Edgar Filing: PACIFIC SPIRIT INC

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

For the fiscal year ended December 31, 2002

Commission File No. 001-31546

PACIFIC SPIRIT, INC.
(Name of small business issuer in its charter)

Nevada
(State or other jurisdiction of Incorporation or Organization)

98-0339-560
(I.R.S. Employer Identification Number)

11640-96 A Avenue
Vancouver, B.C., Canada
(604) 760-1400

(Address, including zip code and telephone number,
including area code, of registrant's executive offices)

Securities registered under Section 12(b) of
the Exchange Act:
none

Securities registered under Section 12(g) of
the Exchange Act:
Common Stock
(Title of class)

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 Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.

Yes y No o

Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

(Continued on Following Page)

State the aggregate market value of the voting stock held by
non-affiliates, computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days: $0.10

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of December 31, 2002 there
were 3,820,000 shares of the Company's common stock issued and outstanding.

State the issuer's revenues for its most recent fiscal year:
Net loss of $71.504

Documents Incorporated by Reference:

None

This Form 10-KSB consists of

Exhibit Index is located at Page

TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT
PACIFIC SPIRIT, INC.

Page
Facing Page
Index
PART I
Item 1. Description of Business 1
Item 2. Description of Property 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 8
Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations 8
Item 7. Financial Statements F-1-F-10
Item 8. Changes in and Disagreements on Accounting and Financial Disclosure 13
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 16(a) of the Exchange Act 13
Item 10. Executive Compensation 14
Item 11. Security Ownership of Certain Beneficial Owners and Management 14
Item 12. Certain Relationships and Related Transactions 14
PART IV
Item 13. Exhibits and Reports on Form 8-K 15
SIGNATURES 16

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

The following discussion should be read in conjunction with our audited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or our behalf. We disclaim any obligation to update forward
looking statements.

History And Organization

Pacific Spirit, Inc. (the "Company") was recently incorporated under
the laws of the state of Nevada on May 4, 2001. We have not commenced business
operations and we are considered an exploration stage enterprise. To date, our
activities have been limited to organizational matters, obtaining a geologist's
report and the preparation and filing of the registration statement of which
this prospectus is a part. In connection with the organization of our company,
the founding shareholder of our company contributed an aggregate of $25,000 cash
in exchange for 2,500,000 shares of common stock. We have no significant assets,
and we are totally dependent upon the successful completion of this offering and
receipt of the proceeds there from, of which there is no assurance, for the
ability to commence our proposed business operations.

Proposed Business

On June 7, 2001, Pacific Spirit acquired a 30 year mineral lease from
Nevada Mine Properties II, Inc., the owner of six unpatented lode mineral
claims, sometimes referred to as the "Del Oro" property in Nevada. There is no
affiliation between Pacific Spirit and the lessor. An unpatented claim is one in
which more assessment work is necessary before all mineral rights can be
claimed. We are presently in the pre-exploration stage and there is no assurance
that a commercially viable mineral deposit exists in our property until
exploration is done and a comprehensive evaluation concludes economic and legal
feasibility.

Under the terms of the mineral lease, Pacific Spirit may extend the
initial term for one additional period of 30 years by giving the owner notice of
such extension not less than thirty days prior to the expiration of the initial
term or any extension thereof. Pacific Spirit has the exclusive possession of
the property for mining purposes during the term of the lease.

terminate. Any default claimed with respect to the payment of money may be cured
by the deposit in escrow of the amount in controversy (not including claimed
consequential, special, exemplary, or punitive damages) and giving of notice of
the deposit to the owner, the amount to remain in escrow until the controversy
is resolved by decision of a court or otherwise. If Pacific Spirit by notice to
owner disputes the existence of a default, then the lease shall not terminate
unless Pacific Spirit does not initiate and diligently pursue steps to correct
the default within thirty days after the existence of a default has been
determined by decision of a court or otherwise.

Under the terms of the lease, Pacific Spirit is obligated to pay
royalties of 4% of the net returns from all minerals sold or processed. In
addition, Pacific Spirit must pay a minimum annual royalty, of which the first
payment of $5,000 has already been made.

Our business activities to date have been restricted to obtaining a
report from our mining engineer, Sam S. Arentz, III, and preparing this
offering. According to Mr. Arentz's report, the six Del Oro claims were staked
in 1986 by wx syndicate who completed 12 shallow air track drill holes which
returned gold assays in the amount of 0.019 Ounces per ton over 10 feet to 0.010
Ounces per ton over 50 feet.

