AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST _, 2006
REGISTRATION NO. 333-133104
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 4
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GULF COAST OIL & GAS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 1311 98-0128688
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
5847 SAN FELIPE, SUITE 1700
HOUSTON, TX 77057
(713) 821-1731
(Address and Telephone Number of Principal Executive Offices)
5847 SAN FELIPE, SUITE 1700
HOUSTON, TX 77057
(713) 821-1731
(Address of Principal Place of Business or
Intended Principal Place of Business)
COPIES TO:
THOMAS P. GALLAGHER, ESQ.
RAHIM RAYANI MARTIN J. CONROY, ESQ.
PRESIDENT & CHIEF EXECUTIVE OFFICER GALLAGHER, BRIODY & BUTLER
GULF COAST OIL & GAS, INC. 155 VILLAGE BOULEVARD
5847 SAN FELIPE, SUITE 1700 PRINCETON, NJ 08540
HOUSTON, TX 77057 (609) 452-6000
(713) 821-1731
(Name, Address and Telephone Number of Agent for Service)
---------------
Approximate Date of Commencement of Proposed Sale to the Public: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED MAXIMUM AGGREGATE OFFERING REGISTRATION
OFFERING PRICE PRICE (1) FEE((2))
PER SHARE (1)
- ------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.01 544,403,329 shares $0.043 $29,409,343.15 $2504.80
per share ((3))
- ------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended. For
the purposes of this table, we have used the average of the closing bid
and asked prices as of a recent date.
(2) Previously Paid.
(3) Includes an indeterminate number of shares of common stock which may be
issued with respect to such shares by way of a stock dividend, stock
split, stock combination, recapitalization, merger, consolidation or other
similar transaction in accordance with Rule 416.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
PROSPECTUS
GULF COAST OIL & GAS, INC.
544,403,329 SHARES OF COMMON STOCK
This prospectus relates to the sale of up to 544,403,329 shares of Gulf Coast's
common stock by certain persons who are stockholders of Gulf Coast. Please refer
to "Selling Stockholders" beginning on page 13.
The shares of common stock are being offered for sale by the selling
stockholders at prices established on the Over-the-Counter Bulletin Board during
the term of this offering. There are no minimum purchase requirements. These
prices will fluctuate based on the demand for the shares of common stock.
Our common stock is quoted on the Over-the-Counter Bulletin Board under the
symbol "GCOG.OB". On August 22, 2006, the last reported sale price of our common
stock was $0.03 per share.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 6.
THIS PROSPECTUS IS NOT AN OFFER OF THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES
REGULATORS HAVE NOT APPROVED OR DISAPPROVED OF THESE SECURITIES,
OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is August --, 2006
-1-
TABLE OF CONTENTS
PROSPECTUS SUMMARY............................................................3
RISK FACTORS .................................................................6
FORWARD-LOOKING STATEMENTS...................................................13
SELLING STOCKHOLDERS.........................................................13
USE OF PROCEEDS..............................................................15
PLAN OF DISTRIBUTION.........................................................15
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS......................18
DESCRIPTION OF BUSINESS......................................................19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS........................................................21
MANAGEMENT...................................................................24
EXECUTIVE COMPENSATION.......................................................24
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................25
DESCRIPTION OF SECURITIES....................................................26
LEGAL MATTERS................................................................27
EXPERTS......................................................................27
AVAILABLE INFORMATION .......................................................27
FINANCIAL STATEMENTS........................................................F-1
-2-
PROSPECTUS SUMMARY
Because this is only a summary, it does not contain all of the information that
may be important to you. You should read the entire prospectus, including "Risk
Factors" and the consolidated financial statements and notes thereto, before
deciding to invest in our common stock offered by this prospectus.
OVERVIEW
We plan to undertake oil and gas exploration projects in the continental United
States. Our goal is to achieve profitable results as quickly as possible.
Therefore, we expect that the majority of our initial projects will have a
comparatively lower risk profile in order to increase our chances of obtaining
positive cash flow in the near term. We may also seek to acquire interests in
riskier projects that have the potential of developing into major oil or gas
fields. Finally, we will consider acquiring an interest (working and/or royalty)
in proven (based upon offset production and geology reports) but undeveloped
drilling locations.
We currently have an interest in one drilling project. On June 8, 2005, we
contracted with Bourgeois Energy, Inc. to acquire a 75% working interest in
property known as the Saratoga prospect located in Sabine Parish, Louisiana. A
"working interest" means that we will receive 75% of the net profits of the
project after payment of all royalties to landowners and others. Under the terms
of the Agreement with Bourgeois Energy, we will pay 100% of the costs of
acquisition, exploration and development of the project. It is anticipated that
those costs will be approximately $480,000, of which $100,000 has already been
advanced.
Bourgeois Energy will be responsible for obtaining the necessary permits from
the State of Louisiana, obtaining insurance, preparing the site for drilling,
obtaining the drilling rig, completion rig and piping, and conducting the
exploratory drilling program on our behalf. In return, it will have a 25%
working interest in the project.
GOING CONCERN
Our accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the continuation of operations, realization of
assets and liquidation of liabilities in the ordinary course of business. Since
inception, we have incurred substantial operating losses and expect to incur
additional operating losses over the next several years. As of December 31,
2005, we had an accumulated deficit of approximately $6.063 million.
We have financed our operations since inception primarily through equity
financings and loans from shareholders and other related parties. We have
recently entered into a number of financing transactions and are continuing to
seek other financing initiatives. These conditions raise substantial doubt about
our ability to continue as a going concern.
The accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
-3-
ABOUT US
Our principal executive office is located at 5847 San Felipe, Suite 1700,
Houston, Texas 77057. Our telephone number is (713) 821-1731.
THE OFFERING
This offering relates to the sale of common stock by certain persons who are our
stockholders. The selling stockholders consist of Cornell Capital Partners, L.P.
("Cornell Capital"), Certain Wealth, Ltd. and TAIB Bank, B.S.C.(c). These
entities intend to sell in the aggregate up to 514,403,292 shares of common
stock to be issued pursuant to convertible debentures. In addition, Cornell
Capital intends to sell up to 30,000,000 shares issuable upon the exercise of
common stock purchase warrants issued to Cornell Capital.
Each of the selling stockholders is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with the sale of common stock issued under
the convertible debentures and warrants.
COMMON STOCK OFFERED 544,403,329 shares by selling stockholders.
OFFERING PRICE Market price
COMMON STOCK OUTSTANDING 119,536,793 shares as of August 15, 2006
BEFORE THE OFFERING
USE OF PROCEEDS We will not receive any proceeds of the
shares offered by the selling
stockholders. Any proceeds we receive
from the exercise of the warrants will be
used for general working capital
purposes. See "Use of Proceeds".
RISK FACTORS The securities offered hereby involve a
high degree of risk. See "Risk Factors".
OVER-THE-COUNTER BULLETIN GCOG.OB
BOARD SYMBOL
-4-
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
We are providing the following summary financial information to aid you in your
analysis of the financial aspects of an investment in us. The table includes
summary historical financial data for us for the years ended December 31, 2005
and 2004 and the quarters ended June 30, 2006 and June 30, 2005. The following
financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial or Plan of Operation" and the consolidated
financial statements and related notes appearing elsewhere in this prospectus.
SUMMARY STATEMENT OF OPERATIONS DATA:
YEAR ENDED DECEMBER 31, QUARTER ENDED JUNE 30,
2005 2004 2006 2005
---------------------------------------------------------
Sales .......................... $ 0 $ 0 $ 0 $ 0
Costs and expenses ............. $ 244,606 $ 5,812,453 $ 115,297 $ 68,192
Other income (expense) ......... $ 57,663 $ (7,783) $ 0 $ 3,753
Net loss to common shareholders $ (186,943) $(6,013,462) $ (104,094) $ (64,439)
Comprehensive loss ............. $ (186,943) $(6,013,462) $ (104,094) $ (64,439)
Basic and diluted loss per share $ (0.00) $ (0.06) $ (0.00) $ (0.00)
SUMMARY BALANCE SHEET DATA:
JUNE 30, 2006 DECEMBER 31, 2005
-----------------------------------
Working capital (deficit) ....................... $ 1,315,872 $ (89,767)
Current assets .................................. 1,443,951 39,672
Total assets .................................... 2,167,764 141,662
Current liabilities ............................. 128,079 129,439
Long-term liabilities (less current portion) .... 2,248,223 0
Stockholders' deficit ........................... 6,516,417 6,295,710
-5-
RISK FACTORS
WE ARE SUBJECT TO VARIOUS RISKS THAT MAY MATERIALLY HARM OUR BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. IF ANY OF THESE RISKS OR UNCERTAINTIES
ACTUALLY OCCURS, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS COULD BE
MATERIALLY HARMED. IN THAT CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS
OUR AUDITORS HAVE EXPRESSED AN OPINION THAT THERE IS SUBSTANTIAL DOUBT ABOUT OUR
ABILITY TO CONTINUE AS A GOING CONCERN.
In its report dated March 5, 2006 our auditors, Pollard-Kelley Auditing
Services, Inc., expressed an opinion that there is substantial doubt about
our ability to continue as a going concern. Our accompanying consolidated
financial statements have been prepared on a going concern basis, which
contemplates the continuation of operations, realization of assets and
liquidation of liabilities in the ordinary course of business. Since
inception, we have incurred operating losses and expect to incur additional
operating losses over the next several years. As of June 30, 2006, we had
an accumulated deficit of approximately $6.576 Million.
We have financed our operations since inception primarily through equity
financings, loans from shareholders and other related parties. We have
recently entered into a number of financing transactions and are continuing
to seek other financing initiatives. We will need to raise additional
capital to implement our business plan. Such capital is expected to come
from the sale of securities. No assurances can be given that such financing
will be available in sufficient amounts or at all. Our ability to continue
our operating will be dependent upon obtaining such further financing.
These conditions raise substantial doubt about our ability to continue as a
going concern. The accompanying consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Subsequent to December 31, 2005, as more fully set forth in "Selling
Stockholders", in February and April of 2006 we received net proceeds in
the amount of approximately $1.7 million from the sale of convertible
debentures to the selling stockholders. We anticipate that we will have
sufficient funds to operate and pursue our business plan for approximately
twelve to eighteen months. After that date, we expect to have a need for
additional capital. We expect to make substantial capital expenditures in
our exploration and development projects. Without additional capital
resources, our drilling and other activities may be curtailed, new projects
may not be commenced and our business, financial condition and results of
operations may suffer. We may not be able to secure additional financing on
reasonable terms or at all.
WE HAVE A HISTORY OF OPERATING LOSSES AND HAVE BEEN UNPROFITABLE SINCE
INCEPTION.
We incurred net losses of approximately $6.412 Million from August 4, 2003
(date of inception) to December 31, 2005, including approximately $186,000
of net loss to common shareholders in the year ended December 31, 2005.
Although we will attempt to achieve profitability through our pursuit of
our business plan, we have not generated revenues to date and cannot assure
you that we will obtain revenues or achieve profitability.
-6-
THE CONVERTIBLE DEBENTURES CONTAIN CERTAIN COVENANTS PROHIBITING US FROM
INCURRING ADDITIONAL DEBT, GRANTING ANY OTHER SECURITY INTEREST IN OUR ASSETS,
OR RAISING CAPITAL AT LESS THAN THE MARKET PRICE.
The convertible debentures and related documents executed in favor of the
selling stockholders contain covenants that, subject to certain
exceptions, restrict the following activities:
(i) Raising capital from the sale of stock or other securities
convertible into stock at a price less than the market price of our
common stock on the date of issuance; or
(ii) Incurring additional indebtedness or granting any other security
interest in our assets.
The existence of these covenants may severely limit our ability to borrow
money or raise capital from the sale of stock or convertible securities.
Potential investors will normally seek a discount from the market price of
the common stock if the stock to be issued is not the subject of a
registration statement permitting it to be sold immediately. This may
hamper our ability to raise funds from other investors.
The inability to incur additional indebtedness may hamper our ability to
implement our business plan and grow the business. For example, if we are
able to identify proven reserves in connection with our exploration
activities, a lender might be interested in lending to further recovery of
such reserves or to invest in other projects. Unless the selling
stockholders consent to such a financing, we will be unable to obtain it
and will be required to work only with existing capital, which we may not
be able to deploy for development opportunities or other projects because
of other corporate needs.
FUTURE SALES BY OUR STOCKHOLDERS MAY ADVERSELY AFFECT OUR STOCK PRICE AND OUR
ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS.
Sales of our common stock in the public market could lower the market
price of our common stock. Sales may also make it more difficult for us to
sell equity securities or equity-related securities in the future at a
time and price that our management deems acceptable or at all. As of
August 15, 2006, we had 119,536,793 shares of common stock outstanding,
without taking into account shares issuable upon exercise of the
convertible debentures or warrants.
THE INVESTORS UNDER THE CONVERTIBLE DEBENTURES WILL PAY LESS THAT THE
THEN-PREVAILING MARKET PRICE OF OUR COMMON STOCK.
The common stock to be issued under the convertible debentures will be
issued at the lower of (i) a fixed price of $0.029716 or (ii) a 20%
discount to the volume weighted average price for the five trading days
immediately before the conversion. These discounted sales could cause the
price of our common stock to decline.
THE ISSUANCE OF STOCK UNDER THE CONVERTIBLE DEBENTURES COULD ENCOURAGE SHORT
SALES BY THIRD PARTIES, WHICH COULD CONTRIBUTE TO THE FUTURE DECLINE OF OUR
STOCK PRICE.
The significant downward pressure on the price of our common stock caused
by the issuance of material amounts of common stock under the convertible
debentures could encourage short sales by third parties. In a short sale,
a prospective seller borrows stock from a shareholder or broker and sells
the borrowed stock. The prospective seller hopes that the stock price will
decline, at which time the seller can purchase shares at a lower price to
repay the lender. The seller profits when the stock price declines because
it is purchasing shares at a price lower than the sale price of the
borrowed stock. Such sales could place further downward pressure on the
price of our common stock by increasing the number of shares being sold.
-7-
OUR BUSINESS AND GROWTH WILL SUFFER IF WE ARE UNABLE TO ATTRACT AND RETAIN KEY
PERSONNEL.
Our success depends in large part upon the services of a number of key
employees and consultants. If we lose the services of one or more of our
key employees or consultants, it could have a significant negative impact
on our business. In addition, our long-term success will in large part be
dependent upon our ability to attract and retain qualified geologists,
geophysicists, and other personnel.
