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 July 31, 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 July 31, 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 JULY 31, 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 - 5............................................................. 8-9
Signatures.............................................................. 10
-2-
ST. GEORGE METALS, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED
BALANCE SHEETS
JULY 31, 1998 AND JANUARY 31, 1998
(EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
JULY 31, JANUARY 31,
1998 1998
---- ----
ASSETS
CURRENT
Cash $ 1 $ 4
OTHER - Reclamation Deposit 78 120
------------- -----------
$ 79 $ 124
------------ ----------
LIABILITIES
CURRENT
Accounts payable $ 152 $ 199
Advances from shareholder 512 320
Accrued interest payable 2,995 2,600
Accrued mineral interests
reclamation costs 100 100
------------- -----------
3,759 3,219
LONG TERM-DEBT
Other 1,888 1,888
Related parties 5,057 5,111
------------- -----------
TOTAL LIABILITIES 10,704 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 (21,859) (21,328)
------------- -----------
(10,625) (10,094)
------------- -----------
TOTAL $ 79 $ 124
------------- -----------
PREPARED BY MANAGEMENT
-3-
ST. GEORGE METALS, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED
CONSOLIDATED STATEMENT OF LOSS AND DEFICIT
FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 31, 1998 AND 1997
(EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
THREE MONTHS SIX MONTHS
ENDED JULY 31 ENDED JULY 31
1998 1997 1998 1997
---- ---- ---- ----
REVENUE
Income $ - $ - $ - $ -
----------- ---------- --------- ---------
ADMINISTRATION COSTS
General and administrative 1 - 4 3
Interest 146 117 340 265
Reclamation and other costs 7 12 171 12
Professional fees 12 2 22 9
----------- ---------- --------- ---------
TOTAL ADMINISTRATIVE COSTS 166 131 537 289
----------- ---------- --------- ---------
NET LOSS BEFORE INTEREST INCOME 166 131 537 289
INTEREST INCOME 5 10 6 10
----------- ---------- --------- ---------
NET LOSS 161 121 531 279
DEFICIT BEGINNING OF PERIOD 21,698 20,593 21,328 20,435
DEFICIT END OF PERIOD $ 21,859 $ 20,714 $ 21,859 $ 20,714
----------- ---------- --------- ---------
BASIC LOSS PER SHARE IN U.S. DOLLARS $ .01 $ .01 $ .04 $ .02
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 14,487,159 14,487,159 14,487,159 14,487,159
PREPARED BY MANAGEMENT
-4-
ST. GEORGE METALS, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 31, 1998 AND 1997
(EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
SIX MONTHS
ENDED JULY 31,
1998 1997
---- ----
FUNDS PROVIDED (USED) BY OPERATING
ACTIVITIES
Net loss $ (531) $ (279)
CHANGES IN OTHER
WORKING CAPITAL ITEMS 582 315
----------- -----------
TOTAL 51 36
FINANCING ACTIVITIES
Long-term debt (54) (43)
----------- -----------
NET INCREASE (DECREASE) IN CASH (3) (7)
CASH BALANCE BEGINNING OF PERIOD 4 20
----------- -----------
CASH BALANCE END OF PERIOD $ 1 $ 13
----------- -----------
PREPARED BY MANAGEMENT
-5-
ST. GEORGE METALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 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 July 31, 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 July 31, 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 month and six month periods ended July 31,
1998, the Company had no revenues and no mineral interest costs recovery, the
same as for the comparable periods in the preceding year.
Costs and Expenses. Total administrative costs were $166,000 for the
three months ended July 31, 1998, compared to $131,000 for the same period in
1997, an increase of $35,000 (27%), mostly attributable to an increase in
accrued interest. Accrued interest expense on the Company's term debt was
$146,000 for the quarter (net of a $54,000 downward adjustment on the Company's
Gold Delivery Contracts due to a decrease in the price of gold during the
period), compared to $117,000 for the period ended July 31, 1997. The Company
incurred consulting fees of $7,000 during the quarter relating to the Company's
efforts to resolve certain environmental issues with the Nevada Department of
Environmental Protection ("NDEP") relating to the Company's former Dean Mine
interest. As the Company has previously reported, it has substantially completed
remediation of its former Dean Mine property. The Company also incurred higher
professional fees ($12,000), compared to $2,000 in the comparable prior period,
primarily as a result of the Company's efforts to sub-lease or sell certain
additional properties.
