
14 -





If we are
not successful in our proposed operations we will be faced with several
options:





1.
            Cease
      operations and go out of business;





2.
            Continue
      to seek alternative and acceptable sources of
  capital;





3.
            Bring
      in additional capital that may result in a change of control;
      or





4.
            Identify
      a candidate for acquisition that seeks access to the public marketplace
      and its financing sources.





Currently,
we believe that we have sufficient capital or access to capital to implement our
proposed business operations or to sustain them for the next twelve months. In
the event that we need additional capital, Ms. Hyde has agreed to loan such
funds as may be necessary through December 31, 2008 for working capital
purposes.





If we can
sustain profitability, we could operate at our present level
indefinitely.





To date,
we have never had any discussions with any possible acquisition candidate nor
have we any intention of doing so.





Proposed
Milestones to Implement Business Operations




At the
present time, we are located in one location in Monte Vista, Colorado. To try to
operate at a break-even level based upon our level of proposed business
activity, we believe that we must generate approximately $50,000 in revenue per
year. However, if our forecasts are inaccurate, we may need to raise additional
funds. In the event that we need additional capital, Ms. Hyde has agreed to loan
such funds as may be necessary through December 31, 2008 for working capital
purposes.





The
results of our operations will depend, among other things, upon our ability to
successfully distill and market a premium priced vodka product to the public.
Further, there is the possibility that our proposed 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. Our operations may be affected by many factors, some of
which are beyond our control.  The principal factors are the state of
the general economy and changing consumer tastes. Any of these problems, or a
combination thereof, could have a materially adverse 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.





Eventually
we plan to establish its distillery, to distill premium priced potato vodka, and
to market this product on a nationwide basis. All sales would be made our
distillery, which will be located at our principal office in Monte Vista,
Colorado.





We have
not yet built the distillery and are not marketing its product. When the vodka
has been produced, we expect to utilize the expertise and existing business
relationships of our principal officers to develop our opportunities.
Operational decisions will be made solely by our management. However, our
management has had limited experience in the distilled spirits
business.





It should
be noted that we do not have any history of operations and have not yet
generat­ed revenues. We are in the process of developing operations.
During the first six months of 2008 we plan to finalize a contract with a third
party distiller and to begin advertising in various media. During this period,
we also plan to develop a web site for additional sales and promotions. To the
extent that management is unsuccessful in keeping expenses in line with income,
failure to affect the events and goals listed herein would result in a general
failure of the business. This would cause management to consider liquidation or
merger. We have no plans for any type of business combination.







-
15 -








We
believe that we can be profitable or at break even at the end of the current
fiscal year, assuming sufficient sales. Based upon our current plans, we have
adjusted our operating expenses so that cash generated from operations and from
working capital financing is expected to be sufficient for the foreseeable
future to fund our operations at our currently forecasted levels. To try to
operate at a break-even level based upon our current level of anticipated
business activity, we believe that we must generate approximately $50,000 in
revenue per year. However, if our forecasts are inaccurate, we will need to
raise additional funds. In the event that we need additional capital, Ms. Hyde
has agreed to loan such funds as may be necessary through December 31, 2008 for
working capital purposes.





On the
other hand, if we are not successful in our plan, we may choose to scale back
our operations to operate at break-even with a smaller level of business
activity, while adjusting our overhead to meet the revenue from current
operations. In addition, we expect that we will need to raise additional funds
if we decide to pursue more rapid expansion, the development of new or enhanced
products, appropriate responses to competitive pressures, or the acquisition of
complementary businesses or technologies, or if we must respond to unanticipated
events that require us to make additional investments. We cannot assure that
additional financing will be available when needed on favorable terms, or at
all.





We expect
to incur operating losses in future periods because we will be incurring
expenses and 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 or
additional financing when needed could cause us to go out of
business.





