SECURITIES AND EXCHANGE
-----------------------
COMMISSION
----------
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
---------
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
June 30, 1996.
- Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
_________ to__________
Commission File No. 0-17246
GULF EXPLORATION CONSULTANTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0293525
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One Independent Drive, Suite 2201
Jacksonville, Florida 32202
----------------------------------------
(Address of principal Offices) (Zip Code)
Registrant's telephone number including area code: (904) 745-6981
--------------
10 Rockefeller Plaza, New York, NY 10020 (212) 247-2120
---------------------------------------------------------------
(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
------- -------
The number of shares of common stock outstanding as of August 19, 1996
was 1,991,092.
<PAGE>
INDEX
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets - June 30, 1996 (unaudited) and
December 31, 1995.
Consolidated Statement of Operations - three and six months ended
June 30, 1995 and 1996 (unaudited).
Consolidated Statement of Cash Flows - six months ended June 30,
1996 (unaudited) and December 31, 1995.
Notes to Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 2. Changes in Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Events.
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1996 December 31, 1995
(unaudited) (audited)
----------- -----------------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 2,659 $10,425
Accounts receivable -- 27,111
------- -------
Total Current Assets 2,659 37,536
------- -------
PROPERTY, PLANT AND EQUIPMENT, at cost
Equipment -- 80,242
Less - Accumulated depreciation -- 31,480
------- -------
-- 48,402
--- -------
$ 2,659 $85,938
======= =======
The accompanying notes are an integral part of these financial statements
<PAGE>
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1996 December 31,
1995
(unaudited) (audited)
------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 4,659 $ 114,304
Accrued expenses 4,262 34,655
Deferred income -- 36,347
Due to affiliates -- 365,666
Current portion of capital lease obligations -- 5,930
Other -- 246,900
----------- ----------
Total Current Liabilities 8,921 803,802
----------- ----------
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 par value, 5,000,000
shares authorized, no shares issued and
outstanding as of June 30, 1996 and
December 31, 1995 -- --
Common Stock, $0.01 par value, 10,000,000
shares authorized, 1,991,092 and 1,999,980
shares issued and outstanding as of June 30,
1996 and December 31, 1995, respectively 19,911 20,000
Additional paid-in capital 7,253,414 7,429,779
Retained deficit (7,279,587) (8,148,814)
Accumulated translation adjustments -- (18,829)
----------- -----------
(6,262) (717,864)
----------- -----------
$ 2,659 $ 85,938
=========== ===========
<PAGE>
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended Six months ended
------------------ ----------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
(unaudited)(unaudited) (unaudited) (unaudited)
---------------------- ----------- ----------
OPERATING REVENUES:
Subscription revenues $ -- $ 19,852 $ -- $ 32,984
Other income 9,370 4,747 9,370 8,245
-------- ---------- -------- ----------
9,370 24,599 9,370 41,229
-------- ---------- -------- ----------
OPERATING EXPENSES:
On-line service
production costs -- 70,998 -- 154,777
Technical, general
and administrative 17,863 140,338 17,116 274,936
Depreciation, depletion
and amortization 19,914 765 37,130
-------- ---------- -------- ----------
(17,863) (231,248) (17,872) (456,833)
-------- ---------- -------- ----------
LOSS FROM OPERATIONS (8,492) (206,649) (8,502) (425,604)
OTHER INCOME EXPENSE:
Interest expense -- (221) -- (479)
Interest income 8 42 8 66
-------- ---------- -------- ----------
8 (179) 8 (413)
-------- ---------- -------- ----------
LOSS BEFORE INCOME TAX AND
EXTRAORDINARY ITEMS (8,484) (206,828) (8,484) (426,017)
INCOME TAX PROVISION -- -- -- --
-------- ---------- -------- ----------
NET INCOME/LOSS BEFORE
EXTRAORDINARY ITEMS (8,484) (206,828) (8,484) (426,017)
EXTRAORDINARY INCOME/LOSS 877,711 -- 877,711 --
-------- ---------- -------- ----------
NET INCOME/LOSS TO COMMON
STOCKHOLDERS $869,227 $(206,828) $869,227 $(426,017)
