SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Information Statement
NUGGET EXPLORATION, INC.
------------------------
(Name of Registrant as Specified in Its Charter)
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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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[ ] Check box if any part of the fee is offset as provided by Exchange
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INFORMATION STATEMENT
OF
NUGGET EXPLORATION, INC.
2051 SPRINGDALE ROAD
CHERRY HILL, NJ 08003
TELEPHONE: 800-204-1902
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
- --------------------------------------------------------------------------------
NOTICE OF SHAREHOLDER CONSENT TO CHANGE THE NAME OF
NUGGET EXPLORATION, INC.
TO
GOHEALTH.MD, INC.
We are providing this Information Statement to all shareholders as
notification that the holders of a majority of our outstanding common stock, par
value $0.01 ("Common Stock"), voted to change our name to "GoHealth.MD, Inc."
On November 10, 1999, holders of a majority of the Common Stock voted
to amend our Articles of Incorporation to change our name to GoHealth.MD, Inc.
Of the 3,799,117 shares issued and outstanding on that date, shareholders owning
3,102,000 shares, or 82% of the outstanding Common Stock, voted to approve this
name change via written consent taken without a meeting pursuant to Section
78.320 of the Nevada Revised Statutes.
On December 31, 1999, we expect to send this Information Statement to
all shareholders of record as of December 1, 1999. The name change shall be
effective twenty (20) calendar days after this Information Statement is mailed
to our shareholders. The effective date for this corporate action is expected to
be January 20, 2000.
The shareholders who consented to the name change were previously
shareholders of GoHealth.MD, Inc., a Delaware corporation ("GoHealth"). These
entities received shares of Common Stock when our wholly owned subsidiary,
Nugget Holding Company, a Delaware corporation ("Newco"), merged with and into
GoHealth, pursuant to a Stock Exchange Agreement and Plan of Merger
("Agreement"), dated September 30, 1999. GoHealth survived the merger and became
our wholly owned subsidiary. For more information on the Agreement, see
"Description of Business."
We have not conducted any operations for several years. When we,
through Newco, merged with GoHealth, our operational focus shifted to GoHealth's
Internet-related marketing services. Our board of directors recommended the name
change to GoHealth.MD, Inc. to reflect our new focus on GoHealth's operations.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning ownership
of our Common Stock as of December 1, 1999. The table discloses each entity we
know to beneficially own more than five percent (5%) of our common stock. The
table also shows the stock holdings our directors, as well as the shares held by
our directors and executive officers as a group. The notes accompanying the
information in the table below are necessary for a complete understanding of the
figures provided.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent of
Title of Class of Beneficial Owner Beneficial Ownership Class
<S> <C> <C> <C>
MCOM Management Corporation
Common Stock 350 Fifth Avenue, Suite 5807 800,000(1) 17.4%(2)
New York, NY 10118
Sandra Vernon
Common Stock 2051 Springdale Road 2,000,000 48.8%
Cherry Hill, NJ 08003
William D. Hanna
Common Stock 2051 Springdale Road 615,000(3) 14.6%(4)
Cherry Hill, NJ 08003
Dr. Leonard Vernon
Common Stock 2051 Springdale Road 2,000,000(5) 48.8%
Cherry Hill, NJ 08003
Kevin O'Donnell
Common Stock 2051 Springdale Road 615,000(6) 14.6%(7)
Cherry Hill, NJ 08003
Common Stock Executive Officers and 3,230,000 77.8% (8)
Directors as a Group
</TABLE>
(1) Includes 450,000 shares of our common stock which may be acquired
upon the exercise of outstanding warrants held by MCOM.
(2) Such percentage presumes the issuance of those shares of common
stock referenced in note 1 above.
(3) Includes 115,000 shares of our common stock which may be acquired
upon the exercise of outstanding stock options held by Mr. Hanna.
(4) Such percentage presumes the issuance of those shares of common
stock referenced in note 3 above.
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(5) Includes 2,000,000 shares owned by Sandra Vernon, the wife of Dr.
Leonard Vernon. Dr. Vernon disclaims any beneficial ownership of such shares.
(6) Includes 115,000 shares of our common stock which may be acquired
upon the exercise of outstanding stock options held by Mr. O'Donnell.
(7) Such percentage presumes the issuance of those shares of common
stock referenced in note 6 above.
(8) Such percentage presumes the issuance of those shares of common
stock referenced in notes 4 and 6 above.
CHANGE IN CONTROL
We experienced a change of control on November 10, 1999, when we issued
3,102,000 shares of our common stock to the shareholders of GoHealth.MD, Inc., a
Delaware corporation ("GoHealth"), pursuant to a Stock Exchange Agreement and
Plan of Merger ("Merger Agreement"), dated September 30, 1999. Pursuant to the
terms of the Merger Agreement, each of the 3,102,000 outstanding shares of
GoHealth common stock (the "GoHealth Stock"), was converted into and exchanged
for one share of our common stock.
The Merger Agreement additionally provided that we assume GoHealth's
rights and obligations under all of its outstanding stock options and warrants.
All holders of such options and warrants agreed upon the exercise of such
securities to accept shares of our common stock. In the event all such options
and warrants are exercised, we will issue an additional 567,000 shares, which
will result in total issuances of a total of 3,669,000 shares of common stock to
GoHealth stockholders. If all GoHealth options and warrants are exercised, the
GoHealth stockholders will have received 77.9% of the total number of shares of
common stock outstanding. All shares issued pursuant to the Agreement were
issued pursuant to exemptions from registration under the Securities Act of
1933, as amended (the "Act"), including Rule 506 under the Act.
Sandra Vernon, William Hanna, Kevin O'Donnell now own in aggregate,
presuming the exercise of all warrants held by Hanna and O'Donnell described
above in Security Ownership of Certain Beneficial Owners and Management, 77.8%
of our common stock, respectively, which provide them with control of the
Company. Sandra Vernon is the wife of Dr. Leonard Vernon, one of our directors
and our president. Control was assumed from Mr. Kurtz, who at that time
beneficially owned 348,709 shares of Common Stock, which represented 50.02% of
the outstanding Common Stock prior to the GoHealth acquisition. Kurtz now owns
approximately 57,709 shares of Common Stock, representing 1.5% of that now
outstanding. We understand that subsequent to the Merger, Kurtz sold
approximately 291,000 shares of Common Stock to various investors in a private
transaction.
In connection with these stock issuances, Dr. Leonard Vernon and
William Hanna were appointed as additional directors. Tyson Schiff then resigned
from his positions as president and director, and Brian Ortega and Marianne
Brady resigned as directors. The directors then appointed Dr. Leonard Vernon as
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president and William Hanna as its secretary and treasurer. Neither Mr. Schiff,
Mr. Ortega nor Ms. Brady had any disagreements with us at the time of their
respective resignations. This change of control in our management coincided with
a change in control of the ownership of our capital stock.
We know of no other arrangements which may result in a change in our
control.
DESCRIPTION OF BUSINESS
The Internet related operations of GoHealth.MD, Inc. ("GoHealth") now
comprise virtually all of our activities. These activities are conducted in two
arenas. GoHealth sells Internet domain names with the ".MD" extension, as
compared to the more standard domain extensions .com, .org, .net or .edu, and
operates an informational Internet site, Healthmall.com. As used hereinafter,
the terms such as "Company," "we," "us" or "our" refer to Nugget Exploration
Inc., a Nevada corporation, and our subsidiary (including GoHealth) and
predecessors, unless the context indicates otherwise.
HEALTHMALL.COM
We operate an informational site on the Internet located aT
www.Healthmall.com. This site is devoted to providing information related to the
use of herbs, vitamins, as well as an information source for alternative health
care providers such as chiropractors and naturopathic physicians. The site
therefore serves as an information portal for alternative health care and is
very heavily content based. Among the vast quantities of information that can be
garnered on the site is herb and prescription drug interactions. This
information is supplied on the site through a licensing contract with Facts and
Comparisons Corporation, one of the leading sources of information for
pharmacists in the United States.
The site includes a continuously updated news wire feed limited to
health care from PR Newswire, a searchable database through the National Library
of Medicine for published peer review medical journal articles known as "Medline
search," and information on almost 200 herbs, including their pharmacology,
toxicology, and their clinical indications.
We also feature one of the largest databases in the United States of
health food stores. This database contains over 5000 health food stores in the
United States and includes their name, address, and phone number. The database
is constantly being updated and expanded.
