SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Nugget Exploration, Inc.
---------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2), or
Item 22(a)(22) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies.
-----------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. ( Set forth the amount on which the
filing fee is calculated and state how it was determined.)
-----------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------
[ ] Fee paid previously by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form of Schedule and the date of its filing.
1) Amount Previously Paid:_________________________________________
2) Form, Schedule or Registration Statement No.: _______________________
3) Filing Party: __________________________________________________
4) Date Filed _____________________________________________________
<PAGE>
NUGGET EXPLORATION, INC.
2133 South 9400 East, Suite 151
Salt Lake City, UT 84093
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 23, 1999
TO THE SHAREHOLDERS OF NUGGET EXPLORATION, INC.:
The 1999 Annual Meeting (the "Annual Meeting") of Stockholders of
Nugget Exploration, Inc. (the "Company"), will be held on Friday, July 23, 1999
at 9:30 a.m. at the Sandy County Library located at 10100 Petunia Way, Sandy,
Utah 84092, to conduct the following items of business:
1. To elect the Board of Directors;
2. To ratify the rescission of the Purchase and Sale Agreement executed
by and between the Company and Imaging Management Associates, Inc. on
December 9, 1998 and rescinded by the parties thereto on May 10, 1999;
3. To increase the authorized number of shares of the Company's Common
Stock to 25 million;
4. To ratify the sale of the Wyoming Property on April 23, 1999 for
$700,000 in net proceeds;
5. To consider and vote upon ratification of the selection of Jones,
Jensen & Company, as the Company's independent auditor for the fiscal
year ending May 31, 2000; and
6. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Stockholders who owned shares of our stock at the close of business on
July 7, 1999, are entitled to attend and vote at the meeting. A complete list of
these stockholders will be available at the Company's offices at 2133 South 9400
East, Suite 151, Salt Lake City, Utah, 84093, prior to the meeting.
As a stockholder of the Company, you have the right to vote on certain
matters affecting the Company. This proxy statement discusses the proposals you
are voting on this year. Please read it carefully because it contains important
information for you to consider when deciding how to vote. Your vote is
important.
In this proxy statement, we refer to Nugget Exploration, Inc. as the
"Company." We also refer to this proxy statement, the proxy card and our 1998
annual report as the "Proxy Materials." The Board of Directors is sending Proxy
Materials to you and all other stockholders on or about July 13, 1999. The Board
is asking you to vote your shares by completing and returning the proxy card.
The complete text of these proposals and the reasons the Company's
directors have proposed their adoption are contained herein and I urge you to
carefully study them. If you do not plan to attend the Annual Meeting, you are
respectfully requested to sign, date, and return the accompanying Proxy
promptly. A return envelope is enclosed for your convenience. This year, all
stockholders may vote on the Internet. Simply follow the instructions on your
proxy card.
ONLY SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON JULY 7, 1999
(THE "RECORD DATE"), ARE ENTITLED TO NOTICE OF AND TO VOTE AT THE ANNUAL
MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
Tyson Schiff, President
Salt Lake City, Utah
Dated: July 12, 1999
PLEASE FILL IN, SIGN, DATE, AND RETURN THE ENCLOSED PROXY TO TAMMY GEHRING, 2133
EAST 9400 SOUTH, SUITE 151, SALT LAKE CITY, UTAH 84093, WHETHER OR NOT YOU
EXPECT TO ATTEND THE ANNUAL MEETING. A RETURN ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE.
<PAGE>
NUGGET EXPLORATION, INC.
2133 South 9400 East, Suite 151
Salt Lake City, Utah, 84093
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the
solicitation of proxies on behalf of the board of directors of Nugget
Exploration, Inc., a Nevada corporation with principal offices at 2133 South
9400 East, Suite 151, Salt Lake City, Utah, 84093 (the "Company"). The proxies
relate to the Company's Annual Meeting of shareholders to be held on July 23,
1999, and/or at any adjournment thereof. The Company's telephone number is (801)
944-0701. Proxies properly executed and returned in a timely manner will be
voted at the meeting in accordance with the directions set forth thereon. This
Proxy Statement and form of proxy are expected to be mailed to shareholders on
July 13, 1999.
VOTING SECURITIES
Only shareholders of record at the close of business on July 7, 1999 (
the "Record Date"), are entitled to vote at the Annual Meeting. On the Record
Date, the Company had issued and outstanding and entitled to vote 697,117 shares
of Common Stock, par value $0.01 per share (the "Common Stock"). Holders of the
Common Stock are entitled to one vote per share on all issues proposed at the
Annual Meeting.
The Company will bear the cost of soliciting proxies. The Company is
utilizing the services of ADP in conducting the Annual Meeting, including the
solicitation of record owners and the mailing of the proxies. ADP will be
compensated for these services pursuant to its normal compensation schedule.
