---------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-17246
GULF EXPLORATION CONSULTANTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0293525
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Rockefeller Plaza, Suite 1012
New York, New York 10020
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (212) 247-2120
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
YES X NO
--- ---
The aggregate market value of the voting stock held by non-
affiliates of the Registrant at as of February 29, 1996, cannot
be determined since there is no established public trading market
for the registrant's common stock.
At April 15, 1996, there were 93,552,625 shares of Common
Stock outstanding.
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<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
Gulf Exploration Consultants Inc. ("the Company") was
incorporated under the laws of the State of Delaware on October
2, 1987. On September 15, 1988, the Company effected a roll-up
transaction pursuant to which its wholly-owned subsidiaries
Bengal Oil & Gas Corporation, a Colorado corporation, Gopher
Exploration, Inc., a Texas corporation, GEC Texas, Inc. (formerly
Gulf Exploration Consultants, Inc.), a Texas corporation, Dornoch
Exploration, Inc., a Texas corporation and Vanderbilt Petroleum,
Inc., a Delaware corporation, were rolled-up into the Company.
In 1988 and 1989, the Company incurred losses in the amount
of $4.3 million and $4.1 million, respectively. These substantial
losses eroded the Company's capital base and made it more
difficult to obtain additional capital through borrowing or
equity offerings. In addition, the Company had already incurred a
substantial amount of debt. In 1990, in order to repay such debt
the Company was forced to dispose of certain of its major oil and
gas interests.
As of July 6, 1989, the National Association of Securities
Dealers, Inc. ("NASD") delisted the Company's Common Stock from
the NASDAQ Small-Cap Market because of the lack of active market
makers registered to trade in the Company's securities.
An additional barrier to the Company's ability to obtain
sufficient financing to fund its operations was the presence of a
class of Preferred Stock of the Company which had a liquidation
preference over the Company's Common Stock. Management determined
that it would not be able to successfully obtain capital through
the issuance of equity securities until it redeemed all of the
Preferred Stock. Thus, over the period from 1990 through 1994,
the Company redeemed all of the outstanding Preferred Stock. The
Preferred Stock redemption, however, resulted in the Company
disposing of all of its remaining significant oil and gas assets.
Subsequent to the redemption the Company did not have any active
business or operations.
EMERGING MONEY
In December 1994, after engaging in negotiations with
several other parties in an attempt to acquire a viable business
opportunity for the Company, the Company issued 37,942,269 shares
of its Common Stock in connection with the acquisition of a 100%
interest in Emerging Money plc, a Republic of Ireland corporation
("Emerging Money"), from Minmet plc, a Republic of Ireland
corporation ("Minmet"). Efforts were made to raise capital for
developmental purposes and to have the Company's shares of Common
Stock included for trading on the NASDAQ Small-Cap Market;
however, the Company was not able to raise sufficient capital for
such purposes. As a result of the Company's inability to raise
sufficient capital, Minmet continued to fund Emerging Money's
operations.
Minmet formed Emerging Money in June 1994 to hold
investments in companies which provide electronically distributed
market information on the world's emerging capital markets. In
December 1994, Minmet contributed its interest in Emerging Money
to the Company in exchange for 37,942,269 shares of the Company's
Common Stock. Emerging Money's principal operating subsidiary was
Russiamoney Limited ("Russiamoney"), of which it held a 50%
interest with the Investment & Analytical Centre of Moscow (the
"IAC") owning the remaining 50% interest. The IAC is a Moscow
based economic consultancy. In November 1995, the IAC terminated
the arrangement as to Russiamoney because of non-payment by
Emerging Money.
Emerging Money has formed India Money Limited and South
Africa Money Limited as subsidiaries; however, neither is
actively engaged in business.
Russiamoney is an information services company specializing
in background analysis of financial, political and economic
events in Russia's developing capital markets. Russiamoney
obtains information from the IAC, which it translates, formats,
edits and data processes. The processed information is then
provided to Bloomberg Financial Markets system for world-wide
transmission to the financial community.
In January and February 1995, Emerging Money hired two
executives to oversee and develop Emerging Money's US sales and
marketing presence and to develop new products. Despite the
retention of such persons, Emerging Money incurred substantial
losses.
The Company believes that the development of Emerging Money
was curtailed for three reasons. First, Emerging Money was unable
to meet its capital raising plan. It planned to raise $500,000 by
January 1995, but was only able to raise $200,000 by March 1995.
Second, sales of the existing Russiamoney services failed to grow
at a significant level. Third, the retention of personnel placed
further strains on Emerging Money's cash resources.
By September 1995, year to date losses had reached more than
$600,000 and Minmet, which had already provided Emerging Money
with more than $350,000 in funding, was unable to continue
providing financial support.
