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, 2003
Commission File Number 000-31032
GL ENERGY AND EXPLORATION, INC.
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(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) 214-1473
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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 1, 2003, the Company had
outstanding 23,839,506 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
ITEM 3 CONTROLS AND PROCEDURES 10
PART II
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 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 Sheets
March 31, December 31,
2003 2002
------------ ------------
Unaudited
ASSETS
Current Assets:
Cash and Cash Equivalents $ 17,498 $ 34,456
Prepaid Expenses 200 200
------------ ------------
TOTAL ASSETS $ 17,698 $ 34,656
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 6,280 $ 242
Accrued Obligation to Platoro West Incorporated 30,798 27,132
Due to Shareholder 68,883 67,225
------------ ------------
Total Liabilities 105,961 94,599
Minority Interest 90 116
Shareholders' Equity:
Preferred Stock - $0.001 par value;
5,000,000 shares authorized, no
shares issued and outstanding -- --
Common Stock - $0.001 par value;
100,000,000 shares authorized,
23,839,506 shares outstanding
at March 31, 2003 23,840 23,840
Additional Paid-in Capital 140,600 140,600
Deficit Accumulated During the Development Stage (252,793) (224,499)
------------ ------------
Total Shareholders' Deficit (88,353) (60,059)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 17,698 $ 34,656
============ ============
See notes to financial statements
3
GL Energy and Exploration, Inc.
(A Company in the Development Stage)
Consolidated Statements of Operations and Accumulated Deficit
During the Development Stage
Three Months Three Months Inception
Ended Ended To
March 31, 2003 March 31, 2002 March 31, 2003
-------------- -------------- --------------
Unaudited Unaudited Unaudited
REVENUES
Revenues $ -- $ -- $ --
Cost of Revenues -- -- --
-------------- -------------- --------------
Gross Margin -- -- --
EXPENSES
Mineral Rights 13,666 3,666 89,664
Legal and Accounting 8,362 4,737 103,181
General and Administrative 6,292 1,092 60,108
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Total Expenses 28,320 9,495 252,953
Minority Interest in Losses of
Subsidiary (26) (15) (160)
-------------- -------------- --------------
(Deficit) from Operations (28,294) (9,480) (252,793)
-------------- -------------- --------------
Net (Deficit) (28,294) (9,480) (252,793)
Deficit Accumulated During the
Development Stage at Beginning
of Period (224,499) (141,674) --
-------------- -------------- --------------
Deficit Accumulated During the
Development Stage at End of Period $ (252,793) $ (151,154) $ (252,793)
============== ============== ==============
Net Deficit per Share - Basic $ (0.00) $ (0.00)
Net Deficit per Share - Diluted $ (0.00) $ (0.00)
Shares used in per Share Calculation:
Basic 23,839,506 22,669,506
Diluted 23,839,506 22,669,506
See notes to financial statements
4
GL Energy and Exploration, Inc.
(A Company in the Development Stage)
Consolidated Statements of Cash Flows
During the Development Stage
Three Months Three Months Inception
Ended Ended To
March 31, 2003 March 31, 2002 March 31, 2003
-------------- -------------- --------------
Unaudited Unaudited Unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Deficit $ (28,294) $ (9,480) $ (252,793)
Adjustments to Reconcile Net Deficit to Cash:
Common Stock Issued for Services -- -- 100
Fair Value of Services Received -- -- 5,400
Minority Interest (26) 15 (160)
Provided by (Used in) Operations:
Prepaid Expenses -- -- (200)
Accounts Payable 6,038 603 6,280
Accrued Obligation to Platoro West Incorporated
3,666 3,666 30,798
-------------- -------------- --------------
NET CASH (USED) BY OPERATING ACTIVITIES (18,616) (5,196) (210,575)
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to Related Parties 1,658 -- 68,883
Issuance of Common Stock -- -- 159,190
-------------- -------------- --------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 1,658 -- 228,073
NET CHANGE IN CASH AND CASH EQUIVALENTS (16,958) (5,196) 17,498
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 34,456 59,073 --
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 17,498 $ 53,877 $ 17,498
============== ============== ==============
See notes to financial statements
5
NOTES TO FINANCIAL STATEMENTS
March 31, 2003
(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, 2002, and reflect all adjustments
which are, in the opinion of management, necessary for a fair statement of the
financial position as of March 31, 2003, 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, 2002, 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
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.
