SECURITIES AND EXCHANGE
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COMMISSION
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WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
September 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
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One Independent Drive, Suite 2201 Jacksonville, Florida 32202
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(Address of principal Offices) (Zip Code)
Registrant's telephone number including area code: (904) 745-6981
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10 Rockefeller Plaza, New York, NY 10020 (212) 247-2120
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(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 NO X
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The number of shares of common stock outstanding as of March 13, 1997
was 1,991,092.
<PAGE>
INDEX
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
10-Q - QUARTER ENDED 30 SEPTEMBER 1996
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets - September 30, 1996 (unaudited) and
December 31, 1995.
Consolidated Statement of Operations - three and nine months
ended September 30, 1995 and 1996 (unaudited).
Consolidated Statement of Cash Flows - nine months ended
September 30, 1996 (unaudited) and September 30, 1995
(unaudited).
Notes to Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 5. Other Events.
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I - FINANCIAL INFORMATION
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
(unaudited) (audited)
-------------- -------------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 5,019 $10,425
Accounts receivable -- 27,111
------- -------
Total Current Assets $ 5,019 37,536
-------
PROPERTY, PLANT AND EQUIPMENT,
at cost
Equipment -- 80,242
Less - Accumulated -- 31,840
depreciation ------- -------
-- 48,402
------- -------
$ 5,019 $85,938
======= =======
The accompanying notes are an integral part of these financial statements
3
<PAGE>
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September December 31,
30,1996 1995
(unaudited) (audited)
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 8,414 $ 114,304
Accrued expenses 2,500 34,655
Deferred income -- 36,347
Due to affiliates -- 365,666
Current portion of capital -- 5,930
lease obligations
Other 35,866 246,900
--------- -----------
Total Current 46,780 803,802
Liabilities ---------- -----------
STOCKHOLDERS' DEFICIT
Common Stock, $0.01 par value,
10,000,000 and 100,000,000
shares authorized, 1,991,092
and 99,999,000 shares issued
and outstanding as of
September 30, and
December 31, 1995,
respectively 19,911 999,990
Additional paid-in capital 7,629,868 6,449,789
Accumulated deficit (7,691,540) (8,148,814)
Accumulated translation -- (18,829)
loss ---------- ----------
Total Stockholders' (41,761) (717,864)
Deficit ------------ ------------
$ 5,019 $ 85,938
============ ===========
The accompanying notes are an integral part of these financial statements
4
<PAGE>
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended Nine months ended
------------------ -----------------
September September September September
30, 30, 30, 30,
1996 1995 1996 1995
(unaudited) (unaudited) (unaudited) (unaudited)
----------- ---------- ----------- -----------
OPERATING REVENUES:
Subscription
revenues $ -- $ 23,286 $ -- $ 56,270
Other income 2,371 -- 11,741 8,245
--------- -------- -------- ---------
2,371 23,286 11,741 64,515
--------- -------- -------- ---------
OPERATING EXPENSES:
On-line service
production costs -- (107,510) -- (262,287)
Technical, general
and administrative (16,457) (70,138) (34,320) (345,064)
Disposal of
subsidiary
undertaking -- -- 479,837 0
Depreciation,
depletion and -- (26,804) -- (63,934)
amortization --------- -------- -------- --------
(16,457) (204,452) 445,517 (671,285)
--------- -------- -------- --------
GAIN (LOSS) FROM
OPERATIONS (14,086) (181,166) 457,258 (606,770)
--------- -------- -------- --------
OTHER INCOME EXPENSE:
Interest expense -- (313) -- (792)
Interest income 8 24 16 90
--------- -------- - -------- --------
8 (289) 16 (702)
--------- -------- -------- --------
PROFIT (LOSS) BEFORE
INCOME TAX (14,078) (181,455) 457,274 (607,472)
INCOME TAX PROVISION -- -- -- --
--------- -------- -------- --------
NET PROFIT (LOSS) TO $(14,078) $(181,455) $457,274 $(607,472)
COMMON STOCKHOLDERS ======= ========= ======== =========