MICRON TRANSACTION
As a result of the inability of Minmet to continue funding
Emerging Money and in order to discharge the loan notes of
$100,000 each from Dennis Mensch ("Mensch") and DRM&S, Inc., now
known as Osprey Investments Inc. ("DRM&S"), and to settle the
loans advanced by Minmet to Emerging Money and the Company, the
Board of Directors of the Company authorized, subject to
stockholder approval, the transactions contemplated on behalf of
the Company under (i) the Subscription Agreement and Option,
dated December 7, 1995 (the "Micron Subscription"), among the
Company, Minmet, Micron Ltd., a Republic of Ireland corporation
("Micron") and Emerging Money and (ii) the Letter Agreement,
dated December 22, 1995 (the "Letter Agreement"), among the
Company, Minmet, DRM&S and Mensch. (The transactions
contemplated on behalf of the Company under the Micron
Subscription and the Letter Agreement are collectively referred
to herein as the "Micron Transaction").
The Micron Subscription relates to the acquisition by Micron
of 3,954,545 newly issued shares of the common stock of Emerging
Money. The acquisition would result in Micron owning 72.5% of the
then outstanding shares of Emerging Money and the Company's
ownership interest in Emerging Money would be reduced to 27.5% of
Emerging Money shares then to be outstanding. In consideration
for such Emerging Money shares, Micron has paid Emerging Money
39,546 Irish Pounds (US$ 63,293 equivalent as of December 31,
1995) and has paid on behalf of Emerging Money approximately US$
80,000 which enabled Emerging Money to discharge certain agreed
creditors. In addition, pending the closing, Micron is to pay or
advance additional funds to creditors of Emerging Money to pay
off certain liabilities and Micron shall have the right to
control the management and finances of Emerging Money on a daily
basis and to request Emerging Money to provide to Micron
exclusive editing and administration services upon a fee basis.
Furthermore, pursuant to the Micron Subscription, Micron controls
marketing for Emerging Money's services and collects and is
entitled to use in its sole discretion all revenues obtained from
new subscribers. Revenues obtained from Russiamoney subscribers
as of November 30, 1995 have been used by Emerging Money for working
capital purposes. Micron has also been given the right to use all
names, trademarks and copyrights used in connection with the business
of Emerging Money or its subsidiaries on an exclusive basis. As of
the entry into the Micron Subscription, neither the Company nor
Emerging Money had sufficient capital to maintain the continuing
operations of Emerging Money. In December 1995, Micron made a
separate arrangement with the IAC as to the former operations of
Russiamoney. Prior to the Micron Subscription, Micron had no
relationship with the Company or Minmet.
CORPORATE RESTRUCTURING
In March 1995, DRM&S and Mensch each invested $100,000 in
the Company as part of a proposed "bridge" financing by the
Company and were issued Promissory Notes (the "Notes"), payable
on June 30, 1995 together with interest at the rate of 9% per
annum. The bridge financing was never completed and a proposed
private equity placement was never commenced by the Company.
Upon the closing of the Micron Subscription, (i) each of
DRM&S and Mensch will exchange its Notes for Common Stock of the
Company amounting to 23.27%of the Common Stock then to be
outstanding, (ii) the Company will transfer its 27.5% interest in
Emerging Money to Minmet in exchange for shares of the Company's
Common Stock presently owned by Minmet which would reduce
Minmet's holding of the Company's Common Stock from 56.37% to
15.86% of the shares then to be outstanding (subject to
adjustment if the valuation of the Emerging Money shares would
exceed the valuation of the Common Stock to be exchanged) and the
forgiveness of certain amounts due from the Company, (iii) the
existing public stockholders of the Company will own the balance
of the outstanding shares of Common Stock (or 37.6%) and (iv) the
Company would have no further interest in Emerging Money nor any
obligation for any liabilities of Emerging Money.
Until the Micron Transaction is consummated DRM&S and Mensch
will remain creditors of the Company under the Notes and Minmet
will remain the majority stockholder of the Company. If the
Micron Transaction is not consummated, Minmet will reimburse
DRM&S and Mensch for all payments made by each of them pursuant
to the Letter Agreement.
After the Micron Transaction, the Company will have no
business activity; however its management will seek 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. Management plans to review
possible acquisition prospects, but will not enter into any
binding arrangement prior to the closing of the Micron
Transaction. The Micron Subscription contains a non-competition
covenant which restricts the Company from competing directly or
indirectly in any business activities of the type carried on by
Emerging Money and any of its subsidiaries at the closing of the
Micron Transaction for a period of two years following such
closing. Management has no plans to seek a business opportunity
in the field of dissemination of financial information on
emerging markets.
The Company plans to call a special meeting of stockholders
in the near future for consideration of the Micron Transaction,
the proposed corporate restructuring and such other matters as
set forth in the notice of the meeting.
ITEM 2. PROPERTIES
The Company having ceased to operate its oil and gas
business had no continuing interest in any properties at December
31, 1995. The Company operates from leased premises in New York,
New York, with some administrative functions carried on from an
office in Dublin, Ireland. These premises are held on a week to
week rent-free basis arrangement with the lessors. The lessor in
New York is George Rieger, an officer and director of the
Company, and the lessor in Dublin is Minmet.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party, and property of the Company is
not subject, to a material legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security
holders of the Company in the fourth quarter of 1995.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The common stock, $.01 par value (the "Common Stock"), of
the Company is traded in the over-the-counter market and the
trading is inactive. Currently, there is no established public
trading market for the Company's Common Stock. The Common Stock
was deleted from the automated quotation system NASD on July 6,
1989 because there were no longer any active market makers
registered to trade the securities.
