NMC Inc. (fka NMCX)

[mcladr]

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HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC.
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
C O N T E N T S Page
CHAIRMAN’S COMMENTS 1
BALANCE SHEET 2
INCOME STATEMENT 3
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY 4
STATEMENT OF CASH FLOW 5
NOTES TO THE FINANCIAL STATEMENTS 6 – 19
ABOUT THESE FINANCIAL STATEMENTS
The following unaudited consolidated financial statements of NMC, Inc. (the
Company) for the year ended December 31, 2001, have been prepared by
Chartered Accountants Pannell Kerr Forster (PKF), which has consented to the
use of its name in this report. While the Company had anticipated releasing
audited financial statements at this time, due to the obligations imposed by the
Sarbanes-Oxley Act of 2002 and the time required for the completion of a thirdparty
audit, the Company has made the decision to release this unaudited
information in the interim.
These financial statements were prepared in accordance with accounting
standards generally accepted in the United States of America, with particular
consideration to the requirement for reasonable assurance of the accuracy of
evidence and information provided by management supporting the amounts and
disclosures in the financial statements.
In the opinion of management, the information contained in these financial
statements fairly presents, in all material respects, the financial condition and
results of operations of the Company for the year ended December 31, 2001.
An auditor opinion of these financial statements will be posted on the Company’s
web site (www.nmcinc.com) as soon as available. In the meantime, any
questions concerning these financial statements should be brought to the
attention of management via email or written request addressed to
[e-mail] or NMC, Inc., 2711 Cool Lilac Avenue, Henderson, NV
89052-3835.
NMC, INC.
On behalf of the Board of Directors,
/s/ Michael Sheppard
Chairman/Chief Executive Officer
President
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 2
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
BALANCE SHEET AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
Notes 2001 2000
--------- ------- -------
CURRENT ASSETS
Cash 435,985 69
Accounts receivable 313,036 -
------------ -----
749,021 69
PROPERTY, PLANT and EQUIPMENT 6 1,269,665 1,244,600
MINERAL INVENTORIES 7 269,375,000 269,375,000
SPARES INVENTORY 7,000 -
------------------- ------------------
TOTAL ASSETS $271,400,686 $270,619,669
=========== ===========
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accruals 8 6,889,333 7,185,487
Notes payable 9 31,541 267,373
--------------- ---------------
TOTAL CURRENT LIABILITIES 6,920,874 7,452,860
--------------- ---------------
SHAREHOLDERS’ EQUITY
Share capital 10 777,049 760,875
Paid in capital 321,353,580 321,288,884
Deficit accumulated during the development
stage (Page 4) ( 57,650,817) ( 58,882,950)
------------------ ------------------
Total shareholders’ equity 264,479,812 263,166,809
------------------ ------------------
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY $271,400,686 $270,619,669
========== ==========
The attached notes on pages 6 to 19 form part of these Financial Statements.
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 3
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
2001 2000
------- -------
REVENUE
Interest Income 1,452 -
Court settlement – notes payable (Note 9) 267,373 -
Court settlement – cash (Note 14) 2,945,606 -
---------------- ------------
3,214,431 -
---------------- ------------
EXPENDITURE
Depreciation and amortization 203,992 174,723
Professional fees (Note 17) 583,069 648,777
Marketing and promotion 1,151 380
Travel and entertainment 32,729 79,318
Telephone 14,391 7,304
Office and general expenses 42,981 24,254
Mining expenses 37,517 28,328
Rent 34,018 4,503
Contract wages 972,725 5,992,336
Interest and Bank charges 318 75
Repairs and maintenance 41,018 74,200
Licenses and permits 3,098 2,425
Automobile rental and expense 10,560 7,773
Insurance 3,570 -
Taxation 1,161 -
--------------- ---------------
Total expenses from operations 1,982,298 7,044,396
--------------- ---------------
NET INCOME (LOSS) FOR THE YEAR – Page 4 $1,232,133 $( 7,044,396)
========= =========
Net income (loss) per share (Note 3g) $0.0031 $(0.0278)
====== =======
The attached notes on pages 6 to 19 form part of these Financial Statements.