In the
event that we need additional capital, Ms. Hyde has agreed to loan such funds as
may be necessary through December 31, 2008 for working capital purposes.
Otherwise, no commitments to provide additional funds have been made by
management or current shareholders. There is no assurance that additional funds
will be made available to us on terms that will be acceptable, or at all, if and
when needed. We expect to continue to generate and increase sales, but there can
be no assurance we will generate sales sufficient to continue operations or to
expand.





In
the next 12 months, we do not intend to spend any material funds on research and
development and do not intend to purchase any large equipment.





Recently
Issued Accounting Pronouncements.





We do not
expect the adoption of any recently issued accounting pronouncements to have a
significant impact on our net results of operations, financial position, or cash
flows.





Seasonality.





We do not
expect our sales to be impacted by seasonal demands for our products and
services.





-
16 -





ITEM
7. FINANCIAL STATEMENTS.














Great
Spirits, Inc.


(A
Development Stage Company)





CONSOLIDATED
COMPARATIVE FINANCIAL STATEMENTS





With
Independent Accountant’s Audit Report





The Year
Ended June 30, 2008 and 2007


and


the
Period September 26, 2005 (Inception) Through June 30, 2008










-
17 -











TABLE
OF CONTENTS





PageIndependent
      Accountant’s Audit Report
            19Consolidated
      Comparative Balance Sheet
            20Consolidated
      Comparative Statement of Operations
            21Consolidated
      Comparative Statement of Cash Flows
            22Consolidated
      Statement of Shareholders’ Equity
            23Notes
      to Consolidated Financial Statements
            24





-
18 -








RONALD R.
CHADWICK, P.C.


Certified
Public Accountant


2851
South Parker Road, Suite 720


Aurora,
Colorado  80014


Telephone
(303)306-1967


Fax
(303)306-1944








REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








Board of
Directors


Great
Spirits, Inc.


Monte
Vista, Colorado





I have
audited the accompanying consolidated balance sheet of Great Spirits, Inc. (a
development stage company) as of June 30, 2008 and 2007, and the related
consolidated statements of operations, stockholders’ equity and cash flows for
the years then ended and for the period from September 26, 2005 (inception)
through June 30, 2008. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.





I
conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  I believe that my audit provides a
reasonable basis for my opinion.





In my
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Great Spirits,
Inc. as of June 30, 2008 and 2007, and the related consolidated statements of
operations, stockholders’ equity and cash flows for the years then ended and for
the period from September 26, 2005 (inception) through June 30, 2008 in
conformity with accounting principles generally accepted in the United States of
America.





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
financial statements the Company has suffered losses from operations that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.





Aurora,
Colorado                                                                                                           /s/Ronald R. Chadwick,
P.C.


September15,
2008                                                                                                           RONALD
R. CHADWICK, P.C.





1





-
19 -








Great
      Spirits, Inc.(A
      Development Stage Company)Consolidated
      Comparative Balance SheetsASSETSJune
      30,
            
            
            June
      30,2008
            
            
            2007Current
      Assets- Cash
            
            $
            9,130
            
            
            $
            33,605TOTAL
      ASSETS
            
            $
            9,130
            
            
            $
            33,605LIABILITIES
      AND SHAREHOLDERS' EQUITY (DEFICIT)LIABILITIESAccounts
      payable
            
            $
            2,237
            
            
            $
            4,635Advances
      from officer
            
            
            65
            
            
            
            0Total
      current liabilities
            
            
            2,302
            
            
            
            4,635TOTAL
      LIABILITIES
            
            $
            2,302
            
            
            $
            4,635SHAREHOLDERS'
      EQUITYPreferred
      stock, par value $.10 per share;  Authorized1,000,000
      shares; issued and outstanding -0- shares.
            