WE FACE SIGNIFICANT COMPETITION, AND MANY OF OUR COMPETITORS HAVE RESOURCES IN
EXCESS OF OUR AVAILABLE RESOURCES.
We plan to operate in the highly competitive areas of oil and natural gas
exploration, exploitation, acquisition and production. We face intense
competition from a large number of independent, technology-driven
companies as well as both major and other independent oil and natural gas
companies in a number of areas such as:
o seeking to acquire desirable producing properties or new leases for
future exploration;
o marketing our oil and natural gas production; and
o seeking to acquire the equipment and expertise necessary to operate
and develop those properties.
Many of our competitors have financial and other resources substantially
in excess of those available to us. This highly competitive environment
could harm our business.
OPERATING HAZARD AND UNINSURED RISKS
Drilling activities are subject to many risks, including the risk that no
commercially productive reservoirs will be encountered. There can be no
assurance that new wells we drill will be productive or that we will
recover all or any portion of our investment. Drilling for oil and natural
gas may involve unprofitable efforts, not only from dry wells, but also
from wells that are productive, but do not produce sufficient net revenues
to return a profit after drilling, operating and other costs. The cost and
timing of drilling, completing and operating wells is often uncertain. Our
drilling operations may be curtailed, delayed or canceled as a result of
numerous factors, many of which are beyond our control, including title
problems, weather conditions, delays by project participants, compliance
with governmental requirements and shortages or delays in the delivery of
equipment and services. Our future drilling activities may not be
successful and, if unsuccessful, such failure may have a material adverse
effect on our business, financial condition or results of operations.
Our operations are subject to hazards and risks inherent in drilling for
and producing and transporting oil and natural gas, such as fires, natural
disasters, explosions, encountering formations with abnormal pressures,
blowouts, cratering, pipeline ruptures and spills, any of which can result
in the loss of hydrocarbons, environmental pollution, personal injury
claims and other damage to our properties and those of others. We do not
currently maintain insurance against some these risks. The occurrence of
an event that is not covered, or not fully covered by insurance could have
a material adverse effect on our business, financial condition and results
of operations.
-8-
REGULATORY RISKS.
Our oil and natural gas exploration and production activities will be
subject to extensive laws, rules and regulations promulgated by federal
and state legislatures and agencies, including the Federal Energy
Regulatory Commission (FERC) and the Environmental Protection Agency.
Failure to comply with such laws, rules and regulations can result in
substantial penalties. The legislative and regulatory burden on the oil
and gas industry will increase our cost of doing business and will affect
our profitability.
Although we do not intend to own or operate any pipelines or facilities
that are directly regulated by FERC, its regulation of third party
pipelines and facilities could indirectly affect our ability to transport
or market our production. Moreover, FERC has in the past, and could in the
future impose price controls on the sale of natural gas. In addition, we
believe we are in substantial compliance with all applicable laws and
regulations, however, we are unable to predict the future cost or impact
of complying with such laws and regulations because they are frequently
amended, interpreted and reinterpreted.
Many states (including Louisiana) require permits for drilling operations,
drilling bonds and reports concerning operations and impose other
requirements relating to the exploration and production of oil and natural
gas. These states also have statutes or regulations addressing
conservation matters, including provisions for the unitization or pooling
of oil and natural gas properties, the establishment of maximum rates of
production from wells and the regulation of spacing, plugging and
abandonment of such wells.
ENVIRONMENTAL MATTERS.
Our operations and properties will be, like the oil and gas industry in
general, subject to extensive and changing federal, state and local laws
and regulations relating to environmental protection, including the
generation, storage, handling, emission, transportation and discharge of
materials into the environment, and relating to safety and health. The
recent trend in environmental legislation and regulation generally is
toward stricter standards, and this trend will likely continue. These laws
and regulations may require the acquisition of a permit or other
authorization before construction or drilling commences and for certain
other activities; limit or prohibit seismic acquisition, construction,
drilling and other activities on certain lands lying within wilderness and
other protected areas; and impose substantial liabilities for pollution
resulting from our operations.
The permits required for many of our operations are subject to revocation,
modification and renewal by issuing authorities. Governmental authorities
have the power to enforce compliance with their regulations, and
violations are subject to fines or injunction, or both. Changes in
existing environmental laws and regulations or in interpretations thereof
could have a significant impact on us, as well as the oil and gas industry
in general. The Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) and comparable state statutes impose strict and
arguably joint and several liabilities on owners and operators of certain
sites and on persons who disposed of or arranged for the disposal of
hazardous substances found at such sites. It is not uncommon for the
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances
released into the environment. The Resource Conservation and Recovery Act
(RCRA) and comparable state statutes govern the disposal of solid waste
and hazardous waste and authorize imposition of substantial fines and
penalties for noncompliance. Although CERCLA currently excludes petroleum
from its definition of hazardous substance, state laws affecting our
operations impose clean-up liability relating to petroleum and petroleum
related products. In addition, although RCRA classifies certain oil field
wastes as non-hazardous, such exploration and production wastes could be
reclassified as hazardous wastes, thereby making such wastes subject to
more stringent handling and disposal requirements.
-9-
OIL AND NATURAL GAS PRICES FLUCTUATE WIDELY AND LOW PRICES COULD HAVE A MATERIAL
ADVERSE IMPACT ON OUR BUSINESS AND FINANCIAL RESULTS BY LIMITING OUR LIQUIDITY
AND FLEXIBILITY TO CARRY OUT DRILLING.
Our revenues, operating results and future rate of growth will depend
highly upon the prices we receive for our oil and natural gas production.
Historically, the markets for oil and natural gas have been volatile and
are likely to continue to be volatile in the future. Market prices of oil
and natural gas depend on many factors beyond our control, including:
o worldwide and domestic supplies of oil and natural gas;
o the ability of the members of the Organization of Petroleum
Exporting Countries to agree to and maintain oil price and
production controls;
o political instability or armed conflict in oil-producing regions;
o the price and level of foreign imports;
o the level of consumer demand;
o the price and availability of alternative fuels;
o the availability of pipeline capacity;
o weather conditions;
o domestic and foreign governmental regulations and taxes; and
o the overall economic environment.
We cannot predict future oil and natural gas price movements and prices often
vary significantly. Significant declines in oil and natural gas prices for an
extended period may have the following effects on our business:
o limit our financial condition, liquidity, ability to finance planned
capital expenditures and results of operations;
o reduce the amount of oil and natural gas that we can produce
economically;
o cause us to delay or postpone some of our capital projects;
o reduce our revenues, operating income and cash flow; and
o reduce the carrying value of our oil and natural gas properties.
-10-
RISKS RELATED TO THIS OFFERING
THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE, WHICH COULD CAUSE THE
VALUE OF AN INVESTMENT IN OUR STOCK TO DECLINE.
The market price of shares of our common stock has been and is likely to
continue to be highly volatile. Factors that may have a significant effect
on the market price of our common stock include the following:
o sales of large numbers of shares of our common stocks in the open
market, including shares issuable at a fluctuating conversion price
at a discount to the market price of our common stock;
o our operating results;
o our need for additional financing;
o governmental regulation; and
o other factors and events beyond our control.
In addition, our common stock has been relatively thinly traded. Thinly
traded common stock can be more volatile than common stock trading in an
active public market. We cannot predict the extent to which an active
public market for the common stock will develop.
The stock market in general has experienced extreme volatility that often
has been unrelated to the operating performance of particular companies.
These broad market and industry fluctuations may adversely affect the
trading price of our common stock, regardless of our actual operating
performance.
As a result of potential stock price volatility, investors may be unable
to resell their shares of our common stock at or above the cost of their
purchase prices. In addition, companies that have experienced volatility
in the market price of their stock have been the subject of securities
class action litigation. If we were to become the subject of securities
class action litigation, this could result in substantial costs, a
diversion of our management's attention and resources and harm to our
business and financial condition.
FUTURE SALES BY OUR STOCKHOLDERS MAY ADVERSELY AFFECT OUR STOCK PRICE AND OUR
ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS.
Sales of our common stock in the public market following this offering
could lower the market price of our common stock. Sales may also make it
more difficult for us to sell equity securities or equity-related
securities in the future at a time and price that our management deems
acceptable or at all.
As of August 15, 2006, we had 119,536,793 shares of common stock
outstanding, without taking into account shares issuable upon exercise of
the outstanding debentures and warrants.
Upon issuance of the maximum number of shares being registered in this
offering, there will be an additional 544,403,329 shares of common stock
outstanding. All of these shares of common stock may be immediately resold
in the public market upon effectiveness of the accompanying registration
statement.
-11-
The selling stockholders intend to sell in the public market the shares of
common stock being registered in this offering. That means that up to
544,403,329 shares of common stock, the number of shares being registered
in this offering, may be sold. Such sales may cause our stock price to
decline.
In addition to the shares being registered in this offering, our
shareholders have recently consented to an amendment to our Articles of
Incorporation to increase the number of shares that we are authorized to
issue from 500,000,000 to 1,000,000,000. After subtracting the maximum
number of shares being issued in this offering, there are an additional
455,596,671 shares capable of being issued by the Company. This increase
in the number of authorized but unissued shares of Common Stock would
enable the Company, without further stockholder approval, to issue shares
from time to time as may be required for proper business purposes such as
raising capital for ongoing operations, business and asset acquisitions,
present and future employee benefit programs and other corporate purposes.
It is anticipated that such purposes may include the issuance for cash as
a means of obtaining capital for use by the Company, issuance in exchange
for debt or issuance as part or all of the consideration required to be
paid by the Company for acquisitions of other businesses or assets. To the
extent these additional shares are issued, the proportionate interest
owned by each shareholder will be diluted by such issuances.
OUR COMMON STOCK MAY BE AFFECTED BY LIMITED TRADING VOLUME AND MAY FLUCTUATE
SIGNIFICANTLY.
There has been a limited public market for our common stock and there can
be no assurance that an active trading market for our common stock will
develop. An absence of an active trading market could adversely affect our
shareholders' ability to sell our common stock in short time periods, or
possibly at all. Our common stock has experienced, and is likely to
experience in the future, significant price and volume fluctuations that
could adversely affect the market price of our common stock without regard
to our operating performance. In addition, we believe that factors such as
quarterly fluctuations in our financial results and changes in the overall
economy or the condition of the financial markets could cause the price of
our common stock to fluctuate substantially.
OUR COMMON STOCK IS DEEMED TO BE "PENNY STOCK", WHICH MAY MAKE IT MORE DIFFICULT
FOR INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS.
Our common stock is deemed to be "penny stock" as that term is defined in
Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. These
requirements may reduce the potential market for our common stock by
reducing the number of potential investors. This may make it more
difficult for investors in our common stock to sell shares to third
parties or to otherwise dispose of them. This could cause our stock price
to decline. Penny stocks are stocks:
o with a price of less than $5.00 per share;
o that are not traded on a "recognized" national exchange;
o whose prices are not quoted on the NASDAQ automated quotation system
(NASDAQ-listed stocks must still have a price of not less than $5.00
per share); or
o in issuers with net tangible assets less than $2.0 million (if the
issuer has been in continuous operation for at least three years) or
$5.0 million (if in continuous operation for less than three years),
or with average revenues of less than $6.0 million for the last
three years.
-12-
Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker/dealers are required to determine whether an investment in a penny
stock is a suitable investment for a prospective investor.
THE PRICE YOU PAY IN THIS OFFERING WILL FLUCTUATE AND MAY BE HIGHER OR LOWER
THAN THE PRICES PAID BY OTHER PEOPLE PARTICIPATING IN THIS OFFERING.
The price in this offering will fluctuate based on the prevailing market
price of the common stock on the Over-the-Counter Bulletin Board.
Accordingly, the price you pay in this offering may be higher or lower
than the prices paid by other people participating in this offering.
FORWARD LOOKING STATEMENTS
Information included in this prospectus may contain forward-looking statements.
This information may involve known and unknown risks, uncertainties and other
factors which may cause our actual results, performance or achievements to be
materially different from the future results, performance or achievements
expressed or implied by any forward-looking statements. Forward-looking
statements, which involve assumptions and describe our future plans, strategies
and expectations, are generally identifiable by use of the words "may," "will,"
"should," "expect," "anticipate," "estimate," "believe," "intend" or "project"
or the negative of these words or other variations on these words or comparable
terminology.
This prospectus contains forward-looking statements. These statements may be
found under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," as well as in this prospectus generally.
Actual events or results may differ materially from those discussed in
forward-looking statements as a result of various factors, including, without
limitation, the risks outlined under "Risk Factors" and matters described in
this prospectus generally. In light of these risks and uncertainties, there can
be no assurance that the forward-looking statements contained in this prospectus
will in fact occur.
SELLING STOCKHOLDERS
The following table presents information regarding the selling stockholders.
None of the selling stockholders has held a position or office, or had any other
material relationship, with us. The selling stockholders acquired all shares
being registered in this offering in the convertible debenture financing
transaction with us described below.
SHARES PERCENTAGE OF
BENEFICIALLY SHARES TO BE SHARES BENEFICIALLY
SELLING OWNED BEFORE SOLD IN OWNED AFTER
STOCKHOLDER OFFERING(1) THE OFFERING THE OFFERING (A)
- ----------------------------------- ---------------- ---------------- -------------------
Cornell Capital Partners, L.P. (2) 287,201,665 (3) 287,201,665 (3) 0
Certain Wealth, Ltd. (4) 128,600,832 (5) 128,600,832 (5) 0
TAIB Bank, B.S.C.(c) (6) 128,600,832 (7) 128,600,832 (7) 0
-13-
TOTAL
(1) Each of the selling stockholders has agreed not to convert its Debenture
(and, in the case of Cornell Capital Partners, L.P., its warrants) to the extent
the conversion would result in the selling stockholder, together with any
affiliate, beneficially owning more than 4.9% of the Company's issued and
outstanding common stock. This provision may be waived by any of the selling
stockholders (as to itself but not the other selling stockholders) upon not less
than 65 days prior notice to the Company. The share numbers used in the table
assume that this limitation does not apply. Moreover, the actual number of
shares to be issued will be determined by the formula set forth in the Debenture
at the time of conversion.
(2) All investment decisions of Cornell Capital are made by its general partner,
Yorkville Advisors, LLC. Mark Angelo, the managing member of Yorkville Advisors,
makes the investment decisions on behalf of Yorkville Advisors.