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 4
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
AT DECEMBER 31,2001
MANAGEMENT ACCOUNTS
No. of Common No. of Preference
Shares Shares Shares Shares
----------- --------------- ----------- ------------------
BALANCE - December 31, 1999 77,735,182 77,735 123,150,000 123,150
Transfer of Shares 147,400,000 147,400 (147,400,000) (147,400)
Issue of Shares 159,990,000 159,990 400,000,000 400,000
Injection of capital - - - -
Net loss for the year (Page 3) - - - -
------------------ ------------ ------------------ --------------
BALANCE - December 31, 2000 385,125,182 385,125 375,750,000 375,750
Transfer of Shares 48,017,188 48,017 (48,017,188) (48,017)
Issue of shares 16,173,376 16,174 - -
Injection of capital - - - -
Treasury Stock (183,564) (184) - -
Net loss for the year (Page 3) - - - -
------------------- ------------- ------------------- ------------
BALANCE - December 31, 2001 (Page 2) 449,132,182 $449,132 327,732,812 $327,733 $
=========== ======== =========== =======
The attached notes on pages 6 to 19 form part of these Financial Statements.
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 5
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
STATEMENT OF CASH FLOW
FOR THE YEAR ENDED DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
2001 2000
------- -------
CASH INFLOWS (OUTFLOWS) FROM OPERATING
ACTIVITIES
Net Income/(loss) for the year 1,232,133 (7,044,396)
Depreciation 203,992 174,723
--------------- ---------------
1,436,125 (6,869,673)
CHANGES IN WORKING CAPITAL ITEMS
Increase in accounts receivable ( 313,036) -
Increase in inventory ( 7,000) -
Increase/(decrease) in accounts payable and accruals ( 296,154) 6,009,297
Increase/(decrease) in notes payable ( 235,832) -
---------------- ---------------
584,103 ( 860,376)
---------------- ---------------
CASH OUTFLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets ( 229,057) ( 393,755)
-------------- --------------
CASH INFLOWS FROM FINANCING ACTIVITIES
Increase in common shares 16,174 559,990
Increase in paid in capital 64,696 694,210
------------ ---------------
80,870 1,254,200
------------ ---------------
NET INCREASE IN CASH DURING THE YEAR 435,916 69
CASH BALANCE - January 1 69 -
------------ ------
CASH BALANCE - December 31 $435,985 $69
======= ===
The attached notes on pages 6 to 19 form part of these Financial Statements.
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 6
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
1. ORGANIZATION
Hexagon Consolidated Companies of America, Inc. a Nevada Corporation headquartered
in Reno, Nevada was incorporated under the name Carleton Enterprises, Ltd. On
November 13, 1984 the Company changed its name to SCN, Ltd. On December 15, 1986,
an involuntary petition for reorganization, under Chapter 11 of the U.S. Bankruptcy Code,
was filed against SCN, Ltd. In December 1988, the Company became debtor in
possession of its assets under a voluntary proceeding. The Company was dormant until
September 10, 1993 at which time the bankruptcy was ordered dismissed. On November
19, 1993 the Company again changed its name to Health Care Centers of America, Inc.
On July 7, 1999, the Company changed its name to Hexagon Consolidated Companies of
America, Inc. (HCCA). On September 9, 2003 the Company changed its name to NMC,
Inc. Also, Peeples Mining Company the wholly owned subsidiary of the Company was
merged into the parent, NMC, Inc. In April 2004, the Company registered the trademark
NMC, Inc. and the trade name Nevada Mining Company with the State of Nevada.
The Company is a development stage enterprise as defined by FASB No. 7. “Accounting
and Reporting by Development Stage Enterprises”.
On June 30, 1998, the Company authorized a reverse stock split. One new share was
issued for 1,000 old shares. The par value remained the same at $.001 per share.
In January 1997 the Company voted to eliminate the previous retained deficit through a
quasi-reorganization. This resulted in the elimination of the deficit in retained earnings of
$13,702,162. It had no effect on assets or liabilities.
On October 2, 1997, the Company authorized and issued 2,000,000,000 shares of the
Company’s preferred stock for services and expenditures valued at $200,000.
2. NATURE OF BUSINESS
Currently the Company is focused on the development, management and exploitation of
two (2) primary industry segments. The first is the development of mining interests and
exploitation of existing inventories of ore concentrate. The second is to continue its
previous entertainment activity of marketing master recordings and recording new master
recordings.
