UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998
[ ] 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
(State or other jurisdiction of incorporation or organization)
88-0199674
(I.R.S. Employer Identification Number)
2929 S. Maryland Parkway
Las Vegas, Nevada 89109
(Address of principal executive offices)
(702) 699-5400
(Issuer's telephone number)
Check whether the issuer (1) has 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 [ ]
As of June 30, 1998, Xplorer, S.A. had 19,779,705 shares of Common Stock
Outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ]No [ X ]
[XPLORER\10-QSB:033198.QSB]-2
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XPLORER, S.A.
INDEX
Page
PART I
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
as of June 30, 1998 (unaudited)........................................ 1
Consolidated Condensed Statements of Operations
for the Three and Six Months Ended June 30, 1998 and 1997 (unaudited).. 2
Consolidated Condensed Statements of Shareholders' Equity for Six Months
Ended June 30 (unaudited).............................................. 3
Consolidated Condensed Statements of Cash Flows for the Six Months Ended
June 30, 1998 and 1997 (unaudited)..................................... 4
Notes to Consolidated Condensed Financial Statements .................... 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations...................................................... 9
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.......................................... 11
Item 6. Exhibits And Reports On Form 8-K........................... 11
Signatures................................................. 12
I
[XPLORER\10-QSB:033198.QSB]-2
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<TABLE>
<CAPTION>
XPLORER, S.A.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET
June 30, 1998
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 16,414
Receivables 39,166
--------------
Total Current Assets 55,580
Property and equipment 98,720
Other investments 34,978
TOTAL ASSETS $ 189,278
==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accrued expensed $ 368,176
Related party payable 364,675
Note payable 450,000
Current portion of long-term debt 1,065,847
--------------
Total Current Liabilities 2,248,698
Long-term debt 689,974
Total Liabilities 2,938,672
Minority Interest (965,000)
Shareholders' Equity (Deficit)
Preferred stock, par value $.001; authorized 15,000,000 shares;
convertible beginning in 2001; 1,280,550 shares
issued and outstanding 1,281
Common stock, par value $.001; authorized 60,000,000
shares; 19,779,705 issued and outstanding 19,780
Additional paid in capital 2,790,714
Accumulated deficit during development stage 4,596,169)
Total Shareholders' Equity (Deficit) (1,784,394)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 189,278
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
[XPLORER\10-QSB:033198.QSB]-2
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<TABLE>
<CAPTION>
XPLORER, S.A.
Statements of Operations
For the Three and Six Months Ended
June 30, 1999 and 1998(Unaudited)
For the Three Months Ended For the Six Months Ended,
June 30, June 30,
--------------------------------------- ------------------------------
1998 1997 1998 1997
--------------------------------------- ------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Other income $ 0 $ 10,000 $ 0 $ 65,020
--------------------------------------- ------------------------------------
Total revenues 0 10,000 0 65,020
--------------------------------------- ------------------------------------
Costs and expenses:
General and administrative 36,004 258,271 85,269 387,129
Net loss on investments and settlement
of gold contracrs 121,705 0 121,705 0
Interest expense 3,750 11,250 3,750 18,750
--------------------------------------- ------------------------------------
Total expenses 161,459 269,521 210,724 405,879
--------------------------------------- ------------------------------------
Net income (loss) (161,459)$ (259,521) $ (210,724)$ (340,859)
======================================= =====================================
Net income (loss) per common share $ (.01)$ (.01) $ (.01)$ (.02)
======================================= =====================================
Weighted average common
shares outstanding 19,779,705 18,782,445 19,779,705 18,782,445
======================================= ====================================
</TABLE>
The accompanying notes are an integral part of these financial statements
[XPLORER\10-QSB:033198.QSB]-2
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<TABLE>
<CAPTION>
XPLORER, S.A.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stock Preferred Stock Additional Accumulated
--------------------------- --------------------- Paid-In During
Capital Development Stage Total
Shares Amount Shares Amount
Balance January 1, 1998 19,779,705 $ 19,780 1,280,550 $ 1,281 $ 2,790,714 $ (4,385,445) $ (1,573,670)
Net loss for period (49,265) (49,265)
--------------- ---------- ---------- ---------- ------------- --------------- -------------
Balance, March 31, 1998 19,779,705 19,780 1,280,550 1,281 2,790,714 (4,434,710) (1,622,935)
Net loss for period (161,459) (161,459)
--------------- ---------- ---------- ---------- ------------- --------------- -------------
Balance, June 30, 1998 19,779,705 $ 19,780 1,280,550 $ 1,281 $ 2,790,714 $ (4,596,169) $ (1,784,394)
=============== ========== ========== ========== ============= =============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
[XPLORER\10-QSB:033198.QSB]-2