Databases of alternative health care providers, such as licensed
chiropractors, massage therapists and naturopathic physicians are also contained
on the site. The site contains a database of over 3,000 chiropractors in the
United States. It is our goal to establish an online presence for the
chiropractor by developing a website as well as an e-mail account. This will
initially be done free-of-charge for six months. Again, at the end of six
months, the chiropractor will have the option of staying online for an annual
fee of $150 or terminate the service. In the event these options prove of
interest to chiropractors, we plan to utilize similar option for other health
care practitioners.
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The site also offers the following options and services:
SYMPTOMS AND REMEDIES: An extensive database of symptoms,
diseases, and medical conditions that offers viewers the
opportunity to read a short description of the symptom,
disease, or condition, as well as view the associated herbal
remedies and/or prescription medications that are commonly
used to treat that condition.
SHOPPING: A health food/health product "mall" with specialized
stores, shops, and services. The shopping section offers each
store a home page, unlimited product categories, unlimited
product descriptions and/or photos, as well as a secure
e-commerce connection to complete ordering transactions
HEALTH CHAT: A chat room in which people can ask questions or
chat about health-related topics, concerns, and information.
We also offer chat sessions with experts in various fields who
offer advice and lectures, as well as interact with the
Internet community in scheduled question and answer sessions.
We are currently gathering data on the purchasing habits of consumers
regarding their vitamin and nutritional supplement purchases. We hope to use
this information in the future as an information source to develop an e-commerce
relationship with vitamin manufacturers and retailers.
Healthmall.com is targeted to well-educated, technology adopting women
aged 25-54 who are proactive in seeking information to actively maintain their
health and well-being and reactive in addressing health and medical issues.
Healthmall.com's target market is predominantly female, as they are the key
healthcare decision-makers within the household. According to International Data
Corporation, women are expected to represent approximately 51% of on-line users
in 1999, up from 46% in 1998. Healthmall.com believes that women represent an
attractive demographic group for advertisers since they have disproportionate
control over consumer spending in the United States. Industry experts estimate
that women make 75% of the household's healthcare decisions, control 66% of the
health dollars and spend 80% of a household's discretionary income.
.MD DOMAIN NAMES
We have a strategic partnership with a Florida company, Domain Name
Trust ("DNT"), which has a licensing agreement with the country of Moldova, a
small Eastern European country which was assigned a monopoly over the ".MD"
top-level domain extension by the Internet Assigned Numbers Authority, a United
States government agency, in conjunction with a United Nations organization
known as ISO, or International Organization for Standardization.
A domain name is the equivalent of an address on Internet. Therefore,
every site on the Internet has a domain name identifying it. There are two types
of top-level domains, generic and country code. Generic domains were created for
use by the Internet public, while country code domains were created to be used
by each individual country as they deemed necessary.
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In the Domain Name System ("DNS") naming of computers, a hierarchy of
names exists. There are a set of what are called "top-level domain names"
("TLDs"). These are the generic TLDs (EDU, COM, NET, ORG, GOV, MIL, and INT),
and the two letter country codes. Under each TLD may be created a hierarchy of
names. Generally, under the generic TLDs the structure is very flat. That is,
many organizations are registered directly under the TLD, and any further
structure is up to the individual organizations.
The .MD domain names are sold directly from our Internet website,
located at WWW.GOHEALTH.MD. Anyone can access this site and acquire an available
domain with the .MD extension. The site is 'branded,' or electronically linked,
to DNT's site, which maintains record of new .MD domains. Therefore, every time
a person at our site registers a .MD domain, DNT's site recognizes the origin of
the sale as our, ensuring that we receive credit for each and every sale of a
.MD domain name generated through our site.
We have acquired the marketing rights to more than 40 domain names that
end in the domain extension .MD. Each one of these domain names have an
unlimited marketing potential since they can be specifically identified by an
individual URL. An example of this would be BACKDOC.MD/SMITH. Thus, a virtually
unlimited number of specialists in any given specialty will have the ability to
use the .MD domain name of their particular choice. Other .MD domain names
acquired by GoHealth include www.Ask.md, www.Call911.md, www.nutrition.md,
www.Family.md. We believe the ".MD" extension is and will continue to be a
highly desired domain extension in the medical industry which is more appealing
than comparable extensions of ".COM", ".NET", ".ORG" or ".EDU".
OFFICE FACILITIES
Our offices are located at 2051 Springdale Road, Cherry Hill, New
Jersey, which also houses the offices of Able Imaging, Inc., a wholly owned
entity of William D. Hanna, one of our directors. We do not pay rent to Mr.
Hanna for such facilities.
MANAGEMENT'S PLAN OF OPERATION
This Information Statement contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," and
similar expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause our actual results to differ
materially from those indicated by such forward-looking statements.
Our operations are conducted through our wholly owned subsidiary,
GoHealth, which is a development stage company. We operate an Internet
informational site relating to health and medicine and sells Internet domain
names with the ".MD" extension.
Capturing a large physician network (medical doctors, chiropractors,
dentists, podiatrists, osteopaths) to view online advertising in exchange for
the establishment of websites and hosting services is one of our primary goals.
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Such a network would facilitate a synergy between GoHealth's Internet
informational site and .MD domain names. We hope to entice physicians to utilize
its Internet website design services with one of its Internet .MD domain
extensions. We hope to have advertisers, such as pharmaceutical companies,
underwrite physician's cost of a .MD domain and website.
The medical industry does not utilize advertising on the Internet as
much as many other industries. However, we hope to alter this lack of
advertising with its .MD domain extensions, which in our opinion, allow for easy
recognition of a physician's website. Physicians interested in the .MD domain
extensions will be offered discount packages to encourage them to assist our
informational site. The presence of physicians participating on our site is
expected to establish a significant potential for advertising revenue.
HEALTHMALL.COM
By developing Healthmall.com into the leading Internet resource
dedicated to the use of herbs, vitamins, as well as an information source for
alternative health care providers such as chiropractors and naturopathic
physicians, we believe we will be able to generate substantial advertising
revenues. We have entered into, and intend to continue to enter into new
distribution and business relationships with entities that have significant
reach on the Internet and are in similar fields, such as pharmacy chains,
Internet access providers and portals, as well as other traditional media to
build the Healthmall.com brand and drive traffic to the site. Since launching
the site, we have developed advertising relationships with the following
companies: Onhealth.com, Dr. Koop.com, Pharmor.com, Natraflex, The Simple
Truth.com, Vivacity.com, Nature's Source's, Permalean, Nutriceutical Technology
Corporation, Northeast Health Institute and Nourishing Foods, Inc. Many of these
advertising contracts have been brought to the site via an agreement with Burst!
Media. Current distribution relationships include:
THE GOTO.COM SEARCH ENGINE. This search engine is basically an
auction-type search engine that allows individual websites to bid for a
position in the search engine. Healthmall.com has almost 300 search
terms which appear on the first page of the search engine.
THE YAHOO SEARCH ENGINE. Healthmall.com also has rankings that permit
direct traffic to our site from the YAHOO search engine.
THE ALTA VISTA SEARCH ENGINE. Healthmall.com not only also has rankings
that permit direct traffic to our site from the ALTA VISTA search
engine, but the Company has search engine positioning with REAL NAMES.
This permits us to purchase various names that will appear first on
ALTA VISTA search engines.
Familiarity of the domain, or address, of a website containing health
and medical information is, in our opinion, a competitive advantage as many
consumers may desire to avoid searching for an unknown website. We believe our
website has a familiar, easy to remember domain. Internet-related marketing and
advertising revenues are tied directly to the amount of 'hits' a site receives,
or times the site is visited. In the event we are able to generate a greater
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viewing market, we expect to generate higher advertising and marketing revenues.
Healthmall.com is attempting to reach independent health food stores at
this time to offer them an online presence and to increase our database of
retail natural food stores. While GNC and Great Earth possess the largest market
segments, and Mother Nature.com is an Internet- based superstore that offers
nutritional products, the remainder of the market is comprised of approximately
8,000 small, independent retailers with no uniformity. There is no ongoing
consolidation of independent health food stores in the United States and the
independents are facing increasing competition from the chains, such as GNC and
Great Earth, as well as online chains, such as Vitamins.com and Vitaminshop.com.
