SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 1O-QSB Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended April 30, 1998 Commission File Number 0-18616 - ------------------------------------ ------------------------------ ST. GEORGE METALS, INC. ----------------------------------------------------- (Exact name of registrant as specified In its charter) Nevada 88-0227915 ------------------------------ -------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) Incorporation or organization) 125 NationsBank Plaza, 1111 E. Main St., Richmond, Virginia 23219 - ----------------------------------------------------------- ----- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (804) 644-3434 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of April 30, 1998, the number of shares of Common Stock outstanding was 14,487,159. NOTE: The information presented in this Form 10-QSB is unaudited, but in the opinion of management reflects all adjustments (which include only normal recurring adjustments) necessary to fairly present such information. ST. GEORGE METALS, INC. FORM 10-QSB QUARTER ENDED APRIL 30, 1998 INDEX PAGE PART I - FINANCIAL INFORMATION Interim Consolidated Balance Sheets.................................. 3 Interim Consolidated Statement of Income and Deficit................. 4 Interim Consolidated Statement of Cash Flows......................... 5 Notes to the Interim Consolidated Financial Statements............... 6 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................ 7 PART II - OTHER INFORMATION Items 1 - 6.......................................................... 8-9 Signatures........................................................... 10 -2- ST. GEORGE METALS, INC. (A DEVELOPMENT STAGE COMPANY) INTERIM CONSOLIDATED BALANCE SHEETS AS OF APRIL 30, 1998 AND JANUARY 31, 1998 (EXPRESSED IN THOUSANDS OF U.S. DOLLARS) APRIL 30, JANUARY 31, 1998 1998 --------- ----------- ASSETS CURRENT Cash $ 2 $ 4 OTHER - Reclamation Deposit 120 120 ----------- ----------- $ 122 $ 124 ---------- ----------- LIABILITIES CURRENT Accounts payable $ 182 $ 199 Advances from shareholder 491 320 Accrued interest payable 2,794 2,600 Accrued mineral interests reclamation costs 120 100 ----------- ----------- 3,587 3,219 LONG TERM-DEBT Other 1,888 1,888 Related parties 5,111 5,111 ----------- ----------- TOTAL LIABILITIES 10,586 10,218 ----------- ----------- SHAREHOLDERS' DEFICIT SHARE CAPITAL Authorized 10,000,000 Preferred shares - Par value $.01 per share 30,000,000 Common shares - Par value $.01 per share Issued and paid in capital 1,450 Series A Preferred shares 1,450 1,450 166,417 Series B Preferred shares 499 499 14,487,159 Common shares 9,285 9,285 Deficit accumulated during development stage (21,698) (21,328) ----------- ----------- (10,464) (10,094) ----------- ----------- TOTAL $ 122 $ 124 ----------- ----------- PREPARED BY MANAGEMENT -3- ST. GEORGE METALS, INC. (A DEVELOPMENT STAGE COMPANY) INTERIM CONSOLIDATED STATEMENT OF INCOME AND DEFICIT FOR THE THREE MONTHS ENDED APRIL 30, 1998 AND 1997 (EXPRESSED IN THOUSANDS OF U.S. DOLLARS) THREE MONTHS ENDED APR. 30 1998 1997 ---- ---- REVENUE Mineral interest costs recovery in excess of expenses $ - $ - ADMINISTRATION COSTS General and administrative 3 3 Interest 194 148 Professional fees 10 7 Reclamation and other costs 164 - ----------- ---------- TOTAL ADMINISTRATIVE COSTS 371 158 ----------- ---------- NET LOSS BEFORE INTEREST INCOME 371 158 INTEREST INCOME 1 - ----------- ---------- NET LOSS 370 158 DEFICIT BEGINNING OF PERIOD 21,328 20,435 ----------- ---------- DEFICIT END OF PERIOD 21,698 20,593 ----------- ---------- BASIC LOSS PER SHARE IN U.S. DOLLARS $ .03 $ .01 ----------- ---------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 14,487,159 14,487,159 ---------- ---------- PREPARED BY MANAGEMENT -4- ST. GEORGE METALS, INC. (A DEVELOPMENT STAGE COMPANY) INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED APRIL 30, 1998 AND 1997 (EXPRESSED IN THOUSANDS OF U.S. DOLLARS) THREE MONTHS ENDED APRIL 30, 1998 1997 ---- ---- FUNDS PROVIDED (USED) BY OPERATING ACTIVITIES Net loss $ (370) $ (158) CHANGES IN OTHER WORKING CAPITAL ITEMS 368 152 ----------- ----------- TOTAL (2) (6) ----------- ----------- NET INCREASE (DECREASE) IN CASH (2) (6) CASH BALANCE BEGINNING OF PERIOD 4 20 ----------- ----------- CASH BALANCE END OF PERIOD $ 2 $ 14 ----------- ----------- PREPARED BY MANAGEMENT -5- ST. GEORGE METALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 1998 (EXPRESSED IN THOUSANDS OF U.S. DOLLARS) 1. ACCOUNTING POLICIES These interim consolidated financial statements have been prepared in accordance with accounting principles and practices that are generally accepted in the United States. The notes to the Company's (unaudited) consolidated financial statements as of January 31, 1998, substantially apply to the interim financial statements at April 30, 1998, and are not repeated here. 2. INTERIM ADJUSTMENTS The unaudited interim financial information reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. These adjustments are of a normal recurring nature. 3. STATUS OF BUSINESS The Company is not engaged in any active business. There was no change during the quarter ending April 30, 1998, with respect to the Company's continued its efforts to reach an out-of-court accord with its trade creditors. See Item 5, Other Information, of Part II of this Form 10-QSB. PREPARED BY MANAGEMENT -6- Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - Financial Revenues. For the three months ended April 30, 1998, the Company had no revenues. The Company had no revenues during the comparable period ended April 30, 1997. Costs and Expenses. Total administrative costs, including accrued interest expense, were $371,000 for the three months ended April 30, 1998, compared to $158,000 for the same period in 1997, an increase of $213,000. Accrued interest expense on the Company's term debt was $194,000 for the quarter, compared to $148,000 for the period ended September 30, 1997. The increase in interest expense was primarily attributable to market adjustments to the Company's gold