In 1992, Equinox Resources assumed the operations of the wx Syndicate.
The Del Oro claims were leased in 1993 to Cameco U. S., Inc. which conducted
magnetic surveys, rock and limited soil sampling and then drilled 4,610 feet in
eleven reverse circulation drill holes. This drilling returned anomalous gold
assays to 0.012 ounces per ton over 25 feet north of the present claim position.
Cameco surrendered their lease in 1994 to Nevada Mine Properties, Inc. (a
subsidiary of Hecla Mining Co.). Subsequently Nevada Mine Properties
quit-claimed the property to Nevada Mine Properties II,Iinc (no association with
Hecla).

In 1995 Newhawk Gold Mines LTD. Acquired a land position in the area
which included a lease on the Del Oro Property. A regional soil grid survey in
1996 resulted in a three-hole 1,850 foot reverse circulation drill program
testing the roots beneath the previously drilled air track targets. Drill
intercepts returned 0.017 ounces per ton of gold over 15 feet. The leased
property has been maintained by Nevada Mine Properties II, Inc. Since 1998. In
June 2001, Pacific Spirit Inc. leased the six claims from Nevada Mine Properties
II, Inc.

Mr. Arentz recommends a two phase program to explore the Del Oro Property.
Phase 1 includes additional claim staking followed by geologic mapping and rock
chip and soil sampling. A five hole, 2,500 foot reverse circulation drill
program is proposed for phase 1. If drilling intersects gold values in the 0.05
To 0.10 Ounces per ton range over thicknesses of tens of feet, then
consideration would be given toward a phase 2 effort which would include an
additional 5000 feet of reverse circulation drilling.

PHASE 1 - PROPOSED BUDGET

ESTIMATED COSTS (US$)
---------------------
Claim Acquisition 2,000.
Rock and Soil Sampling and Assays 2,500.
Geologic Mapping 3,000.
Drilling + Assays (2,500' @ $15 / Ft) 37,500.
Reclamation 5,000.
Report Preparation 3,000.
------
53,000.

PHASE 2 - PROPOSED BUDGET

ESTIMATED COSTS (US$)
---------------------
Drilling + Assays (5000' @ $15 / Ft) 75,000.
Reclamation 5,000.
Report Preparation 3,000.
------
83,000.

Location and Access

The Del Oro Property is Located in Sections 29, 30, and 31, Township 31
North, Range 38 East, MDB&M, Pershing county, Nevada. The claims are situated in
the Goldbanks Mining District approximately 28 miles south of Winnemucca,
Nevada. Access from Winnemucca is south along the Grass Valley paved / gravel
road for approximately 22 miles, turning southwest onto a dirt road toward the
east range about one mile north of Leach Hot Springs. The dirt road runs
generally down-slope toward the southwest for approximately four miles, then
changes to a south-southeast direction and begins upslope for approximately
three miles here the road enters unnamed drainage and continues approximately
two and one half miles southwest onto the north side line of the claims.

Our Proposed Exploration Program

We must conduct exploration to determine what amount of minerals, if any,
exist on our properties, and if any minerals which are found can be economically
extracted and profitably processed. Our exploration program is designed to
economically explore and evaluate our claims.

We do not claim to have any minerals or reserves whatsoever at this time on
any of our claims. We intend to implement an exploration program and to proceed
in the following two phases:

Phase 1 will begin with research of the available geologic literature,
personal interviews with geologists, mining engineers and others familiar with
the prospect sites.

When research is completed, our initial work will be augmented with
geologic mapping, geophysical testing and geo-chemical testing of our claims.
When available, existing workings, like trenches, prospect pits, shafts or
tunnels will be examined. If an apparent mineralized zone is identified and
narrowed down to a specific area by the studies, we will begin drilling the
area.
Once drilling is performed samples are taken and then analyzed for
economically potential minerals that are known to have occurred in the area.
Careful interpretation of this available data collected from the various tests
aid in determining whether or not the prospect has current economic potential
and whether further exploration is warranted. Phase 1 will take about three
months and cost up to $53,000.

Phase 2 involves an initial examination of the underground characteristics
of the mineralization structure that was identified by Phase 1 of exploration.
Phase 2 is aimed at identifying any mineral deposits of potential economic
importance. The methods employed are

- more extensive drilling
- more advanced geophysical work

Drilling identifies the continuity and extent of mineralization, if
any, below the surface. After a thorough analysis of the data collected in Phase
2, we will decide if the property warrants a Phase 3 study. Phase 2 will take
about six months and cost up to $83,000. We do not intend to interest other
companies in the property if we find mineralized materials.