(3) Consists of up to 257,201,665 shares of common stock issuable within sixty
(60) days upon conversion of debentures, and 30,000,000 shares issuable within
sixty (60) upon conversion of warrants. Upon conversion of the debentures,
shares will be issued at the price per share equal to the lesser of (a) $.02916
or (b) an amount equal to eighty percent (80%) of the lowest volume weighted
price of our common stock, as quoted by Bloomberg, LP, for the five (5) trading
days immediately preceding the conversion date.
(4) All investment decisions of Certain Wealth Ltd. are made by Larry Chaleff,
an Authorized Person.
(5) Consists of up to 128,600,832 shares of common stock issuable within sixty
(60) days upon conversion of debentures. Upon conversion of the debentures,
shares will be issued at the price per share equal to the lesser of (a) $.02916
or (b) an amount equal to eighty percent (80%) of the lowest volume weighted
price of our common stock, as quoted by Bloomberg, LP, for the five (5) trading
days immediately preceding the conversion date.
(6) All investment decisions of TAIB Bank, B.S.C.(c) are made by Larry Chaleff,
its Managing Director.
(7) Consists of up to 128,600,832 shares of common stock issuable within sixty
(60) days upon conversion of debentures. Upon conversion of the debentures,
shares will be issued at the price per share equal to the lesser of (a) $.02916
or (b) an amount equal to eighty percent (80%) of the lowest volume weighted
price of our common stock, as quoted by Bloomberg, LP, for the five (5) trading
days immediately preceding the conversion date.
CONVERTIBLE DEBENTURES
On February 1, 2006, we entered into a Securities Purchase Agreement with the
selling stockholders pursuant to which the selling stockholders agreed to
purchase secured convertible debentures in the principal amount of $2,000,000.
On February 2, 2006 we sold and issued $1,000,000 in principal amount of
debentures to the selling stockholders. On April 5, 2006 we sold and issued an
additional $1,000,000 in principal amount of debentures to the selling
stockholders.
In connection with the Securities Purchase Agreement, we also issued to Cornell
Capital five-year warrants to purchase 30,000,000 shares of our common stock at
the following exercise prices: 7,500,000 at $0.02 per share, 7,500,000 at $0.03
per share, 5,000,000 at $0.04 per share, 5,000,000 at $0.05 per share, and
5,000,000 at $0.06 per share.
The debentures are convertible at the option of the selling stockholders any
time up to maturity into shares of our common stock, par value $0.001 per share,
at the price per share equal to the lesser of (a) $.02916 (the "Fixed Price") or
(b) an amount equal to eighty percent (80%) of the lowest volume weighted price
of our common stock, as quoted by Bloomberg, LP, for the five (5) trading days
immediately preceding the conversion date, which may be adjusted pursuant to the
other terms of the Debentures (the "Issuance Formula").
-14-
If the closing bid price of our common stock is less than the Fixed Price, we
can redeem a portion or all amounts outstanding under the debentures prior to
February 1, 2009 for a price equal to the principal amount and accrued interest
thereon being redeemed, plus a redemption premium of twenty percent (20%) of the
principal amount being redeemed.
We also entered into a Security Agreement pursuant to which we have granted the
selling stockholders a security interest in and to substantially all our assets
to secure repayment of the debentures.
Pursuant to the Securities Purchase Agreement, we are obligated to register for
resale a number of shares of common stock equal to five times the number of
shares that would be issuable on the Closing Date pursuant to the Issuance
Formula. Thus, we are obligated to register a total of 514,403,292 shares of
common stock for issuance under the Debentures, and 30,000,000 for issuance
under the Warrants. We have agreed to pursue an amendment to our Articles of
Incorporation to increase the authorized shares to permit the issuance by the
Company of the number of shares it is required to register under the Securities
Purchase Agreement. To that end, we filed a Definitive Proxy Statement with the
Securities and Exchange Commission on March 15, 2006 and commenced the process
of soliciting consents from our shareholders. We received consents from the
majority of our shareholders on April 24, 2006 approving of the amendment.
In connection with the Securities Purchase Agreement, we also paid Yorkville
Advisors, LLC a commitment fee of $200,000 and a structuring fee of $15,000. All
investment decisions of Cornell Capital are made by its general partner,
Yorkville Advisors, LLC. Mark Angelo, the managing member of Yorkville Advisors,
makes the investment decisions on behalf of Yorkville Advisors.
THERE ARE CERTAIN RISKS RELATED TO SALE BY THE SELLING STOCKHOLDERS
There are certain risks related to sales by the selling stockholders, including:
o To the extent the selling stockholders sell their common stock, our
common stock price may decrease due to the additional shares in the
market. This could allow the selling stockholders to sell greater
amounts of common stock, the sales of which would further depress
our stock price.
o The significant downward pressure on the price of our common stock
as the selling stockholders sell material amounts of shares could
encourage short sales by others to the extent permitted by
applicable law. This could place further downward pressure on the
price of our common stock.
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be offered and
sold from time to time by certain selling stockholders. There will be no
proceeds to us from the sale of shares of common stock in this offering. Any
proceeds we receive from the exercise of the warrants will be used for general
working capital purposes.
PLAN OF DISTRIBUTION
The selling stockholders and any of their respective pledgees, assignees and
other successors-in-interest may, from time to time, sell any or all of their
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The selling stockholders may use any one or more of
the following methods when selling shares:
-15-
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits the purchaser;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
o purchase by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately-negotiated transactions;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o through the writing of options on the shares;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders shall have the sole and absolute discretion not to
accept any purchase offer or make any sale of shares if they deem the purchase
price to be unsatisfactory at any particular time.
The selling stockholders may pledge their shares to their brokers under the
margin provisions of customer agreements. If a selling stockholders defaults on
a margin loan, the broker may, from time to time, offer and sell the pledged
shares.
The selling stockholders or their respective pledgees, transferees or other
successors in interest, may also sell the shares directly to market makers
acting as principals and/or broker-dealers acting as agents for themselves or
their customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholders cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling stockholders. The selling
stockholders and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus, are deemed "underwriters" as that term
is defined under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, or the rules and regulations under such acts.
In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
-16-
The selling stockholders, alternatively, may sell all or any part of the shares
offered in this prospectus through an underwriter. No selling stockholder has
entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into.
If a selling stockholder notifies us that they have a material arrangement with
a broker-dealer for the resale of the common stock, then we would be required to
amend the registration statement of which this prospectus is a part, and file a
prospectus supplement to describe the agreements between the selling stockholder
and the broker-dealer.
INDEMNIFICATION. We have agreed to indemnify the selling stockholders, or their
transferees or assignees, against certain liabilities, including liabilities
under the Securities Act of 1933, as amended, or to contribute to payments the
selling stockholder or their respective pledgees, transferees or other
successors in interest, may be required to make in respect of such liabilities.
The selling stockholders have agreed to indemnify us against certain losses,
claims, damages and liabilities, including liabilities under the Securities Act,
including any untrue statement of a material fact contained in this prospectus
or an omission to state any material fact necessary to make the statements in
this prospectus not misleading.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of Gulf
Coast pursuant to the foregoing, or otherwise, Gulf Coast has been advised that
in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
STATUTORY UNDERWRITER. Each of the selling stockholders is an "underwriter"
within the meaning of the Securities Act of 1933 in connection with the sale of
common stock under the convertible debentures. Commissions paid to Cornell
Capital in connection with the convertible debenture transaction included
five-year warrants to purchase 30,000,000 shares of common stock at the
following exercise prices: 7,500,000 at $0.02 per share, 7,500,000 at $0.03 per
share, 5,000,000 at $0.04 per share, 5,000,00 at $0.05 per share, and 5,000,000
at $0.06 per share. We also paid a structuring fee of $15,000 and Commitment Fee
of $200,000 to Yorkville Advisors. The $200,000 Commitment Fee and the
30,000,000 warrants are underwriting discounts.
Each of the selling shareholders is a hedge fund in the business of investing in
and financing public companies. None of the selling stockholders intend to make
a market in our stock or to otherwise engage in stabilizing or other
transactions intended to help support the stock price. Prospective investors
should take these factors into consideration before purchasing our common stock.
BLUE SKY LAWS. Under the securities laws of certain states, the shares of common
stock may be sold in such states only through registered or licensed brokers or
dealers. The selling stockholders are advised to ensure that any underwriters,
brokers, dealers or agents effecting transactions on behalf of the selling
stockholders are registered to sell securities in all fifty states. In addition,
in certain states the shares of common stock may not be sold unless the shares
have been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
COSTS OF REGISTRATION. We will pay all the expenses incident to the
registration, offering and sale of the shares of common stock to the public
hereunder other than commissions, fees and discounts of underwriters, brokers,
dealers and agents. If any of these other expenses exists, we expect the selling
stockholders to pay these expenses. We have agreed to indemnify the selling
stockholders and their controlling persons against certain liabilities,
including liabilities under the Securities Act. We estimate that the expenses of
the offering to be borne by us will be approximately $70,000. The offering
expenses consist of: an SEC registration fee of $3174.69, printing expenses of
approximately $5,000, accounting fees of approximately $5,000, legal fees of
approximately $50,000 and miscellaneous expenses of approximately $2,000. We
will not receive any proceeds from the sale of any of the shares of common stock
by the selling stockholders. We may receive proceeds upon the exercise of
outstanding warrants covered by this prospectus.
-17-
REGULATION M. The selling stockholders should be aware that the
anti-manipulation provisions of Regulation M under the Exchange Act will apply
to purchases and sales of shares of common stock by the selling stockholders,
and that there are restrictions on market-making activities by persons engaged
in the distribution of the shares. Under Registration M, the selling
stockholders or their agents may not bid for, purchase, or attempt to induce any
person to bid for or purchase, shares of our common stock while such selling
stockholders are distributing shares covered by this prospectus. The selling
stockholders are advised that if a particular offer of common stock is to be
made on terms constituting a material change from the information set forth
above with respect to the Plan of Distribution, then, to the extent required, a
post-effective amendment to the accompanying registration statement must be
filed with the Securities and Exchange Commission.
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our common stock is traded in the over-the-counter market, and "bid" and "asked"
prices in the common stock are quoted on the NASD OTC Electronic Bulletin Board
under the symbol "GCOG.OB". The following table sets forth certain information
with respect to the high and low bid prices for our common stock as of the close
of each of the calendar quarters of 2004 and 2005 and the first and second
quarters of 2006. Such quotations reflect inter-dealer prices, without retail
mark-ups, mark-downs or commissions, and may not represent actual transactions.
BID PRICES FOR COMMON STOCK
--------------------------
HIGH LOW
--------------------------
2006
Second Quarter ......................... .056 .025
First Quarter .......................... .82 .023
2005
Fourth Quarter ......................... .09 .027
Third Quarter .......................... .095 .06
Second Quarter ......................... .37 .285
First Quarter .......................... .38 .16
2004
Fourth Quarter ......................... .37 .20
Third Quarter .......................... .48 .25
Second Quarter ......................... 1.13 .33
First Quarter .......................... .86 .26
On August 22, 2006, the last sale price quoted on the OTC Bulletin Board was
$0.03. As of August 22, 2006, there were approximately 37 holders of record of
our common stock.
We have never paid cash dividends on our common stock and do not presently
anticipate paying cash dividends in the foreseeable future. It is anticipated
that earnings, if any, will be retained for use in our business for an
indefinite period. Payments of dividends in the future, if any, will depend on,
among other things, our ability to generate earnings, our need for capital, and
our financial condition. Our ability to pay dividends is limited by applicable
state law. Declaration of dividends in the future will remain within the
discretion of our Board of Directors, which will review the dividend policy from
time to time.
-18-
DESCRIPTION OF BUSINESS
OVERVIEW
We plan to undertake oil and gas exploration projects in the continental United
States. Our goal is to achieve profitable results as quickly as possible.
Therefore, we expect that the majority of our initial projects will have a
comparatively lower risk profile in order to increase our chances of obtaining
positive cash flow in the near term. However, we may also seek to acquire
interests in riskier projects that have the potential of developing into major
oil or gas fields, and will consider acquiring an interest (working and/or
royalty) in proven (based upon offset production and geology reports) but
undeveloped drilling locations.
We have not produced revenues and have been dependent on debt and equity
financings to finance our operations. As of December 31, 2005, we had cash of
approximately $34,000. On February 1, 2006, we entered into the Securities
Purchase Agreement with the selling stockholders pursuant to which we have sold
and issued convertible debentures in the principal amount of $2,000,000. The
proceeds of this financing will allow us to begin implementing our business plan
as detailed herein.
SARATOGA PROSPECT
We currently have an interest in one drilling project. On June 8, 2005, we paid
$100,000 to Bourgeois Energy, Inc. to acquire a 75% working interest in the
exploration and development of land referred to as the Saratoga Prospect located
in the Saratoga Chalk Formation on the outskirts of the Town of Many, in Sabine
Parish, Louisiana. The Saratoga prospect is located within the Upper Cretaceous,
an historically productive trend whose success is attributable to the presence
of cretaceous age fractured chalk. Under the terms of the Agreement with
Bourgeois Energy, we have one year from the date of acquisition of leasehold
interests to advance to Bourgeois Energy the remaining costs of the project
(which may be advanced in stages for drilling and completion activities,
respectively), which we estimate at $380,000.
In July and August of 2005, Bourgeois Energy, Inc. entered into standard form
Oil, Gas and Mineral Leases with the owners of approximately 280 acres of land
in the Saratoga Formation. Each of the leases is for a term of three years;
provided that if the property or unit of which the property is a part is
producing oil, gas or other minerals at that time, the lease shall continue in
effect for as long as that mineral is produced. The property is accessible from
Highway 6 and a local farm to market road, both of which are public roads owned
and maintained by the State of Louisiana.
None of the land that is the subject to the leases has ever been drilled,
although there have been and continue to be a number of commercially producing
wells in the same geologic trend, including two currently producing wells
operated by Superior Oil Incorporated just to the North of the leased property.
At this time, the project is considered exploratory as neither proven (measured)
nor probable (indicated) reserves have been established by an engineering firm.
We plan to finance the exploratory program with the proceeds of the convertible
debenture financing. Upon receipt by Bourgeois Energy, Inc. of the additional
funding for the project, it will apply for a permit for the drilling from the
State of Louisiana. It will also obtain liability and workers compensation
insurance, prepare the property for drilling, lease rigs, purchase equipment,
hire personnel, and generally handle all aspects of the drilling program.
Bourgeois Energy plans to drill the Saratoga prospect vertically to a depth of
approximately 3000 feet with the option of stimulating the well for increased
production using lateral jetting technologies. We estimate that it will take
from four to six months from initial funding to complete the exploratory
drilling program.