======== ========== ======== ==========
INCOME(LOSS) PER COMMON SHARE:
Net loss before
extraordinary item $ 0.00$ 0.00 $ 0.00$ 0.00
Net extraordinary item $ 0.44$ 0.00 $ 0.44$ 0.00
----------- ------------ ----------- ------------
$ 0.44$ 0.00 $ 0.44$ 0.00
----------- ------------ ----------- ------------
LOSS PER COMMON SHARE -
ASSUMING FULL DILUTION:
Net loss before
extraordinary item $ 0.00 $ 0.00 $ 0.00$ 0.00
Net extraordinary item $ 0.44 $ 0.00 $ 0.44$ 0.00
----------- ------------ ----------- ------------
$ 0.44 $ 0.00 $ 0.44$ 0.00
----------- ------------ ----------- ------------
The accompanying notes are an integral part of these financial statements
<PAGE>
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended
----------------
June 30, 1996 December 31, 1995
(unaudited) (audited)
------------- -----------------
OPERATING ACTIVITIES:
Net profit (loss) $869,227 $(426,017)
Adjustments to reconcile net loss to
net cash used in operating activities
Disposal of subsidiary and reorganization
of share structure 876,993 --
Depreciation, depletion and amortization -- 37,130
Net change in accounts receivable,
accounts payable and other -- (30,219)
Change in operating accounts payable and
accrued liabilities, net -- 119,068
-------- ---------
Net cash flows used in operating activities (7,766) (300,038)
INVESTING ACTIVITIES:
Proceeds of sale of property -- --
Purchase of equipment -- (9,853)
Deferred expenditure -- (81,039)
-------- ---------
Net cash flows provided by (used in)
investing activities -- (90,892)
-------- ---------
FINANCING ACTIVITIES:
Repayment of capital lease obligation -- (3,343)
Proceeds of short term loan -- 200,000
Loan from affiliate -- 179,728
-------- ---------
Net cash flows provided by financing
activities -- 376,385
-------- ---------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (7,766) (14,545)
CASH AND CASH EQUIVALENTS, beginning of
period 10,425 26,586
-------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 2,659 $ 12,041
-------- ----------
The accompanying notes are an integral part of these financial statements
<PAGE>
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
-------
The financial statements of Gulf Exploration Consultants, Inc. and
subsidiaries (collectively the "Company") for the period ended June 30,
1996 are unaudited but reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
fairly present the results for such periods. The accompanying financial
statements should be read in conjunction with the financial statements and
notes thereto contained in the Annual Report included in the Form 10-K for
the year ended December 31, 1995.
GOING CONCERN ASSUMPTION
------------------------
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern.
CHANGE OF MANAGEMENT
--------------------
On July 10, 1996, the Company accepted the resignation of L. George Rieger
as President and Chairman of the Board of Directors of the Company. Daniel
Murphy was appointed as Director and President of the Company to fill the
vacancy caused by Mr. Rieger's resignation. Mr. Murphy is a financial
consultant.
RECAPITALIZATION AND SALE OF SUBSIDIARY
---------------------------------------
Effective June 17, 1996, after obtaining stockholder approval, Micron Ltd.
("Micron") acquired 3,954,545 shares totaling 72.5% of the Common Stock of
Emerging Money Limited ("Emerging Money") from the Company. In
consideration for such shares Micron had paid the Company 39, 546 Irish
Pounds (US$ 63,293 equivalent as of December 31, 1995) and had paid on
behalf of Emerging Money approximately US$ 80,000 which enabled Emerging
Money to discharge certain agreed creditors.
Effective July 10, 1996, pursuant to a Letter Agreement, dated December 22,
1995 (the "Letter Agreement"), among the Company, Minmet plc, Osprey
Investments, Inc. (formerly, DRM&S, Inc., "Osprey") and Dennis Mensch
("Mensch"), Osprey and Mensch each exchanged promissory notes, dated March
1995, in the principal amount of $100,000 each plus accrued interest, for
438,040 shares each of the Company's Common Stock. Each of Osprey and
Mensch holds a 22% interest in the Company as a result of this
recapitalization. Also pursuant to the Letter Agreement, effective June
17, 1996, Minmet reduced its beneficial interest in the Company from 56% to
15% and the Company transferred its remaining 27.5% interest in Emerging
Money to Minmet. The Company no longer has any interest in Emerging Money.