Competitive Factors

The mineral industry is fragmented. We compete with other exploration
companies looking for a variety of mineral reserves. We may be one of the
smallest exploration companies in existence. Although we will be competing with
other exploration companies, there is no competition for the exploration or
removal of minerals from our property. Readily available markets exist in North
America and around the world for the sale of minerals. Therefore, we intend to
explore mining claims to the production point in which major mining production
companies would seriously consider pursuing the property as a valuable and
significant acquisition.

Regulations

Our exploration activities will be subject to the Federal Land Policy
And Management Act of 1976 in addition to surface management regulations issued
in 1980 by the Bureau of Land Management in the Code of Federal Regulations.
These statutes and regulations are designed to protect public lands from
unnecessary or undue degradation and to ensure that areas disturbed during the
search for and extraction of mineral resources are reclaimed. BLM rules and
regulations governing mining on federal lands include the preparation of a Draft
Environmental Impact Statement, public hearings and approval of a final
Environmental Impact Statement. The final Environmental Impact Statement will
address county and state needs and requirements and covers issues and permit
requirements concerning air quality, heritage resources, geology, energy, noise,
soils, surface and ground water, wetlands, use of hazardous chemicals,
vegetation, wildlife, recreation, land use, socioeconomic impact, scenic
resources, health and welfare, transportation and reclamation. Bonding
requirements for our exploration activities are developed from the final
Environmental Impact Statement.

We will follow these procedures for exploration and, if development is
warranted on the property, will file final plans of operation before we start
any mining operations. We anticipate no discharge of water into active stream,
creek, river, lake or any other body of water regulated by environmental law or
regulation. No endangered species will be disturbed. Restoration of the
disturbed land will be completed according to law. All holes, pits and shafts
will be sealed upon abandonment of the property. It is difficult to estimate the
cost of compliance with the environmental law since the full nature and extent
of our proposed activities cannot be determined until we start our operations
and know what that will involve from an environmental standpoint.

The initial drill program outlined in Phase I will be conducted on BLM
lands. The BLM will require the submittal of a plan of operation which would be
used as the basis for the bonding requirement, water permit and reclamation
program. The reclamation program could include both surface reclamation and
drill hole plugging and abandonment. The amount of the bonding would be based
upon an estimate by the BLM related to the cost of reclamation if done by an
independent contractor. It is estimated the bonding requirement would be
$5000.00. The water permit and fee is included in the reclamation cost which is

estimated to be $1000.00.

The estimate for Phase II reclamation and bonding is based on the
assumption that we have completed the Phase I reclamation and that the $5000.00
Phase I bond is still in place. Based upon this assumption, it is estimated that
an additional bond of $5,000.00 would be required for Phase II for a total
bonding requirement of $10,000.00.

Following the completion of a feasibility study at the completion of
Phase II, we would be subjected to the BLM rules and regulations governing
mining on federal lands including a draft environmental impact statement or EIS,
public hearings and a final EIS. The final EIS would address county and state
needs and requirements and would cover issues and permit requirements
concerning: air quality, heritage resources, geology, energy, noise, soils,
surface and ground water, wetlands, use of hazardous chemicals, vegetation,
wildlife, recreation, land use, socioeconomic impact, scenic resources, health
and welfare, transportation and reclamation. Bonding requirements for mining are
developed from the final EIS. A draft EIS would be submitted following a
feasibility study that could only be performed at the completion of Phase II of
the exploration plans. It is impossible to know at this time how long it would
take to obtain a final EIS because we can not yet say what the feasibility study
will reveal.

We are in compliance with all laws and will continue to comply with the
laws in the future. We believe that compliance with the laws will not adversely
affect our business operations. Pacific Spirit anticipates that it will be
required to post bonds in the event the expanded work programs involve extensive
surface disturbance.

Employees

Initially, we intend to use the services of subcontractors for manual
labor exploration work on our properties. Pacific Spirit will consider hiring
technical consultants as funds from this offering and additional offerings or
revenues from operations in the future permit. At present, our only employee is
Mr. Solota.

Employees

Initially, we intend to use the services of subcontractors for manual labor
exploration work on our properties. Pacific Spirit will consider hiring
technical consultants as funds from this offering and additional offerings or
revenues from operations in the future permit. At present, our only employee is
Mr. Sotola.

