XERION ECOSOLUTIONS GROUP INC.
(Formerly IMMULABS CORP)
Filing Type: 10QSB
Description: Quarterly Report
Filing Date: May 17, 2004
Period End: March 31, 2004
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 March 31, 2004
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 905, 102-4369 Main Street
Whistler, BC Canada V0N 1B4
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(604) 902 0178
(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: May 12, 2004 2,841,523 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 1 - FINANCIAL INFORMATION
1. Financial Statements 1
2. Management's Discussion and Analysis or Plan of Operation 9
3. Controls and Procedures 11
PART 11 - OTHER INFORMATION
1. Legal Proceedings 11
2. Changes In Securities 12
3. Defaults Upon Senior Securities 12
4. Submission of Matters to a Vote of Security 12
5. Other Information 12
6. Exhibits and Reports on Form 8-K 12
Signatures 13
PART 1 - FINANCIAL INFORMATION
- ------------------------------
Item 1 - Financial Statements
- -----------------------------
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Balance Sheets
As at As at
March 31, December 31,
2004 2003
$ $
(unaudited) (audited)
ASSETS
Current Assets
Cash 4,911 33,685
Accounts Receivable 9,000 --
Prepaid expenses 2,185 2,636
- --------------------------------------------------------------------------------------------------------
Total Current Assets 16,096 36,321
Property, Plant and Equipment (Note 3) 7,098 24,771
- --------------------------------------------------------------------------------------------------------
Total Assets 23,194 61,092
- --------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable (Note 5(a)) 95,090 92,754
Accrued liabilities 3,250 5,000
Loans from a related party (Note 5(b)) -- 1,014
- --------------------------------------------------------------------------------------------------------
Total Liabilities 98,340 98,768
- --------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Notes 1, 8 and 9)
Stockholders' Deficit
Preferred stock, 50,000,000 shares authorized, no par value; none issued -- --
Common Stock, 300,000,000 shares authorized, $0.001 par value
2,841,523 and 5,341,523 shares issued and outstanding respectively (Note 4) 2,841 5,342
Additional Paid-in Capital 8,138,242 8,135,742
Stock based compensation 1,876,171 1,876,171
Donated Capital (Note 5(b)) 126,000 126,000
Deficit Accumulated During the Development Stage (10,218,400) (10,180,931)
- ---------------------------------------------------------------------------------------------------------
Total Stockholders' Deficit (75,146) (37,676)
- ---------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficit 23,194 61,092
- --------------------------------------------------------------------------------------------------------
1
(The accompanying notes are an integral part of the financial statements)
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Statements of Operations
(unaudited)
Accumulated from
November 1, 1985 For the Three Months
(Date of Inception) Ended
to March 31, March 31,
2003 2004 2003
$ $ $
Revenue -- -- --
- -----------------------------------------------------------------------------------
Expenses
General and Administrative
Accounting and audit 55,735 3,838 2,925
Amortization 7,089 807 --
Consulting 154,662 -- --
Donated services 126,000 -- 3,000
Financial services 56,266 -- --
Investor relations 187,148 -- --
Legal 1,029,069 820 6,348
Management fees 838,000 15,000 --
Director fees 12,000 -- --
Office 57,589 3,396 213
Salaries 234,824 946 26,000
Stock based compensation 1,876,171 -- 2,356
Transfer agent and regulatory 24,986 1,489 884
Travel and promotion 22,971 -- --
Loss on disposal of property and equipment 7,866 7,866
- -----------------------------------------------------------------------------------
4,690,376 34,162 41,726
- -----------------------------------------------------------------------------------
Business Development
Consulting 35,392 3,259 --
Mining Exploration 29,427 48 --
Write-off of mining claims (Note 6) 25,000 -- --
Write-off of technologies (Note 7) 20,000 -- --
- -----------------------------------------------------------------------------------
109,819 3,307 --
- -----------------------------------------------------------------------------------
Selling and Marketing (Note 4(f)) 165,924 -- 16,000
- -----------------------------------------------------------------------------------
Total Expenses 4,966,119 37,469 57,726
- -----------------------------------------------------------------------------------
Loss from Continuing Operations (4,966,119) (37,469) (57,726)
Loss from Discontinued Operations (5,252,281) -- --
- -----------------------------------------------------------------------------------
Net Loss For the Period (10,218,400) (37,469) (57,726)
- -----------------------------------------------------------------------------------
Net Loss Per Share - Basic (0.01) (0.02)
- -----------------------------------------------------------------------------------
Weighted Average Shares Outstanding 2,841,000 2,605,000
- -----------------------------------------------------------------------------------
(Diluted loss per share has not been presented as the result is anti-dilutive)
