U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X ] Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended May 31,
1998.
[ ] Transition report under Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from _________ to _________.
Commission File Number: 0-10201
NUGGET EXPLORATION, INC.
(Name of small business issuer in its charter)
Nevada 83-0250943
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
815 South Durbin Street, 82601
Casper, Wyoming (Zip Code)
(Address of principal
executive offices)
Issuer's Telephone Number: (307) 234-2895
Securities to be registered under Section 12(b) of the Exchange
Act:
Title of Each Class: None Name of each exchange on which
registered: N/A
Securities to be registered under Section 12(g) of the Exchange
Act:
Common Stock, $0.01 par value
(Title of class)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act
during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X ] Yes [ ] No
<PAGE>
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
The issuer's total revenues for the year ended May 31, 1998,
were $0.00.
The aggregate market value of the voting stock held by non-
affiliates computed by reference to the average bid and asked
prices of such stock, as of May 31, 1998, was $124,929 based on
an estimated 11,359,000 shares held by non-affiliates.
The number of shares outstanding of the issuer's common
stock ($0.01 par value), as of May 31, 1998, was 15,006,000. As
of August 31, 1998 the number of shares outstanding was
30,106,000.
Transitional Small Business Format: Yes [ ] No [X ]
2
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TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS. . . . . . . . . . . . . . . .4
ITEM 2. DESCRIPTION OF PROPERTY. . . . . . . . . . . . . . . .8
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . .9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. .9
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS. . . . . . . . . . . . . . . . . . . . . . . .9
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION. . . . . . . . . . . . . . . . . . . . . . 10
ITEM 7. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . 11
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING FINANCIAL DISCLOSURE. . . . . . . . . . . 12
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT . . . . . . . . . . . . . . . . . . 12
ITEM 10. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . 13
ITEM 11. SECURITY OWNERSHIP OF BENEFICIAL OWNERS. . . . . . . 14
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . 15
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . 17
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . 17
INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . 18
3
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Business Development
Nugget Exploration, Inc. (the "Company") was originally
incorporated in Nevada on July 24, 1980 under the name of Western
Exploration and Mining Company to engage in the business of
locating, acquiring, testing, exploring and mining precious
metals including gold, silver, uranium and other mineral
properties. On February 5, 1981, the Company amended its
Articles of Incorporation to change its name to Nugget
Exploration, Inc.
In connection with its business objective as stated above,
on November 19, 1980, the Company acquired sixteen patented
mining claims covering 1280 acres in the Atlantic City-South Pass
Mining district and nineteen patented mining claims covering 400
acres in the Lewiston Mining District, Fremont County, Wyoming
(together referred to as the "Wyoming Property").
To date, the Company has been unable to obtain the necessary
funds to proceed with any exploration and mining activities on
this property to a level that would produce revenues and profits
for the Company. The Company has also experienced continued
opposition from various environmental groups with regards to
future mining related activities on the property. As a result,
the property has not had any mining related activity for many
years and the Company does not anticipate engaging in any mining
related activities on the property in the future. On March
25,1998 the Company placed its interests in the Wyoming Property
on the market for sale. For more information, see Item(2)--
"Property".
On November 27, 1997, John W. MacGuire, the Company's
president and director passed away. Currently, the Company is
being operated by Mr. MacGuire's surviving wife - Ms. Mary
MacGuire who is the Company's acting President and director and
Ms. Delores MacQueen the Company's Secretary and director. Other
than Ms. MacGuire and Ms. MacQueen, the Company has no employees.
Neither Ms. MacGuire nor Ms. MacQueen have significant experience
in the mining industry or operating businesses other than
indirectly through their husbands who are both deceased.
In an effort to develop some value in the Company, On March
5, 1998, the Company executed a Financial Consulting Agreement
(the "Agreement") with Park Street Investments, Inc. ("Park
Street"). Pursuant to the Agreement, Park Street is to assist
the Company in restructuring its capitalization and in finding a
suitable merger or business combination. Park Street is a Utah
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Corporation 100% owned by Ken Kurtz. This agreement was filed on
Form 8-K dated June 22, 1998 with the Securities and Exchange
Commission and is incorporated herein by reference.
According to the Agreement, Park Street has agreed to assist
the Company with its corporate maintenance, administration,
financial statement preparation and securities filings. In
addition, Park Street is to actively pursue, negotiate and
structure a merger or business combination with a third party on
behalf of the Company. Park Street has also agreed to pay for
the costs associated with these responsibilities until the
Company effects a business combination with another entity.
On June 22, 1998, and in consideration for the assistance of
Park Street and a cash infusion to the Company by Park Street of
$15,100, the Company issued 15,100,000 shares of restricted
common stock (the "Shares") to a designee of Park Street -- First
Avenue, Ltd., a limited partnership organized under the laws of
the State of Utah. Ken Kurtz, being a general partner of First
Avenue, Ltd. and the president of Park Street, indirectly
controls the Shares. See Item (12) "Certain Relationships and
Related Transactions" for more information on this Agreement.