If even a small portion of these approximately 8,000 these small,
independent health food retailers can be combined and linked at an Internet site
such as Healthmall.com, we believe they will have the opportunity to compete
with the superstores on a national level. We are attempting to achieve this
through a free offer that allows the independent health food store to get a free
website and free online shopping cart for six months. Such technical services
are being provided to us by World Wide Web Communications of Cherry Hill, New
Jersey. Following the six-month trial period, if the independent health food
store wishes to remain online, there is a cost of $20 per month. This presence
would allow the independent retailer the opportunity to advertise their business
on a national level, as well as to their existing customers and prospective
customers in their own community.
One manner by which we hope to differentiate the Healthmall.com site
from other sources of health and Wellness information is by continuing to focus
on the alternative medicine. While other sites only devote portions of their
content to this type of alternative medicine, we intend to predominantly focus
on the use of herbs, vitamins, and alternative health care providers such as
chiropractors and naturopathic physicians.
In an attempt to further differentiate Healthmall.com from other
Internet health sites, we have designed it to allow consumers to obtain
information on specific diseases or conditions and allergy information and
participate in relevant discussion groups, among other things. Healthmall.com
provides updated health-related news articles from around the world are received
every 20 minutes via PR Newswire. This feature always includes a cover story on
the Healthmall.com home page, as well as hundreds of additional news articles
accessible from Healthmall.com's home page, located at www.Healthmall.com.
The licensing arrangement with Facts and Comparison Corporation,
referred to in "Description of Business" above, which allows medication
information to appear directly on Healthmall.com, identifies a goal of
Healthmall.com. Very few of the several informational options found on
Healthmall.com are cobranded, or require transfer to a site removed from
Healthmall.com. Therefore, with a few minor exceptions, a visitor to
Healthmall.com remains on Healthmall.com's pages. This retained viewing is
perceived by the Company to be a competitive advantage in its attempt to
generate advertising revenues.
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".MD" DOMAIN NAMES
We currently own and operate a website for the sale of .MD domain
names. We believe that our use of the domain name .MD carries significant
marketability and that medical specialists that perform elective procedures,
such as plastic or cosmetic surgeon have been increasing their spending on
advertising revenues as evidenced by viewing the yellow page book in the United
States or major regional magazines.
In conjunction with our offering of .MD domain names, we offer
physician websites and the hosting of these websites on our own server which is
included in the .MD domain name purchase price. The website is basically a
templated website that has been designed by World Wide Web Communications of
Cherry Hill, New Jersey. In addition, we sell customized websites, which are
also prepared by World Wide Web Communications of Cherry Hill, New Jersey.
Hosting of websites sold in conjunction with .MD domain names are provided by
Domain Name Trust, as more fully discussed in "Business."
The limited marketing of the .MD domain names and our related Internet
services which has occurred has consisted of advertising in medical journals,
direct mail to physicians, as well as a point of presence at various medical
conventions.
TECHNOLOGY AND SYSTEMS
Both of our website www.Healthmall.com, www.GoHealth.md are made
available with the latest Internet hardware and software technologies. Exodus
IT-class co-location facilities provide a secure, high availability and high
bandwidth space for our servers. This includes redundant OC-3 and OC-12 backbone
connections to the Internet, uninterruptible power supplies with diesel
generator backup, all housed in a copper-lined, earthquake-proof building.
Direct connections via "T-1" and DSL lines allow the main office to connect
seamlessly and reliably to the servers and the Internet. A farm of Intergraph
IS-8000 and IS80 mission-critical servers are housed behind a redundant F5
Big/IP switcher for complete software and hardware fault tolerance and load
leveling. These servers run Microsoft Windows NT Enterprise Server with Internet
Information Server 4.0, Active Server Pages with a proprietary page caching
system and publishing tools for Web page hosting and production management. The
resulting performance in preliminary tests shows dominance over other
competitive sites. All advertisement hosting and reporting is handled through
NetGravity Ad Server, a powerful ad management and forecasting toolset.
The website's Personal Health Tracker and Search features utilize
Microsoft SiteServer tools and technologies. This provides the customized web
crawling, user profile management, nightly process runs and e-mail support that
the Personal Health Tracker requires.
Microsoft SQL Server databases are heavily used for all content,
process management and tracking needs. Offsite backups occur regularly
throughout the day to protect against a total system failure.
We believe the site is a very stable, scalable, and high performance
solution for Healthmall.com's current and future needs.
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COMPETITION
We currently face competition in the domain name registration business
from other registries for ccTLDs, resellers, registrars and registries of the
top-level domains .com, .net and .org, including Network Solutions, Inc. In
developing and distributing future products and services for the Internet-based
services markets, we face intense competition and expect to have multiple
competitors for each of the products or services, if any, which we develop,
market or sell. For example, with respect to our healthcare and medical
information portal we plan to develop, we will be competing with many companies
that have greater experience and brand recognition than we do, including
Healtheon Companies, Inc., DrKoop, Careinsite and Webmd. Increased competition
could result in pricing pressures, reduced sales, margins, profits, and/or
market share or the failure of our products to achieve or maintain market
acceptance. Furthermore, the industry in which we intend to compete is
characterized by rapid changes and frequent product and service introductions.
Many of our current and potential competitors have significantly
greater financial, marketing, customer support, technical and other resources
than we do. Some of our competitors and potential competitors have longer
operating histories, greater name recognition, access to larger customer bases,
more established distribution channels or substantially greater resources than
we have. As a result, they may be able to respond more quickly than we can to
new or changing opportunities, technologies, standards or customer requirements.
ONLINE COMPETITORS
There is significant interest in health-related content among online
consumers. Demographic factors and the growth of online audiences suggest that
the popularity of this content will continue to increase. Similarly, major
health advertisers are showing increased levels of interest in the Internet.
Some key operators of health-related sites on the Internet today include:
o DIVISIONS OR AFFILIATES OF PRINT PUBLISHERS; including Healthy Ideas
(Rodale Press), PHYS (Conde Nast), Thrive (owned by Oxygen Media),
MediConsult, Dr. Koop and HealthScout (a service of RX Remedy, Inc., a
market research firm.)
o VENTURES OF ONLINE SERVICE FIRMS; including Better Health (iVillage)
and Thrive (owned by Oxygen Media), Medscape and WebMD.
o PUBLIC SECTOR AND INSTITUTIONAL SITES; including the National institute
of Health, Mayo Clinic, InteliHealth and university sites. While these
sites compete for viewer time and attention, they do not typically
compete for advertising or transactional revenues.
o PORTALS/SEARCH ENGINES; principally the proprietary health-related
content presented to subscribers to America Online, MSN.com, Yahoo!,
Excite, etc.
o INTERNET SITES OTHER THAN HEALTH-RELATED SITES; including general
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interest sites, such as news sites and search engines, which often host
some health-related content in the context of other editorial
materials.
FINANCIAL STATEMENTS
Our financial statements for the fiscal years ending May 31, 1999, and
1998 have been audited by Jones, Jensen & Company, independent auditors, and are
set forth on page 20 herein. Audited financial statements of GoHealth through
September 30, 1999, and pro forma financial statements have been audited by
Samuel Klein & Co., independent auditors, and are set forth on page 33 herein.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
As a result of our merger, we have retained the services of our merger
partner's independent certified public accountant, Samuel Klein & Co., as of
December 1, 1999, for all of our needs. Jones, Jensen & Company, our previous
accountant ("Jones, Jensen"), was dismissed by our board of directors on
December 1, 1999, in connection with the Merger of GoHealth. This dismissal was
unrelated to Jones, Jensen's competence, practices and procedures. Jones,
Jensen's financial statement reports did not contain any adverse opinion,
disclaimer of opinion, or modified opinion.
Jones, Jensen has informed us that it will provide the SEC a letter
containing our position with the foregoing statements regarding our change in
certifying accountant.
MANAGEMENT
Directors, Executive Officers and Control Persons
Name Age Position(s) and Office(s)
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Dr. Leonard F. Vernon 44 President, Treasurer and Director
William D. Hanna 54 Director
Kevin O'Donnell 51 Secretary
DR. LEONARD F. VERNON, the founder of our only subsidiary, GoHealth,
became our president, treasurer and a director on November 10, 1999. Dr. Vernon
has managed and/or overseen the operation of a successful private practice, as
well as the development of a private company that became a publicly traded
NASDAQ corporation. Dr. Vernon is 44 years old and has maintained a private
practice of chiropractic for over 20 years. He was licensed by the New Jersey
State Board of Medical Examiners for the Practice of Chiropractic in New Jersey.