Employees and Employment Agreements

At present, we have no employees, other than Mr. Peter Sotola, our
president and sole director who has received no compensation for his services.
Mr. Sotola does not have an employment agreement with us. We presently do not
have pension, health, annuity, insurance, stock options, profit sharing or
similar benefit plans; however, we may adopt plans in the future. There are
presently no personal benefits available to any employees.

ITEM 2. DESCRIPTION OF PROPERTY

affiliation between Pacific Spirit and the lessor. An unpatented claim is one in
which more assessment work is necessary before all mineral rights can be
claimed. We are presently in the pre-exploration stage and there is no assurance
that a commercially viable mineral deposit exists in our property until
exploration is done and a comprehensive evaluation concludes economic and legal
feasibility.

If Pacific Spirit fails to comply with any of the provisions of the
lease and does not initiate and diligently pursue steps to correct the default
within thirty days after notice has been given to it by owner specifying with
particularity the nature of the default, then upon the expiration of the
thirty-day period, all rights of Pacific Spirit under the lease terminate and
all liabilities and obligations of Pacific Spirit except royalties then due
terminate. Any default claimed with respect to the payment of money may be cured
by the deposit in escrow of the amount in controversy (not including claimed
consequential, special, exemplary, or punitive damages) and giving of notice of
the deposit to the owner, the amount to remain in escrow until the controversy
is resolved by decision of a court or otherwise. If Pacific Spirit by notice to
owner disputes the existence of a default, then the lease shall not terminate
unless Pacific Spirit does not initiate and diligently pursue steps to correct
the default within thirty days after the existence of a default has been
determined by decision of a court or otherwise.

ITEM 3. LEGAL PROCEEDINGS

There are no material legal proceedings to which we (or any of our
officers and directors in their capacities as such) is a party or to which our
property is subject and no such material proceedings is known by our management
to be contemplated.

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

None

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

(a) Market Information. The Company has applied to quote its securities on
the Over-The-Counter Bulletin Board (OTCBB)

(b) Holders. There are 30 shareholders of our common stock.

(c) Dividends. We have not paid any dividends on our common stock since
inception. We do not foresee that we will have the ability to pay a dividend on
our common stock in the fiscal year ending December 31, 2002.

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

We are a start-up, exploration stage company and have not yet generated or
realized any revenues from our business operations.

Our auditors have issued a going concern opinion. This means that our
auditors believe there is doubt that we can continue as an on-going business for
the next twelve months unless we obtain additional capital to pay our bills.
This is because we have not generated any revenues and no revenues are
anticipated until we begin removing and selling minerals. Accordingly, we must
raise cash from sources other than the sale of minerals found on our property.
Our only other source for cash at this time is investments by others in our
company. We must raise cash to implement our project and stay in business.

To meet our need for cash we are attempting to raise money from this
offering. There is no assurance that we will be able to raise enough money
through this offering to stay in business. Whatever money we do raise will be
applied first to exploration and then if reserves are found, to development, if
warranted. If we do not raise all of the money we need from this offering, we
will have to find alternative sources, like a second public offering, a private
placement of securities, or loans from our officers or others. At the present
time, we have not made any arrangements to raise additional cash, other than
through this offering. If we need additional cash and cannot raise it, we will
either have to suspend operations until we do raise the cash, or cease
operations entirely.

We will be conducting research in connection with the exploration of our
property. We are not going to buy or sell any plant or significant equipment. We

do not expect a change in our number of employees.

Limited Operating History; Need for Additional Capital

There is no historical financial information about our company upon which
to base an evaluation of our performance. We are an exploration stage company
and have not generated any revenues from operations. We cannot guarantee we will
be successful in our business operations. Our business is subject to risks
inherent in the establishment of a new business enterprise, including limited
capital resources, possible delays in the exploration of our properties, and
possible cost overruns due to price and cost increases in services.

To become profitable and competitive, we must conduct research and
exploration of our properties. We are seeking equity financing to provide for
the capital required to implement our research and exploration phases.

We have no assurance that future financing will be available to us on
acceptable terms. If financing is not available on satisfactory terms, we may be
unable to continue, or expand our operations. Equity financing could result in
additional dilution to existing shareholders.

Results of Operations

From Inception on May 4, 2001

On June 7, 2001 we acquired our first interest in un-patented lode
mineral claims. At this time we have not yet commenced the research and/or
exploration stage of our operations on that property. We have paid $5,000 for a
mining lease. As of December 31, 2002, the date of our latest audited financial
statements, we have experienced operating losses of $71,504.

