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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2004
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[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period to
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Commission File Number 001-31608
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PACIFIC SPIRIT, INC.
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(Exact name of small Business Issuer as specified in its charter)
Nevada 98-0349685
-------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
11640 96A Avenue
Surrey, British Columbia V3V 2A1
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(Address of principal executive offices) (Postal or Zip Code)
Issuer's telephone number, including area code: 604-760-1400
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None
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(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days [ ] Yes [X] No
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 3,820,000 shares of $0.001 par value
common stock outstanding as of November 4, 2004.
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
INTERIM FINANCIAL STATEMENTS
September 30, 2004
(Stated in US Dollars)
(Unaudited)
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
INTERIM BALANCE SHEETS
September 30, 2004 and December 31, 2003
(Stated in US Dollars)
(Unaudited)
------------
ASSETS September 30, December 31,
------ 2004 2003
---- ----
Current
Cash $ 830 $ 12,499
Prepaid expenses 253 733
------------ ----------
$ 1,083 $ 13,232
============ ==========
LIABILITIES
-----------
Current
Accounts payable and accrued liabilities $ 4,160 $ 6,698
Due to related party - Note 3 5,676 -
------------ ----------
9,836 6,698
============ ==========
STOCKHOLDERS' EQUITY (DEFICIENCY)
---------------------------------
Preferred stock, $0.001 par value
10,000,000 shares authorized, none outstanding
Common stock, $0.001 par value
100,000,000 shares authorized
3,820,000 shares issued (December 31, 2003: 3,820,000) 3,820 3,820
Paid in capital 87,180 87,180
Deficit accumulated during the pre-exploration stage (99,753) (84,466)
------------ ----------
(8,753) 6,534
------------ ----------
$ 1,083 $ 13,232
============ ==========
SEE ACCOMPANYING NOTES
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
INTERIM STATEMENTS OF OPERATIONS
for the three and nine months ended September 30, 2004 and 2003
and for the period May 4, 2001 (Date of Incorporation) to September 30, 2004
(Stated in US Dollars)
(Unaudited)
-----------
May 4, 2001
(Date of
Three months ended Nine months ended Incorporation) to
September 30, September 30, Sept 30,
2004 2003 2004 2003 2004
---- ---- ---- ---- ----
Expenses
Accounting and audit fees $ 670 $ 1,121 $ 2,592 $ 1,731 $ 22,276
Administrative services 1,500 - 1,500 500 19,000
Bank charges 81 49 179 173 816
Exploration costs 150 - 805 - 2,552
Incorporation costs - - - - 900
Legal fees - - - 2,719 31,206
Mineral lease advance royalty
- Note 4 5,000 2,155 7,000 2,155 17,155
Office and miscellaneous 750 - 750 131 1,268
Transfer agent and listing fees 509 297 2,461 335 4,680
---------- ----------- --------- --------- ---------
Loss before other item (8,660) (3,622) (15,287) (7,744) (99,853)
Other item
Interest income - - - 26 100
---------- ----------- --------- --------- ---------
Net loss for the period $ (8,660) $ (3,622) $ (15,287) $ (7,718) $ (99,753)
========== =========== ========== ========= =========
Basic loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.00)
========== =========== ========== =========
Weighted average number of shares
outstanding 3,820,000 3,820,000 3,820,000 3,820,000
========== ========== ========== =========
SEE ACCOMPANYING NOTES
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
INTERIM STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 2004 and 2003,
and for the period May 4, 2001 (Date of Incorporation) to September 30, 2004
(Stated in US Dollars)
(Unaudited)
-----------
May 4, 2001
(Date of Incor-
Nine months ended poration) to
September 30, September 30,
2004 2003 2004
---- ---- ----
Cash Flows from Operating Activities
Net loss for the period $ (15,287) $ (7,718) $ (99,753)
Changes in non-cash working capital balances
related to operations
Prepaid expenses 480 - (253)
Accounts payable and accrued liabilities (2,538) (7,721) 4,160
---------- ---------- ----------
(17,345) (15,439) (95,846)
---------- ---------- ----------
Cash Flows from Financing Activities
Capital stock issued - - 91,000
Advance from a director 5,676 - 5,676
---------- ---------- ---------
5,676 - 96,676
---------- ---------- ---------
Increase (decrease) in cash during the period (11,669) (15,439) 830
Cash, beginning of the period 12,499 27,983 -
---------- ---------- ----------
Cash, end of the period $ 830 $ 12,544 $ 830
========== ========== ==========
Supplemental disclosure of cash flow information; Cash paid for:
Interest $ - $ - $ -
========== ========== ==========
Income taxes $ - $ - $ -
========== ========== ==========
SEE ACCOMPANYING NOTES
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
INTERIM STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the period May 4, 2001 (Date of Incorporation) to September 30, 2004
(Stated in US Dollars)
(Unaudited)
------------
Deficit
Accumulated
Common Shares Additional During the Pre-
----------------------------------- Paid-in exploration
Number Par Value Capital Stage Total
------ --------- ------- ----- -----
Capital stock issued for cash
- at $0.01 2,500,000 $ 2,500 $ 22,500 $ - $ 25,000
Net loss for the period - - - (40,255) (40,255)
--------- ---------- --------- ---------- ---------
Balance, as at
December 31, 2001 2,500,000 2,500 22,500 (40,255) (15,255)
Capital stock issued for cash
- at $0.05 1,320,000 1,320 64,680 - 66,000
