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 June 30, 2005
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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 [X] Yes [ ] 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 August 12, 2005.
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
INTERIM FINANCIAL STATEMENTS
June 30, 2005
(Stated in US Dollars)
(Unaudited)
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
INTERIM BALANCE SHEETS
June 30, 2005 and December 31, 2004
(Stated in US Dollars)
(Unaudited)
June 30, December 31,
ASSETS 2005 2004
------ ---- ----
Current
Cash $ 1,976 $ 576
Prepaid expenses 400 800
---------------- ----------------
$ 2,376 $ 1,376
================ ================
LIABILITIES
Current
Accounts payable and accrued liabilities - Note 4 $ 20,935 $ 12,504
Due to related party - Note 4 19,451 5,676
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40,386 18,180
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STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.001 par value
10,000,000 shares authorized, none outstanding
Common stock, $0.001 par value
100,000,000 shares authorized
3,820,000 (December 31, 2004: 3,820,000) shares
outstanding 3,820 3,820
Paid-in capital 87,180 87,180
Deficit accumulated during the pre-exploration stage (129,010) (107,804)
---------------- ----------------
(38,010) (16,804)
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$ 2,376 $ 1,376
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SEE ACCOMPANYING NOTES
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
INTERIM STATEMENTS OF OPERATIONS
for the three and six months ended June 30, 2005 and 2004
and for the period May 4, 2001 (Date of Incorporation) to June 30, 2005
(Stated in US Dollars)
(Unaudited)
May 4, 2001
(Date of
Incorporation)
Three Months Ended Six Months Ended to
June 30, June 30, June 30,
2005 2004 2005 2004 2005
---- ---- ---- ---- ----
Expenses
Accounting and audit fees $ 2,251 $ 562 $ 4,943 $ 1,922 $ 31,177
Administrative services - Note 4 1,500 - 3,000 - 23,500
Bank charges and interest 40 51 112 98 971
Exploration costs 655 655 655 655 2,402
Incorporation costs - - - - 900
Legal fees - - - - 32,206
Mineral lease advance royalty
- Note 3 10,000 - 10,000 2,000 27,960
Office and miscellaneous 750 - 1,500 - 3,518
Transfer agent and listing fees 852 1,753 996 1,952 6,476
------------- ------------- -------------- ------------- ---------------
Loss before other item (16,048) (3,021) (21,206) (6,627) (129,110)
Other item
Interest income - - - - 100
------------- ------------- -------------- ------------- ---------------
Net loss for the period $ (16,048) $ (3,021) $ (21,206) $ (6,627) $ (129,010)
============= ============= ============== ============= ===============
Basic loss per share $ (0.00) $ (0.00) $ (0.01) $ (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 six months ended June 30, 2005 and
2004 and for the period May 4, 2001 (Date of
Incorporation) to June 30, 2005
(Stated in US Dollars)
(Unaudited)
May 4, 2001
(Date of
Incorporation)
Six Months Ended to
June 30, June 30,
2005 2004 2005
---- ---- ----
Cash Flows used in Operating Activities
Net loss for the period $ (21,206) $ (6,627) $ (129,010)
Changes in non-cash working capital items related to
operations:
Prepaid expenses 400 (1,220) (400)
Accounts payable and accrued liabilities 8,431 918 20,935
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(12,375) (6,929) (108,475)
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Cash Flows from Financing Activities
Capital stock issued - - 91,000
Advance from related party 13,775 - 19,451
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13,775 - 110,451
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Increase (decrease) in cash during the period 1,400 (6,929) 1,976
Cash, beginning of the period 576 12,499 -
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Cash, end of the period $ 1,976 $ 5,570 $ 1,976
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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 June 30, 2005
(Stated in US Dollars)
(Unaudited)
Deficit
Accumulated
Additional During the
Common Shares Paid-in Pre-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 ended
December 31, 2002 - - - (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 ended
December 31, 2003 - - - (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 year ended
December 31, 2004 - - - (23,338) (23,338)
--------------- --------------- --------------- ------------------ -------------
Balance as at December 31, 2004 3,820,000 3,820 87,180 (107,804) (16,804)
Net loss for the period - - - (21,206) (21,206)
--------------- --------------- --------------- ------------------ -------------
Balance as at June 30, 2005 3,820,000 $ 3,820 $ 87,180 $ (129,010) $ (38,010)
=============== =============== =============== ================== =============
SEE ACCOMPANYING NOTES
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
NOTES TO INTERIM THE FINANCIAL STATEMENTS
June 30, 2005
(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 that 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,
2004 financial statements.
