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, 1999.
[ ] 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 of (I.R.S. Employer Identification No.)
incorporation or organization)
2133 East 9400 South, Suite 151, Salt Lake City, Utah 84093
(Address of principal executive offices)
Issuer's Telephone Number: 801-944-0701
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
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, 1999, 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
July 27, 1999, was $6631,489 based on an estimated 348,408 shares held by
non-affiliates.
The number of shares outstanding of the Company's common stock ($0.01
par value), as of July 27, 1999, was 697,117 shares.
Total Number of Pages: 28
Index to Exhibits is Located on Page 14
<PAGE>
TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS...............................................3
ITEM 2. DESCRIPTION OF PROPERTY...............................................4
ITEM 3. LEGAL PROCEEDINGS.....................................................5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................5
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..............6
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.............6
ITEM 7. FINANCIAL STATEMENTS..................................................7
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.........................8
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE
ACT..........................................................8
ITEM 10. EXECUTIVE COMPENSATION................................................9
ITEM 11. SECURITY OWNERSHIP OF BENEFICIAL OWNERS..............................10
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................11
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.....................................12
SIGNATURES...........................................................13
INDEX TO EXHIBITS....................................................14
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
As used herein, the term "Company" refers to Nugget Exploration Inc., a
Nevada corporation, and its subsidiaries and predecessors, unless the context
indicates otherwise. During the fiscal year ended May 31, 1999, the Company
continued its move away from mining operations. The Company's real and personal
property in Wyoming was sold and all proceeds realized therefrom were utilized
to discharge more than $2 million of corporate debt. See "Description of
Property" for more information on the land sale.
Business of Issuer
Through a March 5, 1998 Financial Consulting Agreement (the
"Agreement"), with Park Street Investments, Inc., a Utah corporation ("Park
Street"), the Company receives the services necessary to maintain its nominal
operations which are primarily focused on (i) a business combination with a
private entity that can provide the Company with a basis for successful
operations and (ii) the settlement of debts that the Company has accrued. Park
Street is wholly owned by Ken Kurtz, the Company's largest shareholder
("Kurtz"). See "Certain Relationships and Related Transactions" for more
information on Kurtz.
On May 10, 1999, the Company and Imaging Management Associates, Inc., a
Colorado corporation engaged in the business of operating diagnostic imaging
centers ("IMAI"), agreed to rescind a December 9, 1998, Purchase and Sale
Agreement whereby the Company was to acquire two of IMAI's diagnostic imaging
centers (the "Imaging Centers") subject to the Company's review of and
satisfaction with 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, $0.01 par value ("Common
Stock"). In connection with its expected acquisition of the Imaging Centers, the
Company tentatively entered into an 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.
The 1,250,000 shares, 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, as these share blocks were retained by the Company
subject to completion of the IMAI acquisition, they were canceled when the
acquisition was rescinded.
<PAGE>
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 May 10, 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.
Subsequent to entering into the IMAI acquisition, the Company entered
into different consulting agreements with Ken Kurtz and Matthew Dwyer. Dwyer
agreed to render services as a management consultant, strategic planner and
advisor with respect to the medical imaging services business, whereas Kurtz was
to prepare employment agreements, contracts and other filings required by the
Commission, satisfy all other necessary state and Federal regulatory bodies, and
locate an independent auditor and attorney for the Company. See "Certain
Relationships and Related Transactions" below for more information on these
agreements and Kurtz and Dwyer.
Now that the IMAI acquisition has been rescinded and the Wyoming
property has been sold, the Company has virtually no assets, currently has no
operations, does not produce any goods or provide any other services and has no
employees, full or part time. The Company's business plan has returned to
identifying and combining with a viable private organization. In the event the
Company is successful in associating with another entity, that entity's
operations shall become those of the Company.
To the extent the Company is seeking an operating Company with which to
merge, the Company also faces substantial competition. There are likely hundreds
of companies that have minimal to no operations that would be attractive
entities into which a private operating entity could merge. 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 intense
competition.
ITEM 2. DESCRIPTION OF PROPERTY
The Company 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.
<PAGE>
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 May 24, 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, are attached hereto as exhibits and incorporated by
reference.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to 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. However, the Company is holding an annual
meeting of shareholders on August 16, 1999.