He is additionally licensed to practice chiropractic in the State of Delaware
and the Commonwealth of Pennsylvania.
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WILLIAM D. HANNA became one of our directors and our vice president on
November 10, 1999. Mr. Hanna attended Philadelphia Community College and has
extensive experience in real estate and site development. Previous to his
retirement more than five years ago, Mr. Hanna worked for 20 years in the
construction industry as a steel erector and owner of his own business. In the
past five years, Mr. Hanna has served as the chief executive officer of a
durable medical equipment company and has also been a co-owner of a provider of
discounted health care services to the general public.
KEVIN O'DONNELL became one of our directors on November 10, 1999. Mr.
O'Donnell is a 1976 graduate of Rutgers University (B.A. Political Science).
From 1978 to 1996, he was employed by Burlington Industries as an operations
manager and then as Northeast Regional Sales and Marketing Manager. In 1990, Mr.
O'Donnell became the Director of Operations for Imaging Management Associates,
Inc. In this position, he oversaw the project development, start-up, and
operation of seven outpatient diagnostic imaging centers. He has extensive
experience in personnel recruitment, employee benefit programs, supplier/vendor
networks, and contract negotiation. He also has marketing and product
development experience in the managed care and private practice physician
sectors of the healthcare marketplace.
BOARD OF DIRECTORS
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Officers are appointed to serve until the meeting of the Board of Directors
following the next annual meeting of stockholders and until their successors
have been elected and have qualified.
Our current directors did not timely file required Forms 3 between the
time of their respective appointments until December 28, 1999. Sandra Vernon,
the wife of one of our directors and our president, Dr. Leonard Vernon, acquired
more than 10% of our common stock in the GoHealth merger and filed a Form 3 on
December 28, 1999.
Based solely upon our 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, we are not aware of any other person who was a
director, officer, or beneficial owner of more than ten percent of our common
stock and who failed to file reports required by Section 16(a) of the Securities
Exchange Act of 1934 in a timely manner.
EXECUTIVE COMPENSATION
The following tables describe the compensation of the persons who have
served as the Company's chief executive officer for the last three fiscal years
and since May 31, 1999. No compensation in excess of $100,000 was awarded to,
earned by, or paid to any executive officer or director of the Company during
the years ended May 31, 1999, 1998 or 1997, or has been since May 31, 1999.
12
<PAGE>
Annual Compensation
Name and Fiscal Other Annual
Principal Position Year Salary ($) Bonus ($) Compensation ($)
Dr. Leonard 1999 -0-(1) -0- -0-
Vernon,
President
Tyson Schiff, 1999 -0- $500(2) -0-
President
Mary C. MacGuire, 1998 -0- -0- -0-
President
John W. MacGuire, 1997 -0- -0- -0-
President
<TABLE>
<CAPTION>
Long Term Compensation
Awards Payouts
------ -------
Restricted Securities LTIP All Other
Name and Principal Fiscal Stock Underlying Payouts Compensation
Position Year Award(s)($) Options/SARs(#) ($) ($)
<S> <C> <C> <C> <C> <C>
Dr. Leonard 1999 -0- -0- -0-
Vernon,
President
Tyson Schiff, 1999 -0- -0- -0- -0-
President
Mary C. MacGuire, 1998 -0- -0- -0- -0-
President
John W. MacGuire, 1997 -0- -0- -0- -0-
President
</TABLE>
(1) Dr. Leonard Vernon has never received compensation for his
services. However, in the event our revenues exceed $1,000,000 or at the
discretion of the board of directors, Dr. Vernon will receive an annual salary
of approximately $145,000. At such point, we also expects to pay $75,000 to
Kevin O'Donnell, Vice President, Director of Operations, and $30,000 to William
Hanna, President of Sales.
(2) 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.
13
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is currently traded through the NASD Over-the-Counter
Bulletin Board ("OTC-BB") under the symbol NUGT. Limited trading has occurred
over the past several years.
In October 1998, our common stock experienced a 1-for-310 reverse stock
split whereby each 310 shares was converted into one share and all fractional
shares were rounded up. Immediately after the reverse split, we had
approximately 97,177 total shares of issued and outstanding. Simultaneous with
this reverse stock split the number of shares of common stock authorized for
issuance was reduced 1-for-10, from 50,000,000 to 5,000,000.
At our 1999 annual meeting, held on August 16, 1999, our Board of
Directors and the holders of a majority of the outstanding common stock
increased the number of authorized shares of our common stock to 25,000,000 from
5,000,000.
The following table set forth below lists the range of high and low
bids of our common stock for each fiscal quarter for the last two fiscal years.
The prices in the table reflect inter-dealer prices, without retail markup,
markdown or commission and may not represent actual transactions.
The amounts, and all other shares and price information contained in
this document have been adjusted to reflect the stock splits.
FISCAL YEAR ENDED MAY 31, 1998 HIGH LOW
First Quarter $0.02 $0.005
Second Quarter $0.02 $0.005
Third Quarter $0.02 $0.001
Fourth Quarter $0.02 $0.005
FISCAL YEAR ENDED MAY 31, 1999
First Quarter $0.02 $0.001
Second Quarter $6.00 $0.062
Third Quarter $7.00 $0.062
Fourth Quarter $5.062 $0.062
FISCAL YEAR ENDED MAY 31, 2000
First Quarter $4.125 $1.375
Second Quarter $5.25 $2.00
Third Quarter (*) $5.812 $4.25
* This is only a partial fiscal quarter as the third quarter of 200
began on December 1,
14
<PAGE>
1999 and ends on February 29, 2000. The prices listed in this quarter are
therefore high and low bids between December 1, 1999 through December 27, 1999.
As of December 1, 1999, we had approximately 4,099,603 shares of our
common stock outstanding held by approximately 622 holders of record.
DIVIDENDS
We have never paid a cash dividend on our common stock. It is our
present policy to retain earnings, if any, to finance the development and growth
of our business. Accordingly, we do not anticipate declaring any cash dividends
in the foreseeable future.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Leonard Vernon founded GoHealth and is one of our directors, our
president and the husband of Sandra Vernon, our largest shareholder. Dr. Vernon
has a previous disciplinary action by the New Jersey State Board of Medical
Examiners in which he was given an 18-month suspension of his license, 30 days
of which were to be active with a monetary penalty of $3000. Dr. Vernon failed
to perform the required community service and pay the fine and the suspension
was imposed for a full 18 months. This disciplinary action was taken after the
determination that Dr. Vernon's application to the Educational Commission of
Foreign Medical Graduates was misleading. Dr. Vernon currently possesses an
unrestricted license to practice chiropractic in the State of New Jersey as well
and the Commonwealth of Pennsylvania and State of Delaware and there is no
pending disciplinary action against him in any of the states in which he is
licensed.
Our offices are located at 2051 Springdale Road, Cherry Hill, New
Jersey, which also houses the offices of Able Imaging, Inc., a wholly owned
entity of William D. Hanna, one of our directors. We do not pay rent to Mr.
Hanna for such facilities.
We have obtained a total of $38,000 pursuant to three working capital
loans from William Hanna Consultants, Inc., an entity controlled by William
Hanna, one of our directors. All of these notes are unsecured, require all
interest and principal be repaid in one lump sum and bear 5% interest per annum.
A $25,000 April 26, 1999 Note was due to be repaid on May 26, 1999, and was
extended indefinitely. No additional consideration was tendered for this
indefinite extension. A $10,000 Note dated March 29, 1999, matures on March 29,
2000. A $3,000 Note dated May 2, 1999 matures on May 2, 2000. We have not made
any payments of interest or principal upon either the March 29, 1999 Note or the
May 2, 1999 Note.
Ken Kurtz currently owns less than 5% of our outstanding common stock.
Prior to the GoHealth merger, however, he owned in excess of 50% of the common
stock. Mr. Kurtz received 400,000 shares pursuant to a November 30, 1998
consulting agreement with us whereby he agreed to assist in preparing employment
agreements, contracts and other filings required by the Commission and all other
necessary state and Federal regulatory bodies, and in referring to us an
independent auditor and attorney.
15
<PAGE>
On June 22, 1998, for a $15,100 investment we 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 such shares.
According to a Financial Consulting Agreement between Company and Park
Street Investments, Inc. executed on March 5, 1998, Park Street assisted with
our administration and recapitalization. Park Street also agreed to actively
pursue and negotiate a merger or business combination with a third party on our
behalf. GoHealth was introduced to us through the efforts of Kurtz and Park
Street. Park Street paid all costs associated with these responsibilities
through the GoHealth merger.