When proxies are returned to the Company properly executed and not
revoked, the shares represented thereby will be voted at the Annual Meeting
and/or any adjournment thereof. If the proxy is signed with preferences
indicated, the shares represented thereby will be voted accordingly. Proxies
that are signed by shareholders but lack any such specification will be voted in
favor of the proposals set forth in the Notice of Meeting. The Company does not
know of any other matters which will be presented for action at the Annual
Meeting. However, the proxy holder intends to vote on and act with respect to
any other proposal which may be properly presented in accordance with his best
judgment. A stockholder submitting a proxy may revoke it at any time before it
is voted at the Annual Meeting by executing a proxy bearing a later date or by
written revocation addressed to the Corporate Secretary, addressed to Nugget
Exploration, Inc., 2133 South 9400 East, Suite 151, Salt Lake City, Utah, 84093,
telephone number (801) 944-0701. A shareholder who attends the Annual Meeting
may also revoke a previously executed proxy by voting a ballot at the Annual
Meeting. The Board of Directors recommends a vote FOR all the proposals
discussed in this Proxy Statement.
The Common Stock will vote as one class on all proposals. Holders of a
majority of Common Stock outstanding on the record date must be represented in
person or by proxy at the Annual Meeting to constitute a quorum for conducting
business. Any shares which abstain from voting will be counted for the purpose
of obtaining a quorum but will not be counted in calculating the votes for the
proposals. Broker non-votes will not be counted either for purposes of
determining a quorum or in calculating the vote on any proposal. All Proposals
discussed herein shall be adopted or ratified upon receipt of the affirmative
vote of a majority of the votes cast at the Annual Meeting.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 12, 1999, certain
information with respect to each person or group known by the Company to
beneficially own more than 5% of the issued and outstanding shares of Common
Stock, each executive officer and director individually and all officers and
directors as a group. To the best of Company's knowledge, unless otherwise
indicated, each holder has sole voting and investment power over the shares
indicated as beneficially owned by such person.
All information contained in the Proxy Statement relating to the
security holders of directors and officers of the Company is based upon
information received from such directors and officers and from the company's
Transfer Agent.
<TABLE>
<CAPTION>
Name and Address of Amount of Percent of
Beneficial Owner Beneficial Class
Ownership
- ------------ -------------------------------------------- ------------ ----------
Executive Officers and Directors
<S> <C> <C> <C>
Common Stock Tyson Schiff, President, Treasurer, Director 0 0
2133 East 9400 South, Suite 151
Salt Lake City, Utah 84093
Common Stock Marianne Brady, Director 0 0
2133 East 9400 South, Suite 151
Salt Lake City, Utah 84093
Common Stock Brian Ortega, Director 0 0
2133 East 9400 South, Suite 151
Salt Lake City, Utah 84093
Common Stock Ken Kurtz, Control Person(1) 348,709 50.02%
2133 East 9400 South, Suite 151
Salt Lake City, Utah 84093
Common Stock First Avenue Ltd. 148,709 21.3%
2133 East 9400 South, Suite 151
Salt Lake City, Utah 84093
Common Stock Executive Officers and Directors as a Group 0 0
(1) Partial indirect ownership through Kurtz's ownership of Park Street
Investments and First Avenue Ltd., Inc.
</TABLE>
- --------------------------------------------------------------------------------
PROPOSAL NO. 1: ELECTION OF NEW BOARD MEMBERS
- --------------------------------------------------------------------------------
The Company's Articles of Incorporation provide that the Board of
Directors shall consist of no less than three (3) and no more than seven (7)
members. Three directors will be elected at the Annual Meeting and each director
elected will hold office until the next Annual meeting of shareholders. The
affirmative vote of a majority of the votes cast by shareholders entitled to
vote on this Proposal is necessary to elect each director. Shareholders are not
entitle to cumulate their votes for the election of directors.
2
<PAGE>
Each of the nominees listed below is currently serving as a director of
the Company and the terms of their office expire upon the election of new
directors.
Tyson Schiff
Marianne Brady
Brian Ortega
For additional information regarding the current directors please see
"Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act" of Appendix I herein.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES NAMED IN THIS PROXY STATEMENT.
- --------------------------------------------------------------------------------
PROPOSAL NO. 2: RATIFICATION OF RESCISSION OF PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
On December 9, 1998, the Company executed a Purchase and Sale Agreement
(the "Purchase Agreement") with Imaging Management Associates, Inc., a Colorado
corporation engaged in the business of operating diagnostic imaging centers
("IMAI"). Pursuant to the Purchase Agreement, the Company was to acquire two
diagnostic imaging centers (the "Imaging Centers") subject to the Company's
review and independent approval of the audited financial statements of IMAI's
operations. IMAI has notified the Company that it will not be providing audited
financial statements to the Company and has additionally notified the Company
that the audited financial statements will materially differ from the unaudited
financial statements IMAI had given to the Company during negotiations which it
thought were representative of its operations. Because the financial status of
IMAI is thus uncertain, the Company believes rescinding the Purchase Agreement
is the safest action the Company can take. Additionally, IMAI has agreed that
rescission is the best action for it to take. For additional information please
see "Description of Business and Related Information" of Appendix I herein.
