XERION ECOSOLUTIONS GROUP INC.
(Formerly IMMULABS CORP)
Filing Type: 10QSB
Description: Annual Report
Filing Date: August 15, 2003
Period End: June 30, 2003
Primary Exchange: Over the Counter Bulletin Board
Ticker: XECO
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934 (Fee required)
For the quarterly period ended June 30, 2003
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- ----- TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission File Number: 0-26760
XERION ECOSOLUTIONS GROUP INC.
(Formerly IMMULABS CORPORATION )
Colorado 84-1286065
- ------------------------ -------------------------
(State of incorporation) (IRS Employer ID Number)
Suite 132-3495 Cambie Street
Vancouver, BC Canada V5Z 4R3
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(Address of principal executive offices)
(604)696-0073
(Issuer's telephone number)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant 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
equity as of the latest practicable date: August 11, 2003 5,172,233 common
stock.
The SEC maintains an Internet site that contains reports, proxy and information
statements, and other information regarding filings of the Company at
http://www.sec.gov .
Transitional Small Business Disclosure Format (check one): YES NO X
--- ---
TABLE OF CONTENTS
ITEM NUMBER PAGE
- ----------- ----
PART I
1. Financial Statements 4
2. Management's Discussion and Analysis or Plan of Operation 12
PART II
1. Legal Proceedings 17
2. Changes In Securities 17
3. Defaults Upon Senior Securities 18
4. Submission of Matters to a Vote of Security Holders 18
5. Other Information 18
6. Exhibits and Reports on Form 8-K 19
Signatures 19
Exhibit 23.1 - Consent of Independent Certified Public Accountants
3
PART 1
Item 1 - Financial Statements
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Balance Sheets
As at As at
June 30, December 31,
2003 2002
$ $
(unaudited) (audited)
ASSETS
Current Assets
Cash 71,193 2,997
Prepaid expenses 11,204 --
- -------------------------------------------------------------------------------------------------------
Total Current Assets 82,397 2,997
Mining Claims (Note 6) 25,000 --
Technology Rights (Note 7) 20,000 --
- -------------------------------------------------------------------------------------------------------
Total Assets 127,397 2,997
=======================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable 23,516 41,487
Accrued liabilities 2,250 3,000
Loans from a related party (Note 4) 1,867 1,100
- -------------------------------------------------------------------------------------------------------
Total Liabilities 27,633 45,587
- -------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Notes 1 and 5)
Stockholders' Equity (Deficit)
Preferred stock, 50,000,000 shares authorized, no par value;
none issued -- --
Common Stock, 300,000,000 shares authorized, $0.001 par value
5,152,233 shares issued and outstanding (December 31, 2002 - 392,133 shares) 5,152 392
Additional Paid-in Capital 7,884,752 7,594,262
Stock based compensation 1,876,171 1,873,815
Donated Capital 66,000 3,000
Deficit Accumulated During the Development Stage (9,732,311) (9,514,059)
- -------------------------------------------------------------------------------------------------------
Total Stockholders' Equity (Deficit) 99,764 (42,590)
- -------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficit 127,397 2,997
=======================================================================================================
(The accompanying notes are an integral part of the financial statements)
4
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Statements of Operations
(unaudited)
Accumulated
from
November 1,
1985
(Date of For the Three Months For the Six Months
Inception) Ended Ended
to June 30, June 30 June 30
2003 2003 2002 2003 2002
$ $ $ $ $
Revenue -- -- -- -- --
- --------------------------------------------------------------------------------------------------------
Expenses
General and Administrative
Accounting and audit 36,909 3,309 -- 6,234 500
Amortization 2,833 -- -- -- --
Consulting 48,826 48,826 -- 48,826 --
Donated services 66,000 60,000 -- 63,000 --
Financial services 56,266 -- -- -- --
Investor relations 170,786 -- -- -- --
Legal 1,020,708 1,353 -- 7,701 --
Management fees 763,000 -- 90,000 -- 180,000
Office 25,665 21,976 441 22,029 813
Salaries 229,730 -- 33,000 26,000 66,000
Stock based compensation 1,876,171 -- -- 2,356 --
Transfer agent and regulatory 19,883 2,658 477 3,702 977
Travel and promotion 7,111 -- -- -- --
- --------------------------------------------------------------------------------------------------------
4,323,888 138,122 123,918 179,848 248,290
- --------------------------------------------------------------------------------------------------------
Selling and Marketing (Note 4(f)) 156,142 22,404 -- 38,404 --
- --------------------------------------------------------------------------------------------------------
Total Expenses 4,480,030 160,526 123,918 218,252 248,290
- --------------------------------------------------------------------------------------------------------
Loss from Continuing Operations (4,480,030) (160,526) (123,918) (218,252) (248,290)
Loss from Discontinued Operations (5,252,281) -- -- -- --
- --------------------------------------------------------------------------------------------------------
Net Loss For the Period (9,732,311) (160,526) (123,918) (218,252) (248,290)
========================================================================================================
Net Loss Per Share - Basic (0.03) (0.31) (0.06) (0.01)
========================================================================================================
Weighted Average Shares Outstanding 5,127,000 391,000 3,659,000 391,000
========================================================================================================
(Diluted loss per share has not been presented as the result is anti-dilutive)
(The accompanying notes are an integral part of the financial statements)
5
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Statements of Cash Flows
For the Six Months
Ended
June 30,
2003 2002
$ $
(unaudited) (unaudited)
