United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2005
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ______________ to ________________
Commission File Number: 0-26760
XERION ECOSOLUTIONS GROUP INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1286065
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization)
Suites A-C 20/F Neich Tower, 128
Gloucester Road, WanChai, Hong Kong
The People's Republic of China
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(Address of principal executive offices)
(626) 457-5958
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(Issuer's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes |_| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 227,321,840 shares of common stock as
of November 15, 2005.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
XERION ECOSOLUTIONS GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Balance Sheet as of September 30, 2005 (unaudited).................. 2
Condensed Statements of Operations for the three months and nine
months ended September 30, 2005 and 2004 (unaudited).......................... 3
Condensed Statements of Cash Flows for nine months ended
September 30, 2005 and 2004 (unaudited)....................................... 4
Notes to Condensed Financial Statements....................................... 5
Item 2. Management's Discussion and Analysis or Plan of Operations...................... 7
Item 3. Controls and Procedures.........................................................10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...............................................................10
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.....................10
Item 3. Defaults upon Senior Securities.................................................10
Item 4. Submission of Matters to a Vote of Security Holders.............................10
Item 5. Other Information...............................................................10
Item 6. Exhibits and Reports on Form 8-K................................................10
Signatures.............................................................10
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Condensed Balance Sheet
(expressed in U.S. Dollars)
As at
Sept 30,
2005
------------
(unaudited)
ASSETS
Current Assets
Cash $ 2,161
------------
Total Current Assets 2,161
Property and Equipment (Note 3) 2,563
------------
Total Assets 4,724
============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities
Accounts payable 37,466
Accrued liabilities 1,500
Due to related party (Note 4) 163,359
------------
Total Liabilities 202,325
------------
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 shares issued and outstanding 2,842
Additional Paid-in Capital 10,014,413
Donated Capital 126,000
Deficit Accumulated During the Development Stage $(10,340,856)
------------
Total Stockholders' (Deficit) $ (197,601)
------------
Total Liabilities and Stockholders' (Deficit) $ 4,724
============
The accompanying notes are an integral part of the financial statements
2
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Condensed Statements of Operations
(expressed in U.S. Dollars)
(unaudited)
Accumulated from
November 1, 1985 For the For the
(Date of Inception) Three Months Ended Nine Months Ended
to Sept 30, September 30, September 30,
2005 2005 2004 2005 2004
------------ ------------ ------------ ------------ ------------
Revenue -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Expenses
Depreciation $ 11,625 $ 805 $ 829 $ 2,273 $ 2,447
General and administrative (1) 3,039,054 18,040 22,309 55,004 78,546
Impairment loss on intangible asset 20,000 -- -- -- --
Loss on disposal of property and equipment 7,866 -- -- -- --
Mining exploration 54,379 -- -- -- --
Stock-based compensation 1,955,651 -- -- -- --
------------ ------------ ------------ ------------ ------------
Total Expenses 5,088,575 18,845 23,138 55,277 80,993
------------ ------------ ------------ ------------ ------------
Loss from Continuing Operations (5,088,575) (18,845) (23,138) (57,277) (80,993)
Loss from Discontinued Operations (5,252,281) -- -- -- --
------------ ------------ ------------ ------------ ------------
Net (Loss) $(10,340,856) $ (18,845) $ (23,138) $ (57,277) $ (80,993)
============ ============ ============ ============ ============
Net (Loss) Per Share - Basic and Diluted -- $ (0.01) $ (0.01) $ (0.02) $ (0.03)
============ ============ ============ ============ ============
Weighted Average Shares Outstanding -- 2,841,523 2,841,523 2,841,523 2,841,523
============ ============ ============ ============ ============
(1) Stock-based compensation is excluded from:
General and administrative 1,955,651 -- -- -- --
============ ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements
3