Tungsten Operations
We are engaged in the exploration of mining prospects with tungsten
mineralization located in the Western United States. Tungsten is considered to
be an important industrial mineral. It has many uses in the industrialized
world. Some of the more common uses of tungsten include its utilization with
other metals to provide strength and a wear resistance for various kinds of
tools used in construction, mining and metal working. It is also used in many
household products such as light bulbs, television sets and magetrons for
microwave ovens as well as in munitions, such as bullets, because of its
strength and its being environmentally superior to lead or uranium.
We have an agreement with Platoro West Incorporated, a mineral
exploration company, under which that company would locate, stake out and record
mining claims that the mineral exploration company believed to contain high
concentrations of tungsten. The mineral exploration company staked 30 unpatented
claims for GL Energy pursuant to this contract. If we default under the
contract, the remedy specified in the agreement calls for us to convey to
Platoro West all of our right title and interest in the mining claims and to all
the mineral resources located therein. As of March 31, 2003 we believe that we
have met all of our obligations under this agreement and do not anticipate
defaulting on any of the conditions specified in the agreement.
On October 10, 2001, GL Energy formed GL Tungsten, Inc. as a subsidiary
incorporated in the state of Nevada, for the purpose of conducting the mining
exploration activities of the company. GL Energy and Platoro West each assigned
its respective obligations under the mineral exploration agreement to GL
Tungsten. GL Energy owns 99.3% and Platoro West owns .7% of GL Tungsten. The
financial statements of GL Tungsten have been consolidated with GL Energy in the
financial statements included elsewhere herein.
Through GL Tungsten, we currently have a 100% interest in a tungsten
project known as Pilot Mountain located in Nevada. In August 2002, the company
commissioned a geological report on the Pilot Mountain project. The report was
to assess the existing data that the company has on the property for the
principal purpose of gauging the former determinations of mineralization
identification and occurrence and the likelihood of current realization on the
assets. The report confirms that the earlier mineralization identification,
which includes tungsten and other trace metals, and the estimates of tungsten
levels are consistent with one another, the geology of the land and the personal
surveillance of the property by the geologist preparing the company report.
Notwithstanding the report making the assessment that the property has potential
of being developed by surface open pit mining on a small pit and possibly large
pit basis and by partial underground mining, the report indicates that any
viable recovery of the mineralizations will depend entirely on economic
conditions from time to time dictated by metal prices, mill recoveries and
operating cost efficiencies. Any one or all of these factors will have a
dramatic effect on the viability of the properties.
7
In addition, the report recommends that additional information be
obtained in respect of the project. Inclined holes should be drilled to
substantiate or modify current geological interpretations and delineations of
any deposits. New preliminary feasibility and scoping studies also must be
carried out, using various mineral prices. A comprehensive review should be
undertaken of all the metallurgical reports and chemical analyses that exist and
new metallurgical tests should be conducted to attempt to improve tungsten
recoveries in certain zones of the project. Also, three-dimensional models of
the various zones of tungsten mineralization should be prepared by a qualified
mining engineer to generate various development scenarios so that a more current
cost analysis can be formulated.
Undertaking any substantive exploration activities will require a
significant amount of capital, additional time and compliance with regulatory
requirements and ordained methodologies. The current working capital of the
company is not adequate to implement exploration of the property at this time.
Depending upon the availability of capital and the outlook for the tungsten
market, the company will consider undertaking further exploration activities. We
are continuing our search for financing opportunities. We plan to drill more
holes, update our feasibility study and conduct metallurgical and economic
studies with any financing we might obtain. If we do not receive adequate
funding, we will have to discontinue our operations.