<PAGE>
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 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 ended May
31, 1999 and 1998. The prices in the table reflect inter-dealer prices, without
retail markup, markdown or commission and may not represent actual transactions.
The prices below are adjusted for the 1-for-310 share reverse stock split of the
Company's Common Stock effective October 19, 1998.
Calendar Year Quarter High Low
1998 First $0.02 $0.005
Second $0.02 $0.005
Third $0.02 $0.001
Fourth $0.02 $0.005
1999 First $0.02 $0.001
Second $6.00 $0.062
Third $7.00 $0.062
Fourth $6.50 $0.062
As of July 20, 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.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
Plan of Operations
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 original business objective, 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 occurred on
the property for several years because the Company has been inadequately funded
and various environmental groups had opposed mining related activities on the
property.
As the Company's merger with IMAI has been rescinded, which is more
fully discussed below, the Company's current business plan has reverted to
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 limited assets and resources to support itself,
Park Street Investments, Inc., a Utah corporation ("Park Street"), has agreed to
pay, pursuant to its Agreement as described below, 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, 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 merger or acquisition has been
effected. 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 almost certainly involve the issuance of the
Company's common stock, par value $0.01 ("Common Stock"). Such an exchange of
Common Stock will likely 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.
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements for the fiscal year ended May 31,
1998 are attached hereto as pages F-1 through F-13.
<PAGE>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
May 31, 1999 and 1998
CONTENTS
Independent Auditors' Report...................................................3
Balance Sheets.................................................................4
Statements of Operations.......................................................5
Statements of Stockholders' Equity (Deficit)...................................6
Statements of Cash Flows.......................................................8
Notes to the Financial Statements.............................................10
<PAGE>
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, 1999 and 1998, and the related
statements of operations, stockholders' equity (deficit), and cash flows for the
years ended May 31, 1999, 1998 and 1997 and from inception on July 24, 1980
through May 31, 1999. 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 audits 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, 1999 and 1998, and the results of its
operations and its cash flows for the years ended May 31, 1999, 1998 and 1997
and from inception on July 24, 1980 through May 31, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue 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
July 21, 1999
<PAGE>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
May 31,
-------------------
1999 1998
-------- --------
CURRENT ASSETS
Cash $ 6,180 $ 7,010
-------- --------
Total Current Assets 6,180 7,010
-------- --------
OTHER ASSETS
Patented lode mining claims held for sale (Note 4) -- 111,502
-------- --------
Total Other Assets -- 111,502
-------- --------
TOTAL ASSETS $ 6,180 $118,512
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 20,465 $ 147,553
Accrued payroll - related party (Note 5) -- 651,389
Notes payable - related parties (Note 3) -- 624,642
Accrued interest - related parties (Note 3) -- 591,652
Notes payable (Note 6) 7,380 29,714
Accrued interest (Note 6) 8,702 27,635
---------- ----------
Total Current Liabilities 36,547 2,072,585
---------- ----------
TOTAL LIABILITIES 36,547 2,072,585
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 50,000,000 shares authorized of
$0.01 par value; 697,117 and 48,407 shares issued
and outstanding, respectively 6,971 484
Additional paid-in capital 3,536,930 3,342,317
Deficit accumulated during the development stage (3,574,268) (5,296,874)
----------- -----------
Total Stockholders' Equity (Deficit) (30,367) (1,954,073)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 6,180 $ 118,512
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Statements of Operations
From
Inception on
For the Years Ended July 24,
May 31, 1980 Through
----------------------------------------- May 31,
1999 1998 1997 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES $ -- $ -- $ -- $ --
----------- ----------- ----------- -----------
EXPENSES 250,304 78,524 78,967 5,547,178
----------- ----------- ----------- -----------
NET LOSS FROM OPERATIONS (250,304) (78,524) (78,967) (5,547,178)
----------- ----------- ----------- -----------
OTHER INCOME
Gain on sale of asset (Note 4) 588,499 -- -- 588,499
----------- ----------- ----------- -----------
Total Other Income 588,499 -- -- 588,499
----------- ----------- ----------- -----------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 338,195 (78,524) (78,967) (4,958,679)