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 7
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
3. SIGNIFICANT ACCOUNTING POLICIES
(a) Principles Of Consolidation
The consolidated Financial Statements include the accounts of its wholly owned
subsidiaries, Med Away, International, Inc., Music Alley, Inc. and Peeples Mining
Company. All significant inter-company transactions have been eliminated.
(b) Organizational Costs
The Company has adopted Statement of Position (SOP) 98-5, “Reporting on the Costs of
Start-Up Activities” issued in April 1998 by the Accounting Standards Executive Committee
of the American Institute of Certified Public Accountants. Pursuant to SOP 98-5,
organizational costs are expensed as incurred instead of being capitalized and amortized.
(c) Property, Plant and Equipment
Equipment and furniture are stated at cost. Depreciation is computed using the straightline
at the following rates:
Building 2%
Office furniture and equipment 20%
Mining equipment 20%
Tools 25%
Trailers 25%
Computer Equipment 33.3%
Motor Vehicles 25%
Equipment also includes 24 Medaway-1 infectious waste treatment units, an on-site
machine to process medical waste. Originally the Company had plans to lease these
machines to hospitals. Subsequently it is the view that these models maybe more cost
effective if used in the production of Dorebars. The machines were purchased in June
1996 through an exchange of 2,066,015 shares of the Company’s common stocks. The
transaction was valued at the seller’s cost of $555,185 or $23,133 per unit. This
equipment is not being depreciated because it has not yet been placed in service.
(d) Cash and Cash Equivalents
The Company considers all short-term deposits with a maturity of three months or less to
be cash equivalent.
(e) Federal Income Tax
Due to an operating loss, since reorganization, there is no provision for federal income tax.
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 8
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(f) Use of Estimates:
The preparation of Financial Statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could
differ from these estimates.
(g) Income/(Loss) Per Common Share:
Weighted average shares outstanding used in the income/(loss) per common share
calculation were 395,905,943 for December 31, 2001; (253,188,515 for December 31,
2000).
4. ACQUISITION OF SUBSIDIARIES
(i) On June 26, 1996, the Company issued 40,000 shares (after given effect to reverse split
(see Note 1)) of its common stock in exchange for all the outstanding common stock of
ElfWorks, Ltd. The business combination has been accounted for as a pooling of interest
and, accordingly, the Company’s Consolidated Financial Statements have been given
retroactive effect to include the accounts and operations of ElfWorks, Ltd. for all periods
prior to the acquisition. ElfWorks, Ltd. had not commenced operations and had no activity
since inception, except for organizational costs of $40,000. Therefore, the combined
corporations will show no effect on the profit and loss from ElfWorks, Ltd. operations.
This combination was accounted as a pooling of interest after satisfying the twelve criteria
referenced under APB 16, as follows: 1) each company is autonomous; 2) each company
is independent; 3) the combination was effected in a single transaction; 4) common stock
was issued for all the common stock of ElfWorks, Ltd.; 5) the equity interest of common
stock of each company was unchanged; 6) the combining companies reacquired a normal
number of shares; 7) the ratio interest of individual stockholders was unchanged; 8) voting
rights are exercisable; 9) the combination was resolved at the consummation date of June
26, 1996; 10) ElfWorks, Ltd. agreed not to retire common stock to effect the combination;
11) there is no intent to dispose of a significant part of the assets of ElfWorks, Ltd. and 12)
no financial arrangements have been made for the benefit of former stockholders.
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 9
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
4. ACQUISITION OF SUBSIDIARIES (Continued)
Advertising credits (trade due bills) were acquired through the acquisition of ElfWorks, Ltd.
Such credits are recorded at the predecessor’s cost of zero. With reference to Staff
Accounting Bulletin No. 48 Topic 5-G (27/09/82), when a company acquires assets from
shareholders in exchange for stock prior to registration of the company, such asset should
generally be recorded at the cost to the shareholder. The credits are an irrevocable
promise (trade due bill) to provide the holder with network programming time and
commercial advertising time. According to American Independent Network (AIN) current
rate card, the Company could broadcast a half (½) hour program five (5) days a week at
prime time for more than four (4) years, throughout the network’s 161 stations. The
certificates are transferable and negotiable.
