Cannonau Corp. - Quarter Report: 2010 June (Form 10-Q)

10Q

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 June 30, 2010

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

For the transition period from ______ to _______

Commission File Number 333-1145876

PACIFIC BLUE ENERGY CORP.

(Name of small business issuer in its charter)


Nevada		20-8766002
(State of incorporation)		(I.R.S. Employer Identification No.)

1016 W. University Ave. Ste. 218

Flagstaff, AZ 86001

(Address of principal executive offices)

(602) 910-2114

(Registrant’s telephone number)

with a copy to:

Carrillo Huettel, LLP

3033 Fifth Ave. Suite 201

San Diego, CA 92103

Telephone (619) 399-3090

Facsimile (619) 399-0120

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K. .

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 . No X .

As of August 16, 2010, there were 40,749,000 shares of the registrant’s $.001 par value common stock issued and outstanding.

PACIFIC BLUE ENERGY CORP. *

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	20
ITEM 4.	CONTROLS AND PROCEDURES	20

PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	20
ITEM 1A.	RISK FACTORS	20
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	20
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	21
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	21
ITEM 5.	OTHER INFORMATION	21
ITEM 6.	EXHIBITS	21

*Please note that throughout this Quarterly Report, except as otherwise indicated by the context, references in this report to “Company”, “PBEC”, “we”, “us” and “our” are references to Pacific Blue Energy Corp.

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PACIFIC BLUE ENERGY CORP.

(formerly Descanso Agency Inc.)

(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2010

Balance Sheets (unaudited)

Statements of Operations (unaudited)

Statements of Cash Flows (unaudited)

Notes to the Financial Statements (unaudited)

PACIFIC BLUE ENERGY CORP.

(formerly Descanso Agency Inc.)

(An Development Stage Company)

Consolidated Balance Sheets

(Unaudited)


	June 30, 2010 $	December 31, 2009 $

ASSETS

Cash	1,241,048	2,448

Total Current Assets	1,241,048	2,448

Property and Equipment	49,158	–
Investment in Wind Energy Project	1,005,000	–

Total Assets	2,295,206	2,448

LIABILITIES

Current liabilities
Accounts Payable	10,871	22,072
Loan Payable	–	5,025

Total Liabilities	10,871	27,097

STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock
Authorized: 10,000,000 shares, par value of $0.001
Issued and outstanding: nil preferred shares	–	–
Common Stock
Authorized: 290,000,000 shares, par value of $0.001
Issued and outstanding: 39,249,000 and 37,350,000 common shares	39,249	37,350
Common Stock Subscribed	1,240,000	–
Additional Paid-In Capital	1,492,544	87,064
Deficit accumulated during the development stage	(487,458)	(149,063)

Total Stockholders’ Equity (Deficit)	2,284,335	(24,649)

Total Liabilities and Stockholders’ Equity (Deficit)	2,295,206	2,448

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

PACIFIC BLUE ENERGY CORP.

(formerly Descanso Agency Inc.)

(An Development Stage Company)

Consolidated Statements of Operations

(Unaudited)


	For the Three Months Ended June 30, 2010 $	For the Three Months Ended June 30, 2009 $	For the Six Months Ended June 30, 2010 $	For the Six Months Ended June 30, 2009 $	Accumulated from April 3, 2007 (Date of Inception) to June 30, 2010 $

Revenue	–	–	–	–	–

Operating Expenses
Consulting Fees	202,288		202,288		202,288
General and Administrative	41,565	4,475	51,322	10,095	77,803
Management Fees	28,085	–	48,585	–	121,542
Professional Fees	12,150	–	36,200	–	85,825

Total Operating Expenses	284,088	4,475	338,395	10,095	487,458

Net Loss	(284,088)	(4,475)	(338,395)	(10,095)	(487,458)

Net Loss per Share – Basic and Diluted	(0.01)	–	(0.01)	–

Weighted Average Shares Outstanding – Basic and Diluted	38,681,374	37,000,000	38,062,182	37,000,000

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

PACIFIC BLUE ENERGY CORP.

(formerly Descanso Agency Inc.)