As of December 31, 1995, there were approximately 1,424
stockholders of record of the Company's Common Stock.
The Company paid no dividends on the Common Stock in the
fiscal years ended December 31, 1995, 1994 and 1993 and future
dividend payments are dependent upon management's ability to
acquire a profitable business into the Company. No dividend
payments are expected in 1996.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial information set forth below has been
taken from the consolidated financial statements of the Company
included herein and from previously published consolidated
financial statements of the Company not appearing herein. Such
selected financial information should be read in conjunction with
the consolidated financial statements of the Company.
For the year ended
December 31 1995 1994 1993
------------------- ---- ---- ----
INCOME STATEMENT DATA:
Revenues $ 64,034 $ 8,045 $ 224,285
Net income (loss) ($712,694) $(106,562) $ 121,294
Net income (loss) per
common share ($0.01) $0.00 $0.00
BALANCE SHEET DATA:
Total assets $ 85,938 $ 251,497 $ 111,491
Long-term obligations $0 $ 5,035 $0
Number of shares 99,999,000 63,638,658 62,056,731
1992 1991
---- ----
INCOME STATEMENT DATA:
Revenues $ 11,859 $ 26,294
Net income (loss) ($ 15,442) $1,211,022
Net income (loss) per
common share $0.00 $0.00
BALANCE SHEET DATA:
Total assets $ 369,446 $1,344,022
Long-term obligations $0 $0
Number of shares 62,056,731 43,156,731
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
The Company had a net loss in 1995 of $712,694 compared to
net loss in 1994 of $106,562. Of the loss of $712,694, $128,957
was incurred by the Company and $583,737 was incurred by Emerging
Money. The Company incurred the loss due to professional fees
that were incurred in maintaining the Company and the cost of a
full-time executive in the United States during the six-month
period to June 30, 1995. Emerging Money's losses were incurred
in developing its financial information on-line business.
Technical, general and administrative costs increased from
$110,588 in 1994 to $700,672 in 1995 with the inclusion of the
development stage costs of Emerging Money.
Interest income amounted to $322 in 1995 compared to $948 in
1994 as the cash balances of the Company were reduced.
YEARS ENDED DECEMBER 31, 1994 AND 1993
The Company had a net loss in 1994 of $106,562 compared to
net income in 1993 of $121,294. The Company incurred the loss
due to the high cost of professional fees that were necessarily
incurred in maintaining the Company and preparing it for the
acquisition of Emerging Money. The professional fees were
incurred at a time when the level of activity in the Company was
functioning at a low level.
Technical, general and administrative costs increased from
$78,553 in 1993 to $110,588 as a result of the high level of
professional fees.
Interest income amounted to $948 in 1994 compared to $2,374
in 1993 as the cash balances of the Company were reduced.
LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN ASSUMPTIONS
Based on the financial position of the Company at December
31, 1995 significant doubt exists about the Company's ability to
continue as a going concern as the Company has, exclusive of
extraordinary items, suffered recurring losses over the past
years and has sold all of its oil and gas revenue producing
assets in order to retire certain debt on which it had defaulted.
The Company was successful in eliminating all of its debt, at a
substantial discount, in 1991, 1992 and 1993. The Company has
also been successful in eliminating all of the liquidation
preference associated with its preferred stock by repurchasing
such stock. The elimination of this liquidation preference has
allowed management the opportunity to seek out new business
opportunities which culminated in 1994 with the acquisition of
Emerging Money. Following the acquisition of Emerging Money the
management team had been seeking to raise monies through debt or
equity placements to fund the Company's present operations and
future expansion.
However the planned fund raising raised $200,000, $300,000
less than the targeted figure of $500,000. Emerging Money
incurred significant losses in 1995 which forced management to
seek outside funding to rescue Emerging Money. Negotiations to
that end have been concluded and management have described above
the arrangements being proposed to refinance Emerging Money and
to reorganize the Company. See Item 1 of this Report.
Due to the limited capital resources, management of the
Company has been forced to liquidate certain subsidiaries of the
Company. Management believes that the liquidation of these
subsidiaries will not have an effect on its parent or affiliate
companies. However, no assurance can be given that the parent or
affiliate companies will not assume a contingent liability for
the amount of subsidiary debt not fully extinguished in
liquidation.
No assurance can be given that following the approval of the
Micron Transaction and any reorganization that a new acquisition
will be quickly effected, or, if effected, that the terms will be
favorable or substantially non-dilutive to the stockholders of
the Company, or that an active trading market would be created
for the Common Stock.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements, financial statement schedules and
supplementary data, listed under Item 14, are presented in a
separate section of this Report beginning on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
The Company changed independent accountants from Arthur
Andersen LLP to Berry Dunn McNeil and Parker in March 1995.
