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 March 31, 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 March 31, 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 March 31, 1998 (unaudited) ........................... 1
Consolidated Condensed Statements of Operations
for the Three and Nine Months Ended March 31, 1998 and 1997
(unaudited) ................................................ 3
Consolidated Condensed Statements of Cash Flows for the Nine
Months Ended March 31, 1998 and 1997 (unaudited) ........... 4
Notes to Consolidated Condensed Financial Statements ........ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................10
PART II
Item 1. Legal Proceedings........................................15
Item 2. Changes In Securities....................................15
Item 3. Defaults Upon Senior Securities..........................15
Item 4. Submission Of Matters To A Vote Of Security Holders......15
Item 5. Other Information........................................15
Item 6. Exhibits And Reports On Form 8-K.........................15
Signatures...................................................16
I
[XPLORER\10-QSB:033198.QSB]-2
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<TABLE>
<CAPTION>
XPLORER, S.A.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET
March 31, 1998
ASSETS
<S> <C>
Current Assets
Cash and cash equivalents $ 28,337
Receivables 39,166
Total Current Assets 67,503
Property and equipment 98,720
Other investments 156,683
TOTAL ASSETS $ 322,906
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accrued expensed $ 340,345
Related party payable 364,675
Note payable 450,000
Current portion of long-term debt 1,065,847
Total Current Liabilities 2,220,867
Long-term debt 689,974
Total Liabilities $ 2,910,841
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 (4,434,710)
Total Shareholders' Equity (Deficit) (1,622,935)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 322,906
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<TABLE>
<CAPTION>
XPLORER, S.A.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Three Months Ended
March 31, 1998 March 31, 1997
---------------------- ------------------------
<S> <C> <C>
Revenues
Other income $ 0 $ 55,020
Total revenues 0 55,020
Expenses
General and administrative 45,515 128,858
Net loss on investments and settlement of gold contracts 0 0
Interest expense 3,750 7,500
Total expenses 49,265 136,358
Net loss before minority interest (49,265) (81,338)
Minority interest 0 0
Net loss $ (49,265) $ (81,338)
Net loss per common share $ (0.00) $ (0.00)
Weighted average common shares outstanding 19,779,705 18,782,447
</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 THREE MONTHS ENDED MARCH 31, 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)
</TABLE>
The accompanying notes are an integral part of thesefinancial 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 THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Three Months Ended
March 31, 1998 March 31, 1997
<S> <C> <C>
Net (Loss) $ (49,265) $ (81,338)
Adjustments to Reconcile Net Income to
Decrease in marketable securities 2,707
Increase in prepaid commissions (76,320)
Increase in related party payable 59,017
Increase (decrease) in accrued expenses 6,478 (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 (42,787) (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 63,071
NET INCREASE (DECREASE) IN CASH (42,787) (70,456)
CASH, at Beginning of Period 71,124 166,000
CASH, at End of Period $ 28,337 $ 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 $4,037,959
from inception to March 31, 1998. The Company has not realized economic
production from its mineral properties as of March 31, 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 company and
its 59% owned subsidiary, Atlantic Pacific Trust, LLC (APT), and APT's
wholly-owned subsidiary, Atlantic-Pacific
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Finanzprodukte, GmbH. In consolidations, 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.
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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 pat EMTEC bi-monthly
at invoiced cost plus 18% overhead.
As of March 31, 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 three months ended March 31, 1998:
Going Concern:
The Company's working capital resources during the period ended March 31,
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 March 31, 1998 Compared to Quarter
Ended March 31, 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.
Operating expenses was $49,265 in the current quarter compared to $136,358 in
the comparable period last year. The change is attributable to continued
utilization of services provided by professional consultants and other advisors
and a minimal level of activities.
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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 March 31, 1998, the Company had a working capital deficit of $2,143,364
a decrease of $933,015 from March 31, 1997. The change was attributable to the
operating losses experienced and impairment recognized in the last nine months
of 1997 and the first quarter of 1998.
The Company had cash balances of approximately $28,337 and $95,544 at March
31, 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 March 31, 1999, the Company had no operations or employees
other than its President.
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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 29, 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> 28,337
<SECURITIES> 0
<RECEIVABLES> 39,166
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 67,503
<PP&E> 918,120
<DEPRECIATION> (819,400)
<TOTAL-ASSETS> 322,906
<CURRENT-LIABILITIES> 2,210,867
<BONDS> 0
0
0
<COMMON> 1,281
<OTHER-SE> (1,624,216)
<TOTAL-LIABILITY-AND-EQUITY> 322,906
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 45,515
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,750
<INCOME-PRETAX> (49,265)
<INCOME-TAX> 0
<INCOME-CONTINUING> (49,265)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,265)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