Cash Flows to Operating Activities
Net loss for the period (218,252) (248,290)
Adjustment to reconcile net loss to cash:
Donated services 63,000 --
Stock based compensation 2,356 --
Change in non-cash working capital items:
Increase (Decrease) in prepaid expenses (11,204) (373)
Increase (Decrease) in accounts payable and accrued liabilities (222) 242,199
- -----------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (164,322) (6,464)
- -----------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Proceeds from shares issued 251,750 --
Advances from a related party 767 8,500
- -----------------------------------------------------------------------------------------
Net Cash From Financing Activities 252,517 8,500
- -----------------------------------------------------------------------------------------
Cash Flows to Investing Activities
Purchase of mining claims (20,000) --
- -----------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (20,000) --
- -----------------------------------------------------------------------------------------
Increase in Cash 68,195 2,036
- -----------------------------------------------------------------------------------------
Cash - Beginning of Period 2,997 2,276
- -----------------------------------------------------------------------------------------
Cash - End of Period 71,192 4,312
=========================================================================================
Non-Cash Financing Activities
Forgiveness of debt to related party 18,500 --
Shares issued for acquisition of mining claims 5,000 --
Shares issued for acquisition of technology rights 20,000 --
=========================================================================================
Supplemental Disclosures
Interest paid -- --
Income tax paid -- --
=========================================================================================
(The accompanying notes are an integral part of the financial statements)
6
1. Nature of Operations and Continuance of Business
Xerion EcoSolutions Group Inc., formerly Immulabs Corporation (the
"Company"), was initially incorporated as Gemini Ventures, Inc. on November
1, 1985 under the laws of the State of Colorado. The Company changed its
name to Solomon Trading Company, Limited in July 1989; The Voyageur, Inc.
in November 1994; The Voyageur First, Inc. in December 1994; North American
Resorts, Inc. in March 1995; and Immulabs Corporation in September 2000.
Effective March 28, 2003, the Company changed its name to Xerion
EcoSolutions Group Inc. The shares of the Company currently trade on the
Over the Counter Bulletin Board under the ticker symbol "XECO".
From 1995 through 1998, the Company was in the business of selling
vacations in Florida and the sale of time share memberships to the Ocean
Landings and Cypress Island Preserve facilities in Florida which were then
controlled by the Company and the operation of Cypress Island Preserve as a
tourist destination. During the fourth quarter of 1998, the Company
liquidated its holdings in these ventures and discontinued all operations.
With the disposition of all operations, the Company became fully dependent
upon the support of its controlling shareholders for the maintenance of its
corporate status and to provide all working capital.
On December 6, 2002, the Company's Board of Directors affected a 1 new for
100 old reverse split of the issued and outstanding shares. The effect of
this split is reflected in the financial statements as of the first day of
the first period presented.
With the acquisition of sixty-seven mineral claims in California and the
rights to certain ore and waste processing technologies, the Company has
entered the business of mine reclamation and environmental remediation with
a focus on serving the mining and coal fired power plant industries. Refer
to Notes 6 and 7.
These financial statements are prepared using generally accepted accounting
principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course
of business. However, the Company does not have significant cash or other
material assets, nor does it have an established source of revenues needed
to cover its operating costs and to allow it to continue as a going
concern. The Company has ongoing overhead expenses and will require
significant capital to execute its business plan. The Company's ability to
meet those obligations and continue as a going concern is dependent upon
raising new capital through issuing debt and/or equity securities and then
to generate revenues and profits. Until these funding sources materialize
the controlling shareholders intend to continue the funding of necessary
expenses to sustain operations. Refer to Note 8 for subsequent issuance of
shares for cash and services.
2. Summary of Significant Accounting Policies
Year End
The Company's fiscal year end is December 31.
Cash and Equivalents
For the purpose of the statements of cash flows, all highly liquid
investments with the maturity of three months or less are considered to be
cash equivalents.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the periods. Actual results could differ from those estimates.
Basic and Diluted Net Income (Loss) per Share
The Company computes net income (loss) per share in accordance with SFAS
No. 128, "Earnings per Share" (SFAS 128). SFAS 128 requires presentation of
both basic and diluted earnings per share (EPS) on the face of the income
statement. Basic EPS is computed by dividing net income (loss) available to
common shareholders (numerator) by the weighted average number of common
shares outstanding (denominator) during the period. Diluted EPS gives
effect to all dilutive potential common shares outstanding during the
period including stock options, using the treasury stock method, and
convertible preferred stock, using the if-converted method. In computing
Diluted EPS, the average stock price for the period is used in determining
the number of shares assumed to be purchased from the exercise of stock
options or warrants. Diluted EPS excludes all dilutive potential shares if
their effect is anti dilutive. Loss per share information does not include
the effect of any potential common shares, as their effect would be
anti-dilutive.