UNDERTAKING REGARDING FORM 10-KSB
We hereby undertake 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 us at our headquarters at
2051 Springdale Road, Cherry Hill, New Jersey 08003.
SIGNATURE
By order of the board of directors,
/s/ Dr. Leonard Vernon
- ----------------------------------
Dr. Leonard Vernon, President
Cherry Hill, New Jersey
December 29, 1999
16
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
2.1 Stock Exchange Agreement and Plan of Merger dated September 30, 1999,
by and between Nugget Exploration, Inc., Nugget Holding Company and
GoHealth.MD, Inc. Incorporated herein from our Form 10-QSB for the
quarter ended August 31, 1999.
23.1 Consent of Jones, Jensen & Co.
23.2 Consent of Samuel Klein & Co.
17
<PAGE>
[SEE END OF DOCUMENT FOR EXHIBITS 23.1 AND 23.2]
<PAGE>
NUGGET EXPLORATION, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
MAY 31, 1999 AND 1998
20
<PAGE>
CONTENTS
Independent Auditors' Report..................................................22
Balance Sheets................................................................23
Statements of Operations......................................................24
Statements of Stockholders' Equity (Deficit)..................................25
Statements of Cash Flows......................................................27
Notes to the Financial Statements.............................................29
21
<PAGE>
[Letterhead of Jones, Jensen & Company]
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.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
July 21, 1999
The accompanying notes are an integral part of these
financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
MAY 31,
1999 1998
---- ----
CURRENT ASSETS
<S> <C> <C>
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
================= ===================
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
<S> <C> <C>
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
================= ===================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Statements of Operations
From
Inception on
July 24,
For the Years Ended 1980 Through
May 31, May 31,
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.
24
<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)
------------------ ----------- ------------- --------------------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
25
<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)
============== =============== ================= ====================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
July 24,
For the Years Ended 1980 Through
May 31, May 31,
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
============ ============ ============== ==============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
27
<PAGE>
<TABLE>
<CAPTION>
NUGGET EXPLORATION, INC.
(A Development Stage Company)
Statements of Cash Flows (Continued)
From
Inception on
July 24,
For the Years Ended 1980 Through
May 31, May 31,
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
</TABLE>
The accompanying notes are an integral part of these
financial statements.
28
<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.
29
<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
<TABLE>
<CAPTION>
Notes payable - related parties at May 31, 1999 and 1998 consisted
of the following:
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.
30
<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:
<TABLE>
<CAPTION>
1999 1998
----------------- -----------------
<S> <C> <C>
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
============= =================
</TABLE>
31
<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>
32
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
33
<PAGE>
[Letterhead of Samuel Klein and Company]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
GOHEALTH.MD, Inc.
(A Development Stage Company)
Cherry Hill, New Jersey 08003
We have audited the accompanying balance sheet of GOHEALTH.MD, Inc. (A
Development Stage Company) as of September 30, 1999 and the related statements
of operations, stockholders= equity and cash flows for the period from inception
(February 23, 1999) to September 30, 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 GOHEALTH.MD, Inc. (A
Development Stage Company) as of September 30, 1999 and the results of its
operations and its cash flows for the initial period then ended in conformity
with generally accepted accounting principles.
/S/
SAMUEL KLEIN AND COMPANY
Newark, New Jersey
December 27, 1999
34
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
Current Assets:
Cash $109,016
Accounts receivable 48
Stock subscription receivable 1,400
Domain names - available for sale 27,577
----------
138,041
Other Assets:
Website costs 65,955
$203,996
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 37,806
Accrued expenses 4,694
Notes payable 38,000
Due to officer 21,622
----------
Total Liabilities 102,122
Stockholders' Equity:
Common stock ($.001 par value, 10,000,000 shares
authorized, 3,080,000 shares issued and outstanding) 3,080
Additional paid-in capital 207,920
Deficit accumulated during the development stage (109,126)
----------
Total Stockholders' Equity 101,874
$203,996
===========
- --------------------
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (FEBRUARY 23, 1999)
TO SEPTEMBER 30, 1999
Sales:
Advertising revenue $ 48
Domain name sales 1,300
Cost of Sales (910)
Gross Profit 438
Other Expenses:
General and administrative expenses 82,532
Marketing and licensing fees 26,338
Interest expensE 694
--------------
109,564
--------------
Net Loss $(109,126)
==============
- --------------------
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (FEBRUARY 23, 1999)
TO SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
$.001 Par Value Additional During the Total
Number Paid-In Development Stockholders'
of Shares Amount Capital Stage Equity
--------- --------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
At Inception on February 23, 1999 $ $ $ $ $
Issuance of Common Stock
at $.001 per share 3,000,000 3,000 - - 3,000
Issuance of Shares and Warrants
in Private Placement 76,000 76 197,524 - 197,600
Issuance of Shares and
Warrants for Services 4,000 4 10,396 - 10,400
Net Loss for the Period from
Inception February 23, 1999 to
September 30, 1999 (109,126) (109,126)
------------- ------------ ------------ ------------ -------------
$ 3,080,000 $ 3,080 $ 207,920 $ (109,126) $ 101,874
============= ============ ============ ============ ============
</TABLE>
- --------------------
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (FEBRUARY 23, 1999)
TO SEPTEMBER 30, 1999
Cash Flows from Operating Activities:
Net loss $(109,126)
Adjustment to reconcile net loss to net cash
used in operating activities:
Increase in accounts receivable (48)
Increase in stock subscription receivable (1,400)
Increase in Domain names - available for sale (27,577)
Increase in accounts payable 37,806
Increase in accrued expenses 4,694
-----------
Net cash used in operating activities (95,651)
----------
Cash Flows from Investing Activities:
Purchase of Website (55,555)
Net cash used in investing activities (55,555)
Cash Flows from Financing Activities:
Proceeds from sale of common stock and stock warrants 200,600
Proceeds of notes payable 38,000
Proceeds from officers loans 21,622
-----------
Net cash provided by investing activities 260,222
-----------
Net Increase in Cash 109,016
Cash - Inception (February 23, 1999) $ -
-
-----------
Cash - End of Period (September 30, 1999) $109,016
===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ -
Taxes $ -
===========
Supplemental Disclosure of Noncash Investing
and Financing Activities:
Issuance of common stock and warrants for
Website purchase $ 10,400
===========
- --------------------
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
GOHEALTH.MD, Inc. (the ACompany@), a development stage company, was incorporated
under the laws of the State of Delaware on February 23, 1999. GOHEALTH.MD, Inc.
will be engaged in providing through the Internet an advertising network and
Internet presence for independently-owned health food stores, health care
providers and others.
BASIS OF ACCOUNTING
The financial statements of the Company have been prepared on the accrual basis
of accounting.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less to be cash equivalents.
USE OF MANAGEMENT'S 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 as of the date of the financial statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
DOMAIN NAMES - AVAILABLE FOR SALE
Domain name - available for sale consists of specific domain names purchased and
are valued at the purchase price. When a domain name is sold, the purchase price
for that specific name is removed at cost.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company adopted Statement of Financial Accounting Standards No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". SFAS 121 requires that if facts and circumstances
indicate that the cost of fixed assets or othe assets may be impaired, an
evaluation of recoverability would be performed by comparing the estimated
future undiscounted pre-tax cash flows associated with the asset to the asset's
carrying value to determine if a write-down to market value or discounted
pre-tax cash flow value would be required.
ADVERTISING AND PROMOTIONAL COSTS
Advertising expenditures of the Company's programs and services are expensed in
the period the advertising costs are incurred. Advertising and promotional costs
for the period from inception (February 23, 1999) to September 30, 1999 were
$24,478.
39
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Continued)
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 130, (SFAS
130) AReporting Comprehensive Income@. This statement establishes rules for the
reporting of comprehensive income and its components which require that certain
items such as foreign currency translation adjustments, unrealized gains and
losses on certain investments in debt and equity securities, minimum pension
liability adjustments and unearned compensation expense related to stock
issuances to employees be presented as separate components of stockholders=
equity. The adoption of SFAS 130 had no impact on total stockholders= equity for
the period presented in these financial statements.