The Company is presently seeking new business opportunities.
(2) INCOME/LOSS PER COMMON SHARE
---------------------
Income/loss per common share is based on the weighted average number of
shares of Common Stock outstanding during each period. The average number
of shares outstanding for the three month periods ended June 30, 1996 and
1995 was 1,991,092 and 1,999,980 shares, respectively.
Common stock equivalents are antidilutive and are not considered in the
calculations of income/loss per share.
<PAGE>
(3) COMMITMENTS AND CONTINGENCIES
-----------------------------
As of August 26, 1996, the Company has not filed certain federal and state
income tax returns for the years ended 1991, 1992, 1993, 1994 and 1995. It
is management s intent to file the required tax returns in 1996.
Management believes penalties for late filing will not be material to the
financial statements.
(4) COMMON STOCK REVERSE SPLIT
--------------------------
Effective June 17, 1996, stockholders approved a one-for-fifty reverse
split of the Company's Common Stock. All references in the financial
statements to average number of shares and per share amounts of the
Company's Common Stock have been retroactively restated to reflect the
reverse split. In addition, stockholders also approved the reduction in
the number of authorized shares of Common Stock from 100,000,000 to
10,000,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS.
---------------------
RESULTS OF OPERATIONS
The net loss for the three month period ended June 30, 1996 was $8,484.
Expenses of $17,863 were incurred in professional fees during the quarter.
LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN ASSUMPTIONS
As indicated in Note (1) to the Financial Statements, effective June 17,
1996 the Company disposed of its entire interest in Emerging Money,
including all related liabilities. The Company registered a $877,711
extraordinary accounting gain resulting from the disposition of such
subsidiary and the related liabilities.
Pursuant to a letter agreement, dated July 10, 1996, Mensch loaned the
Company $25,866, $15,866 of which was used to pay a portion of the
Company's accounting and legal fees existing at November 15, 1995 that were
incurred in connection with the recapitalization of the Company and the
remaining $10,000 is being used to provide the Company with some short term
working capital. The $25,866 loan by Mensch is evidenced by a promissory
note, dated July 10, 1996, that matures on July 1, 1997 (subject to
prepayment upon a sale of a controlling interest in the Company) and bears
interest at a rate of 7% per annum.
Pursuant to a separate letter agreement, dated July 10, 1996, Osprey agreed
to loan the Company an aggregate of $25,866. Of that amount $15,866 is to
be used to pay a portion of the Company's accounting and legal fees
existing at November 15, 1995, that were incurred in connection with the
recapitalization of the Company. The Company received $5,000 of the
$15,866 on July 10, 1996 and the remaining $10,000 is to be paid to the
Company in five monthly installments of $2,173.20. Osprey agreed to loan
the Company an additional $10,000 to be used to provide the Company with a
portion of its short term working capital. Of the $10,000 amount, $5,000
was paid on July 10, 1996 and the remaining $5,000 is payable upon the
request of the Board of Directors of the Company. Osprey's loan is
evidenced by a promissory note, dated July 10, 1996 that matures on July 1,
1997 (subject to prepayment upon a sale of a controlling interest in the
Company) and bears interest at a rate of 7% per annum.
The Company presently has no operations or business activity. Management,
however, is seeking new business opportunities for the Company. The
intention is to identify and enter into an arrangement for a business which
would present growth prospects to stockholders. The arrangement would be
subject to approval by stockholders.
<PAGE>
Presently, the only expenses incurred by the Company are expenses related
to maintaining the Company's status as a filer of reports pursuant to the
Securities Exchange Act of 1934, as amended, and stockholder matters and
expenses incurred in connection with seeking new business opportunities.
The Company anticipates incurring additional legal and accounting expenses
for services rendered and to be rendered by its management, attorneys and
accountants in connection with the reorganization of the Company and
certain follow up work related thereto and the search for and any
negotiations in connection with an acquisition transaction.