2
(The accompanying notes are an integral part of the financial statements)
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Statements of Cash Flows
(unaudited)
For the Three Months
Ended
March 31,
2004 2003
$ $
Cash Flows to Operating Activities
Net loss for the period (37,469) (57,726)
Adjustments to reconcile net loss to cash:
Amortization 807
Donated services -- 3,000
Stock based compensation -- 2,356
Loss on sale of property, plant and equipment 7,866 --
Change in non-cash working capital items:
Increase in accounts receivable (9,000) --
Decrease in prepaid expenses 451 (16,000)
Decrease in accounts payable and accrued liabilities 586 342
- -------------------------------------------------------------------------------
Net Cash Used in Operating Activities (36,759) (68,028)
- -------------------------------------------------------------------------------
Cash Flows from Financing Activities
Proceeds from subscriptions receivable -- 20,000
Proceeds from shares issued -- 90,000
Advances from (to) a related party (1,015) 767
- -------------------------------------------------------------------------------
Net Cash From (Used in) Financing Activities (1,015) 110,767
- -------------------------------------------------------------------------------
Cash Flows to Investing Activities
Proceeds from sale of property, plant and equipment 9,000 --
Purchase of mining claims -- (20,000)
- -------------------------------------------------------------------------------
Net Cash From (Used in) Investing Activities 9,000 (20,000)
- -------------------------------------------------------------------------------
Increase (Decrease) in Cash (28,774) 22,739
Cash - Beginning of Period 33,685 2,997
- -------------------------------------------------------------------------------
Cash - End of Period 4,911 25,736
- -------------------------------------------------------------------------------
Non-Cash Financing Activities
Shares issued to consultants -- --
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 -- --
- -------------------------------------------------------------------------------
(Diluted loss per share has not been presented as the result is anti-dilutive)
3
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 reverse split is reflected in the financial statements as of the first
day of the first period presented.
The Company had entered the business of mine reclamation and environmental
remediation, which had focused on serving the mining and coal, fired power
plant industries. Refer to Notes 6 and 7. On March 17, 2003 the Company
purchased 67 mining claims and certain ore and waste processing
technologies. In compliance with the purchase agreements, the vendors were
obligated to deliver exploration and metallurgical data to support the
representations made about the processing technologies and claims. The
Vendors neglected to deliver this documentation. Subsequent to December 31,
2003 the Company cancelled the purchase agreements and is evaluating its
legal options in claiming damages based on misrepresentation. The
cancellation of the purchase agreements results in a reimbursement of 2.5
million shares to the Company, which will substantially reduce the issued
and outstanding shares of the Company.
The Company has recently been working with a specialist consultant in the
field of hydrometallurgy. This work has included a research project focused
of developing a viable alternative to cyanide for the gold mining industry.
The results of this research project have identified specific chemical
conditions in the application of certain non-toxic reagents that could lead
to a significant breakthrough in the development of a replacement for
cyanide. The Company is currently evaluating its options with regard to
developing this new technology.
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.
2. Summary of Significant Accounting Policies
Year End
The Company's fiscal year end is December 31.
4
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Notes to the Financial Statements
Basis of Accounting
These financial statements are prepared in conformity with accounting
principles generally accepted in the United States and are presented in
U.S. dollars.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three
months or less at the time of issuance to be cash equivalents.
2. Summary of Significant Accounting Policies (continued)
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.
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
Property, plant and equipment consists of laboratory and computer equipment
recorded at cost and amortized on a straight-line basis over a three-year
period.
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.
5
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Notes to 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.
Long-Lived Assets
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" establishes a single accounting model for long-lived assets to be
disposed of by sale including discontinued operations. SFAS 144 requires
that these long-lived assets be measured at the lower of the carrying
amount or fair value less cost to sell, whether reported in continuing
operations or discontinued operations.
