XERION ECOSOLUTIONS GROUP INC.
(Formerly IMMULABS CORP)
Filing Type: 10QSB
Description: Quarterly Report
Filing Date: November 7, 2003
Period End: September 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)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ------ ACT OF 1934
(Fee required)
For the quarterly period ended September 30, 2003
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 4K3
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(604) 696 0073
(Issuer's telephone number)
------------------------------------------------------
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: November 4, 2003 5,257,773 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
1
TABLE OF CONTENTS
ITEM NUMBER PAGE
PART 1
1. Financial Statements 3
2. Management's Discussion and Analysis or Plan of Operation 12
PART 11
1. Legal Proceedings 16
2. Changes In Securities 16
3. Defaults Upon Senior Securities 17
4. Submission of Matters to a Vote of Security 17
5. Other Information 17
6. Exhibits and Reports on Form 8-K 18
Signatures 19
2
PART 1
Item 1 - Financial Statements
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Balance Sheets
As at As at
September 30, December 31,
2003 2002
$ $
(unaudited) (audited)
ASSETS
Current Assets
Cash 43,402 2,997
Prepaid expenses 13,828 --
Accounts receivable 926 --
- -------------------------------------------------------------------------------------------------------
Total Current Assets 58,156 2,997
Mining Claims (Note 7) 25,000 --
Technology Rights (Note 8) 20,000 --
Property, Plant and Equipment (Note 3) 48,756 --
- -------------------------------------------------------------------------------------------------------
Total Assets 151,912 2,997
=======================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable 46,385 41,487
Accrued liabilities 1,150 3,000
Loans from a related party (Note 5) 1,867 1,100
- -------------------------------------------------------------------------------------------------------
Total Liabilities 49,402 45,587
- -------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Notes 1 and 6)
Subsequent Event (Note 9)
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
5,257,773 and 392,133 shares issued and outstanding respectively (Note 3) 5,257 392
Additional Paid-in Capital 8,099,248 7,594,262
Stock based compensation 1,876,171 1,873,815
Donated Capital 126,000 3,000
Stock Subscription Receivable (20,000) --
Deficit Accumulated During the Development Stage (9,984,166) (9,514,059)
- -------------------------------------------------------------------------------------------------------
Total Stockholders' Equity (Deficit) 102,510 (42,590)
- -------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity 151,912 2,997
=======================================================================================================
(The accompanying notes are an integral part of the financial statements)
3
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Statements of Operations
(unaudited)
Accumulated from
November 1, 1985 For the Three Months For the Nine Months
(Date of Inception) Ended Ended
to September 30, September 30 September 30
2003 2003 2002 2003 2002
$ $ $ $ $
Revenue -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Expenses
General and Administrative
Accounting and audit 42,120 5,211 1,625 11,444 2,125
Amortization 2,833 -- -- -- --
Consulting 157,837 109,011 -- 157,837 --
Donated services 126,000 60,000 -- 123,000 --
Financial services 56,266 -- -- -- --
Investor relations 187,148 16,362 -- 16,362 --
Legal 1,025,270 4,562 -- 12,263 --
Management fees 763,000 -- 90,000 -- 270,000
Office 34,980 9,315 382 31,344 1,195
Salaries 229,944 214 33,230 26,214 99,230
Stock based compensation 1,876,171 -- -- 2,356 --
Transfer agent and regulatory 20,155 272 979 3,974 1,956
Travel and promotion 21,540 14,429 -- 14,429 --
- ----------------------------------------------------------------------------------------------------------------
4,543,264 219,376 126,216 399,223 374,506
Research and Development
Consulting 18,659 18,659 -- 18,659 --
Mining Exploration 5,251 5,251 -- 5,251 --
Selling and Marketing (Note 4(f)) 164,712 8,570 -- 46,974 --
- ----------------------------------------------------------------------------------------------------------------
Total Expenses 4,731,886 251,856 126,216 470,107 374,506
- ----------------------------------------------------------------------------------------------------------------
Loss from Continuing Operations (4,731,886) (251,856) (126,216) (470,107) (374,506)
Loss from Discontinued Operations (5,252,281) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
Net Loss For the Period (9,984,167) (251,856) (126,216) (470,107) (374,506)
================================================================================================================
Net Loss Per Share - Basic (0.05) (0.32) (0.11) (0.96)
================================================================================================================
Weighted Average Shares Outstanding 5,201,000 391,000 4,344,000 391,000
================================================================================================================
(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)
4
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Statements of Cash Flows
For the Nine Months
Ended
September 30,
2003 2002
$ $
(unaudited) (unaudited)
Cash Flows to Operating Activities
Net loss for the period (470,107) (374,506)
Adjustments to reconcile net loss to cash:
Donated services 123,000 --
Stock based compensation 94,258 --
Change in non-cash working capital items:
Increase in accounts receivable (926) --
Increase in prepaid expenses (13,828) --
Decrease in accounts payable and accrued liabilities 21,547 365,806