Business of the Issuer
For many years, the Company has remained dormant without any
material operations. The Company's only asset is its interest in
the Wyoming property which it currently has on the market for
sale (see Item(2)-- "Property"). The Company does not produce any
other goods or provide any other services. The Company has no
employees, full or part time, aside from its officers and
directors.
Given the limited mining experience of the Company's present
management, opposition from environmental groups and its
substantial debts, the Company does not expect to continue as a
mining related Company.
Through its Agreement with Park Street, the Company receives
services necessary to maintain its operations which are primarily
focused on the sale of its Wyoming Property, the settlement of
its debts, and in locating an entity with which it can combine or
acquire. However, there can be no assurances that the Company
will be able to negotiate a business combination or if such a
business combination is achieved, that it will be profitable,
worthwhile or sustainable.
Through Park Street, its consultant, the Company is in the
process of prospecting for, interviewing and performing the
necessary due diligence to structure a successful business
combination.
5
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Over the years, the Company has accrued substantial debt.
Furthermore, the Company is unable to meet its current
obligations. As of the date of this report, the Company reported
a stockholders' deficit of nearly $2 million. Except for a
nominal amount of cash, the Wyoming Property is currently the
Company's only asset. See Item(7) "Financial Statements".
To operate, the Company is currently relying solely on the
resources provided by Park Street in accordance with its
consulting agreement with Park Street. For more information
about this agreement, see Item (1) "Description of Business
Business Development" and Item (12) "Certain Relationships and
Related Transactions".
While the Company's current primary business focus is its
search for a suitable candidate with which to combine, its
business focus could ultimately change. To the extent that the
Company is successful in combining with a viable operating
entity, its business would likely become that of the target
company.
In addition to the listing of its Wyoming Property interests
for sale and its consulting arrangement with Park Street, the
Company appointed the accounting firm of Jones, Jensen in Salt
Lake City, Utah on July 27, 1998 to conduct an independent audit
of the Company's accounting records. See Item(8)-- "Changes in
and Disagreements with Accountant on Accounting Financial
Disclosure."
Supplies and Equipment
Because the Company has the Wyoming Property interests --
its only significant asset for sale, the Company cannot foresee
or estimate what operations, if any, it may engage in the future.
As such, the Company is unable to ascertain what types and
amounts of supplies or equipment may be needed in the future.
Competition
As mentioned throughout this report, the Company has the
Wyoming Property interests -- its only significant asset for
sale. To this extent, the Company is competing with other sellers
of similar properties for which competition is likely intense.
While the Company has not had any significant mining activities
nor does it expect any in the future, it may be classified by
some as a mining related Company. To this extent, the Company
would compete with other companies in the mining industry, which
is in general, highly competitive. Competitors are well
capitalized with resources far greater than those of the Company.
The Company's competitive position in the mining industry is thus
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very insignificant. If minerals are discovered under the
properties or leases in which the Company owns interest, the
availability of ready markets for such minerals will depend upon
a number of factors beyond the Company's control including the
effect of federal and state regulations upon the extraction of
minerals.
The environment for the Company's current activities of
searching for a suitable candidate with which to combine is
highly competitive. There are thousands of companies seeking to
merge with or acquire viable operating entities. It can be
assumed that most, if not all of these companies have
substantially more resources than the Company. The Company
competes based on its large base of existing shareholders and its
status as a reporting Company under the 1934 Securities and
Exchange Act, as amended. However, the Company has no other
resources to offer a potential target other than its stock.
Additional issuance of its common stock would result in
substantial dilution to the Company's existing shareholders.
Moreover, to the extent the Company is unable to sell its
property interests or settle its debts, its public shell becomes
substantially less marketable and subject to even greater
competition.
Environmental Regulation
As an owner of interests in real property the Company is
subject to laws surrounding any operations that could adversely
effect the environment. To the best of its knowledge, the
Company believes it is not subject to any adverse environmental
claims from any regulatory agency, although no such assurances
can be given.
The Company believes that if it can sell its Wyoming
Property interests and settle with its creditors, it would be an
attractive entity into which a viable operating Company could
merge. At this time, however, the Company has not identified a
merger candidate. Moreover, if it is able to identify a
potential merger candidate, there are no assurances that it will
be able to complete a transaction or that such transaction will
result in an increase in shareholder value.
To the extent the Company is unable to sell its Wyoming
Property interests or settle with its creditors, it would become
substantially less attractive for a potential merger candidate.
Additionally, in the event the Company is unable to settle with
its creditors it may be forced to seek protection from such
creditors under applicable bankruptcy laws.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company holds sixteen patented mining claims covering
1280 acres in the Atlantic City-South Pass Mining district and
nineteen patented mining claims covering 400 acres in the
Lewiston Mining District, Fremont County, Wyoming (together
referred to as the "Wyoming Property").
On March 25,1998 the Company placed its interests in the
Wyoming Property on the market for sale for $1,200,000. As of
the date of this report, the Company has not had an appraisal
performed on the property interests. The Company has only relied
on estimates of value from its real estate agent and of its
management in determining the price. As such, there are no
assurances that this price reflects a true market value for the
property interests. Moreover, the Company may consider a
substantial price reduction if the property interests are not
sold within a reasonable period of time.
