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, 1999
[ ] 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
(Issuers 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, 1999, Xplorer, S.A. had 20,086,266 shares of Common Stock
Outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ]No [ X ]
[XPLORER\10-QSB:033199.QS1]
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XPLORER, S.A.
INDEX
Page
PART I
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
as of March 31, 1999 (unaudited).....................................1
Consolidated Condensed Statements of Operations
for the Three Months Ended March 31, 1999 and 1998 (unaudited).......2
Consolidated Condensed Statements of Shareholders Equity for Three
Months Ended March 31 (unaudited)....................................3
Consolidated Condensed Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998 (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:033199.QS1]
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XPLORER, S.A.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET
March 31, 1999
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents $ -
Receivables 3,495
Total Current Assets 3,495
Property and equipment 77,535
Other investments 13,170
TOTAL ASSETS $ 94,200
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Accrued expensed $ 464,801
Related party payable 364,675
Note payable 450,000
Due to trustee 131,603
Current portion of long-term debt 1,311,335
Total Current Liabilities 2,722,414
Long-term debt 463,658
Total Liabilities 3,186,072
Minority Interest -
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; 20,086,266 issued and outstanding 20,087
Additional paid in capital 2,570,530
Accumulated deficit during development stage (5,683,770)
Total Shareholders Equity (Deficit) (3,091,872)
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) $ 94,200
</TABLE>
The accompanying notes are an integral part of these financial statements.
[XPLORER\10-QSB:033199.QS1]
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XPLORER, S.A.
Statements of Operations
For the Three Months Ended
March 31, 1999 and 1998(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1999 1998
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues
Other income $ 0 $ 0
Total revenues 0 0
Costs and expenses:
General and administrative 18,942 45,515
Interest expense - 3,750
Total expenses 18,942 49,265
Net income (loss) $ (18,942) $ (49,265)
Net income (loss) per common share $ (.00)$ (.00)
Weighted average common
shares outstanding 20,086,266 19,779,705
</TABLE>
The accompanying notes are an integral part of these financial statements
[XPLORER\10-QSB:033199.QS1]
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XPLORER, S.A.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional Accumulated
Paid-In During
Shares Amount Shares Amount Capital Development Stage Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1999 20,086,266 $ 20,087 1,280,550 $ 1,281 $ 2,570,530 $ (5,664,828) $(3,072,930)
Net loss for period (18,942) (18,942)
Balance, March 31, 1999 20,086,266 $ 20,087 1,280550 $ 1,281 $ 2,570,530 $ (5,683,770) $(3,091,872)
</TABLE>
The accompanying notes are an integral part of these financial statements.
[XPLORER\10-QSB:033199.QS1]
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XPLORER, S.A.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1999 March 31, 1998
<S> <C> <C>
Net (Loss) $ (18,942) $ (49,265)
Adjustments to Reconcile Net Income to
Increase in accrued expenses 15,050 6,478
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (3,892) (42,787)
NET INCREASE (DECREASE) IN CASH (3,892) (42,787)
CASH, at Beginning of Period 3,892 71,124
CASH, at End of Period $ - $ 28,337
</TABLE>
The accompanying notes are an integral part of these financial statements.
[XPLORER\10-QSB:033199.QS1]
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XPLORER, S. A. (A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Month Period Ended March 31, 1999
Note 1 Organization and Presentation
Organization
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
Gerants Third Amended Plan of Reorganization (the Plan). The Plan approved the
amendment 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 September 22, 1999.
The Company owns 59% of Atlanta Pacific Trust, LLC (APT). APT is the owner of
the Evening Star Mine and through its related company, Atlantic-Pacific
Finanzprodukte, GMBH (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 $5,683,770 before
minority interest from inception to 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 APTs related
company, Atlantic-Pacific 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.
[XPLORER\10-QSB:033199.QS1]
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Note 2 Summary of Significant Accounting Policies (Continued)
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.
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, 1998, management has chosen to
follow the more conservative method of accounting by expending the previously
capitalized gold mineral costs of $2,665,500 as of December 31, 1996, and
expensing any future development costs.
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.
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.
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 its Annual Report on Form 10 KSB for the Companys fiscal
year ended December 31, 1999 are carried forward here. These values are at the
defined cost of $918,120, with accumulated depreciation of $840,585, with the
net reflected on the balance sheet. Depreciation for the current year will be
added at year end.
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Note 3 Property, Plant and Equipment (Continued)
During 1997, the Company expensed previously capitalized development costs of
its Evening Star mine. Also, during 1997, the Company considered its mining
equipment to be impaired and provided an allowance for 90% of its original cost.
Note 4 Note Payable
As of March 31, 1999, the Company had a 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. Investment
contracts payable consist of the following at March 31, 1998:
<TABLE>
<S> <C> <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>
As of November 4, 1999, the Company was unable to repay $1,253,663 in contracts
that have matured.