Although it is not required to do so, the Board of Directors wishes to
submit the ratification of the Purchase Agreement's rescission to the
shareholders for ratification. Approval of this Proposal requires the
affirmative vote of a majority of the votes cast by shareholders entitled to
vote on this Proposal. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL
TO RATIFY THE RECISSION OF THE PURCHASE AGREEMENT. If the rescission of the
Purchase Agreement is not ratified, the Board of Directors will reconsider its
decision.
- --------------------------------------------------------------------------------
PROPOSAL NO. 3: INCREASE IN THE NUMBER OF SHARES OF
COMMON STOCK AUTHORIZED FOR ISSUANCE
- --------------------------------------------------------------------------------
The Company currently has approximately 4.3 million shares of Common Stock
authorized but unissued and approximately 700,000 shares of Common Stock issued
and outstanding. The Board of Directors has
3
<PAGE>
proposed an increase in the number of authorized Common Stock to provide the
Company with greater latitude with which to entice a merger or acquisition
candidate. Such an increase will also ensure that the Company will have shares
available for future issuances of Common Stock for proper corporate purposes,
including, but not limited to, the discharge of liabilities in exchange for the
issuance of Common Stock to the Company's creditors, payment to consultants,
acquisitions of other businesses, financing, and any other lawful corporate
purpose in the discretion of the Board of Directors.
The Board of Directors recommends the approval of this proposed
amendment to the Company's Articles of Incorporation, which would increase the
number of shares of Common Stock authorized for issuance from 5,000,000 to
25,000,000 and make an additional 20,000,000 shares of the Company's Common
Stock available for issuance by the Company.
The Board of Directors has determined that the proposed amendment to
the Articles of Incorporation is in the best interests of the Company and its
shareholders. Approval of this Proposal requires the affirmative vote of a
majority of the votes cast by shareholders entitled to vote on this Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO INCREASE THE NUMBER
OF COMMON STOCK AUTHORIZED FOR ISSUANCE.
- --------------------------------------------------------------------------------
PROPOSAL NO. 4: SELECTION OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
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.
The decision to change accountants was recommended by the board of
directors and stemmed from the fact that the previous accountant that had been
filing the unaudited financial statements was not a member of the SEC Practice
Board.
Jones, Jensen & Company has audited the Company's financial statements
from the years May 31, 1984 through May 31, 1999. The Company's Board of
Directors have appointed Jones, Jensen & Company to be its independent
accountant and to audit the Company's consolidated financial statements for the
fiscal year ending May 31, 2000.
The Company expects that a representative of Jones, Jensen & Company,
will attend the Annual Meeting and will be able to make a statement, if he or
she desires to do so, and answer appropriate questions. The Company has invited
the previous accountant to attend the Annual Meeting, but does not expect that
the previous accountant will attend the Annual Meeting.
The Board of Directors selected Jones, Jensen & Company, because of
their familiarity with the firm. The Board of Directors believes that Jones,
Jensen & Company is well qualified to serve as the Company's independent
auditors. Neither the Company nor any other person has consulted Jones, Jensen &
Company,
5
<PAGE>
on the application of accounting principles to a specific completed or
contemplated transaction involving the Company, or the type of audit opinion
that might be rendered on the Company's financial statements.
Although it is not required to do so, the Board of Directors wishes to
submit the selection of Jones, Jensen & Company, to the shareholders for
ratification. Approval of this Proposal requires the affirmative vote of a
majority of the votes cast by shareholders entitled to vote on this Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF JONES, JENSEN &
COMPANY, AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MAY 31, 2000. If the
selection of Jones, Jensen & Company, is not ratified, the Board of Directors
will reconsider its selection.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Shareholder proposals to be presented in the Proxy Materials relating
to the next annual meeting of shareholders must be delivered to the Corporate
Secretary at the Company's offices at 2133 South 9400 East, Suite 151, Salt Lake
City, Utah, 84093 , on or before March 31, 2000.
OTHER MATTERS
The Company does not know of any matters that will be considered at the
Annual Meeting other than the proposals described in this Proxy Statement.
However, if any other matters properly come before the Annual Meeting, or any of
its adjournments, the proxy holder intends to vote the shares represented by the
proxies according to his best judgment.
In order to assure the presence of the necessary quorum, please date,
sign, and promptly return the enclosed proxy in the envelope provided. No
postage is required if mailed in the United States. The signing of a proxy by no
means prevents you from attending the meeting and voting your shares in person.
By order of the Board of Directors,
/s/ Tyson Schiff
Tyson Schiff, President
Salt Lake City, Utah
July 12, 1999
<PAGE>
PROXY
ANNUAL MEETING OF THE SHAREHOLDERS OF NUGGET EXPLORATION, INC., JULY 23,1999.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Tyson Schiff, President of Nugget
Exploration, Inc. (The Company"), proxy, with full power of substitution, to
vote, as directed below, the shares of Common Stock of the Company which the
undersigned is entitled to vote at the annual meeting of shareholders to be held
at THE LOCATION CHOSEN BY THE MIGHTY KEN KURTZ, on July 23, 1999, at 10:00 a.m.,
Mountain Standard Time, or any adjournment(s) thereof (the "Annual Meeting").