The Company's interests in the Wyoming Property are
encumbered by certain grazing rights owned by an unrelated party.
To the extent that potential buyers do not wish to be subject to
this encumbrance, the potential sale of the Wyoming Property
could be adversely affected. The Company has had discussions,
from time-to-time, with the owners of the grazing rights with
regards to possible terms they would be willing to accept to
release such rights. However, no definitive agreement has been
reached and no assurances can be given that the Company will be
able to effect the release of such rights.
As of the date of this report, there is no insurance of any
kind in place covering the Wyoming Property. As such, the Company
would not have funds to cover any adverse claims resulting from
personal injury, property damage or otherwise. To the extent the
Company is a party to such claim, its operations and financial
condition could be additionally adversely affected.
Notwithstanding the grazing rights, the Wyoming Property is
not encumbered by any other encumbrances or liens, nor does it
secure any form of indebtedness.
There is strong opposition by environmentalists to mining
activities in the area including and surrounding the Wyoming
Property. Therefore, no assurances can be given that the
property will ever be suitable for or have mining operations. As
such, any potential buyer may only view the property for its
recreational value, which may or may not be at a substantially
lower price than if utilized for mining activities.
8
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ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any pending legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters before its
shareholders during the year ended May 31, 1998 and has not
submitted any matters to its shareholders since December 1993.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock of the Company is currently traded through
the NASD Over-the-Counter ("OTC") Bulletin Board ("OTCBB") under
the symbol NUGT, although very limited trading has occurred over
the past several years.
The table set forth below lists the range of high and low
bids of the Company's Common Stock for each quarter over the last
two fiscal years. The prices in the table reflect inter-dealer
prices, without retail markup, markdown or commission and may not
represent actual transactions.
Calender
Calendar Year Quarter High Low
1996 Third $.02 $.005
Fourth $.02 $.005
1997 First $.02 $.005
Second $.02 $.005
Third $.02 $.005
Fourth $.02 $.005
1998 First $.02 $.005
Second $.02 $.005
As of May 31, 1998, there were approximately 616 holders of
record of the Company's Common Stock. The Company has not
declared any cash dividends for the last two fiscal years. The
Company does not anticipate declaring any cash dividends in the
near future. There are no restrictions that limit the Company's
ability to pay dividends, other than those generally imposed by
applicable state law. The future payment of dividends, if any,
on the Common Stock is within the discretion of the board of
directors and will depend on the Company's earnings, capital
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requirements, financial condition, and other relevant factors.
The Company does not anticipate the payment of future dividends.
Recent Sales of Unregistered Securities
Pursuant to the Agreement with Park Street, On June 22,
1998, the Company issued 15,100,000 shares of unregistered
restricted common stock (the "Shares") to First Avenue, Ltd., a
limited partnership organized under the laws of the State of
Utah, as a designee of Park Street. Ken Kurtz, being a general
partner of First Avenue, Ltd. and the president of Park Street,
indirectly controls the Shares. For more information about this
Agreement, See Item (12) "Certain Relationships and Related
Transactions".
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF
OPERATION
Plan of Operations
For many years, the Company has remained dormant without any
operations or significant assets. The Company's current business
plan involves the sale of its Wyoming Property, settlement of its
debts, and finding a suitable merger or acquisition candidate
that can provide the Company with a basis for successful
operations. The Company does not currently produce any goods or
provide any services, nor does the Company have any full or part
time employees, aside from its officers and directors. The
Company has no assets or resources to support itself. However,
the Company recently signed a consulting agreement with Park
Street. Under the agreement, Park Street has agreed to pay the
Company's costs and support the Company's administrative needs
until it is able to combine with another entity. For more
information about this agreement, see Item (1) "Description of
Business Business Development" and Item (12) "Certain
Relationships and Related Transactions".
The Company is currently searching for viable operating
entities with which to combine. However, as of the date of this
filing, no definitive agreements have been reached. The Company
has not realized any cash inflow/or revenue for many years. The
Company hopes that it can engage in a business combination with
an entity that will provide the Company with revenue from
operations. Since the Company no longer has any significant
assets, any business combination that the Company ultimately
effects will involve the issuance of the Company's Common Stock.
Such an exchange of the Company's Common Stock would
substantially dilute the existing ownership position of the
Company's current shareholders. If the Company effects a future
business combination, it may need financing to satisfy the cash
requirements of its business combination partner. The nature and
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extent of these requirements will depend upon the kind of
business acquired by the Company. Given the Company's limited
cash flow and history of operating losses, there is a substantial
risk that the Company will not be able to raise the capital
necessary to make a subsequent business combination successful. A
business combination will also likely result in the Company's
recruitment of additional employees (For more information on
these developments see Item (1) "Description of Business").
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements for the fiscal year ended
May 31, 1998 are attached hereto as pages F-3 through F-13.
[THIS SPACE LEFT INTENTIONALLY BLANK]
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INDEPENDENT AUDITORS' REPORT
Board of Directors
Nugget Exploration, Inc.