- --------------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (246,056) (8,700)
- --------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Proceeds from shares issued 354,450 --
Advances from a related party 767 8,500
- --------------------------------------------------------------------------------------------------------------
Net Cash From Financing Activities 355,217 8,500
- --------------------------------------------------------------------------------------------------------------
Cash Flows to Investing Activities
Purchase of property, plant and equipment (48,756) --
Purchase of mining claims (20,000) --
- --------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (68,756) --
- --------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash 40,405 (200)
Cash - Beginning of Period 2,997 2,276
- --------------------------------------------------------------------------------------------------------------
Cash - End of Period 43,402 2,076
==============================================================================================================
Non-Cash Financing Activities
Shares issued to consultants 91,902 --
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 --
Debt relating to Company expenses and cash advances to the former President, his
son and a company controlled by the former President were forgiven and treated as
additional paid-in capital -- 801,313
==============================================================================================================
Supplemental Disclosures
Interest paid -- --
Income tax paid -- --
==============================================================================================================
(The accompanying notes are an integral part of the financial statements)
5
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Notes to the Financial Statements
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
6
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Notes to the Financial Statements
2. Summary of Significant Accounting Policies (continued)
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.
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.
Property, Plant and Equipment
Capital assets consist of laboratory and computer equipment, are recorded
at cost and will be amortized on a straight-line basis over a 3 year
period. 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 September, 2003, the Company has no items that
represent comprehensive loss and, therefore, has not included a schedule of
comprehensive loss in the financial statements.
Mineral Properties
The Company capitalizes the acquisition cost of mineral properties.
Exploration costs, such as prospecting and geophysical analysis, are
expensed as incurred, and pre-production development costs are generally
capitalized on an individual property basis. These costs, which do not
necessarily reflect present values, are amortized over the estimated
productive lives of the properties following the commencement of commercial
production using the unit of production method. If a property is
subsequently abandoned, sold or determined not to be economic, all related
costs are written down. It is reasonably possible that economically
recoverable reserves may not be discovered and accordingly a material
portion of the carrying value of mineral properties and related deferred
exploration costs could be written off. Properties acquired under option
agreements whereby payments are made at the sole discretion of the Company
are recorded in the accounts at such time as the payments are made.
7
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Notes to the Financial Statements
2. Summary of Significant Accounting Policies (continued)
Long-Lived Assets
In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal
of Long Lived Assets", the carrying value of intangible assets and other
long-lived assets is reviewed on a regular basis for the existence of facts
or circumstances that may suggest impairment. The Company recognizes an
impairment when the sum of the expected undiscounted future cash flows is
less than the carrying amount of the asset. Impairment losses, if any, are
measured as the excess of the carrying amount of the asset over its
estimated fair value.
Recent Accounting Pronouncements
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 January 1,
2003 and its impact did not have a material effect on its financial
position or results of operations.
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. Property, Plant and Equipment
September 30, December 31,
2003 2002
------------- -------------
Net Book Net Book
Value Value
(unaudited) (audited)
------------- -------------
Computer equipment $ 10,543 $ --
Lab equipment 38,213 --
------------- -------------
$ 48,756 $ --
============= =============
4. Share Capital
(a) Common Stock
On March 17, 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.
8
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Notes to the Financial Statements
4. Share Capital (continued)
(a) Common Stock (continued)
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.
On July 15, 2003, the Company completed a private placement offering
and issuance consisting of 15,000 shares of common stock at a price of
$2.50 per share to net the Company proceeds of $37,500.
On August 12, 2003, the Company issued 50,000 common restricted
shares, as a signing bonus for its newly recruited director of
Business Development. These shares were valued at $0.85 per share
based on a 30 day average rate with a 60% discount rate.
On August 27, 2003, the Company issue a total of 8,500 common
restricted shares, distributed to 3 of is contracting consultants.
These shares were valued at $1.63 per share based on a 30 day average
rate with a 60% discount rate.