START-UP ACTIVITIES
The American Institute of Certified Public Accountants recently issued Statement
of Position ("SOP") 98-5, "Reporting the Costs of Start-Up Activities." SOP 98-5
requires start-up costs, as defined, to be expensed as incurred and is effective
for financial statements for fiscal years after December 15, 1998. The Company
currently expenses all start-up costs as incurred and the application of SOP
98-5 will have no material impact on the Company's financial statements.
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No. 25,
(APB 25) "Accounting for Stock Issued to Employees" in accounting for its
employee stock option plans. Under APB 25, when the exercise price of the
Company's employee stock options equals or is above the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
In accounting for options granted to persons other than employees, the
provisions of Financial Accounting Standards Board Statement No. 123, (FASB 123)
"Accounting for Stock Based Compensation" are applied. In accordance with FASB
123 the fair value of these options are to be estimated at the grant date using
the Black- Scholes option pricing model.
INCOME TAXES
The Company follows Statement of Financial Accounting Standards No. 109, (SFAS
109) "Accounting for Income Taxes". SFAS 109 requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on the
difference between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized.
40
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Continued)
2. PLAN OF OPERATIONS
GOHEALTH.MD, Inc. is a development stage company and will be engaged in
providing through the Internet an advertising network and Internet presence for
independently owned health food stores, health care providers and others through
an additional website owned by the Company, HEALTHMALL.COM.
GOHEALTH.MD, Inc. has marketing rights to more than 40 domain names (such as:
HERB.MD, NUTRITION.MD, ARTHRITIS.MD, VITAMIN.MD, FAMILY.MD, and SPORTS.MD) in
the TLD (top level domain) .MD. A Florida company, Domain Name Trust, acquired
the .MD protocol from Moldova, a small European country formerly part of the
Soviet Union. Domain Name Trust has been licensed to sell registrations by
Moldova in Europe, Canada and other English speaking countries. The country of
Moldova benefits economically from this arrangement, receiving $35 for each name
sold.
The Company believes that .MD is the first of a new generation of website
addresses and it is a natural and intuitive address that makes sense for
physicians and those in the broad medical community, as well as those whose
personal initials, corporate initials, state of residence (i.e. Maryland), or
title (i.e. Managing Director) are the letters .MD.
.MD is a top level domain (TLD), comparable in purpose to the top level domain
.COM, .NET, or .ORG. The Company believes that in the future a top level domain
name will no longer be as primitive as the first TLDs. Secondly, the names still
available within these domains are finite. Once a name is registered, it is not
available to anyone else. Eventually, all of the domains may be taken. .MD was
first made available in 1998.
The Company believes it has several advantages over other companies that may be
offering a similar product. The Company expects to develop a significant revenue
stream over the next three years through the development and marketing of its
Internet domain names. The availability of capturing a large physician network
(medical doctors, chiropractors, dentists, podiatrists, osteopaths) to view
online advertising in exchange for the establishment of websites and hosting
services is one of the Company's primary goals. The availability of having tens
of thousands of physicians guaranteed viewing the websites establishes the
significant potential for advertising revenue. The Company also believes that
the same potential exists for the natural health food products market. It is
believed that individual health food stores could be provided with a webpage
either free of charge or for a nominal fee with free hosting and website design
in exchange for guaranteed viewing of certain web pages on a monthly basis. In
exchange, the Company could receive advertising revenue for the guaranteed
visits to that particular site.
The Company also owns the domains ACCIDENT.MD, ASK.MD and CALL911.MD and
believes that management will be able to obtain the necessary funding to
commence its planned principal operations during the year 2000.
41
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Continued)
2. PLAN OF OPERATIONS (Continued)
The Company is only recently organized and does not have any material assets and
has no previous commercial operations, and therefore, there is no history of
earnings or operations upon which to judge its future success. To date, the
Company has been engaged in the development of its business plan and the
preparation and offering of a Private Placement Memorandum. The Company
currently has not conducted any significant business nor has the Company signed
any definitive agreements with any health food stores, health care providers, or
others. Because of its lack of prior operations, assets and industry position,
the Company must be considered a development stage enterprise. Consequently,
there can be no assurance that viable commercial operations can be achieved or
sustained by the Company even if it is successful in raising all of the capital
it requires. As a development stage enterprise, the Company is subject to all of
the risks inherent in the establishment of a new business, including the absence
of a significant operating history, lack of market recognition and limited
banking and financial relationships. There can be no assurance that the
Company's proposed operations will attract a sufficient customer base to
establish viable commercial operations or that it will generate sufficient cash
flow to fund the future operations of the Company. The Company's growth strategy
is largely dependent on the marketing of its home pages through various
marketing media, including but not limited to the Internet.
The market for the Company's products will be characterized by rapidly changing
technology and continuing development of customer requirements. The future
success of the Company's business will depend in large part upon its ability to
develop and market its products at an acceptable cost, develop and market
products which meet changing customer needs, and successfully anticipate or
respond to technological changes in customer requirements on a cost-effective
and timely basis. There can be no assurance that the Company's product
development efforts will be successful or that the emergence of new
technologies, industry standards or customer requirements will not render the
Company's technology or products obsolete or noncompetitive. In addition, to the
extent that the Company determines that new technologies or equipment are
required to remain competitive, the acquisition and implementation of such
technologies and equipment are likely to require significant capital investments
by the Company. There can be no assurance that sufficient capital will be
available in the future. Operating results can also be significantly adversely
affected by the development and introduction of new products or by the
establishment of better financed competition.
The Company intends to comply fully with industry rules and regulations. These
regulations vary dramatically, from region to region. The Company can make no
assurances that it will be able to meet or comply with all the regulatory
standards affecting Internet service in every jurisdiction in the world.
Furthermore, management cannot predict what changes may occur in such
regulations in the future or give any assurances as to the Company's ability to
continue its planned operations in light of any such presently unknown changes
in regulations applicable to the Company. The Company may be faced with the need
to incur substantial legal and professional expenses in an effort to meet the
requirements of changing regulatory requirements.
The Company plans an aggressive growth strategy for its clientele and products.
There can be no assurance that the Company will be successful in these
endeavors. Forces that can contribute to the lack of success in implementing
this growth strategy include, among others: (i) regulatory bodies and
governmental regulations affecting the Company and its operations, (ii)
availability of funding on a timely basis and (iii) functionality. The Company's
growth strategy relies on its ability to raise further capital and upon the
skills of its management.
42
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Continued)
3. NOTES PAYABLE
The following is a summary of the Company's notes payable at September 30, 1999:
Payable to William Hanna on demand, with interest accrued
at 5% per annum, unsecured $25,000
Payable to William Hanna Consultants on March 29, 2000,
with interest accrued at 5% per annum, unsecured 10,000
Payable to William Hanna Consultants on May 2, 2000, with
interest accrued at 5% per annum, unsecured 3,000
---------
$38,000
=========
4. DUE TO OFFICER
As of September 30, 1999 the Company is indebted to its officer in the amount of
$21,622. This is a noninterest bearing loan payable on demand.
5. PROVISION FOR INCOME TAXES
For the period of inception (February 23, 1999) to September 30, 1999 the
Company had a loss of $109,126. No tax expense or benefit has been reported in
the financial statements due to the uncertainty of future operations.
6. COMMON STOCK
The authorized capital stock of the Company consists of 10,000,000 shares of
Common Stock, par value $.001 per share.
The Company issued 3,000,000 shares of Common Stock to the incorporators of the
Company for $3,000.
The Company has offered a total of 500 Units at a price of $5,200 per Unit,
which were offered on a Abest efforts, all or none@ basis with respect to the
first 20 shares of the Company's Common Stock and a detachable warrant entitling
the holder to purchase 2,000 shares of Common Stock. The Company is conducting
the Offering in such a manner that the Shares will be sold only to certain
Accredited Investors as such term is defined in Rule 501 of Regulation D under
the Act, and to not more than 35 other nonaccredited investors, and who satisfy
any additional requirements of their state of residency. The pricing and the
terms of the securities have been arbitrarily determined by the Company and bear
no relationship to the Company's assets, book value or results of operations or
any other generally accepted criteria of value. The Units are being offered and
sold exclusively through the Company by its Officers, as well as the selected
dealers, if any, and their officers, directors and employees may purchase the
Units on the same terms and conditions as other investors.
43
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Continued)
6. COMMON STOCK (Continued)
The minimum subscription price to investors is for $10,400 for 2 units. The
Company may, in its sole discretion, accept subscription offers for lesser
amounts if deemed to be in the Company's best interest and insofar as permitted
by law.