PROFIT/LOSS PER $ (0.01) $ (0.09) $ 0.23 $ (0.31)
COMMON SHARE ======== ========= ======== =========
PROFIT/LOSS PER
COMMON SHARE
ASSUMING FULL $ (0.01) $ (0.09) $ 0.23 $ (0.31)
DILUTION ======== ========== ======== =========
The accompanying notes are an integral part of these financial statements
5
<PAGE>
GULF EXPLORATION CONSULTANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine months ended
-----------------
Sept 30, Sept 30,
1996 1995
(unaudited) (unaudited)
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OPERATING ACTIVITIES:
Net profit (loss) $457,274 $(607,471)
Adjustments to reconcile net
loss to net cash used in
operating activities
Depreciation, depletion and
amortization -- 65,621
Adjustment on disposal of
subsidiary (436,412) --
(Increase) decrease in
Accounts receivable,
prepaid expenses
and other -- (1,979)
Increase (decrease) in
Accounts payable and
accrued expenses (62,134) 94,938
-------- --------
Net cash flows used in
operating activities (41,272) (448,891)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant
and equipment -- (11,471)
Deferred expenditure -- (81,039)
-------- --------
Net cash flows provided by
(used in) investing
activities -- (92,510)
-------- --------
FINANCING ACTIVITIES:
Repayment of Capital
Lease Obligation -- (5,827)
Proceeds of short term loan -- 200,000
Loan from Affiliate 35,866 328,135
-------- --------
Net cash flows provided by -- 522,308
financing activities -------- --------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (5,406) (19,093)
CASH AND CASH EQUIVALENTS,
beginning of period 10,425 26,586
-------- --------
CASH AND CASH EQUIVALENTS,
end of period $ 5,019 $ 7,493
-------- ---------
SUPPLEMENTAL INFORMATION:
Non Cash Transactions:
Conversion of debt to
equity $200,000 $ --
======== =========
The accompanying notes are an integral part of these financial statements
6
<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 three month period ended
September 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
and has no operating activities.
The Company is presently seeking new business opportunities.
(2) INCOME/LOSS PER COMMON SHARE
----------------------------
Profit/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 September 30, 1996
and 1995 was 1,991,092 and 1,999,980 shares, respectively.
7
<PAGE>
Profit/loss per common share, assuming full dilution, is based on the
weighted average number of common shares outstanding during each period.
The average number of shares used to compute the fully diluted loss per
share was 1,991,092 and 1,999,980 common shares for the three month periods
ended September 30, 1996 and 1995, respectively.
Common stock equivalents are antidilutive and are not considered in the
calculations of income/loss per share.
(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 other income represents oil and gas royalties on the Company's oil and
gas interests. The net loss for the three month period ended September 30,
1996 was $14,078. Expenses of $16,457 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 recognized a $479,837
gain resulting from the disposition of such subsidiary and
the related liabilities.
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.
8
<PAGE>
PART II
OTHER INFORMATION
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 did not file any report on Form 8-K for the quarter ended
September 30, 1996.
9
<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: April 29, 1997
/s/ Danial Murphy
------------------------------------
Daniel Murphy,
President
/s/ Michael H. Nolan
------------------------------------
Michael H. Nolan,
Chief Financial Officer
10
<PAGE>
EXHIBIT INDEX
Exhibit Description
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27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GULF
EXPLORATION CONSULTANTS, INC. FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,019
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,019
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,019
<CURRENT-LIABILITIES> 46,780
<BONDS> 0
0
0
<COMMON> 19,911
<OTHER-SE> (61,672)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 11,741
<TOTAL-REVENUES> 11,741
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 457,274
<INCOME-TAX> 0
<INCOME-CONTINUING> 457,274
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 457,274
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