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<TABLE>
<CAPTION>
XPLORER, S.A.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Six Months Ended
June 30, 1998 June 30, 1997
<S> <C> <C>
Net (Loss) $ (210,724) $ (340,859)
Adjustments to Reconcile Net Income to
Decrease in marketable securities - 2,707
Decrease in other investments 121,705 -
Increase in prepaid commissions - (76,320)
Increase in related party payable - 59,017
Increase (decrease) in accrued expenses 34,309 (57,710)
Increase in contracts and notes payable - 20,117
Increase in contracts and notes payable - 20,117
--------------------- -------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (54,710) (133,527)
===================== ===================
CASH FLOWS FROM INVESTING ACTIVITIES
Increase (Decrease) in:
Costs added to property, plant &
equipment - (84,984)
Increase in paid in capital - 148,055
--------------------- -------------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 0 63,071
===================== ===================
NET INCREASE (DECREASE) IN CASH (54,710) (70,456)
CASH, at Beginning of Period 71,124 166,000
--------------------- -------------------
CASH, at End of Period $ 16,414 $ 95,544
===================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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XPLORER, S. A. (A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Month Period Ended March 31, 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 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, has been attempting to
obtain cash resources from the sale of investment contracts, warrant
exercise, operations, or private placement of equity securities. Such
proceeds have been necessary to assure the funding of anticipated
operating costs and satisfaction of any negative working capital as of
the current period.
The Company owns 59% of Atlanta Pacific Trust, LLC (APT) and its
wholly-owned subsidiary Atlantic-Pacific Finanzprodukte, Gmbh (APT
Germany). APT is the owner of the Evening Star Mine and through its
subsidiary APT Germany secures financing for its exploration and
development activities.
The Company's consolidated financial statements have been presented on
the basis that it is a going concern, which contemplates the
realization of the mineral properties and other assets and the
satisfaction of liabilities in the normal course of business. The
Company has incurred losses of $4,596,169 from inception to June 30,
1998. The Company has not realized economic production from its mineral
properties as of June 30, 1998. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management
continues to actively seek additional sources of capital to fund
current and future operations. There is no assurance that the Company
will be successful in continuing to raise additional capital,
establishing probable or proven ore reserves, or determining if the
mineral properties can be mined economically. These consolidated
financial statements do not include any adjustments that might result
from the outcome of these uncertainties.
Note 2 Summary of Significant Accounting Policies:
Principles of Consolidation
The consolidated financial statements include the accounts of the
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Company and its 59% owned subsidiary, Atlantic Pacific Trust, LLC (APT),
(Apt), and apt's wholly-owned subsidiary, atlantic-pacific
finanzprodukte, gmbh. In consolidation, all significant intercompany
balances and transactions are eliminated.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
and disclosure of contingent liabilities at the date of the financial
statements, and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those results.
Mineral Properties and Mining Equipment
Mineral properties and mining equipment are carried at cost. Depreciation
on equipment is provided on a straight-line basis over its estimated
useful lives ranging from three years to five years. Mining equipment not
in service is not depreciated.
In the past, the Company deferred direct costs related to the
acquisition, exploration and development of mineral properties pending
determination of their economic viability which normally entails
performing an in-depth geological and geophysical study. If no minable
ore body was discovered, previously capitalized costs were expensed in
the period the property was abandoned. Any revenue generated from
pre-production costs. When a property was placed in commercial
production, such deferred costs were depleted using the
units-of-production method.
During 1997, the Securities and Exchange Commission (SEC) staff
reconsidered existing accounting practices for mineral expenditures by
United States junior mining companies. They now interpret generally
accepted accounting policy for junior mining companies to permit
capitalization of acquisition, exploration and development costs only
after persuasive engineering evidence is obtained to support
recoverability of these costs (ideally upon determination of proven
and/or probable reserves based upon dense drilling samples and
feasibility studies by a recognized independent engineer). Although the
company has performed drilling samples, and an independent engineer has
deemed the gold properties contain profitable reserves in excess of
property and equipment costs incurred through December 31, 1997,
management has chosen to follow the more conservative method of
accounting by expending the previously capitalized gold mineral costs,
for which there is no feasibility study as of the year ended December 31,
1997.