On August 31, 2003, the Company completed a private placement offering
and issuance consisting of 17,040 shares of common stock at a price of
$5.00 per share to net the Company proceeds of $85,200.
On September 12, 2003, the Company issued 15,000 common restricted
shares, as a signing bonus for its newly recruited director of
Management Systems. These shares were valued at $2.38 per share based
on a 30 day average rate with a 60% discount rate.
(b) Warrants
(i) Pursuant to private placements the Company received cash of
$179,250 and issued 125,100 common shares during April, May and
July, 2003. One Gold Warrant per share was attached to each
common share. This allows each investor the right to purchase
0.03215 oz. of gold for each share purchased from the Company at
a 25% discount to the New York spot price calculated on the day
the warrant is exercised. The warrant is non-transferable and is
a conditional warrant in that the Company must first produce gold
in "sufficient" quantities before it can be exercised. The Gold
Warrant shall expire sixty months from the date of acceptance of
the agreement. "Sufficient" quantities is defined in each
contract as the economic recovery of at least 250,000 ounces of
gold which belong solely to the Company, and gold which has been
recovered using the Xerion Reaction System and that such exercise
of the Gold Warrants will not endanger the ability of the Company
to finance or support its immediate operational plan.
(ii) Pursuant to a private placement the Company received cash of
$85,200 and issued 17,040 common shares in August, 2003. One Gold
Warrant was attached to each common share under the same
contractual agreement as above. However, the Gold Warrant allows
each investor the right to purchase 0.0643 oz. of gold for each
share purchased.
(c) 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;
9
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Notes to the Financial Statements
4. Share Capital (continued)
(c) Stock Options (continued)
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.
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.
4. Share Capital (continued)
(c) Stock Options (continued)
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%.
5. 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 September 30, 2003. A total of $123,000 had been
recognized for the nine months ended September 30, 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 September 30, 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 fees of $41,079, 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.
10
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Notes to the Financial Statements
6. Commitment
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 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.
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.
7. Mining Claims
On March 17, 2003 and subsequently amended on September 4, 2003 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, 2004. 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.
8. 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 required the Company to
raise one million dollars within twelve 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 twelve 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.
9. Subsequent Event
As a result of the contract signed by the Company on July 3, 2003, the
Company began its project validation process. Xerion retained a qualified
consultant to perform an independent assessment of the project based on all
available data. The final report has not been delivered to the company yet,
however, the report in its existing form can be summarized as stating that
`there is not sufficient existing data to make technical representations
regarding mineral content or recoverability'. Xerion has notified the other
party of this information and it is likely that the project will not
proceed without further substantiation of mineral content.
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 Company's 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 valuable market. Much of that
market is currently untapped, due to the lack of appropriate economic
technology.
The economics of XRS reprocessing 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 sought the cooperation of several mining
companies, including major and intermediate producers, and has begun tests on
ores from some of those companies with the view to exploit the XRS technology at
their existing operations and/or to further develop and exploit the technology
on a broader scale.
Each one of these companies are considered by management to be `business in the
pipeline'. 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 for
preliminary contracts 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. As
part of its project validation process, Xerion retained a qualified consultant
to perform an independent assessment of the project based on all available data.
The final report has not been delivered to the company yet, however, the report
in its existing form can be summarized as stating that `there is not sufficient
existing data to make technical representations regarding mineral content or
recoverability'. Xerion has notified the other party of this information and it
is likely that the project will not proceed without further substantiation of
mineral content.
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
12
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 evaluate
some of the existing assays over the next quarter and depending upon
availability of capital, may extend the evaluation to include a pre-feasibility
study.
GENERAL BUSINESS OVERVIEW
Xerion owns patent pending technology known as the Xerion Reaction System or
`XRS'.
XRS has several potential applications including;
a) Replacing cyanide in the mining industry for the processing of ore
b) Pre-treating refractory ores, thus replacing autoclaves, roasters and
bio-treatment plants.
c) Remediation of leached out heaps, previously leached by cyanide
d) Reprocessing of waste produced by the mining and coal fired power
plant industries.
Management sees the XRS technology, and particularly the reprocessing
application, as offering a significant environmental benefit since XRS has the
ability to extract not only the valuable elements, but also deleterious elements
that are leaching into streams and rivers destroying ecosystems. This waste may
include that 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. Traditionally, 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
implement its first 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 currently 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 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 pre-treatment 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 $1,900.00 per ton of waste. (This gross 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.