Interest Income. Interest income during the three months ended July 31,
1998 was $5,000 compared to $10,000 during the comparable period in 1997. The
amount of the Company's cash bond posted with NDEP was reduced from $220,000 in
the comparable period in 1997 to $78,000 at July 31, 1998 as funds have been
released from the bond periodically upon fulfillment of certain of the Company's
reclamation obligations with respect to its former Dean Mine property.
Net Loss. For the three months ending July 31, 1998, the Company had a
net loss of $161,000 ($.01 per share), compared with a net loss of $121,000
($.01 per share) for the same period in 1997. The Company's cumulative net loss
at July 31, 1998 was $21.9 million compared to $20.7 million at the end of the
same period in 1997, an increase of $1.2 million.
Analysis of Financial Condition
Liquidity and Capital Resources. The Company's liquidity and capital
resources are extremely limited. At July 31, the Company's cash position had
decreased from January 31 ($1,000 at July 31 versus $4,000 at January 31). The
Company's outstanding trade debt at July 31 ($664,000 including approximately
$512,000 representing advances from one shareholder for operating expenses)
significantly exceeded the Company's current assets (excluding reclamation
deposit) at that date. During the period, NDEP released $42,000 from the
Company's cash bond posted to secure its reclamation obligations. Proceeds were
applied to the Company's trade debt. Interest income of $5,000 from the balance
remaining on deposit with NDEP was similarly applied. During the balance of the
fiscal year ending January 31, 1999, the Company anticipates receiving a cash
payment in October of $30,000 under its option agreement with Cameco (U.S.)
Inc., and up to approximately $35,000 from the sale or sub-lease of certain
additional properties. See Item 5 of Part II below. Proceeds will be applied to
outstanding trade debt. The Company continues to seek a resolution of its
outstanding trade debt other than through a court-supervised process, which
would entail significant administrative expense.
-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
significant 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.
-8-
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.
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 upon
Cameco's study of this property, the Company has determined to
maintain its interest in these claims. 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.
There was no change in the status of the Company's properties
during the quarter ended July 31, 1998.
In August, 1998, the Company concluded an agreement with
Triband Resource U.S. Inc., for the sub-lease of various
properties, including the Company's leasehold interest in a
group of claims identified as Whisky Canyon, Red Cap and North
Cap, as well as the remaining portion of the Draco/AMAX
property not under separate option to Cameco (U.S.) Inc. These
properties are described in the Company's Form 10-KSB for the
year ended January 31, 1998.
Upon execution of the agreement with Triband, the Company
received a payment of $15,000; an additional $15,000 is
payable on the first anniversary; and $25,000 on the second
anniversary and annually thereafter, subject to escalation in
certain circumstances. Under the agreement, the Company has
retained a 4% net smelting royalty, subject to reduction in
the event of the exercise of certain option rights granted to
Triband Resource. A copy of the agreement with Triband
Resource is filed herewith as Exhibit 10.39.
The Company has reached an agreement in principle with a
third-party for the sale of the Company's approximate 560 acre
tract (known as the Dean Mine mill site) for a sale price of
$20,000. Consummation of the transaction is anticipated during
the quarter ending October 31, 1998, but is dependent upon the
purchaser's financing arrangements.
Other. Warrants for the purchase of 686,751 shares of the
Company's Common Stock at an exercise price (at issue) of $.40
per share expired by their terms without exercise during the
quarter ended July 31, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 10.39: Mineral Lease and Option Agreement dated August
___, 1998 between the Company and Triband Resource (U.S.) Inc.
(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)
September 5, 1998 By: /s/ C. B. Robertson, III
- ----------------- --------------------------
C. B. Robertson, III - Chairman and Principal
Executive Officer
September 5, 1998 /s/ Harrison Nesbit, II
- ----------------- -----------------------
Harrison Nesbit, II - Treasurer and Chief Financial
and Accounting Officer
-10-