UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB (Amended)
( x ) Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
OR
( ) Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition period from to
Commission file number 0-17874
XPLORER, S.A.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0199674
- ------------------------------ ---------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
4750 Kelso Creek Road, Weldon, California 93238
- ----------------------------------------- ---------
Address of principal executive offices) (Zip Code)
Phone: (619) 378-3936 Fax: (619) 378-1066
----------------------------------------------------
(Registrant's telephone number, including area code)
Gerant Industries, Inc. - March 31, 1997
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 ( )
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan confirmed
by a court. Yes ( X ) No ( )
As of June 30, 1997, there were 18,782,447 shares of common stock ($0.001 par
value) issued and outstanding.
Total sequentially numbered pages in this document: 14
1
<PAGE>
PART I. FINANCIAL INFORMATION
- -------------------------------------------------------------------------
ITEM 1. FINANCIAL STATEMENTS
Xplorer, S.A.
(A Development Stage Enterprise)
Consolidated Balance Sheet
As of June 30
Assets 12/31/96 1997
------------------------
(Audited) (Unaudited)
Current Assets:
Cash $166,000 $39,756
Note receivable (Note 5) 16,000 0
Marketable securities 226,400 330,261
Prepaid commissions 210,000 170,467
------------------------
Total Current Assets 618,400 540,484
Property, plant & equipment - net 3,404,400 3,404,400
Other investments 1,019,000 1,019,000
------------------------
Total Assets $5,041,800 $4,963,884
========================
Liabilities and Shareholder Equity
Liabilities:
Current Liabilities:
Gold contracts 273,000 94,438
Zero-coupon bonds - Current 915,000 887,609
Related party payable 149,000 208,017
Note payable 450,000 450,000
Payroll obligations 3,200 3,200
Other accrued expenses 38,000 10,000
------------------------
1,828,200 1,653,264
Accrued legal fees 147,000 86,897
Long-term zero coupon bonds 552,700 855,403
Minority interest in consolidated
subsidiary (Note 8) 852,000 915,080
------------------------
3,379,900 3,510,644
------------------------
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
2
<PAGE>
Xplorer, S.A.
(A Development Stage Enterprise)
Consolidated Balance Sheet (Cont'd)
As of June 30
12/31/96 1997
------------------------
(Audited) (Unaudited)
Commitments and contingencies
Shareholders' Equity :
Preferred Stock, par value $0.001, authorized 1,300 1,300
15,000,000 shares; convertible beginning in 2006;
1,280,600 shares issued and outstanding
Common Stock Subscribed 1,000 0
Common Stock, $0.0001 par value, authorized sixty 17,600 18,828
million (60,000,000) shares; 18,554,000 as of
December 31, 1996 and 18,782,447 shares issued
and outstanding as of June 30, 1997
Additional paid in capital 2,546,000 2,555,830
Deficit accumulated during the development stage (904,000) (1,122,718)
------------------------
Total Shareholders' Equity 1,661,900 1,453,240
------------------------
Total Liabilities and Shareholders' Equity $5,041,800 $4,963,884
========================
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
3
<PAGE>
Xplorer, S.A
(A Development Stage Enterprise)
Unaudited Statement of Operations
For The Six Month Period Ended June 30
1996 1997
------------------------------------------
Year Year
Quarter To Date Quarter To Date
------------------------------------------
Income:
Revenues (Note 1) Not $0 $0
Available
For Prior
Investment income Periods 10,000 20,020
See Note 13
------------------------------------------
Total Income 10,000 20,020
------------------------------------------
Cost of Sales:
0 0
------------------------------------------
Total Cost of sales 0 0
------------------------------------------
Gross margin (Loss) 10,000 20,020
------------------------------------------
Operating Expenses:
Compensation 51,687 95,453
Professional fees 51,351 93,590
Commissions 90,000 111,000
Interest 42,000 72,000
Administrative 6,962 18,686
Depreciation 0 0
------------------------------------------
Total Operating expenses 242,000 390,729
------------------------------------------
Net Loss before minority interest (232,000) (370,709)
------------------------------------------
Minority interest in loss 95,120 151,991
------------------------------------------
Net Profit (Loss) ($136,880) ($218,718)
==========================================
Earnings (Loss) per Share of Common
Stock and Common Stock Equivalents ($0.007) ($0.012)
==========================================
Common Stock outstanding 18,782,447 18,782,447
==========================================
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
4
<PAGE>
Xplorer, S.A.