            
            -Common
      Stock, par value $.001 per share;  Authorized50,000,000
      shares; issued and outstanding 8,248,020 and8,248,020
      respectively
            
            
            8,248
            
            
            
            8,248Capital
      paid in excess of par value
            
            
            33,437
            
            
            
            34,003Deficit
      accumulated during development stage
            
            
            (34,857
            )
            
            
            (13,281
            )TOTAL
      SHAREHOLDERS' EQUITY
            
            
            6,828
            
            
            
            28,970TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
            
            $
            9,130
            
            
            $
            33,605




The
accompanying notes are an integral part of these consolidated financial
statements.





-
20 -








Great
      Spirits, Inc.(A
      Development Stage Company)Consolidated
      Comparative Statements of OperationsSeptember
      26,Year
            
            
            Year
            
            
            2005
      Inceptionended
            
            
            ended
            
            
            throughJune
      30,
            
            
            June
      30,
            
            
            June
      30,2008
            
            
            2007
            
            
            2008Revenue
            
            $
            -
            
            
            $
            -
            
            
            $
            -General
      and adminstrative expensesAccounting
            
            
            7,000
            
            
            
            -
            
            
            
            7,000Bank
      charges
            
            
            27
            
            
            
            -
            
            
            
            27Consulting
            
            
            2,000
            
            
            
            7,500
            
            
            
            9,500Legal
            
            
            7,500
            
            
            
            
            
            
            
            7,500Licensing
            
            
            29
            
            
            
            346
            
            
            
            375Office
            
            
            4,450
            
            
            
            -
            
            
            
            4,450Research
      & development
            
            
            -
            
            
            
            800
            
            
            
            800Stock
      transfer fees
            
            
            570
            
            
            
            4,635
            
            
            
            5,205Total
      General and administrative expenses
            
            
            21,576
            
            
            
            13,281
            
            
            
            34,857Net
    (Loss)
            
            
            (21,576
            )
            
            
            (13,281
            )
            
            
            (34,857
            )Basic
      (Loss) Per Share
            
            
            (0.00
            )
            
            
            (0.00
            )
            
            
            (0.00
            )Weighted
      Average Common SharesOutstanding
            
            
            8,248,020
            
            
            
            8,066,347
            
            
            
            8,248,020




The
accompanying notes are an integral part of these consolidated financial
statements.





-
21 -











Great
      Spirits, Inc.(A
      Development Stage Company)Consolidated
      Comparative Statements of Cash FlowsSeptember
      26,Year
            
            
            Year
            
            
            2005
      Inceptionended
            
            
            ended
            
            
            throughJune
      30,
            
            
            June
      30,
            
            
            June
      30,2008
            
            
            2007
            
            
            2008Net
      (Loss)
            
            $
            (21,576
            )
            
            $
            (13,281
            )
            
            $
            (34,857
            )Adjustments
      to reconcile decrease in net assets to net cashprovided
      by operating activities:Stock
      issued for services
            
            
            -
            
            
            
            7,500
            
            
            
            7,500Increase
      in accounts payable
            
            
            (2,398
            )
            
            
            4,635
            
            
            
            2,237Net
      cash (used) in operation activities
            
            
            (23,974
            )
            
            
            (1,146
            )
            
            
            (25,120
            )Cash
      flows from investing activities:Advances
      received from officer
            
            
            65
            
            
            
            1,000
            
            
            
            1,065Advances
      paid to officer
            
            
            -
            
            
            
            (1,000
            )
            
            
            (1,000
            )Net
      cash (used) in investing activities
            
            
            65
            
            
            
            -
            
            
            
            65Cash
      flows from financing activities:Issuance
      of common stock
            
            
            -
            
            
            
            45,251
            
            
            
            45,251Deferred
      offering costs
            
            
            (566
            )
            
            
            (10,500
            )
            
            
            (11,066
            )Net
      cash provided from financing activities
            
            
            (566
            )
            
            
            34,751
            
            
            
            34,185Net
      increase in cash
            
            
            (24,475
            )
            
            
            33,605
            
            
            
            9,130Cash
      at beginning of period
            
            
            33,605
            
            
            
            -
            
            
            
            -Cash
      at end of period
            
            $
            9,130
            
            
            $
            33,605
            
            
            $
            9,130Supplemental
      disclosure information:Stock
      issued for services
            
            $
            -
            
            
            $
            7,500
            
            
            $
            7,500Cash
      paid for:Interest
            
            $
            -
            
            
            $
            -
            
            
            $
            -Income
      taxes
            
            $
            -
            
            
            $
            -
            
            
            $
            -




The
accompanying notes are an integral part of these consolidated financial
statements.