2. Summary of Significant Accounting Policies (continued)
Foreign Currency Transactions/Balances
The Company's functional currency is the United States dollar. Occasional
transactions occur in Canadian currency, and management has adopted SFAS
No. 52, "Foreign Currency Translation". Monetary assets and liabilities
denominated in foreign currencies are translated into United States dollars
at rates of exchange in effect at the balance sheet date. Non-monetary
assets, liabilities and items recorded in income arising from transactions
denominated in foreign currencies are translated at rates of exchange in
effect at the date of the transaction.
Concentration of Risk
The Company maintains its cash account in primarily one commercial bank in
Vancouver, British Columbia, Canada. The Company's cash accounts are two
uninsured business checking accounts maintained in U.S. and Canadian
dollars, which totalled $4,911 on March 31, 2004. At March 31, 2004 the
Company has not engaged in any transactions that would be considered
derivative instruments on hedging activities.
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.
Recent Accounting Pronouncements
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.
6
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Notes to the Financial Statements
In December 2003, the United States Securities and Exchange Commission
issued Staff Accounting Bulletin No. 104, "Revenue Recognition" (SAB 104),
which supersedes SAB 101, "Revenue Recognition in Financial Statements."
The primary purpose of SAB 104 is to rescind accounting guidance contained
in SAB 101 related to multiple element revenue arrangements, which was
superseded as a result of the issuance of EITF 00-21, "Accounting for
Revenue Arrangements with Multiple Deliverables." While the wording of SAB
104 has changed to reflect the issuance of EITF 00-21, the revenue
recognition principles of SAB 101 remain largely unchanged by the issuance
of SAB 104. The adoption of SAB 104 did not have a material impact on the
Company's financial statements.
3. Property, Plant and Equipment
March 31, December 31,
2004 2003
Net Book Net Book
Accumulated Value Value
Cost Amortization $ $
$ $ (unaudited) (audited)
Computer equipment 9,207 2,109 7,098 7,905
-------------------------------------------------------------------------------------------------
4. Share Capital
(a) Common Stock
On February 2, 2004, the Company cancelled the mining claims and
technology right agreements with the vendors and is currently
evaluating its legal options in claiming damages based on
misrepresentation. The 2,500,000 shares issued to the vendors have
been returned to treasury and cancelled.
(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.
(iii)Pursuant to a private placement the Company received cash of
$49,000 and issued 98,000 common shares in December 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, and need not have mined the gold using the
Xerion Reaction System.
7
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Notes to the Financial Statements
(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;
As of March 31, 2004, there are no outsanding stock options.
Weighted
Average
Weighted Remaining
Shares Average Contractual
Under Option Option Price Life
# $ (months)
Beginning of year 125,000 4.00
Granted -- --
Exercised -- --
Expired (125,000) 4.00
- --------------------------------------------------------------------------------
End of period -- --
- --------------------------------------------------------------------------------
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 at $20,000 per month. The
President of the Company has agreed to reduce this to $5,000 per
month, as of January 1, 2004.
Included in accounts payable is a balance of $72,928 payable to the
President of the Company. Until October 1, 2003, the President has
been donating his services to the Company, at which point the Company
agreed to remunerate the President at $20,000 per month. As of January
1, 2004, this has been adjusted to $5,000 per month.
(b) The amounts due to the President of the Company represented cash loans
and are non-interest bearing, unsecured and without specific terms of
repayment.
6. Mining Claims
On March 17, 2003 and subsequently amended on September 4, 2003 the Company
had 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. On February 2, 2004, the Company cancelled the
agreement with the vendors and is currently evaluating its legal options in
claiming damages based on misrepresentation. The 500,000 shares issued to
the vendors have been returned to treasury and cancelled.
8
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Notes to the Financial Statements
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 $1. 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. On February 2, 2004 the Company cancelled this agreement with the
vendors and is currently evaluating its legal options in claiming damages
based on misrepresentation. The 2,000,000 shares issued to the vendors have
been returned to treasury and cancelled.