This proxy, when properly executed and returned to the Company as
provided below, will be voted in the manner directed by the undersigned
shareholder. If no direction is given, the proxy holder will vote the shares
represented by this proxy FOR all proposals. The Board of Directors recommends
voting FOR all proposals.
1. To elect the Board of Directors;
FOR [___] AGAINST [___] ABSTAIN [___]
2. To ratify the recission of the Purchase and Sale Agreement (the "Purchase
Agreement") executed by and between the Company and Imaging Management
Associates, Inc. on December 9, 1998 and rescinded by the board of directors
on May 10, 1999;
FOR [___] AGAINST [___] ABSTAIN [___]
3. To increase the authorized number of shares of Common Stock to 25 million;
FOR [___] AGAINST [___] ABSTAIN [___]
4. To consider and vote upon ratification of the selection of Jones , Jensen
and Company, Salt Lake City, Utah, as the Company's independent auditors for
the fiscal year ending May 31, 2000; and
FOR [___] AGAINST [___] ABSTAIN [___]
5. The Company does not know of any matters that will be considered at the
Special Meeting other than the proposals described above. However, if any
other matters should properly come before the Special Meeting, Tyson Schiff
or his substitute intends to vote the shares represented by the proxies
according to his or her best judgment.
FOR [___] AGAINST [___] ABSTAIN [___]
================================================================================
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON YOUR CERTIFICATE(S). WHEN SHARES
ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. IF YOUR SHARES ARE HELD AT A
BROKERAGE HOUSE, PLEASE INDICATE IN THE SPACE PROVIDED THE NAME OF THE
BROKERAGE HOUSE AND THE NUMBER OF SHARES HELD.
================================================================================
Date:____________
- ------------------------------------- ---------------------------
Name of Brokerage/Clearing House Number of Shares Held
- ------------------------------------- ---------------------------
Signature Signature (if held Jointly)
- ------------------------------------- ---------------------------
Print Name Print Name
================================================================================
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY TO THE COMPANY IN THE
ENVELOPE ENCLOSED. NO STAMP IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
================================================================================
<PAGE>
APPENDIX I
TO PROXY STATEMENT OF
NUGGET EXPLORATION INC.
ANNUAL REPORT AS REQUIRED BY RULE 14A-3(B)
OF THE EXCHANGE ACT OF 1934, AS AMENDED
<PAGE>
MANAGEMENT'S PLAN OF OPERATION
As used herein, the term "Company" refers to Nugget Exploration Inc., a
Nevada corporation, and its subsidiaries and predecessors, unless the context
indicates otherwise. 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"). No mining
activity has occurred on the property for several years because the Company has
been inadequately funded and various environmental groups had at that time
opposed future mining related activities on the property.
As the Company's merger with IMAI has been rescinded, as more fully
discussed below, the Company's current business plan has reverted to its attempt
to merge with a privately owned entity whose operations can provide the Company
with a basis for profitably, and the settlement of its debts. 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.
While the Company has no assets or resources to support itself, it has secured
the services of Park Street Investments, Inc., a Utah corporation ("Park
Street"), under which 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.
Park Street and the Company executed a Financial Consulting Agreement
on March 5, 1998, (the "Agreement"), whereby Park Street agreed to assist in
restructuring the Company's capitalization and finding a suitable merger or
business combination. Park Street is 100% owned by Ken Kurtz. The Agreement was
filed with the Securities and Exchange Commission ("Commission") on Form 8-K
dated June 22, 1998 and is incorporated herein by reference. For more
information please see "Certain Relationships and Related Transactions" herein.
On November 30, 1998, the Company and Ken W. Kurtz ("Kurtz") entered a
Consulting Agreement ("November Consulting Agreement") whereby Kurtz agreed to
assist the Company by preparing employment agreements, contracts and other
filings required by the Commission as well as all other necessary State and
Federal regulatory bodies, locating independent auditor and attorney for the
Company. For more information on this, see the Company's Form 10-QSB for the
quarter ended February 28, 1998.
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 engaging in a business combination with a private
organization 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, par value $0.01 ("Common Stock"). Such an exchange of Common Stock would
substantially dilute the existing ownership position of the Company's current
shareholders. If the Company effects a business combination of this type, it may
attempt to raise capital or obtain additional employees, as needed by the
acquired entity.
DESCRIPTION OF BUSINESS AND RELATED INFORMATION
Park Street located a merger candidate and assisted in the execution of
a December 9, 1998 Purchase and Sale Agreement (the "Purchase Agreement") by and
between the Company and Imaging Management Associates, Inc., a Colorado
corporation engaged in the business of operating diagnostic imaging centers
("IMAI").
IMAI RESCISSION
On December 9, 1998, the Company executed a Purchase and Sale Agreement
(the "Purchase Agreement") with Imaging Management Associates, Inc., a Colorado
corporation engaged in the business of operating diagnostic imaging centers
("IMAI"). Pursuant to the Purchase Agreement, the Company was to acquire two
diagnostic imaging centers (the "Imaging Centers") subject to the Company's
review and independent approval of the audited financial statements of IMAI's
operations. Approval was contingent upon IMAI's audited financial statements
being substantially similar to the unaudited financial statements which they
provided to the Company in the early stages of negotiation. The transaction was
structured as an asset purchase whereby the Company was to acquire all the
assets related to and constituting the Imaging Centers and assume certain
liabilities as described in the Purchase Agreement.