Arthur Andersen had represented the Company through its Houston,
Texas office to service more efficiently the Company's previous
oil and gas business and continued as accountant after such
business activities were terminated and the Company was inactive
and had relocated its administrative base to New York. There
were no disagreements with Arthur Andersen on any matter of
accounting principles or practices, financial statement
disclosure or auditing scope or procedure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the names, ages, positions, and
periods of service with the Company of its directors and
executive officers.
Served as
Director
Name Age Since Position
---- --- ----------- --------
L. George Rieger 56 1988 Chairman of the
Board and President
Michael H. Nolan 34 1995 Chief Financial
Officer, Secretary
and Director
Jeremy Metcalfe 56 1995 Director
L. George Rieger has served as a director of the Company
since June 1988 having been the sole director between May 15,
1993 and December 16, 1994, has been Chairman of the Board and
the President of the Company since May 1993 and January 1993,
respectively. In 1984, Mr. Rieger founded Rieger Robinson &
Harrington, a private client investment business and has served
as its Chairman of the Board since 1984. From 1979 to 1984, Mr.
Rieger was employed by Morgan Stanley in the asset management
division in New York.
Michael H. Nolan, a chartered accountant in Ireland, has
been the Chief Financial Officer of the Company since May 1994,
Secretary and a director since December 1995. Since April 1994,
he has also served as Finance Director of Minmet, which is
engaged in mining. From 1989 through 1994, Mr. Nolan was an
associate director of Equity and Corporate Finance plc, a London
based investment company.
Jeremy Metcalfe has been a director of the Company since
December 1995. He has served as the Chairman of the Board of
Directors of Minmet since September 1995 and is also on the Board
of Directors of several Minmet subsidiaries. Mr. Metcalfe has
also served as a director of City Venture Properties Limited, a
real estate brokerage firm since 1989 and has been senior partner
in JP Metcalfe Associates, a corporate finance firm in Kent,
England specializing in the venture capital industry since 1980.
The term of office of the directors is until the next annual
meeting of stockholders or until his earlier resignation or his
successor is duly elected and qualified.
The Board of Directors held three meetings during the 1995
fiscal year.
The Company does not have any standing audit, nominating or
compensation committee of the Board of Directors or committees
performing similar functions.
No director receives any compensation from the Company for
serving in such position.
ITEM 11. EXECUTIVE COMPENSATION
CASH COMPENSATION
No executive officer of the Company received any
compensation from the Company or any of its subsidiaries during
1995.
STOCK OPTION PLAN
The 1988 Stock Option Plan was terminated by the Board of
Directors in January 1993. No options are outstanding under this
Plan.
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of April 15, 1996 the
beneficial ownership of each person (including any "group" as
that term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended) who is known by the Company to be the
beneficial owner of more than 5% of any class of voting
securities of the Company:
AMOUNT AND
NATURE OF PERCENT
TITLE OF BENEFICIAL OF
NAME CLASS OWNERSHIP CLASS
---- ------------ ---------- ------
Minmet plc Common Stock 52,735,246 56.4%
51/52 Fitzwilliam Square
Dublin 2, Ireland
Security Ownership of Management
The following table sets forth as of March 31, 1996 the
beneficial ownership of each class of equity securities of
the Company of (I) each current director of the Company and
(ii) all executive officers and directors of the Company as
a group. Such information is based solely upon information
provided by such persons to the Company.
AMOUNT AND
NATURE OF PERCENT
TITLE OF BENEFICIAL OF
NAME CLASS OWNERSHIP CLASS
---- --------- ---------- -------
L. George Rieger Common Stock 0 0
Jeremy P. Metcalfe Common Stock 52,735,246 (1) 56.4%
Michael H. Nolan Common Stock 52,735,246 (1) 56.4
All directors and Common Stock 52,735,246 (1) 56.4
executive
officers as a
group (3 persons)
(1) Mr. Metcalfe and Mr Nolan represent Minmet on the Board
of the Company. Mr. Metcalfe is Executive Chairman of Minmet and
Mr. Nolan is Finance Director of Minmet.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Michael H. Nolan, Chief Financial Officer, Secretary and a
director of the Company, is the Finance Director of Minmet, and
Jeremy Metcalfe, a Director of the Company, is the Chairman of
the Board of Directors of Minmet. Minmet owns a majority of the
outstanding shares of the Company's Common Stock. Pursuant to
the Letter Agreement, Minmet will assume certain liabilities of
the Company and exchange shares of the Company's Stock held by it
for the Company's interest in Emerging Money as part of the
Micron Transaction. Messrs. Nolan and Metcalfe have an indirect
interest in the Micron Transaction and the exchange of the
Emerging Money Shares by reason of their executive positions in
Minmet. See Item 1 of this Report.
The Company uses offices premises rent-free in New York and in
Dublin leased from George Rieger, Chairman of the Board and
President of the Company, and Minmet, respectively. See Item 2
of this Report.