-19-
BUSINESS PLAN
We plan to use the proceeds from the convertible debentures to fund our
operating costs, to explore and possibly develop the Saratoga prospect, and to
identify, explore and develop, either on our own or in conjunction with others,
three to five additional oil & gas prospects over the next eighteen months. We
believe that there exists in the United States potentially profitable oil and
gas projects that, because of their relatively small barrel potential, have been
neglected by major oil companies.
The price of oil has been increasing over the past several years. For example,
according to information published by the Energy Information Administration on
its website at http://eia.doe.gov, the United States spot price for crude
oil increased from around $30 per barrel throughout 2003 to $75.63 per barrel
for the week ending August 11, 2006. This increase in oil prices has made the
projects described above more attractive at this time. We will seek to invest in
these types of projects and others consistent with our goal to generate positive
cash flow at the earliest possible date.
EMPLOYEES
We currently have one (1) employee, Rahim Rayani, our Chief Executive Officer.
We have entered into a consulting agreement with C. Craig Bourgeois, a
geologist. Mr. Bourgeois has assisted us in identifying potential oil and gas
prospects. Mr. Bourgeois is the sole shareholder of Bourgeois Energy, Inc. We
contemplate using other independent contractors from time to time as the need
arises.
We are in the process of recruiting a management team and plan to hire to roll
out our business plan.
COMPETITION
We plan to operate in the highly competitive areas of oil and natural gas
exploration, exploitation, acquisition and production. We face intense
competition from a large number of independent, technology-driven companies as
well as both major and other independent oil and natural gas companies in a
number of areas such as:
o seeking to acquire desirable producing properties or new leases for
future exploration;
o marketing our oil and natural gas production; and
o seeking to acquire the equipment and expertise necessary to operate
and develop those properties.
Many of our competitors have financial and other resources substantially in
excess of those available to us. This highly competitive environment could harm
our business.
GOVERNMENT REGULATION AND ENVIRONMENTAL COMPLIANCE
Our oil and natural gas exploration and production activities will be subject to
extensive laws, rules and regulations promulgated by federal and state
legislatures and agencies, including the Federal Energy Regulatory Commission
(FERC) and the Environmental Protection Agency.
Although we do not intend to own or operate any pipelines or facilities that are
directly regulated by FERC, its regulation of third party pipelines and
facilities could indirectly affect our ability to transport or market our
production. Moreover, FERC has in the past, and could in the future impose price
controls on the sale of natural gas. In addition, we believe we are in
substantial compliance with all applicable laws and regulations, however, we are
unable to predict the future cost or impact of complying with such laws and
regulations because they are frequently amended, interpreted and reinterpreted.
-20-
DESCRIPTION OF PROPERTY
The Company currently leases on a month to month basis 250 sq. ft. of office
space located at 5847 San Felipe, Suite 1700, Houston, Texas 77057. The current
rental is $600.00 per month. This facility has sufficient space to meet our near
term needs.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
CORPORATE MATTERS
We were originally incorporated in Nevada under the name First Cypress
Technologies, Inc. on September 14, 1999. In July 2003, the Company changed its
name to First Cypress, Inc. We changed our name to Otish Mountain Diamond
Company in October 2003. We changed the corporate name to our current name, Gulf
Coast Oil & Gas, Inc., on January 13, 2005.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
GULF COAST OIL & GAS, INC. SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. GULF COAST'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING, BUT NOT LIMITED TO COMPETITION AND OVERALL MARKET CONDITIONS.
The following discussion and analysis should be read together with the
Consolidated Financial Statements and the accompanying notes to the Consolidated
Financial Statements included elsewhere in this Prospectus.
GENERAL
We plan to undertake oil and gas exploration projects in the continental United
States. Our goal is to achieve profitable results as quickly as possible.
Therefore, we expect that the majority of our initial projects will have a
comparatively lower risk profile in order to increase our chances of obtaining
positive cash flow in the near term. However, we may also seek to acquire
interests in riskier projects that have the potential of developing into major
oil or gas fields, and will consider acquiring an interest (working and/or
royalty) in proven (based upon offset production and geology reports) but
undeveloped drilling locations.
-21-
LIQUIDITY AND FINANCIAL CONDITION
At June 30, 2006, cash and cash equivalents were $1,314,070. Total liabilities
at June 30, 2006 were $2,376,302 of which $128,079 were current liabilities. The
remainder of the liabilities relate to the issuance of the convertible
debentures to the investors and recognition of a derivative liability arising
from the warrants issued in that transaction.
At June 30, 2006, other current assets included $4,517 in receivables.
As of June 30, 2006, we had a working capital surplus of $1,315,872 as compared
to a working capital surplus of $748,577 at March 31, 2006. The increase in
working capital is primarily attributable to the receipt during the second
quarter of an additional $1,000,000 in proceeds from the convertible debenture
financing.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2005 COMPARED TO YEAR ENDED DECEMBER 31, 2004
REVENUES
The Company did not generate any revenues in the year ended December 31, 2005 or
the year ended December 31, 2004 and has not generated any revenues to date.
EXPLORATION COSTS
Exploration Costs during the year ended December 31, 2005 decreased to ($46,789)
from $192,127 in the same period in 2004. The decrease was the result of the
cessation by the Company of its diamond mining exploration activities as of
December 31, 2004 and the receipt of a refund of a deposit during 2005.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses during the year ended December 31, 2005
decreased to $291,395 from $5,620,326 in the same period in 2004. This decrease
was primarily due to the cessation by the Company of its diamond mining
exploration activities as of December 31, 2004.
NET LOSS TO COMMON SHAREHOLDERS
Net loss to common shareholders was $186,943 or $(0.00) per share for the year
ended December 31, 2005 as compared to a net loss of $6,013,462 or $(0.06) per
share for the year ended December 31, 2004. The decrease in net loss for the
year was principally due to a decrease in administrative expenses and
exploration costs as set forth above.
ACCUMULATED DEFICIT
Since inception, we have incurred substantial operating losses and expect to
incur substantial additional operating losses over the next several years. As of
December 31, 2005, our accumulated deficit was $6,295,710.
-22-
SIX MONTHS ENDED JUNE 30, 2006
COMPARED TO SIX MONTHS ENDED JUNE 30, 2005
REVENUES
The Company did not generate any revenues in the six months ended June 30, 2006
(other than interest income) or the six months ended June 30, 2005 and has not
generated any operating revenues to date. For the six months ended June 30,
2005, interest income was $15,170.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses during the six months ended June 30, 2006
increased to $115,297 from $68,192 in the same period in 2005. This increase was
primarily due to an increase in professional fees as a result of the convertible
debenture financing and subsequent filing of an SB-2 Registration Statement, an
increase in salaries and consulting fees as the Company prepares to implement
its business plan, and an increase in interest costs from the convertible
debenture financing.
NET GAIN/LOSS TO COMMON SHAREHOLDERS
Net operating loss to common shareholders was ($220,761) or ($0.00) per share
for the six months ended June 30, 2006 as compared to a net loss of ($98,404) or
($0.00) for the six months ended June 30, 2005. The increase in net operating
loss was principally due to an increase in administrative expenses as set forth
above.
ACCUMULATED DEFICIT
Since inception, we have incurred substantial operating losses and expect to
incur substantial additional operating losses over the next several years. As of
June 30, 2006, our accumulated deficit was $6,516,471.
THREE MONTHS ENDED JUNE 30, 2006
COMPARED TO THREE MONTHS ENDED JUNE 30, 2005
REVENUES
The Company did not generate any revenues in the quarter ended June 30, 2006
(other than interest income) or the quarter ended June 30, 2005 and has not
generated any operating revenues to date.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses during the quarter ended June 30, 2006
increased to $115,297 from $68,192 in the same period in 2005. This increase was
primarily due an increase in salaries and consulting fees as the Company
prepares to implement its business plan, and an increase in interest costs from
the convertible debenture financing.
NET GAIN/LOSS TO COMMON SHAREHOLDERS
Net operating loss to common shareholders was $104,094 or ($0.00) per share for
the quarter ended June 30, 2006 as compared to a net loss of $64,439 or ($0.00)
for the quarter ended June 30, 2005. The increase in net operating loss was
principally due to an increase in administrative expenses as set forth above.
For the quarter ended June 30, 2006, the Company recognized Other Comprehensive
Income in the amount of $732,609 as a result of an increase in the fair value of
derivatives relating to the warrants issued in the Company's preferred stock
financing. As a result, Net Comprehensive Income for the quarter was $628,515 or
$.01 per share.
RECENT FINANCING
On February 1, 2006, we entered into the Securities Purchase Agreement with the
selling shareholders, pursuant to which we have sold and issued $2,000,000 in
principal amount of debentures.
PLAN OF OPERATION
We do not plan to make any material capital expenditures except in connection
with our exploratory drilling activities that we plan to fund with a portion of
the proceeds of the convertible debentures. The Company does anticipate hiring
several employees to round out its management team over the next several months.
We anticipate that the proceeds from the sale of the convertible debentures will
be sufficient to permit us to fund ongoing overhead expenses, pursue the
Saratoga prospect and participate in an additional three to five oil and gas
projects over the next twelve to eighteen months. The Company plans to keep its
overhead costs to a bare minimum in order to maximize its ability to participate
in projects and will evaluate the need for capital on a regular basis. We may
need additional capital in order to participate in additional projects beyond
the three to five that we plan to engage in over the next twelve to eighteen
months. The timing of any additional financing will depend in part on the
success of our initial projects. We have no commitments for any financing and
such financing may not be available when needed.
-23-
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning our directors and
executive officers as of May 31, 2006:
NAME AGE POSITION
- --------------------------------------------------------------------------------
Rahim Rayani 31 Chairman of the Board and Chief Executive Officer
RAHIM RAYANI, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
Mr. Rayani has been the Chairman of the Board and Chief Executive Officer of the
Company since June of 2005. Since 2003, Mr. Rayani has worked independently,
providing management consulting and investment banking services to companies,
focusing on the oil and gas and resource mining sectors. From 2001 to 2003, Mr.
Rayani was an Investor Relations Executive with Mindshare Communications, Inc.,
where he managed investor relations services for companies in the mining, oil &
gas, and technology sectors.
Our directors hold office until the next annual meeting of our stockholders and
until their successors have been duly elected and qualified.
AUDIT COMMITTEE
Since we have only one director, we do not have an audit committee. At such time
as we can attract other directors to serve on the Board, we plan to establish an
audit committee. Mr. Rayani is not a "financial expert".
CODE OF ETHICS
The Company adopted a Code of Ethics in April of 2004 that applies to its Chief
Executive Officer and Principal Accounting and Financial Officers.
EXECUTIVE COMPENSATION
Compensation paid to Officers and Directors is set forth in the Summary
Compensation Table below. The Company may reimburse its Officers and Directors
for any and all out-of-pocket expenses incurred relating to the business of the
Company.
-24-
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation paid by
us during the three years ended on December 31, 2005 to our Chief Executive
Officer and our other executive officers and executive officers of our
subsidiaries, who were serving as executive officers on December 31, 2005 and
received total salary and bonus in excess of $100,000 during fiscal year 2005
(the "Named Executive Officers").
LONG-TERM
COMPENSATION
AWARDS
----------------
OTHER SECURITIES
NAME AND PRINCIPAL POSITION ANNUAL UNDERLYING
AS OF DECEMBER 31, 2005 YEAR SALARY COMPENSATION OPTIONS/SARS (#)
- ----------------------------------------------------------------------------------------
Rahim Rayani, Chairman and CEO 2005 $ 56,000(1) -0- -0-
2004 -0- -0- -0-
2003 -0- -0- -0-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of December 31, 2005, the number and
percentage of outstanding shares of our common stock beneficially owned by our
Named Executive Officers, directors and stockholders owning more than 5% of our
common stock and our executive officers and directors as a group:
SHARES PERCENTAGE
BENEFICIALLY OF
NAME OF OWNER OWNED(1) CLASS
- ------------- -------- -----
Rahim Rayani, Chairman of the Board and CEO 16,500,000 13.8%
All Named Executive Officers and
Directors as a Group (1 person) 16,500,000 13.8%
- -----------------------------------------------
(1) All of the shares are owned directly by Mr. Rayani.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
- --------------------------
(1) Represents $8,000 per month for a period of seven months commencing June 1,
2005. As of December 31, 2005, a portion of Mr. Rayani's salary was
deferred due to the Company's financial condition.
-25-
DESCRIPTION OF SECURITIES
We have summarized below the material provisions of our Articles of
Incorporation, Amended By Laws and other instruments defining the rights of our
securities holders. Our summary may not contain all of the information that is
important to you. See "Available Information" for information about how to
obtain a copy of the documents described in this section.
GENERAL
Our Articles of Incorporation authorize 1,000,000,000 shares of our common
stock, $0.01 par value per share and 100,000,000 shares of our preferred stock,
$0.01 par value per share. As of August 15, 2006 we have 119,536,793 outstanding
shares of common stock and no outstanding shares of preferred stock.
COMMON STOCK
Each share of common stock entitles the holder to one vote on each matter
submitted to a vote of our stockholders, including the election of directors.
There is no cumulative voting. Subject to preferences that may be applicable to
any outstanding preferred stock, stockholders are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the Board of
Directors. Stockholders have no preemptive, conversion or other subscription
rights. There are no redemption or sinking fund provisions related to the common
stock. In the event of liquidation, dissolution or winding up of the Company,
stockholders are entitled to share ratably in all assets remaining after payment
of liabilities, subject to prior distribution rights of preferred stock, if any,
then outstanding.
PREFERRED STOCK
GENERAL
Preferred stock may be issued in one or more series as may be designated by our
Board of Directors.
The preferred stock may be entitled to such dividends, redemption rights,
liquidation rights, exercise rights and voting rights as the Board of Directors,
in its discretion, may determine, in a resolution or resolutions providing for
the issuance of any such stock. Rights granted by the Board of Directors may be
superior to those of existing shareholders (including the right to elect a
controlling number of directors as a class). Preferred stock can be issued
without the vote of the holders of common stock.
CONVERTIBLE SECURITIES
At August 15, 2006, the only outstanding convertible securities are the
convertible debentures and warrants issued to the selling stockholders.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our By laws provide for indemnification of our "Indemnitees" against judgments,
penalties, fines, amounts paid in settlement and reasonable expenses actually
and reasonably incurred by such person, by reason of the fact that such person
was or is our authorized representative, in connection with a threatened,
pending or completed third party proceeding, whether civil or criminal,
administrative or investigative, unless such individual acted or failed to act
in a manner that (i) constituted a breach of his fiduciary duties and (ii) such
breach involved intentional misconduct, fraud or knowing violation of the law
and in a manner such person reasonably believed to be in, or not opposed to, our
best interests, and, if the action was a criminal proceeding, if such person had
no reasonable cause to believe that such person's conduct was unlawful.