In exchange for the Imaging Centers, the Company was to issue IMAI
1,250,000 shares of the Company's common stock, $.01 par value. In connection
with its expected acquisition of the Imaging Centers, the Company tentatively
entered into an
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION INC. PAGE 8
- --------------------------------------------------------
<PAGE>
Employment Agreement with Dr. Leonard Vernon who agreed to serve as President of
the Company and receive compensation of $200,000 per year until December 31,1999
and $300,000 per year from January 1, 2000 until December 31, 2002. Dr. Vernon
was also to receive an annual cash bonus equal to 1.5% of the amount of the
Company's post tax profits over $1,000,000 subject to certain conditions and a
car allowance of $500 per month. The Company also granted Dr. Vernon an option
to purchase 3,000,000 shares of Common Stock for $0.155 per share. Dr. Vernon
exercised the option in exchange for a Promissory Note and a Stock Pledge
Agreement.
Both the 1,250,000 share block constituting consideration for the
Purchase and Sale Agreement and the 3,000,000 shares to be received upon
exercise of an option in the Employment Agreement were authorized and issued by
the Company's board of directors. However, both share blocks have at all times
remained in the possession of the Company's board subject to completion of the
IMAI acquisition, which was rescinded on June 15, 1999.
IMAI notified the Company that it would not be providing audited
financial statements to the Company, partially because any such audited
statements would materially differ from the unaudited financial statements IMAI
thought were representative of its operations. Pursuant to a Rescission of
Agreements and Release of Claims dated June 15, 1999, which is attached hereto
as Exhibit A and incorporated herein by reference ("Rescission and Release"),
both the Purchase Agreement and the Employment Agreement were terminated and
rescinded ab initio, as was Dr. Vernon's stock option and corresponding
Promissory Note and Stock Pledge Agreement. In accordance with the Rescission
and Release, the Company, IMAI and Vernon agreed to effect the return and
cancellation of any and all consideration related thereto and hold one another
harmless and indemnify one another with respect to the obligations stemming from
the Purchase and Sale Agreement, the Employment Agreement, Promissory Note, and
Stock Pledge Agreement.
BUSINESS OF ISSUER
Through its Financial Consulting Agreement with Park Street, the
Company receives the services necessary to maintain its nominal operations which
are primarily focused on merging with a suitable merger or acquisition candidate
that can provide the Company with a basis for successful operations, and the
settlement of debts that the Company has accrued. As of the date of this report,
the Company reported a stockholders' deficit of nearly $2 million. After the
sale of the Wyoming property, the Company has virtually no assets.
REAL ESTATE HOLDINGS
The Company has owned certain real property located in Fremont County,
Wyoming, and buildings and mining equipment located on such property for many
years (all such real and personal property shall hereinafter be referred to as
the "Wyoming Property"). For more information and a legal description of the
Wyoming Property, see Exhibit A hereto. The Company had been unable to obtain
the necessary funds to proceed with any exploration and mining activities on the
Wyoming Property to a level that would produce revenues and profits for the
Company. The Company had previously experienced opposition from various
environmental groups regarding future mining related activities on the Wyoming
Property. As a result, the Wyoming Property has not had any mining related
activity for an extended period of time and the Company did not anticipate
engaging in any mining related activities in the future.
The Company executed a Contract to Purchase Mining Property on November
18, 1998 ("Property Contract"), to sell the Wyoming Property to ORA Management,
L.L.C. (the "Buyer"), for Seven Hundred Thousand Dollars ($700,000). Pursuant to
the Property Contract, which was approved by the Board of Directors and the
holders of a majority of the outstanding shares, the Buyer purchased the
property, subject to all liens and encumbrances, together with all equipment,
houses and other material, excluding any personal property belonging to the
caretaker. The Property Contract included, without limitation, the minerals,
mining rights and other rights in the land as particularly described in a deed
from Timbabah Mining Company to the Company recorded July 13, 1981 in Book 162,
Page 741 of Deeds in the Office of the County Recorder of Fremont County,
Wyoming. The Property Contract did not include the surface grazing right which
was granted to Willowbrook Ranch Company by Timbabah Mining Company pursuant to
an Order issued by the District Court of Fremont County, Wyoming, Ninth Judicial
District, Civil Action Number 26862.
On February 15, 1999, the Company and Buyer executed an Extension of
Contract to Purchase Mining Property. Pursuant to this extension, the closing
date was extended to April 30, 1999 in exchange for an additional cash down
payment of Ten Thousand Dollars ($10,000). All other terms and conditions of the
Contract to Purchase Mining Property remained the same. On April 23, 1999, the
Company and Buyer executed a Second Extension of Contract to Purchase Mining
Property. Pursuant to this second extension, the closing date was extended to
May 24, 1999, in exchange for an additional cash down payment in the amount of
Four Hundred Fifty Thousand Dollars ($450,000) to be deposited in an escrow
account. One Hundred Thousand Dollars ($100,000) of this deposit was
non-refundable. The Thirty Five Thousand Dollars ($35,000) in down payment
already deposited in the escrow account was also made non-refundable. These
deposits accrued to the final purchase price of Seven Hundred Thousand Dollars
($700,000) which was paid at the time of closing on April 23, 1999.