Plan of Operations

Since inception, we have used our common stock to raise money for our
property acquisition, for corporate expenses and to repay outstanding
indebtedness. Net cash provided by financing activities from inception on May 4,
2001 to May 31, 2001 was $25,000 as a result of proceeds received from our
president and sole director. Our business activities to date have been
restricted to obtaining a mining engineer's report and preparing this offering.

Pacific Spirit 's plan of operations for the next twelve months is to
undertake Phase I of the drilling and exploration program. Phase I is estimated
to be cost $53,000.00 and therefore can not be completed unless more than 75% of
the offering is sold. If only 50% of the offering is sold, we will be able to
make an annual royalty payment, obtain permits, bonds and conduct land
preparation along with surveying, drill site location and some drilling, but we
will not be able to complete our exploration program or analyze the results. If
only 25% of our offering is sold, we will be able to pay the offering expenses
only. If less than 25% of the offering is sold we will become indebted for
offering expenses and we may have to cease operations entirely. We have no plan
to engage in any alternative business if Pacific Spirit ceases or suspends
operations as a result of not having enough money to complete any phase of the
exploration program.

Phase I will involve drilling five holes to investigate the extent of
mineralization of the claims which will include additional claim staking
followed by geologic mapping and rock chip and soil sampling. Claim staking is
estimated to cost $2,000. Geological mapping, rock chip and soil sampling will
cost approximately $5,500. Drilling expenses are expected to about $37,500 and
reclamation about $5,000. Expenses associated with the geologist's report for

Phase I are anticipated to be approximately $3,000.

Liquidity and Capital Resources

As of the date of this registration statement, we have yet to generate
any revenues from our business operations. Since our inception, Mr. Sotola has
paid $25,000 in cash in exchange for 2,500,000 shares of common stock. This
money has been utilized for organizational and start-up costs and as operating
capital. As of December 31, 2002 we had sustained operating losses $71,504.

We will not able to conduct meaningful business operations unless we
sell at least 50% of this offering. In addition, unless more than 75% of the
offering is sold, we will not be able to complete Phase I. Assuming sufficient
funds are raised in this offering to complete Phase I, we will be able evaluate
within the next 12 months whether to proceed with Phase II. Should we decide to
proceed with Phase II, we will be required to raise an additional $83,000.00 in
addition to offering expenses.

According to the terms or our mineral lease, we are obligated by June
7, 2002 to pay a minimum royalty of $8,000 followed by annual minimum royalty
payments thereafter of $16,000 in 2003, $24,000 in 2004, $50,000 in 2005 and
$50,000 every year thereafter. We will be required to renegotiate the terms of
the mineral lease in the event we are unable to raise sufficient funds in time
to meet these obligations.

ITEM 7. FINANCIAL STATEMENTS

PACIFIC SPIRIT, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
Independent Auditors' Report F-2
Consolidated balance sheets as of December 31, 2002 and 2001 F-3
Consolidated statements of operations for the years ended December 31, 2001 and 2000 F-4
Consolidated statements of stockholders' deficit for the years ended December 31, 2001 and 2000 F-5
Consolidated statements of cash flows for the years ended December 31, 2001 and 2000 F-6
Notes to consolidated financial statements F-7

PACIFIC SPIRIT, INC.

REPORT AND FINANCIAL STATEMENTS

December 31, 2002 and 2001

(Stated in US Dollars)

F-1

[LETTERHEAD OF AMISANO HANSON]

INDEPENDENT AUDITORS' REPORT

To the Stockholders,
Pacific Spirit Inc.

We have audited the accompanying balance sheets of Pacific Spirit Inc. (A
Pre-exploration Stage Company) as of December 31, 2002 and 2001 and the related
statements of operations, cash flows and stockholders' deficiency for the year
ended December 31, 2002 and the period May 4, 2001 (Date of Incorporation) to
December 31, 2001 and the period May 4, 2001 (Date of Incorporation) to December
31, 2002. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, these financial statements referred to above present fairly, in
all material respects, the financial position of Pacific Spirit Inc. as of
December 31, 2002 and 2001 and the results of its operations and its cash flows
for the year ended December 31, 2002, the period May 4, 2001 (Date of
Incorporation) to December 31, 2001 and the period May 4, 2001 (Date of
Incorporation) to December 31, 2002, in conformity with accounting principles
generally accepted in the United States of America.