7
2. Summary of Significant Accounting Policies (continued)
Accounting for Stock Based Compensation
The Company has adopted SFAS No. 123 "Accounting for Stock Based
Compensation" which requires that stock awards granted to employees and
non-employees are recognized as compensation expense based on the fair
market value of the stock award or fair market value of the goods and
services received whichever is more reliably measurable.
Interim Financial Statements
These interim unaudited financial statements have been prepared on the same
basis as the annual financial statements and in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the Company's financial position, results of
operations and cash flows for the periods shown. The results of operations
for such periods are not necessarily indicative of the results expected for
a full year or for any future period.
Income Taxes
Income taxes are provided for using the liability method of accounting in
accordance with Statements of Financial Accounting Standards No. 109
"Accounting for Income Taxes". A deferred tax asset or liability is
recorded for all temporary differences between financial and tax reporting.
Deferred tax expense (benefit) results from the net change during the year
of deferred tax assets and liabilities.
Due to the provisions of Internal Revenue Code Section 338, the Company
will have no net operating loss carryforwards available to offset financial
statement or tax return taxable income in future periods as a result of
changes in control in both 2000 and 1999, respectively, involving 50
percentage points or more of the issued and outstanding securities of the
Company.
Financial Instruments
The fair value of the Company's current assets and current liabilities were
estimated to approximate their carrying values due to the immediate
short-term maturity of these financial instruments. As the Company operates
in Canada, virtually all of its assets and liabilities are giving rise to
significant exposure to market risks from changes in foreign currency
rates. The financial risk is the risk to the Company's operations that
arise from fluctuations in foreign exchange rates and the degree of
volatility of these rates. Currently, the Company does not use derivative
instruments to reduce its exposure to foreign currency risk. Management
does not believe the Company is exposed to significant credit or interest
rate risks.
Comprehensive Loss
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
the reporting and display of comprehensive loss and its components in the
financial statements. As at January 31, 2003, the Company has no items that
represent comprehensive loss and, therefore, has not included a schedule of
comprehensive loss in the financial statements.
Recent Accounting Pronouncements
In June, 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". The provisions of this Statement are
effective for exit or disposal activities that are initiated after December
31, 2002, with early application encouraged. This Statement addresses
financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force (EITF) Issue
No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". This Statement requires that a liability for a cost
associated with an exit or disposal activity be recognized when the
liability is incurred. The Company adopted SFAS No. 146 on January 1, 2003
and its impact did not have a material effect on its financial position or
results of operations. In December 2002, the FASB issued SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure",
which amends SFAS No. 123 to provide alternative methods of transition for
a voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 expands the
disclosure requirements of SFAS No. 123 to require more prominent
disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect
of the method used on reported results. The transition provisions of SFAS
No. 148 are effective for fiscal years ended after December 15, 2002. The
disclosure provisions of SFAS No. 148 are effective for financial
statements for interim periods beginning after December 15, 2002. The
Company adopted SFAS No. 148 on 2.
8
(2) Summary of Significant Accounting Policies (continued)
January 1, 2003 and its impact did not have a material effect on its
financial position or results of operations. FASB has also issued SFAS No.
147 and 149 but they will not have any relationship to the operations of
the Company therefore a description of each and their respective impact on
the Company's operations have not been disclosed.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity".
SFAS No.150 establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity.It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). The
requirements of SFAS No. 150 apply to issuers' classification and
measurement of freestanding financial instruments, including those that
comprise more than one option or forward contract. SFAS No. 150 does not
apply to features that are embedded in a financial instrument that is not a
derivative in its entirety. SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June
15, 2003, except for mandatory redeemable financial instruments of
non-public entities. It is to be implemented by reporting the cumulative
effect of a change in an accounting principle for financial instruments
created before the issuance date of SFAS No. 150 and still existing at the
beginning of the interim period of adoption. Restatement is not permitted.
The adoption of this standard is not expected to have a material effect on
the Company's results of operations or financial position.
FASB has also issued SFAS No. 147 and 149 but they will not have any
relationship to the operations of the Company therefore a description of
each and their respective impact on the Company's operations have not been
disclosed.
3. Share Capital
(a) Common Stock
On March 14, 2003, the Company received $20,000 and released 2,000,000
shares at $0.01 per share to the President of the Company pursuant to
a private placement. These shares were issued into a lawyer's trust
account on December 13, 2002 pending receipt of funds.
The Company received $90,000 pursuant to the exercise of 150,000
options at $0.60 per share.
On April 15, 2003, the Company completed a private placement offering
and issuance consisting of 89,000 shares of common stock at a price of
$1.00 per share to net the Company proceeds of $89,000.
On May 15, 2003, the Company completed a private placement offering
and issuance consisting of 21,100 shares of common stock at a price of
$2.50 per share to net the Company proceeds of $52,750.
A total proceeds from private placement offerings of $141,750 was
raised in the June quarter.