The results of operations for the six month period ended June 30,
2005 are not necessarily indicative of the results that can be
expected for the year ended December 31, 2005.
Note 2 Continuance of Operations
-------------------------
The interim 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. As at June 30, 2005, the Company
has not yet attained profitable operations, has a working capital
deficiency of $38,010 and has accumulated losses of $129,010 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. The outcome of
these matters cannot be predicted with any certainty at this time
and raise substantial doubt that the Company will be able to
continue as a going concern. These financial statements do not
include any adjustments to the amounts and classification of
assets and liabilities that may be necessary should the Company be
unable to continue as a going concern. The Company anticipates
that additional funding will be in the form of equity financing
from the sale of common shares. The Company may also seek to
obtain short-term loans from the directors of the Company. There
are no current arrangements in place for equity funding or
short-term loans.
Note 3 Commitments
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Mineral Property
By a lease agreement effective June 1, 2001 and amended June 25,
2002, November 25, 2002, January 9, 2004 and April 11, 2005, 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 conditions 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
June 30, 2005
(Stated in US Dollars)
(Unaudited) - Page 2
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Note 3 Commitments - (cont'd)
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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 of the amended agreement dated January
9, 2004 (paid);
- $5,000 on July 9, 2004 (paid);
- $5,000 on April 12, 2005 (paid);
- 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 the execution year as the base year.
In addition, the Company is required to fund exploration
expenditures of $5,000 by April 12, 2005 (paid).
As per the lease agreement, the landlord must give written default
notice to the Company and the Company then has 15 days to cure the
default or the lease can be terminated. No notice has been
received due to current negotiations.
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.
Pacific Spirit Inc.
(A Pre-exploration Stage Company)
Notes to the Interim Financial Statements
June 30, 2005
(Stated in US Dollars)
(Unaudited) - Page 3
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Note 4 Related Party Transactions
--------------------------
The Company was charged the following by a director of the
Company:
May 2, 2001
(Date of
Three months ended Six months ended Incorporation)
June 30, June 30, to June 30,
2005 2004 2005 2004 2005
---- ---- ---- ---- ----
Administrative services $ 1,500 $ - $ 3,000 $ - $ 6,000
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These charges were measured by the exchange amount which is the
amount agreed upon by the transacting parties.
Included in accounts payable at June 30, 2005 is $6,000 (December
31, 2004: $3,000) consisting of unpaid management fees due to a
director of the Company.
The amount due to related party, a director of the Company,
consists of unpaid advances. The amount due is unsecured,
non-interest bearing and has no specific terms for repayment.
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 April 2005, we amended our mineral claims agreement regarding the Del Oro
Property located in Pershing County Nevada. We paid the lessor of the property
$5,000 advance royalty on April 12, 2005 and paid $5,000 on April 12, 2005 for
exploration expenditures.
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 June 30, 2005 was $1,976. 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 second quarter ended June 30, 2005
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We incurred a net loss of $21,206 for the six-month period ended June 30, 2005,
as compared to a loss of $6,627 in the same period in 2004. The difference in
net loss was primarily due to an increase in accounting and audit fees, office
expenses, and administrative services expense and office expenses, and increase
in 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 services ($3,000 per the period January - June, 2005). The
Company also incurred $250 per month for office rent, telephone expenses, and
general miscellaneous office expenses ($1,500 per the period January - June,
2005) related to the use of the Vancouver office. In the comparative period, the
president did not charge the Company for such expenses. During the six-month
period ended June 30, 2005, we incurred transfer agent and filing fees of $996
(2004: $1,952) and accounting and audit fees of $4,943 (2004: $1,922) in order
to bring all outstanding SEC filings current. We incurred $10,000 resource
property costs during this period (2004: $2,000). At the end of the second
quarter, we had cash on hand of $1,976. Our liabilities at the same date
totalled $40,386, and consisted of accounts payable of $20,935 and $19,451 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
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 302 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 June
30, 2005.
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: August 12, 2005