(A Development Stage Enterprise)
UNAUDITED STATEMENT OF CASH FLOWS
For the Six Month Period Ended June 30
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1997
--------------------
Net (Loss) Not ($218,718)
Adjustments to Reconcile Net Income to available
Net Cash Used in Operating Activities: for Prior
Eliminate Non Cash Items (Depreciation and Periods
Amortization) See Note
(Increase) Decrease in: 13 for
Minority interest in consolidated sub. (151,991)
Receivables 16,000
Marketable securities (103,861)
Prepaid commissions 39,533
Increase (Decrease) in:
Related party payable 59,017
Accrued expenses and accounts payable (28,000)
Other 165,026
NET CASH PROVIDED BY (USED IN) --------------------
OPERATING ACTIVITIES (222,994)
--------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase (Decrease) in:
Redemption of investment contracts (205,953)
Sale of investment contracts 302,703
--------------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 96,750
--------------------
NET INCREASE (DECREASE) IN CASH (126,244)
CASH, at Beginning of Period 166,000
--------------------
CASH, at End of Period $39,756
====================
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
5
<PAGE>
Xplorer, S.A. (A Development Stage Enterprise)
UNAUDITED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Note 8)
For the Six Month Period Ended June 30, 1997
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional
-------------------- ------------------ Paid In Retained
Shares Amount Shares Amount Capital Earnings Total
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance per audit, 18,554,000 $18,600 1,280,550 $1,300 $2,546,000 ($904,000) $1,661,900
December 31, 1996
Entries For Quarter
Ending June 30, 1997
Stock issuance for debt 228,447 228 9,830 $10,058
repayments
Profit (loss) for period (218,718) ($218,718)
-----------------------------------------------------------------------------------
BALANCE, March 31, 1997 18,782,447 $18,828 1,280,550 $1,300 $2,555,830 ($1,122,718) $1,453,240
-----------------------------------------------------------------------------------
</TABLE>
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
6
<PAGE>
XPLORER, S. A.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Month Period Ended June 30, 1997
Note 1 Organization and Presentation:
Xplorer, S. A., the "Company" (successor to Gerant Industries, Inc.)
was organized by adoption of amended and restated Articles of
Incorporation dated July 5, 1996 which were filed with the office of
the Secretary of State of Nevada on August 15, 1996.
Gerant Industries, Inc. ("Gerant") filed a petition for reorganization
under Chapter 11 of the United States Bankruptcy Court ("the Court")
for the Central District of California on March 1, 1994. On July 24,
1996 the Court confirmed Gerant's Third Amended Plan of Reorganization
(the "Plan"). The Plan approved the amendment of the of the Articles of
Incorporation and By-Laws, change of corporate name, authorization of
common and preferred shares of stock, payment of claims and issuance of
stock by the successors to this debtor-in-possession, Xplorer, S. A.
The Company was to issue 16,500,000 shares of common stock and
1,043,000 shares of preferred stock which were valued in aggregate at
$53 Million by the Court. The Company accounted for the transaction as
a reverse acquisition by Xplorer.
The Company is a development stage enterprise and has not achieved its
intended operations or related revenue as of this date.
The Company, a development stage enterprise, anticipates obtaining
sufficient cash resources in 1997 from the sale of investment
contracts, warrant exercise, operations, or private placement of equity
securities. Such proceeds are necessary to assure the funding of
anticipated operating costs and satisfaction of any negative working
capital as of the current period.
PRESENTATION
The Company intends to engage in the development of natural resource
properties. As of June 30, 1997 the Company does not have any operating
properties and is a development stage enterprise owning 59% of Atlantic
Pacific Trust, L.L.C. and its wholly-owned subsidiary Atlantic-Pacific
Finanzprodukte, GmbH. The accounts of this entity, which has made loans
to its parent are included in these financial statements and all
significant inter-company transactions have been eliminated. The loans
have been converted to common stock or units of the Company (Note 8).
Note 2 Summary of Significant Accounting Policies:
MINING PROPERTIES:
Mining properties are reflected in property, plant, and equipment at
cost of acquisition and development. Costs include efforts to remove
ore and waste, exploration, development of new ore bodies and defining
further mineralization in existing ore bodies. These costs are deferred
and will be charged to operation costs utilizing the unit-of
-production method in the period in which commercial production occurs.