(An Development Stage Company)

Consolidated Statements of Cash Flows

(Unaudited)


	For the Six Months Ended June 30, 2010	For the Six Months Ended June 30, 2009	Accumulated from April 3, 2007 (Date of Inception) to June 30, 2010
	$	$	$

Operating Activities

Net loss for the period	(338,395)	(10,095)	(487,458)

Adjustments to net loss relating to non-cash operating items:
Shares issued for services	120,000	–	170,000

Changes in operating assets and liabilities:
Accounts payable and accrued liabilities	(11,201)	3,200	10,871
Due to a related party	–	4,800	–

Net Cash Used In Operating Activities	(229,596)	(2,095)	(306,587)

Investing Activities

Purchase of equipment	(49,158)	–	(49,158)
Net cash paid for acquisition	(299,622)	–	(299,622)

Net Cash Used In Investing Activities	(348,780)	–	(348,780)

Financing Activities

Proceeds from loan payable	332,225	–	33,725
Repayment of loan payable	(337,250)	–	(33,725)
Proceeds from related parties	–	–	17,414
Proceeds from common shares issuances	582,001	–	639,001
Proceeds from common shares subscribed	1,240,000	–	1,240,000

Net Cash Provided By Financing Activities	1.816,975	–	1,896,415

Increase in Cash	1,238,600	(2,095)	1,241,048

Cash – Beginning of Period	2,448	4,073	–

Cash – End of Period	1,241,048	1,978	1,241,048

Supplemental Disclosures
Interest paid	–	–
Income tax paid	–	–	–

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

PACIFIC BLUE ENERGY CORP.

(formerly Descanso Agency Inc.)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Unaudited)

Nature of Operations and Continuance of Business

Pacific Blue Energy Corp. (formerly Descanso Agency Inc.) (the “Company”) was incorporated under the laws of the State of Nevada on April 3, 2007. The Company is a development stage company that intends to acquire and exploit oil and gas properties. On April 5, 2010, the Company acquired a 100% interest of Ship Ahoy LLC, a limited liability company in Arizona, in exchange for $300,000 and 1,000,000 common shares of the Company.

Going Concern

These consolidated 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. The Company has generated no revenues to date and has never paid any dividends and is unlikely to pay dividends or generate significant earnings in the immediate or foreseeable future. As of June 30, 2010, the Company had an accumulated deficit of $487,458. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. 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.

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Ship Ahoy LLC. All intercompany transactions have been eliminated. The Company’s fiscal year-end is December 31.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States and 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 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.

Interim Financial Statements

These interim unaudited consolidated 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.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As of June 30, 2010 and December 31, 2009, the Company had no cash equivalents.

PACIFIC BLUE ENERGY CORP.

(formerly Descanso Agency Inc.)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Unaudited)

Summary of Significant Accounting Policies (continued)

Basic and Diluted Net Loss Per Share

The Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which 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 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.

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 June 30, 2010, the Company has no items that represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

Financial Instruments

ASC 820, “Fair Value Measurements” and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It 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. It 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.

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, land, investment in wind energy project, accounts payable, and amounts due to related parties. Pursuant to ASC 820 and ASC 825, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

PACIFIC BLUE ENERGY CORP.

(formerly Descanso Agency Inc.)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Unaudited)

Summary of Significant Accounting Policies (continued)

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.

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 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.

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 financial statements.

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 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.

PACIFIC BLUE ENERGY CORP.

(formerly Descanso Agency Inc.)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Unaudited)

Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements

In August 2009, FASB issued an amendment to the accounting standards related to the measurement of liabilities that are recognized or disclosed at fair value on a recurring basis. This standard clarifies how a company should measure the fair value of liabilities and that restrictions preventing the transfer of a liability should not be considered as a factor in the measurement of liabilities within the scope of this standard. This standard is effective for the Company on October 1, 2009. The adoption of this amendment did not have a material effect on the Company’s financial statements.

On September 30, 2009, the Company adopted changes issued by the Financial Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These changes establish the FASB Accounting Standards Codification (Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Company’s financial statements.