AIN through a successor Corporation has applied for protection under the US Bankruptcy
Court (Chapter II).
(II) Effective February 4, 1997, the Company consummated the purchase of Nashville
Music Consultants, Inc. (NMC) a Tennessee Corporation headquartered in
Nashville, Tennessee. On April 21, 1995, the Company entered into a stock
exchange agreement with NMC whereby 4,000 shares (after given effect to
reverse split (see Note 1)) of the Company’s common stock valued by using the
stock price on the date of the agreement discounted 50% for restricted stock
issued, was exchanged for all the issued and outstanding shares of NMC. The
subject matter of the stock exchange agreement with NMC concerned only the
music publishing operation of NMC. On September 1, 1998, NMC, (now Nashville
Music Group (NMG) and the Company entered into an amendment to the stock
exchange agreement, which was effective as of April 21, 1995. The reason for the
amendment was to conform operations to the intent of the initial stock exchange.
NMC had expanded its operations into areas beyond music publishing. As a result
of the amendment, the publishing division of NMC, Music Alley, Inc., was
transferred to the Company. Since the amendment to the agreement, HCCA
received various rights to the publishing operation. Since receiving these rights,
there has been no activity and Music Alley, Inc. has been dormant. The remaining
value has been reserved as impairment of assets. The uncertainty of obtaining
this information is so great, it is felt that the value may have been impaired to an
unknown extent. Therefore, it has been fully reserved against until such time that
the appropriate information is obtained.
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 10
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
4. ACQUISITION OF SUBSIDIARIES (Continued)
● Effective 4th February, 1997, the Company acquired F & H Mining, Inc. (F&H), an
International Business Corporation, and Peeples Mining LLC (Peeples LLC), an
Arizona Limited Liability Company, accounted for as a purchase. Both F&H and
Peeples LLC are primarily engaged in the mining of precious metals. On March
25, 1994, the Company entered into a stock exchange agreement with F&H,
whereby 12,000 shares (after given effect to reverse split (see Not 1)) of the
Company’s common stock was exchanged for all the issued and outstanding
shares of F&H valued current replacement cost of equipment purchased of
$86,130. On June 18, 1994, the Company entered into a stock exchange
agreement with Peeples LLC, whereby 20,000 shares (after given effect to reverse
split (see Note 1)) of the Company’s common stock was exchanged for all the
issued and outstanding shares of Peeples LLC also valued at current replacement
cost of the equipment purchased of $410,000. Both companies were dormant and
had no operations for several years.
● On February 4, 1997, the Company formed Peeples Mining Company, a Nevada
Corporation, and a wholly owned subsidiary of the Company. The assets of
Peeples LLC and F&H were consolidated into the new corporation as well as the
inventory of concentrated precious metals ore acquired from Zarzion, Ltd. As a
result, Peeples Mining Company now has mining interests in Arizona, Nevada and
California. The Arizona operation includes a mineral lease of state land on 377.11
acres. The Nevada property includes 7 claims on 140 acres. The production
facility and lab equipment owned by Peeples Mining Company is located at the
Arizona mill site operation. Assay reports obtained by professionals in the industry
indicate the expected value of the above to be in excess of the stock value on the
date of these agreements discounted by 50% for restriction.
● On February 6, 1997, 375,000 shares (after given effect to reverse split (see Note
1)) of common stock was issued to Zarzion, Ltd., for the purchase of 17 mining
claims covering a 340 acre site in San Bernardino County, California. The shares
were valued at $69,375,000 the stock price on the date of the agreement
discounted by 50% for restriction. Assay reports obtained by an independent
assayer indicate a value in excess of this value. There has been no activity on this
property for several years.
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 11
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
5. GOING CONCERN
As discussed in Note 1, the Company has been in the development stage since June 29,
1993. A major portion of its assets includes mineral inventories valued at $200,000,000,
and mining claims located in San Bernardino County, California valued at $69,375,000 and
mining claims near Mesquite, Nevada valued at $86,130. Realization of a major portion of
these assets is dependent upon the Company’s ability to successfully liquidate the mineral
inventory. The Financial Statements do not include any adjustments that might result from
the outcome of this uncertainty. These factors raise concern about the Company’s ability
to continue as a going concern. It is Management’s intention to raise additional capital by
the sale of some or all of the ore inventory (Note 7(a)).
