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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 June 30, 2006
---------------
[ ] 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
--------------------------------------- --------------------------
(Address of principal executive offices) (Postal or Zip Code)
Issuer's telephone number, including area code: 604-760-1400
---------------------------
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
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
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 common shares as of August
6, 2006.
Authorized share capital of the registrant 100,000,000 common shares , par value
of $0.001
The Company recorded $nil revenue for the quarter ended June 30, 2006.
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
INTERIM FINANCIAL STATEMENTS
June 30, 2006
(Stated in US Dollars)
(Unaudited)
-----------
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
INTERIM BALANCE SHEETS
June 30, 2006 and December 31, 2005
(Stated in US Dollars)
(Unaudited)
June 30, December 31,
ASSETS 2006 2005
------ ---- ----
Current
Cash $ 247 $ -
=============== ===============
LIABILITIES
-----------
Current
Bank overdraft $ - $ 12
Accounts payable and accrued liabilities - Note 4 23,777 18,318
Due to related party - Note 4 40,817 34,227
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64,594 52,557
--------------- ---------------
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 (2005: 3,820,000) shares outstanding 3,820 3,820
Additional paid-in capital 87,180 87,180
Deficit accumulated during the pre-exploration stage (155,347) (143,557)
---------------- -----------------
(64,347) (52,557)
---------------- -----------------
$ 247 $ -
=============== ===============
SEE ACCOMPANYING NOTES
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
INTERIM STATEMENTS OF OPERATIONS
for the three and six months ended June 30, 2006 and 2005
and for the period May 4, 2001 (Date of Inception) to June 30, 2006
(Stated in US Dollars)
(Unaudited)
----------
May 4, 2001
(Date of
Inception)
Three Months Ended Six Months Ended to
June 30, June 30, June 30,
2006 2005 2006 2005 2006
---- ---- ---- ---- ----
Expenses
Accounting and audit fees $ 2,343 $ 2,251 $ 4,593 $ 4,943 $ 43,658
Administrative services - Note 4 1,500 1,500 3,000 3,000 29,500
Bank charges and interest 32 40 111 112 1,176
Exploration costs - 655 - 655 1,747
Incorporation costs - - - - 900
Legal fees - - - - 32,206
Mineral lease advance royalty
- Note 3 - 10,000 - 10,000 28,615
Office and miscellaneous 750 750 1,500 1,500 6,518
Transfer agent and listing fees 962 852 2,586 996 10,127
------------- ------------- -------------- ------------- ---------------
Loss before other item (5,587) (16,048) (11,790) (21,206) (155,447)
Other item
Interest income - - - - 100
------------- ------------- -------------- ------------- ---------------
Net loss for the period $ (5,587) $ (16,048) $ (11,790) $ (21,206) $ (155,347)
============= ============= ============== ============= ===============
Basic loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.01)
============== ============== ============== =============
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, 2006 and 2005
and for the period May 4, 2001 (Date of Inception) to June 30, 2006
(Stated in US Dollars)
(Unaudited)
-----------
May 4, 2001
(Date of
Three-months ended Inception) to
June 30, June 30,
2006 2005 2006
---- ---- ----
Cash Flows used Operating Activities
Net loss for the period $ (11,790) $ (21,206) $ (155,347)
Changes in non-cash working capital items
related to operations:
Prepaid expenses - 400 -
Accounts payable and accrued liabilities 5,459 8,431 23,777
--------------- -------------- ---------------
(6,331) (12,375) (131,570)
--------------- -------------- ---------------
Cash Flows from Financing Activities
Bank overdraft - - 12
Capital stock issued - - 91,000
Advance from a related party 6,590 13,775 40,817
--------------- -------------- ---------------
6,590 13,775 131,829
--------------- -------------- ---------------
Decrease in cash during the period 259 1,400 259
Cash, beginning of the period - 576 -
--------------- --------------- ---------------
Cash, end of the period $ 259 $ 1,976 $ 259
=============== ============== ===============
SEE ACCOMPANYING NOTES
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
INTERIM STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the period May 4, 2001 (Date of Inception) to June 30, 2006
(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 year ended
December 31, 2005 - - - (35,753) (35,753)
--------------- --------------- --------------- ------------------ ---------------
Balance as at December 31, 2005 3,820,000 3,820 87,180 (143,557) (52,557)
Net loss for the three-months ended
June 30, 2006 - - - (11,790) (11,790)
--------------- --------------- --------------- ------------------ ---------------
Balance as at June 30, 2006 3,820,000 $ 3,820 $ 87,180 $ (155,347) $ (64,347)
=============== =============== =============== ================== ===============
SEE ACCOMPANYING NOTES
PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
June 30, 2006 and 2005
(Stated in US Dollars)
(Unaudited)
-----------
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,
2005 financial statements.