Office Furniture and Equipment
Office furniture and equipment are recorded at cost. Depreciation is
computed by the straight-line method, based upon the estimated useful
lives of the respective assets, generally three to five years.
Income (Loss) per Common Stock
Income (loss) per share of common stock is computed based on the weighted
average number of shares outstanding. Warrants, options and convertible
debentures have not been included in the calculation as their effect
would be anti-dilutive.
[XPLORER\10-QSB:033198.QSB]-2
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
The Company accounts for income taxes using the liability method which
requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in
the financial statements or tax returns. Deferred tax assets and
liabilities are determined based on the difference between the
financial statements and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are
expected to reverse.
Stock Based Compensation
In October 1995, the Financial Accounting Standards board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," (SFAS 123), which is effective for periods
beginning after December 15, 1995. SFAS 123 requires that companies
either recognize compensation expense for grants of stock, stock
options, and other equity instruments based on fair value or provide
proforma disclosure of the effect on net income and earnings per share
in the Notes to the financial Statements. The Company intends to
continue to account for its stock-based compensation under Accounting
Principles Board No. 25; however, the Company has adopted the
disclosure provisions of SFAS 123 for the fiscal year ended December
31, 1997.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
highly liquid debt instrument purchased with a maturity of three months
or less.
Note 3 Property, Plant and Equipment:
The values reflected in the 10 KSB of December 31, 1997 are carried
forward here. These values are at the defined cost of $918,120, with
accumulated depreciation of $819,400, with the net reflected on the
balance sheet. Depreciation for the current year will be added at year
end.
During 1997, the Company expensed previously capitalized development
costs of its Evening Star mine.
During 1997, the Company considered its mining equipment to be impaired
and provide an allowance for 90% of its original cost.
Note 4 Note Payable:
Note payable in the amount of $450,000 with interest at 10% per annum
payable monthly, with all outstanding principal and interest due on
demand. The note is convertible at any time for 150,000 shares of the
common stock of the Company at the option of the holder.
Note 5 Investment Contracts Payable:
Atlantic has issued investment contracts under German securities laws.
Investment contracts payable consist of the following at December 31,
1997:
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<TABLE>
<S> <C>
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. $ 118,636
Zero-coupon contract of $12,500 payable
in U.S. dollars and bearing interest at
9.00% per annum. Such contracts are
payable with related interest in one to five years. 192,231
Zero-coupon contract payable in 5,000 German Deutsche Marks (DM) units
and bearing interest at 9.00% per annum. Such contracts are payable
with related interest in DM in
one to five years. 868,913
Zero-coupon contract payable in DM or gold at the rate of 600 DM
principal per unit and bearing interest at 9.00% per annum. Contracts
are payable with related
interest in DM in one to five years. 576,041
---------
$ 1,755,821
Less current portion of long-term debt 1,065,847
----------
$ 689,974
</TABLE>
All bonds are secured by the Company's interest in the Evening Star
mining claims per assignment to a bond trustee.
Investment contracts are due as follows:
<TABLE>
<S> <C>
1998 $ 1,065,847
1999 282,674
2000 134,462
2001 208,454
2002 64,384
-----------
Total $ 1,755,821
===========
</TABLE>
Note 6 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
[XPLORER\10-QSB:033198.QSB]-2
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renewable after a five year term and require a future minimum annual
payment of $72,000 to Sequoia Trust.
These properties provide the Company with the opportunity to develop
three patented mining claims with probable commercial grade ore (12%
royalty due to Sequoia Trust), construct a primary ore processing
refinery, and utilize 13,000 square feet at the Weldon Research Center
for its mineralization analyzes and other testing procedures.
Atlantic also has a cancellable contract with EMTEC, Inc., a related
party, for development of all eleven mining claims and the future
operation of the mine and refinery. The contract requires the Company
to pay EMTEC bi-monthly at invoiced cost plus 18% overhead.
As of June 30, 1998 Atlantic owed the above related entities
development costs and accrued interest in the amount of $364,675.
ITEM 2. MANAGEMENT' S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For the six months ended June 30, 1998:
Going Concern:
The Company's working capital resources during the period ended June
30, 1998 were provided by utilizing the cash on hand at December 31, 1997. The
formal business activity of mining did not begin this quarter since the activity
is just in the process of being funded. Sufficient funds have previously been
made available by related parties for the working capital requirements not
filled by other sources. Management anticipates this will continue until the
commencement of operations.