Effective June 30, 2009, the Company adopted a new accounting standard issued by the FASB related to the disclosure requirements of the fair value of the financial instruments. This standard expands the disclosure requirements of fair value (including the methods and significant assumptions used to estimate fair value) of certain financial instruments to interim period financial statements that were previously only required to be disclosed in financial statements for annual periods. In accordance with this standard, the disclosure requirements have been applied on a prospective basis and did not have a material impact on the Company’s financial statements.

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.

PACIFIC BLUE ENERGY CORP.

(formerly Descanso Agency Inc.)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Unaudited)

Acquisition of Ship Ahoy LLC

On April 5, 2010, the Company acquired a 100% interest in the outstanding members’ shares of Ship Ahoy LLC (“Ship Ahoy”), a limited liability company in Arizona, in exchange for $300,000 and 1,000,000 common shares of the Company.

The common shares issued to Ship Ahoy shareholders were determined to have a fair value of $705,378. The purchase price was allocated to the following assets and liabilities:


	$
Purchase price

Cash	300,000
1,000,000 common shares	705,378

	1,005,378

Fair value of Ship Ahoy net assets

Cash and cash equivalents	378
Land	591,000
Interest in Sunshine Wind Park	414,000

	1,005,378

The determination of the fair value of the Ship Ahoy net assets were obtained through an independent valuation from management subsequent to the date of acquisition. The valuation of the common shares issued as part of the acquisition was determined using the fair value of the Company’s trading price on the date of acquisition less a 25% discount to reflect the fact that the common shares issued were restricted for resale.

Loan Payable

As at June 30, 2010, the Company owed $nil (December 31, 2009 - $5,025) to a shareholder of the Company. The amount owing is unsecured, non-interest bearing, and due on demand.

PACIFIC BLUE ENERGY CORP.

(formerly Descanso Agency Inc.)

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(Unaudited)

Common Stock

On January 28, 2010, the Company issued 125,000 common shares of the Company at $0.20 per common share for proceeds of $25,000.

On February 11, 2010, the Company received proceeds of $20,000 for the issuance of 100,000 common shares which were issued in April 2010.

On April 20, 2010, the Company issued 1,000,000 common shares to the shareholders of Ship Ahoy as part of acquisition as noted in Note 3.

On April 21, 2010, the Company issued 174,000 common shares of the Company for proceeds of $57,000.

On May 5, 2010, the Company issued 100,000 common shares of the Company to settle consulting services with a fair value of $120,000, based on ending market prices of the Company’s common shares.

On May 19, 2010, the Company issued 500,000 common shares at $1.00 per share for proceeds of $500,000.

As at June 30, 2010, the Company received $1,240,000 of common stock subscriptions for the future issuance of common shares.

Subsequent Events

On July 16, 2010, the Company issued 700,000 common shares at $1.00 per common share for proceeds of $700,000, which were received as at June 30, 2010. Refer to Note 4(g).

On August 5, 2010, the Company issued 800,000 common shares at $1.00 per share for proceeds of $800,000, of which $540,000 was received as at June 30, 2010. Refer to Note 4(g).

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

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. The forward looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

GENERAL

The Company was incorporated in the State of Nevada on April 3, 2007 under the name Descanso Agency, Inc. We originally incorporated to enter the travel industry by establishing a specialized service travel company that serves the needs of Mexican and United States wedding planners, travel agents, and clients seeking upscale personal attention at unique hotels and spas located in Mexico. Our core business plan was intended to focus on the wedding and party destination travel. However, due to a lack of available financing, the Company ceased its operations relating to the travel industry in September 2009 and began seeking out viable alternatives.

On October 16, 2009, we filed a Certificate of Amendment with the Nevada Secretary of State to change our name to Pacific Blue Energy Corp. The name change reflected the Company's refocused business as an independent alternative energy company.

Our common stock is currently quoted on the OTC Bulletin Board. Our common stock has been quoted on the OTC Bulletin Board since January 14, 2008, originally traded under the symbol “DSAY.OB.” On November 6, 2009, we began trading under our current symbol of “PBEC.OB.”