As at December 31, 1995, Minmet had advanced $31,192 and
$361,930 to the Company and Emerging Money, respectively, and the
Company had advanced $137,303 to Emerging Money. All these
advances are unsecured and due on demand.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
EXHIBIT
NUMBER PAGE
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(a)(1) Index to Financial Information:
Report of Independent Public Accountants
for 1995 and 1994 F-1
Consolidated Balance Sheets as of
December 31, 1995 and 1994 F-2
Consolidated Statements of Operations
for the years ended December 31, 1995
and 1994 F-4
Consolidated Statements of Changes in
Stockholder's Equity for the years ended
December 31, 1995 and 1994 F-5
Consolidated Statements of Cash Flows
for the years ended December 31, 1995
and 1994 F-6
Notes to Consolidated Financial Statements F-7
All other supplemental schedules are omitted because they are
not required.
(a)(3) The following exhibits are filed herewith or incorporated
by reference:
3.1 Certificate of Incorporation of the Company. (Reference
is made to Exhibit 3.1 to the Company's Registration
Statement on Form S-1, Registration No. 33-20866).
3.2 Bylaws of the Company. (Reference is made to Exhibit 3.2
to the Company's Registration Statement on Form S-1,
Registration No. 33-20866).
3.3 Certificate of Designations, Preferences and Rights of
Serial Preferred Stock, $8.00 Cumulative Convertible
Series A. (Reference is made to Exhibit 3.3 to the
Company's Registration Statement on Form S-1, Registration
No. 33-20866.)
3.4 Certificate of Designations, Preferences and Rights of
Serial Preferred Stock, $8.00 Cumulative Convertible
Series B. (Reference is made to Exhibit 4.2 to Report on
Form 8-K filed by the Company on January 11, 1989).
3.5 Certificate of Designations, Preferences and Rights of
Serial Preferred Stock, $4.00 Cumulative Convertible
Series C. (Reference is made to Exhibit 4.1 to Report on
Form 8-K filed by the Company on January 11, 1989).
10.1 Agreement between the Company and Minmet plc relating to
the purchase by the Company of Emerging Money plc dated
December 16, 1994 (Reference is made to Exhibit 1 to
Report on Form 8-K filed by the Company for an event of
December 16, 1994.
10.2 Agreement between the Company and Sampson Resources
Company relating to the assignment of leases in Wyoming to
Sampson.
10.3 Agreement between the Company and Robert R. Hillery
relating to the sale to Hillery of all the outstanding
shares of Dornoch Inc. and GEC Texas Inc. in exchange for
the cancellation of 6,446,375 shares of Common Stock held
beneficially by Hillery in the Company.
10.4 Subscription Agreement and Option, dated December 1995
among the Company, Minmet plc, Micron Ltd and Emerging
Money Plc; (Reference is made to Exhibit 99.1 to Report on
Form 8-K for an event of December 22, 1995).
10.5 Letter Agreement dated December 22, 1995, among the
Company, Minmet plc, DRM&S Inc. and Dennis Mensch
(Reference is made to Exhibit 99.2 to Report on Form 8-K
for an event of December 22, 1995).
21 Subsidiaries (Reference is made to Exhibit 21 to Report on
Form 10-K for fiscal year ended December 31, 1995).
27 Financial Data Schedule.
REPORTS ON FORM 8-K
The Company filed a report on Form 8-K for an event of
December 22, 1995, detailing the appointment of directors, and a
proposed recapitalization of the Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GULF EXPLORATION CONSULTANTS, INC.
/s/ L. George Rieger
----------------------------------
By: George Rieger,
Chairman
Date: May 14, 1996
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Company and in the capacities and on the
dates indicated.
Signature Title Date
/s/ L. George Rieger
-------------------------- Director May 14, 1996
L. George Rieger
/s/ Jeremy P. Metcalfe
-------------------------- Director May 14, 1996
Jeremy P. Metcalfe
/s/ Michael H. Nolan
-------------------------- Director and May 14, 1996
Michael H. Nolan Chief Financial
Officer
<PAGE>
INDEPENDENT AUDITORS' REPORT
Gulf Exploration Consultants, Inc.