(b) Stock options
On March 24, 2003, the Company filed a Form S-8 Registration Statement
with the U.S. Securities and Exchange Commission to register 1,000,000
shares of common stock pursuant to the Company's 2003 Nonqualifying
Stock Option Plan ("2003 NQPlan"). This 2003 NQPlan is for persons
employed or associated with the Company, including without limitation
any employee, director, general partner, officer, attorney,
accountant, consultant or advisor, is intended to advance the best
interests of the Company by providing additional incentive to those
persons who have a substantial responsibility for its management,
affairs, and growth by increasing their proprietary interest in the
success of the Company, thereby encouraging them to maintain their
relationships with the Company. The determination of those eligible to
receive options under the 2003 NQPlan, and the amount, price, type and
timing of each Stock option and the terms and conditions shall rest at
the sole discretion of the Company's Board of Directors, subject to
the provisions of the 2003 NQPlan;
On March 24, 2003, the Company granted options to purchase 150,000
shares at an exercise price of $0.60 per share under the 2003 NQPlan
to officers and directors of the Company. These options were exercised
on March 28, 2003.
9
On March 24, 2003, the Company granted options to purchase 325,000
shares at an exercise price of $4.00 per share under the 2003 NQPlan
to officers and directors of the Company.
Weighted
Average
Weighted Remaining
Shares Average Contractual
Under Option Option Price Life
# $ (months)
Beginning of year -- --
Granted 475,000 2.93
Exercised (150,000) 0.65
----------------------------------------------------------------------
End of period 325,000 4.00 12
======================================================================
Stock based compensation was calculated using the Black-Scholes Option
Pricing method with the following assumptions: expected volatility -
95%; expected life - 1.0 years; and risk-free rate - 1.18%.
4. Related Party Transactions and Balances
a) On March 20, 2003, the Company entered into a five-year contract to
retain the current President of the Company.
b) The Company recognized $60,000 ($20,000 per month) as donated services
to the President of the Company for services rendered during the three
months ended June 30, 2003. A total of $3,000 had been recognized in
the three months ended March 31, 2003.
c) The Company received notification from the President of the Company
that all amounts owing to him are forgiven as of March 13, 2003.
Therefore $18,500 is included in Additional Paid In Capital for the
period ended March 31, 2003 representing the extinguishment of the
debt owing to the President of the Company. Due to his relationship to
the Company as principal stockholder, the forgiveness of this debt has
been treated as contributed capital in accordance with the provisions
of Staff Accounting Bulletin Topic 5T "Accounting for Expense of
Liabilities Paid by Principal Stockholders". It is treated as
contributed capital because the forgiveness of debt maintained the
value of the principal stockholder's investment in the Company.
d) The amounts due to a related party represent cash loans and are
non-interest bearing, unsecured and without specific terms of
repayment.
e) The Company received $20,000 and released 2,000,000 shares at $0.01
per share to the President of the Company pursuant to a private
placement. These shares were issued into a lawyer's trust account on
December 13, 2002.
f) The Company paid a fee of $38,404, to a company controlled by the
spouse of the President of the Company, for marketing consultation,
including logo design, website strategy, concept and design and
brochure concept and design and printing of collateral marketing
materials.
5. Commitment
The Company entered into a property lease agreement with Tharp Enterprise
of California. The term of the lease is for 6 months at $400 per month,
commencing June 1, 2003.
6. Mining Claims
The Company entered into an agreement to acquire 67 mining claims located
in California from an arms-length vendor. Consideration was $20,000 and
500,000 shares of the Company valued at $0.01 per share. These shares were
issued on March 21, 2003. The Vendor may cancel this transaction if the
Company does not raise $1,000,000 by September 17, 2003. The Company may
cancel this transaction for any sound business reason. In the event of
cancellation the shares will be returned to treasury and cancelled.
10
7. Technology Rights
The Company entered into an agreement to acquire an option-to-purchase
certain ore and waste processing technologies (the "Technologies") from the
President of the Company for one (1) dollar. The Company subsequently
exercised that option-to-purchase and issued 2,000,000 common shares of the
Company in total consideration to the three original arms-length owners of
the Technologies. The 2,000,000 shares issued by the Company have been
valued at $0.01 per share or $20,000 in total. These shares were issued on
March 21, 2003. A patent has been applied for these technologies that are
to be used to extract valuable and/or hazardous elements from the soil.
The recent mining claim and technology acquisitions require the Company to
raise one million dollars within six months to avoid notice of cancellation
from Sellers. There is no guarantee that the Company will be able to raise
this capital, however, in the event that the capital has not been raised in
this time period, the ownership of the mining claims and technology does
not revert back to the sellers. The Seller's recourse in such an event, if
they chose to pursue it, is to give the Company notice within a nine day
window at the end of the six month period and include reasons why the
Sellers believe the company has willfully failed and then give the company
an additional 45 days to cure such willful failure.
The Company may cancel this transaction if it is proven that the vendors
misrepresented the potential of the Technologies. In the event of
cancellation the shares will be returned to treasury and cancelled.