(A Development Stage Company)
Casper, Wyoming
We have audited the accompanying balance sheets of Nugget
Exploration, Inc. (a development stage company) as of May 31, 1998
and 1997, and the related statements of operations, stockholders'
equity (deficit), and cash flows for the years ended May 31, 1998,
1997 and 1996 and from inception on July 24, 1980 through May 31,
1998. 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 conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
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.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Nugget
Exploration, Inc. (a development stage company) as of May 31, 1998
and 1997, and the results of its operations and its cash flows for
the years ended May 31, 1998, 1997 and 1996 and from inception on
July 24, 1980 through May 31, 1998 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continued as a going concern. As discussed
in Note 2 to the financial statements, the Company's recurring
losses from operations and working capital deficit raise
substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in
Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Jones, Jensen & Company
Salt Lake City, Utah
September 9, 1998
F-3
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NUGGET EXPLORATION, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
May 31
-----------------
1998 1997
----------- ----------
CURRENT ASSETS
Cash $ 7,010 $ 22
----------- ----------
Total Current Assets 7,010 22
----------- ----------
OTHER ASSETS
Property held for sale (Note 6) 111,502 111,502
----------- ----------
Total Other Assets 111,502 111,502
----------- ----------
TOTAL ASSETS $ 118,512 $ 111,524
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 154,540 $ 136,749
Accrued payroll - related party (Note 7) 651,389 651,389
Notes payable - related party (Note 4) 624,642 624,642
Accrued interest - related party (Note 4) 591,652 520,386
Notes payable (Note 8) 29,714 29,714
Accrued interest (Note 8) 27,635 27,193
----------- ----------
Total Current Liabilities 2,079,572 1,987,073
----------- ----------
TOTAL CURRENT LIABILITIES 2,079,572 1,987,073
----------- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 50,000,000 shares authorized
of $0.01 par value; 15,006,000 shares
issued and outstanding 150,060 150,060
Additional paid-in capital 3,201,741 3,201,741
Accumulated deficit (5,312,861) (5,227,350)
------------ ----------
Total Stockholders' Equity (Deficit) (1,961,060) (1,875,549)
------------ ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 118,512 $ 111,524
============ ==========
The accompanying notes are an integral part of these financial statements
F-4
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NUGGET EXPLORATION, INC.
(A Development Stage Company)
Statements of Operations
From
Inception on
July 24,
For the Years Ended 1980 Through
May 31, May 31,
1998 1997 1996 1998
------------ ------------ ------------ ------------
REVENUES $ - $ - $ - $ -
------------ ------------ ------------ ------------
LOSS FROM DISCONTINUED
OPERATIONS (NOTE 3) (78,524) (78,967) (35,851) (5,296,874)
------------ ------------ ------------ ------------
NET LOSS $ (78,524) $ (78,967) $ (35,851) $(5,296,874)
============ ============ ============ ============
BASIC NET LOSS PER SHARE
OF COMMON STOCK $ (0.01) $ (0.01) $ (0.00)
============ ============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 15,006,000 15,006,000 15,006,000
============ ============ ============
The accompanying notes are an integral part of these financial statements
F-5
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NUGGET EXPLORATION, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
------------ ------------ ------------ ------------
At inception on
July 24, 1980 - $ - $ - $ -
Common stock issued for
property at $0.06 per
share 3,240,000 32,400 172,644 -
Common stock issued for
cash at $0.10 per share 736,000 7,360 64,640 -
Common stock issued for
cash at approximately
$0.25 per share 3,000,000 30,000 720,000 -
Stock offering costs - - (18,854) -
Common stock issued for
cash at $0.25 per share 80,000 800 19,200 -
Common stock issued for
cash at $0.50 per share 5,000,000 50,000 2,450,000 -
Stock offering costs - - (482,517) -
Stock issued for property
at $0.31 per share 800,000 8,000 241,528 -
Warrant issued for cash - - 100 -
Common stock issued for
cash and services at
$0.14 per share 200,000 2,000 26,000 -
Common stock issued for
services at $0.01 per
share 100,000 1,000 - -
Common stock issued for
debt at $0.01 per share 1,850,000 18,500 - -
Net loss for the period
from inception on July
24, 1980 to May 31, 1995 - - - (5,103,532)
------------ ------------ ------------ ------------
Balance, May 31, 1995 15,006,000 150,060 3,192,741 (5,103,532)
Net loss for the year
ended May 31, 1996 - - - (35,851)
------------ ------------ ------------ ------------
Balance, May 31, 1996 15,006,000 $ 150,060 $ 3,192,741 $(5,139,383)
------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements
F-6
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NUGGET EXPLORATION, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
------------ ------------ ------------ ------------
Balance, May 31, 1996 15,006,000 $ 150,060 $ 3,192,741 $(5,139,383)
------------ ------------ ------------ ------------
Net loss for the year
ended May 31, 1997 - - - (78,967)
------------ ------------ ------------ ------------
Balance, May 31, 1997 15,006,000 150,060 3,192,741 (5,218,350)
Net loss for the year
ended May 31, 1998 - - - (78,524)
------------ ------------ ------------ ------------
Balance, May 31, 1998 15,006,000 $ 150,060 $ 3,192,741 $(5,296,874)
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements
F-7
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NUGGET EXPLORATION, INC.