8. Contingent Liability
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
$97,509 due to their losses, however, the title of the bus was never
transferred to the Company and the Company is looking to recoup
approximately $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 the costs. These parties have signed a
Hold Harmless Agreement indemnifying the Company from any costs arising
from this matter. It is not possible at this time for the Company to
predict with any certainty the outcome of this claim. However, management
is of the opinion, based upon information presently available, that it is
unlikely that any liability would be material in relation to the Company's
financial position.
9. 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 allowed 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. Subsequently, 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.
Item 2 - Management's Discussion and Analysis or Plan of Operation
- ------------------------------------------------------------------
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.
General Business Overview
- -------------------------
Xerion EcoSolutions Group Inc. was originally incorporated in Colorado in 1985
as Gemini Ventures, Inc. The name was changed in 1989 to Solomon Trading
Company, Ltd., in 1994 to the Voyageur First, Inc., in 1995 to North American
Resorts, Inc., in 2000 to Immulabs Corp. Effective March 28, 2003, as filed with
the State of Colorado, the Company changed its name to Xerion EcoSolutions Group
Inc. and is currently in the business of developing gold extraction technology
for the mining industry.
9
In November 2000, Immulabs acquired the exclusive rights to purchase
technologies developed by Quest Research Group, Inc. ("Quest") of Boston,
Massachusetts, and to buy up to 100% of that company. Quest's biotech research
had resulted in the development of two technologies of interest to the Company,
which the Company hoped to commercialize. With the exclusive rights to acquire
secured, the Company had been performing its due diligence pursuant to its
option contract with Quest in order to evaluate the technology and develop its
commercialization strategy. The parties entered into a dispute and the Company
contacted Quest to seek mediation or arbitration as provided for in the option
agreement. The Company subsequently learned that Quest had insufficient assets
to warrant litigation and decided at this time not to pursue further legal
action.
In October 2002, the Company retained Ben Traub as President of the company. Mr.
Traub was to identify new business opportunities on behalf of the Company.
On March 17, 2003 the Company purchased 67 mining claims and certain ore and
waste processing technologies. In compliance with the purchase agreements, the
vendors were obligated to deliver exploration and metallurgical data to support
the representations made about the processing technologies and claims. The
Vendors neglected to deliver this documentation. Subsequent to December 31, 2003
the Company has canceled the purchase agreements and is currently evaluating its
legal options in claiming damages based on misrepresentation. The cancellation
of the purchase agreements results in a reimbursement of 2.5 million shares to
the company, which substantially reduced the issued and outstanding shares of
the Company.
Over the past several months the Company has been working with Dr. David
Dreisinger (1), a specialist consultant in the field of hydrometallurgy. This
work has included a research project focused of developing a viable alternative
to cyanide for the gold mining industry.
As a result of this research project, Dr. Dreisinger has identified certain
chemical conditions in the application of certain non-toxic reagents that he
believes could lead to a significant breakthrough in the development of a
replacement for cyanide.
Cyanide is currently used to extract in excess of 80% of the world's gold
production. Cyanide is widely known to be toxic and dangerous to work with (2).
Due to many accidental spills of cyanide into lakes, streams and drinking water,
the use of cyanide has come under close scrutiny by environmental regulators.
Public awareness of the perceived dangers has led to the use of cyanide being
banned or severely restricted in some areas of the world, thus providing a
commercial opportunity for alternative gold extraction systems. For example,
Canyon Resources has a 10.9 million ounce gold deposit that is currently impeded
from development by the anti-mining initiative, I-137, which bans development of
new gold and silver mines which use open-pit mining and cyanide in the treatment
and recovery process in the State of Montana (3).
To date, no alternative gold extraction system has found broad commercial
success due to associated problems with chemistry and/or economics (4).
It is Xerion's goal to develop a less toxic alternative to cyanide for the gold
mining industry. There is currently little market for cyanide alternatives due
to the wide use of cyanide and its strong market dominance. However, due to the
current regulatory climate, it is possible that substantial proof of concept by
a less toxic alternative could result in adoption by the mining industry.
Dr. Dreisinger has identified and proposed certain chemical conditions under
which selected non-toxic reagents could potentially operate economically, at the
same time avoid known handicaps previously associated with such chemistry. A
substantial review of related literature and existing patents has not revealed
any other work that has utilized these proposed chemical conditions. Xerion
continues to examine the large body of knowledge associated with this chemistry
in the search for potential conflicts that might hinder the success of a patent
application.