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 12
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
(Continued)
MANAGEMENT ACCOUNTS
6. PROPERTY, PLANT AND EQUIPMENT
Office Mining Rental Air
Cost Furniture Equipment Equipment Building Conditioners Tools Trailers E
------- --------------- ------------------- ------------------ -------------- --------------------- --------- ------------ -
At January 1, 2001 65,209 725,898 555,185 99,148 3,000 7,031 3,478
Additions 2,253 144,232 - 20,488 - 7,008 -
----------- ----------- ------------ ----------- ---------- --------- ---------
At December 31,2001 67,462 870,130 555,185 119,636 3,000 14,039 3,478
----------- ----------- ------------ ----------- ---------- --------- ---------
Accumulated
Depreciation
At January 1, 2001 22,075 213,093 - 1,983 600 1,758 869
Charge for the year 3,192 167,679 - 2,393 600 3,510 869
----------- ----------- ------------ -------- --------- -------- ---------
At December 31, 2001 25,267 380,772 - 4,376 1,200 5,268 1,738
----------- ----------- ------------ -------- --------- -------- ---------
Net Book Values
At December 31, 2001 $42,195 $489,358 $555,185 $115,260 $1,800 $8,771 $1,740
====== ======== ======= ======= ====== ===== =====
At December 31, 2000 $43,134 $512,805 $555,185 $97,165 $2,400 $5,273 $2,609
====== ======== ======== ====== ====== ===== =====
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 13
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
7. MINERAL INVENTORIES 2001 2000
(a) Purchased mineral inventory 200,000,000 200,000,000
(b) Acquisition cost 69,375,000 69,375,000
----------------- -----------------
$269,375,000 $269,375,000
========== ==========
Mineral properties include:
a) An inventory of concentrated precious metals ore located on land leased from the
State of Arizona through the year 2003. Recent assay reports commissioned by
the Company indicate there is a combination of precious metals, rare earth and
common elements. These concentrates were purchased in exchange for 100,000
shares (after given effect of reverse split (see Note 1)) of the Company’s common
stock. Such stock was valued at $200,000,000 based on the stock price on the
date of the agreement discounted by 50% due to restrictions on transferability,
applicable to such stock. A subsequent independent valuation indicated a fairmarket
value in excess of the recorded amount.
b) The San Bernardino, California site consists of the purchase of 17 mining claims
covering a 340-acre site. These claims were purchased in exchange for 375,000
shares (after given effect of reverse split (see Note 1)) of the Company’s common
stock. The shares were valued at $69,375,000 the stock price on the date of the
agreement discounted by 50% for restriction. Assay reports obtained by an
independent assayer indicate a value in excess of this value. There has been no
activity on this property for several years.
c) The seven claims covering 140 acres are located near Mesquite in Nevada.
These were acquired through a stock exchange agreement with F & H Mining
dated March 25, 1994 involving 12,000,000 common stock shares.
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 14
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
8 ACCOUNTS PAYABLE AND ACCRUALS 2001 2000
-------- --------
Trade payable 112,551 112,551
Accrual expenses 275,815 250,815
Due to Shareholders 6,490,828 6,822,121
Other payables 10,139 -
--------------- ---------------
$6,889,333 $7,185,487
======== ========
9. LOAN PAYABLE
a) R. K. Company No. 1 - 52,373
b) R. K. Company No. 2. - 215,000
c) Motor vehicle loan 31,541 -
------------ ------------
$31,541 $267,373
======= =======
(a) R. K. Company No. 1
This note dated November 17, 1995 is unsecured and repayable in equal monthly
installments of $43,367 with interest at 10% per annum through to May 17, 1996 and
thereafter at 18% per annum. This note was forgiven as part of the Krilich court
settlement.
(b) R. K. Company No. 2
This note dated November 17, 1995 is unsecured and repayable in equal monthly
installments of $37,624 with interest at 10% through to May 17, 1996 and thereafter at
18% per annum.