CURRENT BUSINESS OPERATIONS

We have begun the process of approaching potential investment partners and have also begun seeking out potential opportunities, including joint venture opportunities, to move forward with our new business model. We will attempt to finance our operations through a combination of privately placed debt and/or equity. With the recent alignment of a number of positive factors including technical advances, tax incentives, rising environmental awareness and the state of the economy, the availability of clean, affordable, solar- and wind-powered electricity to power homes and small businesses is becoming a reality.

On December 7, 2009, we entered into a Product Sales Agreement (the "Agreement") with Siliken Renewable Energy, Inc. ("Siliken"), pursuant to which the Company was to purchase and sell products manufactured by Siliken. Siliken is in the business of manufacturing and selling photovoltaic modules and related products, namely solar panels, inverters and racking ("Products").

We believe that we are positioning the Company to take advantage of technological advances, recent federal renewable energy and other tax incentives, and a revitalized interest in the environment that will drive the coming surge in the U.S. and global alternative/renewable energy market.

Description of Business

Effective as of June 30, 2010, the Company has completed the following:

Effective November 6, 2009, the Registrant implemented a 4-for-1 forward split of its issued and outstanding shares of common stock, whereby every share of common stock held was exchanged for 4 shares of common stock. As a result, the issued and outstanding shares of common stock was increased from 9,250,000 prior to the forward split to 37,000,000 immediately following the forward split.

On December 7, 2009, Siliken Renewable Energy, Inc. entered into a Product Sales Agreement with Pacific Blue Energy Corp., pursuant to which the Company will purchase products manufactured by Siliken. Siliken is in the business of manufacturing and selling photovoltaic modules and related products, namely solar panels, inverters and racking.

Quarterly Developments:

On April 5, 2010, the Company closed a Membership Interest Purchase Agreement (the "MIPA"), whereby the we acquired 100% of the membership interests in Ship Ahoy, LLC, an Arizona limited liability company ("Ship Ahoy"). Ship Ahoy's assets consist of approximately 154 acres of land located 30 miles east of Flagstaff, Arizona, in Coconino County, the land is more specifically described by Assessor's Parcel Number 406-07-004 (the "Property"). Additionally, Ship Ahoy owns a 52.5% economic interest in a wind farm project know as the Sunshine Wind Park (the "Sunshine Wind Park") which is also to be located in Coconino County, Arizona. The economic interest in the Sunshine Wind Park grants Ship Ahoy the right to a continuing 52.5% interest in connection with the development of the Sunshine Wind Park. We acquired 100% of the Membership Interests of Ship Ahoy for consideration consisting of: (i) three hundred thousand dollars ($300,000); and, (ii) the issuance of one million restricted shares (1,000,000) of the Registrant's common stock, par value $0.001.

On April 7, 2010, the Board of Directors of the Company nominated Mr. George M. Buckingham to become the Company’s Chief Operating Officer. On April 7, 2010, Mr. Buckingham accepted the appointment.

On May 10, 2010, the Company entered into a Joint Venture Agreement (the "Agreement") with Patriot Solar, Inc., an Arizona based corporation ("Patriot"). Pursuant to the terms and conditions of the Agreement, Patriot shall identify potential private commercial solar projects in Arizona, Nevada, Utah and Texas and the Company shall have the first right of refusal for a period of two years to provide financing for such projects. Upon acceptance of any such project by the Company, Patriot will have responsibility for all engineering calculations, engineering design, procurement, construction, permitting, REC filings, interconnection agreements and on-going operations and maintenance and the Company shall be responsible for all cost associated with the development of any such project. The term of the Agreement is for an initial two year period with an option to extend for an addition one year period.

Subsequent to June 30, 2010:

On July 16, 2010, the Company entered into a Purchase and Sale Agreement (the “Purchase Agreement") with Sonoran Trails, LLC, an Arizona limited liability company ("Sonoran") for the purchase of approximately 100 acres of land located in Maricopa County, Arizona, for an aggregate consideration of $850,000. The Company has tendered a $20,000 earnest money deposit (the “Deposit”), which allows the Company time to enter upon the property to make inspections, studies, surveys, and tests prior to the closing of the sale upon the terms and conditions mentioned in the Purchase Agreement. The Deposit is refundable to the Company until August 12, 2010, during such period the Company shall determine whether the Property is suitable for purchase with respect to all matters and complete certain closing conditions (the “Feasibility Period”).