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
---------------------
On June 17, 1996, the Company filed amendments to its Certificate of
Incorporation with the Secretary of State of the State of Delaware which
(i) reduced the number of outstanding shares of the Company's Common Stock,
$.01 par value ("Common Stock"), through a one-for-fifty reverse split (the
"Reverse Split"); and (ii) reduced the number of authorized shares of
Common Stock from 100,000,000 to 10,000,000 shares.
The amendments were approved by the Company's stockholders at a special
meeting of stockholders held on June 17, 1996 and became effective as of
the time of filing with the Secretary of State of the State of Delaware
(the "Effective Time").
At and after the Effective Time each share of Common Stock issued and
outstanding immediately prior to the Effective Time was reclassified and
changed into one-fiftieth (1/50) of one (1) share of Common Stock, $.01 par
value (shares of Common Stock issued and outstanding prior to the Effective
Time being hereinafter called "Old Shares" and shares of Common Stock
issued and outstanding at and after the Effective Time being hereinafter
called "New Shares"); provided, however, that no fractional New Shares are
to be issued as a result of the reverse split. In lieu of fractional
shares, each stockholder whose Old Shares were not evenly divisible by
fifty were rounded up or down to the nearest whole share, except that
record holders of 25 or fewer shares received one New Share.
Certificates for Common Stock dated on or before June 17, 1996 represent
Old Shares. Certificates dated after June 17, 1996 reflect the reverse
stock split, and represent New Shares. Stockholders will be asked to
surrender all certificates representing Old Shares in exchange for
certificates representing the appropriate number of New Shares in
accordance with the procedures set forth in a letter of transmittal that
will be sent to stockholders by the Company. Stockholders should not
submit their certificates representing Old Shares until requested to do so.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
---------------------------------------------------
The Company held a Special Meeting of Stockholders on June 17, 1996. The
following three directors were elected to serve until the next annual
meeting of stockholders and thereafter, until their successors are elected
and qualified.
Name Votes "FOR" Votes "WITHHELD"
---------- ---------- ----------------
Jeremy Metcalfe 67,768,356 80
Michael Nolan 67,768,356 80
L. George Rieger 67,768,356 80
The stockholders also approved the transactions contemplated by the
Subscription Agreement and Option, dated December 7, 1995, among the
Company, Minmet plc, Micron Ltd., and Emerging Money Limited ("Emerging
Money"). The transaction involved, among other things, the disposition of
the Company's interest in Emerging Money. The stockholder vote was as
follows:
FOR: 67,743,226
AGAINST: 40
ABSTAIN: 25,170
BROKER NO VOTE: 0
The stockholders also approved amendments to the Company's Certificate of
Incorporation to effect the recapitalization of the Corporation whereby (i)
the Reverse Split was effected and (ii) the number of authorized shares of
Common Stock was reduced from 100,000,000 to 10,000,000. The stockholder
vote on such amendments was as follows:
FOR: 67,743,226
AGAINST: 119
ABSTAIN: 25,150
BROKER NO VOTE: 0
ITEM 5. OTHER EVENTS.
------------
On July 10, 1996, L. George Rieger resigned as President, Chairman and
Director of the Company. Daniel Murphy was appointed to the Board of
Directors of the Company and to the office of President as of July 10, 1996
by unanimous written consent of the Board of Directors of the same date.
Mr. Murphy is a financial consultant.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
--------------------------------
(a) Exhibit 27. Financial Data Schedule
(b) The Company filed a Form 8-K for an event of June 17, 1996
reporting in Item 2 the disposition of its interest in Emerging Money
Limited and in Item 5 the recapitalization.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
GULF EXPLORATION CONSULTANTS, INC.
Date: August 30, 1996
/s/ Daniel Murphy
-----------------------------------------
Daniel Murphy,
President
/s/ Michael H. Nolan
-----------------------------------------
Michael H Nolan,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM COVER-ALL TECHNOLOGIES INC. FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,659
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,659
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,659
<CURRENT-LIABILITIES> 8,921
<BONDS> 0
<COMMON> 19,911
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,659
<SALES> 9,370
<TOTAL-REVENUES> 9,370
<CGS> 17,863
<TOTAL-COSTS> 17,863
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,484)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 877,711
<CHANGES> 0
<NET-INCOME> 869,227
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
