UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended September 30, 2001
Commission File Number 000-31032
GL ENERGY AND EXPLORATION, INC.
(formerly LRS Capital, Inc.)
(Exact name of registrant as specified in charter)
Delaware 52-52190362
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
141 ADELAIDE STREET WEST, STE 1004, TORONTO, ONTARIO M5H 3L5
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (416) 777-0477 Ext.227
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No __
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of October 31, 2001, the Company
had outstanding 3,251,000 shares of its common stock, par value $0.001.
TABLE OF CONTENTS
ITEM NUMBER AND CAPTION PAGE
PART I
ITEM 1. FINANCIAL STATEMENTS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND PLAN OF OPERATIONS 7
PART II
ITEM 1. LEGAL PROCEEDINGS 10
ITEM 2. CHANGES IN SECURITIES 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
2
ITEM 1. FINANCIAL STATEMENTS
GL Energy and Exploration, Inc.
(formerly LRS Capital, Inc.)
(A Company in the Exploration Stage)
BALANCE SHEET
Unaudited Audited
September 30, December 31,
2001 2000
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ASSETS
Current Assets
Cash and Cash Equivalents $ 66,532 $ 4,401
Prepaid Expenses - 96
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TOTAL ASSETS $ 66,532 $ 4,497
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ (180) $ 18,873
Accrued Obligation to Platoro West
Incorporated 17,201 11,203
Due to Related Parties 67,261 32,952
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Total Liabilities 84,282 63,028
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Shareholders' Equity
Preferred Stock - $0.001 par value;
5,000,000 shares authorized,
no shares issued and outstanding - -
Common Stock - $0.001 par value;
50,000,000 shares authorized,
3,251,000 and 2,654,720 shares
outstanding at September 30, 2001
and December 31, 2000 3,251 2,655
Additional Paid-in Capital 109,639 35,335
Deficit Accumulated during the
Exploration Stage (130,640) (96,521)
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Total Shareholders' Equity (17,750) (58,531)
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 66,532 $ 4,497
============= ============
See notes to financial statements.
3
GL Energy and Exploration, Inc.
(formerly LRS Capital, Inc.)
(A Company in the Exploration Stage)
STATEMENT OF OPERATIONS AND DEFICIT ACCUMULATED DURING THE
EXPLORATION STAGE
Unaudited Unaudited Unaudited
Three Months Nine Months Inception
Ended Ended To
September 30, 2001 September 30, 2001 September 30, 2001
------------------ ------------------ ------------------
Net Revenues $ - $ - $ -
Cost of Revenues - - -
------------------ ------------------ ------------------
Gross Profit - - -
General and Administrative Expenses
Mineral Rights 6,966 14,494 56,322
Taxes - - 380
Legal and Accounting 2,692 15,933 59,031
Transfer Agent 1,210 2,620 5,500
Office 300 900 3,600
Compensation - - 3,800
Organization 142 142 1,626
Miscellaneous 24 30 381
------------------ ------------------ ------------------
Total Expenses 11,334 34,119 130,640
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(Deficit) from Operations (11,334) (34,119) (130,640)
------------------ ------------------ ------------------
Net (Deficit) (11,334) (34,119) (130,640)
Deficit Accumulated During the
Exploration Stage at Beginning
of Period (96,521) (96,521) -
------------------ ------------------ ------------------
Deficit Accumulated During the
Exploration Stage at End
of Period $ (107,855) $ (130,640) $ (130,640)
================== ================== ==================
Net Deficit per Share - Basic $ (0.04) $ (0.04) $ (0.05)
Net Deficit per Share - Diluted $ (0.04) $ (0.04) $ (0.05)
Shares Used in Per Calculation:
Basic 3,053,907 2,791,116
Diluted 3,053,907 2,791,116
See notes to financial statements.
4
GL Energy and Exploration, Inc.
(formerly LRS Capital, Inc.)