[XPLORER\10-QSB:033199.QS1]
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Note 5 Investment Contracts Payable (Continued)
In connection with the sale by APT of Bonds, Certificates, Contracts and 9%
Bonds ("Contracts") APT has assigned its eight mineral claims, known as the
Evening Star Mine, to Benjamin C. Rice, Esq. ("Trustee"), a director of the
Company, to be held in trust for a term of ten years or until all obligations
owed on the Contracts are fully satisfied. The Trustee will allow APT to remove
and process gold ore from the Evening Star Mine for delivery and payment of
Contracts as they mature. APT may also remove additional gold ore to cover
expenses only but may not remove any gold ore for any other purpose until all
the Contracts have been fully repaid. Upon default, the Trustee may cause the
gold ore to be refined by a third party refiner or he may sell the claims to pay
all indebtedness evidenced by the contracts.
Accrued interest on the above contracts amounted to $317,119 at December 31,
1998.
<TABLE>
<CAPTION>
Investment contracts are due as follows:
<S> <C> <C>
1999 ...........................$1,311,335
2000 ............................ 185,248
2001 ............................ 208,454
2002 ............................ 64,385
2003 ........................... 5,571
Total ...........................$1,774,993
</TABLE>
The amount for 1999 included $986,857 of 1998 maturities.
Note 6 - Subsequent Event
The Company has been unable to repay $1,044,775 in debt obligations, which
matured subsequent to December 31, 1998, as of November 4, 1999.
The Company, in a meeting of the Board of Directors on July 30, 1999, entered
into the following agreement:
Advisory agreement with a third party to assist the Company in
restructuring the Company and/or obtain financing for its operations;
Authorized the issuance of 150,000 shares of Xplorer, S.A. common stock to
Gardner Investment, Inc. to convert the note payable of $450,000 to common
stock.
Approved the conversion of 1,280,550 Xplorer, S.A. preferred shares owned
by a single shareholder to 12,805,050 Xplorer, S.A. common stock;
Issuance of 1,500,000 common stock with options for additional common stock
to third party advisors in return for past and future consulting services; and
Xplorer, S.A. to enter into a stock purchase plan and plans of
reorganization whereby Xplorer, S.A. will exchange shares of its common stock
for no less than 50% of the outstanding common stock of an unrelated
corporation.
[XPLORER\10-QSB:033199.QS1]
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ITEM 2. MANAGEMENT' S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For the three months ended March 31, 1999
Going Concern
The Company's working capital resources during the period ended March 31,
1999 were provided by utilizing the cash on hand at December 31, 1998. The
formal business activity of mining did not begin this quarter since the activity
is just in the process of being funded. As a result, the Company is
substantially a shell. 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
mining operations or other 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 1999. 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, 1999 Compared to Quarter Ended March 31, 1998
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 $18,942 in the current quarter and $49,265 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 since 1997.
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 Companys 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 Companys management provides no assurance as to the outcome of any
of these matters and resulting adjustments could be material to the Companys
financial condition and operations.
The Companys 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
[XPLORER\10-QSB:033199.QS1]
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mineralization studies, additional drilling and sampling, and geological
feasibility analysis.
Liquidity and Capital Resources
As of March 31, 1999, the Company had a working capital deficit of
$2,718,919 an increase of $575,555 from March 31, 1998. The change was
attributable to the operating losses experienced and impairment from the
maturity of long term payables.
The Company had no cash on hand at March 31, 1999. The limited cash balance
is a direct result of the Company having no operations during the periods.
The Companys 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 Companys ability to continue as a
going concern. As such, the Companys independent accountants have modified their
report for the Companys latest fiscal year ended December 31, 1998 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.
Business Risks:
As discussed previously, the Company is substantially a shell but intends
to seek out and acquire profitable operating businesses. However, no definitive
agreements have been reached. If any acquisition agreements are reached in the
near term, the Company can make no assurances that it will be able to obtain the
financing necessary to complete the any transaction.
Competition:
Since the Company has no current operations, it does not have any direct
across the board competitors, but may have competition in the future within the
industries for which it may acquire operations.
Management of Growth:
If the Company is successful in implementing its growth strategy, the
Company believes it could undergo a period of rapid growth that could place a
significant strain on its management, financial and other resources. The
Companys ability to manage its growth will require it to continue to improve its
operational and financial systems and to motivate and effectively manage its
employees. If the Company grows it will have to implement new financial,
budgeting, management information and internal control systems. The Companys
success will depend upon its ability to attract and retain highly skilled
personnel. There can be no assurance that the Company will be successful in
attracting and retaining key management, technical, marketing and sales
personnel. Its failure to do so would materially and adversely affect the
Companys business and results of operations.
Additionally, as of March 31, 1999, the Company had no operations or
employees other than its President.
[XPLORER\10-QSB:033199.QS1]
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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:033199.QS1]
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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: November 5, 1999 By: /s/ Leonard J.Roman
Leonard J. Roman
Treasurer, Chief Financial Officer and
Director; Xplorer, S.A.
[XPLORER\10-QSB:033199.QS1]
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,495
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,495
<PP&E> 918,120
<DEPRECIATION> (840,585)
<TOTAL-ASSETS> 94,200
<CURRENT-LIABILITIES> 2,248,698
<BONDS> 0
0
0
<COMMON> 1,281
<OTHER-SE> (3,093,153)
<TOTAL-LIABILITY-AND-EQUITY> 94,200
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,942
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (18,942)
<INCOME-TAX> 0
<INCOME-CONTINUING> (18,942)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,942)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
