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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] 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.
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2) Aggregate number of securities to which transaction applies:
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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.)
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4) Proposed maximum aggregate value of transaction:
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[ ] 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>
PROXY
ANNUAL MEETING OF THE SHAREHOLDERS OF NUGGET EXPLORATION, INC., AUGUST 16, 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
on Monday, August 16, 1999 at 9:30 a.m. at the Sandy County Library located at
10100 Petunia Way, Sandy, Utah 84092, 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>
NUGGET EXPLORATION, INC.
2133 South 9400 East, Suite 151
Salt Lake City, UT 84093
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 16, 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 Monday, August 16,
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 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
5. 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 1999
annual report as the "Proxy Materials." The Board of Directors is sending Proxy
Materials to you and all other stockholders on or about August 3, 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 30, 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 August 16,
1999, and/or at any adjournment thereof (the "Annual Meeting"). 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 August 3, 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 Services 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 by a representative of
the Company. The Company does not know of any other matters which will be
presented for action at the Annual Meeting. However, the Company's proxy holder
shall 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.
<PAGE>
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 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, American Securities Transfer, Inc.
<TABLE>
<CAPTION>
Name and Address of Amount of Percent of
Beneficial Owner Beneficial Class
Ownership
- -------------- ------------------------------- ----------- ---------
<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
as a Group 0 0
</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.
<PAGE>
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 entitled to
cumulate their votes for the election of directors.
Each of the nominees listed below is currently serving as a director of the
Company. The Articles of Incorporation provide that each director serve until a
successor is elected.
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 its 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 any such audited statements will materially differ
from the unaudited financial statements IMAI had given to the Company during
negotiations which IMAI thought were representative of its operations. Because
the financial status of IMAI is unknown, the Company believes rescinding the
Purchase Agreement is the safest action the Company can take. On May 10, 1999,
IMAI and the Company signed a Rescission of Agreements and Release of Claims
regarding the Purchase Agreement, which is attached hereto and incorporated
herein by reference. 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 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.
<PAGE>
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 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 various corporate purposes, including, but not limited to, the
discharge of liabilities, payment to consultants, acquisitions of other
businesses and financing.
The Board of Directors recommends 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 SHARES 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.
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 audit the Company's consolidated financial
statements for the fiscal year ending May 31, 2000.
The Company expects a representative of Jones, Jensen & Company, to attend the
Annual Meeting and be capable of making a statement or responding to appropriate
questions.
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.
<PAGE>
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 May 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 does not prevent
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 30, 1999
<PAGE>
PROXY
ANNUAL MEETING OF THE SHAREHOLDERS OF NUGGET EXPLORATION, INC., AUGUST 16, 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 on Monday,
August 16, 1999 at 9:30 a.m. at the Sandy County Library located at 10100
Petunia Way, Sandy, Utah 84092, 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.
================================================================================
APPENDIX I
TO PROXY STATEMENT OF
NUGGET EXPLORATION INC.
<PAGE>
ANNUAL REPORT AS REQUIRED BY RULE 14A-3(B)
OF THE EXCHANGE ACT OF 1934, AS AMENDED
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 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 future 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.
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION, INC.
- --------------------------------------------------------
<PAGE>
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 its 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 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, 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 May 10, 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 May 10, 1999, which was filed with the Company's
February 28, 1999 Form 10-QSB and is 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.
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION, INC.
- --------------------------------------------------------
<PAGE>
In conjunction with 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.
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 (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. 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 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 the Company's February 28, 1999 Form 10-QSB, which is incorporated
herein by reference. 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 May 24, 1999.
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION, INC.
- --------------------------------------------------------
<PAGE>
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.
FINANCIAL STATEMENTS
Please see Pages F-1 through F-13 which follow this Annual Report.
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. Prior to
the audit of Jones, Jensen & Company, the Company had never had its financial
statements audited.
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 sought to assist the Company
liquidate its existing assets and settle certain of its debts.
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.
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION, INC.
- --------------------------------------------------------
<PAGE>
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 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. 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.
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION, INC.
- --------------------------------------------------------
<PAGE>
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- $500(1) -0-
Mary C. MacQueen, President 1998 -0- -0- -0-
John W. MacGuire, President 1997 -0- -0- -0-
</TABLE>
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------------------------------
Awards Payouts
------------------------------------------ --------
LTIP All Other
Name and Principal Ristricted Stock Securities Underlying Payouts Compensation
Position Year Award(s)($) 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.
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION, INC.
- --------------------------------------------------------
<PAGE>
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.
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.
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 did not change for $0.01 per share.
REVERSE STOCK SPLITS
The Company's Board of Directors and the holders of a majority of the
outstanding common stock approved a reverse split on October 7, 1998, effective
October 19,1998, whereby each 310 shares was converted into one share and 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.
Simultaneous with the 1-for-310 reverse stock split of the outstanding shares of
Common Stock, on October 7, 1998, the holders of a majority of the then
outstanding Common Stock and all of the Board of Directors 1-for-10 reverse
stock split of the number of shares of Common Stock authorized for issuance.
Pursuant to this 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>
Shareholders should be aware that as a general rule stock combinations and
reverse splits do not increase or 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. However, when the
authorized number of shares are not split, or are split in a smaller ratio than
outstanding shares are split, existing shareholders own a smaller percentage of
the total number of shares which can be issued. This results in the Company
having the ability to issue relatively more shares than prior to the splits, and
therefore possibly dilute the ownership of existing shareholders in a manner
greater than existed prior to the 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
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.
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.
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION, INC.
- --------------------------------------------------------
<PAGE>
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.
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.
APPENDIX I TO PROXY STATEMENT OF NUGGET EXPLORATION, INC.
- --------------------------------------------------------
<PAGE>
APPENDIX II
TO PROXY STATEMENT OF
NUGGET EXPLORATION INC.
AUDITED FINANCIAL STATEMENTS
NUMBERED F-1 TO F-13
APPENDIX II TO PROXY STATEMENT OF NUGGET EXPLORATION, INC.
- --------------------------------------------------------
<PAGE>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
May 31, 1999 and 1998
APPENDIX II TO PROXY STATEMENT OF NUGGET EXPLORATION, INC.
- --------------------------------------------------------
<PAGE>
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
The accompanying notes are an integral part of these financial statements.
<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)
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
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>