8. Subsequent Events
In July 2003, the Company completed a private placement offering consisting
of 15,000 shares of common stock at a price of $2.50 per share to net the
Company proceeds of $37,500.
In July, 2003 the Company also agreed to issue 5,000 common restricted
shares each to three of employees in lieu of cash, for a total issuance of
15,000 shares.
The Company has signed a binding preliminary agreement for the reclamation
of a smelter slag project in Arizona. The agreement allows Xerion six
months to perform tests on the slag to validate the reported mineral
content before proceeding into production on a 50/50 joint venture basis.
Early test results indicate that mineral reserves are generally consistent
with joint venture representation. The Company has issued a letter of
acceptance to its joint venture partner indicating its acceptance to move
ahead with the definitive joint venture agreement.
11
Item 2 - Management's Discussion and Analysis or Plan of Operation
(1) Caution Regarding Forward-Looking Information
This quarterly report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to the Company or management. When used in this document, the words
"anticipate", "believe", "estimate", "expect" and "intend" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current view of
the Company regarding future events and are subject to certain risks,
uncertainties and assumptions, including the risks and uncertainties noted.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. In each instance, forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.
(2) Results of Operations, Liquidity and Capital Resources
The Company owns non-toxic, patent-pending leaching technology known as the
Xerion Reaction System (XRS) which has potential to become an industry standard
solvent, potentially replacing Cyanide as an economic method of choice for
extracting gold and other elements from ore. The XRS has the ability to recover
any targeted element from the earth including: gold, silver, platinum,
palladium, rare earth elements such as neodymium and scandium, strategic metals
such as tungsten, and other valuable elements. XRS can also neutralize or remove
elements that are harmful to the environment, including zinc, lead, mercury,
arsenic, germanium, cyanide and other deleterious elements.
The acquisition of XRS technology was made in March of this year and during the
past quarter Management focused on establishing early relationships with mining
companies for onsite validation of XRS.
Ore processing, remediation and reprocessing of previously processed ore and
other waste is thought by management to be a trillion dollar market. Much of
that market is currently untapped, due to the lack of appropriate economic
technology.
The economics of XRS have not yet been validated on a production scale and the
Company must create a showcase project that will serve to validate the
technology to the industry. If the Company can create a successful showcase,
management believes that the demand for XRS will be substantial.
Management has received very positive feedback from the market and there appears
to be an abundance of ready projects once the Company has produced industry
validation of its XRS technology.
This past quarter management has been in discussions with several mining
companies and is currently performing tests on ores from at least six of those
companies.
12
Each one of these companies are considered by management to be `business in the
pipeline', amounting to at least several hundred million dollars in potential
business. It is expected that revenue-producing contracts, joint ventures or
ore-body acquisitions will be the final result from some of these tests if
validation is successful.
Early results from some of these tests have been obtained and negotiations are
underway.
On July 3, 2003 the Company signed its first contract for the reprocessing of
thirty five million tons of slag produced by a copper smelter last operated by
Phelps Dodge in the 1950's. The slag has been analyzed by the owners and they
represent to the Company that it contains over six million ounces of recoverable
gold as well as significant amounts of silver, copper, zinc, iron and silica.
The Company is currently performing its due diligence on the project and
successful validation of the numbers will result in a 50/50 joint venture
reprocessing operation expected to last up to ten years, potentially producing
gross operating profit to Xerion exceeding one billion dollars over the course
of the project.
On March 17, 2003 the Company acquired ownership of sixty-seven mining claims in
the Randsburg Mining District of California. The intent of this acquisition was
to develop the claims into a showcase project for XRS. Due to the interest level
in XRS by other mining companies, the Company has not had to focus on the mining
claims to validate the technology. The Company has yet to produce a feasibility
plan for development of the claims and current tests are keeping management
focused on obtaining near-term revenue projects. Management expects to validate
some of the existing assays over the next quarter and depending upon
availability of capital, may extend those tests to include a pre-feasibility
study.
GENERAL BUSINESS OVERVIEW
Xerion is a mining company focused on acquiring and processing ore reserves that
are on the surface of the earth. Typically this would include reprocessing waste
produced by older mining operations when technologies of the day did not allow
for optimum recovery of elements, thus leaving behind substantial mineral
deposits. Also a focus is the waste dumps produced by the Coal-Fired Power Plant
Industry.
Tailings and waste dumps from these industries scatter the world. They can be
hazardous to the environment and there are few economic solutions for their
remediation. It is a little known fact that traditional recovery methods often
leave these dumps with a considerable percentage of their original elements such
as gold and platinum, still intact. A patent application for the XRS has
recently been filed and Xerion is in the start-up phase of its business cycle.
The Company is in the process of building the infrastructure and raising capital
necessary to perform its first reprocessing project.
The Company has administration offices in Vancouver, BC and a laboratory in
Ridgecrest, CA.
OUTLOOK ON USE OF CYANIDE BY THE MINING INDUSTRY
The mining industry is facing many regulatory pressures regarding the use of
cyanide, which is an industry standard method to economically recover gold from
ore. Cyanide has resulted in a number of environmental disasters in recent
history. There is growing concern about the use of cyanide in mining operations.