We have audited the accompanying consolidated balance sheets of
Gulf Exploration Consultants, Inc. (a Delaware corporation) and
subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, changes in stockholders'
equity (deficit) and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Gulf Exploration Consultants, Inc. and subsidiaries
as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial
statements, the Company has suffered recurring losses and has
sold substantially all of its revenue producing assets in the oil
and gas industry and does not have an operating business. This
raises substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters
are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Berry, Dunn, McNeil & Parker
Manchester, New Hampshire
May 7, 1996
<PAGE>
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
1995 1994
---- ----
CURRENT ASSETS
Cash and cash equivalents $10,425 $ 26,586
Accounts receivable, net of reserve of
$-0- IN 1995 and $9,000 in 1994 27,111 9,211
Prepaid expenses - 13,636
Due from affiliate - 4,935
Other - 471
------- -------
TOTAL CURRENT ASSETS 37,536 54,839
------- -------
EQUIPMENT, AT COST
Equipment, including assets acquired under
capital leases ($15,058 in 1995 and 1994) 80,242 70,818
Less accumulated depreciation, including
amortization applicable to assets acquired
under capital leases ($6,791 IN 1995 and
$839 in 1994) 31,840 8,552
------- -------
NET EQUIPMENT 48,402 62,266
------- -------
DEFERRED EXPENSES - 134,392
------- --------
$85,938 $251,497
======= ========
-----------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
1995 1994
---- ----
CURRENT LIABILITIES
Accounts payable $ 114,304 $ 85,715
Accrued expenses 34,655 57,570
Deferred income 36,347 8,192
Current portion of capital
lease obligations 5,930 7,551
Due to affiliate 365,666 66,962
Other 246,900 6,813
---------- ----------
Total current liabilities 803,802 232,803
Capital lease obligations, excluding
current portion - 5,035
---------- ----------
TOTAL LIABILITIES 803,802 237,838
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock of $.01 par value;
100,000,000 shares authorized,
99,999,000 shares issued and
outstanding 999,990 999,990
Additional paid-in capital 6,449,789 6,449,789
Accumulated deficit (8,148,814) (7,436,120)
Accumulated translation loss (18,829) -
----------- -----------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT) (717,864) 13,659
----------- -----------
$ 85,938 $ 251,497
============ ===========
------------------------------------------------------------------
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
---- ----
REVENUES
Subscription income $ 60,504 $ -
Other income 3,530 8,045
--------- ---------
64,034 8,045
--------- ---------
OPERATING EXPENSES
Oil and gas production costs - 4,967
Technical, general and administrative 700,672 110,588
Depreciation and amortization 76,378 -
--------- ---------
777,050 115,555
--------- ---------
LOSS FROM OPERATIONS (713,016) (107,510)
Interest income 322 948
--------- ---------
LOSS BEFORE INCOME TAX PROVISION (712,694) (106,562)
Income tax provision - -
---------- ---------
NET LOSS $(712,694) $(106,562)
========== ==========
NET LOSS PER COMMON SHARE
Net loss
$(0.01) $(0.00)
========= ========
----------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
<PAGE>
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIT)
YEARS ENDED DECEMBER 31, 1995 AND 1994
Common Stock Additional
----------------- Paid-In Accumulated
Shares Amount Capital Deficit
-------- ---------- ---------- -----------
BALANCE,
DECEMBER 31, 1993 62,056,731 $620,567 $6,783,482 $(7,329,558)
Stock issuance
for acquisition 37,942,269 379,423 (333,693) -
Net loss - - - (106,562)
----------- --------- ------------ ----------
BALANCE,
DECEMBER 31, 1994 99,999,000 999,990 6,449,789 (7,436,120)
Accumulated
translation loss - - - -
Net loss - - - (712,694)
----------- --------- ------------ ----------
BALANCE,
DECEMBRER 31, 1995 99,999,000 999,990 6,449,789 (8,148,814)
=========== ========= ============ ==========
Accumulated
Translation Total Stockholders'
Loss Equity (Deficit)
------------ ---------------
BALANCE,
DECEMBER 31, 1993 $ - $ 74,491
Stock issuance
for acquisition - 45,730
Net loss - (106,562)
----------- ---------
BALANCE,
DECEMBER 31, 1994 - 13,659
Accumulated
translation loss (18,829) (18,829)
Net loss - (712,694)
----------- ---------
BALANCE,
DECEMBER 31, 1995 $ (18,829) $(717,864)
=========== =========
------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(712,694) $(106,562)
Adjustments to reconcile net loss to
net cash provided (used) by
operating activities
Depreciation and amortization 76,378 -
Decrease in deferred expenses 72,961 -
Accumulated translation loss (18,829) -
(Increase) decrease in
Accounts receivable and other (8,429) -
Receivables from related parties 4,935 -
Prepaid expenses 13,636 -
Increase (decrease) in
Accounts payable 28,589 (1,085)
Accrued expenses (22,915) 27,570
Payables to related parties 298,704 (10,000)
Deferred income 28,155 -
Other 240,087 -
-------- ---------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 578 (90,077)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash from purchased subsidiary - 5,172
Purchase of equipment (9,424) -
Proceeds from sale of property,
plant and equipment - 12,000
-------- -------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES (9,424) 17,172
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on capital lease obligations (7,315) -
-------- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (16,161) (72,905)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 26,586 99,491
-------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 10,425 $ 26,586
========= =========
--------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NATURE OF BUSINESS
------------------
Gulf Exploration Consultants, Inc., a Delaware corporation (Gulf), was formed
on October 2, 1987. Gulf completed a series of transactions on September 15,
1988, whereby it acquired all of the outstanding stock of Bengal Oil and Gas
Corporation, a Colorado corporation (Bengal), Dornoch Exploration, Inc., a
Texas corporation (Dornoch), GEC-Texas, Inc. (formerly Gulf Exploration
Consultants, Inc.), a Texas corporation (GEC), Gopher Exploration, Inc., a
Texas corporation (Gopher) and Vanderbilt Petroleum, Inc., a Delaware
corporation (Vanderbilt). As a result of these transactions, Gulf and its
consolidated subsidiaries (collectively referred to as the Company) became a
publicly owned company engaged primarily in the businesses of oil and gas
exploration, development and production.