Gold Operations
In February 2003 we formed a new wholly owned subsidiary, GL Gold, Inc.
GL Gold has agreed to an asset purchase agreement, dated as of February 25,
2003, to acquire a permitted gold mine as well as two un-permitted groups of
mining claims, which may have gold mineralization. At its election, the company
may also acquire certain mining equipment. The mining claims and assets are
located in Oregon.
The agreement required the company to pay a $10,000 deposit, as well as
a further $590,000 for the mining claims and $150,000 for the equipment. The
purchase is subject to a number of conditions, which originally required
completion on or before April 30, 2003, including the company raising the
purchase amounts, and completing its due diligence. In April 2003, the company
and the seller agreed to extend the closing deadline to July 31, 2003. GL Gold
has begun conducting surveys and other exploration activities on this property
to ascertain the viability of the gold mineralization located at that project.
We will need to raise additional capital above the purchase price in order to
conduct these exploration activities. In addition, the company will need working
capital going forward. We are currently searching for financing opportunities.
No assurance can be given that the company will consummate the purchase.
Financial Condition and Changes in Financial Condition
Overall Operating Results:
We had no revenues for the quarter ended March 31, 2003, or since our
inception.
We incurred $28,320 in operating expenses for the quarter ended March
31, 2003. The expenses included legal and accounting fees of $8,362 incurred in
connection with our compliance filings with the Securities and Exchange
Commission and fees associated with the preparation of documents relating to the
asset purchase agreement. Mineral rights expenses totaled $13,666, which
includes the $10,000 non-refundable deposit made on the gold mine prospect. In
addition, we had $3,500 in consulting fees related to the gold mine project. The
remaining expenses were incurred for general business operations.
8
Operating expenses for the quarter ended March 31, 2002 were $9,495.
Legal and accounting services rendered in connection with our compliance filings
with the SEC were $4,737. We incurred $3,666 in expenses for mineral rights
associated with the tungsten operations. Other operating expenses were incurred
for supplies and stock transfer agent fees.
The net operating loss for the current and prior year quarters were
$28,294 and $9,480, respectively and were the result of the aforementioned
operating expenses
Liquidity and Capital Resources:
Since our inception we have had minimum working capital to fund our
operations. In order to fund our operations we have relied on the sale of our
common stock and loans from shareholders.
To fund our mining exploration operations to date, we sold shares of
our common stock. These sales were comprised of 2,364,624 shares of our common
stock registered in 2001 and our Regulation S offering of 1,000,000 shares in
2002, which also had attached warrants to purchase 2,000,000 shares of common
stock. These warrants expire on July 31, 2003. All shares and warrants are on a
pre-stock split basis.
We have also relied on loans from shareholders to fund operations. As
of March 31, 2003, two shareholders have loaned the company a total of $68,883.
These loans are due on demand and bear 10% interest per annum. We currently have
a working capital deficit and only a minimum of operating cash with which we can
fund our future operations. We must obtain adequate funding in order to conduct
further evaluations of the tungsten and gold projects and to implement our
business plan. If we do not receive adequate funding, we will have to
discontinue or substantially scale back 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. In addition, we may also
consider strategic alliances and mergers and acquisitions as a means to pursue
our business plan or otherwise fund the company.
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, we are not being charged any
rent. Any costs of this office space are considered immaterial to the financial
statements and accordingly are not reflected therein.
GL Tungsten has an interest in 30 claims through Platoro West located
in Mineral County, Nevada.
9
New Accounting Pronouncements
In April 2002, the FASB approved for issuance Statements of Financial
Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44 and 64,
Amendment of SFAS 13, and Technical Corrections" ("SFAS 145"). SFAS 145 rescinds
previous accounting guidance, which required all gains and losses from
extinguishment of debt be classified as an extraordinary item. Under SFAS 145
classification of debt extinguishment depends on the facts and circumstances of
the transaction. SFAS 145 is effective for fiscal years beginning after May 15,
2002 and is not expected to have a material effect on the Company's financial
position or results of its operations.