On May 24, 1999, the Company received the purchase price of $700,000,
of which $648,810.82 constituted net proceeds to the Company. The Company agreed
with six of its largest creditors to exchange these net proceeds in varying
proportions for the release and satisfaction of claims against the Company
totaling $2,032,433. The Company's Board of Directors has unanimously agreed to
this sale of the Wyoming Property and the settlement of such claims with the
sale proceeds. Such proceeds were in fact transferred to such creditors pursuant
to five Satisfaction and Releases, which, along with the Property Contract and
its two extensions, were filed with the Commission on the Company's Form 10-QSB
for the quarter ended February 28, 1999, which the Company hereby undertakes to
provide to every shareholder who requests such in writing from the Company. Such
requests should be forwarded to the Company at 2133 East 9400 South, Suite 151,
Salt Lake City, Utah 84093.
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION INC. PAGE 9
- --------------------------------------------------------
FINANCIAL STATEMENTS
Please see Pages F-1 through F-? which follow this Annual Report.
Note: Such statements are not yet complete and will be inserted at such time.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has been exempt from the required filings of audited
financial statements pursuant to Rule 3-11 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, 1999. The
previous accountant that had been filing the unaudited financial statements was
not a member of the SEC Practice Board.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
On October 7, 1998, the board of directors of the Company, consisting
of Mary MacGuire and Dolores MacQueen, appointed Tyson Schiff, a Utah resident,
to fill the vacancy on the Company's board of directors. Mr. Schiff was also
appointed as the Company's Secretary and Treasurer. Subsequent to this
appointment but on the same date, Ms. MacQueen resigned from her position as a
director of the Company and as Secretary and Treasurer. Immediately after the
resignation of Ms. MacQueen, but on the same date, the remaining directors,
consisting of Mary MacGuire and Tyson Schiff, appointed Richard E. Houraney, a
Florida resident, to fill the vacancy on the Company's board of directors. Mr.
Houraney was also appointed as the Company's Vice President. Ms. MacGuire, Mr.
Schiff and Mr. Houraney were appointed to serve as the Company's officers and
directors until the earlier of their resignation, removal or death, or until the
next meeting of the Company's shareholders.
On November 30, 1998, the board of directors of Nugget Exploration,
Inc. (the "Company") consisting of Mary MacGuire, Tyson Schiff and Richard E.
Houraney, appointed Mr. Brian Ortega to the Company's board of directors. On the
same date as the appointment of Mr. Ortega, the board of directors appointed
Tyson Schiff as the Company's President. Immediately after these appointments,
but on the same date, Ms. Mary MacGuire resigned from her position as a director
of the Company and as President of the Company. Ms. MacGuire did not wish to
participate in the Company's decisions with regards to any reorganization,
merger, acquisition or recapitalization, but still wishes to assist the Company
with the liquidation of its existing assets and settlement of certain debts owed
by the Company.
Richard Houraney resigned as a director and vice president of the
Company on June 9, 1999 at a special meeting of the board of directors called to
address the Company's 1999 Annual Meeting of shareholders. The remaining
directors appointed Marianne Brady to serve as Mr. Houraney's replacement until
the 1999 Annual Meeting.
Directors, Executive Officers and Control Persons
--------------------------------------------------------------
Name Age Position(s) and Office(s)
--------------------------------------------------------------
Tyson Schiff 27 President, Secretary, Treasurer
and Director
Brian Ortega 26 Director
Marianne Brady 23 Director
Ken Kurtz 31 Control Person
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION INC. PAGE 10
- --------------------------------------------------------
<PAGE>
Tyson Schiff is currently serving as an account specialist at Culver
Staffing Resource in Salt Lake City, Utah, where he has been employed since
April 1997. Prior to this, Mr. Schiff worked for a consulting firm in Salt Lake
City, Utah, specializing in mergers and acquisitions of small public and private
companies. Mr. Schiff earned his Bachelors of Science degree in Business
Management from the University of Utah in 1995. Mr. Schiff is not currently, nor
has he been in the past, an officer or director of any other reporting issuer.
Brian Ortega is currently serving as an account specialist at Culver
Staffing Resource in Salt Lake City, Utah, where he has been employed since
December 1997. Prior to this, Mr. Ortega was employed as an account manager for
Matrixx Marketing which is a Salt Lake City based telemarketing and fulfillment
center for approximately seven years. Mr. Ortega earned his Associates Degree in
Business Management from the Salt Lake community College in Salt Lake City,
Utah. Mr. Ortega is not currently, nor has he been in the past, an officer or
director of any other reporting issuer.
Marianne Brady is currently serving as an account manager for Culver
Staffing Resource in Salt Lake City, Utah, since April 1998. Prior to this, Ms.