In March 1997, a payment of $195,436 was made on the note payable to R. K. Company,
a related party (see Note 13 and 14). Both notes are delinquent and a demand for
payment has been made on both notes. A final determination of the enforceability of these
notes is subject to the outcome of the litigation reported above (see Note 2). Should the
courts determine that these notes are not enforceable, the Company will pursue recovery
of the $195,436 payment made in March 1997. This note was forgiven as part of the
Krilich court settlement. (See Note 14).
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 15
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
10. SHARE CAPITAL 2001 2000
Authorized
900,000,000 Common Shares @ $0.001 900,000 900,000
600,000,000 Preferred Shares @ $0.001 600,000 600,000
-------------- --------------
$1,500,000 $1,500,000
======== ========
Issued and Fully Paid
449,132,182 Common Shares @ $0.001 449,132 385,125
327,732,812 Preferred Shares @ $0.001 327,733 375,750
Treasury Stock- 183,564 Common Shares 184 -
------------ ------------
$777,049 $760,875
======= =======
On December 28, 1993 the Company amended its articles of incorporation to increase the
authorized capitalization from 80,000,000 shares common stock to 900,000,000 shares of
common stock and changed the par value of its common stock from $0.02 per share to
$0.001 per share. In January 1994, the Company declared a one-for-three reverse stock
split. In June 1998, the Company declared a one-for-one thousand reverse stock split.
On March 1, 2000, the Board of Directors increased the authorized number of shares of
Convertible Preferred Stock to 600,000,000 from 200,000,000 shares.
11. INCOME TAXES
At December 31, 1993 the Company had a net operating loss carry forward for federal
income tax purposes which will be limited because of change in ownership since 1993.
Post 1993 net operating losses carry forward of approximately $500,000 is available to
provide future tax benefits:
Expiration Date Operating Losses
2008 800
2009 101,000
2010 90,000
2011 308,200
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 16
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
12. CONTINGENCIES
Various actions and legal proceedings may arise against the Company during the normal
course of business. However, Management and in-house Legal Counsel are aware of only
the following:
U.S. Securities and Exchange Commission (SEC)
There are three (3) separate but related matters.
(a) SEC v. Hexagon Consolidated Companies of America, Inc. (HCCA)
On March 10, 2003 the SEC instituted an administrative law action against the
Company to the registration of its stock for failure to file certain required reports.
The Company had attempted to voluntarily withdraw the registration statement;
however, it was not successful. Therefore, the Company agreed to a court order
that revoked the registration statement.
(b) SEC v. Michael J. Pietrzak, Maurice W. Furlong, Donald Jordan
On February 28, 2003, the SEC filed a civil action against the above individuals in
Federal Court in Chicago, Illinois. The allegation against Pietrzak and Furlong
include: Attempts to fraudulently increase the stock price, fraudulent sale of stock,
overstatement of value of the Company, improper valuation, misleading press
releases and letters to the shareholders and failure to timely file reports on behalf
of the Company. The allegations against Jordan include: fraudulent sale of stock
and that, as an assayer, he could not opine as to the total economic value of the
mining assets.
(c) Grand Jury Investigation of Michael J. Pietrzak
By letter dated October 28, 2003, Michael J. Pietrzak, Company Secretary, was
informed that he was a target of a Federal Grand Jury investigation regarding
possible securities law violations and possible violations of the Internal Revenue
Code.
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 17
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
13. FINANCIAL INFORMATION FOR BUSINESS ACQUIRED OR TO BE ACQUIRED.
(a) Effective February 4, 1997, F&H Mining Company, Inc. (F&H) and Peeples Mining,
L.L.C. (Peeples LLC) were acquired by the Company through the exchange for
common stock of the Company. These acquisitions were accounted for under the
purchase method.
(b) Effective February 4, 1997, Nashville Music Consultants, Inc. (NMC) was acquired
by the Company through the exchange for common stock of the Company. On
August 20, 1998, the Company entered into an Amendment To Stock Exchange
Agreement, which related back to the same date as the original stock exchange
agreement. The original stock exchange agreement provided for the acquisition of
only the music publishing operations of NMC. NMC (now known as Nashville
Music Group, Inc. (NMG) has failed to provide the Company with current financial
information relating to the music publishing. The uncertainty of obtaining this
information is so great, it is felt that the value may have been impaired to an
unknown extent. Therefore, it has been fully reserved against until such time the
appropriate information is obtained.