In July 2002, the FASB issued Statements of Financial Accounting
Standards No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities" (SFAS 146). SFAS 146 requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. Examples of costs
covered by SFAS 146 include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activity. SFAS 146 is to be
applied prospectively to exit or disposal activities initiated after December
31, 2002. The adoption of SFAS 146 is not expected to have a material effect on
the Company's financial position or results of its operations.
In December 2002, the FASB issued Statements of Financial Accounting
Standards No. 148 "Accounting for Stock-Based Compensation--Transition and
Disclosure--an amendment of FASB Statement No. 123, This Statement amends FASB
Statement No. 123, Accounting for Stock-Based Compensation, to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
Statement amends the disclosure requirements of Statement 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The adoption of SFAS 148 is not expected to
have a material effect on the Company's financial position or results of its
operations.
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.
ITEM 3. CONTROLS AND PROCEDURES
Based on the evaluation of the Company's disclosure controls and
procedures by Mr. Mitchell Geisler, both the chief executive officer and chief
accounting officer of the company, as of a date within 90 days of the filing
date of this quarterly report, such officer has concluded that the Company's
disclosure controls and procedures are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits
under the Securities and Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported, within the time period specified by the
Securities and Exchange Commission's rules and forms.
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
10
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Changes in Common Equity
On April 23, 2003, a majority of the stockholders of the company
approved a change in the capitalization of the Company to effect a reverse split
of the common stock at the rate of one share for every 22 shares outstanding and
thereafter to increase the authorized common stock, $.001 par value ("Common
Stock"), from 4,545,454 shares to 100,000,000. A performance equity plan for
10,000,000 shares (on a post-stock split basis) of Common Stock ("2003
Performance Equity Plan") was also approved. The rights of the common stock were
not changed. These capitalization changes have not been reflected in the
accompanying financial statements.
Recent Sales of Unregistered Securities
In March 2003, the company issued 170,000 shares of its common stock in
lieu of cash to the Geologist that wrote the August 2002 report on our tungsten
property.
In July 25, 2002, the company completed an offering under Regulation S
to two accredited investors. Each investor subscribed for 500,000 shares on a
pre-stock split basis of common stock for $25,000 cash. Under the subscription
agreements the investors were also granted common stock warrants authorizing
each investor the right to purchase up to 1,000,000 shares of common stock on a
pre-stock split basis at $0.25 per share, on a pre-stock dividend basis. The
warrants expire on July 31, 2003, if not exercised prior to that date.
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
a) Exhibits
3.1 Certificate of Amendment to the Certificate of Incorporation (1)
4.1 Form of 2003 Equity Performance Plan (1)
(1) Previously filed with Form DEF 14c (information statement) on May
5, 2003.
b) Reports on Form 8-K
We filed a current report with the Securities and Exchange Commission
on Form 8-K on March 5, 2003 reporting the asset purchase contract, dated as of
February 25, 2003, to acquire a permitted gold mine as well as two un-permitted
groups of mining claims, which may have gold mineralization. At its election,
the company may also acquire certain mining equipment.
11
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 (Principal
Executive Officer and Principal
Accounting Officer)
Date: May 14, 2003
12
FORM OF CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
CERTIFICATION
I, Mitchell Geisler, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of GL
Energy and Exploration, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days of the filing date of this
quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize, and report financial data and have identified for
the registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls.
6. The registrant's other certifying officer and I have indicated
in this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 14, 2003 /s/ Mitchell Geisler
------------------------------------
Name: Mitchell Geisler
Title: President and Chief Executive
Officer and Treasurer
13
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of GL Energy and Exploration, Inc. on
Form 10-QSB for the period ended March 31, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), each of the undersigned,
in the capacities and on the dates indicated below, hereby certifies pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation of the
Company.
/s/ Mitchell Geisler
-------------------------------
Mitchell Geisler, President and
Chairman of the Board
Dated: May 14, 2003
14