-26-
Our By laws also provide for mandatory indemnification of Indemnitees who have
been successful in defense of any third party or corporate proceeding or in
defense of any claim, issue or matter therein, against expenses actually and
reasonably incurred in connection with such defense.
Our "Indemnitees" include our directors, employees or agents or persons serving
at our request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION
The authorized but unissued shares of our common and preferred stock are
available for future issuance without our shareholders' approval. These
additional shares may be utilized for a variety of corporate purposes including
but not limited to future public or direct offerings to raise additional
capital, corporate acquisitions and employee incentive plans. The issuance of
such shares may also be used to deter a potential takeover of the Company that
may otherwise be beneficial to shareholders by diluting the shares held by a
potential suitor or issuing shares to a shareholder that will vote in accordance
with the Company's Board of Directors' desires. A takeover may be beneficial to
shareholders because, among other reasons, a potential suitor may offer
shareholders a premium for their shares of stock compared to the then-existing
market price.
LEGAL MATTERS
The validity of the shares of common stock offered hereby and other legal
matters in connection with the offering contained herein will be passed upon for
our company by Gallagher, Briody & Butler, Princeton, New Jersey.
EXPERTS
The audited consolidated financial statements of Gulf Coast Oil & Gas Co., Inc.
for the year ended December 31, 2005, the year ended December 31, 2004 and for
the period August 4, 2003 (inception of explanation stage) to December 31, 2005,
included in this prospectus have been so included in reliance on the reports
(which contains an explanatory paragraph relating to the Company's ability to
continue as a going concern as disclosed in Note 6 to the consolidated financial
statements) of Pollard-Kelley Auditing Services, Inc., given on the authority of
said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
We have filed with the SEC a registration statement on Form SB-2 in connection
with the securities offered under this prospectus. As permitted by SEC rules,
this prospectus does not contain all of the information contained in the
registration statement or in the exhibits to the registration statement. For
further information you may read and copy documents at the public reference room
of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. The SEC
charges a fee for copies. Copies of this material should also be available
through the Internet at the SEC EDGAR Archive, the address of which is
http://www.sec.gov.
We intend to distribute to our shareholders annual reports containing audited
financial statements. Our audited financial statements for the fiscal year
December 31, 2005 are contained in our Annual Report on Form 10-KSB. We are
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended.
-27-
INDEX TO FINANCIAL STATEMENTS
GULF COAST OIL & GAS, INC.
(FORMERLY OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(AN EXPLORATION STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE(S)
-------
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2005 AND DECEMBER 31, 2004
Reports of Independent Registered Public Accounting Firm F-2
Balance Sheet at December 31, 2005 and December 31, 2004 F-3
Statement of Operations for the years ending December 31, 2005
and 2004 and the period beginning August 4, 2003
(inception) through December 31, 2005 F-4
Statement of Stockholders' Equity for the period beginning
August 4, 2003 (inception) through December 31, 2005 F-5
Statement of Cash Flows for the years ending December 31, 2005
and 2004 and the period beginning August 4, 2003
(inception) through December 31, 2005 F-6
Notes to Consolidated Financial Statements-December 31, 2005 F-7 - F-10
FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2006
AND JUNE 30, 2005 (Unaudited)
Balance Sheets--June 30, 2006 and December 31, 2005 F-11
Statements of Operations - Quarters Ending and Year to Date
Ending June 30, 2006 and June 30, 2005, and Period From
August 4, 2003 (Inception) to June 30, 2006 F-12
Statements of Changes in Stockholders' Equity (Deficit)--For
Period Beginning August 4, 2003 (Inception) Through June
30, 2006 F-13
Statement of Cash Flows--Quarters Ending and Year to Date
Ending June 30, 2006 and June 30, 2005 and Period From
August 4, 2003(Inception) to June 30, 2006 F-14
Notes to Consolidated Financial Statements--June 30, 2006 F-15 - F-19
F-1
POLLARD-KELLEY AUDITING SERVICES, INC...........................................
AUDITING SERVICES 3250 WEST MARKET ST, SUITE 307,
FAIRLAWN, OH 44333 330-836-2558
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Gulf Coast Oil and Gas, Inc. and Subsidiary
(Formerly Otish Mountain Diamond Company and Subsidiary)
We have audited the accompanying balance sheets of Gulf Coast Oil and Gas, Inc.
and Subsidiary (Formerly Otish Mountain Diamond Company and Subsidiary) as of
December 31, 2005 and 2004, and the related statements of income, changes in
stockholders' equity, and cash flows for each of the two years in the period
ended December 31, 2005 and the period from August 4, 2003 through December 31,
2005 (since inception). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conduct our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The Company has not generated significant revenues or profits to date. This
factor among others may indicate the Company will be unable to continue as a
going concern. The Company's continuation as a going concern depends upon its
ability to generate sufficient cash flow to conduct its operations and its
ability to obtain additional sources of capital and financing. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at December 31,
2005 and 2004, and the results of its operations and its cash flows for each of
the two years in the period ended December 31, 2005 and the period from August
4, 2003 through December 31, 2005 (since inception), in conformity with U.S.
generally accepted accounting standards.
Pollard-Kelley Auditing Services, Inc.
/S/ Pollard-Kelley Auditing Services, Inc.
- ------------------------------------------
Fairlawn, Ohio
March 5, 2006
F-2
GULF COAST OIL & GAS, INC.
(FORMERLY OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
December 31, 2005 and December 31, 2004
DECEMBER 31, DECEMBER 31,
ASSETS 2005 2004
----------- -----------
Current Assets
Cash in banks $ 34,424 $ 1,912
Accounts receivable-other 5,248 --
----------- -----------
Total Current Assets 39,672 1,912
Fixed Assets
Office equipment 3,550 2,475
Less accumulated depreciation (2,560) (1,544)
----------- -----------
990 931
Other Assets
Website costs less accumulated
amortization of $500 and $0 1,000 --
Deposit on interest in unproved oil and gas leases 100,000 --
----------- -----------
101,000 --
----------- -----------
Total Assets $ 141,662 $ 2,843
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 70,672 $ 309,117
Due to shareholder 23,136 --
Accrued expenses 35,631 105,582
----------- -----------
Total Current Liabilities 129,439 414,699
Stockholders' Equity
Series A Preferred stock, 1,000,000 shares authorized, 0 shares
outstanding, par value $.001 per share -- --
Common stock, 600,000,000 shares authorized, 119,536,793 and 114,125,433
shares outstanding at respective period ends,
par value $.001 per share 119,537 114,126
Additional contributed capital 6,138,494 5,582,785
Deficit accumulated during exploration stage (6,295,710) (6,108,767)
Stock subscription advances 49,902 --
----------- -----------
12,223 (411,856)
----------- -----------
Total Liabilities and Stockholders' Equity $ 141,662 $ 2,843
=========== ===========
See accompanying notes to financial statements.
F-3
GULF COAST OIL & GAS, INC.
(FORMERLY OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF OPERATIONS
For the Years Ending December 31, 2005 and
2004, and for the period beginning
August 4, 2003 (Inception) through December 31, 2005
YEAR TO DATE YEAR ENDING
DECEMBER 31, DECEMBER 31, SINCE
2005 2004 INCEPTION
------------- ------------- -------------
Revenues
Sales $ -- $ -- $ --
Cost of sales
Exploration costs (46,789) 192,127 159,625
------------- ------------- -------------
Gross Profit 46,789 (192,127) (159,625)
Expenses
Administrative 291,395 5,620,326 5,993,179
------------- ------------- -------------
(244,606) (5,812,453) (6,152,804)
Other income and expenses
Loss on sale of fixed assets -- (684) (684)
Gain on settlement of debt 67,693 -- 67,693
Foreign exchange (loss) gain (10,030) (7,099) (16,689)
------------- ------------- -------------
57,663 (7,783) 50,320
------------- ------------- -------------
Loss from continuing operations (186,943) (5,820,236) (6,102,484)
------------- ------------- -------------
Discontinued operations
Mineral rights abandoned -- (193,226) (193,226)
------------- ------------- -------------
Net Loss $ (186,943) $ (6,013,462) $ (6,295,710)
============= ============= =============
Net loss per share (Basic and Diluted) $ (0.00) $ (0.06)
Average shares outstanding 117,302,001 99,430,563
See accompanying notes to financial statements.
F-4
GULF COAST OIL & GAS, INC.
(FORMERLY OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS EQUITY
For the period beginning August 4, 2003
(Inception) through December 31, 2005
SERIES A
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCK
CONTRIBUTED RETAINED SUBSCRIPTION
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADVANCES TOTAL
------------------------------------------------------------------------------------------------------
Balance August 4, 2003 -- $ -- -- $ -- $ -- $ -- $ -- $ --
Shares issued for services -- -- 24,300,000 24,300 (16,200) -- -- 8,100
Shares issued for cash -- -- 11,700,000 11,700 162,300 -- -- 174,000
Shares issued for
mineral rights -- -- 9,000,000 9,000 62,250 -- -- 71,250
Merger with Otish
Mountain Company 1,000,000 1,000 323,283 324 (216) (1,167) -- (59)
Net loss for the period -- -- -- -- -- (94,138) -- (94,138)
---------- -------- ----------- --------- ----------- ----------- -------- -----------
Balance December 31, 2003 1,000,000 1,000 45,323,283 45,324 208,134 (95,305) -- 159,153
Shares issued for services -- -- 60,900,000 60,900 5,119,100 -- -- 5,180,000
Shares issued for
mineral rights -- -- 150 -- 53 -- -- 53
Shares issued for cash -- -- 7,902,000 7,902 255,498 -- -- 263,400
Redemption of Preferred
Shares (1,000,000) (1,000) -- -- -- -- -- (1,000)
Net loss for the period -- -- -- -- -- (6,013,462) -- (6,013,462)
---------- -------- ----------- --------- ----------- ----------- -------- -----------
Balance at December 31, 2004 -- -- 114,125,433 114,126 5,582,785 (6,108,767) -- (411,856)
Shares issued for Debt -- -- 996,360 996 236,124 -- -- 237,120
Shares sold -- -- 4,115,000 4,115 295,885 -- -- 300,000
Shares issued for services -- -- 300,000 300 23,700 -- -- 24,000
Stock subscription advance -- -- -- -- -- -- 49,902 49,902
Net loss for the period -- -- -- -- -- (186,943) -- (186,943)
---------- -------- ----------- --------- ----------- ----------- -------- -----------
Balance at December 31, 2005 -- $ -- 119,536,793 $ 119,537 $ 6,138,494 $(6,295,710) $ 49,902 $ 12,223
========== ======== =========== ========= =========== =========== ======== ===========
See accompanying notes to financial statements.
F-5
GULF COAST OIL & GAS, INC.
(FORMERLY OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF CASH FLOWS
For the Years Ending December 31, 2005 and
2004, and for the period beginning August 4,
2003 (Inception) through December 31, 2005
YEAR TO DATE YEAR ENDING
DECEMBER 31, DECEMBER 31, SINCE
2005 2004 INCEPTION
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (186,943) $(6,013,462) $(6,295,710)
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation 1,016 10,665 13,617
Amortization 500 2,898 4,844
Services paid by stock 24,000 5,412,120 5,444,095
Mineral rights abandoned -- 195,226 195,226
Changes in Current assets and liabilities:
(Increase) in Accounts receivable - other (5,248) -- (5,248)
(Decrease) Increase in Accounts payable (6,325) 58,982 70,672
(Decrease) Increase in Accrued expenses (41,815) 84,335 58,767
----------- ----------- -----------
NET CASH (USED) BY
OPERATING ACTIVITIES (214,815) (249,236) (513,737)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Mineral rights -- (18,830) (91,534)
Purchase of Interest in unproved oil and gas (100,000) -- (100,000)
Purchase of Website costs (1,500) -- (27,519)
Purchase of Fixed assets (1,075) -- (20,280)
----------- ----------- -----------
NET CASH (USED) BY
INVESTING ACTIVITIES (102,575) (18,830) (239,333)
CASH FLOWS FROM FINANCING ACTIVITIES
Redemption of Preferred stock -- (1,000) --
Sale of Common stock 300,000 263,400 737,400
Stock subscription advances 49,902 -- 49,902
----------- ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 349,902 262,400 787,302
----------- ----------- -----------
NET INCREASE IN CASH 32,512 (5,666) 34,232
CASH FROM OTISH DIAMOND MERGER -- -- 192
CASH AT BEGINNING OF PERIOD 1,912 7,578 --
----------- ----------- -----------
CASH AT END OF PERIOD $ 34,424 $ 1,912 $ 34,424
=========== =========== ===========
See accompanying notes to financial statements.
F-6
GULF COAST OIL & GAS, INC. AND SUBSIDIARY
(Formerly OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2005
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY
Otish Mountain Diamond Company (formerly First Cypress, Inc.), a Nevada
corporation, was organized on September 14, 1999. From inception to September
30, 2003, the Company had not generated any revenues and was considered a
development stage enterprise, as defined in Financial Accounting Standards Board
No. 7. The Company was in the process of developing an internet computer
software program known as EngineMax. Essentially, software development was
suspended in November 2002 due to cash flow constraints. In October 2002, the
Company acquired certain items constituting the "Money Club Financial" business
concept and business plan. Due to the Company's inability to raise the necessary
equity capital to further the Money Club Financial business concept, no monies
were spent furthering the business concept from the date of acquisition to
September 30, 2003. The Company discontinued its involvement in these operations
in the third quarter of 2003.
On November 30, 2003, the Company successfully acquired 100% of Otish Mountain
Diamond Corp. ("Otish Corp."). The business activities of Otish Corp. became the
business activities of the Company. In connection with the merger the
capitalization of the Company was amended to reflect a 220:1 reverse stock split
and to increase the authorized capital to 600,000,000 shares, consisting of
500,000,000 common shares with a par value of $0.001, and 100,000,000 preferred
shares with a par value of $0.001. Also, 1,000,000 shares of a Serial A
Preferred were issued for services rendered. Finally, the then president of the
Company entered into two agreements with the Company; one, assumed all the known
liabilities of the company, and the second, agreed to convert debt owed the
president of $236,000 into 236,000 shares of Company common stock.
