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, 2004
Commission File Number 000-31032
GL ENERGY AND EXPLORATION, INC.
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(Exact name of registrant as specified in charter)
Delaware 52-2190362
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10330 Pioneer Blvd., Suite 290 Santa Fe Springs, California 90670
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (562) 903-1114
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 25, 2004, the Company
had outstanding 32,882,042 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............. 8
ITEM 3 CONTROLS AND PROCEDURES.................................... 10
PART II
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.......................................... 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................... 12
2
PART I
ITEM 1. FINANCIAL STATEMENTS
GL Energy and Exploration, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
Unaudited Audited
September 30, December 31,
2004 2003
------------ ------------
ASSETS
Current Assets:
Cash $ 35 $ 79
Investment in Joint Venture -- 20,000
------------ ------------
TOTAL ASSETS $ 35 $ 20,079
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable $ 30,000 $ 24,290
Due to Shareholders 99,187 65,225
------------ ------------
Total Liabilities 129,187 89,515
Minority Interest 306 306
Stockholders' 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,
32,882,042 and 29,573,641 shares
outstanding at September 30, 2004
and December 31, 2003 32,882 29,573
Additional Paid-in Capital 2,446,886 2,051,467
Deficit Accumulated During the Development Stage (2,609,226) (2,150,782)
------------ ------------
Total Stockholders' Deficit (129,458) (69,742)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 35 $ 20,079
============ ============
3
GL Energy and Exploration, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
Unaudited Unaudited
Three Months Three Months
Ended Ended
September 30, 2004 September 30, 2003
------------------ ------------------
EXPENSES
Legal and Accounting $ 3,822 $ 6,313
General and Administrative 44,093 7,375
Minority interest in losses of subsidiary -- 241
Interest 2,262 --
Forgiveness of debt -- 34,464
------------------ ------------------
NET INCOME (LOSS) $ (50,177) $ 20,535
================== ==================
Net Loss per Share - Basic and Diluted $ (0.00) $ 0.00
================== ==================
Weighted average shares outstanding:
Basic and Diluted 32,848,129 25,513,614
================== ==================
4
GL Energy and Exploration, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
Unaudited Unaudited Unaudited
Nine Months Nine Months Inception
Ended Ended To
September 30, 2004 September 30, 2003 September 30, 2004
------------------ ------------------ ------------------
EXPENSES
Mineral Rights $ -- $ 9,832 $ 85,830
Impairment 20,000 -- 20,000
Legal and Accounting 17,227 32,760 153,506
General and Administrative 414,442 57,313 2,340,384
Forgiveness of Debt (income) -- (34,464) --
Minority Interest in Losses of Subsidiary -- 190 56
(Gain) on Disposal of Subsidiary -- (18,261) --
Interest Expense 6,775 -- 9,450
------------------ ------------------ ------------------
NET LOSS $ (458,444) $ (47,370) $ (2,609,226)
================== ================== ==================
Net Loss per Share - Basic and Diluted $ (0.01) $ (0.00)
================== ==================
Weighted average shares outstanding:
Basic and Diluted 31,793,850 11,885,812
================== ==================
5
GL Energy and Exploration, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Unaudited Unaudited Unaudited
Nine Months Nine Months Inception
Ended Ended To
September 30, 2004 September 30, 2003 September 30, 2004
------------------ ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (458,444) $ (47,369) $ (2,606,964)
Adjustments to Reconcile Net Deficit to Cash
Used by Operation Activities:
Common Stock Issued for Services 288,300 10,531 2,184,900
Fair Value of Services Received -- -- 9,400
Impairment 20,000 -- 20,000
Minority Interest -- 190 306
Net Changes in:
Prepaid Expenses -- (2,080) --
Accounts Payable 5,710 21,234 30,000
Accrued Interest from Notes Payable- Shareholders 6,760 32,000 9,435
Accrued Obligation to Platoro West Incorporated -- (27,132) --
------------------ ------------------ ------------------
NET CASH USED IN OPERATING ACTIVITIES (137,674) (12,626) (352,923)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the Sale of Common Stock 110,428 -- 234,528
Proceeds from Notes Payable - Shareholders -- -- 30,940
Due to Related Parties 27,202 (21,425) 89,752
------------------ ------------------ ------------------
NET CASH PROVIDED USED IN FINANCING ACTIVITIES 137,630 (21,425) 355,220
NET CHANGE IN CASH AND CASH EQUIVALENTS (44) (34,051) 35
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 79 34,456 --
------------------ ------------------ ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 35 $ 405 $ 35
================== ================== ==================
Supplemental Non-cash Transactions:
Issuance of common stock for assets $ -- $ 20,000 $ 20,000
================== ================== ==================
Conversion of Notes Payable - Shareholders $ -- $ -- $ 30,940
================== ================== ==================
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GL Energy and Exploration, Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of GL Energy
Exploration, Inc. have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the
Securities and Exchange Commission ("SEC"), and should be read in conjunction
with the audited financial statements and notes thereto contained in the
Company's registration statement filed with the SEC on Form 10-KSB. In the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the
financial statements, which would substantially duplicate the disclosure
contained in the audited financial statements for the most recent fiscal year
2003 as reported in Form 10-KSB, have been omitted.