Already Montana has outlawed the use of cyanide altogether and other states have
made it extremely difficult and costly to obtain permits. The Xerion Reaction
13
System offers an environmentally friendly alternative to cyanide. Several tests
were carried out under the auspices of the Arizona Department of Environmental
Quality for a placer mine operation, using an earlier process developed by
Xerion's Chief Scientific Officer. (The XRS is more efficient and just as
non-toxic as this earlier process). Due to its non-toxic nature, the government
granted the technology a negative declaration, `no permit required' for the
project. This type of `negative declaration' could shorten the
time-to-production for any mine using the XRS. Aside from the dangers of
environmental impact, cyanide is only effective in leaching gold and silver from
certain types of ores. Sulphides, in particular, are not amenable to economic
cyanide leaching without additional pretreatment costs. The future of cyanide is
questionable and the industry is being forced to consider other alternatives.
The potential exists for XRS to become an industry standard replacement for
cyanide.
CREATING WEALTH FROM `WASTE' PRODUCED BY THE COAL-FIRED POWER PLANT INDUSTRY
There are over one thousand coal-fired power plants in the United States. These
power plants generate approximately half of all electricity consumed in the
country and produce a regular supply of solid waste. An independent laboratory
has conducted tests on this waste and results indicate that it contains an
extraordinarily high content of valuable elements. Analyses done on fly ash were
carried out at the Argonne National Laboratory in Illinois by the United States
Geological Survey, using a DC Arc Atomic Emission Spectrograph, indicates gross
value of all elements exceeds $1900.00 per ton of waste. (This value was based
on the element prices as readily available off the Internet and values are
expected to fluctuate with market prices of recoverable elements). In addition
to existing stockpiles, coal-fired power plants in the United States produce
over one hundred and fifteen million (115,000,000) new tons of waste every year.
Due to the apparent lack of technology capable of recovering the inherent
values, the power plants currently sell a portion of their waste to the cement
industry as an inexpensive ingredient, and disposes of, or stockpiles the rest.
It is the Company's intention to acquire this `waste' for offsite mineral
recovery or to form strategic alliances with power plants to process their waste
directly as it comes out of the plant.
COAL-FIRED POWER PLANT INDUSTRY OUTLOOK
There is growing concern among environmental groups and government agencies
regarding the problem of toxic waste produced by this industry. Although they
have made Herculean efforts and have spent billions of dollars on controls to
reduce particulates, sulfur dioxide and carbon dioxide emissions, the industry
has yet to adequately address the problems associated with its solid waste.
Further environmental restrictions may be imposed on this industry unless it is
able to solve its waste remediation problem. Test results indicate the Xerion
Reaction System may provide an economical method of processing this industry's
waste. The Company anticipates performing recovery and remediation tests for the
industry in the very near future.
Due to strict cost control, there is no immediate danger of the company running
out of funds and the firm is in negotiations with institutions, seeking a
primary source of capital to put its first project into production.
RISK FACTORS AND FORWARD LOOKING STATEMENTS
Certain statements herein, including those regarding production, joint venture
contracts, patents, industry outlooks and realized metals prices constitute
"forward looking statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995. Such forward looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company to be materially
different from future results, performance or achievements expressed or implied
by those forward looking statements. These risks, uncertainties and other
14
factors include, but are not limited to, difficulties in successfully raising
capital (given the Company's lack of operating history, lack of profitable
operations and limitations on the market for the Company's securities), in
developing and commercializing its products and mining claims (including the
ability to overcome technical hurdles that may arise), in meeting applicable
existing or new regulatory standards, in receiving required regulatory
approvals, in obtaining necessary patents and licenses, in defending against
third party infringement of patents and licenses, in protecting itself from
costly, unforeseen legal disputes, in producing gold and other elements in
commercial quantities at reasonable costs, in competing successfully against
other companies and in marketing itself successfully and in successfully
addressing the concerns and/or obtaining the support of lobbies in various
States. There can be no assurance that the Company will be successful in its
efforts to develop and commercialize XRS or its mining claims. Most importantly
at this stage, the Company's success and each step required to achieve such
success depends on its ability to raise significant further financing on an
ongoing basis and there is no guarantee it will be able to do so. The company is
still in the development stage and has no revenues. Additionally, funds may be
raised through the issuance of equity shares and such securities might have
rights, preferences or privileges senior to its common stock and will likely
result in dilution to existing shareholders. The Company is therefore subject to
a number of known and unknown risks and uncertainties that could cause actual
operations or results to differ materially from those that are anticipated.
The entire executive management team has agreed to work for the company on
substantially reduced salaries, or in most cases, no salary whatsoever. There is
no guarantee that every member will continue to work for the company under such
favorable conditions.
Management recognizes that additional funds through additional private sales of
Company stock, capital contributions from existing significant shareholders
and/or loans from existing significant shareholders will be required in the
future. However, there can be no assurance that the Company will be able to
obtain additional funds to support the Company's liquidity requirements or, that
such funding, if available, will be obtained on terms favorable to or affordable
by the Company.