The Company's income statement at the date of merger was as follows:
Revenues $ -0-
Expenses:
Exploration costs $ 36,293
Administrative $ 136,284
Net Loss $ 172,577
Otish Mountain Diamond Corp. was incorporated in the state of Nevada on August
4, 2003. The Company was formerly engaged in the mining and exploration business
and had mineral rights in the Otish Mountain and Superior Craton regions of
Canada.
On November 30, 2003, the Company declared a 1 for 220 reverse stock split. On
July 13, 2005, the Company declared a 3 for 1 forward stock split. All shares
amount referenced in these footnotes represent the share equivalents after
taking into account, to the extent applicable, the effect of the reverse stock
split and the forward stock split. All share amounts in the financial statements
have also been adjusted retroactively for the reverse and forward stock split.
In August and November 2003, the Company issued 40,909 shares of its common
stock and paid $77,745 for mineral rights in the Otish Mountain and Superior
Craton regions of Quebec, Canada.
In the first quarter of 2004 the Company issued 60,900,150 shares of common
stock for services valued at $5,180,053. Valuation was based on the approximate
trading value of the Company's shares on the date issued.
During the third quarter of 2004 the Company issued 7,902,000 shares of common
stock to liquidate $263,400 of advances.
On January 13, 2005, the Company changed its name to Gulf Coast Oil & Gas, Inc.
F-7
On April 15, 2005, the Company settled an accounts payable debt of $232,120 for
696,360 shares of common stock.
On May 2, 2005, the Company received $100,000 for 1,665,000 shares of common
stock.
On May 26, 2005, the Company settled a current period debt of $5,000 for 300,000
of common stock.
On June 17, 2005, the Company received $100,000 for 1,200,000 shares of common
stock.
On July 17, 2005, the Company received $50,000 for 625,000 shares of common
stock.
On August 15, 2005, the Company issued 300,000 shares of common stock for
consulting services valued at $24,000.
On September 26, 2005, the Company received $50,000 for 625,000 shares of common
stock.
FINANCIAL STATEMENT PRESENTATION
The Company was a shell at the time of the acquisition having only $192 in
assets; the acquisition was treated as a reverse merger whereby the acquired
company is treated as the acquiring company for accounting purposes.
AN EXPLORATION STAGE COMPANY
The Company is an Exploration Stage Company since it is engaged in the search
for mineral deposits, which are not in the development or productions stage. As
an exploration stage company the Company will present, Since Inception, results
on its statements of operations, stockholders' equity and cash flows.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents. There was no cash paid during the periods for interest or
taxes.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Maintenance, repairs and renewals
are expensed as incurred. Depreciation of property and equipment is provided for
over their estimated useful lives, which range from three to five years, using
the straight-lined method.
WEBSITE DEVELOPMENT COSTS
The Company has expended $1,500 in Website Development Costs through March 1,
2005, for internal use software. These costs are being amortized over a three
year estimated life.
MINERAL RIGHTS
The Company uses the "full costs method" of accounting for its mineral reserves.
Under this method of accounting, properties are divided into cost centers. The
Company presently has two cost centers. All acquisition, exploration, and
development costs for properties within each cost center are capitalized when
incurred. The Company intends to deplete these costs equally over the estimated
units to be recovered from the properties. These costs were written off at
December 31, 2004 as part of the cost of mineral rights abandoned.
DEPOSIT ON INTEREST IN UNPROVED OIL AND GAS LEASES
On June 8, 2005, the Company paid $100,000 to acquire, subject to lease
availability, a 75% working interest in oil and gas leases in Louisiana. Under
the terms of the agreement the Company will pay 100% of the costs of
acquisition, exploration and development of the leases, the lease are subject to
overriding royalties, and has one year to submit the remaining portion of the
total costs. In the event the leases are unavailable, the funds advanced, less
expenses incurred will be returned to the Company.
F-8
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
Prior to September of 2005, the Company's primary functional currency was the
Canadian dollar. In September 2005 the Company consolidated all operations in
the United States of America and adopted the U.S. dollar as its primary
functional currency. For financial statement presentation, all historical
statements were translated in U.S. dollars. Monetary assets and liabilities were
translated at year-end exchange rates while non-monetary items were translated
at historical rates. Income and expense accounts were translated at the average
rates in effect during the period, except for depreciation, which was translated
at historical rates. Therefore, translation adjustments and transaction gains or
losses were recognized in the income in the period of occurrence.
NOTE 2 - MINERAL RIGHTS
Otish Mountain Diamond Corporation
On August 19, 2003 the Company purchased the mineral rights for 60,933 acres in
the Otish Mountain and Superior Craton regions of Quebec, Canada. The claims
were purchased for $42,506 and 17,045 shares of common stock. The Company is
required to spend a minimum of $135 CDN per mining claim on exploration before
the expiration date of each claim. The Company is required to spend $105 CDN per
claim maintenance/renewal fee to the appropriate governmental authority before
the expiration date of the mining claim. If the Company fails to meet its
obligations under this agreement the seller has the option to make the
expenditures and to reassume title to the mining claims.
On November 4, 2003 the Company purchased the mineral rights for 775 acres in
the Otish Mountain region of Quebec, Canada. The Claims were purchased for
$1,855 and 3,409 shares of common stock. The Company is required to pay a 2%
royalty of the net smelter returns and a 2% royalty on the gross overriding
royalty as defined in the agreement. The Company shall also pay to the seller
$5,000 CDN minimum annual advance royalty beginning on November 1, 2004 and each
year thereafter. The Company is also required to keep the property in good
standing for 1 year or the seller shall be entitled to reacquire the claims.
On November 4, 2003 the Company entered into a joint venture agreement for the
mineral rights for 15,361 acres in the Otish Mountain region of Quebec, Canada.
The investment was $33,383 and 20,454 shares of common stock. The Company paid
the required claim tax/renewal fees of $12,495 CDN by the due date of November
27, 2003. The Company was required to make a minimum advanced royalty payment of
$15,000 CDN once mining stage began. Royalties were subject to underlying
royalties of 2% of the net smelter returns and 2% of the gross overriding
royalty as defined in the agreement. The Company's total outlay for the joint
venture was not to exceed $375,000 CDN. The Company owned 45% of the joint
venture.
At December 31, 2004 the Company decided to abandon the above mineral rights.
The balance of the rights and the net book value of the website development
costs were expensed. The total amount written off was $195,226.
At present the Company has no proven properties.
NOTE 3 - DEPOSIT ON INTEREST IN UNPROVED OIL AND GAS LEASES
On June 8, 2005, the Company paid $100,000 to acquire, subject to lease
availability, a 75% working interest in oil and gas leases in Louisiana. Under
the terms of the agreement the Company will pay 100% of the costs of
acquisition, exploration and development of the leases, the leases are subject
to overriding royalties, and has one year to submit the remaining portion of the
total costs. In the event the leases are unavailable, the funds advanced, less
expenses incurred will be returned to the Company.
F-9
NOTE 4 - SERIES A PREFERRED STOCK
Each share of preferred has 15 votes compared to each share of common, which has
only one vote. In the second quarter 2004 all outstanding shares of Preferred
Stock were redeemed for $1,000.
NOTE 5 - RELATED PARTIES
The Company owes the former President and shareholder of the Company $0 and
$71,113 for compensation and expense reimbursement at December 31, 2005 and
December 31, 2004 respectively. The debt was settled in the third quarter 2005
for $20,000 resulting in a gain on settlement of debt of $67,693.
The Company owes it present President $23,136 for compensation and expense
reimbursement at March 31, 2006 and December 31, 2005, respectively.
NOTE 6 - GOING CONCERN
The Company has not generated significant revenues or profits to date. This
factor among others may indicate the Company will be unable to continue as a
going concern. The Company's continuation as a going concern depends upon its
ability to generate sufficient cash flow to conduct its operations and its
ability to obtain additional sources of capital and financing. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
NOTE 7 - ERROR CORRECTION
The number of common shares outstanding at December 31, 2003 was corrected in
these financial statements for an additional 33 shares issued in connection with
the merger with Otish Mountain Company. The total corrected Common Shares
outstanding at December 31, 2003 is 45,323,283. The amount previously reported
was 45,323,250.
The Net Loss for 2004 was corrected for the write-off of an Accounts Payable
balance. In 2005 the Company learned that the payable amount had not been
contributed to the Company. The debt was satisfied in 2005 with the issue of
696,360 of the Company's Common Stock. The corrected Net Loss for 2004 is
($6,013,462) or $(0.06) per share. The amounts previously reported were
($5,781,342) and $(0.06) respectively.
In connection with the above, the Accounts Payable balance at December 31, 2004
was corrected to $309,117 from $76,997 as originally reported.
NOTE 8 - SUBSEQUENT EVENTS
On February 1, 2006, the Company entered into a Securities Purchase Agreement
with a group of investors to sell secured convertible debentures in the
principal amount of $2,000,000. On February 2, 2006, the Company sold $1,000,000
of these debentures. In connection with this agreement the Company issued
five-year warrants to purchase 30,000,000 shares of common stock at the
following exercise prices: 7,500,000 at $0.02 per share, 7,500,000 at $0.03 per
share, 5,000,000 at $0.04 per share, 5,000,000 at $0.05 per share and 5,000,000
at $0.06 per share. The debentures are convertible at the option of the
investors at any time up to maturity into shares of common stock at the price
per share equal to the lesser of $0.02916 per share or an amount equal to 80% of
the lowest volume weighted price of common stock for the five days immediately
preceding the conversion date.
The Debentures have a three-year term and accrue interest at 10% per annum. The
repayment of the Debentures is secured by substantially all the assets of the
Company.
The Company agreed to file a Registration Statement to register the shares of
common stock issuable upon conversion of the debentures and upon exercise of the
warrants by March 4, 2006 (which has subsequently been extended to March 31,
2006).
F-10
GULF COAST OIL & GAS, INC. AND SUBSIDIARY
(Formerly OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(An Exploration Stage Company)
BALANCE SHEETS
JUNE 30, 2006 AND DECEMBER 31, 2005
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
----------- -----------
ASSETS
Current Assets
Cash & Cash Equivalents $ 1,314,070 $ 34,424
Accounts receivable 4,517 5,248
Deferred financing 125,364 --
----------- -----------
1,443,951 39,672
Fixed Assets
Office equipment 3,550 3,550
Less: accumulated depreciation (2,834) (2,560)
----------- -----------
716 990
Other Assets
Deferred financing 359,897 --
Website costs less accumulated amortization 700 1,000
Deposit on interest in unproved oil and gas leases 362,500 100,000
----------- -----------
723,097 101,000
----------- -----------
Total Assets $ 2,167,764 $ 141,662
=========== ===========
Current Liabilities
Accounts payable $ 69,312 $ 70,672
Accrued expenses 35,631 35,631
Due to shareholder 23,136 23,136
----------- -----------
128,079 129,439
Promissory Notes 2,000,000
Derivative Liability arising from warrants 248,223
Stockholders' Equity
Series A preferred stock, 100,000,000 shares authorized, 0
shares outstanding, par value $.001 per share
Common stock, 1,000,000,000 shares authorized,
119,536,793 and 119,536,793 shares outstanding
at June 30, 2006 and December 31, 2005
par value $.001 per share 119,537 119,537
Additional contributed capital 6,138,494 6,138,494
Deficit accumulated during exploration stage (6,516,471) (6,295,710)
Accumulated other comprehensive deficit -- --
Stock subscription advances 49,902 49,902
----------- -----------
(208,538) 12,223
----------- -----------
Total Liabilities and Stockholders' Equity $ 2,167,764 $ 141,662
=========== ===========
See accompanying notes and accountants report.
F-11
GULF COAST OIL & GAS, INC. AND SUBSIDIARY
(Formerly OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(An Exploration Stage Company)
STATEMENT OF OPERATIONS
FOR THE QUARTERS ENDING AND YEAR TO DATE ENDING JUNE 30, 2006
AND JUNE 30, 2005, AND THE PERIOD BEGINNING AUGUST 4, 2003
(INCEPTION) THROUGH TO JUNE 30, 2006 (UNAUDITED)
QUARTER QUARTER YEAR TO DATE YEAR TO DATE SINCE
JUNE 30, JUNE 30, JUNE 30, JUNE 30, INCEPTION
2006 2005 2006 2005
------------- ------------- ------------- ------------- -------------
Interest revenue $ 11,203 $ -- $ 15,170 $ -- $ 15,190
Cost of sales
Exploration costs -- -- -- -- 159,625
------------- ------------- ------------- ------------- -------------
Gross Profit 11,203 -- 15,170 -- (144,435)
Expenses
Administration 115,297 68,192 235,931 99,694 5,996,988
------------- ------------- ------------- ------------- -------------
(104,094) (68,192) (220,761) (99,694) (6,141,423)
------------- ------------- ------------- ------------- -------------
Other income and expenses
Loss on sale of fixed assets -- -- -- -- (684)
Gain on settlement of debt -- -- 67,693
Foreign exchange (loss) gain 3,753 -- 1,290 (16,689)
------------- ------------- ------------- ------------- -------------
-- 3,753 -- 1,290 50,320
------------- ------------- ------------- ------------- -------------
Loss from continuing operations (104,094) (64,439) (220,761) (98,404) (6,091,103)
------------- ------------- ------------- ------------- -------------
Discontinued operations
Mineral rights abandoned -- -- -- -- (193,226)
------------- ------------- ------------- ------------- -------------
Net (Loss) (104,094) (64,439) (220,761) (98,404) (6,284,329)
Other Comprehensive Income
Increase in fair value of
derivatives 732,609 -- -- -- --
------------- ------------- ------------- ------------- -------------
Net Comprehensive Income / (Loss) $ 628,515 $ (64,439) $ (220,761) $ (98,404) $ (6,284,329)
============= ============= ============= ============= =============
Net loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.00)
Net Comprehensive Income per share $ 0.01 $ (0.00) $ (0.00) $ (0.00)
Average shares outstanding 119,536,793 114,604,133 119,536,793 114,363,333
See accompanying notes to financial statements.