Each Unit Warrant entitles the registered holder thereof to purchase up to 2,000
shares of Common Stock at a price of $2.50 per share (subject to adjustment as
described herein) at any time prior to the earlier of (i) May 31, 2003 or (ii)
the date that the respective Unit Warrant is redeemed. If the Company is able to
complete an initial public offering (AIPO@) of the Common Stock, then beginning
12 months after the IPO, the Unit Warrants will be subject to redemption by the
Company at $0.10 per share of the Common Stock that remains, subject each Unit
Warrant on thirty (30) days prior written notice if the average closing sales
price of the Common Stock over any 10 consecutive trading days equals or exceeds
150% of the IPO price per share of Common Stock.
As of September 30, 1999 and in connection with the private placement, the
Company issued 76,000 shares of its Common Stock and 76,000 detachable Warrants
and received proceeds of $197,600.
Also, as of September 30, 1999, the Company issued 4,000 Shares and 4,000
Warrants in connection with a website purchase and valued these services at
$10,400.
Subsequent to September 30, 1999 and in connection with the private placement,
the Company issued additional 22,000 Common Stock shares and 22,000 Warrants and
received proceeds of $52,000 and consulting services valued at $5,200.
7. COMMITMENTS AND CONTINGENCIES
EMPLOYEE STOCK OPTIONS
The Company has reserved a total of 500,000 shares of its Common Stock for
grants of incentive stock options to employees. A total of 230,000 options with
an exercise price of $.50 per share with terms expiring seven (7) years from the
respective dates of the grant have been granted to two employees as of September
30, 1999.
All future grants will have an exercise price above $1.50 per share.
OTHER STOCK OPTIONS
On May 6, 1999 the Company granted 30,000 options to a consulting firm at an
exercise price of $.50 per share. These options will have no expiration date and
contain two piggyback registration rights.
On May 26, 1999 the Company granted 10,000 options to investment banking
consultants at exercise prices of $.50 per share for 5,000 options and $1.00 for
5,000 options. These options contain piggyback registration rights.
On August 27, 1999 the Company granted 20,000 options to a professional
consultant. The options, which include piggyback registration rights, are
exercisable 10,000 at an exercise price of $1.00 and 10,000 at an exercise price
of $1.50.
44
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Continued)
7. COMMITMENTS AND CONTINGENCIES (Continued)
OTHER STOCK OPTIONS (Continued)
In August 1999 the Company granted to two consultants nonqualified stock options
for the right to purchase 175,000 shares of the Company's Common Stock. The
options have an exercise price of $1.00 and expire on August 27, 2006 and
piggyback registrations rights.
The fair value of the other stock options were estimated according to FASB 123
at the grant dates using the Black Scholes option pricing model and were
determined to be immaterial.
GOVERNMENT REGULATION
The Company is subject to local state and federal laws of the jurisdiction that
it operates in. The Company also believes that it will be subject to all
jurisdictions of its participants and clients.
LITIGATION
The Company is not a party to any litigation, nor to the knowledge of
management, is any viable litigation currently threatened against the Company or
any of its officers or directors in their capacity as such.
EMPLOYMENT AGREEMENTS
The current officers and directors of the Company have entered into agreements
with the Company that state that they will forego salaries until the Company's
revenues exceed $1,000,000 or at the discretion of the Board of Directors.
YEAR 2000 ISSUES
The year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
2000 dates is processed. In addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something other than a date. The
effects of the Year 2000 Issue may be experienced before, on, or after January
1, 2000, and, if not addressed, the impact on operations and financial reporting
may range from minor errors to significant systems failures which could affect
an entity's ability to conduct normal business operations. It is not possible
that all aspects of the Year 2000 Issue affecting the Company, including those
related to the efforts of customers or third parties, will be fully resolved.
The Company has verified that its significant service providers are currently
Year 2000 compliant
8. MERGER AGREEMENT
On September 30, 1999 the Company entered into a Stock Exchange Agreement and
Plan of Merger with Nugget Exploration, Inc. (ANugget@), a publicly held Nevada
corporation without current operations and seeking a merger with a corporate
entity with planned operations. The agreement provides that at the closing date
each issued and outstanding common shares of the Company shall be converted into
and exchanged for one fully paid and nonassessable Nugget share.
45
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Continued)
8. MERGER AGREEMENT (Continued)
In addition, the agreement provided that Nugget would assume all of the
Company's rights and obligations under all outstanding stock options and
warrants. Upon the closing of the transaction, which was subject to a number of
conditions, including shareholder approvals and regulatory requirements, the
stockholders of The Company will own approximately 81% of Nugget and therefore
have control.
On November 10, 1999 the merger became effective and the stockholders of The
Company were issued 3,102,000 shares of Nugget common stock, par value $.01,
which resulted in 3,799,117 shares of Nugget common stock outstanding after the
merger.
The transaction is expected to be accounted for as a purchase, however, since
the stockholders of The Company will own approximately 81% of Nugget outstanding
shares and therefore have control, the Company will be deemed to be the acquirer
and surviving entity.
9. SUBSEQUENT EVENTS
On November 16, 1999 the Company entered into a Management Consulting Agreement
(AAgreement@) for management consulting, strategic planning and marketing and
advisor services. The Agreement requires the Company to compensate the
management consulting company $5,000 per month through October 2000, issue to
the consultant 300,000 shares of its common stock and requires the Company to
issue warrants to the consultant to purchase 500,000 shares of the Company's
common stock at exercise prices of $1.00 for the first 100,000 and $2.00 per
share for the next 400,000.
In connection with this transaction, the Company will record an expense of
$1,050,000 for the 300,000 shares grant and $850,000 for the intrinsic value of
the warrants to purchase 500,000 shares of the Company's common stock.
On December 13, 1999 50,000 of the $1.00 warrants were exercised.
On December 22, 1999 the Company issued, in connection with a private placement
offering, warrants to purchase 302,000 shares of its common stock at an exercise
price of $1.00 per share till December 31, 2002. The warrants were sold for
$1.00 per common stock purchase warrants and resulted in the Company receiving
proceeds of $302,000. The market price of the Company's common stock at December
22, 1999 was $5.00 and created a beneficial conversion feature to the warrant
holders. The Company intends to record $906,000 as a charge in computing net
income or loss on common stock.
46
<PAGE>
<TABLE>
<CAPTION>
GOHEALTH.MD, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
(Unaudited)
Nugget
GoHealth Exploration
.MD, , Inc.
August 31,
Inc. 1999 Pro Forma
Sept. 30, Adjustment Pro Forma
1999 (Unaudited) s Results
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 109,016 $ 3,253 $ 1,400(2) $ 1,669,669
52,000(1)
900,000(4)
604,000(5)
Accounts receivable 48 48
Stock subscription receivable 1,400 (1,400)(2) 0
Domain names available for 0
sale 27,577 27,577
=========== =========== ================ ============
Total Current Assets 138,041 3,253 1,556,000 1,697,294
Other Assets - Website Costs 65,955 65,955
=========== =========== =============== ============
$ 203,996 $ 3,253 $ 1,556,000 1,763,249
=========== =========== =============== ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Notes payable $ 38,000 $ 7,380 $ $ 45,380
Accounts payable 42,500 22,622 65,122
Accrued interest 8,906 8,906
Due to officers 21,622 21,622
=========== =========== =============== ============
Total Current Liabilities 102,122 38,908 141,030
=========== =========== =============== ============
Commitments and Contingencies 0 0 0 0
Stockholders' Equity:
Common stock 3,080 6,971 20(1) 49,001
2(3)
3,000(4)
5,000(4)
3,020(5)
27,908(7)
Additional paid-in-capital 207,920 3,536,930 51,980(1) 4,493,544
5,198(3)
1,047,000(4)
1,745,000(4)
600,980(5)
906,000(6)
(3,607,464)(7)
Unamortized Consulting Expense (1,050,000)(4) (1,900,000)
(850,000)(4)
Retained deficit (5,200)(3)
(906,000)(6)
(109,126) (3,579,556) 3,579,556(7) (1,020,326)
============= =========== ================ ============
101,874 1,556,000 1,622,219
Total Stockholders' Equity (35,655)
=========== =========== ================ ============
0
203,99 1,556,00 1,763,24
$ 6 $ 3,253 $ 0 $ 9
=========== ============= ================ ============
</TABLE>
- --------------------
See notes to Pro Forma Consolidated
Financial Data.