NOTE 2 - RELATED PARTY TRANSACTIONS
GL Energy had outstanding loans due to shareholders of $99,187 at September 30,
2004, which included $9,435 of accrued interest. In June 2003, GL Energy agreed
to pay its President and Chairman of the Board for $8,000 per month as
compensation and office rental through May 2004. These management fees have been
paid through May 2004 and the agreement was terminated. On June 1, 2004, GL
Energy agreed with Wellstar International, Inc. that Wellstar would provide
management services and office facilities on an ongoing basis for $10,000 per
month for the 12-month period ending May 31, 2005. This agreement was terminated
in September 2004. GL Energy's former President and Chairman of the Board is the
sole director of Wellstar International Inc.
NOTE 3 - COMMON STOCK
From February through September 30, 2004, GL Energy issued 2,670,000 shares of
stock into a trust account in connection with a 10,000,000 share Registration S
offering. During the quarter ended June 30, 2004, GL Energy sold 538,401 shares
from the trust for net proceeds of $110,428. GL Energy also issued a total of
1,370,000 shares of stock through September 30, 2004 from the trust for services
valued at $134,300 or the fair market value of the stock on the date of the
issuance of the shares.
During the quarter ending March 31, 2004 GL Energy issued 1,400,000 shares of
stock for services valued at $154,000 or the fair market value of the stock on
the date of the agreement.
NOTE 4 - EQUITY PERFORMANCE PLAN
In February 2004, the Board of Directors adopted a 2004 Equity Performance Plan
under which 10,000,000 shares of GL Energy's common stock have been reserved for
issuance to employees, officers, directors and consultants whose past, present
and/or potential contributions to the Company and its Subsidiaries have been, or
will be important to the success of the Company. Under this plan, as of
September 30, 2004, no common shares have been issued.
NOTE 5 - JOINT VENTURE AGREEMENT
The joint venture agreement was terminated in early 2004. Due to this
termination the Investment in Joint Venture was fully impaired in March 2004.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward Looking Statements
From time to time, we or our representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filings made by us with the Securities and Exchange Commission. Words or
phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project or projected", or similar expressions are
intended to identify "forward-looking statements". Such statements are qualified
in their entirety by reference to and are accompanied by the above discussion of
certain important factors that could cause actual results to differ materially
from such forward-looking statements.
Management is currently unaware of any trends or conditions other than
those previously mentioned in this management's discussion and analysis that
could have a material adverse effect on the Company's consolidated financial
position, future results of operations, or liquidity. However, investors should
also be aware of factors that could have a negative impact on the Company's
prospects and the consistency of progress in the areas of revenue generation,
liquidity, and generation of capital resources. These include: (i) variations in
revenue, (ii) possible inability to attract investors for its equity securities
or otherwise raise adequate funds from any source should the Company seek to do
so, (iii) increased governmental regulation, (iv) increased competition, (v)
unfavorable outcomes to litigation involving the Company or to which the Company
may become a party in the future and, (vi) a very competitive and rapidly
changing operating environment.
The risks identified here are not all inclusive. New risk factors
emerge from time to time and it is not possible for management to predict all of
such risk factors, nor can it assess the impact of all such risk factors on the
Company's business or the extent to which any factor or combination of factors
may cause actual results to differ materially from those contained in any
forward-looking statements. Accordingly, forward-looking statements should not
be relied upon as a prediction of actual results.
The financial information set forth in the following discussion should
be read with the financial statements of GL Energy & Exploration, included
elsewhere herein.
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. Prior to October
2004 the company had no viable business operations.
Effective October 1, 2004 the company appointed David Michery and
Marcus Sanders to the board of directors. In addition, David Michery was
appointed as Chairman, CEO, and President, and Kent Puckett as CFO, Secretary,
and Treasurer.