F-12
GULF COAST OIL & GAS, INC. AND SUBSIDIARY
(Formerly OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(An Exploration Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY (DEFICIT) FOR THE PERIOD BEGINNING AUGUST 4,
2003 (INCEPTION) THROUGH JUNE 30, 2006 (UNAUDITED)
SERIES A ADDITIONAL
PREFERRED STOCK COMMON STOCK CONTRIBUTED RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
--------- ----------- ---------- ----------- ------------ ----------
Balance
August 4, 2003 -- $ -- -- $ -- $ -- $ --
Shares issued
for services -- -- 24,300,000 24,300 (16,200) --
Shares issued
for cash -- -- 11,700,000 11,700 162,300 --
Shares issued
for mineral
rights -- -- 9,000,000 9,000 62,250 --
Merger with
Otish Mountain
Company 1,000,000 1,000 323,283 324 (216) (1,167)
Net loss for
the period -- -- -- -- -- (94,138)
--------- ----------- ---------- ----------- ------------ ----------
Balance
December 31, 2003 1,000,000 1,000 45,323,283 45,324 208,134 (95,305)
Shares issued
for services -- -- 60,900,000 60,900 5,119,100 --
Shares issued
for mineral
rights -- -- 150 -- 53 --
Shares issued
for cash -- -- 7,902,000 7,902 255,498 --
Redemption of
Preferred Shares (1,000,000) (1,000) -- -- -- --
Net loss for
the period -- -- -- -- -- (6,013,462)
--------- ------------ ---------- ----------- ------------ ----------
Balance at
December 31, 2004 -- -- 114,125,433 114,126 5,582,785 (6,108,767)
Shares issued
for Debt -- -- 996,360 996 236,124 --
Shares sold -- -- 4,115,000 4,115 295,885 --
Shares issued
for services -- -- 300,000 300 23,700 --
Stock subscription
advance -- -- -- -- -- --
Net loss for
the period -- -- -- -- -- (186,943)
--------- ------------ ---------- ----------- ------------ ----------
Balance at
December 31, 2005 -- -- 119,536,793 119,537 6,138,494 (6,295,710)
Net loss for
the period -- -- -- -- -- (220,761)
--------- ------------ ----------- ----------- ------------ ------------
-- $ -- 119,536,793 $ 119,537 $ 6,138,494 $ (6,516,471)
========= =========== =========== =========== ============ ============
ACCUMULATED
OTHER STOCK
COMPREHENSIVE SUBSCRIPTION
DEFICIT ADVANCES TOTAL
------------- ------------ -----------
Balance
August 4, 2003 $ -- $ -- $ --
Shares issued
for services -- -- 8,100
Shares issued
for cash -- -- 174,000
Shares issued
for mineral
rights -- -- 71,250
Merger with
Otish Mountain
Company -- -- (59)
Net loss for
the period -- -- (94,138)
----------- ---------- ----------
Balance
December 31, 2003 -- -- 159,153
Shares issued
for services -- -- 5,180,000
Shares issued
for mineral
rights -- -- 53
Shares issued
for cash -- -- 263,400
Redemption of
Preferred Shares -- -- (1,000)
Net loss for
the period -- -- (6,013,462)
---------- ----------- ----------
Balance at
December 31, 2004 -- -- (411,856)
Shares issued
for Debt -- -- 237,120
Shares sold -- -- 300,000
Shares issued
for services -- -- 24,000
Stock subscription
advance -- 49,902 49,902
Net loss for
the period -- -- (186,943)
---------- ----------- ----------
Balance at
December 31, 2005 -- 49,902 12,223
Net loss for
the period -- -- (220,761)
---------- ----------- ----------
$ -- $ 49,902 $ (208,538)
========== =========== ==========
See accompanying notes to financial statements.
F-13
GULF COAST OIL & GAS, INC. AND SUBSIDIARY
(Formerly OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(An Exploration Stage Company)
STATEMENT OF CASH FLOWS
FOR THE QUARTERS ENDING AND YEAR TO DATE ENDING JUNE
30, 2006 AND JUNE 30, 2005, AND THE PERIOD
BEGINNING AUGUST 4, 2003 (INCEPTION) THROUGH TO
JUNE 30, 2006 (UNAUDITED)
QUARTER QUARTER JUNE YEAR TO DATE YEAR TO DATE SINCE
JUNE 30, 2006 30, 2005 JUNE 30, 2006 JUNE 30, 2005 INCEPTION
------------- ------------ ------------- ------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (104,094) $ (64,439) $ (220,761) $ (98,408) $(6,284,329)
Adjustments to reconcile net earnings to
net cash provided (used) by
operating activities:
Depreciation 149 -- 507 13,617
Amortization 125 25,526 250 30,245
Services paid by stock -- -- -- 5,212,100
Mineral rights abandoned -- -- -- 195,226
Changes in current assets and liabilities
(Increase) Decrease in accounts
receivable -other -- (5,438) 731 (5,438) (4,517)
(Increase) decrease in deferred financing (126,992) -- (261,992) -- (261,992)
(Decrease) Increase in accounts payable 2,479 8,300 (1,358) 5,542 69,292
(Decrease) Increase in accrued expenses -- (10,954) 13,193 58,767
----------- ----------- ----------- ----------- -----------
NET CASH (USED) BY OPERATING ACTIVITIES (216,427) (72,257) (457,854) (84,354) (971,591)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of mineral rights -- -- -- -- (91,534)
Purchase of interest in unproved oil and gas leases (262,500) (100,000) (262,500) (100,000) (362,500)
Purchase of website costs -- -- -- (1,500) (27,519)
Purchase of fixed assets -- -- -- -- (20,280)
----------- ----------- ----------- ----------- -----------
NET CASH (USED) BY INVESTING ACTIVITIES (262,500) (100,000) (262,500) (101,500) (501,833)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock/ convertible debentures 1,000,000 100,035 2,000,000 200,000 2,737,400
Stock subscription advances -- -- -- -- 49,902
----------- ----------- ----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 100,035 2,000,000 200,000 2,787,302
----------- ----------- ----------- ----------- -----------
NET INCREASE IN CASH (72,222) 1,279,646 14,146 1,313,878
CASH FROM OTISH DIAMOND MERGER 192
CASH AT BEGINNING OF PERIOD 792,997 88,280 34,424 1,912
----------- ----------- ----------- ----------- -----------
CASH AT END OF PERIOD $ 1,314,070 $ 16,058 $ 1,314,070 $ 16,058 $ 1,314,070
=========== =========== =========== =========== ===========
See accompanying notes and accountants report.
F-14
GULF COAST OIL & GAS, INC. AND SUBSIDIARY
(Formerly OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY
Otish Mountain Diamond Company (formerly First Cypress, Inc.), a Nevada
corporation, was organized on September 14, 1999. From inception to September
30, 2003, the Company had not generated any revenues and was considered a
development stage enterprise, as defined in Financial Accounting Standards Board
No. 7. The Company was in the process of developing an internet computer
software program known as EngineMax. Essentially, software development was
suspended in November 2002 due to cash flow constraints. In October 2002, the
Company acquired certain items constituting the "Money Club Financial" business
concept and business plan. Due to the Company's inability to raise the necessary
equity capital to further the Money Club Financial business concept, no monies
were spent furthering the business concept from the date of acquisition to
September 30, 2003. The Company discontinued its involvement in these operations
in the third quarter of 2003.
On November 30, 2003, the Company successfully acquired 100% of Otish Mountain
Diamond Corp. ("Otish Corp."). The business activities of Otish Corp. became the
business activities of the Company. In connection with the merger the
capitalization of the Company was amended to reflect a 220:1 reverse stock split
and to increase the authorized capital to 600,000,000 shares, consisting of
500,000,000 common shares with a par value of $0.001, and 100,000,000 preferred
shares with a par value of $0.001. Also, 1,000,000 shares of a Serial A
Preferred were issued for services rendered. Finally, the then president of the
Company entered into two agreements with the Company; one, assumed all the known
liabilities of the company, and the second, agreed to convert debt owed the
president of $236,000 into 236,000 shares of Company common stock.
The Company's income statement at the date of merger was as follows:
Revenues $ -0-
Expenses:
Exploration costs 36,293
Administrative 136,284
Net Loss : $172,577
Otish Mountain Diamond Corp. was incorporated in the state of Nevada on August
4, 2003. The Company was formerly engaged in the mining and exploration business
and had mineral rights in the Otish Mountain and Superior Craton regions of
Canada.
On November 30, 2003, the Company declared a 1 for 220 reverse stock split. On
July 13, 2005, the Company declared a 3 for 1 forward stock split. All shares
amount referenced in these footnotes represent the share equivalents after
taking into account, to the extent applicable, the effect of the reverse stock
split and the forward stock split. All share amounts in the financial statements
have also been adjusted retroactively for the reverse and forward stock split.
In August and November 2003, the Company issued 40,909 shares of its common
stock and paid $77,745 for mineral rights in the Otish Mountain and Superior
Craton regions of Quebec, Canada.
In the first quarter of 2004 the Company issued 60,900,150 shares of common
stock for services valued at $5,180,053. Valuation was based on the approximate
trading value of the Company's shares on the date issued.
During the third quarter of 2004 the Company issued 7,902,000 shares of common
stock to liquidate $263,400 of advances.
On January 13, 2005, the Company changed its name to Gulf Coast Oil & Gas, Inc.
On April 15, 2005, the Company settled an accounts payable debt of $232,120 for
696,360 shares of common stock.
F-15
GULF COAST OIL & GAS, INC. AND SUBSIDIARY
(Formerly OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 2006
On May 2, 2005, the Company received $100,000 for 1,665,000 shares of common
stock.
On May 26, 2005, the Company settled a current period debt of $5,000 for 300,000
of common stock.
On June 17, 2005, the Company received $100,000 for 1,200,000 shares of common
stock.
On July 17, 2005, the Company received $50,000 for 625,000 shares of common
stock.
On August 15, 2005, the Company issued 300,000 shares of common stock for
consulting services valued at $24,000.
On September 26, 2005, the Company received $50,000 for 625,000 shares of common
stock.
FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America and rules and regulations of the Securities and
Exchange Commission (the "SEC") applicable to interim periods. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been included. These financial
statements should be read in conjunction with the Company's audited financial
statements included in the Company's Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission for the year ended December 31, 2005.
Operating results for three months ended June 30, 2006 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2006 or any interim period. The accompanying unaudited condensed consolidated
financial statements have not been reviewed by an independent public accountant.
AN EXPLORATION STAGE COMPANY
The Company is an Exploration Stage Company since it is engaged in the search
for mineral deposits, which are not in the development or productions stage. As
an exploration stage company the Company will present, Since Inception, results
on its statements of operations, stockholders' equity and cash flows.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents. There was no cash paid during the periods for interest or
taxes.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Maintenance, repairs and renewals
are expensed as incurred. Depreciation of property and equipment is provided for
over their estimated useful lives, which range from three to five years, using
the straight-lined method.
WEBSITE DEVELOPMENT COSTS
The Company has expended $1,500 in Website Development Costs through March 1,
2005, for internal use software. These costs are being amortized over a three
year estimated life.
F-16
GULF COAST OIL & GAS, INC. AND SUBSIDIARY
(Formerly OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 2006
MINERAL RIGHTS
The Company uses the "full costs method" of accounting for its mineral reserves.
Under this method of accounting, properties are divided into cost centers. The
Company presently has two cost centers. All acquisition, exploration, and
development costs for properties within each cost center are capitalized when
incurred. The Company intends to deplete these costs equally over the estimated
units to be recovered from the properties. These costs were written off at
December 31, 2004 as part of the cost of mineral rights abandoned.
DEPOSIT ON INTEREST IN UNPROVED OIL AND GAS LEASES
On June 8, 2005, the Company paid $100,000 to acquire, subject to lease
availability, a 75% working interest in oil and gas leases in Louisiana. Under
the terms of the agreement the Company will pay 100% of the costs of
acquisition, exploration and development of the leases, the lease are subject to
overriding royalties, and has one year to submit the remaining portion of the
total costs. In the event the leases are unavailable, the funds advanced, less
expenses incurred will be returned to the Company.
On May 9, 2006, the Company paid a deposit of $262,500 on oil and gas property
in Corpus Christi, Texas. The agreement was not completed until the third
quarter 2006.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
Prior to September of 2005, the Company's primary functional currency was the
Canadian dollar. In September 2005 the Company consolidated all operations in
the United States of America and adopted the U.S. dollar as its primary
functiional currency. For financial statement presentation, all historical
statements are translated in U.S. dollars. Monetary assets and liabilities are
translated at year-end exchange rates while non-monetary items are translated at
historical rates. Income and expense accounts are translated at the average
rates in effect during the period, except for depreciation, which is translated
at historical rates. Therefore, translation adjustments and transaction gains or
losses are recognized in the income in the period of occurrence.
NOTE 2 - MINERAL RIGHTS
Otish Mountain Diamond Corporation
On August 19, 2003 the Company purchased the mineral rights for 60,933 acres in
the Otish Mountain and Superior Craton regions of Quebec, Canada. The claims
were purchased for $42,506 and 17,045 shares of common stock. The Company is
required to spend a minimum of $135 CDN per mining claim on exploration before
the expiration date of each claim. The Company is required to spend $105 CDN per
claim maintenance/renewal fee to the appropriate governmental authority before
the expiration date of the mining claim. If the Company fails to meet its
obligations under this agreement the seller has the option to make the
expenditures and to reassume title to the mining claims.
On November 4, 2003 the Company purchased the mineral rights for 775 acres in
the Otish Mountain region of Quebec, Canada. The Claims were purchased for
$1,855 and 3,409 shares of common stock. The Company is required to pay a 2%
royalty of the net smelter returns and a 2% royalty on the gross overriding
royalty as defined in the agreement. The Company shall also pay to the seller
$5,000 CDN minimum annual advance royalty beginning on November 1, 2004 and each
year thereafter. The Company is also required to keep the property in good
standing for 1 year or the seller shall be entitled to reacquire the claims.
On November 4, 2003 the Company entered into a joint venture agreement for the
mineral rights for 15,361 acres in the Otish Mountain region of Quebec, Canada.
The investment was $33,383 and 20,454 shares of common stock. The Company has
paid the required claim tax/renewal fees of $12,495 CDN by the due date of
November 27, 2003. The Company is required to make a minimum advanced royalty
payment of $15,000 CDN once mining stage began. Royalties were subject to
underlying royalties of 2% of the net smelter returns and 2% of the gross
overriding royalty as defined in the agreement. The Company's total outlay for
the joint venture was not to exceed $375,000 CDN. The Company owned 45% of the
joint venture.
F-17
GULF COAST OIL & GAS, INC. AND SUBSIDIARY
(Formerly OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 2006
At December 31, 2004 the Company decided to abandon the above mineral rights.
The balance of the rights and the net book value of the website development
costs were expensed. The total amount written off was $195,226.
At present the Company has no proven properties.
