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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
------------------------
[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period to
------------------ --------------------
Commission File Number 001-31546
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FOOTHILLS RESOURCES, INC.
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(Exact name of small Business Issuer as specified in its charter)
Nevada 98-0339560
--------------------------------- -----------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Canadiana Lodge, Wellfield Close, Coad's Green
Launceston, Cornwall, England, PL15 7LR
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(Address of principal executive offices)
01566 782 199
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Registrant's telephone number, including area code
Not Applicable
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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: 1,366,000 shares of $0.001 par value
common stock outstanding as of November 2, 2004
<page>
FOOTHILLS RESOURCES, INC.
(A Pre-exploration Stage Company)
INTERIM FINANCIAL STATEMENTS
September 30, 2004
(Stated in US Dollars)
(Unaudited)
-----------
<page>
FOOTHILLS RESOURCES, INC.
(A Pre-exploration Stage Company)
BALANCE SHEETS
September 30, 2004 and December 31, 2003
(Stated in US Dollars)
(Unaudited)
-----------
<table>
<caption>
September 30, December 31,
ASSETS 2004 2003
------ ---- ----
<s> <c> <c>
Current
Cash $ 4,022 $ 681
Prepaid expenses 500 200
------------ -----------
$ 4,522 $ 881
============ ===========
LIABILITIES
-----------
Current
Accounts payable $ 6,948 $ 7,377
Due to related party - Note 3 38,963 16,691
------------ -----------
45,911 23,068
------------ -----------
STOCKHOLDERS' DEFICIENCY
------------------------
Preferred stock, $0.001 par value
1,000,000 shares authorized, none outstanding
Common stock, $0.001 par value
100,000,000 shares authorized
1,366,000 (2003: 1,366,000) shares outstanding 1,366 1,366
Paid-in capital 79,434 79,434
Deficit accumulated during the pre-exploration stage ( 122,189) ( 103,987)
----------- -----------
( 41,389) ( 23,187)
----------- -----------
$ 4,522 $ 881
=========== ===========
</table>
SEE ACCOMPANYING NOTES
<page>
FOOTHILLS RESOURCES, INC.
(A Pre-exploration Stage Company)
STATEMENTS OF OPERATIONS
for the nine months ended September 30, 2004 and 2003
and for the period November 17,2000 (Date of Incorporation)to September 30,2004
(Stated in US Dollars)
(Unaudited)
-----------
<table>
<caption>
November 17,
2000 (Date of
Three months ended Nine months ended Incorporation)
September 30, September 30, To Sept. 30,
2004 2003 2004 2003 2004
---- ---- ---- ---- ----
<s> <c> <c> <c> <c> <c>
Expenses
Accounting, audit and legal $ 1,294 $ 991 $ 3,311 $ 5,228 $ 63,023
Bank charges 85 48 329 210 1,252
Consulting fees - - - - 5,000
Management fees 3,000 - 3,000 - 20,500
Office and miscellaneous 1,500 - 1,500 100 2,393
Resource property costs 125 500 7,672 2,000 21,726
Transfer agent and filing
fees 696 414 2,390 1,014 7,737
Travel - - - - 712
---------- --------- -------- --------- --------
Loss before other item ( 6,700) ( 1,953) ( 18,202) ( 8,552) ( 122,343)
Other item
Interest income - - - - 154
---------- --------- -------- --------- --------
Net loss for the period $ ( 6,700) $ ( 1,953) $ ( 18,202) $ ( 8,552) $ ( 122,189)
Basic loss per share $ ( 0.00) $ ( 0.00) $ ( 0.01) $ ( 0.00)
========== ========= ========= ==========
Weighted average number of shares
outstanding 1,366,000 1,366,000 1,366,000 1,366,000
========== ========= ========= ==========
</table>
SEE ACCOMPANYING NOTES
<page>
FOOTHILLS RESOURCES, INC.