----------- ----------- ----------- -----------
EXTRAORDINARY ITEM (Note 7)
Gain on extinguishment of debt 1,384,411 -- -- 1,384,411
----------- ----------- ----------- -----------
Total Extraordinary Item 1,384,411 -- -- 1,384,411
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 1,722,606 $ (78,524) $ (78,967) $(3,574,268)
----------- ----------- ----------- -----------
BASIC INCOME (LOSS) PER
SHARE OF COMMON STOCK
Before extraordinary items $ 0.85 $ (1.62) $ (1.63)
Extraordinary items 3.50 - -
----------- ----------- -----------
Basic Income (Loss) Per
Share of Common Stock $ 4.35 $ (1.62) $ (1.63)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 396,162 48,407 48,407
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
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
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
At inception on July 24, 1980 -- $ -- $ -- $ --
Common stock issued for property
at approximately $19.62 per share 10,452 104 204,940 --
Common stock issued for cash
at approximately $30.33 per share 2,374 24 71,976
Common stock issued for cash
at approximately $77.50 per share 9,677 97 749,903 --
Stock offering costs -- -- (18,854) --
Common stock issued for cash
at approximately $77.52 per share 258 3 19,997 --
Common stock issued for cash
at approximately $96.68 per share 16,129 161 2,499,839 --
Stock offering costs -- -- (482,517) --
Stock issued for property
at approximately $96.68 per share 2,581 26 249,502 --
Warrant issued for cash -- -- 100 --
Common stock issued for cash
and services at approximately
$43.41 per share 645 6 27,994 --
Common stock issued for services
at approximately$3.10 per share 323 3 997 --
Common stock issued for debt
at approximately $3.10 per share 5,968 60 18,440 --
Net loss for the period from
inception on July 24, 1980 to
May 31, 1995 -- -- -- (5,103,532)
---------- ---------- ----------- -----------
Balance, May 31, 1995 48,407 484 3,342,317 (5,103,532)
Net loss for the year ended
May 31, 1996 -- -- -- (35,851)
---------- ---------- ----------- -----------
Balance, May 31, 1996 48,407 $ 484 $ 3,342,317 $(5,139,383)
---------- ---------- ----------- -----------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, May 31, 1996 48,407 $ 484 $ 3,342,317 $(5,139,383)
Net loss for the year ended
May 31, 1997 -- -- -- (78,967)
---------- ---------- ----------- -----------
Balance, May 31, 1997 48,407 484 3,342,317 (5,218,350)
Net loss for the year ended
May 31, 1998 -- -- -- (78,524)
---------- ---------- ----------- -----------
Balance, May 31, 1998 48,407 484 3,342,317 (5,296,874)
Common stock issued for cash
$0.31 per share 48,710 487 14,613 --
Common stock issued for services
at $0.31 per share 600,000 6,000 180,000 --
Net income for the year ended
May 31, 1999 -- -- -- 1,722,606
---------- ---------- ----------- -----------
Balance, May 31, 1999 697,117 $ 6,971 $ 3,536,930 $(3,574,268)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Statements of Cash Flows
<PAGE>
From
Inception on
For the Years Ended July 24,
May 31, 1980 Through
---------------------------------------- May 31,
1999 1998 1997 1999
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $ 1,722,606 $ (78,524) $ (78,967) $(3,574,268)
Adjustments to reconcile net loss to
changes in operating assets and
liabilities:
Stock issued for services, property and
debt 186,000 -- -- 550,571
Gain on sale of asset (588,499) -- -- (588,499)
Gain on extinguishment of debt (1,384,411) -- -- (1,384,411)
Changes in operating assets and liabilities:
Increase (decrease) in accrued expenses 664 74,709 73,907 1,271,340
Increase (decrease) in accounts payable (90,611) 10,803 4,932 56,942
----------- ----------- ---------- -----------
Net Cash Provided (Used) by
Operating Activities (154,251) 6,988 (128) (3,668,325)
----------- ----------- ---------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Investment in property -- -- -- (111,502)
Cash received on sale of property 700,000 -- -- 700,000
----------- ----------- ---------- -----------
Net Cash Provided by
Investing Activities 700,000 -- -- 588,498
----------- ----------- ---------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Sale of common stock for cash - net of
stock offering costs 15,100 -- -- 2,993,330
Cash payments of notes payable - related (561,679) -- -- (561,679)
Proceeds from notes payable -- -- -- 654,356
----------- ----------- ---------- -----------
Net Cash Provided (Used) by
Financing Activities (546,579) -- -- 3,086,007
----------- ----------- ---------- -----------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (830) 6,988 (128) 6,180
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 7,010 22 150 --
----------- ----------- ---------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 6,180 $ 7,010 $ 22 $ 6,180
=========== =========== ========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Statements of Cash Flows (Continued)
From
Inception on
For the Years Ended July 24,
May 31, 1980 Through
------------------------------ May 31,
1999 1998 1997 1999
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
SUPPLEMENTAL CASH FLOW
INFORMATION
CASH PAID FOR:
Interest $ -- $ -- $ -- $ --
Income taxes $ -- $ -- $ -- $ --
NON-CASH FINANCING ACTIVITIES
Common stock issued for services rendered $186,000 $ -- $ -- $ 200,000
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.