The accompanying financial statements referred to above have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company is in the exploration stage, and has
no established source of revenue and is dependent on its ability to raise
capital from shareholders or other sources to sustain operations. These factors,
along with other matters as set forth in Note 1, raise substantial doubt that
the Company will be able to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Vancouver, Canada "AMISANO HANSON"
February 26, 2003 Chartered Accountants

F-2

PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
BALANCE SHEETS
December 31, 2002 and 2001
(Stated in US Dollars)
--------------------

ASSETS 2002 2001
------ ---- ----
Current
Cash $ 27,983 $ 29

LIABILITIES
Current
Accounts payable $ 8,487 $ 14,534
Advance from a director - 750

8,487 15,284

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 (2001: 2,500,000) 3,820 2,500
Paid in capital 87,180 22,500
Deficit accumulated during the pre-exploration stage ( 71,504) ( 40,255)

19,496 ( 15,255)

$ 27,983 $ 29

Nature and Continuance of Operations - Note 1
Commitments - Note 5

F-3

PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
STATEMENTS OF OPERATIONS
for the year ended December 31, 2002,
for the period May 4, 2001 (Date of
Incorporation) to December 31, 2001 and the
period May 4, 2001 (Date of Incorporation) to
December 31, 2002
(Stated in US Dollars)
--------------------

May 4, 2001 May 4, 2001
(Date of (Date of
Year ended Incorporation) to Incorporation) to
December 31, December 31, December 31,
2002 2001 2002
---- ---- ----
Expenses
Administrative services $ 10,000 $ 7,000 $ 17,000
Audit fees 8,451 4,482 12,933
Bank charges 267 152 419
Exploration costs 758 989 1,747
Incorporation costs - 900 900
Legal fees 6,953 21,534 28,487
Mineral lease advance royalty - Note 5 (a) 3,000 5,000 8,000
Office 34 253 287
Transfer agent fees 1,805 - 1,805

Loss before other item ( 31,268) ( 40,310) ( 71,578)
Other item:
Interest income 19 55 74

Net loss for the period $ ( 31,249) $ ( 40,255) $ ( 71,504)

Basic loss per share $ ( 0.01) $ ( 0.03)

Weighted average number of shares outstanding 2,720,000 1,554,795

F-4

PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
STATEMENTS OF CASH FLOWS
for the year ended December 31, 2002,
for the period May 4, 2001 (Date of
Incorporation) to December 31, 2001 and the
period May 4, 2001 (Date of Incorporation) to
December 31, 2002
(Stated in US Dollars)
--------------------

May 4, 2001 May 4, 2001
(Date of (Date of
Year ended Incorporation) to Incorporation) to
December 31, December 31, December 31,
2002 2001 2002
---- ---- ----
Cash Flows from (used in) Operating Activities
Net loss for the period $ ( 31,249) $ ( 40,255) $ ( 71,504)
Change in non-cash working capital balance
related to operations
Accounts payable ( 6,047) 14,534 8,487

( 37,296) ( 25,721) ( 63,017)

Cash Flows from Financing Activities
Capital stock issued 66,000 25,000 91,000
Increase (decrease) in advance from a director ( 750) 750 -

65,250 25,750 91,000

Increase in cash during the period 27,954 29 27,983

Cash, beginning of the period 29 - -

Cash, end of the period $ 27,983 $ 29 $ 27,983

Supplemental disclosure of cash flow information Cash paid for:
Interest $ - $ - $ -

Income taxes $ - $ - $ -

F-5

PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(DEFICIENCY) for the period May 4, 2001 (Date of
Incorporation) to December 31, 2002
(Stated in US Dollars)
--------------------

Deficit
Accumulated
Additional During the Pre-
Common Shares 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

F-6

PACIFIC SPIRIT INC.
(A Pre-exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2002 and 2001
(Stated in US Dollars)
--------------------

Note 1 Nature and Continuance of Operations

The Company is in the pre-exploration stage. The Company has
entered into a lease agreement to explore and mine a property
located in the State of Nevada, United States of America and has
not yet determined whether this property contains reserves that
are economically recoverable. The recoverability of amounts from
the property will be dependent upon the discovery of economically
recoverable reserves, confirmation of the Company's interest in
the underlying property, the ability of the Company to obtain
necessary financing to satisfy the expenditure requirements under
the property agreement and to complete the development of the
property and upon future profitable production or proceeds for the
sale thereof.

These financial statements have been prepared on a going concern
basis. The Company has accumulated a deficit of $71,504 since
inception. Its ability to continue as a going concern is dependent
upon the ability of the Company to generate profitable operations
in the future and/or to obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business
operations when they come due.

The Company was incorporated in Nevada on May 4, 2001.