Net loss for the year - - - (31,249) (31,249)
--------- ---------- --------- ---------- ---------
Balance, as at
December 31, 2002 3,820,000 3,820 87,180 (71,504) 19,496
Net loss for the year - - - (12,962) (12,962)
--------- ---------- --------- ---------- ---------
Balance, as at
December 31, 2003 3,820,000 3,820 87,180 (84,466) 6,534
Net loss for the period - - - (15,287) (15,287)
--------- ---------- ---------- ---------- ---------
Balance, as at
September 30, 2004 3,820,000 $ 3,820 $ 87,180 $ (99,753) $ (8,753)
========= ========== ========== ========== =========
SEE ACCOMPANYING NOTES
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
September30, 2004
(Stated in US Dollars)
(Unaudited)
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Note 1 Interim Reporting
-----------------
While information presented in the accompanying interim financial
statements is unaudited, it includes all adjustments which are, in
the opinion of management, necessary to present fairly the
financial position, results of operations and cash flows for the
interim period presented. All adjustments are of a normal
recurring nature. It is suggested that these interim financial
statements be read in conjunction with the company's December 31,
2003 financial statements.
The results of operations for the period ended September 30, 2004
are not necessarily indicative of the results that can be expected
for the year ended December 31, 2004.
Note 2 Continuance of Operations
-------------------------
The financial statements have been prepared using generally
accepted accounting principles in the United States of America
applicable for a going concern which assumes that the Company will
realize its assets and discharge its liabilities in the ordinary
course of business. The Company has a working capital deficiency
of $8,753 as at September 30, 2004, has not yet attained
profitable operations and has accumulated losses of $99,753 since
its commencement. Its ability to continue as a going concern is
dependent upon the ability of the Company to obtain the necessary
financing to meet its obligations and pay its liabilities arising
from normal business operations when they come due.
Note 3 Due to Related Party
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The amount due to related party, a director of the Company,
consists of unpaid advances of $5,676. The amount due is
unsecured, non-interest bearing and has no specific terms for
repayment.
Note 4 Commitments
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Mineral Property
By a lease agreement effective June 1, 2001 and amended June 25,
2002, November 25, 2002, and January 9, 2004 the Company was
granted the exclusive right to explore and mine the Del Oro and NP
Claims located in Pershing County of the State of Nevada. The term
of this lease is for 30 years, renewable for an additional 30
years so long as the condition of the lease are met. Minimum
payments and performance commitments are as follows:
Pacific Spirit Inc.
(A Pre-exploration Stage Company)
Notes to the Interim Financial Statements
September 30, 2004
(Stated in US Dollars)
(Unaudited) - Page 2
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Note 3 Commitments - (cont'd)
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Mineral Property - (cont'd)
Minimum Advance Royalty Payments:
The owner shall be paid a royalty of 4% of the net smelter returns
from all production. In respect to this royalty, the Company is
required to pay minimum advance royalty payments of the following:
- $5,000 upon execution (paid) and $4,500 (paid) for extension of
the agreement;
- $2,000 upon execution (paid) of the amended agreement dated
January 9, 2004;
- $5,000 on July 9, 2004 (paid);
- $10,000 on January 9, 2005; and
- each January 9 thereafter, a payment of $50,000 plus an annual
increase or decrease equivalent to the rate of inflation
designated by the Consumer Price Index for that year with
execution year as base year.
The Company can reduce the net smelter return royalty to 0.5% by
payment of a buy-out price of $5,000,000. Advance royalty payments
made to the date of the buy-out will be applied to reduce the
buy-out price.
Performance Commitment:
In the event that the Company terminates the lease after June 1 of
any year, it is required to pay all federal and state mining claim
maintenance fees for the next assessment year. The Company is
required to perform reclamation work on the property as required
by federal, state and local law for disturbances resulting from
the Company's activities on the property.
Item 2. Management's Discussion and Analysis or Plan of Operation
Forward Looking Statements
--------------------------
This quarterly report contains forward-looking statements that involve risks and
uncertainties. We use words such as anticipate, believe, plan, expect, future,
intend and similar expressions to identify such forward-looking statements. You
should not place too much reliance on these forward-looking statements. Our
actual results are likely to differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described in this Risk Factors section and elsewhere in this quarterly report.
Plan of Operation
-----------------
Our plan of operation for the twelve months following the date of this report is
to complete the recommended phase one exploration program on the Del Oro
Property in which we hold a leasehold interest. We still anticipate that this
program will cost us $53,000.
In January 2004, we amended our mineral claims agreement regarding the Del Oro
Property located in Pershing County Nevada. We paid the lessor of the property
$2,000 upon execution of the agreement and $5,000 on July 9, 2004. In order to
keep the lease in good standing, we must pay the lessor $10,000 by January 9,
2005, and $50,000 per year thereafter.