On July 27, 2010, the Company entered into a Cooperation Agreement (the "Cooperation Agreement") with Siliken Renewable Energy, Inc. ("Siliken"). Pursuant to the terms and conditions of the Cooperation Agreement, Siliken and the Company shall jointly collaborate to submit a proposal to Arizona Public Service (“APS”) to build a solar energy project (the “Sunshine Solar Farm”) to be developed on approximately 154 acres in Coconino County, Arizona. Should the proposal to APS be accepted, the Parties have agreed that the development of the Sunshine Solar Farm shall be further defined and set forth in a definitive agreement, to be negotiated, agreed to, and executed by both Siliken and the Company.

On July 29, 2010, the Company entered into that certain Consulting Agreement (the “Agreement”) with Mr. Yoram Gordon (“Mr. Gordon”) pursuant to which Mr. Gordon shall offer research services regarding the Company’s operations to the Company for a period of one (1) year in exchange for a monthly salary of $2,500, and a warrant to purchase 10,000 shares of the Company’s common stock issued at the end of the fiscal year, per the terms and conditions set forth in the Gordon Agreement.

Our Strategy

As opportunities become available and appear attractive to our management, we will attempt to raise such funds necessary to conduct the appropriate due diligence and research to determine if it would be beneficial to the Company in both the short and long term. Our current management believes that current market conditions are creating situations that could result in the opportunity for viable opportunities as an alternative energy company.

It is anticipated that funding for the next twelve months will be required to maintain our operations. Attempts are ongoing to raise funds through private placements and said attempts will continue throughout 2010. We may also use various debt instruments as well as public offerings to raise needed capital during 2010. There can be no assurance; however, that any of these methods of financing will be successful in helping fund our operations.

The operating expenses will increase as we undertake our plan of operations. The increase will be attributable to the continuing acquisition programs and continued professional fees that will be incurred.

Regulatory Requirements

Government Regulation

The market for electricity generation products is heavily influenced by foreign, U.S. federal, state and local government regulations and policies concerning the electric utility industry, as well as policies promulgated by electric utilities. These regulations and policies often relate to electricity pricing and technical interconnection of customer-owned electricity generation. In the U.S. and in a number of other countries, these regulations and policies are being modified and may continue to be modified. These fees could increase the cost to our future customers using our solar power products and make them less desirable, thereby harming our business, prospects, results of operations and financial condition. We anticipate that our solar power products and their installation will be subject to oversight and regulation in accordance with national and local ordinances relating to building codes, safety, environmental protection, utility interconnection and metering and related matters. Any new government regulations or utility policies pertaining to our solar power products may result in significant additional expenses to us and our resellers and their customers and, as a result, could cause a significant reduction in demand for our solar power products.

Environmental Issues and Regulations

In addition to those we have identified, we continue to seek markets that allow for the generation and sale of electricity by “third party developers”. We also believe that we will apply for and receive all environmental permits necessary to conduct our business. We are not aware of any pending or threatened environmental investigation, proceeding or action by foreign, federal, state or local agencies, or third parties involving our current facilities. Any failure by us to control the use of or to restrict adequately the discharge of hazardous substances could subject us to substantial financial liabilities, operational interruptions and adverse publicity, any of which could materially and adversely affect our business, results of operations and financial condition.

If successful, we will become subject to a variety of foreign, federal, state and local governmental laws and regulations related to generation and delivery of electricity and the purchase, storage, use and disposal of hazardous materials. In some cases, these laws provide local utilities with “monopoly” rights, adversely constraining our ability to easily penetrate economically attractive markets. In other cases, if we fail to comply with present or future environmental laws and regulations, we could be subject to fines, suspension of production or a cessation of operations. In addition, under some foreign, federal, state and local statutes and regulations, a governmental agency may seek recovery and response costs from operators of property where releases of hazardous substances have occurred or are ongoing, even if the operator was not responsible for the release or otherwise was not at fault.

