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 March 31, 2002
Commission File Number 000-31032
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GL ENERGY AND EXPLORATION, INC.
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(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. 2274
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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 May 10, 2002, the Company had
outstanding 11,334,753 shares of its common stock, par value $0.001.
TABLE OF CONTENTS
ITEM NUMBER AND CAPTION PAGE
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PART I
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ITEM 1. FINANCIAL STATEMENTS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND PLAN OF OPERATIONS 8
PART II
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ITEM 1. LEGAL PROCEEDINGS 11
ITEM 2. CHANGES IN SECURITIES 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
2
PART I
ITEM 1. FINANCIAL STATEMENTS
GL Energy and Exploration, Inc.
(A Company in the Development Stage)
CONSOLIDATED BALANCE SHEET
Unaudited Audited
March 31, December 31,
2002 2001
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ASSETS
Current Assets
Cash and Cash Equivalents $ 53,877 $ 59,073
Prepaid Expenses - -
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TOTAL ASSETS $ 53,877 $ 59,073
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 2,550 $ 1,947
Accrued Obligation to Platoro West Incorporated 22,089 18,423
Due to Shareholder 67,261 67,261
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Total Liabilities 91,900 87,631
Minority Interest 191 176
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, 11,334,753 shares
outstanding at March 31, 2002 and December 31, 2001 11,335 11,335
Additional Paid-in Capital 101,605 101,605
Deficit Accumulated during the Development Stage (151,154) (141,674)
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Total Shareholders' Equity (38,214) (28,734)
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 53,877 $ 59,073
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See notes to financial statements.
3
GL Energy and Exploration, Inc.
(A Company in the Development Stage)
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT DURING
THE DEVELOPMENT STAGE
Unaudited Unaudited
Three Months Inception
Ended To
March 31, 2002 March 31, 2002
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Net Revenues $ - $ -
Cost of Revenues - -
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Gross Profit - -
General and Administrative Expenses
Mineral Rights 3,666 61,210
Taxes - -
Legal and Accounting 4,737 70,141
Transfer Agent 650 7,995
Office 300 4,200
Compensation - 3,800
Organization 142 2,913
Miscellaneous - 984
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Total Expenses 9,495 151,243
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Minority Interest in
Losses of Subsidiary (15) (89)
(Deficit) from Operations (9,480) (151,154)
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Net (Deficit) (9,480) (151,154)
Deficit Accumulated During the
Development Stage at Beginning
of Period (141,674) -
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Deficit Accumulated During the
Development Stage at End
of Period $ (151,154) $ (151,154)
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Net Deficit per Share - Basic $ (0.00)
Net Deficit per Share - Diluted $ (0.00)
Shares Used in Per Calculation:
Basic 11,334,753
Diluted 11,334,753
See notes to financial statements.
4
GL Energy and Exploration, Inc.
(A Company in the Development Stage)
CONSOLIDATED STATEMENT OF CASH FLOWS DURING
THE DEVELOPMENT STAGE
Unaudited Unaudited
Three Months Inception
ended To
March 31, 2002 March 31, 2002
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CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Deficit $ (9,480) $ (151,154)
Adjustments to Reconcile Net Deficit to Cash
Common Stock Issued for Services - 100
Fair Value of Services Received - 3,900
Minority Interest 15 (59)
Provided by (Used in) Operations:
Accounts Payable 603 2,550
Accrued obligation to
Platoro West Incorporated 3,666 22,089
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NET CASH (USED) BY
OPERATING ACTIVITIES (5,196) (122,574)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Due to Related Parties - 67,261
Issuance of Common Stock - 109,190
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NET CASH (USED) BY
FINANCING ACTIVITIES - 176,451
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NET CHANGE IN CASH AND
CASH EQUIVALENTS (5,196) 53,877
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 59,073 -
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 53,877 $ 53,877
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See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
March 31, 2002
(Unaudited)
1. GENERAL
The accompanying unaudited financial statements have been prepared in conformity
with the accounting principles stated in the audited financial statements for
the year ended December 31, 2001 and reflect all adjustments which are, in the
opinion of management, necessary for a fair statement of the financial position
as of March 31, 2002 and the results of operations for the periods presented.
These statements have not been audited but have been reviewed 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.
The notes to the consolidated financial statements appearing in the Company's
Annual Report as filed on SEC Form 10-KSB for the year ended December 31, 2001
should be read in conjunction with this Quarterly Report on Form 10-QSB.
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
Company Background
GL Energy and Exploration, Inc. 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. GL Energy is a development stage company that has acquired
certain mining claims.
In May 1999, the company entered into an agreement with a mineral
exploration company, under which they would locate, stake out and record not
less than 20 and not more than 40 mining claims within 30 business days of the
date of the agreement that the mineral exploration company believed to contain
high concentrations of tungsten. The mineral exploration company staked 30
unpatented claims for the company pursuant to this contract and met its staking
obligation. The mineral exploration company assigned this agreement on March 28,
2001 to Platoro West Incorporated. 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 March 31, 2002, we
believe that we have met all of our obligations to Platoro.