</TABLE>
<PAGE>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Notes to the Financial Statements
May 31, 1999 and 1998
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 Loss Per Share
The computations of basic 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, 1999, the Company had net operating loss carryforwards
of approximately $3,500,000 that may be offset against future
taxable income through 2014. 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.
<PAGE>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Notes to the Financial Statements
May 31, 1999 and 1998
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 - NOTES PAYABLE - RELATED PARTIES
Notes payable - related parties at May 31, 1999 and 1998 consisted of the
following:
<TABLE>
1999 1998
---------- ----------
<S> <C> <C>
Note payable to officers of the Company,
interest at 12% per annum, due on demand,
unsecured $ -- $ 155,203
Notes payable to an officer of the Company,
interest at 11% to 12.75%, due on demand,
unsecured -- 434,073
Note payable to a related party bearing interest
at 2% over prime, due on demand, unsecured -- 34,166
Note payable to a related party bearing interest
at 2% over prime, due on demand, unsecured -- 1,200
---------- ----------
Totals -- 624,642
Accrued interest -- 591,652
---------- ----------
Total Amounts Due $ -- $1,216,294
========== ==========
</TABLE>
Since inception of the Company, the President and Treasurer of the
Company had advanced money to the Company without collateral and
paid certain expenses on behalf of the Company, which totaled
$624,642 at May 31, 1998. During the year ended May 31, 1999, the
Company settled the amount in full, including accrued interest
thereon.
<PAGE>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Notes to the Financial Statements
May 31, 1999 and 1998
NOTE 4 - PATENTED LODE MINING CLAIMS SALE
The Company acquired patented lode mining claims in Atlantic City,
Wyoming for the purpose of mining gold. During the year ended May
31, 1999, the mining claims were sold at a gain of $588,499.
NOTE 5 - ACCRUED PAYROLL - RELATED PARTY
The Company had accrued salary to the Company's former President.
At May 31, 1999 and 1998, the amounts due were $-0- and $651,389,
respectively.
NOTE 6 - NOTES PAYABLE
Notes payable at May 31, 1999 and 1998 consisted of the following:
1999 1998
------- -------
Note payable to an individual, interest at 9%
per annum, due on demand, unsecured $ 2,290 $ 2,290
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 -- 22,334
------- -------
Totals 7,380 29,714
Accrued interest 8,702 27,635
------- -------
Total Amounts Due $16,082 $57,349
======= =======
<PAGE>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Notes to the Financial Statements
May 31, 1999 and 1998
NOTE 7 - EXTRAORDINARY ITEM
During the year ended May 31, 1999, the Company recognized a gain
from extinguishment of debt in the amount of $1,384,411. FASB
Statement No. 4 requires that gains and losses from extinguishment
of debt be reported as extraordinary items. Due to the Company's
net operating loss carryforwards, tax effects are not considered
in the calculation. The gain on extinguishment of debt was
calculated as follows:
<TABLE>
<CAPTION>
Balance, Gain on Debt Balance,
May 31, Cash Extinguish- May 31,
1998 Payments ments Additions 1999
---------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Accounts payable $ 147,553 $ (92,342) $ (36,476) $ 1,730 $ 20,465
Accrued payroll -
related party 651,389 -- (651,389) -- --
Notes payable -
related parties 624,642 (561,679) (62,963) -- --
Accrued interest -
related parties 591,652 -- (591,652) -- --
Notes payable 29,714 -- (22,334) -- 7,380
Accrued interest 27,635 -- (19,597) 664 8,702
---------- ---------- ------------- ---------- ----------
Total $2,072,585 $ (654,021) $ (1,384,411) $ 2,394 $ 36,547
========== ========== ============= ========== ==========
</TABLE>
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING
FINANCIAL DISCLOSURE
The principal independent auditor of the Company has not changed within
the past two years.