Brady worked at Utah Valley Medical Center as a registration intake
representative. Ms. Brady earned her associates degree in Marketing from Utah
Valley State College. Ms. Brady is not currently, nor has she been in the past,
an officer or director of any other reporting issuer.
Ken Kurtz, has never been named as an officer or director of the
Company. He is 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 his indirect ownership of more than
50% of the Company's outstanding Common Stock. See "Certain Relationships and
Related Transactions" herein for more information on Mr. Kurtz, First Avenue,
Ltd, and Park Street. Mr. Kurtz has over twelve years experience in 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,
which is 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. 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.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock of the Company is currently traded through the NASD
Over-the-Counter Bulletin Board ("OTCBB") under the symbol NUGT, although very
limited trading has occurred over the past several years.
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION INC. PAGE 11
- --------------------------------------------------------
<PAGE>
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.
Calendar Year Quarter High Low
1996 Third $0.02 $0.005
Fourth $0.02 $0.005
1997 First $0.02 $0.005
Second $0.02 $0.005
Third $0.02 $0.005
Fourth $0.02 $0.005
1998 First $0.02 $0.005
Second $0.02 $0.005
Third $0.02 $0.001
Fourth $7.00 $0.001
1999 First $6.50 $0.125
As of June 18, 1999, 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 requirements, financial condition, and other relevant factors. The
Company does not anticipate the payment of future dividends.
On October 21, 1998, the National Association of Securities Dealers,
Inc. (" NASDAQ") stock permitted trading of the Company's shares on the basis of
the reverse split of the Company's outstanding common stock in the amount of
1-for-310 and a reduction in the Company's class of authorized common stock to
5,000,000 shares. The par value remains at $0.01.
REVERSE STOCK SPLITS
The Company's Board of Directors and the holders of a majority of the
outstanding common stock approved the reverse split on October 7, 1998.
Effective October 19,1998, each 310 shares was converted into one share. All
fractional shares were rounded up. The board of directors authorized the stock
split because they believed that the number of issued and outstanding shares of
common stock was disproportionately large given the Corporation's absence of
revenue, net income and net worth. Immediately after the reverse split, the
Company had approximately 97,177 total shares of its $0.01 common stock issued
and outstanding.
On October 7, 1998, the holders of a majority of the then outstanding
Common Stock and all of the Board of Directors approved a 1-for-310 reverse
stock split of the outstanding shares of Common Stock and 1-10 reverse stock
split of the authorized number of shares of Common Stock. Pursuant to the
reverse stock split, the number of shares of Common Stock authorized for
issuance decreased from 50,000,000 to 5,000,000, although the total
capitalization of the Company and the intrinsic value of each shareholders'
investment did not change significantly when the Reverse stock split took
effect.
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION INC. PAGE 12
- --------------------------------------------------------
<PAGE>
Shareholders should be aware that as a general rule a stock combination
or reverse split will, in and of itself, neither increase nor decrease the
intrinsic value of a stockholder's investment. Except for holders of a small
number of shares who receive a full share in exchange for a fractional share,
the number of shares resulting from a reverse split generally leaves
shareholders with approximately the same proportionate ownership as before the
reverse split.
The reverse stock split may leave shareholders with one or more "odd
lots" of the Common Stock, i.e. stock in amounts of less than 100 shares. These
shares may be more difficult to sell than shares in lots of 100 because the
commission on such sales may be greater than the proceeds.
The Company believes that shareholders will generally not realize any
gain or loss for federal income tax purposes as a result of the reverse stock
split. However, shareholders should consult their personal tax advisors
regarding the tax effect, including the effect under state tax laws, of the
reverse stock split.
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 at MacGuire's option.
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 former Secretary, Delores MacQueen, 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 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.
Ken W. Kurtz
Ken Kurtz indirectly owns more than 50% of the Company's outstanding
Common Stock based on his personal stock ownership and his control of two
entities. Personally, Kurtz owns approximately 200,000 shares, which were
received pursuant to a November 30, 1998 consulting agreement with the Company,
which is discussed more fully below.
On November 30, 1998, the Company and Ken W. Kurtz ("Kurtz") entered a
Consulting Agreement ("November Consulting Agreement") whereby Kurtz agreed to
assist the Company by preparing employment agreements, contracts and other
filings required by the Commission as well as all other necessary State and
Federal regulatory bodies, locating independent auditor and attorney for the
Company. Kurtz received Four Hundred Thousand (400,000) shares of Client's
common stock in exchange for such services, which shares were registered on a
Form S-8 registration statement. Subsequent to such issuance Kurtz entered into
a private transaction with Matt Dwyer, who personally agreed to purchase 100,000
shares or return them. Currently he is seeking payment of the shares or their
return.
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 restricted shares of common stock
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION INC. PAGE 13
- --------------------------------------------------------
<PAGE>
(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. The October 7, 1998 stock split reduced this
quantity to First Avenue's current ownership of 48,710 shares.