The results of operations for the period ended June 30, 2006, are
not necessarily indicative of the results that can be expected for
the year ended December 31, 2006.
Note 2 Continuance of Operations
-------------------------
These financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going
concern , which assumes that the Company will be able to meet its
obligations and continue its operations for its next twelve
months. Realization values may be substantially different from
carrying values as shown and these financial statements do not
give effect to adjustments that would be necessary to the carrying
values and classification of assets and liabilities should the
Company be unable to continue as a going concern. At June 30, 2006
the Company had not yet achieved profitable operations, has
accumulated losses of $155,347 since its inception, has a working
capital deficiency of $64,347 and expects to incur further losses
in the development of its business, all of which casts substantial
doubt about the Company's ability to continue as a going concern.
The Company's ability to continue as a going concern is dependent
upon its ability to generate future profitable operations and/or
to obtain the necessary financing to meet its obligations and
repay its liabilities arising from normal business operations when
they come due. Management has no formal plan in place to address
this concern but considers that the Company will be able to obtain
additional funds by equity financing and/or related party
advances, however there is no assurance of additional funding
being available.
Note 3 Commitments
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, 2006
(Stated in US Dollars)
(Unaudited) - Page 2
---------
Note 3 Commitments (cont'd)
----------- -
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 of the amended agreement dated
January 9, 2004 (paid);
- $5,000 on July 9, 2004 (paid);
- $5,000 on April 12, 2005 (paid); and
- each January 9 thereafter, a payment of $50,000 plus an
annual increase or decrease equivalent to the date of
inflation designated by the Consumer Price Index for
that year with the execution year as the base year.
The advance royalty payment of $50,000 due January 9, 2006 has not
been made. 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. On March
10, 2006 the Company received a termination notice dated February
18, 2006. All attempts by the Company to negotiate an amendment to
the agreement failed.
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 Inception) to
June 30, June 30, June 30,
2006 2005 2006 2005 2006
---- ---- ---- ---- ----
Administrative services $ 1,500 $ 1,500 $ 3,000 $ 3,000 $ 12,000
============ ============ =========== ============ ==============
The amount due to related party, a director of the Company,
consists of unpaid advances and management fees. 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.
Pacific Spirit Inc. was incorporated under the laws of the state of Nevada. Our
Company's fiscal year end is December 31.
There is no public market for our common shares and our common shares are not
posted for trading or listed on any trading market.
We currently have no revenue from operations. We are in a start-up phase with
our existing assets and we have no significant assets, tangible or intangible.
There can be no assurance that we will generate revenues in the future, or that
we will be able to operate profitably in the future, if at all. We have incurred
net losses in each fiscal year since inception of our operations. We have never
declared bankruptcy, have never been in receivership, and never been involved in
any legal action or proceedings. Since becoming incorporated, we have not made
any significant purchase or sale of assets, nor have we been involved in any
mergers, acquisitions or consolidations.