7
<PAGE>
When a property is identified as having development potential, the
costs of engineering, contract labor, financing, and professional fees
related to development are capitalized as they are incurred. If a
project is determined not to be economically feasible, unrecoverable
costs are expensed in the year in which the determination is made.
REVENUE RECOGNITION:
Revenue is recognized when title to delivered gold or other precious
metals passes to the buyer.
REPORTING CURRENCY:
While the Company has significant financing transactions denominated in
German currency, its operations are located in the U.S. Accordingly,
all financial information regarding these transactions is translated
into U.S. dollars and no material transaction effect exists at March
31, 1997.
LOSS PER SHARE:
The loss per share is calculated using the weighted average number of
shares outstanding. Warrants outstanding are anti-dilutive and are not
included.
PROPERTY, PLANT & EQUIPMENT AND DEPRECIATION:
All property, plant & equipment is stated at cost and depreciated on a
straight-line basis over individual useful lives - three years
(computers), five years (mining equipment), and units-of-production
once mining property is at the operational level.
FINANCIAL UNCERTAINTIES:
The Company is in the development stage and has experienced a net loss.
The loss is principally due to commissions and interest associated with
the German financing. There is no assurance that commercial quantities
of mineral resources can be developed and sold in a profitable market.
Also, mining production could be delayed and uninsurable risks could be
incurred (see Note 9).
The Company intends to engage in financial instruments to reduce the
financial impact caused by fluctuations in the exchange rate of U.S.
dollars to German Duetsch Mark liabilities.
The carrying values of investment contracts involving gold settlement
are re-measured using the market value of gold at the balance sheet
date ($369 per troy ounce). The price of gold fluctuates daily, thus
the values used herein may fluctuate subsequent to the date hereof.
INCOME TAXES:
Xplorer, S.A. and its predecessor company have a substantial net
operating loss of an uncertain amount as of the date of this report.
COMMON STOCK ISSUANCE:
Shares issued to Gerant special creditors, employees, consultants, and
preferred shareholder of the Company are valued at the nominal value of
$0.10 per share. Common stock Units include one share of stock and a
8
<PAGE>
warrant to acquire an additional share at 70% of market value.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Note 3 Reverse Acquisition:
Gerant changed its corporate name to Xplorer, S.A. pursuant to an
exchange of stock and the provisions outlined in the Plan, which was
accounted for as a reverse acquisition.
The Gerant's balance sheet prior to the execution of the Plan and
reorganization with newly-formed Xplorer S.A. was as stated in the
Company's 10 KSB, as amended, as of December 31, 1996.
Under the Plan, the Company would realize the assets of Gerant and
assume the liabilities at Gerant basis, and issue common and preferred
stock in exchange for 1,005,000 units of Atlantic equity held by the
Company.
Note 4 Marketable Securities:
The Company maintains an interest in marketable equity securities as
part of its hedge program. The realized gains or losses are reflected
in the Statement of Operations under Investment Income.
The Company does not use derivatives financial instruments for
speculative purposes. The Company enters into gold equity investments
to manage exposure to increases in gold price and the Company's
undelivered commitments.
Note 5 Property, Plant and Equipment:
The Company's majority-owned subsidiary (Note 8) owns eight claims
known as the Evening Star Mine located in Piute Mountain, Kern County,
California. Most of the development costs for Evening Star Mines are
from related parties (Note 13). There were no additions during the
quarter.
Note 6 Other Investments:
The Company holds a $500,000 full recourse promissory note at 8%
interest per annum, payable monthly and principal due August 18, 1997.
This note is secured by 500,000 Class C Units of United Reality Group
Limited Partnership redeemable by issuer at $1.00 per unit in August
1997 and 75% tenant in common interest in the net proceeds from the
Southwood Plaza Shopping Center in Charlotte, North Carolina.
9
<PAGE>
Atlantic owns 100% of the common stock of a company that has two
investments in commercial property located in Bakersfield, California.
The net realizable value of this investment is $500,000 as of the
current date.