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
July 24,
For the Years Ended 1980 Through
May 31, May 31,
1998 1997 1996 1998
---------- ---------- ---------- ------------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss $ (78,524) $ (78,967) $ (35,851) $(5,296,874)
Adjustments to Reconcile
Net Loss to Changes in
Operating Assets and
Liabilities:
Stock issued for services,
property and debt - - - 364,571
Changes in operating assets
and liabilities:
Increase in accrued expenses 74,709 73,907 35,851 1,270,676
Increase in accounts payable 10,803 4,932 - 147,553
---------- ---------- ---------- ------------
Net Cash Used by Operating
Activities 6,988 (128) - (3,514,074)
---------- ---------- ---------- ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Investment in property - - - (111,502)
---------- ---------- ---------- ------------
Net Cash Used by Investing
Activities - - - (111,502)
---------- ---------- ---------- ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Sale of common stock for cash
- net of stock offering costs - - - 2,978,230
Proceeds from Increase in notes
payable - related - - - 624,642
Proceeds from Increase in notes
payable - - - 29,714
---------- ---------- ---------- ------------
Net Cash Provided by
Financing Activities - - - 3,632,586
---------- ---------- ---------- ------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 6,988 (128) - 7,010
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 22 150 150 -
---------- ---------- ---------- ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 7,010 $ 22 $ 150 $ 7,010
========== ========== ========== ============
The accompanying notes are an integral part of these financial statements
F-8
<PAGE>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Statements of Cash Flows (Continued)
From
Inception on
July 24,
For the Years Ended 1980 Through
May 31, May 31,
1998 1997 1996 1998
---------- ---------- ---------- ------------
SUPPLEMENTAL CASH FLOW
INFORMATION
CASH PAID FOR:
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Common stock issued for
services rendered $ - $ - $ - $ 14,000
Common stock issued for
debt relief $ - $ - $ - $ 18,500
Common stock issued for
property $ - $ - $ - $ 249,528
The accompanying notes are an integral part of these financial statements
F-9
<PAGE>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Notes to the Financial Statements
May 31, 1998 and 1997
NOTE 1 - ORGANIZATION AND HISTORY
Nugget Exploration, Inc. (the Company) was incorporated
under the laws of Nevada on July 24, 1980 for the purpose
of exploring for and developing uranium, gold and other
mineral properties. The Company has had limited
operations to date and its activities have consisted
primarily of raising equity capital and the acquisition
and exploration of mineral properties; accordingly, the
Company is considered to be a development stage
enterprise as defined in SFAS 7. Current operations are
being funded by borrowings from the Company's officers.
a. Accounting Method
The Company's financial statements are prepared using the
accrual method of accounting. The Company has elected a
May 31 calendar year end.
b. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid
investments with maturities of three months or less at
the time of acquisition.
c. Basic Net Loss Per Share
The computations of basic net loss per share of common
stock are based on the weighted average number of shares
outstanding during the period of the financial
statements.
d. Provision for Taxes
At May 31, 1998, the Company had net operating loss
carryforwards of approximately $5,300,000 that may be
offset against future taxable income through 2013. No
tax benefit has been reported in the financial
statements, because the Company believes there is a 50%
or greater chance the carryforwards will expire unused.
Accordingly, the potential tax benefits of the loss
carryforwards are offset by a valuation allowance of the
same amounts.
e. Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-10
<PAGE>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Notes to the Financial Statements
May 31, 1998 and 1997
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using
generally accepted accounting principles applicable to a
going concern which contemplates the realization of
assets and liquidation of liabilities in the normal
course of business. However, the Company does not have
significant cash or other material assets, nor does it
have an established source of revenues sufficient to
cover its operating costs and to allow it to continue as
a going concern. It is the intent of the Company to seek
a merger with an existing, operating company. Until that
time, shareholders of the Company have committed to
meeting its minimal operating needs.
NOTE 3 - DISCONTINUED OPERATIONS
The Company has been inactive since 1989. Therefore, all
revenues generated by the Company have been netted
against the expenses and are grouped into the
discontinued operations line on the statement of
operations.
NOTE 4 - NOTES PAYABLE - RELATED PARTIES
Notes payable - related at May 31, 1998 and 1997
consisted of the following:
1998 1997
------------ ------------
Note payable to officers
of the Company,
interestat 12% per annum,
due on demand,
unsecured. $ 155,203 $ 155,203
Notes payable to an officer
of the Company,
interest at 11% to 12.75%,
due on demand,
unsecured. 434,073 434,073
Note payable to a related
party bearing interest
at 2% over prime, due on
demand, unsecured. 34,166 34,166
Note payable to a related
party bearing interest
at 2% over prime, due on
demand, unsecured. 1,200 1,200
------------ ------------
Totals 624,642 624,642
Accrued interest 591,652 520,386
------------ ------------
Total Amounts Due $ 1,216,294 $ 1,145,028
============ ============
F-11
<PAGE>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Notes to the Financial Statements
May 31, 1998 and 1997
NOTE 5 - RELATED PARTY TRANSACTIONS
Since the inception of the Company, the president and
treasurer of the Company had advanced money to the
Company without collateral and paid certain expenses for
the Company which in the aggregate, approximate $624,500.