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)
Tyson Schiff 27 President, Secretary,
Treasurer and Director
Brian Ortega 26 Director
Marianne Brady 23 Director
Ken Kurtz 31 Control Person
Tyson Schiff has served as an officer and director of the Company since
October 7, 1998. 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 has served as a director of the Company since November 30,
1998. He 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 has served as a director of the Company since June 9,
1999. She 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.
<PAGE>
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. 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.
Section 16(a) Beneficial Ownership Reporting Compliance
None of the Company's directors have ever owned shares of the Company's
Common Stock. However, the Company's current directors did not timely file
required Forms 3, between the time of their respective appointments until July
13, 1999.
Based solely upon the Company's review of Forms 3, 4 and 5 and
amendments thereto furnished to the registrant under Rule 16a-3(a) during the
fiscal year preceding the filing of this Form 10-KSB, the Company is not aware
of any other 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.
ITEM 10. EXECUTIVE COMPENSATION
No compensation in excess of $100,000 was awarded to, earned by, or
paid to any executive officer or director of the Company during the years ended
May 31, 1999, 1998 or 1997. The following tables describe the compensation of
the persons who have served as the Company's president for the last three fiscal
years and the first six months of the current fiscal year.
SUMMARY COMPENSATION TABLES
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------------------------------------------------------------------------------
Name and Other Annual Compensation
Principal Position Year Salary ($) Bonus ($) ($)
-------------------------- ----- ---------- --------- --------------------------
<S> <C> <C> <C> <C>
Tyson Schiff, President 1999 -0- $500(1) -0-
Mary C. MacQueen, President 1998 -0- -0- -0-
John W. MacGuire, President 1997 -0- -0- -0-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------------------------------
Awards Payouts
------------------------------------------ --------
LTIP All Other
Name and Principal Ristricted Stock Securities Underlying Payouts Compensation
Position Year Award(s)($) Options/SARs(#) ($) ($)
- ------------------- ----- ------------------ --------------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Tyson Schiff, 1999 -0- -0- -0- -0-
President
Mary C. MacQueen, 1998 -0- -0- -0- -0-
President
John W. MacGuire, 1997 -0- -0- -0- -0-
President
</TABLE>
(1) In October 1998, Tyson Schiff received a $500 bonus for serving as
the Company's president and director since July 1996, and for agreeing to
continue to serve as a director and the president of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 23, 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 herein 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, American
Securities Transfer, Inc.
<TABLE>
<CAPTION>
Name and Address of Amount of
Beneficial Owner Beneficial Ownership Percent of Class
------------------------------- -------------------- ----------------
<S> <C> <C> <C>
Common Stock Ken Kurtz 348,709(1) 50.02%
2133 East 9400 South, Suite 151
Salt Lake City, Utah 84093
Common Stock First Avenue Ltd. 139,709 21.3%
2133 East 9400 South, Suite 151
Salt Lake City, Utah 84093
Executive Officers and Directors
--------------------------------
Common Stock Tyson Schiff 0 0
2133 East 9400 South, Suite 151
Salt Lake City, Utah 84093
Common Stock Marianne Brady 0 0
2133 East 9400 South, Suite 151
Salt Lake City, Utah 84093
Common Stock Brian Ortega 0 0
2133 East 9400 South, Suite 151
Salt Lake City, Utah 84093
Common Stock Executive Officers and Directors 0 0
as a Group
</TABLE>
(1) Includes 139,709 shares owned by First Avenue Ltd., which is wholly owned by
Kurtz, and 9,000 shares held in a retirement account of Kurtz.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Several outstanding debts were discharged with the proceeds received
from the sale of the Company's Wyoming Property. See "Description of Business &
Related Information - Real Estate Holdings" above for more information on the
Wyoming Property. Some of the debts settled were owed to the Company's former
president, Mary MacGuire, and to its former corporate secretary, Dolores
MacQueen. A total of $2,032,433 of debt was settled in exchange for the
$648,810.82 of net proceeds realized from the sale of the Wyoming Property. Such
debts were settled in varying proportions pursuant to five Satisfaction and
Releases, which were attached hereto as Exhibits 10(vi) through 10(x) to the
Company's Form 10-QSB for the quarter ended February 28, 1999.