Dependence on Government Subsidies and Incentives

Various subsidies and tax incentive programs exist at the federal, state and local level to encourage the adoption of solar power including capital cost rebates, performance-based incentives, feed-in tariffs, tax credits and net metering. Capital cost rebates provide funds to customers based on the cost or size of a customer’s solar power system. Government policies, in the form of regulation and incentives, have accelerated the adoption of solar technologies by businesses and consumers.

Performance-based incentives provide funding to a customer based on the energy produced by their solar system. Under a feed-in tariff subsidy, the government sets prices that regulated utilities are required to pay for renewable electricity generated by end-users. The prices are set above market rates and may be differentiated based on system size or application. Feed-in tariffs pay customers for solar power system generation based on kilowatt-hours produced, at a rate generally guaranteed for a period of time. Tax credits reduce a customer’s taxes at the time the taxes are due. Net metering programs allow a customer, who generates more energy than used, to “sell” electricity back to the utility, which will spin the meter backwards. During these periods, the customer “lends” electricity to the grid, retrieving an equal amount of power at a later time. Net metering programs enable end-users to sell excess solar electricity to their local utility in exchange for a credit against their utility bills. Net metering programs are usually combined with rebates, and do not provide cash payments if delivered solar electricity exceeds their utility bills.

Renewable Energy Certificates

In addition, several states have adopted renewable portfolio standards (“RPS”), which mandate that a certain portion of electricity delivered to customers come from a set of eligible renewable energy resources. Under a renewable portfolio standard, the government requires regulated utilities to supply a portion of their total electricity in the form of renewable electricity. Some programs further specify that a portion of the renewable energy quota must be from solar electricity. A utility can receive “credit” for renewable energy produced by a third party by either purchasing the electricity directly from the producer or paying a fee to obtain the right to renewable energy generated but used by the generator or sold to another party. This Renewable Energy Credit allows the utility to add this electricity to its RPS requirement total without actually expending the capital for generating facilities.

Despite the benefits of solar power, there are also certain risks and challenges faced by solar power. Solar power is currently dependent on government subsidies to promote acceptance by mass markets. We believe that the near-term growth in the solar energy industry depends significantly on the continued availability and size of these government subsidies and on the ability of the industry to reduce the cost of generating solar electricity. The market for solar energy products is, and will continue to be, heavily dependent on public policies that support growth of solar energy. There can be no assurances that such policies will continue. Decrease in the level of rebates, incentives or other governmental support for solar energy would have an adverse affect on our ability to sell our products.

Challenges Facing Solar Power

The solar power industry must overcome the following challenges to achieve widespread commercialization of its products:

Decrease Per Kilowatt-hour Cost to Customer. In most cases, the current cost of solar electricity is greater than the cost of retail electricity from the utility network. While government programs and consumer preference have accelerated the use of solar power for on-grid applications, product cost remains one of the largest impediments to growth. To provide an economically attractive alternative to conventional electricity network power, the solar power industry must continually reduce manufacturing and installation costs.

Achieve Higher Conversion Efficiencies. Increasing the conversion efficiency of solar cells reduces the material and assembly costs required to build a solar panel with a given generation capacity. Increased conversion efficiency also reduces the amount of rooftop space required for a solar power system, thus lowering the cost of installation per consumer.

Improve Product Appearance. We believe that aesthetics are a barrier to wider adoption of solar power products, particularly among residential consumers. Historically, residential and commercial customers have resisted solar power products, in part, because most solar panels are perceived as unattractive.

Ultimately, federal and state government, and locally sponsored support for the solar industry is expected to reduce or stop. At or before that time, solar technologies must be priced, as a function of purchase price and performance, to compete cost effectively with traditional electricity generating technologies.

Marketing

PV Solar Electricity

According to a report released in July, 2009, by IntertechPira, a market research firm in the UK, the global photovoltaic (PV) market is expected to double within the next five years, reaching US$48 billion by 2014. Wafer-based silicon will continue as the dominant technology, but amorphous thin-film and cadmium telluride (CdTe) technologies will gain ground, and are expected to account for a combined 22% of the market by 2014.