The recent mining claim and technology acquisitions require the Company to raise
one million dollars within six months to avoid notice of cancellation from
Sellers. There is no guarantee that the Company will be able to raise this
capital, however, in the event that the capital has not been raised in this time
period, the ownership of the mining claims and technology does not revert back
to the sellers. The Seller's recourse in such an event, if they chose to pursue
it, is to give the Company notice within a nine day window at the end of the six
month period and include reasons why the Sellers believe the Company has
willfully failed and then give the Company an additional 45 days to cure such
willful failure.
If the Company loses its technology and mining claims, it will have no
significant technology on which to base its long-term business plan and may
fail.
The XRS technology was invented by the Company's Chief Scientific Officer (CSO)
and the company must be able to duplicate his results without him present. It is
therefore necessary for the Company to fully document the necessary formulas and
to train additional staff on the implementation of those formulas. If the
Company fails to do this and something happens to the CSO, the company may have
difficulty reproducing his results and if it is not able to do so the company
may fail. Subsequent to the end of this quarter the Company has hired an
additional technologist to mitigate some of this risk.
To be successful in implementing its business plan the Company will require the
services of numerous other executives with varied technical and professional
backgrounds in environmental engineering, ore processing and financial
management and the company's ability to recruit such executives is entirely
dependant upon its access to working capital and there is no guarantee that such
capital will be available.
15
The Registrant is highly dependent upon management and/or significant
shareholders to provide sufficient working capital to preserve the integrity of
the corporate entity during this phase of early development and there is no
assurance that the Registrant will be able to finance its planned operations.
There is no guarantee that contracts for ore processing, mine reclamation or
environmental remediation will be forthcoming and the economic success of such
contracts are subject to many known and unknown risks including; availability of
adequate capital, availability of qualified staff, successful negotiations with
mining and power plant companies, protection of the proprietary qualities of XRS
technology, successful economic implementation of XRS, availability of raw
materials or specialized equipment.
There is no guarantee that the Company will be able to put its mining claims
into production and the economic success of such production is subject to many
known and unknown risks including; availability of adequate capital,
availability of qualified staff, successful negotiations with regulatory bodies
for necessary permitting, access to ore with sufficient grades as to make
production economical, results of feasibility studies, satisfactory weather
conditions and availability of subcontractors, water, power and equipment. The
Company may, from time to time, make oral forward-looking statements. The
Company strongly advises investors to carefully read the above paragraph and the
risk factors described in its Annual Reports and other documents filed with the
United States Securities and Exchange Commission for a description of certain
factors that could cause the actual results of the Company to materially differ
from those in the oral or written forward-looking statements. The Company
disclaims any intention or obligation to update or revise any oral or written
forward-looking statements whether as a result of new information, future events
or otherwise.
During the quarter ended June 30, 2003, the Company added Len Zielke, Vice
President, Corporate Finance to its executive management team.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED June 30, 2003.
Revenues. The Company currently has no revenues from operations, and the Company
does not anticipate that it will generate any revenues until it can either
successfully validate its technology to the industry or put its current joint
venture project into production. Management continues to be actively involved in
negotiations to secure sufficient equity financing to fund the Company's
business plan and to ensure the generation of future revenues.
General and Administrative Expense. For the first half of 2003, we reported
general and administrative expense of $179,848, a decrease of $68,442, or 3%
from $248,290 reported in the comparable period of the prior year. The decrease
resulted primarily from the elimination of management fees and reduced salaries.
Consulting, legal and regulatory fees increased during the period due to
expenses associated with the Company's equity raising efforts. Management
intends to keep operating expenses at the lowest possible level.
Selling and Marketing Expense. There was a 100% increase in advertising expenses
for the first half of 2003 of $38,404, compared to the prior year. This resulted
from management's efforts to pursue the Company's business plan and to recruit
an executive management team.
Liquidity and Capital Resources. The primary source of the Company's cash has
been through the sale of equity. Our cash increased $68,195 from $2,997 at
December 31,2002 to an ending balance of $71,192 at June 30, 2003. Cash of
$251,750 was raised primarily from the issuance of private placement shares, and
used to fund our operating expenses.
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The Company anticipates raising additional funds from the sale of equity
financing during the current fiscal year. Such funds will be used for working
capital.
The Company believes its current available cash position is sufficient to meet
its cash needs on a short-term basis. The Company's ability to continue as a
going concern is dependent upon the Company's ability in the near future to (i)
raise additional funds through equity financings, and (ii) validate its XRS
technology and put its projects into production.