(A Pre-exploration Stage Company)
STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 2004 and 2003
and for the period November 17,2000 (Date of Incorporation) to September 30,2004
(Stated in US Dollars)
(Unaudited)
-----------
<table>
<caption>
November 17,
2000 (Date of
Nine months ended Incorporation)
September 30, to Sept. 30,
2004 2003 2004
---- ---- ----
<s> <c> <c> <c>
Cash Flows used in Operating Activities
Net loss for the period $ ( 18,202) $ ( 8,552) $ ( 122,189)
Changes in non-cash working capital balances
related to operations
Prepaid expenses ( 300) ( 300) ( 500)
Accounts payable ( 429) ( 82) 6,948
------------ ----------- -----------
( 18,931) ( 8,934) ( 115,741)
------------ ----------- -----------
Cash Flows from Financing Activities
Capital stock issued - - 80,800
Due to related party 22,272 6,075 38,963
------------ ----------- -----------
22,272 6,075 119,763
------------ ----------- -----------
Increase (decrease) in cash during the period 3,341 ( 2,859) 4,022
Cash, beginning of the period 681 3,686 -
------------ ----------- ----------
Cash, end of the period $ 4,022 $ 827 $ 4,022
============ =========== ==========
Supplemental disclosure of cash flow information
Cash paid for:
Interest $ - $ - $ -
============ =========== ==========
Income taxes $ - $ - $ -
============ =========== ==========
</table>
SEE ACCOMPANYING NOTES
<page>
FOOTHILLS RESOURCES, INC.
(A Pre-exploration Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
for the period November 17, 2000 (Date of Incorporation) to September 30, 2004
(Stated in US Dollars)
(Unaudited)
-----------
<table>
<caption>
Deficit
Accumulated
Common Shares Additional During the
------------------- Paid-in Subscriptions Pre-Exploration
Number Par Value Capital Received Stage Total
------ --------- ------- -------- ----- -----
<s> <c> <c> <c> <c> <c> <c>
Capital stock issued for cash - at $0.10 143,000 $ 143 $ 14,157 $ - $ - $ 14,300
Net loss for the period - - - - ( 4,927) ( 4,927)
---------- --------- --------- --------- ---------- ----------
Balance as at December 31, 2000 143,000 143 14,157 - ( 4,927) 9,373
Capital stock issued for cash - at $0.10 107,000 107 10,593 - - 10,700
Net loss for the year ended
December 31, 2001 - - - - ( 44,243) ( 44,243)
Subscriptions received - - - 5,000 - 5,000
---------- ---------- --------- --------- --------- ----------
Balance as at December 31, 2001 250,000 250 24,750 5,000 ( 49,170) ( 19,170)
Subscriptions converted - - - ( 5,000) - ( 5,000)
Capital stock issued for cash - at $0.05 1,116,000 1,116 54,684 - - 55,800
Net loss for the year ended
December 31, 2002 - - - - ( 41,883) ( 41,883)
---------- ---------- --------- --------- --------- -----------
Balance as at December 31, 2002 1,366,000 1,366 79,434 - ( 91,053) ( 10,253)
...Cont'd
</table>
SEE ACCOMPANYING NOTES
<page>
Continued
FOOTHILLSRESOURCES,INC.
(A Pre-exploration Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
for the period November 17, 2000 (Date of Incorporation) to September 30, 2004
(Stated in US Dollars)
(Unaudited)
-----------
<table>
<caption>
Deficit
Accumulated
Common Shares Additional During the
------------------- Paid-in Subscriptions Pre-Exploration
Number Par Value Capital Received Stage Total
------ --------- ------- -------- ----- -----
<s> <c> <c> <c> <c> <c> <c>
Net loss for the year ended
December 31, 2003 - - - - ( 12,934) ( 12,934)
--------- --------- -------- -------- --------- ----------
Balance as at December 31, 2003 1,366,000 1,366 79,434 - ( 103,987) ( 23,187)
Net loss for the nine months ended
September 30, 2004 - - - - ( 18,202) ( 18,202)
--------- ---------- -------- -------- --------- ---------
Balance as at September 30, 2004 1,366,000 $ 1,366 $ 79,434 $ - $ ( 122,189) $ ( 41,389)
========= ========== ======== ======== ========= =========
</table>
SEE ACCOMPANYING NOTES
<page>
FOOTHILLS RESOURCES, INC.
(A Pre-exploration Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004
(Stated in US Dollars)
(Unaudited)
Note 1 Interim Reporting
-----------------
While the information presented in the accompanying interim six
months 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 financial
statements be read in conjunction with the company's December 31,
2003 annual financial statements.
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. At September 30, 2004, the Company has a
working capital deficiency of $41,389 and has accumulated losses
of $122,189 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
--------------------
Amounts due to related party, a director of the Company, consist
of unpaid advances. The amount due is unsecured, non-interest
bearing and has no specific terms for repayment.
Note 4 Commitments
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Exploration Lease
By a lease agreement effective March 1, 2001 and amended
February 22, 2002, September 30, 2002, December 1, 2002, March
28, 2003 and January 1, 2004 the Company was granted the
exclusive right to explore, develop and mine the Golden Cross
resource property located in White Pine County of the State of
Nevada. The term of the lease is for 20 years, renewable for
an additional 20 years so long as conditions of the lease are
met.