(A Company in the Exploration Stage)
STATEMENT OF CASH FLOWS DURING THE EXPLORATION STAGE
Unaudited Unaudited
Nine Months Inception
ended To
September 30, 2001 September 30, 2001
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CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Deficit $ (34,119) $ (130,640)
Adjustments to Reconcile Net Deficit to
Cash Provided by (Used in) Operations:
Office - 2,700
Prepaid Expenses 96 -
Accounts Payable (19,052) (179)
Accrued obligation to
Platoro West Incorporated 5,998 17,201
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NET CASH (USED) BY
OPERATING ACTIVITIES (47,077) (110,918)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Due to Related Parties 34,309 67,261
Issuance of Common Stock 74,900 110,190
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NET CASH (USED) BY
FINANCING ACTIVITIES 109,209 177,451
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NET CHANGE IN CASH AND
CASH EQUIVALENTS 62,132 66,532
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 4,401 -
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 66,532 $ 66,532
================== ==================
SUPPLEMENTARY SCHEDULE
OF NON-CASH OPERATING
AND FINANCING ACTIVITIES
ISSUANCE OF COMMON
SHARES FOR SERVICES $ 700 $ 4,650
================== ==================
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
(Unaudited)
1. GENERAL
The accompanying unaudited consolidated financial statements have been prepared
in conformity with the accounting principles stated in the audited financial
statements for the year ended December 31, 2000 and reflect all adjustments
which are, in the opinion of management, necessary for a fair statement of the
financial position as of September 30, 2001 and the results of operations for
the periods presented. These statements have not been audited by the Company's
independent certified public accountants. The operating results for the interim
periods are not necessarily indicative of results for the full fiscal year.
To the Board of Directors
GL Energy and Exploration, Inc.
Toronto, Ontario, CANADA
We have reviewed the balance sheet of GL Energy and Exploration, Inc. (an
exploration stage company) as of September 30, 2001 and the related statements
of operations and cash flows for the nine months ended September 30, 2001 and
the cumulative amounts from October 7, 1998 (inception) to September 30, 2001.
These statements are the responsibility of management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of obtaining an understanding of the
system for the preparation of interim financial information, applying analytical
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the aforementioned financial statements for them to be in conformity
with generally accepted accounting principles.
The accompanying financial statements have been presented assuming that the
Company will continue as a going concern. The Company has not established source
of revenue and this raises substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from outcome of this uncertainty.
/s/ Simon Krowitz Bolin & Associates, P.A.
Rockville, Maryland
November 12, 2001
The notes to consolidated financial statements appearing in the Company's Annual
Report as filed on SEC Form SB-2 for the years ended December 31, 2000, 1999 and
1998 should be read in conjunction with this Quarterly Report on Form 10-QSB.
2. ISSUANCE OF COMMON STOCK
In August 2001, the Company sold 591,280 shares of its common stock at $0.125
per share. Total net proceeds to the Company were $73,910.
3. SUBSEQUENT EVENTS
On October 10, 2001, the Company changed its name to GL Energy and Exploration,
Inc. from LRS Capital, Inc. On the same date, the Company increased its
authorized capital to 55,000,000 shares of which 5,000,000 shares were
designated as preferred stock and 50,000,000 shares were designated as common
stock. Prior to this change the Company had authorized capital of 15,000,000
shares all of which were designated as common stock. The current outstanding
shares of common stock and the rights of the common stock were not altered.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
Forward Looking Statements
When used in this Form 10QSB and in future filings by GL Energy and Exploration,
Inc. with the Securities and Exchange Commission, the words or phrases "will
likely result," "management expects," or we expect," "will continue," "is
anticipated," "estimated," or similar expression or use of the future tense, are
intended to identify forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Readers are cautioned not to
place undue reliance on any such forward-looking statements, each of which speak
only as of the date made. These statements are subject to risks and
uncertainties, some of which are described below and others are described in
other parts of this Form 10QSB. Actual results may differ materially from
historical earnings and those presently anticipated or projected. We have no
obligation to publicly release the result of any revisions that may be made to
any forward-looking statements to reflect anticipated events or circumstances
occurring after the date of such statements.