On December 16, 1994, the Company acquired all the outstanding stock of
Emerging Money, PLC (Emerging Money), an Irish corporation which was a
development stage enterprise. With this acquisition, the Company ceased its
involvement in the oil and gas business and was involved in the provision of a
subscription-based English language information service specializing in
providing background analysis of the world's emerging capital market. In 1994,
Emerging Money's activities were focused on the Russian market and conducted
its activities through a joint venture (Russiamoney Limited), 50% owned, and
whose financial activities are consolidated with Emerging Money. This
acquisition is accounted for under the purchase method of accounting. Due to
the immateriality of the activity between December 16, 1994 and December 31,
1994, Emerging Money's operations for this period are not reflected in the
consolidated financial statements, however, the acquisition has been reflected
as of December 31, 1994 (see Note 7). Proforma disclosures are not deemed
necessary due to the subsidiary being a development stage enterprise.
On November 30, 1995, due to continuing losses in Emerging Money, the
directors of the Company negotiated an agreement to dispose of its interest
in the subscription-based English language information business. Consequently,
the Company has no operating business subsequent to November 30, 1995. Note 2
summarizes the terms and conditions of the Company's disposition of its
subscription-based English language information business.
1. GOING CONCERN ASSUMPTION
------------------------
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. However,
substantial doubt exists about its ability to continue as a going
concern as the Company has suffered recurring losses, has sold
substantially all of its revenue producing assets in the oil and gas
industry in order to retire certain debt on which it had defaulted and
has disposed of its only operating business, as discussed above. The
accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Management's current plans are to secure shareholder agreement for the
disposal of Emerging Money (see Note 2) and thereafter acquire an
operating corporate entity. However, no assurance can be given that
these strategies will be effected, or, if effected, that the terms
will be favorable or non-dilutive to the stockholders of the Company.
Management of the Company is also liquidating certain other wholly-
owned subsidiaries of Gulf. Management of the Company believes that
the liquidation of the subsidiaries will not have an effect on Gulf
or the affiliate companies. However, no assurance can be given that
Gulf or the affiliate companies will not assume a contingent liability
for the amount of the subsidiary debt not fully extinguished in
liquidation.
2. AGREEMENTS TO DISPOSE OF EMERGING MONEY
---------------------------------------
The Company has entered into agreements which, if approved by the
Company's stockholders, will transfer 100% of the Company's interest
in Emerging Money to creditors of the Company, effective December 1,
1995. In exchange for the transfer, the Company's creditors have
agreed to discharge their debt. If stockholder approval is not
accomplished, 100% of the Company's interest in Emerging Money will
be transferred, effective December 1, 1995, in partial settlement of
debt and the remaining debt would still be payable.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
CONSOLIDATION
-------------
All subsidiaries of Gulf are 100% owned and accordingly are
consolidated with Gulf and all intercompany activity has been
eliminated. The result of Emerging Money's joint venture investment
is consolidated with Emerging Money's activity due to the control it
exercises over the joint venture. Since the joint venture had a loss
and negative net worth as of December 31, 1995, no value is attributed
to the minority interest.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
-----------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
EQUIPMENT
---------
Equipment purchased is depreciated by the straight-line method over
the estimated useful lives of the respective assets. Equipment
acquired under capital leases is amortized by the straight-line
method over the estimated useful lives of the respective assets.
INCOME TAXES
------------
Deferred income taxes are recognized for income and expense items that
are reported for financial statement purposes in different years than
for income tax purposes.
CASH AND CASH EQUIVALENTS
-------------------------
For purposes of reporting the statements of cash flows, the Company
considers all cash accounts, which are not subject to withdrawal
restrictions or penalties, and all highly liquid investments with a
maturity of three months or less to be cash equivalents.
INCOME RECOGNITION
------------------
Income is recognized when earned. Prepaid subscription fees are
included in liabilities as deferred income.
Credit is extended at regular terms without collateral after the
Company performs appropriate credit investigations.
TRANSLATION OF FOREIGN CURRENCIES
---------------------------------
Assets and liabilities recorded in functional currencies other than
U.S. dollars are translated into U.S. dollars at the year-end rate of
exchange. Revenue and expenses are translated at the weighted-average
exchange rates for the year. The resulting translation adjustments are
charged or credited directly to a separate component of stockholders'
equity. Gains or losses from foreign currency transactions, such as
those resulting from the settlement of receivables or payables
denominated in foreign currency, are included in the earnings of the
current period.
NET LOSS PER COMMON SHARE
-------------------------
Net loss per common share is based on the weighted average number of
common shares outstanding during each year. The weighted average
number of common shares outstanding for 1995 and 1994 was
99,999,000 and 63,638,658, respectively.