contracts due to increases in the price of gold. The remaining increase in administrative costs was primarily attributable to consulting fees and other costs of $164,000 incurred during the quarter relating to the Company's continuing reclamation work at the Company's former Dean Mine leasehold interest. Net Recovery in Excess of Costs for Period. For the three months ending April 30, 1998, the Company had a net loss of $370,000 ($.03 per share), compared with a net loss of $158,000 ($.01 per share) for the same period in 1997. The Company's cumulative net loss at April 30, 1998 was $21,698,000, compared to $20,593,000 at the end of the same period in 1997. Analysis of Financial Condition Liquidity and Capital Resources. At April 30, the Company's cash position had decreased from January 31 ($2,000 at April 30 versus $4,000 at January 31). The Company's outstanding trade debt at April 30 ($673,000, including approximately $491,000 representing advances from one shareholder for operating expenses) significantly exceeded the Company's current assets (excluding reclamation deposit) at that date. The Company continues to seek a resolution of its outstanding trade debt other than through a court-supervised process, which would entail significant administrative expenses. The Company's reclamation deposit of $120,000 at April 30 was reduced after the period end to $104,000 as funds were released by the Nevada Department of Environmental Protection to cover certain expenses incurred in connection with the reclamation of the Company's former Dean Mine property. The Company believes it has substantially completed the NDEP mandated reclamation work. Monitoring on the Dean Mine property is required for a period of years, however. -7- PART II - OTHER INFORMATION Item 1. Legal proceedings. (a) See Item 5 below. Item 2. Changes in securities. (a) None (b) None Item 3. Defaults upon senior securities. Under the Company's Phase I and II Loan Commitments, non-payment of interest constitutes an event of default; however, a note holder must advise the Company in writing that he declares his debt to be in default. As previously reported, two note holders, one a former related party of the Company, advised the Company in January, 1994, that the Company was in default with respect to the Company's debt obligations to them. The Company advised such holders that it did not agree with their position. Item 4. Submission of matters to a vote of security holders. None Item 5. Other information. General. The Company's financial resources have been substantially exhausted and management does not know of any additional financing available to the Company. The Company has no continuing on-going business operations at this time. The Company has been seeking, since early 1995, to satisfy its trade debt other than through a court supervised process, which would entail significant administrative expenses. The Company has been able to satisfy a substantial portion of its trade debt, but in light of its financial position, it is unlikely any payments will be made on its other indebtedness, which has been voluntary subordinated to the Company's trade creditors. SEC Reporting Obligations. Because of the Company's financial condition and its consequent difficulty paying the attendant legal and accounting expenses, its ability to continue to meet its reporting obligations under the Securities Exchange Act of 1934 remains questionable. The financial statements included with its Form 10-KSB for the year ended January 31, 1998, were not audited by an independent certified accountant, because the Company could not afford the cost of an audit. The Company sought and obtained administrative relief from the staff of the Securities and Exchange Commission from the requirement that it obtain an audited financial statement for its Form 10-KSB filing. Inability to Pay Indebtedness. Management does not presently anticipate that any of its outstanding obligations under its Operations Advances, Gold Delivery Contracts and term debt, a substantial portion of which outstanding obligations are held by members of the Company's board of directors, can be satisfied. Accordingly, management does not believe, as a practical matter, that there is any remaining value to be ascribed to the Company's outstanding preferred stock or common stock. -8- Status of Properties. During the quarter ending April 30, 1998, Cameco (U.S.) Inc. gave notice to the Company that it had decided not to commit itself to a 1998 expenditure on its Hancock Canyon Project. Accordingly, Cameco has given notice of its termination of the Hancock Option Agreement dated November 21, 1996, on the Hancock Canyon property. Based on this development, the Company contemplates allowing its interest in the claims known as the Hancock Canyon property to lapse. Cameco (U.S.) Inc. continues to hold a portion of the Company's Draco/AMAX claims under option pursuant to a separate agreement dated February 21, 1996. The Company continues with its efforts to work out a satisfactory arrangement for a lease to a third-party of its leasehold interest in a group of claims identified as Whiskey Canyon, Red Cap and North Cap. The Company is also in discussions with the same party regarding a leasehold interest in its Trenton Canyon claims and in the remaining portion of its Draco/AMAX property not under separate option to Cameco (U.S.) Inc. These properties are described in greater detail in the Company's Form 10-KSB for the year ended January 31, 1998. There is no assurance any such discussions will result in a definitive agreement. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: Exhibit 27 Financial Data Schedule, filed herewith (b) Reports on Form 8-K: None -9- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. St. George Metals. Inc. ------------------------------ (Registrant) June 12, 1998 By: /s/ C. B. Robertson, III -------------------------- C. B. Robertson, III - Chairman and Principal Executive Officer June 12, 1998 /s/ Harrison Nesbit, II ------------------------- Harrison Nesbit, II - Treasurer and Chief Financial and Accounting Officer -10-