On October 10, 2001, a company named GL Tungsten, Inc. was formed. GL
Tungsten was incorporated in the state of Nevada.
On October 31, 2001, GL Energy assigned its obligations under its
agreement with Platoro and all of its mining operation activities to GL
Tungsten. In conjunction with that transfer of obligations, Platoro West agreed
to reassign its agreement with GL Energy to GL Tungsten. GL Tungsten is now
solely responsible for the mining of tungsten. Along with assigning the
agreement to GL Tungsten, Platoro West agreed to cancel the 43,750 shares of
common stock of GL Energy and Exploration, which it owned for 60,000 shares of
common stock in GL Tungsten.
On November 19, 2001, GL Tungsten passed a resolution to issue 60,000
shares of its common stock to Platoro West. In addition, GL Tungsten issued
14,940,000 shares of its common stock to GL Energy And Exploration in
consideration for $5,000, which was paid by GL Energy to GL Tungsten.
GL Tungsten is now the primary operating entity and is a 99.6% owned
subsidiary of GL Energy. The financial statements of GL Tungsten have been
consolidated with GL Energy in the financial statements included elsewhere
herein.
7
On November 19, 2001, GL Energy declared a stock dividend to its
shareholders. The dividend was at the rate of 2.5 additional shares of common
stock for each outstanding share.
Company Plan of Operation
We are engaged in the exploration of mining prospects with tungsten
mineralization located in the Western United States. We plan to locate mining
prospects that will produce commercially viable tungsten deposits.
Tungsten is considered to be an important industrial mineral. It has
many uses in the industrialized world. It is utilized with other metals to
strengthen and prolong wear resistance for various construction, mining and
metal working tools. It is also utilized in light bulbs, televisions, microwave
ovens and in munitions.
We currently have 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. Scheelite
and powellite, both tungsten-bearing minerals are known to occur in the
prospect. We cannot give any assurance that this exploration process will prove
fruitful in attaining our goal of extracting any tungsten or any other mineral
that might produce revenue for us.
We currently do not have adequate capital to fully implement our
business plan and must obtain funding. If we do not receive adequate funding, we
will have to discontinue our operations (See "Liquidity and Capital Resources").
Financial Condition and Changes in Financial Condition
Overall Operating Results:
We had no revenues for the quarter ended March 31, 2002 or since our
inception.
Operating expenses for the quarter ended March 31, 2002 were $9,500. We
incurred $4,700 for legal and accounting services rendered in connection with
our compliance filings with the Securities and Exchange Commission. Expenses for
mineral rights were $3,700. Other operating expenses amounted to $1,100 and were
incurred for supplies and stock transfer agent fees.
The net operating loss for the quarter was $9,500, and was the result
of the aforementioned operating expenses. We have incurred a cumulative net loss
since inception of $151,200.
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 fully implement
our business plan. If we do not receive adequate funding, we will have to
discontinue or substantially scale back our operations. To fund our mining
operations to date, we sold 591,156 (pre-dividend) shares of our common stock
through a private placement in August 2001 and received $73,900 in cash. In
addition, we have been reliant on loans from shareholders to fund operations. As
of March 31, 2002, 2 shareholders have loaned the company a total of $67,300.
These loans are due on December 31, 2002 and bear 10% interest per annum.
Interest on these loans has been waived by the shareholders through March 31,
2002.
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.
8
As of March 31, 2002 our only asset was $53,900 in cash. Our total
liabilities were $91,900, which includes $67,300 in short-term notes payable to
shareholders. In addition, GL Tungsten has a liability of $22,100 to Platoro
West, Incorporated, which represents our accrued obligations to them under the
terms of an agreement dated May 6, 1999.
Total stockholders' deficit at March 31, 2002 was $38,200.
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 two part-time employees, our president and secretary.
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.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 "Business Combinations"
("SFAS 141") and No. 142 "Goodwill and Other Intangible Assets ("SFAS 142"). The
company does not believe that the adoption of these statements will have a
material effect on its financial position, results of operations or cash flows.
In June 2001, the FASB also approved for issuance SFAS 143 "Asset
Retirement Obligations." The company will adopt the statement effective no later
than January 1, 2003, as required. At this time, the company does not believe
that the adoption of this statement will effect its financial position, results
of operations or cash flows.
In October 2001, the FASB also approved SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS 144 replaces SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The provisions of Statement 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001, and,
generally, are to be applied prospectively. At this time, the company cannot
estimate the effect of this statement on its financial position, results of
operations or cash flows.
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
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit Number Name of Exhibit
15.01 Letter on unaudited interim financial
information (Filed herewith)
b. Reports on Form 8-K
None
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
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Mitchell Geisler, President and
Chairman of the Board
Date: May 14, 2002
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.
Signature Title Date
/s/ Mitchell Geisler President & Chairman of the Board May 14, 2002
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Mitchell Geisler
/s/ Cindy Roach Secretary and Director May 14, 2002
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Cindy Roach
11
Table of Exhibits
Exhibit Number Name of Exhibit
15.01 Letter on unaudited interim financial
information (Filed herewith)
12