Note 2 Summary of Significant Accounting Policies

The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the
United States of America. Because a precise determination of many
assets and liabilities is dependent upon future events, the
preparation of financial statements for a period necessarily
involves the use of estimates which have been made using careful
judgement. Actual results may vary from these estimates.

The financial statements have, in management's opinion, been
properly prepared within reasonable limits of materiality and
within the framework of the significant accounting policies
summarized below:

Pre-exploration Stage Company

The Company complies with Financial Accounting Standards Board
Statement No. 7 and Securities and Exchange Commission
Act Guide 7 for its characterization of the Company as
pre-exploration stage.

Mineral Lease

Costs of lease, acquisition, exploration, carrying and retaining
unproven mineral lease properties are expensed as incurred.

F-7

Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------

Environmental Costs

Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate
to an existing condition caused by past operations, and which do
not contribute to current or future revenue generation, are
expensed. Liabilities are recorded when environmental assessments
and/or remedial efforts are probable, and the cost can be
reasonably estimated. Generally, the timing of these accruals
coincides with the earlier of completion of a feasibility study or
the Company's commitments to plan of action based on the then
known facts.

Income Taxes

The Company uses the liability method of accounting for income
taxes pursuant to Statement of Financial Accounting
Standards, No. 109 "Accounting for Income Taxes".

Basic Loss Per Share

The Company reports basic loss per share in accordance with the
Statement of Financial Accounting Standards No,. 128, "Earnings
Per Share". Basic loss per share is computed using the weighted
average number of shares outstanding during the period.

Fair Value of Financial Instrument

The carrying value of cash, accounts payable and advance from a
director approximates their fair value because of the short
maturity of these instruments. Unless otherwise noted, it is
management's opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these
financial instruments.

New Accounting Standards

Management does not believe that any recently issued, but not yet
effective accounting standards if currently adopted could have a
material effect on the accompanying financial statements.

F-8

Note 3 Deferred Tax Assets

The Financial Accounting Standards Board issued Statement Number
109 in Accounting for Income Taxes ("FAS 109") which is effective
for fiscal years beginning after December 15, 1992. FAS 109
requires the use of the asset and liability method of accounting
of income taxes. Under the assets and liability method of FAS 109,
deferred tax assts and liabilities are recognized for the future
tax consequences attributable to temporary differences between the
financial statements carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.

The following table summarizes the significant components of the
Company's deferred tax assets:

Total
Deferred Tax Assets
Non-capital loss carryforward $ 12,877
Valuation allowance for deferred tax asset ( 12,877)

$ -

The amount taken into income as deferred tax assets must reflect
that portion of the income tax loss carryforwards that is likely
to be realized from future operations. The Company has chosen to
provide an allowance of 100% against all available income tax loss
carryforwards, regardless of their time of expiry.

Note 4 Income Taxes

No provision for income taxes has been provided in these financial
statements due to the net loss. At December 31, 2002 the Company
has net operating loss carryforwards, which expire commencing in
2021, totalling approximately $71,504, the benefit of which has
not been recorded in the financial statements.

Note 5 Commitments

(a) Mineral Property

By a lease agreement effective June 1, 2001 and amended June
25, 2002 and November 25, 2002, 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:

F-9

Note 5 Commitments - (cont'd)
-----------

(a) 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 $3,000 (paid) for extension of the
agreement;
- $8,000 on June 1, 2003;
- $16,000 on June 7, 2003
- $24,000 on June 7, 2004
- $50,000 on June 7, 2005 and thereafter

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.

F-10

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

None.

PART III

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

Directors are elected for one-year terms or until the next annual meeting
of shareholders and until their successors are duly elected and qualified.
Officers continue in office at the pleasure of the Board of Directors.

The Directors and Officers of the Company as of the date of this report
are as follows:

Name Age Position

Peter Sotola 56 Director

All our Directors hold office until the next annual meeting of our
shareholders and until successors have been elected and qualified. Our officers
are elected by our Board of Directors and hold office until their death or until
they resign or are removed from office.

There are no family relationships among the officers and directors. There
is no arrangement or understanding between us (or any of our directors or
officers) and any other person pursuant to which such person was or is to be
selected as a director or officer.