Plan of Operation
In October 2004, GL Energy entered into a binding merger agreement to
acquire 100 percent of American Southwest Music Distribution Inc., subject to
final audits and shareholder approval. We anticipate the closing for the merger
will occur during the quarter ending December 31, 2004. David Michery and Kent
Puckett will remain with the company in their current positions.
8
American Southwest Music Distribution manufactures, sells, markets,
distributes and acquires intellectual properties in the music industry in genres
such as rock, pop, country, rhythm and blues, alternative, metal and gospel.
American Southwest currently owns and controls various music catalogs and is
continuing to seek the acquisition of existing high-volume revenue-generating
catalogs. In addition, America Southwest has several artists under contract.
We believe that the merger with American Southwest will enable us to
create long term value for GL Energy shareholders. We also believe there are
several independents that when united would become more competitive while
increasing market share, exposure and distribution. However, we can give no
assurance that we will be successful in this very competitive market.
Financial Condition and Changes in Financial Condition
Overall Operating Results:
We had no revenues for the quarter ended September 30, 2004, or since
our inception.
We incurred $50,177 in operating expenses for the quarter ended
September 30, 2004. The expenses included legal and accounting fees of $3,822
incurred in connection with our compliance filings with the Securities and
Exchange Commission. We issued 390,000 shares of our common stock to an attorney
and sales representative for consulting services out of our Regulation S
offering at a value of $15,600. We also incurred $24,409 in management fees
during the quarter pursuant to a management agreement with Wellstar
International, Inc. This agreement was terminated in September 2004 in
conjunction with the appointment of the new board of directors.
We incurred $13,688 in operating expenses for the quarter ended
September 30, 2003. These expenses were primarily for our compliance filings
with the Securities and Exchange Commission and fees associated investor
relations and management fees. During the prior year quarter we also recognized
other income of $34,464 for the forgiveness of debt due to Platoro West.
For the nine months ended September 30, 2004 our operating expenses
totaled $458,444, a vast majority of which were incurred for public relations,
accounting and legal fees, consulting fees and management fees. These fees
totaled $388,310. Of this amount $288,300 was non-cash expenses incurred with
the issuance of common stock.
For the nine months ended September 30, 2003 our operating expenses
totaled $99,904, incurred for legal, accounting, mineral rights and general
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.
Between 2000 and 2004 we sold shares of our common stock in order to
fund our operations. During the quarter ended June 30, 2004, we received
proceeds totaling US$110,428 for shares of stock sold from the Regulation S
offering in Europe.
In addition, Donald Byers, our prior President, Chairman of the Board
and majority shareholder and two other shareholders have loaned the company
$99,187 as of September 30, 2004 to fund our business operations.
We currently have a working capital deficit and only a minimum of
operating cash with which we can fund our future operations. If we do not
receive adequate funding, we will have to discontinue or substantially scale
back our operations.
9
We intend to seek either debt or equity capital or both. We cannot give
any assurance that any funding will occur or will be adequate 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.
Description of Properties
Our executive offices were relocated in October 2004 to 10330 Pioneer
Blvd., Suite 290, Santa Fe Springs, California 90670 in conjunction with the
change in officers and directors.
Employees/Directors
On September 30, 2004, Donald Byers resigned as president and director
of the company, and Frank Rossi resigned as director of the company.
On October 1, 2004, David Michery and Marcus Sanders accepted
appointment to the board of directors. Thereafter, the board of directors
appointed David Michery as Chairman, CEO, and President, and appointed Kent
Puckett as CFO, Secretary, and Treasurer.
New Accounting Pronouncements
GL Energy does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on GL Energy's results of
operations, financial position or cash flow.
ITEM 3. CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in company
reports filed or submitted under the Securities Exchange Act of 1934 (the
"Exchange Act") is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in
company reports filed under the Exchange Act is accumulated and communicated to
management, including the Company's Chief Executive Officer and Chief Financial
Officer (the "Certifying Officers"), as appropriate to allow timely decisions
regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, the
Certifying Officers carried out an evaluation of the effectiveness of the design
and operation of the Company's disclosure controls and procedures as of
September 30, 2004. Their evaluation was carried out with the participation of
other members of the Company's management. Based upon their evaluation, the
Certifying Officers concluded that the Company's disclosure controls and
procedures were effective.