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
("November Consulting Agreement") whereby Kurtz agreed to assist the Company in
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.
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 (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 48,709 shares. See "Market for Common Equity & Related Shareholder
Matters" for more information on the reverse stock split.
<PAGE>
According to a Financial Consulting Agreement between Company and Park
Street Investments, Inc. executed on March 5, 1998 ("March Consulting
Agreement"), 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 March 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.
Matthew Dwyer
The Company and Matthew P. Dwyer entered a Consulting Agreement on
November 30, 1998, which provided for Dwyer's services as a management
consultant, strategic planner and advisor with respect to the medical imaging
services business, which the Company temporarily entered when it executed the
Purchase Agreement with IMAI. Pursuant to this contract, Dwyer was issued
200,000 shares of the Company's Common Stock and was to receive options to
purchase of One Million shares of the Common Stock exercisable as follows:
250,000 shares exercisable at $0.50, 250,000 shares exercisable at $1.00,
250,000 shares exercisable at $2.00 and 250,000 shares exercisable at 3.00. The
Company issued the 200,000 shares to Dwyer and registered such shares on Form
S-8 under the Securities Act of 1933, as amended, but ceased its involvement in
the medical imaging industry prior to granting Dwyer any options. The Company
believes neither Dwyer nor any party related to Dwyer hold any of the shares he
was issued or any other shares of the Company's Common Stock.
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 15 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.
<PAGE>
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 30th day of July, 1999.
Nugget Exploration, Inc.
/s/ Tyson Schiff
Tyson Schiff, 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.
/s/ Tyson Schiff Date:
Tyson Schiff, President,
Secretary, Treasurer and Director
/s/ Brian Ortega Date:
Brian Ortega, Director
/s/ Marianne Brady Date:
Marianne Brady, Director
<PAGE>
INDEX TO EXHIBITS
SEC Ref Page
No. No. Description
3(i) * Articles of Incorporation, including amendments,
incorporated herein by reference from the Company's
previous filings.
3(ii) * Bylaws of the Company, incorporated herein by
reference from the Company's previous filings.
10(i) * This Rescission of Agreements and Release of Claims
is made as of this 10th day of May 1999 between and
among Nugget Exploration, Inc., Imaging Management
Associates, Inc., and Dr. Leonard Vernon, ,
incorporated herein by reference from the Company's
previous filings.
10(ii) * This Consulting Agreement is made effective this
30th day of November, 1998 by and between the
Company and Ken W. Kurtz, incorporated herein by
reference from the Company's previous filings.
10(iii) * Contract to Purchase Mining Property entered on
November 18, 1998, by and between ORA Management,
LLC, and the Company, incorporated herein by
reference from the Company's previous filings.
10(iv) * Extension of Contract to Purchase Mining Property
by and between ORA Management, L.L.C., and the
Company, dated February 15, 1999, incorporated
herein by reference from the Company's previous
filings.
10(v) * Second Extension of Contract to Purchase Mining
Property by and between ORA Management, L.L.C., and
the Company, dated April 23, 1999, incorporated
herein by reference from the Company's previous
filings.
10(vi) * Satisfaction and Release entered into April 30,
1999 between and among the Company, Anne M.
MacGuire and Mary C. MacGuire, incorporated herein
by reference from the Company's previous filings.
10(vii) * Satisfaction and Release entered into April 30,
1999 by and between the Company and Delores H.
MacQueen, incorporated herein by reference from the
Company's previous filings.
10(viii) * Satisfaction and Release entered into May 5, 1999
by and between the Company and Lubuau, Hand &
Bailey, L.L.C., incorporated herein by reference
from the Company's previous filings.
10(ix) * Satisfaction and Release entered into May 11, 1999
by and between the Company and Mary Alice Hand
(Mrs. Dennis (Joe) Hand), incorporated herein by
reference from the Company's previous filings.
10(x) * Satisfaction and Release entered into May 11, 1999
by and between the Company and Robert Jerry Hand,
incorporated herein by reference from the Company's
previous filings.
(10)(xi) * 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.