-
22 -








Great
      Spirits, Inc.(A
      Development Stage Company)Consolidated
      Statements of Shareholders' EquityNumber
      Of
            
            
            
            
            
            Capital
      Paid
            
            
            RetainedCommon
            
            
            Common
            
            
            in
      Excess
            
            
            EarningsShares Issued (1)
            
            
            Stock
            
            
            of Par Value
            
            
            (Deficit)
            
            
            TotalBalance
      at September 26, 2005 (Inception)
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Net
      Income (Loss)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Balance
      at June 30, 2006
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -July
      1, 2006 issued 7,500,000shares
      of par value $.001 common stockto
      founders for services
            
            
            7,500,000
            
            
            
            7,500
            
            
            
            -
            
            
            
            
            
            
            
            7,500September
      1, 2006 issued 500,000shares
      of par value $.001 common stockfor
      cash of $500 or $.001 per share
            
            
            500,000
            
            
            
            500
            
            
            
            -
            
            
            
            
            
            
            
            500November
      10, 2006 issued 20,000shares
      of par value $.001 common stockfor
      cash of $3,000 or $.15 per share
            
            
            20,000
            
            
            
            20
            
            
            
            2,980
            
            
            
            
            
            
            
            3,000November
      24, 2006 issued 6,670shares
      of par value $.001 common stockfor
      cash of $1,000.50 or $.15 per share
            
            
            6,670
            
            
            
            7
            
            
            
            994
            
            
            
            
            
            
            
            1,001December
      11, 2006 issued 13,340shares
      of par value $.001 common stockfor
      cash of $2,001 or $.15 per share
            
            
            13,340
            
            
            
            13
            
            
            
            1,988
            
            
            
            
            
            
            
            2,001December11,
      2006 issued 13,670shares
      of par value $.001 common stockfor
      cash of $2,050 or $.15 per share
            
            
            13,670
            
            
            
            14
            
            
            
            2,036
            
            
            
            
            
            
            
            2,050January
      3, 2007 issued 13,340shares
      of par value $.001 common stockfor
      cash of $2,001 or $.15 per share
            
            
            13,340
            
            
            
            13
            
            
            
            1,988
            
            
            
            
            
            
            
            2,001June
      18, 2007 issued 147,000shares
      of par value $.001 common stockfor
      cash of $36,750 or $.25 per share
            
            
            147,000
            
            
            
            147
            
            
            
            36,603
            
            
            
            
            
            
            
            36,750Deferred
      offering costs
            
            
            -
            
            
            
            -
            
            
            
            (21,052
            )
            
            
            
            
            
            
            (21,052
            )June
      24, 2007 issued 34,000shares
      of par value $.001 common stockfor
      cash of $8,500 or $.25 per share
            
            
            34,000
            
            
            
            34
            
            
            
            8,466
            
            
            
            
            
            
            
            8,500Net
      (Loss)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (13,281
            )
            
            
            (13,281
            )Balance
      at June 30, 2007
            
            
            8,248,020
            
            
            $
            8,248
            
            
            $
            34,003
            
            
            $
            (13,281
            )
            
            $
            28,970Deferred
      offering costs
            
            
            
            
            
            
            
            
            
            
            (566
            )
            
            
            
            
            
            
            (566
            )Net
      (Loss)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (21,576
            )
            
            
            (21,576
            )Balance
      at June 30, 2008
            
            
            8,248,020
            
            
            $
            8,248
            
            
            $
            33,437
            
            
            $
            (34,857
            )
            
            $
            6,828______________________________
              (1)As restated for a
      75,000 for 1 recapitalization on September 1, 2006








The
accompanying notes are an integral part of these consolidated financial
statements.