Atlantic owns 406,000 shares of Xplorer S.A. of which 218,218 shares
are committed to German contract holders who are exchanging their
contracts for stock of Xplorer that is owned by Atlantic. This
investment is 59% eliminated in consolidated financial statements and
reflected at a nominal value of $0.10 per share of $19,000.
Note 7 Atlantic Pacific Trust, L.L.C.:
Atlantic Pacific Trust, L.L.C. ("Atlantic"), a Nevada limited liability
company, is a natural resource company owned by Xplorer and three of
the Company's shareholders (the "Minority Interest"). Such corporation
is the successor to Atlantic Pacific Trust ("APT") and is the legal
owner of certain mining properties located in Kern County, California.
These mining properties (approximately 117 mining claims) were held by
a trust controlled by William M. Moreland ("Moreland"), and transferred
to a new entity, North Star Industries ("North"). North was 30% owned
by Moreland, 30% owned by Gardner, and 40% owned by Compania Comerciale
Atlantis, S.A., a Costa Rican entity ("CCA"). The claims were
eventually divided into four separate trusts. One of these trusts,
Nevada Trust, which owned eight claims known as the "Evening Star
Mine", was acquired at cost by APT.
APT was funded by sale of investment contracts, precious metal forward
contracts, and equity units ("LLC"). The Company owns 1,254,960 LLC
units as of the current date (59%).
APT made a loan to the Company for $355,000 that was converted to
Company special units (one share of common stock and one B warrant and
C warrant each exercisable within five years at $2.00 and $3.00 per
share, respectively and paid a Gerant creditor $110,000 in exchange for
111, 667 shares of the Company's common stock. These funds were used by
the Company to pay Gerant creditors according to the Plan. At the
current date the value of 275,334 shares (59% of 466,667) has been
eliminated upon consolidation.
The Plan provided that Compania Comerciale Atlantis, S.A. would
exchange 500,000 of its LLC units for 1,250,000 preferred shares of the
Company. However, only 417,200 units were exchanged for 1,043,000
preferred shares under this Plan. In December 1996, CCA did exchange
189,960 units for an additional 237,550 shares of preferred stock. The
preferred stock is partially convertible to ten shares of common stock
at the end of six years and has a dividend of 1.00% per month payable
in common stock at time of conversion. In December 1996, the preferred
stockholder agreed to waive all present and future preferred dividend
rights for the immediate issuance of 1,000,000 common shares of the
Company.
10
<PAGE>
The Plan also provided that 585,560 LLC units held by Atlantic
beneficiaries Be exchanged for Debtor Notes and converted to 14,639,000
shares of common stock. In addition, the former Gerant shareholders had
a reverse split to 400,000 common stock Units. All of these Units have
not as yet been issued.
Note 8 Accrued Legal Fees:
Per the Plan, Atlantic agreed to purchase an estimated $257,000 legal
fee administrative claim of the law firm, Robinson, Diamant, Brill, &
Klausner (the "Firm"). The balance due as of June 30, 1997 is $87,000.
Upon purchase, Atlantic intends to exchange the claim for 257,000
Xplorer common stock special units. This transaction is still in
progress and is anticipated to be completed during the calendar year
1997.
Note 9 Note Payable:
In September, 1996 the Company borrowed $450,000 from Gardner
Investments. The terms of the note are 10.00% per annum payable
monthly. The principal is due and payable on September 25, 1997 and is
secured by 500,000 Class C Units of United Realty Group, L.P. The note
is convertible, at the option of the holder, at any time for 150,000
shares of common stock of the Company.
Note 10 Investment Contracts Payable:
Atlantic has issued investment contracts under German securities laws.
Such contracts are four types:
a) Contract of $9,645 per kilo received in U.S. dollars for
purchase of undelivered kilos (32.15 troy ounces) of gold
bullion. All contracts have a one year maturity. As of June
30, 1997, the balance owed is $99,437. The Company has covered
it's gold risk on outstanding contracts up to $369 per ounce.