The Company has experienced recurring net losses, has limited liquid
resources, and negative working capital. Management's intent is to continue
searching for additional sources of capital and the Company intends to continue
operating with minimal overhead and key administrative functions provided by
consultants who are compensated in the form of the Company's common stock. It is
estimated, based upon its historical operating expenses and current obligations,
that the Company may need to utilize its common stock for future financial
support to finance its needs during 1998. Accordingly, the accompanying
consolidated financial statements have been presented under the assumption the
Company will continue as a going concern.
Results of Operations - Quarter Ended June 30, 1998 Compared to Quarter Ended
June 30, 1997
- Six Months Ended June 30, 1998 Compared to Six Months
Ended June 30, 1997
There has not been sufficient time since the emergence from Chapter 11
Proceedings to begin operations. There is currently no schedule as to when these
operation activities will begin, accordingly, there were no revenues or cost of
revenues recorded during the current quarter or comparable quarter.
Total expenses were $161,459 in the current quarter and $210,724 in the
current six months compared to $269,521 and $340,859 in the comparable periods
last year. The change is attributable to continued utilization of services
provided by professional consultants and other advisors and a minimal level
[XPLORER\10-QSB:033198.QSB]-2
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of activities in 1998. Additionally, during the current quarter the Company
wrote off an investment at the Atlantic level due to the bankruptcy filing of
the company in which the investment was made.
Estimations of Management:
Each year, Atlantic Management estimates or reserves and prepares a
comprehensive mining plan for the then-anticipated remaining life of the mining
property. Other metals could also be present in the ore reserves. Significant
changes to the Company's plans could occur as a result of mining experience, new
ore discoveries, changes in mining process, new investment in equipment and
technology. Also permits may not be renewable under the same terms and
conditions as originally granted. Exploration could not result in recoverable
metals, and the anticipated pilot refinery could not be completed and other
factors.
The Company's management provides no assurance as to the outcome of any
of these matters and resulting adjustments could be material to the Company's
financial condition and operations.
Given the above uncertainties, Atlantic utilizes the values for its
gold ore resources based upon a comprehensive geological report updated by
Christopher L. Pratt, Geologist, dated December 31, 1996, as to ore reserves.
The Company's management in compliance with applicable reporting
guidelines has graded the ore reserves as Probable Reserves (indicated reserves)
until completion of the pilot ore refinery, further mineralization studies,
additional drilling and sampling, and geological feasibility analysis.
Liquidity and Capital Resources
As of June 30, 1998, the Company had a working capital deficit of
$2,193,118 a decrease of $674,655 from June 30, 1997. The change was
attributable to the operating losses experienced and impairment recognized in
the last six months of 1997 and the first six months of 1998.
The Company had cash balances of approximately $16,414 and $39,756 at
June 30, 1998 and 1997, respectively. The limited cash balances are a direct
result of the Company having no operations during the quarters.
The Company's plan is to keep searching for additional sources of
capital and new operating opportunities. Furthermore, the Company may have to
utilize its common stock for future financial support to finance its needs. Such
conditions raise substantial doubt about the Company's ability to continue as a
going concern. As such, the Company's independent accountants have modified
their report for the Company's latest fiscal year ended December 31, 1997 to
include an explanatory paragraph with respect to the uncertainty.
The Company has no commitments for capital expenditures or additional
equity or debt financing and no assurances can be made that its working capital
needs can be met.
Additionally, as of June 30, 1999, the Company had no operations or
employees other than its President.
[XPLORER\10-QSB:033198.QSB]-2
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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
None.
[XPLORER\10-QSB:033198.QSB]-2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
XPLORER, S.A.
(Registrant)
Dated: September 30, 1998 By:/s/ Leonard J.Roman
----------------------------------
Treasurer, Chief Financial Officer
and Director; Xplorer, S.A.
[XPLORER\10-QSB:033198.QSB]-2
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 16,414
<SECURITIES> 0
<RECEIVABLES> 39,166
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 55,580
<PP&E> 918,120
<DEPRECIATION> (819,400)
<TOTAL-ASSETS> 189,278
<CURRENT-LIABILITIES> 2,248,698
<BONDS> 0
0
0
<COMMON> 1,281
<OTHER-SE> (1,785,675)
<TOTAL-LIABILITY-AND-EQUITY> 189,278
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 157,709
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,750
<INCOME-PRETAX> (161,459)
<INCOME-TAX> 0
<INCOME-CONTINUING> (161,459)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (161,459)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