NOTE 3 - DEPOSIT ON INTEREST IN UNPROVED OIL AND GAS LEASES
On June 8, 2005, the Company paid $100,000 to acquire, subject to lease
availability, a 75% working interest in oil and gas leases in Louisiana. Under
the terms of the agreement the Company will pay 100% of the costs of
acquisition, exploration and development of the leases, the leases are subject
to overriding royalties, and has one year to submit the remaining portion of the
total costs. In the event the leases are unavailable, the funds advanced, less
expenses incurred will be returned to the Company.
On May 9, 2006, the Company paid a deposit of $262,500 on oil and gas property
in Corpus Christi, Texas. The agreement was not completed until the third
quarter 2006.
NOTE 4 - NOTES PAYABLE
On February 1, 2006, the Company entered into a Securities Purchase Agreement
with Cornell Capital Partners, L.P., Certain Wealth, Ltd., and TAIB Bank, B.S.C.
pursuant to which the Buyers agreed to purchase secured convertible debentures
in the principal amount of $2,000,000. On February 2, 2006 the Company sold and
issued $1,000,000 in principal amount of Debentures to the Buyers. In connection
with the Securities Purchase Agreement, the Company issued Cornell Capital
five-year warrants to purchase 30,000,000 shares of our common stock at the
following exercise prices: 7,500,000 at $0.02 per share, 7,500,000 at $0.03 per
share, 5,000,000 at $0.04 per share, 5,000,000 at $0.05 per share, and 5,000,000
at $0.06 per share.
The debentures are convertible at the option of the Buyers any time up to
maturity into shares of the Company's common stock. The debentures have a
three-year term and accrue interest at 10% per year. All unpaid interest and
principal are due on or before February 1, 2009.
On April 5, 2006, the Company sold the balance, $1,000,000, of the secured
convertible debentures. The terms and conditions are the same. The debentures
have a three-year term and accrue interest at 10% per year. All unpaid interest
and principal are due on or before April 5, 2009.
Maturities of long term debt:
2006 $ -0-
2007 $ -0-
2008 $ -0-
2009 $2,000,000
F-18
GULF COAST OIL & GAS, INC. AND SUBSIDIARY
(Formerly OTISH MOUNTAIN DIAMOND COMPANY AND SUBSIDIARY)
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 2006
NOTE 5 - DERIVATIVE LIABILITY ARISING FROM WARRANTS
The Company accounts for debt with embedded conversion features and warrant
issues in accordance with EITF 98-5: ACCOUNTING FOR CONVERTIBLE SECURITIES WITH
BENEFICIAL CONVERSION FEATURES OR CONTINGENCY ADJUSTABLE CONVERSION and EITF No.
00-27: APPLICATION OF ISSUE NO 98-5 TO CERTAIN CONVERTIBLE INSTRUMENTS.
Conversion features determined to be beneficial to the holder are valued at fair
value and recorded to additional paid in capital. The Company determines the
fair value to be ascribed to the detachable warrants issued with the convertible
debentures utilizing the BLACK-SCHOLES method. Any discount derived from
determining the fair value to the debenture conversion features and warrants is
amortized to financing cost over the life of the debenture. The unamortized
discount, if any, upon the conversion of the debentures is expensed to financing
cost on a pro rata basis.
Debt issue with the variable conversion features are considered to be embedded
derivatives and are accountable in accordance with FASB 133; ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. The fairs value of the embedded
derivative is recorded to derivative liability. This liability is required to be
marked each reporting period. The resulting discount on the debt is amortized to
interest expense over the life of the related debt.
NOTE 6 - SERIES A PREFERRED STOCK
Each share of preferred, has 15 votes compared to each share of common, which
has only one vote. In the second quarter 2004 all outstanding shares of
Preferred Stock were redeemed for $1,000.
NOTE 7 - RELATED PARTIES
The Company owes it present President $23,136 for compensation and expense
reimbursement at June 30, 2006.
NOTE 8 - GOING CONCERN
The Company has not generated significant revenues or profits to date. This
factor among others may indicate the Company will be unable to continue as a
going concern. The Company's continuation as a going concern depends upon its
ability to generate sufficient cash flow to conduct its operations and its
ability to obtain additional sources of capital and financing. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
F-19
--------------------------------------------
PROSPECTUS
--------------------------------------------
544,403,329 SHARES OF COMMON STOCK
GULF COAST OIL & GAS, INC.
August --, 2006
We have not authorized any dealer, salesperson or other person to provide any
information or make any representations about Gulf Coast Oil & Gas, Inc. except
the information or representations contained in this prospectus. You should not
rely on any additional information or representations if made.
This prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy any securities:
o except the common stock offered by this prospectus;
o in any jurisdiction in which the offer or solicitation is not
authorized;
o in any jurisdiction where the dealer or other salesperson is not
qualified to make the offer or solicitation;
o to any person to whom it is unlawful to make the offer or
solicitation; or
o to any person who is not a United States resident or who is outside
the jurisdiction of the United States. The delivery of this
prospectus or any accompanying sale does not imply that:
o there have been no changes in the affairs of Gulf Coast Oil & Gas,
Inc. after the date of this prospectus; or
o the information contained in this prospectus is correct after the
date of this prospectus.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our By laws provide that we have the power to indemnify any officer or director
against damages unless such individual acted or failed to act in a manner that
(i) constituted a breach of his fiduciary duties and (ii) such breach involved
intentional misconduct, fraud or knowing violation of the law and in a manner
such person reasonably believed to be in, or not opposed to, our best interests,
and, if the action was a criminal proceeding, if such person had no reasonable
cause to believe that such person's conduct was unlawful.
No indemnification may be made (i) if a person is adjudged liable unless a Court
determines that such person is entitled to such indemnification, (ii) with
respect to amounts paid in settlement without court approval or (iii) expenses
incurred in defending any action without court approval.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth estimated expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered. All expenses will be paid by us.
Securities and Exchange Commission Registration Fee $ 3,174.69
Printing and Engraving Expenses $ 5,000.00
Accounting Fees and Expenses $ 5,000.00
Legal Fees and Expenses $ 50,000.00
Miscellaneous $ 2,000.00
----------------
TOTAL $ 65,174.69
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On November 30, 2003, the Company declared a 1 for 220 reverse stock split. On
July 13, 2005, the Company declared a 3 for 1 forward stock split. All shares
amount referenced in these footnotes represent the share equivalents after
taking into account, to the extent applicable, the effect of the reverse stock
split and the forward stock split. All share amounts in the financial statements
have also been adjusted retroactively for the reverse and forward stock split.
In March of 2003 and in February 2004, the Company issued 150 shares and 150
shares, respectively, of its common stock, $.001 par value per share to Locke B.
Goldsmith pursuant to an Option Agreement that the Company entered into with Mr.
Goldsmith to acquire a 100% interest in the Cahill Mineral Claims. In August and
November 2003, the Company issued 40,909 shares of its common stock and paid
$77,745 for mineral rights in the Otish Mountain and Superior Craton regions of
Quebec, Canada.
In the first quarter of 2004 the Company issued 60,900,150 shares of common
stock for services valued at $5,180,053. Valuation was based on the approximate
trading value of the Company's shares on the date issued.
During the third quarter of 2004 the Company issued 7,902,000 shares of common
stock to liquidate $263,400 of advances.
On January 13, 2005, the Company changed its name to Gulf Coast Oil & Gas, Inc.
II-1
During 2005, the Company settled a debt owed to a former officer of the Company
in the amount of $232,120 for shares of the Company. The initial settlement was
one share for each dollar owed. Prior to the actual delivery of the shares, the
Company had a three to one stock split so that the actual numbers of shares
delivered was 696,360 which was reflected in the Statement of Shareholders'
Equity. Since the correct number of shares was used in the weighted number of
shares outstanding, no restatement is necessary.
On May 2, 2005, the Company received $100,000 for 1,650,000 shares of common
stock.
On May 26, 2005, the Company settled a current period debt of $5,000 for 300,000
of common stock.
On June 17, 2005, the Company received $100,000 for 1,200,000 shares of common
stock.
On July 17, 2005, the Company received $50,000 for 625,000 shares of common
stock.
On August 15, 2005, the Company issued 300,000 shares of common stock for
consulting services valued at $24,000.
On September 26, 2005, the Company received $50,000 for 625,000 shares of common
stock.
On February 1, 2006, the Company entered into a Securities Purchase Agreement
with the selling stockholders pursuant to which the selling stockholders agreed
to purchase secured convertible debentures in the principal amount of
$2,000,000. On February 2, 2006 the Company sold and issued $1,000,000 in
principal amount of debentures to the selling stockholders. On April 5, 2006 the
Company sold and issued an additional $1,000,000 in principal amount of
debentures to the selling stockholders.
In connection with the Securities Purchase Agreement, the Company also issued to
Cornell Capital five-year warrants to purchase 30,000,000 shares of our common
stock at the following exercise prices: 7,500,000 at $0.02 per share, 7,500,000
at $0.03 per share, 5,000,000 at $0.04 per share, 5,000,000 at $0.05 per share,
and 5,000,000 at $0.06 per share.
In connection with the Securities Purchase Agreement, the Company also paid
Yorkville Advisors, LLC a commitment fee of $200,000 and a structuring fee of
$15,000.
Except as described above, in connection with the securities that were issued
for cash, no underwriting discounts or commissions were paid. Issuance of the
securities in each of the transactions was exempt from registration pursuant to
Section 4(2) of the Securities Act. The underlying securities were issued to
accredited investors in private transactions without the use of any form of
general solicitation or advertising. The underlying securities are "restricted
securities" subject to applicable limitations on resale.
ITEM 27. EXHIBITS
The following exhibits are filed as part of this registration statement:
EXHIBIT NO. DOCUMENT DESCRIPTION LOCATION
- ----------- -------------------- --------
3.1 Articles of Incorporation filed September 14, 1999 (1)
3.2 Certificate of Designation filed October 7, 2003 (2)
3.3 Articles of Amendment to Articles of Incorporation filed October 15, (3)
2003
3.4 Certificate of Amendment to Articles of Incorporation filed January 13, (4)
2005
3.5 Certificate of Amendment to Articles of Incorporation filed May 25, 2006 (5)
3.6 Amended and Restated Bylaws (6)
4.1 Specimen of Common Stock Certificate (1)
4.2 Form of Common Stock Purchase Warrant (2)
5.1 Legal Opinion of Gallagher, Briody & Butler (7)
10.1 Securities Purchase Agreement dated as of February 1, 2006 between the (6)
Company and Cornell Capital Partners, LP, Certain Wealth, Ltd. and Taib
Bank, B.S.C.(c)
10.2 Investor Registration Rights Agreement dated as of February 1, 2006 (6)
between the Company and Cornell Capital Partners, LP, Certain Wealth,
Ltd. and Taib Bank, B.S.C.(c)
10.3 Security Agreement dated as of February 1, 2006 between the Company and (6)
Cornell Capital Partners, LP, Certain Wealth, Ltd. and Taib Bank,
B.S.C.(c)
10.4 First Amendment to Investor Registration Rights Agreement dated as of (6)
March, 2006 between the Company and Cornell Capital Partners, LP,
Certain Wealth, Ltd. and Taib Bank, B.S.C.(c)
II-2
10.5 Agreement between the Company and Bourgeois Energy, Inc. dated June 17, (6)
2005 relating to the Saratoga Prospect
10.6 Business Consulting Services Agreement between the Company and Bourgeois (6)
Energy, Inc. dated August 15, 2005
10.7 Second Amendment to Investor Registration Rights Agreement dated (7)
as of March 31, 2006 between the Company and Cornell Capital Partners,
LP, Certain Wealth, Ltd. and Taib Bank, B.S.C. (c)
10.8 Third Amendment to Investor Registration Rights Agreement dated (7)
as of August 15, 2006 between the Company and Cornell Capital Partners,
LP, Certain Wealth, Ltd. and Taib Bank, B.S.C. (c)
23.1 Consent of Pollard-Kelley Audit Services, Inc. (7)
99.1 Secured Convertible Debenture issued February 1, 2006 in the amount of (6)
$500,000 to Cornell Capital Partners, LP (CCP-001)
99.2 Secured Convertible Debenture issued February 1, 2006 in the amount of (6)
$250,000 to Certain Wealth, Ltd. (CCP-002)
99.3 Secured Convertible Debenture issued February 1, 2006 in the amount of (6)
$250,000 to Taib Bank, B.S.C.(c)(CCP-003)
99.4 Warrant dated as of February 1, 2006 issued to Cornell Capital Partners, (6)
LP (7,500,000 shares)
99.5 Warrant dated as of February 1, 2006 issued to Cornell Capital Partners, (6)
LP (7,500,000 shares)
99.6 Warrant dated as of February 1, 2006 issued to Cornell Capital Partners, (6)
LP (5,000,000 shares)
99.7 Warrant dated as of February 1, 2006 issued to Cornell Capital Partners, (6)
LP (5,000,000 shares)
99.8 Warrant dated as of February 1, 2006 issued to Cornell Capital Partners, (6)
LP (5,000,000 shares)
(1) Filed as an exhibit to Registration Statement on Form SB-2, as amended,
filed on April 22, 2001 and incorporated herein by reference.
(2) Filed as Exhibit 3.1 to Report on Form 8-K filed on October 20, 2003 and
incorporated herein by reference.
(3) Filed as Exhibit 3.1 to Report on Form 8-K filed October 23, 2003 and
incorporated herein by reference.
(4) Filed as Exhibit 3 to Report on Form 8-K filed January 19, 2005 and
incorporated herein by reference.
(5) Filed as Exhibit 3.1 to Report on Form 8-K filed June 1, 2006.
(6) Filed as an exhibit to Form 10-KSB filed March 31, 2006.
(7) Filed herewith.
ITEM 28. UNDERTAKINGS
The undersigned registrant will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Sections 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement;
(iii)Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each such
post-effective amendment as a new registration statement of securities
offered, and the offering of such securities at that time to be the
initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
II-3
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on our behalf by the undersigned, in Vancouver, British
Columbia on August 29, 2006.
GULF COAST OIL & GAS, INC.
By: /S/ RAHIM RAYANI
--------------------
Rahim Rayani
Chief Executive Officer and President
(Principal Executive Officer)
By: /S/ RAHIM RAYANI
--------------------
Rahim Rayani
Chief Financial Officer (Principal Financial Officer
And Principal Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates stated.
SIGNATURE TITLE DATE
- ------------------- ------------------------------------- ----------------
/S/ RAHIM RAYANI President and Chief Executive Officer August 29, 2006
---------------- (Principal Executive Officer),
Rahim Rayani Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
and Director
II-4