Wind Power

There is huge and growing global demand for emissions-free wind power, which can be installed quickly, virtually everywhere in the world. Wind energy has grown into an important player in the world’s energy markets, with the 2008 market for turbine installations worth about $56.5 billion. Over the past ten years, global wind power capacity has continued to grow at an average cumulative rate of over 30%, and 2008 was another record year with more than 27 GW of new installations, bringing the total up to over 120 GW. The United States passed Germany to become the number one market in wind power, and China’s total capacity doubled for the fourth year in a row.

Insurance

We do not maintain any insurance and do not intend to maintain insurance in the future. Because we do not have any insurance, if we are made a party to a liability action, we may not have sufficient funds to defend the litigation. If that occurs a judgment could be rendered against us that could cause us to cease operations.

Competition

The market for solar power products is competitive and continually evolving. We expect to face increased competition, which may result in our inability to develop sustaining revenue. We will compete with companies large and small, public and private, and some will be suppliers as well as competitors and well known such as; groSolar, Sunpower, Sunwize, BP Solar, Evergreen Solar and GE Solar. Chinese companies have made significant inroads in manufacturing and are currently leading the production of solar panels or modules. Many of our competitors have established a stronger market position than ours and have larger resources and recognition than we have. In addition, the solar power market in general competes with other sources of renewable energy and conventional power generation.

We believe that the key competitive factors in the market for solar products include:

power efficiency and performance;

price;

quality, and warranty coverage and length;

aesthetic appearance of solar installations;

strength of distribution relationships; and,

knowledgeable sales and installation personnel.

Offices

Our offices are currently located at 1016 W. University Avenue, Suite 218 in Flagstaff, AZ and our telephone number is (602) 910-2114. As of the date of this filing, we have not sought to move or change our office site. We rent, on a monthly basis, approximately 189 square feet of industrial/office space for $274.05 per month. The space we lease is utilized for general office purposes. It is our belief that the our space is adequate for our immediate needs. Additional space may be required as we expand our operations. We do not foresee any significant difficulties in obtaining any required additional space. We do not own any real estate.

Employees; Identification of Certain Significant Employees

Joel Franklin, our chief executive officer and director devotes approximately 60 hours a week of his time to our operations. We currently have no other employees, other than our officers and directors. We also frequently use third party consultants to assist in the completion of various projects. Third parties are instrumental to keep the development of projects on time and on budget.

RESULTS OF OPERATIONS

Operating Revenues

We have not generated any revenues since inception.

Operating Expenses and Net Loss

Operating expenses for the six months ended June 30, 2010 were $338,395 compared with $10,095 for the six months ended June 30, 2009. The increase of $328,300 was attributed to management fees of $48,585 payable at $6,000 per month to the Company’s President plus expenditures, increase in general and administrative costs of $41,227 due to costs incurred with respect to the acquisition of Ship Ahoy LLC, consulting fees of $202,288, and an increase of $36,200 of professional costs relating to legal, accounting, and audit expenses resulting from the Company’s SEC filings.

Liquidity and Capital Resources

As at June 30, 2010, the Company’s cash balance was $1,241,048 and total assets were $2,295,206 compared to $2,448 in cash balance and total assets as at December 31, 2009. The increase in cash is attributed to private placement financing of common shares of $1,240,000 that was received for future share issuances. The increase in total assets is attributed to the $1,240,000 of cash received from financing, purchase of equipment of $49,158, and acquisition of the wind energy assets valued at $1,005,000 during the period.

As at June 30, 2010, the Company had total liabilities of $10,871 compared with total liabilities of $27,097 as at December 31, 2009. The decrease in total liabilities is attributed to payments of outstanding obligations as the Company raised new financing during the period, as well as repayment of outstanding loans payable.

Cashflow from Operating Activities

During the six months ended June 30, 2010, the Company used $229,596 of cash for operating activities compared to the use of $2,095 of cash for operating activities during the six months ended June 30, 2009. The increase in the use of cash for operating activities was attributed to higher levels of operating activity for the Company during fiscal 2010 based on the fact that the Company had new financing during the period.

Cashflow from Investing Activities

During the six months ended June 30, 2010, the Company used $348,780 of cash for investing activities compared to the use of $nil of cash for investing activities during the six months ended June 30, 2009. The increase in the use of cash for operating activities was attributed to net cash use of $299,622 for the acquisition of Ship Ahoy (payment of $300,000 less $378 of cash received from Ship Ahoy’s bank accounts) and $49,158 for the purchase of a company vehicle.