The Company has repaid $469,297 of the above including
interest thereon at 2% above prime.
On May 31, 1984, the Company entered into a non-
transferable, convertible, subordinated promissory note
with the president and treasurer of the Company in the
amount of $155,203. The note bears interest at 12% with
principal and accrued interest due on demand. The note
is completely or partially convertible into shares of the
Company's $0.01 par value common stock at the rate of
$0.19 per share. If the note is fully converted by the
due date, no interest will be paid.
NOTE 6 - PATENTED LODE MINING CLAIMS HELD FOR SALE
The Company acquired patented lode mining claims in
Atlantic City, Wyoming for the purpose of mining gold.
The Company did not commence mining and later decided to
sell the patented lode mining claims. The patented lode
mining claims are recorded at cost. The properties are
currently listed for sale and the Company hopes to sell
the patented lode mining claims within the next few
months. A portion of the patented lode mining claims is
encumbered by grazing rights.
NOTE 7 - ACCRUED PAYROLL - RELATED PARTY
The Company has accrued salary to the Company's former
President. At May 31, 1998 and 1997 the amount due was
$651,389.
NOTE 8 - NOTES PAYABLE
Notes payable at May 31, 1998 and 1997 consisted of the
following:
1998 1997
Note payable to an individual,
interest at 9%
per annum, due on demand,
unsecured. $ 2,289 $ 2,289
Note payable to an individual,
interest at 9%
per annum, due on demand,
unsecured. 5,090 5,090
Notes payable to a company,
interest at 10.5% -
12.75%, due on demand,
unsecured. 22,335 22,335
Totals 29,714 29,714
Accrued interest 27,635 24,193
Total Amounts Due $ 57,349 $ 53,907
F-12
<PAGE>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Notes to the Financial Statements
May 31, 1998 and 1997
NOTE 8 - SUBSEQUENT EVENTS
The Company has had virtually no revenues, income or cash
flow for many years. Currently, the Company has no
assets or resources with which to operate.
The Company's current president believes that the
Company, if revived and restructured, could be a
potential candidate with which a viable operating entity
could combine. The Company has a base of shareholders
and is a reporting Company under the Securities and
Exchange Act of 1934, as amended.
Because the Company had no assets or resources to
compensate or induce personnel to assist it with such a
program, the Company entered into a Financial Consulting
Agreement ("Agreement") with Park Street Investments,
Inc. ("Park Street") on March 5, 1998. Park Street is a
Utah Corporation.
According to the Agreement, Park Street has agreed to
assist the Company with its corporate maintenance,
administration, financial statement preparation and
securities filings. In addition, Park Street is to
actively pursue, negotiate and structure a merger or
business combination with a third party on behalf of the
Company. Park Street has also agreed to pay for the
costs associated with these responsibilities until the
Company effects a combination with another entity.
On June 22, 1998, and in consideration for the assistance
of Park Street and a cash infusion to the Company by Park
Street of $15,100, the Company issued 15,100,000 shares
of restricted common stock (the "Shares") to a designee
of Park Street - First Avenue, Ltd., a limited
partnership organized under the laws of the State of
Utah. Ken Kurtz is a general partner of Fist Avenue,
Ltd. and the president of the Agreement. Park Street
shall be entitled to as much as 15% after a business
combination. Park Street shall also be entitled to any
cash consideration it can negotiate from a potential
business entity.
Because the exact number of shares to be outstanding
after a business combination is currently unknown and
because the exact percentage of ownership that Park
Street is entitled to will be subject to negotiations
between the Company, Park Street, and a potential target
Company, the actual number of shares to be owned by Park
Street will be modified by mutual agreement by the
parties involved. Moreover, the amount of cash that Park
Street is to receive is also subject to negotiations and
is currently unknown. In no event, shall Park Street's
ownership percentage exceed more that 15% of the total
outstanding shares of the Company after a business
combination.
F-13
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON
ACCOUNTING FINANCIAL DISCLOSURE
The Company has been exempt from the required filings of
audited financial statements pursuant to Rule 311 of Regulation
S-X. For over 10 years, the Company filed unaudited financial
statements. On July 27, 1998, the Board of Directors appointed
Jones, Jensen & Company to conduct an audit of the Company's
financial statements from the years May 31, 1984 through May 31,
1998. The previous accountant that had been filing the unaudited
financial statements was not a member of the SEC Practice Board.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
Directors, Executive Officers and Control Persons
Name Age Position(s) and Office(s)
Mary C. MacGuire 68 Treasurer, Director and
Acting President
Delores H. MacQueen 75 Secretary and Director
Ken Kurtz 31 Control Person
Mary C. MacGuire became treasurer and director on August 20,
1992. Ms. MacGuire's principle occupation for the past five
years has been as a sole proprietor providing bookkeeping and
accounting services to individuals and small companies. Ms.
MacGuire's husband, John W. MacGuire, was the Company's President
from July 24, 1980, the date of incorporation through November
27, 1997 when he passed away.
Delores H. MacQueen became secretary and director on July 1,
1994. Ms. MacQueen has no other occupation other then as an
officer and director of the Company.