(c) The combined assets of F & H and Peeples LLC were $496,130 as of February 4,
1997. There have been no operations in ether Company for several years.
14. COURT SETTLEMENT
HCCA v Robert R. Krilich, Sr.
From 1993 to 1995, the Company and Robert R. Krilich, Sr. (Krilich) entered into a
series of agreements for the purpose of exchanging stock in the Company for
assets owned or controlled by Krilich. Disputes arose and lawsuits were filed in
DuPage and Cook Counties in Illinois and in Federal Court located in Nashville,
Tennessee. On July 27, 2001, the Company and Krilich entered into a settlement
agreement. The closing of the settlement agreement occurred on October 7,
2001. Pursuant to the agreement, the Company released all interest in and to all
of Krilich’s property identified in the stock exchange agreements and released
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 18
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
14. COURT SETTLEMENT (Continued)
Krilich from all obligations in the exchange agreements. Krilich released all
interest in and re-conveyed all of the Company stock issued pursuant to the
exchange agreement, released the Company from any and all obligations
pursuant to the exchange agreements and the payments of the five million dollars
($5,000,000). The Court entered an Agreed Order Dismissal on October 9, 2001.
The balance of $5,000,000 was paid in 2002.
15. SUBSEQUENT EVENTS
(a) State of Arizona v. Peeples, Inc.
On or about October 20, 2000, the Arizona State Land Department (ASLD) issued
a Notice of Default and Denial of Mining Plan of Operation (MPO). The ASLD
attempted to terminate the lease between the Company’s wholly owned
subsidiary, Peeples, Inc. (Peeples) and the ASLD. After a five-day hearing,
Administrative Law Judge (ALJ) found in favor of Peeples on seven of eight
issues. Peeples appealed that one issue to the Superior Court. The Superior
Court ruled against Peeples. Peeples then appealed that ruling to the Appellate
Court and were successful. Therefore, Peeples was successful on all issues.
(b) Sale of Precious Metal Concentrate
On June 2, 2003 the Company entered into an agreement to sell 137,939 tons of
certain precious metal concentrate to a privately held U.S. corporation for the sum
of US$500,000,000. It was further agreed that this sum will be paid for by way of
a deposit of US$11 million down payment and the balance over a ten (10) year
period from the date that the down payment schedule is activated. The down
payment will be paid over a period of twenty-four (24) months commencing on or
before March 31, 2005, or within 30 days after the receipt of a signed audit. In
2003, the buyer paid the Company a good faith irrevocable deposit of $720,860.
In addition, the buyer was granted a stock option to purchase 15,000,000 common
stock at $0.05 executable ninety (90) days after the closing of the sale agreement
and first payment of US$150,000. This option was not exercised.
HEXAGON CONSOLIDATED COMPANIES OF AMERICA, INC. Page 19
AND SUBSIDIARIES
(Formerly HEALTH CARE CENTERS OF AMERICA, INC.)
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 2001
MANAGEMENT ACCOUNTS
15. SUBSEQUENT EVENTS (continued)
(c) Name Change and Merger of Subsidiary into the Parent
On September 9, 2003 the Company changed its name to NMC, Inc. Also,
Peeples Mining Company the wholly owned subsidiary of the Company was
merged into the parent, NMC, Inc. In April 2004, the Company registered the
trademark NMC, Inc. and the trade name Nevada Mining Company with the State
of Nevada.
16. RELATED PARTY TRANSACTION
On October 11, 2001, the Company and Michael J. Pietrzak – Company Secretary,
entered into a loan agreement whereby the Company loaned a total of $300,000.00 to
Pietrzak for a period of 42 months. All principal and interest is due on March 11, 2005.
The interest payable is equal to the three (3) years Certificate of Deposit as published by
Bankrate.com, which is 3.77%. Pietrzak has assigned 5,000,000 shares of convertible
preferred stock as collateral. This transaction occurred prior to the enactment of the
Sarbanes-Oxley Act of 2002.
17. PROFESSIONAL FEES 2001 2000
Accounting 45,065 55,635
Legal 442,966 320,223
Assays and Testing 78,125 230,983
Public Relations 7,259 6,055
Agency and Filing Fees 6,284 30,695
Consulting 3,370 5,186
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$583,069 $648,777
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