The Company is currently in discussions with Dr. Dreisinger and the University
of British Columbia (5) regarding the necessary bench scale lab work to prove
out Dr. Dreisinger's hypothesis.
(1) www.mmat.ubc.ca/units/bioh/people/dreisinger/dreisinger.html
(2) www.cyanidecode.org/library/cn_facts_health.html
(3) www.canyonresources.com/projects/mcdon.html
(4) http://technology.infomine.com/enviromine/publicat/cyanide.pdf
(5) www.mmat.ubc.ca/research/groups/hydromet.htm
10
Results of Operations for the Period Ended March 31, 2004
- ---------------------------------------------------------
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 three month period ended March 31,
2004, we reported general and administrative expenses of $26,296, a decrease of
$15,430, or 37% from $41,726 reported in the equivalent period for 2003. The
decrease primarily resulted from reduced legal fees and salaries as business
development strategies are currently being delayed until further research and
development takes place. Management fees of $15,000 are a new expenditure
incurred this period compared to the period of March 2003. This represents
management fees at $5,000 per month as opposed to the donated services
previously accounted.
Selling and Marketing Expense. There was a 100% decrease in advertising expenses
for the quarter of March 31, 2004, compared to the equivalent quarter in 2003.
This resulted from management's primary focus being diverted to research and
development as opposed to the previous business development strategies.
Business Development Expenditure. $11,173 has been spent on business development
for the quarter ended March 31, 2004, compared to nil in the equivalent period
for 2003. The was no active business activity in last year's March quarter. The
expenditures incurred this period represents research and development consulting
expenses used primarily for product development and disposal of the laboratory
equipment.
Liquidity and Capital Resources. The primary source of the Company's cash has
been through the sale of equity. Our cash decreased to $4,911 at March 31, 2004
from $33,685 at March 31,2003. Cash of $9,000 is due to be collected from the
sale of laboratory equipment and cash of $37,000 was used to fund the operating
activities. Future expenses will be either be financed by additional sale of
equity to the President of the Company or in the form of private placements.
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) develop marketable
technology in the mining industry.
Item 3 - Controls and Procedures
- --------------------------------
(a) Evaluation of disclosure controls and procedures. Based on the evaluation
of the Company's disclosure controls and procedures (as defined in Rules
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) as of a
date within 90 days of the filing date of this Quarterly Report on Form
10-QSB, our chief executive officer and chief financial officer have
concluded that our disclosure controls and procedures are designed to
ensure that the information we are required to disclose in the reports we
file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC's rules and forms
and are operating in an effective manner.
(b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their most recent evaluation.
PART 11 - 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
11
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.
On March 17, 2003 the Company purchased 67 mining claims and certain ore and
waste processing technologies. In compliance with the purchase agreements, the
vendors were obligated to deliver exploration and metallurgical data to support
the representations made about the processing technologies and claims. The
Vendors neglected to deliver this documentation. As of February 4, 2004 the
Company has cancelled the purchase agreements and is currently evaluating its
legal options in claiming damages based on misrepresentation.
Item 2 - Changes in Securities
- ------------------------------
None
Item 3 - Defaults Upon Senior Securities
- ----------------------------------------
None
Item 4 - Submission Of Matters To A Vote Of Security Holders
- ------------------------------------------------------------
None
Item 5 - Other Information
- --------------------------
None
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(DOCUMENTS INCORPORATED BY REFERENCE)
(a) Filed January 7, 2004. The Company has received final results from an
independent review of the patent application of XRS technology. The
results indicate that most of the chemistry surrounding Xerion's
technology is known to be valid, but according to the Consultant,
these valid components appear to have been developed by parties other
than the Vendors.
(b) Filed February 9, 2004. The Company has cancelled purchase agreements
related to acquisition of mining claims and mining technology and is
taking steps for recovery of shares that were granted to the vendors.
Additionally, the Company is currently evaluating its legal options
for return of funds expended in reliance upon the vendor's
representations.
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: May 12, 2004
By:
/s/ Ellen Luthy
- ----------------------
Ellen Luthy, Secretary
Dated: May 12, 2004
12