Ken Kurtz, has never been named as an officer or director of
the Company. He may, however, be deemed to be a control person
based upon his significant influence and "control" (as defined in
Rule 12b-2 of the Securities Exchange Act of 1934) over the
affairs of the Company as a result of the issuance by the Company
of 15,100,000 shares in June 1998 to First Avenue, Ltd., of which
Mr. Kurtz is the general partner. See Item (12) "Certain
Relationships and Related Transactions" for more information on
this Agreement. Mr. Kurtz has over twelve years experience in
12
<PAGE>
the securities industry. Over the past five years, most of his
activities have been involved in consulting with public and
private companies on mergers, recapitalizations and other
reorganizations. Mr. Kurtz is, and has been since February 1992,
the president, sole director and sole shareholder of Park Street
Investments, Inc., a Utah corporation and the Company's largest
shareholder. Additionally, Mr. Kurtz has served on the board of
directors and as an officer of several publicly held companies
including Hamilton Exploration Co., Inc. in 1995. Currently Mr.
Kurtz holds no other directorships with other reporting
companies.
Compliance with Section 16(a) of the Exchange Act
Based solely upon the Company's review of Forms 3, 4 and 5
and amendments thereto furnished to the registrant under Rule
16a-3(d) during the fiscal year preceding the filing of this Form
10-KSB, the Company is not aware of any person who was a
director, officer, or beneficial owner of more than ten percent
of the Company's Common Stock and who failed to file reports
required by Section 16(a) of the Securities Exchange Act of 1934
in a timely manner except those listed in this subsection.
ITEM 10. EXECUTIVE COMPENSATION
No compensation in excess of $100,000 was awarded to, earned
by, or paid to any executive officer or director of the Company
during the fiscal years 1996 to 1998. No cash compensation was
paid by the Company to any officer during the last three fiscal
years. The Company's directors were not paid any remuneration in
their capacity as directors during the last three fiscal years.
The following table provides a summary information for each
of the last three fiscal years concerning cash and non-cash
compensation paid to or accrued by John W. MacGuire, the
Company's president through November 27, 1997, and Mary C.
MacGuire, the Company's recent acting president and treasurer.
[THIS SPACE LEFT INTENTIONALLY BLANK]
13
<PAGE>
Summary Compensation Table
Long Term
Compensation
------------------
Annual Compensation Awards Payouts Other
------------------- --------- -------- -----
Securities
Name and Restricted Underlying
Principal/ Year Salary Bonus Other Stock Options All
Position 199- ($) ($) ($) Awards ($)SAR ($)Other
- ----------------- ------ ------ ---- --------- -------- -----
Mary C. 8 -0- -0- -0- -0- -0- -0-
MacGuire/ 7 -0- -0- -0- -0- -0- -0-
Acting 6 -0- -0- -0- -0- -0- -0-
President,
Treasurer
& Director
John W.
MacGuire/ 8 -0- -0- -0- -0- -0- -0-
Former 7 -0- -0- -0- -0- -0- -0-
President 6 -0- -0- -0- -0- -0- -0-
& Director
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information
concerning the ownership of the Company's Common Stock as of May
31, 1998 and August 31, 1998, with respect to (i) each person
known to the Company to be the beneficial owner of more than five
percent of the Company's Common Stock; (ii) all directors; and
(iii) directors and executive officers or the Company as a group.
For purposes of determining the beneficial owners of more than
five percent of the Common Stock, as well as the Percent and
Class column below, the Company has assumed that 15,006,000
shares of Common Stock were issued and outstanding as of May 31,
1998 and that 30,106,000 shares of Common Stock were issued and
outstanding on August 31, 1998.
Amount and % of
Nature of Class
Title of Name and Address of Beneficial 5-31 8-31
Class Beneficial Owner Ownership 1998 1998
- -------- ----------------------- ------------ ----------
Common First Avenue, Ltd.(1) 15,100,000 0% 52%
Stock, 2133 East 9400 South
Par Value Suite 151
$0.001 Sandy, Utah 84093
14
<PAGE>
Common Ken Kurtz (1) 15,100,000 0% 52%
Stock, 2133 East 9400 South
Par Value Suite 151
$0.001 Sandy, Utah 84093
Common Mary C. MacGuire (2) 3,427,123 23% 11%
Stock, 815 South Durbin
Par Value Street
$0.001 Casper, WY 82601
Common Officers and Directors 3,427,123 23% 11%
Stock, as a Group
Par Value
$0.001
(1) Pursuant to a Financial Consulting Agreement by and
between the Company and Park Street Investments, Inc.
dated March 5, 1998, the Company issued 15,100,000 to
First Avenue, Ltd. on June 22, 1998 as a designee of
Park Street Investments, Inc. Ken Kurtz, being a
general partner of First Avenue, Ltd. and the president
of Park Street, indirectly controls the Shares.
(2) Includes 25,000 shares owned by Mr. MacGuire's
daughter.