Cashflow from Financing Activities

During the six months ended June 30, 2010, the Company received $1,816,975 of proceeds from financing activities compared to $nil during the six months ended June 30, 2009. The increase in the proceeds received from financing activities was attributed to $582,001 of cash received for the issuance of common shares and $1,240,000 received for the future issuance of common shares.

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.

Critical Accounting Policies

Financial Instruments

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 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, land, investment in wind energy project, accounts payable and accrued liabilities, and amounts due to related parties. Pursuant to ASC 820 and ASC 825, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Recent Accounting Pronouncements

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

Management’s Quarterly Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that information is accumulated and communicated to our management, including our principal executive and principal financial officer (whom we refer to in this periodic report as our Certifying Officer), as appropriate to allow timely decisions regarding required disclosure.

Our management evaluated, with the participation of our Certifying Officer, the effectiveness of our disclosure controls and procedures as of June 30, 2010, pursuant to Rule 13a-15(b) under the Securities Exchange Act. Based upon that evaluation, our Certifying Officer concluded that, as of June 30, 2010, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in internal controls over financial reporting that occurred during the three months ended June 30, 2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are not a party to any pending legal proceeding. No federal, state or local governmental agency is presently contemplating any proceeding against the Company. No director, executive officer or affiliate of the Company or owner of record or beneficially of more than five percent of the Company's common stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

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.

Sales of Equity Securities for Cash:

On April 8, 2010, the Company sold 24,000 shares of the Company's common stock at $0.50 per share to Christopher Bright for total proceeds of $12,000 pursuant to Section 4(2) and/or Regulation D.

On April 9, 2010, the Company sold 50,000 shares of the Company's common stock at $0.50 per share to Jeffrey Zimmerman for total proceeds of $25,000 pursuant to Section 4(2) and/or Regulation D.

Issuance of Equity Securities in exchange for services:

On April 16, 2010, the Company issued 100,000 shares of the Company's common stock at $0.50 per share to Corey Whitehead pursuant to Section 4(2) and/or Regulation D for consulting services.

Convertible Securities:

None.

Outstanding Warrants:

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None

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

None

ITEM 5. OTHER INFORMATION.

None

ITEM 6. EXHIBITS

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


Exhibit
Number	Description of Exhibit	Filing
3.01	Articles of Incorporation	Incorporated by reference to our Registration Statement Form SB-2 filed with the SEC on September 5, 2007.
3.01a	Restated Articles of Incorporation	Incorporated by reference to our Current Report Form 8-K filed with the SEC on October 29, 2009.
3.02	Bylaws	Incorporated by reference to our Registration Statement Form SB-2 filed with the SEC on September 5, 2007.
10.01	Membership Interest Purchase Agreement	Filed with the SEC on April 8, 2010 as part of our Current Report on Form 8-K.
10.02	Promissory Note ($250,000) between PBEC and George M. Buckingham and Viki K. Buckingham, individually and on behalf of the George M. Buckingham and Viki K. Buckingham Family Limited Liability Partnership	Filed with the SEC on April 29, 2010 as part of our Current Report on Form 8-K.
10.03	Joint Venture Agreement between PBEC and Patriot Solar Inc. dated May 10, 2010.	Filed with the SEC on May 11, 2010 as part of our Current Report on Form 8-K.
10.04	Purchase and Sale Agreement between PBEC and Sonoran Trails, LLC dated July 16, 2010.	Filed with the SEC on July 26, 2010 as part of our Current Report on Form 8-K.
10.05	Cooperation Agreement between PBEC and Siliken Renewable Energy, Inc. dated July 27, 2010.	Filed with the SEC on July 29, 2010 as part of our Current Report on Form 8-K.
10.06	Consulting Agreement between PBEC and Yoram Gordon dated July 29, 2009.	Filed herewith.
31.01	Certification of Principal Executive 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.

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.

PACIFIC BLUE ENERGY CORP.

Dated: August 16, 2010

By:

/s/ Joel Franklin

JOEL FRANKLIN

President and CEO