Part II - Other Information
Item 1 - Legal Proceedings
To the best of knowledge of the Officers and Directors of the Company,
neither the Company nor any of its Officers and Directors are parties to any
legal proceeding or litigation other than as described below. Further, the
Officers and Directors know of no threatened or contemplated legal proceedings
or litigation other than as described below
The current company management learned in late 2002 that the Company is in
dispute over the purchase of a shuttle bus in 1998. The owners of the bus
lost the vehicle in bankruptcy and are looking to recoup $97,508.58 plus
associated costs due to their losses, however, the title of the bus was
never transferred to the Company and the Company was looking to recoup some
$15,000 in payments made towards the purchase. The Company is now relying
on former directors of the Company as well as the estate of the Company's
former attorney to cover any costs which arise. These parties have signed a
Hold Harmless Agreement indemnifying the Company from any costs arising
from this matter. An attorney representing a former Director of the Company
has informed the Company that they have worked out a potential alternative
settlement with the Claimants which would absolve the Company of any
liability. That attorney is waiting for his legal fees to be paid to
complete these transactions and has advised the Company that a payment of
$10,000 will clear the matter within thirty days. The Company has notified
former Directors that if necessary it will be pursuing them for any payment
that becomes due in this matter.
Item 2 - Changes in Securities
On March 25, 2003 the Company filed a Form S-8 Registration Statement with the
U.S. Securities and Exchange Commission to register 1,000,000 shares of common
stock pursuant to the Company's 2003 Nonqualifying Stock Option Plan ("2003
NQPlan"). This 2003 NQPlan is for persons employed or associated with the
Company, including without limitation any employee, director, general partner,
officer, attorney, accountant, consultant or advisor, is intended to advance the
best interests of the Company by providing additional incentive to those persons
who have a substantial responsibility for its management, affairs, and growth by
increasing their proprietary interest in the success of the Company, thereby
encouraging them to maintain their relationships with the Company. The
determination of those eligible to receive options under the 2003 NQPlan, and
the amount, price, type and timing of each Stock option and the terms and
conditions shall rest at the sole discretion of the Company's Board of
Directors, subject to the provisions of the 2003 NQPlan;
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SALES OF SECURITIES:
In December, 2002 the Company issued 2,000,000 shares to be held in trust, in
the name of "Race & Co.". These shares were subsequently issued to the President
of the Company pursuant to a private placement on March 17, 2003, for proceeds
in the amount of $20,000.
On March 17, 2003 the Company authorized the issuance of 500,000 restricted
shares (and $20,000 in cash) in consideration for the acquisition of 67 mining
claims.
On March 17, 2003 the Company authorized the issuance of 2,000,000 restricted
shares in consideration for the acquisition of ore and waste processing
technology.
Subsequent to December 31, 2002 the Company granted 475,000 stock options under
the 2003 NQPlan to various directors, officers and consultants of the Company at
the following prices: 150,000 shares at a price of $0.60 per share; 325,000
shares at a price of $4.00 per share. On March 28, 2003 the Company issued
150,000 shares upon the exercise of stock options by officers at a price of
$0.60 per share to net the Company proceeds of $90,000.
On April 15, 2003 the Company completed a private placement offering and
issuance consisting of 89,000 shares of common stock at a price of $1.00 per
share.
On May 15, 2003 the Company completed another private placement offering and
issuance consisting of 21,100 shares of common stock at a price of $2.50 per
share.
Both offerings net the Company proceeds for the 30 June, 2003 quarter of
$141,750.
Subsequent to June 30, 2003 the Company completed a private placement for 15,000
shares of common stock at a price of $2.50 per share to net the Company proceeds
of $37,500.
Subsequent to June 30, 2003 the Company also agreed to issue 5,000 common
restricted shares each to three of its management team in lieu of consulting
fees, for a total issuance of 15,000 shares.
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission Of Matters To A Vote Of Security Holders
None
Item 5 - Other Information
The Company is in discussions with several parties for ore processing and/or
mine reclamation contracts. Negotiations have been positive thus far and
management believes that it will sign one or more contracts in the very near
future that could result in significant revenues.
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ITEM 6 - EXHIBITS AND REPORTS ON FROM 8-K
(DOCUMENTS INCORPORATED BY REFERENCE)
(a) Form S-8 Registration Statement filed with the U.S. Securities and
Exchange Commission March 24, 2003 to register 1,000,000 shares of common stock
pursuant to the Company's 2003 Nonqualifying Stock Option Plan ("2003 NQPlan").
(b) Reports on Form 8-K:
i. Filed June 4, 2003 reporting that the Company has signed an
agreement with a premier intermediate gold mining company for
onsite validation of its patent-pending Xerion Reaction System
(XRS). A test protocol was pursued however results appeared to be
skewed. That particular test protocol was shelved and further
analysis by the Company is currently underway.
ii. The Company has signed a binding preliminary agreement for the
reclamation of a smelter slag project in Arizona. The agreement
allows Xerion six months to perform tests on the slag to validate
the reported mineral content before proceeding into production on
a 50/50 joint venture basis. Subsequent to this filing, early
test results indicate that mineral reserves are generally
consistent with joint venture representation. The Company has
issued a letter of acceptance to its joint venture partner
indicating its acceptance to move ahead with the definitive joint
venture agreement.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Xerion EcoSolutions Group Inc. (Formerly Immulabs Corporation)
By Ben Traub
/s/ Ben Traub Dated: August 13, 2003
- ---------------------------------
Ben Traub, President
By Ellen Luthy
Ellen Luthy Dated: August 13, 2003
- ---------------------------------
Ellen Luthy, Secretary
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