-
23 -







Great
Spirits, Inc.


(A
Development Stage Company)


Notes to
Consolidated Comparative Financial Statements


The Year
Ended June 30, 2008 and 2007and


the
Period September 26, 2005 (Inception) Through June 30, 2008








Note 1 - Organization and
Summary of Significant Accounting Policies





ORGANIZATION


Great
Spirits, Inc. (the “Company”), was incorporated as a holding company 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.





Rocky
Mountain Distilleries, Inc. is a wholly-owned subsidiary of the Company. It was
incorporated as a Colorado corporation on September 26, 2005 to act as a vodka
producer and marketer. The Company may also engage in any business that is
permitted by law, as designated by the board of directors of the
Company.





On
September 1, 2006, in an acquisition classified as a transaction between parties
under common control, Great Spirits, Inc. acquired all the outstanding common
shares of Rocky Mountain Distilleries, Inc. (7,500,000 shares of Great Spirits,
Inc common shares were issued for 100 common shares of Rocky Mountain
Distilleries, Inc.), making Rocky Mountain Distilleries, Inc. a wholly owned
subsidiary of Great Spirits, Inc. Financial activity of the Company up to August
31, 2006 as represented in the financial statements is that of Rocky Mountain
Distilleries, Inc., as Great Spirits, Inc. had no activity. The results of
operations of Rocky Mountain Distilleries, Inc., and Great Spirits, Inc. have
been consolidated from August 31, 2006 forward.







PRINCIPLES
OF CONSOLIDATION





The
accompanying consolidated financial statements include the accounts of Eagle
Bend Holding Company and its wholly owned subsidiary. All intercompany accounts
and transactions have been eliminated in consolidation.





DEVELOPMENT
STAGE


The
Company is currently in the developmental stage and has no significant
operations to date.





USE
OF ESTIMATES


The
preparation of financial statements in conformity with generally accepted
accounting principles 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.  Actual results could differ from those
estimates.








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24 -





Great
Spirits, Inc.


(A
Development Stage Company)


Notes to
Consolidated Comparative Financial Statements


The Year
Ended June 30, 2008 and 2007and


the
Period September 26, 2005 (Inception) Through June 30, 2008








Note 1 - Organization and
Summary of Significant Accounting Policies (continued)





STATEMENT
OF CASH FLOWS


For
purposes of the statement of cash flows, the Company considered demand deposits
and highly liquid-debt instruments purchased with maturity of three months or
less to be cash equivalents. Cash paid for interest during the period was
$0.  Cash paid for income taxes during the period was $0.





BASIC
EARNINGS PER SHARE


The basic
earnings (loss) per common share are computed by dividing the net income (loss)
for the period by the weighted average number of shares outstanding at June 30,
2008 and 2007.





REVENUE
RECOGNITION


The
Company will be producing and marketing vodka. The revenue is recognized when
the product is delivered. As of  June 30, 2008 and 2007 the Company
has had no operations.





Note 2 – Basis of
Presentation





In the
course of its life the Company has had limited operations.  This
raises substantial doubt about the Company’s ability to continue as a going
concern.  Management filed a Limited Offering Registration with the
State of Colorado to acquire capital.  Management believes this will
contribute toward its operations and subsequent profitability.  The
accompanying financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.





Note 3 – Related Party
Events





The
Company currently has an office located at an address maintained by the
President on a rent free basis.





Note 4 – Capital
Stock





The
Company authorized 50,000,000 shares of no par value common
stock.  Through December 31, 2006, the Company issued a total of
8,053,680 shares raising $8,552.