(b) Resumes

Peter Sotola is the founder of our company. Mr. Sotola has been the President,
Secretary-Treasurer and Director since Pacific Spirit's inception on May 4,
2001. Between 1987 and 1999 Mr. Sotola was an account executive at Georgia
Pacific Securiites, which has its principal offices in Vancouver, British
Columbia, and engages in the business of buying and selling public securities.
From 1999 to the present Mr. Sotola has been engaged in providing business
consulting services. He is expected to hold his position with our company until
the next annual meeting of shareholders. Mr. Sotola educational experience
includes attending the College of Hotel Management in Mareinbad, Czechoslovakia
between 1976 and 1980. From 1980 to 1982 he attended the Economic University in
Prague, Czechoslovakia where he majored in economics and political science.

ITEM 10. EXECUTIVE COMPENSATION.

Remuneration

The following table reflects all forms of compensation for services to us
for the years ended December 31, 2000 and 1999 of our then chief executive
officer.

SUMMARY COMPENSATION TABLE

Long Term Compensation
Awards
Annual Compensation
Securities Payouts
Underlying
Options/
SARs
(#)
Other Restricted All
Annual Stock Other
Compensation Award(s) Compensation
($) ($) ($)
Name and Principal Year Salary Bonus LTIP
Position ($) ($) Payouts
($)
Peter Sotola 2002 0 0 0 0 0 0 0 0

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

(16) and (b) Security Ownership of Certain Beneficial Owners and Management.

The table below lists the beneficial ownership of the our voting
securities by each person known by us to be the beneficial owner of more than 5%
of such securities, as well as by all of our directors and officers, as of the
date of this report. Unless otherwise indicated, the shareholders listed possess
sole voting and investment power with respect to the shares shown.

Title of Name and Address of Beneficial Owner Amount and Percent of
Class Nature of Class
Beneficial
Ownership
Common Peter Sotola 2,500,000 65.440%

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In connection with the organization of Pacific Spirit , Peter Sotola, the
founding shareholder, President, Secretary-Treasurer and Director of our
company, has paid an aggregate of $25,000.00 cash to purchase 2,500,000 shares
of common stock of Pacific Spirit .

Pacific Spirit presently has no office facilities but for the time
being will use as its business address the office of Mr. Sotola on a rent free
basis, until such time as the business operations of our company may require
more extensive facilities and our company has the financial ability to rent
commercial office space. There is presently no formal written agreement for the

use of such facilities, and no assurance that such facilities will be available
to our company on such a basis for any specific length of time.

We have no formal written employment agreement or other contracts with
our officers, and there is no assurance that the services to be provided by
them, and facilities to be provided by Mr. Sotola, will be available for any
specific length of time in the future. Mr. Sotola anticipates initially devoting
up to approximately 15% of his time to the affairs of our company. If and when
the business operations of our company increase and a more extensive time
commitment is needed, Mr. Sotola is prepared to devote more time to our company,
in the event that becomes necessary. The amounts of compensation and other terms
of any full time employment arrangements with our company would be determined if
and when such arrangements become necessary.

PART IV

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

3.1Certificate and Articles of Incorporation*
3.2Bylaws**

*
Filed with the Securities and Exchange Commission in the Exhibits to Form
SB-2, filed on August 24, 2001 and are incorporated by reference herein.

**
Filed with the Securities and Exchange Commission in the Exhibits to Form
SB-2, filed on August 24, 2001 and are incorporated by reference herein.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on April 14, 2003.

Pacific Spirit, Inc.
(Registrant)
By: /s/ Peter Sotola
Peter Sotola

In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
indicated on April 14, 2003, 2002.

/s/ Peter Sotola
Peter Sotola, Director

BREAM VENTURS, INC.

Exhibit Index to Annual Report on Form 10-KSB For the Fiscal Year
Ended December 31, 2002

EXHIBITS

3.1Certificate and Articles of Incorporation*
3.2Bylaws**

*
Filed with the Securities and Exchange Commission in the Exhibits to Form
SB-2, filed on August 24, 2001 and are incorporated by reference herein.

**
Filed with the Securities and Exchange Commission in the Exhibits to Form
SB-2, filed on August 24, 2001 and are incorporated by reference herein.

CERTIFICATIONS*
I, Peter Sotola, certify that:
1. I have reviewed this annual report on Form 10-KSB of Pacific Spirit, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed
such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in
which this annual report is being prepared; b) evaluated the effectiveness of
the registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the "Evaluation Date"); and c)
presented in this annual report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions): a) all significant deficiencies in the design or
operation of internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in internal
controls; and b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated
in this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date:
April 14, 2003
Peter Sotola
/s/Peter Sotola, CEO and Principal Financial Officer
* Provide a separate certification for each principal executive officer and
principal financial officer of the registrant. See Rules 13a-14 and 15d-14. The
required certification must be in the exact form set forth above.