Our business plan is currently on hold due to a lack of cash resources and the
termination of the lease on March 5, 2006 (15 days from the date of the letter),
2006 over a group of mining claims, which served as our only significant
business activity for future operations. We had been planning to develop a
company focused on exploration and development of mining claims showing
promising gold prospects. We currently have a negative working capital balance
in excess of $64,000 and only $247 in cash.
There is no assurance that we be successful in obtaining any financing, or on
terms that are acceptable to our company. We are actively seeking debt and
equity financing to ensure our survivability. We are also actively seeking
suitable merger partners and business opportunities, which may enable us to
obtain financing or recover value for our stockholders.
Plan of Operation
-----------------
Our immediate plan of operation is to identify and obtain financing to survive.
As of June 30, 2006, our working capital balance is a negative balance of
$(64,347), which means our liabilities exceed our cash resources and ability to
pay by that amount. Our ongoing survival is wholly dependent on funding from our
officers and directors, and the identification and successful completion of
additional long-term or permanent equity financing, the support of creditors and
shareholders, and, ultimately, the achievement of profitable operations. There
can be no assurances that we will be successful. We have already reduced
operations, and in conjunction with our financing activities, we are also
actively seeking viable merger/business partners as an alternative to
liquidation.
Our ability to succeed is uncertain.
Management Discussion and Analysis
At June 30, 2006, we had negative working capital of $(64,347), compared to
negative working capital of $(52,557) for beginning of the fiscal year. At June
30, 2006, our total assets were $247, which consisted solely of cash. Assets
were $nil at the beginning of the year.
At Jnne 30, 2006, our total current liabilities increased to $64,594 from
$52,557 at December 31, 2005.
We have not had revenues from inception. Our business plan and limited
operations are on hold due to a lack of cash and our negative working capital
balance. Our survival is dependent on funding from sales of securities and, as
necessary, or from shareholder loans. Our President has lent our company $40,817
to continue our operations and maintain our statutory corporate and reporting
requirements. We are actively seeking additional financing and/or new business
partners to ensure our survival. There is no assurance that we will be
successful in raising the required amounts, or on terms acceptable to our
company.
We do not anticipate conducting any research and development directly, or hiring
additional employees in the next 12 months.
Results of Operations for the six months ended June 30, 2006
------------------------------------------------------------
We incurred a net loss of $11,790 for the six-month period ended June 30, 2006,
as compared to a loss of $21,206 in the same period in 2005. The difference in
net loss of $9,416 was primarily due to the company's failure to make the
required property payments (2006 - $Nil; 2005 - $10,000). As per management
agreement dated July 1, 2004, the president started to charge the Company $500
per month for administrative services ($3,000 for the period). The Company also
incurred $250 per month for office rent, telephone expenses, and general
miscellaneous office expenses ($1,500 for the period) related to the use of the
Vancouver office. During the six-month period ended June 30, 2006, we incurred
transfer agent and filing fees of $2,586 (2005: $996) and accounting and audit
fees of $4,593 (2005: $4,943) in order to keep SEC filings current.
We have utilized all of our cash resources for our operations to date and
currently have no further resources to continue our operations.
Item 3. Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation,
under the supervision and with the participation of our sole officer and
director of our disclosure controls and procedures (as defined in Rule 13a-15(e)
of the Exchange Act). Based upon this evaluation, our sole officer and director
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and forms.
There has been no change in our internal control over financial reporting during
the current quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
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 and use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Mr. Sotola our sole Officer and Director, continues to advance funds to our
company for working capital purposes (2004 - $8,676; 2005 - $25,551;
2006 - $6,590). The loan is unsecured, has no stated repayment terms, and bears
no interest. As of the date hereof, there is $40,817 due to Mr. Sotola.
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
Notice of Termination of Lease Agreement with J. Prochnau & Co over
the Nevada Mine Properties II.
There were no reports filed on Form 8-K during the six-month period ended June
30, 2006.
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 11, 2006