<page>
Foothills Resources, Inc.
(A Pre-exploration Stage Company)
Notes to the Financial Statements
September 30, 2004
(Stated in US Dollars)
(Unaudited) - Page 2
- -----------
Note 4 Commitments - (cont'd)
-----------
Exploration Lease - (cont'd)
Minimum payments and performance commitments are as follows:
Minimum Advance Royalty Payments:
The owner shall be paid a royalty of 3% 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);
- $1,500 on March 1, 2002 (paid);
- $2,000 on September 1, 2002 (paid);
- $2,000 on December 1, 2002 (paid);
- $2,000 upon execution of the amended agreement dated
January 1, 2004 (paid);
- $5,000 on July 1, 2004 (paid);
- $10,000 on January 1, 2005; and
- Each annual payment thereafter of US $50,000 plus an
annual increase or decrease equivalent to the rate of
inflation designated by the Consumer's Price Index for
that year with execution year as base year. Each such
payment shall be made by January 1 of each successive year
of the lease.
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.
Pursuant to an amending agreement dated March 28, 2003, the
Company has paid an extension fee of $1,500 to extend the
terms for the advance royalty payments.
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.
<page>
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 operations for the twelve months following the date of this report
is to complete the recommended phase one exploration program on the TC claims,
White Pine County, Nevada, in which we hold a leasehold interest. In order to
complete phase one of the exploration program, we still anticipate the costs to
be $100,000.
In January 2004, we amended our mineral claims agreement. We paid the lessor
$2,000 upon execution and $5,000 on June 30, 2004. In order to keep the lease
agreement in good standing, we are also required to pay an additional $10,000 by
January 1, 2005, and $50,000 per year thereafter.
In addition, we anticipate incurring $6,000 in professional fees and $21,000 in
administrative expenses.
Total expenditures over the next twelve months are therefore expected to be
$137,000. Our cash on hand at September 30, 2004 was $4,022. Accordingly, we
will need to raise additional funds in order to complete the recommended
exploration program on the Golden Cross project and meet our other expected
expenses.
Results of Operations for the second quarter ended September 30, 2004
We incurred a net loss of $18,202 for the nine month period ended September 30,
2004, as compared to a loss of $8,552 in the same period in 2003. The increase
in the net loss was primarily due to a payment of $7,000 to the owner of the
Golden Cross property pursuant to an amended lease agreement dated January 1,
2004. As per management agreement dated July 1, 2004, the president started to
charge $1,000 per month for management fees ($3,000 per the period July -
September 2004). The Company also started to incur $500 per month for rent,
telephone and general office expenses ($1,500 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 months
ended September 30, 2004, we incurred transfer agent fees and filing fees of
$2,390 (2003 - $1,014) and accounting, audit, and legal fees of $3,311 (2003 -
$5,228) in order to bring all SEC filings current. At the end of the third
quarter, we had cash on hand of $4,022. Our liabilities at September 30, 2004
totalled $45,911 and consisted of accounts payable of $6,948 and $38,963 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 conducted by the sole director of the
Company, who also acts as the Company's President, the Chief Executive Officer,
and the Chief Financial Officer.
<page>
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
<page>
There were no reports filed on Form 8-K during the third quarter 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.
Dated: November 2, 2004 FOOTHILLS RESOURCES, INC.
/s/ J. Earl Terris
--------------------------
J. Earl Terris
President, Secretary, Treasurer
Chief Executive Officer and Director
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
<page>
Exhibit 10.1
MANAGEMENT AGREEMENT
--------------------
This Management Agreement is dated July 1, 2004.
BETWEEN:
Sirret Investments Inc., a company wholly owned by J. Earl
Terris, with address at
(the "Manager")
and
FOOTHILLS RESOURCES 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 J.
Earl Terris ("Terris") 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$1,000
commencing on the Commencement Date.
<page>
4. REIMBURSEMENT FOR EXPENSES
The Manager will be reimbursed US$500 per month for providing the Company an
office, telephone, internet and all reasonable office expenses during the
duration of this agreement, which are pre-approved by the Company.
5. DUTIES AND SERVICES
During the term of this Agreement, the Company agrees that Terris 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.
SIRRET INVESTMENTS INC. FOOTHILLS RESOURCES LTD.
Per: Per:
Sgd: J. Earl Terris Sgd: J. Earl Terris
J. Earl Terris, President J. Earl Terris, President