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Condensed Statements of Cash Flows
(expressed in U.S. Dollars)
(unaudited)
For the Nine Months
Ended
September 30,
2005 2004
------------ ------------
Cash Flows to Operating Activities
Net loss $ (57,275) $ (80,973)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 2,273 2,447
Loss on disposal of property and equipment -- 7,866
Changes in operating assets and liabilities:
Prepaid expenses -- 2,636
Accounts payable and accrued liabilities 41,471 28,266
------------ ------------
Net Cash Used in Operating Activities (13,531) (39,758)
------------ ------------
Cash Flows from Investing Activities
Sale of mining claims -- 9,000
------------ ------------
Net Cash Provided By Investing Activities -- 9,000
------------ ------------
Cash Flows from (to) Financing Activities
Advances from a related party 13,359 --
Repayments to a related party -- (1,015)
------------ ------------
Net Cash Provided By (Used in) Financing Activities 13,359 (1,015)
------------ ------------
Increase (Decrease) in Cash (172) (31,772)
Cash - Beginning of Period $ 2,333 $ 33,685
------------ ------------
Cash - End of Period $ 2,161 $ 1,913
============ ============
Non-cash Financing and Investing Activities -- --
============ ============
Supplemental Disclosures
Interest paid -- --
Income tax paid -- --
============ ============
The accompanying notes are an integral part of the financial statements
4
Xerion EcoSolutions Group Inc.
(A Development Stage Company)
Notes to the Condensed Financial Statements
(expressed in U.S. Dollars)
(unaudited)
1. Nature of Operations and Continuance of Business
Xerion EcoSolutions Group Inc. (the "Company") was incorporated on November 1,
1985 under the laws of the State of Colorado. The shares of the Company
currently trade on the Electronic Bulletin Board over-the-counter market
(OTC-BB) under the symbol "XECO".
The Company is a development stage company as defined by Statement of Financial
Accountings Standards ("SFAS") No. 7 "Accounting and Reporting by Development
Stage Enterprises". In a development stage company, management devotes most of
its activities in developing a market for its products and/or services. The
Company is presently in its developmental stage and currently has no sources of
revenue to provide incoming cash flows to sustain future operations. As at
September 30, 2005, the Company has a working capital deficit of $200,164
(December 31, 2004 - $145,162) and has an accumulated deficit of $10,340,856
since its inception. The ability of the Company to emerge from the development
stage with respect to any planned principal business activity is dependent upon
its successful efforts to raise additional equity financing and then generate
significant revenue. There is no guarantee that the Company will be able to
complete any of the above objectives. These factors raise substantial doubt
regarding the Company's ability to continue as a going concern.
2. Summary of Significant Accounting Policies
a) Basis of Accounting and Year End
These financial statements are prepared in conformity with
accounting principles generally accepted in the United States and
are presented in U.S. dollars. The Company's fiscal year end is
December 31.
b) Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
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.
c) 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.
d) Property and Equipment
Property and equipment consists of computer equipment recorded at
cost and depreciated on a straight-line basis over the estimated
useful life of three years.
e) Long-lived Assets
In accordance with Financial Accounting Standards Board ("FASB")
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.
5
f) Financial Instruments
The carrying value of cash, accounts payable and accrued liabilities
and amounts due to related party approximate fair value due to the
immediate or short-term maturity of these financial instruments.
g) Mineral Property Costs
The Company has been engaged in the acquisition, exploration and
development of mining properties. Mineral property acquisition and
exploration costs are expensed as incurred. When it has been
determined that a mineral property can be economically developed as
a result of establishing proven and probable reserves, the costs
incurred to develop such property, are capitalized. Such costs will
be amortized using the units-of-production method over the estimated
life of the probable reserve.
h) Income Taxes
Potential benefits of income tax losses are not recognized in the
accounts until realization is more likely than not. The Company has
adopted SFAS No. 109, "Accounting for Income Taxes", as of its
inception. Pursuant to SFAS No. 109 the Company is required to
compute tax asset benefits for net operating losses carried forward.