In addition, we anticipate spending $12,000 on professional fees and $15,000 on
administrative expenses.
Total expenditures over the next 12 months are therefore expected to be $90,000.
Our cash on hand at September 30, 2004 was $830. Accordingly, we will need to
raise additional funds in order to complete the recommended exploration program
on the Del Oro Property and meet our other expected expenses. We do not
currently have any arrangements for raising additional funding.
Results of Operations for the third quarter ended September 30, 2004
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We incurred a net loss of $15,287 for the nine-month period ended September 30,
2004, as compared to a loss of $7,718 in the same period in 2003. The difference
in net loss was primarily due to an increase in management fees, office
expenses, and resource costs as per lease agreement. As per management agreement
dated July 1, 2004, the president started to charge the Company $500 per month
for administrative fees ($1,500 per the period July - September 2004). The
Company also started to incur $250 per month for office rent, telephone
expenses, and general miscellaneous office expenses ($750 per the period July -
September 2004) related to the use of the Vancouver office. In the previous
periods, the president did not charge the Company for such expenses. During the
nine-month period ended September 30, 2004, we incurred transfer agent and
filing fees of $2,461 (2003: $335) and accounting and audit fees of $2,592
(2003: $1,731) in order to bring all outstanding SEC filings current. We also
incurred resource property costs as per lease agreement of $7,000 (2003:
$2,155). At the end of the third quarter, we had cash on hand of $830. Our
liabilities at the same date totalled $9,836, and consisted of accounts payable
of $4,160 and $5,676 due to a related party.
Item 3. Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to
the filing date of this report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's
President, the Chief Executive Officer, and the Chief Financial Officer.
Based upon that evaluation, the Company concluded that the disclosure controls
and procedures are effective. There have been no significant changes in the
Company's internal controls or in other factors, which could significantly
affect internal controls subsequent to the date the Company carried out its
evaluation.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any pending legal proceeding. Management is not
aware of any threatened litigation, claims or assessments.
Item 2. Changes in Securities
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 and Report on Form 8-K
10.1 Management Agreement
31.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
There were no reports filed on Form 8-K during the six-month period ended
September 30, 2004.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Pacific Spirit, Inc.
/s/ Peter Sotola
------------------------------------
Peter Sotola
President, Secretary, Treasurer
Chief Executive Officer and Director
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
Dated: November 4, 2004
Exhibit 10.1
MANAGEMENT AGREEMENT
--------------------
This Management Agreement is dated July 1, 2004.
BETWEEN:
Peter Sotola, with address at 11640 - 96A Avenue, Surrey, B.C.
(the "Manager")
and
PACIFIC SPIRIT INC., a company having a registered office
in the State of Nevada and records office at 802 - 700 West
Pender Street, Vancouver, BC, V6C 1G8
(the "Company")
WHEREAS:
A. The Company has agreed to retain the services of the Manager on the terms
and conditions hereinafter set forth effective the date referenced above; and
B. The Manager has agreed to be retained by the Company upon the terms and
conditions hereinafter set forth.
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the premises
and mutual covenants and agreements herein contained, the parties hereto
covenant and agree each with the other as follows:
1. RETAINER
The Company hereby retains the Manager and the Manager hereby accepts such
retainer, to perform the duties and render the services set forth herein during
the term of this Agreement. The Manager agrees to provide the services of Peter
Sotola ("Sotola") to the Company for the duration of this Agreement.
2. TERM
This Agreement will be effective July 1, 2004 (the "Commencement Date") and
shall continue in full force and effect for 12 months after the Commencement
Date.
3. COMPENSATION
As compensation for the services of the Manager during the term of this
Agreement, the Company shall pay the Manager a monthly salary of US$500
commencing on the Commencement Date.
4. REIMBURSEMENT FOR EXPENSES
The Manager will be reimbursed for all reasonable out-of-pocket expenses
incurred by the Manager in or about the execution of his duties which are
pre-approved by the Company.
5. DUTIES AND SERVICES
During the term of this Agreement, the Company agrees that Sotola will provide
general management duties, as required.
6. TERMINATION OF AGREEMENT
Notwithstanding any other provision herein, it is understood and agreed by and
between the parties hereto that the Manager may resign his retainer hereunder by
giving one month's written notice of such intention to resign.
7. APPLICABLE LAW
This Agreement shall be governed by the laws of the State of Nevada, USA and the
Province of British Columbia, Canada.
8. AMENDMENT
This Agreement may not be amended or otherwise modified except in writing signed
by both parties.
9. HEADINGS
All headings and titles in this Agreement are for reference only and are not to
be used in the interpretation of the terms hereof.
10. ACCEPTANCE OF AGREEMENT
This Agreement is subject to the approval of the Board of Directors of the
Company.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written.
PETER SOTOLA PACIFIC SPIRIT INC.
Per: Per:
sgd: Peter Sotola sgd: Peter Sotola
Peter Sotola Peter Sotola, President