47
<PAGE>
<TABLE>
<CAPTION>
GOHEALTH.MD, INC.
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Year Ended For the Three Months Ended August 31, 1999 (Nugget)
May 31, 1999 For the Four Months Ended September 30, 1999 (GoHealth)
========================================================================================================
Nugget Nugget
GoHealth.MD, Exploration, Pro Forma GoHealth.MD, Exploration, Pro Forma Pro Forma
Inc. Inc. Results Inc. Inc. Adjustments Results
----------- ----------- -------------- ----------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Ad revenue $ $ $ $ 48 $ $ $ 48
Domain name sales 400 400 900 900
Cost of sales (280) (280) (630) (630)
----------- ---------- ----------- ----------- ---------- ----------- ------------
Gross Profit (Loss) 120 120 318 318
----------- ---------- ----------- ----------- ---------- ----------- ------------
Costs and Expenses:
General and administrative
expenses 20,764 250,304 271,068 88,800 5,288 5,200(3) 99,288
----------- ----------- ----------- ----------- ---------- ----------- ------------
Loss from Operations (20,644) (250,304) (270,948) (88,482) (5,288) (5,200) (98,970)
Other Income:
Gain on sale of asset 588,499 588,499
=========== ============ ============ =========== =========== =========== ===========
Net Income (Loss) before
Extraordinary Item (20,644) 338,195 317,551 (88,482) (5,288) (5,200) (98,970)
Gain on Extinguishment
of Debt 1,384,411 1,384,411
Beneficial Conversion Feature
Series A Warrants/Dividends (906,000)(6) (906,000)
----------- ----------- ----------- ----------- ---------- ----------- -----------
Net Income (Loss) on
Common Stock $ (20,644) $ 1,722,606 $ 1,701,962 $ (88,482) $ (5,288) $ (911,200) $ (1,004,970)
=========== ============ ============ =========== =========== =========== ===========
Net Income (Loss) per Share:
Basic $ (0.03) $ (0.01) (0.21)
=========== =========== ===========
Diluted $ (0.03) $ (0.01) $ (0.21)
=========== =========== ===========
Basic common shares
outstanding 3,080,000 697,117 4,901,117
Diluted common shares
outstanding 3,080,000 697,117 4,901,117
</TABLE>
- --------------------
See notes to Pro Forma
Consolidated Financial Data.
48
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data for GoHealth.MD,
Inc. ("GoHealth") is based on the historical financial statements of GoHealth
and Nugget Exploration, Inc. (collectively with its subsidiaries referred to
herein as "Nugget") which appear elsewhere in this Registration Statement and
has been prepared on a pro forma basis to give effect to the merger under the
purchase method of accounting, as if the transaction had occurred at January 1,
1998 for each operating period presented. The unaudited pro forma information
was prepared based upon certain assumptions described below and may not be
indicative of results that actually would have occurred had the merger occurred
at the beginning of the last full fiscal year presented or of results which may
occur in the future. The unaudited pro forma consolidated financial data and
accompanying notes should be read in conjunction with the annual and interim
financial statements and notes thereto of Nugget and GoHealth appearing
elsewhere herein and incorporated by reference into this Registration Statement.
The unaudited pro forma consolidated balance sheet as of September 30, 1999
presents the financial position of Nugget as if the merger had occurred on that
date and was prepared utilizing the audited GoHealth balance sheet as of
September 30, 1999 and the unaudited Nugget balance sheet as of August 31, 1999.
The unaudited pro forma consolidated statement of operations presented, assumes
the merger occurred at the beginning of the periods presented. It should not be
assumed that Nugget and GoHealth would have achieved the unaudited pro forma
consolidated results if they had actually been combined during the periods
shown.
The merger is expected to be accounted for as a purchase. The stockholders of
GoHealth will receive one share of common stock of Nugget for each share of
GoHealth common stock held, resulting in the current stockholders of GoHealth
owning approximately 81% of Nugget common stock.
The unaudited pro forma consolidated results are based on estimates and
assumptions, which are preliminary and have been made solely for the purposes of
developing such pro forma information. The unaudited pro forma consolidated
results are not necessarily an indication of the results that would have been
achieved had such transactions been consummated as of the dates indicated or
that may be achieved in the future.
The unaudited pro forma combined results should be read in conjunction with the
historical consolidated financial statements and notes thereto set forth herein,
and other financial information pertaining to GoHealth and Nugget including
Management's Discussion and Analysis of Financial Condition and Results of
Operations of GoHealth, Management's Discussion and Analysis of Financial
Condition and Results of Operations of Nugget and Risk Factors".
49
<PAGE>
GOHEALTH.MD, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL DATA
SEPTEMBER 30, 1999
On November 10, 1999 GoHealth.MD, Inc. (AGoHealth@) and Nugget Exploration, Inc.
(collectively with it's subsidiaries herein referred to as ANugget@ completed
their planned Stock Exchange Agreement and Plan of Merger. Under the terms of
the Agreement, GoHealth will become a wholly owned subsidiary of Nugget and a
wholly owned subsidiary of GoHealth will merge with and into Nugget. Following
the merger, GoHealth will be a wholly owned subsidiary of Nugget. The
stockholders of GoHealth will receive one share of common stock of Nugget for
each share of GoHealth common stock held, resulting in the current stockholders
of GoHealth owning approximately 81% of Nugget common stock.
The merger is expected to be accounted for as a purchase. However, since the
stockholders of GoHealth will own approximately 81% of Nugget outstanding
shares, and therefore have control, they will be deemed to be the acquirer and
no step up in basis will be reflected and no goodwill will be recorded by the
company.
PRO FORMA ADJUSTMENTS
1) To record private placement offering proceeds of GoHealth.MD, Inc.
subsequent to September 30, 1999 and the issuance of 20,000 shares of
common stock, 20,000 warrants to purchase common stock and the receipt
of corresponding cash proceeds totaling $52,000.
2) To record the receipt of stock subscriptions receivable subsequent to
September 30, 1999.
3) To record the issuance of 2,000 shares of common stock and 2,000
warrants to purchase common stock subsequent to September 30, 1999
to a consultant for services valued at $5,200.
4) On November 16, 1999 the Company entered into a Management Consulting
Agreement for management consulting, strategic planning and marketing
and advisor services. The Agreement requires the Company to compensate
the management consulting company $5,000 per month through October 2000
issue to the consultant 300,000 shares of its common stock and requires
the Company to issue warrants to purchase 500,000 shares of the
Company's common stock at exercise prices of $1.00 for the first
100,000 and $2.00 per share for the next 400,000. In connection with
this transaction, the Company will record an expense of $1,050,000 for
the 300,000 shares granted and $850,000 for the intrinsic value of the
warrants to purchase 500,000 shares of the Company's common stock
5) On December 22, 1999 the Company issued, in connection with a private
placement offering, warrants to purchase 302,000 shares of its common
stock at an exercise price of $1.00 per share until December 31, 2002.
The warrants were sold for $1.00 per common stock purchase warrants
and resulted in the Company receiving proceeds of $302,000. The
market price of the Company's common stock at December 22, 1999
was $5.00 and created a beneficial conversion feature to the warrant
holders.
6) In connection with the transaction described in Note 5, the Compan
will record $906,000 as a charge in computing net income or loss on
common stock.
7) To record issuance of 3,102,000 shares of common stock of Nugget to the
stockholders of GoHealth and the elimination of Nugget's accumulated
deficit as a result of the merger.
50
Exhibit 23.1
[Letterhead of Jones, Jensen & Company]
Consent of Jones, Jensen & Co.
CONSENT OF INDEPENDENT AUDITORS'
Board of Directors
GoHealth.MD, Inc.
(fka Nugget Exploration, Inc.)
Cherry Hill, New Jersey
We hereby consent to the use of our audit report dated July 21, 1999 in the
Schedule 14C of GoHealth.MD, Inc. (fka Nugget Exploration, Inc.) for the year
ended May 31, 1999 and all references to our firm included in the Schedule 14C.
/s/
Jones, Jensen & Company
Salt Lake City, Utah
December 29, 1999
18
Exhibit 23.1
[Letterhead of Samuel Klein & Co.]
Consent of Samuel Klein & Co.
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption AExperts@ and to the
use of our report dated December 27, 1999 on the financial statements of
GoHealth .MD, Inc., that is made a part of this Registration Statement.
/S/
SAMUEL KLEIN AND COMPANY
Newark, New Jersey
December 29, 1999
19