The potential benefits of net operating losses have not been
recognized in these financial statements because the Company cannot
be assured that it is more likely than not it will utilize the net
operating losses carried forward in future years.
i) Foreign Currency Transactions
The Company's functional and reporting 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.
j) 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.
k) 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.
l) 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 30, 2005
and 2004, the Company has no items that represent comprehensive loss
and, therefore, has not included a schedule of comprehensive loss in
the financial statements.
m) Recent Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 123 (Revised 2004) ("SFAS
No. 123R"), "Share-Based Payment." SFAS No. 123R requires that the
compensation cost relating to share-based payment transactions be
recognized in financial statements. That cost will be measured based
on the fair value of the equity or liability instruments issued.
SFAS No. 123R represents the culmination of a two-year effort to
respond to requests from investors and many others that the FASB
improve the accounting for share-based payment arrangements with
employees. The scope of SFAS No. 123R includes a wide range of
share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation
rights, and employee share purchase plans. SFAS No. 123R replaces
SFAS No. 123, "Accounting for Stock-Based Compensation", and
supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees". SFAS No. 123, as originally issued in 1995, established
as preferable a fair-value-based method of accounting for
share-based payment transactions with employees. However, that
statement permitted entities the option of continuing to apply the
guidance in APB Opinion No. 25, as long as the footnotes to the
financial statements disclosed what net income would have been had
the preferable fair-value-based method been used. Although those
disclosures helped to mitigate the problems associated with
accounting under APB Opinion No. 25, many investors and other users
of financial statements believed that the failure to include
employee compensation costs in the income statement impaired the
transparency, comparability, and credibility of financial
statements. Public entities that file as small business issuers will
be required to apply Statement 123R in the first interim or annual
reporting period that begins after December 15, 2005. The adoption
of this standard is not expected to have a material impact on the
Company's results of operations or financial position.
6
In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets - An Amendment of APB Opinion No. 29". SFAS No.
153 is the result of a broader effort by the FASB to improve
financial reporting by eliminating differences between GAAP in the
United States and GAAP developed by the International Accounting
Standards Board (IASB). As part of this effort, the FASB and the
IASB identified opportunities to improve financial reporting by
eliminating certain narrow differences between their existing
accounting standards. SFAS No. 153 amends APB Opinion No. 29,
"Accounting for Nonmonetary Transactions", that was issued in 1973.
The amendments made by SFAS No. 153 are based on the principle that
exchanges of nonmonetary assets should be measured based on the fair
value of the assets exchanged. Further, the amendments eliminate the
narrow exception for nonmonetary exchanges of similar productive
assets and replace it with a broader exception for exchanges of
nonmonetary assets that do not have "commercial substance."
Previously, APB Opinion No. 29 required that the accounting for an
exchange of a productive asset for a similar productive asset or an
equivalent interest in the same or similar productive asset should
be based on the recorded amount of the asset relinquished. The
provisions in SFAS No.153 are effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005.
Early application is permitted and companies must apply the standard
prospectively. The effect of adoption of this standard is not
expected to have a material impact on the Company's results of
operations and financial position.
The FASB has also issued SFAS No. 151 and 152, but they will not
have any relationship to the operations of the Company. Therefore, a
description and its impact for each on the Company's operations and
financial position have not been disclosed.
In March 2005, the SEC staff issued Staff Accounting Bulletin No.
107 ("SAB 107") to give guidance on the implementation of SFAS No.
123R. The Company will consider SAB 107 during the implementation of
SFAS No. 123R.
n) Reclassifications
Certain reclassifications have been made to the prior period's
financial statements to conform to the current period's
presentation.
o) 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.
3. Property and Equipment
June 30, December 31,
2005 2004
Net Book Net Book
Accumulated Value Value
Cost Depreciation (unaudited) (audited)
------------ ------------ ------------ ------------
Computer equipment $ 9,207 $ 6,645 $ 2,563 $ 4,836
4. Related Party Transactions
a) The Company accrued $45,000 during the nine months ended September
30, 2005 (2004 - $45,000) to the President of the Company for
management services rendered.
b) Included in due to related party is a balance of $150,000 (December
31, 2004 - $120,000) payable to the President of the Company.
c) The amount of $13,359 (December 31, 2004 - $0) due to the President
of the Company for cash advances and expenses paid on behalf of the
Company is without interest, unsecured and due on demand.