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25 -





Great
Spirits, Inc.


(A
Development Stage Company)


Notes to
Consolidated Comparative Financial Statements


The Year
Ended June 30, 2008 and 2007and


the
Period September 26, 2005 (Inception) Through June 30, 2008








Note 4 – Capital Stock
(continued)





On
September 1, 2006 the Company issued 7,500,000 shares of $.001 par value common
stock for all of the shares of Rocky Mountain Distilleries, Inc. valued at
$7,500 or $.001 per share. The issuance has been reported in the consolidated
statements of shareholders’ equity as a retroactive recapitalization of the
shares issued to the founders of Rocky Mountain Distilleries, Inc. on July 1,
2006.





On
September 1, 2006 the Company issued 500,000 shares of $.001 par value common
stock for $500 or $.001 per share.





On
November 10, 2006 the Company issued 20,000 shares of $.001 par value common
stock for $3,000 or $.15 per share.





On
November 24, 2006 the Company issued 6,670 shares of $.001 par value common
stock for $1,000.50 cash or $.15 per share.





On
December 10, 2006 the Company issued 13,340 shares of $.001 par value common
stock for $2,001 cash or $.15 per share.





On
December 10, 2006 the Company issued 13,670 shares of $.001 par value common
stock for $2,050.50 cash or $.15 per share.





On
January 3, 2007 the Company issued 13,340 shares of $.001 par value common stock
for $2,001.00 cash or $.15 per share.





On June
18, 2007, as part of a private offering, the Company issued 147,000 shares of
$.001 par value common stock for $36,750 cash or $.25 per share.





On June
24, 2007, as part of a private offering, the Company issued 34,000 shares of
$.001 par value common stock for $8,500 cash or $.25 per share.





In
addition the Company incurred deferred offering expenses of $21,688 that
directly reduces the proceeds received from the offering. If the offering had
been unsuccessful these expenses would have been deducted in the period in which
the offering was unsuccessful.








-
26 -





Great
Spirits, Inc.


(A
Development Stage Company)


Notes to
Consolidated Comparative Financial Statements


The Year
Ended June 30, 2008 and 2007and


the
Period September 26, 2005 (Inception) Through June 30, 2008








Note 4 – Capital Stock
(continued)





The
Company authorized 1,000,000 shares of no par value, preferred stock, to have
such preferences as the Directors of the Company may assign from time to time.
No preferred stock is either issued or outstanding as of June 30,
2008.





The
Company has declared no dividends through June 30, 2008.








Note 5 -  Income
Taxes





At June
30, 2008 and 2007, the Company had a tax loss of $(21,576) and $(13,281)
respectively. As of June 30, 2008 and 2007 the Company has fully allowed for
these losses in the valuation allowance. The valuation allowance offset the net
deferred tax asset for which there is no assurance of recovery.





The net
operating loss carry forward will begin to expire in 2027.





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27 -








ITEM 8. DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.





We did
not have any disagreements on accounting and financial disclosures with our
present accounting firm during the reporting period.





ITEM
8A(T). CONTROLS AND PROCEDURES.





Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures





Under the
supervision and with the participation of our principal executive officer and
principal financial officer, we conducted an evaluation of our disclosure
controls and procedures, as such term is defined under Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended (the Exchange
Act).   Accordingly, we concluded that our disclosure controls and
procedures as defined in Rule 13a-15(e) under the Exchange Act were effective as
of June 30, 2008 to ensure that information required to be disclosed in reports
we file or submit under the Exchange Act is recorded, processed, and summarized
and reported within the time periods specified in SEC rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the Act is accumulated and
communicated to the issuer’s management, including its principal executive and
principal financial officers, or persons performing similar functions as
appropriate to allow timely decisions regarding required
disclosure.




Management’s
Annual Report on Internal Control Over Financial Reporting.