The Company's internal control over financial reporting is a process
designed by, or under the supervision of, the Certifying Officers and effected
by the Company's Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of the Company's financial
reporting and the preparation of the Company's financial statements for external
purposes in accordance with generally accepted accounting principles. Internal
control over financial reporting includes policies and procedures that pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the Company's assets; provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of the Company's financial statements in accordance with generally
accepted accounting principles, and that the Company's receipts and expenditures
are being made only in accordance with the authorization of the Company's Board
of Directors and management; and provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of the Company's assets that could have a material effect on its financial
statements. There has been no change in the Company's internal control over
financial reporting that occurred in the quarter ended September 30, 2004, that
has materially affected, or is reasonably likely to affect, the Company's
internal control over financial reporting.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
Changes in Common Equity
On February 27, 2004, the board of directors approved a performance
equity plan for 10,000,000 shares of Common Stock. The rights of the common
stock were not changed. The purpose of the GL Energy and Exploration, Inc. 2004
Equity Performance Plan is to enable the Company to offer to its employees,
officers, directors and consultants whose past, present and/or potential
contributions to the Company and its Subsidiaries have been, or will be
important to the success of the Company. The various types of long-term
incentive awards that may be provided under the Plan will enable the Company to
respond to changes in compensation practices, tax laws, accounting regulations
and the size and diversity of its businesses. As of September 30, 2004, no
shares have been issued under this plan.
On April 23, 2003, a majority of the stockholders of the company
approved a performance equity plan for 10,000,000 shares of Common Stock ("2003
Performance Equity Plan"). The rights of the common stock were not changed. We
intend to issue the shares of common stock from time to time as determined by
the board of directors to directors, employees, consultants and others. The
board of directors of the company believes the 2003 Plan will provide
flexibility in structuring compensation arrangements and provide an equity
incentive for employees and others who are awarded shares under the 2003 Plan.
The shares under an award may be issued at less than market price at the
discretion of the board of directors. None of the awards as provided under the
2003 Plan are allocated to any particular person or class of persons among those
eligible to receive awards. As of September 30, 2004 we have issued a total of
9,890,000 shares of common stock to various consultants under the Plan.
The common stock is quoted on the over-the-counter market (OTC BB)
under the symbol "GEEX" and quoted in the pink sheets published by the National
Quotations Bureau. Effective September 30, 2003 the Company met all of the
listing requirements and has been accepted on the Berlin Stock Exchange and will
trade under the ticker symbol GE6.BE and German Securities CUSIP number WKN
914350. The trading volume in the Common Stock has been and is extremely
limited.
Recent Sales of Unregistered Securities
From February through September 30, 2004, GL Energy issued 2,670,000
shares of stock in trust in connection with this Registration S offering in
Europe. During the quarter ended June 30, 2004, GL Energy sold 538,401 shares of
stock from the trust. Total proceeds received by GL Energy were US$110,428. We
also have issued a total of 1,370,000 shares of stock from the trust for
services rendered in connection with the offering. The remaining shares are
being returned to the company. These shares have not been registered with the
SEC.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
11
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
4.1 Form of 2003 Equity Performance Plan (1)
4.2 Form of 2004 Equity Performance Plan (2)
31.1 Certification of Chief Executive Officer, pursuant to Rule
13a-14(a) of the Exchange Act, as enacted by Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer, pursuant to Rule
13a-14(a) of the Exchange Act, as enacted by Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Chief Financial
Officer, pursuant to 18 United States Code Section 1350, as
enacted by Section 906 of the Sarbanes-Oxley Act of 2002.
(1) Previously filed with Form DEF 14c (information statement) on May
5, 2003.
(2) Previously filed with Form S-8 on March 29, 2004.
b) Reports on Form 8-K
On October 29, 2004 we filed an information statement on Form 8-K
disclosing the resignations of Donald Byers as president and director of the
company, and Frank Rossi as director of the company effective on September 30,
2004.
In conjunction with the resignations, we announced the appointments of
David Michery and Marcus Sanders to the board of directors. Thereafter, the
board of directors appointed David Michery as Chairman, CEO, and President, and
appointed Kent Puckett as CFO, Secretary, and Treasurer.
12
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.
GL ENERGY AND EXPLORATION, INC.
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(Registrant)
By: /s/ David Michery
---------------------------------
David Michery, CEO, President and
Chairman of the Board (Principal
Executive Officer)
By: /s/ Kent Puckett
--------------------------------
Kent Puckett, CFO, Secretary and
Treasurer (Principal Financial
Officer)
Date: November 15, 2004
13