5. Subsequent Event
The Company entered into a definitive Stock Exchange Agreement (the "Agreement")
under which Town House Land Limited ("Town House"), a real estate development
company organized in the People's Republic of China; was acquired by the Company
in consideration for the issuance of the common stock of the Company
representing a 98.75% ownership interest in the Company to the former owners of
Town House and their designees. The Agreement closed on October 31, 2005.
Reference is made to the Form 8-K and Form 8-K/A current reports filed with the
U.S. Securities and Exchange Commission during November 2005.
7
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. (the "Company") 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.
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. The cancellation of the
purchase resulted in a reimbursement of 2.5 million shares to the Company, which
substantially reduced the issued and outstanding shares of the Company.
For over a year the Company had been working with Dr. David Dreisinger, a
specialist consultant in the field of hydrometallurgy. This work has included a
research project focused on developing a viable alternative to cyanide for the
gold mining industry. The Company has discontinued this project.
8
Results of Operations for the Nine Months Ended September 30, 2005
Revenues. The Company has had no revenues from operations.
The Company incurred a net loss of $55,277 during the nine month period ended
September 30, 2005 compared to $80,993 in the equivalent period of 2004, a
decrease of 31.8%. The losses for both periods primarily consisted of management
fees paid to the president of the Company of $45,000. The remaining expenses
consisted of legal and professional fees which had decreased during the current
year.
Results of Operations for the Three Months Ended September 30, 2005
The Company had no revenues from operations.
The Company incurred a net loss of $18,845 during the three month period ended
September 30, 2005 as compared to $23,138 for an equivalent period in 2004, a
decrease of 18.6%. The losses for both periods primarily consisted of management
fees paid to the president of the Company at a rate of $5,000 per month.
Liquidity and Capital Resources. The primary source of the Company's cash has
been through the sale of its common stock. Our cash decreased to $2,161 at
September 30, 2005 from $2,333 at December 31, 2004. The President of the
Company advanced $13,234 to the Company during the year which was offset by
general and administrative expenditures. As at September 30, 2005, the Company
has a working capital deficit of $200,164 as compared to $145,162 at December
31, 2004.
The Company entered into a definitive Stock Exchange Agreement (the "Agreement")
under which Town House Land Limited ("Town House") was acquired by the Company
in consideration for the issuance of the common stock of the Company
representing a 98.75% ownership interest in the Company to the former owners of
Town House and their designees. The Agreement closed on October 31, 2005.
Future expenses of the Company are expected to be financed through the
operations of Town House and through additional funds raised through equity
financings.
9
Item 3 - Controls and Procedures
The Company's Chief Executive Officer and chief financial officer have evaluated
the effectiveness of the Company's disclosure controls and procedures (as such
term is defined in Rules 13a-15 and 15d-15 under the Exchange Act of 1934) as of
the end of period covered by this quarterly report (the "Evaluation Date").
Based on such evaluation, such officer has concluded that, as of the Evaluation
Date, the Company's disclosure controls and procedures are effective.
During the most recent fiscal quarter, there have not been any significant
changes in the Company's internal controls over financial reporting or in other
factors that have materially affected, or are reasonably likely to materially
affect internal controls over financial reporting.
PART 2 - OTHER INFORMATION
Item 1 - Legal Proceedings
N/A
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
N/A
Item 3 - Defaults Upon Senior Securities
N/A
Item 4 - Submission of Matters To a Vote of Security Holders
N/A
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K
Exhibits
31.1 Certification of Fang Zhong
32.1 Certification of Fang Zhong
Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized on this 16th day of November, 2005
Xerion EcoSolutions Group Inc.
By: /s/ Fang Zhong
------------------------------------
Fang Zhong
Chief Executive Officer, President,
Treasurer, and principal financial
And accounting officer
10