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) and 15d-(f) under
the Exchange Act. Our internal control over financial reporting are designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of consolidated financial statements for external purposes
in accordance with U. S. generally accepted accounting principles. Our internal
control over financial reporting includes those policies and procedures
that:




i.
            pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of our
      assets;




ii.
            provide
      reasonable assurance that transactions are recorded as necessary to permit
      the preparation of our  consolidated financial statements
      in  accordance with U. S. generally accepted accounting
      principles, and  that our receipts and expenditures are being made
      only in accordance with  authorizations of our management and
      directors; and




iii.
            provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on the consolidated financial
  statements.





Management
assessed the effectiveness of the Company’s internal control over financial
reporting as of June 30, 2008. In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control-Integrated Framework.





Management
has concluded that our internal control over financial reporting was effective
as June 30, 2008.








-
28 -





Inherent
Limitations Over Internal Controls





Internal
control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of its inherent limitations, including
the possibility of human error and circumvention by collusion or overriding of
controls. Accordingly, even an effective internal control system may not prevent
or detect material misstatements on a timely basis. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions or that the
degree of compliance with the policies or procedures may
deteriorate.




Changes
in Internal Control Over Financial Reporting.





We have
made no change in our internal control over financial reporting during the last
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.





Attestation
Report of the Registered Public Accounting Firm.





This
annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our independent
registered public accounting firm pursuant to temporary rules of the SEC that
permit us to provide only management's report in this annual report on Form
10-KSB.





ITEM
8B. OTHER INFORMATION.





Nothing
to report.








PART
III





ITEM
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.





Our
Director and Executive Officer, her age and positions held with us as of June
30, 2008 are as follows:





Our
director is elected by the stockholders to a term of one year and serves until
his or her successor is elected and qualified. Each of our officers is elected
by the board of directors to a term of one year and serves until his or her
successor is duly elected and qualified, or until he or she is removed from
office.




The name,
address, age and position of our officers and directors is set forth
below:





Name and Address
            Age
            Position(s)Dana
      Hyde
              215
      N. Washington Street
              Monte
      Vista, Colorado 81144
            71
            President,
      Secretary, Treasurer and Director







-
29 -





Background
Information about Our Officers and Directors.




Dana Hyde
has been our President and a Director since our inception and our
Secretary-Treasurer since April, 2008.  She has been involved in this
business since 2005 through Rocky Mountain Distilleries, Inc., our wholly-owned
subsidiary. This has been her principal occupation during this period. She
worked as a Psychotherapist prior to this time. She was in private practice from
1998 to 2005. In addition, she has the following degrees from Trinity
University: Bachelors of Science Degree in Psychology, 1992 (Conferred with
Distinction); Masters of Science Degree in Psychology, 1995; and Doctorate of
Philosophy in Psychology, 1999. Ms. Hyde attended Arlington State College in
1954.





Our
Director will serve in such capacity until the next annual meeting of the
Company's shareholders and until her successors have been elected and qualified.
The officer serves at the discretion of the Company's Director. There are no
arrangements or understandings between any of the directors or officers of the
Company or any other person pursuant to which any officer or director was or is
to be selected as an officer or director.





Committees
of the Board of Directors





There are
no committees of the Board of Directors.





Section 16(a)
Beneficial Ownership Reporting Compliance





Section 16(a)
of the Securities Exchange Act of 1934 (the “34 Act”) requires our officers and
directors and persons owning more than ten percent of the Common Stock, to file
initial reports of ownership and changes in ownership with the Securities and
Exchange Commission (“SEC”). Additionally, Item 405 of Regulation S-B
under the 34 Act requires us to identify in its Form 10-KSB and proxy statement
those individuals for whom one of the above referenced reports was not filed on
a timely basis during the most recent year or prior years. We have nothing to
report in this regard.




Code
of Ethics





Our board
of directors has not adopted a code of ethics but plans to do so in the
future.