Some attempts have been made to remediate this waste at a profit but no solution
has been widely accepted by the industry. 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.
13
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.
RISK FACTORS AND FORWARD LOOKING STATEMENTS
Certain statements herein, including those regarding production, plans, 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 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, validating
the technology to industry standards, 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 has no
revenues and is therefore more vulnerable to business failure than other more
developed companies. 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 some 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 required the Company to
raise one million dollars within six months to avoid notice of cancellation from
Sellers. That date has since been extended to September 2004. The company is
currently on track to meets its obligations under the terms of the purchase
agreement. 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 automatically
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 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 were to lose 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).
The Company has made efforts to be able to duplicate the CSO's results without
him present and has hired an additional technologist to fully document the
necessary formulas and to train on the implementation of those formulas. The
Company believes it now has the ability to reproduce such results, which
dramatically mitigates risk in this area.
14
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. 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.
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 revenue producing contracts for any of its services
or technology applications 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 September 30, 2003, the Company has appointed Mark Van
Kleek, director of Business Development, and Jane McIvor, director of Management
Systems to its executive management team.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 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 prospective
projects 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 nine months of 2003, we
reported general and administrative expense of $399,223, an increase of $24,717,
or 6% from $374,506 reported in the comparable period of the prior year. The
increase primarily resulted from stock based compensation of issuing shares to
newly recruited management and contract consultants. Donates services reflects
the work performed by the president of the Company, which has been donated and
expensed at $20,000 per month since inception of the Company, totalling
$123,000. The additional expense incurred this period relating to Investor
Relations and Travel resulted from the Company's equity raising efforts. There
has been no management fee expense, and minimal salary expense this period as
the company has relied on external consultants to manage these roles. 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 nine months of 2003 of $46,974, 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.
Research and Development and Mineral Exploration Expenses. R&D is a new
expenditure incurred by the Company for this period. $18,659 of the $23,910 R&D
expense, relates to industry consultants. The consultants have been offering
advice and assistance in the development of our newly acquired technology. The
remaining $5,251 has been incurred as a result of assay testing.
Liquidity and Capital Resources. The primary source of the Company's cash has
been through the sale of equity. Our cash increased $40,405 from $2,997 at
December 31,2002 to an ending balance of $43,402 at September 30, 2003. Cash of
$374,450 was raised from the issuance of private placement shares, and used to
fund our operating expenses.
15
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 projects into production.
Part II - Other Information
Item 1 - Legal Proceedings
To the best 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 Management learned in late 2002 that the Company is in dispute over
its 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 dba
North American Resorts Inc. as well as the estate of the Company's former
attorney to cover the costs. These parties have signed a Hold Harmless Agreement
indemnifying the Company from any costs arising from previously undisclosed
liabilities. 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 that 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 made no payments and no formal
demand for payment has been received by the Company and in the event that this
occurs the Company will be pursuing former Directors for payment in this matter.
If this situation escalates and the Company cannot collect from its
indemnifiers, the company may have to pay any money that becomes due.
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;
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.
16
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 a private placement offering and
issuance, consisting of 21,100 shares of common stock at a price of $2.50 per
share.
On July 15, 2003, the Company completed a private placement offering and
issuance, consisting of 15,000 shares of common stock at a price of $2.50 per
share.
On August 12, 2003, the Company agreed to issue 50,000 common restricted shares,
as a contracting signing bonus for its newly recruited director of Business
Development.
On August 27, 2003, the Company agreed to issue a total of 8,500 common
restricted shares, distributed amongst 3 of is contracting consultants.
On August 31, 2003, the Company completed a private placement offering and
issuance, consisting of 17,040 shares of common stock at a price of $5.00 per
share.
On September 12, 2003, the Company agreed to issue 15,000 common restricted
shares, as a signing bonus for its newly recruited director of Management
Systems.
Both private placement offerings made during the quarter, net the Company
proceeds for the 30 September, 2003 quarter to $122,700.
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.
17
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 Non-qualifying Stock Option Plan ("2003
NQPlan").
(b) Reports on Form 8-K:
i. Filed July 14, 2003. 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, an independent assessment has been unable
to confirm metal content or anticipated recoverability and it is
unlikely that the project will proceed without further substantiation
of the owner's claims.
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 /s/ Ben Traub
- ------------------------------------
Ben Traub, President
Dated: November 7, 2003
By /s/ Ellen Luthy
- ------------------------------------
Ellen Luthy, Secretary
Dated: November 7, 2003
18