Business
GL Energy and Exploration, Inc. is an exploration stage company that seeks to
begin exploration of its tungsten mine. The Company was incorporated in the
state of Delaware on October 7, 1998 under the name LRS Group Incorporated. On
October 15, 1998, the name of the corporation was changed to LRS Capital, Inc.
On October 10, 2001 the name of the corporation was changed to GL Energy and
Exploration, Inc.
Our common stock recently began trading on the Over-the-Counter Bulletin Board
under the stock symbol "GLEE". There has been minimum trading activity in our
common stock. Moreover, if our common stock is traded, there can be no assurance
given that there will be active trades in the security. Therefore, holders of
our common stock may not be able to sell it from time to time or possibly not at
all.
We currently do not have adequate capital to implement our business plan and
must obtain funding. If we do not receive funding, we will have to discontinue
our operations (See "Liquidity and Capital Resources").
We are engaged in the exploration of mining prospects with tungsten
mineralization located in the Western United States. Our business objective is
to locate mining prospects that will produce commercially viable tungsten
deposits, which we intend to be the basis for revenue production. Investors in
our common stock should note that most mining prospects do not yield positive
economic returns. Therefore, an investment in our common stock contains a high
degree of risk, which could result in a complete loss of their investment.
We consider tungsten to be an important industrial mineral. It has many uses in
the industrialized world. When used with certain other metals, it provides
strength and a wear resistance for various kinds of tools used in construction,
mining and medal working. Tungsten is used in many household products such as
light bulbs, television sets and magetrons for microwave ovens. Tungsten is also
being used in munitions, such as bullets, because of its strength and it being
environmentally superior to lead or uranium.
We have acquired a 100% interest in a tungsten project known as Pilot Mountain
in west-central Nevada. We intend to conduct an exploration program to determine
whether or not the prospect is viable for tungsten mining. We intend to pursue
an exploration program consisting of geological mapping, geophysical and
geochemical surveys, sampling, diamond drilling and metallurgical studies to
determine the economic potential of the prospect. If these aspects of the
exploration program provide favorable results, we will conduct a study on the
economic viability of this prospect. We cannot give any assurances that this
program will have any positive affects in reaching our goal of extracting any
tungsten or any other mineral that might produce revenue for us.
7
We expect to compete with numerous mining and exploration companies, many of
which have far greater capital resources than we have, to identify and acquire
claims with potential tungsten composites. We can give no assurance that we will
be able to be competitive in this market.
We will also be subject to regulation by numerous federal and state governmental
authorities. The most significant of these authorities will be the Federal
Environmental Protection Agency, the Bureau of Land Management and comparable
state agencies. If we fail to comply with any of the laws established by these
agencies, we will be subject to possible fines, many of which could be
considerable in amount.
Financial Condition and Changes in Financial Condition
Overall Operating Results:
We had no revenues for the quarter ended September 30, 2001 or since our
inception.
Operating expenses for the quarter ended September 30, 2001 were $11,300. We
incurred $2,700 for legal and accounting services rendered in connection with
our compliance filings with the Securities and Exchange Commission. Expenses for
mineral rights were $7,000. Other operating expenses amounted to $1,600 and were
incurred for supplies and stock transfer agent fees
For the nine months ended September 30, 2001 our total operating expenses were
$34,100 and were incurred primarily for legal and accounting fees and mineral
rights.
We have incurred a cumulative net loss since inception of $130,600.
Liquidity and Capital Resources:
We currently have minimum working capital with which we can fund our future
operations. We must obtain adequate funding in order to implement our business
plan. If we do not receive funding, we will have to discontinue our operations.
To fund our mining operations, we are seeking to raise approximately $950,000
(net of an estimated $50,000 in offering expenses) through a private placement
of our common stock. We registered with the Securities and Exchange Commission
8,000,000 additional shares of our common stock at an offering price of $0.125
per share. These shares have not been underwritten and will be offered for sale
by current officers, directors and shareholders. We may sell any amount of
shares through this offering up to a maximum of 8,000,000 shares. Any investment
in our common stock involves a high degree of risk. We may not be successful in
raising adequate funds through this offering to continue operations.