Options/SAR
Grants and Fiscal Year End Option Exercises and Values





We have
not had a stock option plan or other similar incentive compensation plan for
officers, directors and employees, and no stock options, restricted stock or SAR
grants were granted or were outstanding at any time.




Compensation
of Directors





Our
directors did not receive nor was she entitled to receive remuneration for the
fiscal year ended June 30, 2008





Item
10. EXECUTIVE COMPENSATION





Our
officer and director do not receive any compensation for her services rendered
to us, nor has she received such compensation in the past.  As of the
date of this registration statement, we have no funds available to pay the
officers and directors.  Further, our officer and director is not
accruing any compensation pursuant to any agreement with us. We have no plans to
pay any compensation to our officer or director in the future.





-
30 -










None
of our officers and directors will receive any finder’s fee, either directly or
indirectly, as a result of their respective efforts to implement our business
plan outlined herein.




No
retirement, pension, profit sharing, stock option or insurance programs or other
similar programs have been adopted by us for the benefit of its
employees.





ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.





The
following sets forth the number of shares of our $.0.001 par value common stock
beneficially owned by (i) each person who, as of June 30, 2008, was known by us
to own beneficially more than five percent (5%) of its common stock; (ii) our
individual Directors and (iii) our Officers and Directors as a group. A total of
8,248,020 common shares were issued and outstanding as of June 30,
2008.








Name
      and Address of Beneficial Owner
            Amount
      and Nature of Beneficial Ownership (1)(2)
            Percent
      of ClassDana
      Hyde (2)
            7,414,000
            89.9%215
      N. Washington StreetMonte
      Vista, Colorado 81144All
      Officers and Directors as a Group
            7,414,000
            89.9%(one
      person)


___________________





(1)
            All
      shares of owned beneficially or of record.





ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.





We
currently occupy office space on a rent-free basis from one of our officers, Ms.
Dana Hyde.





ITEM
13. EXHIBITS AND REPORTS ON FORM 8-K.





The
following financial information is filed as part of this report:





(a)   (1)
FINANCIAL STATEMENTS





(2)
SCHEDULES





(3)
EXHIBITS. The following exhibits required by Item 601 to be filed
herewith


are
incorporated by reference to previously filed documents:








-
31 -











Exhibit
              Number
            Description3.1*
            Articles
      of Incorporation3.2*
            Bylaws21.1*
            List
      of Subsidiaries31.1
            Certification
      of CEO/CFO pursuant to Sec. 30232.1
            Certification
      of CEO/CFO pursuant to Sec. 906





*
Previously filed with Form SB-2 Registration Statement, November 1,
2008.





(b)  Reports
on Form 8-K. No reports were filed under cover of Form 8-K for the fiscal year
ended June 30, 2008.





ITEM
14: PRINCIPAL ACCOUNTANT FEES AND SERVICES





Our
independent auditor, Ronald R. Chadwick, P.C., Certified Public Accountant,
billed an aggregate of $7,500 for the year ended June 30, 2008 and $13,520 for
the year ended June 30, 2007 for professional services rendered for the audit of
the Company's annual financial statements and review of the financial statements
included in its quarterly reports.





We do not
have an audit committee and as a result its entire board of directors performs
the duties of an audit committee. Our board of directors evaluates the scope and
cost of the engagement of an auditor before the auditor renders audit and
non-audit services.











-
32 -





SIGNATURES





In
accordance with Section 12 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 September 23, 2008.








GREAT
      SPIRITS, INC.Date:September
      23, 2008
            By:
            /s/
      Dana HydeDana
      Hyde,Chief
      Executive Officer and President
              (principal
      executive officer)




Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following person on behalf of the Registrant and in the
capacity and on the date indicated.





Date:
      September 23, 2008
            By:
            /s/
      Dana HydeDana
      Hyde,Chief
      Financial Officer
              (principal
      financial and accounting officer)




- 33 -