4. INCOME TAXES
------------
Gulf, Bengal, Dornoch, GEC, Gopher and Vanderbilt each filed separate
federal tax returns through December 31, 1989. A consolidated U.S.
federal income tax return was filed by the Company for 1990 using a
December 31 fiscal year end. Consolidated income tax returns will be
filed for years subsequent to 1990. See Note 5 for status of returns
filed.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes, which
requires deferred income taxes to be provided for the expected tax
effects of differences between the financial statement and tax bases
of assets and liabilities. As a result of adopting the cumulative
effect of the change in accounting principle, the Company has a
deferred tax asset which is attributable primarily to net operating
loss carryforwards. Since, at this time, it is more probable than
not that the deferred tax asset will not be realized, a valuation
allowance for the entire amount has been recorded.
As of December 31, 1995, the Company had net operating loss
carryforwards of approximately $5 million. The benefits of the
carryforward will begin to expire in 2003. These carryforwards exclude
net operating loss carryforwards of merged companies as of September
15, 1988 because the availability of such carryforwards to benefit
future operations is limited.
5. COMMITMENTS AND CONTINGENCIES
-----------------------------
As of May 7, 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.
6. CAPITAL LEASES
--------------
The following is a schedule of the future minimum lease payments under
the capital leases together with the present value of the net minimum
lease payments as of December 31, 1995:
Year ending December 31:
1996 $6,207
------
Minimum lease payments 6,207
Less amount representing
interest (6.10%) 277
------
Present value of net minimum lease payments
(of which $5,930 is included in current
liabilities) $5,930
======
7. BUSINESS COMBINATION
--------------------
On December 16, 1994, Gulf Exploration Consultants, Inc. issued
37,942,269 shares of $.01 par value common stock for 100% of the
outstanding stock of Emerging Money, PLC, an Irish corporation. Gulf
acquired Emerging Money from MINMET, PLC, an Irish corporation, which,
after its sale of Emerging Money, owns 52.7% of Gulf's common stock.
Consequently, this business combination is being accounted for under
the purchase method of accounting. Emerging Money's activity between
December 16, 1994 and December 31, 1994 is not material to the
financial statements and is not shown in the statements of operations
or cash flows.
Emerging Money, through its 50% ownership investment in Russiamoney
Limited, is a development stage enterprise which was incorporated on
February 24, 1994. For financial statement reporting purposes,
Russiamoney Limited is consolidated with Emerging Money. No value has
been attributed to the minority interest due to the venture's negative
net worth as of December 31, 1994.
The results of operations for Emerging Money for 1994 are as follows:
Subscription income $6,183
Net loss $183,470
Net loss per share $0.00
8. DEFERRED EXPENSES
-----------------
The deferred expenses as of December 31, 1994 consist of expenses
associated with the creation of Emerging Money's proprietary database
and software, which it developed in 1994. The database and software
developed is an integral part of the subscription revenue to be
generated in the future. Accordingly, the costs have been capitalized
and amortized over 60 months, beginning January 1, 1995. The amounts
were written off as of December 31, 1995 because Emerging Money is no
longer entitled to the revenue stream generated by the assets (see
Note 2).
9. CASH FLOW INFORMATION
Noncash investing activities consisted of the following as of December
31, 1994:
Purchase of subsidiary
Fair market value of assets acquired
Cash and cash equivalents $ 5,172
Accounts receivable 9,211
Prepaid expenses 13,636
Due from affiliate 4,935
Other assets 471
Equipment, net 62,266
Deferred expenses 134,392
-------
Value of assets acquired 230,083
-------
Liabilities assumed
Accounts payable and accrued expenses 79,800
Deferred income 8,192
Capital lease obligations, current 7,551
Due to affiliate 76,962
Other 6,813
Capital lease obligations, long-term 5,035
-------
184,353
-------
Investment in subsidiary $ 45,730
=======
Noncash financing activities consisted of the following as of
December 31, 1994:
37,942,269 shares of common stock were issued in connection with
the acquisition of the subsidiary.
10. DUE TO AFFILIATE
----------------
The amounts due to affiliate is due MINMET, PLC which owns 52.7% of
the Company. No interest is due on these amounts.
11. OTHER LIABILITIES
-----------------
Included in other liabilities is $200,000 advanced by two entities who
are parties to the agreement discussed in Note 2. The interest amount
is not being sought nor accrued, pending stockholder approval of
these agreements.
Another $46,900 has been advanced by a party to those agreements to
allow the Company to pay some of its liabilities.
12. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
----------------------------------------------------
The Company's financial instruments consist of cash, short-term trade
receivables and payables, and long-term debt. The carrying value of
all instruments approximate their fair value.
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS, STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY AND STATEMENTS OF CASH FLOWS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 10,425
<SECURITIES> 0
<RECEIVABLES> 27,111
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,536
<PP&E> 80,242
<DEPRECIATION> 31,840
<TOTAL-ASSETS> 85,938
<CURRENT-LIABILITIES> 803,802
<BONDS> 0
0
0
<COMMON> 999,990
<OTHER-SE> 6,449,789
<TOTAL-LIABILITY-AND-EQUITY> 85,938
<SALES> 64,034
<TOTAL-REVENUES> 64,034
<CGS> 0
<TOTAL-COSTS> 777,050
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (712,694)
<INCOME-TAX> 0
<INCOME-CONTINUING> (712,694)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (712,694)
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