(2) Mary C. MacGuire holds a nontransferable, convertible
subordinated promissory note from the Company which may
be converted into 816,858 shares at any time.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective May 31, 1984, the Company issued a five year
nontransferable, subordinated promissory note in the principal
amount of $155,203 bearing interest at the rate of 12% per annum
accruing monthly, to Mrs. MacGuire for monies advanced to the
Company. This note has been renewed and will come due on May 31,
1999. Additionally, this note is convertible into common stock of
the Company at a conversion price of $0.19 per share.
The Company also owes Natrona Services, a Company controlled
by Mrs. McGuire, a principal amount of $36,187 plus accrued
interest from 1995 bearing an interest rate of 9%.
The Company's secretary holds six nontransferable,
subordinated promissory notes as follows: $19,214 due on demand
at 9.00%; $13,063 at 11% due May 31, 2000: $69,254 at 2% over
prime due February 28. 2001, $59,860 at 2% over prime due January
15, 2002, $19,730 at 12% due May 29, 2002 and $238,849 at 12.75%
due March 7, 2001. The notes with due dates are completely or
15
<PAGE>
partially convertible into shares of the Company's $0.01 par
value common stock at the rate of $0.06, $0.045, $0.09, $0.085
and $.05 per share respectively.
Consulting Agreement
The Company has had virtually no revenues, income or cash
flow for many years. Currently, the Company has no assets or
resources with which to operate.
The Company's current president believed that the Company,
if revived and restructured, could be a potential candidate with
which a viable operating entity could combine. The Company has a
base of shareholders and is a reporting Company under the
Securities and Exchange Act of 1934, as amended. As such, the
Company has some characteristics attractive to a potential
candidate.
Because the Company had no assets or resources to compensate
or induce personnel to assist it with such a program, the Company
entered into a Financial Consulting Agreement ("Agreement") with
Park Street Investments, Inc. ("Park Street") on March 5, 1998.
Park Street is a Utah Corporation 100% owned by Ken Kurtz.
According to the Agreement, Park Street has agreed to assist
the Company with its corporate maintenance, administration,
financial statement preparation and securities filings. In
addition, Park Street is to actively pursue, negotiate and
structure a merger or business combination with a third party on
behalf of the Company. Park Street has also agreed to pay for
the costs associated with these responsibilities until the
Company effects a combination with another entity.
On June 22, 1998, and in consideration for the assistance of
Park Street and a cash infusion to the Company by Park Street of
$15,100, the Company issued 15,100,000 shares of restricted
common stock (the "Shares") to a designee of Park Street -- First
Avenue, Ltd., a limited partnership organized under the laws of
the State of Utah. Ken Kurtz, being a general partner of First
Avenue, Ltd. and the president of Park Street, indirectly
controls the Shares. Also according to the Agreement, Park Street
shall be entitled to as much as 15% of the total issued and
outstanding shares of the Company after a business combination.
Park Street shall also be entitled to any cash consideration it
can negotiate from a potential business entity.
Because the exact number of shares to be outstanding after a
business combination is currently unknown and because the exact
percentage of ownership that Park Street is entitled to will be
subject to negotiations between the Company, Park Street, and a
potential target Company, the actual number of shares to be owned
16
<PAGE>
by Park Street will be modified by mutual agreement by the
parties involved. Moreover, the amount of cash that Park Street
is to receive is also subject to negotiations and is currently
unknown. In no event, shall Park Street's ownership percentage
exceed more than 15% of the total outstanding shares of the
Company after a business combination.
More information about this consulting agreement can be
found in the Company's report filed on Form 8-K on July 27, 1998
with the Securities and Exchange Commission and is incorporated
herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. Exhibits required to be attached by Item 601 of
Regulation S-B are listed in the Index to Exhibits beginning
on page 18 of this Form 10-KSB, which is incorporated
herein by reference.
(b) Reports on Form 8-K. No reports on Form 8-K have been filed
during the last quarter of the period covered by this
report.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed by the
undersigned, thereunto duly authorized, this ____ day of
_____________, 1998.
Nugget Exploration, Inc.
Mary MacGuire
Mary MacGuire, Acting President
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dated indicated.
Mary MacGuire Date: ________________
Mary MacGuire
Acting President, Treasurer and Director
Delores MacQueen Date: ________________
Delores MacQueen
Secretary and Director
17
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
(3)(i) * Articles of Incorporation, filed in Nevada on
July 24, 1980, under the name of Western
Exploration and Mining Company, incorporated
herein by reference from the Company's previous
filings. Certificate of Amendment of Articles
of Incorporation, filed in Nevada on February
5, 1981, incorporated herein by reference from
the Company's previous filings.
(3)(ii) * By-Laws of the Company, incorporated herein by
reference form the Company's previous filings.
(10)(i) * Financial Consulting Agreement by and between
Nugget Exploration, Inc. and Park Street
Investments, Inc., dated March 5, 1998 filed
as an Exhibit to the Company's report filed
on Form 8-K dated June 22, 1998 and
incorporated herein by reference.
(10)(ii) * Appointment of Jones, Jensen & Company as the
Company's independent auditor filed as an
Exhibit to the Company's report filed on Form
8-K dated July 27, 1998 and incorporated
herein by reference.
(27) 19 Financial Data Schedule of Nugget
Exploration, Inc. for the fiscal year ended
May 31, 1998.
18
<PAGE>
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