According to a Financial Consulting Agreement between Company and Park
Street Investments, Inc. executed on March 5, 1998, Park Street has also agreed
to assist the Company with its administration and recapitalization. Park Street
also agreed to actively pursue and negotiate a merger or business combination
with a third party on behalf of the Company. Park Street is responsible for the
costs associated with these responsibilities until the Company effects a
business combination with another entity. If a merger or business combination is
achieved, the Company anticipates having such third party take over full
operation and responsibility of the Company.
Also according to the Financial Consulting 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 that it can negotiate from a potential business entity.
However, because the exact number of shares which will be outstanding after an
as of yet unidentified business combination is currently unknown and because the
exact percentage of ownership that Park Street may receive will be subject to
negotiations between the Company, Park Street, and the potential target Company,
the actual number of shares to be owned by Park Street may be modified by mutual
agreement by the parties involved. Moreover, the amount of cash that Park Street
may receive is also subject to negotiation 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.
UNDERTAKING REGARDING FORM 10-KSB
The Company hereby undertakes to provide without charge to each person
solicited with this proxy statement, on the written request of any such person,
a copy of its annual report on Form 10-KSB including the financial statements
and the financial statement schedules, required to be filed with the Securities
and Exchange Commission pursuant to Rule 13a-1 under the Act for the fiscal year
ended May 31, 1999.
This written request should be addressed to the Company at its
headquarters at 2133 East 9400 South, Suite 151, Salt Lake City, Utah 84093.
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION INC. PAGE 14
- --------------------------------------------------------
<PAGE>
APPENDIX II
TO PROXY STATEMENT OF
NUGGET EXPLORATION INC.
AUDITED FINANCIAL STATEMENTS
NUMBERED F-1 TO F-?
Please note that such audited financial statements are not yet complete,
but will be inserted at such time.
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION INC. PAGE 15
- --------------------------------------------------------
<PAGE>
Exhibit A
RESCISSION OF AGREEMENTS
AND
RELEASE AND INDEMNIFICATION OF CLAIMS
THIS RESCISSION OF AGREEMENTS AND RELEASE OF CLAIMS ("Rescission and
Release") is made as of this 10th day of May 1999 between and among Nugget
Exploration, Inc. ("Nugget"), Imaging Management Associates, Inc. ("Imaging"),
and Dr. Leonard Vernon ("Vernon") (Nugget, Imaging and Vernon may be
collectively referred to as the "Parties"), for the purpose of rescinding a
variety of transactions related to a merger of Imaging and Nugget.
RECITALS
WHEREAS, effective December 9, 1998, Nugget and Imaging, which is owned
by Vernon, entered into a Purchase and Sale Agreement, which was related to an
Employment Agreement entered on November 30, 1998 by and between Nugget and
Vernon.
WHEREAS, pursuant to the Purchase and Sale Agreement, Nugget was to
acquire two operating imaging centers from Imaging in exchange for 1,250,000
restricted shares of Nugget common stock.
WHEREAS, pursuant to the Employment Agreement, Vernon was to become
employed by Nugget in exchange for a compensation package that included, among
other things, an option to purchase 3,000,000 restricted shares of Nugget common
stock, which option Vernon did exercise in exchange for a Promissory Note and
Stock Pledge Agreement to Nugget (the Purchase and Sale Agreement, the
Employment Agreement, the Promissory Note, and the Stock Pledge Agreement may be
collectively referred to as the "Agreements").
WHEREAS, Imaging and Nugget wish to mutually rescind the Agreements
because Imaging's audited financial statements, which are still unfinished, are
not expected to substantially reflect the unaudited statements Nugget was
provided during the negotiation of the Purchase and Sale Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties contained herein, and the recitals expressed
above, which are incorporated herein by this reference, and of the mutual
benefits to be derived herefrom, and intending to be legally bound, the Parties
hereto agree as follows:
1. Nugget, Imaging and Vernon hereby agree to immediately rescind and
terminate, ab initio, the Agreements. The Parties agree not to be bound by the
terms of the Agreements because material conditions have not been fulfilled and
the Parties have determined that the transactions are therefore not in their
best interests.
2. The Parties further agree to hold one another harmless, release any
and all claims against one another stemming from the Agreements and indemnify
one another with respect to any obligations arising pursuant to or from the
Agreements, including any and all out of pocket costs and expenses.
3. All shares issued or to be issued under the Agreements shall be
returned to the respective issuers of such shares. All Parties agree to waive
any interests in any shares that have not been issued or transferred.
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION INC. PAGE 16
- --------------------------------------------------------
<PAGE>
4. The officers and directors of Nugget immediately prior to the
Employment Agreement and Purchase and Sale Agreement shall be reinstated as the
officers and directors of Nugget effective upon mutual execution of this
Rescission and Release. The Rescission and Release contemplated herein is
complete upon signing of the Parties.
Nugget Exploration, Inc. Dr. Leonard Vernon
/s/ Tyson Schiff /s Dr. Leonard Vernon
Tyson Schiff, Director and former Dr. Leonard Vernon
President and Secretary
Imaging Management Associates, Inc.
/s/ Dr. Leonard Vernon
Dr. Leonard Vernon
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION INC. PAGE 17
- --------------------------------------------------------