We have been reliant on loans from related parties to fund operations through
August 2001. In August 2001, we sold 591,280 shares of the aforementioned
registered shares of our common stock to several investors. The total net
proceeds from the sales were $73,910.
Even if the offering is successful, we will need additional funding in the
future to continue our operations. We intend to seek either debt or equity
capital or both. We have no commitments for funding from any unrelated parties
or any other agreements that will provide us with adequate working capital. We
cannot give any assurance that we will locate any funding or enter into any
agreements that will provide the required operating capital to fund our
operations.
As of September 30, 2001 our only asset was $66,500 in cash. Our total
liabilities were $84,300, which includes $67,300 in short-term notes payable to
related parties. In addition, we have a liability of $17,200 to Platoro West,
Incorporated, which represents our accrued obligations to them under the terms
of an agreement dated May 6, 1999 under which they will locate, stake out and
record not less than 20 and not more than 40 mining claims for us. If we default
under the contract, the remedy specified in the contract is that we will
transfer and convey to Platoro all of our rights, title and interest in and to
the mining claims and to all the mineral resources located therein to which the
contract relates. In addition, in such default, Platoro will retain all amounts
previously paid to it and retain all shares previously issued to it under the
contract. At September 30, 2001, we believe that we have met all of our
obligations to Platoro.
8
Total stockholders' deficit at September 30, 2001 was $17,800.
We anticipate generating sufficient revenues with which we will be able to cover
exploration costs. To the extent our revenues exceed exploration costs, we will
use these funds for business expansion. Mining operations contain a high degree
of risk and we may not locate a profitable prospect or any prospect that
contains enough minerals that would warrant further exploration
Employees
We currently have one part time employee. We expect to hire consultants and
independent contractors who specialize in mining operations during the early
stages of implementing our business plan.
Description of Properties
Our executive office is located at 141 Adelaide Street West, Suite 1004,
Toronto, Ontario, Canada. At this location, we share an undesignated amount of
space with another entity. Currently, the landlord and primary tenant are not
charging us any rent. Any costs of this office are considered immaterial to the
financial statements and accordingly are not reflected therein.
Inflation
The Company's results of operations have not been affected by inflation and
management does not expect inflation to have a significant effect on its
operations in the future.
9
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 10, 2001, the Company received the consents from all the shareholders
of the Company pursuant to the General Corporation Law of Delaware, Section 228,
authorizing a change of the Company's name to GL Energy and Exploration, Inc.
from LRS Capital, Inc. and increasing the number of authorized shares to
55,000,000 shares of which 5,000,000 shares were designated as preferred stock
and 50,000,000 shares were designated as common stock.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit Number Name of Exhibit
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15.01 Letter on unaudited interim financial
information (Filed herewith)
b. Reports on Form 8-K
We filed a current report with the Securities and Exchange Commission on Form
8-K on October 24, 2001 reporting the following:
On October 10, 2001, LRS Capital, Inc. received the consents from all the
shareholders of the Company pursuant to the General Corporation Law of Delaware
authorizing two changes to the current certificate of incorporation. The Company
changed its name to GL Energy and Exploration, Inc. from LRS Capital, Inc. On
the same date, the Company increased its authorized capital to 55,000,000 shares
of which 5,000,000 shares were designated as preferred stock and 50,000,000
shares were designated as common stock. Prior to this change the Company had
authorized capital of 15,000,000 shares all of which were designated as common
stock. The current outstanding shares of common stock and the rights of the
common stock were not altered.
10
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
(Registrant) GL ENERGY AND EXPLORATION, INC.
By /s/ Mitchell Geisler
---------------------
Mitchell Geisler, President and
Chairman of the Board
Date November 13, 2001
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Mitchell Geisler
---------------------
Mitchell Geisler, President and
Chairman of the Board
Date November 13, 2001
11
Table of Exhibits
Exhibit Number Name of Exhibit
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15.01 Letter on unaudited interim financial
information (Filed herewith)
12