The Company has paid off $128,823 of these contracts in 1997.
b) Zero-coupon contract of $12,500 payable in U.S. dollars and
bearing interest at 9.00% per annum. Such contracts are
repayable with related interest in one to five years. As of
June 30, 1997 has been accreted. The Company has paid off
$50,000 of these contracts in 1997.
c) Zero-coupon contract payable in 5,000 German Duetsch Marks
("DM") units and bearing interest at 9.00% per annum. Such
contracts are repayable with related interest in DM in one to
five years. As of June 30, 1997 interest expense has been
accreted. The Company has paid off $296,223 in 1997 with
218,218 shares of the Company common stock owned by Atlantic.
d) Zero-coupon contract payable in DM or gold at the rate of 600
DM principal per 1 troy ounce of gold did not result in
funding to the Company until January 1997. This is the only
type of contract that will be offered in the future. For the
11
<PAGE>
six months ended June 30, 1997 the Company raised $328,338
from these contracts. No payments have been due on these
contracts in 1997.
All bonds are secured by the Company's interest in the Evening Star
mining claims per assignment to a bond trustee.
The Company paid commissions of approximately 33% and raised $1,697,000
in net funds to date.
Investment contracts are due as follows:
1997 $610,893
1998 458,261
1999 211,824
2000 82,419
2001 300,909
2002 78,706
----------
Total $1,743,012
----------
Note 11 Related Party Payable:
In 1995, Atlantic entered into agreements with Sequoia Trust, a related
party, to lease surface and mineral rights related to 57 acres of land
adjacent to Evening Star Mine and certain improved real property known
as the Weldon Research Center for total cost of $6,000 per month. These
lease are renewable after a five year term and require a future minimum
annual payment of $72,000 to Sequoia Trust. Total charges capitalized
to development during 1996 were $104,000.
Atlantic also has a cancellable contract with EMTEC, Inc., a related
party, for development of the eleven mining claims and the future
operation of the mine and refinery. The contract requires the Company
to pat EMTEC bi-monthly at invoiced cost plus 18% overhead. Total
charges capitalized to development to date are.
As of March 31, 1997 the Company owes these entities $147,000 for past
services.
Note 12 New Accounting Pronouncements:
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets to be Disposed Of" (SFAS 121)
requires that long-lived assets be reviewed for impairment whenever
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The adoption of this statement as of March 31,
1997 had no material effect on the consolidated financial statements.
Note 13 Comparative Financial Statements
Comparative financial data for similar periods in 1996 are not
available. Xplorer S.A. had little or no operations as of June 30,
12
<PAGE>
1997. Any presentation of the numbers during that period would cause
the reader to have a distorted view from a comparative standpoint. This
will continue until the fourth quarter of this year, when Comparative
Balance Sheets will commence.
ITEM 2. MANAGEMENT' S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the three months ended June 30, 1997:
Financial Condition:
The formal business activity of mining did not begin this quarter since
the activity is just in the process of being funded ($322,000 for six months
ended June 30, 1997). Sufficient funds will be made available by related parties
for the working capital requirements not filled by other sources. This will
continue until the commencement of operations.
Management believes that the Company's working capital resources and
anticipated cash flow from mining activities will not be sufficient to support
operations during the year ending December 31, 1997, therefore Management has
arranged sufficient financing to fund these activities and to fulfill its budget
requirements. Although Management can offer no assurance that the commitments
for the financing for these activities will be fulfilled.
Results of Operations:
While full operating activities are not scheduled to begin until the
second quarter of 1998. For the six months ended June 30, 1997 the Company
incurred approximately $111,000 in commissions to obtain funding and paid
officers and professionals $189,000 for services rendered.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
N/A
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
XPLORER, S.A.
--------------------
(Registrant)
Date: January 12, 1998 /s/ Steven Mortensen
--------------------
Steven Mortensen,
Chairman and Secretary
/s/ Jon W. Bice
--------------------
Jon W. Bice (CFO)
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 39,756
<SECURITIES> 330,261
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 540,484
<PP&E> 3,586,300
<DEPRECIATION> (181,900)
<TOTAL-ASSETS> 4,963,884
<CURRENT-LIABILITIES> 1,653,264
<BONDS> 0
0
1,300
<COMMON> 18,828
<OTHER-SE> 1,433,112
<TOTAL-LIABILITY-AND-EQUITY> 4,963,884
<SALES> 0
<TOTAL-REVENUES> 20,020
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 318,729
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,000
<INCOME-PRETAX> (370,709)
<INCOME-TAX> 0
<INCOME-CONTINUING> (370,709)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (218,718)
<EPS-PRIMARY> (0.012)
<EPS-DILUTED> (0.012)
</TABLE>
