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 October 31, 1998 Commission File Number 0-18616
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ST. GEORGE METALS, INC.
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(Exact name of registrant as specified In its charter)
Nevada 88-0227915
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or organization)
125 NationsBank Plaza, 1111 E. Main St., Richmond, Virginia 23219
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (804) 644-3434
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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
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As of October 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.
<PAGE>
ST. GEORGE METALS, INC.
FORM 10-QSB
QUARTER ENDED OCTOBER 31, 1998
INDEX
PAGE
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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
<PAGE>
<TABLE>
ST. GEORGE METALS, INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED BALANCE SHEETS
AS OF OCTOBER 31, 1998 AND JANUARY 31, 1998
(EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
OCTOBER 31, JANUARY 31,
1998 1998
----------- -----------
ASSETS
<S> <C> <C>
CURRENT
Cash $ 12 $ 4
OTHER - Reclamation deposit 78 120
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$ 90 $ 124
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LIABILITIES
CURRENT
Accounts payable $ 86 $ 199
Advances from shareholders 562 320
Accrued interest payable 3,190 2,600
Accrued mineral interests reclamation costs 90 100
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3,928 3,219
LONG TERM-DEBT
Other 1,888 1,888
Related parties 5,057 5,111
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TOTAL LIABILITIES 10,873 10,218
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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 (22,017) (21,328)
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(10,783) (10,094)
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TOTAL $ 90 $ 124
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PREPARED BY MANAGEMENT
-3-
<PAGE>
ST. GEORGE METALS, INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENT OF INCOME AND DEFICIT
FOR THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
(EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
THREE MONTHS NINE MONTHS
ENDED OCT. 31 ENDED OCT. 31
1998 1997 1998 1997
--------- ------- --------- --------
REVENUE
Option fees 45 30 45 30
--------- ------- --------- --------
ADMINISTRATION COSTS
General and administrative 2 - 6 3
Interest 196 111 536 376
Reclamation and other costs - 129 171 141
Professional fees 6 - 28 9
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TOTAL ADMINISTRATIVE COSTS 204 240 741 529
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NET LOSS BEFORE
INTEREST INCOME 159 210 696 499
INTEREST INCOME 1 1 7 11
--------- ------- --------- --------
NET LOSS 158 209 689 488
DEFICIT BEGINNING OF PERIOD 21,859 20,714 21,328 20,435
--------- -------- --------- --------
DEFICIT END OF PERIOD 22,017 20,923 22,017 20,923
--------- -------- --------- --------
BASIC LOSS PER SHARE
IN U.S. DOLLARS $ .01 $ .02 $ .05 $ .04
--------- -------- --------- --------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 14,487,159 14,487,159 14,487,159 14,487,159
---------- ---------- ---------- ----------
PREPARED BY MANAGEMENT
-4-
<PAGE>
ST. GEORGE METALS, INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
(EXPRESSED IN THOUSANDS OF U.S. DOLLARS)
<CAPTION>
NINE MONTHS
ENDED OCTOBER 31,
1998 1997
----------- -----------
FUNDS PROVIDED (USED) BY OPERATING
ACTIVITIES
Net loss recovery $ (689) $ (488)
CHANGES IN OTHER
WORKING CAPITAL ITEMS 751 572
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TOTAL 62 84
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FINANCING ACTIVITIES
Long-term debt (54) (97)
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NET INCREASE (DECREASE) IN CASH 8 (13)
CASH BALANCE BEGINNING OF PERIOD 4 20
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CASH BALANCE END OF PERIOD $ 12 $ 7
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</TABLE>
PREPARED BY MANAGEMENT
-5-
<PAGE>
ST. GEORGE METALS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 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 October 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 October 31, 1998, with respect to the
Company's continuing 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
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<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations - Financial
Revenues. During the three months ended October 31, 1998, the Company
received $45,000 in option fees compared to $30,000 in the comparable prior year
period. The $45,000 was comprised of $30,000 received from Cameco (U.S.) Inc.
under an option agreement expiring October 9, 1999, and an initial $15,000
payment received from Triband Resources U.S. Inc. in connection with a sub-lease
and purchase option on certain Company properties.
Costs and Expenses. Total administrative costs were $204,000 for the
three months ended October 31, 1998, compared to $240,000 for the same period in
1997, a decrease of $36,000 (17.6%), mostly attributable to an increase in
accrued interest. Accrued interest expense on the Company's term debt was
$196,000 for the quarter compared to $111,000 for the period ended October 31,
1997. The Company also incurred professional fees ($6,000), compared to none 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 October
31, 1998 was $1,000 which was the same as the comparable period in 1997. The
amount of the Company's cash bond posted with NDEP was reduced from $120,000 at
January 31, 1998, to $78,000 at October 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 October 31, 1998, the Company had
a net loss of $158,000 ($.01 per share), compared with a net loss of $209,000
($.01 per share) for the same period in 1997. The Company's cumulative net loss
at October 31, 1998 was $22.017 million compared to $20.923 million at the end
of the same period in 1997, an increase of $10.94 million.
Analysis of Financial Condition
Liquidity and Capital Resources. The Company's liquidity and capital
resources remain extremely limited. At October 31, the Company's cash position
had increased from January 31 ($12,000 at October 31 versus $4,000 at January
31), due to the receipt of option fees during the quarter. However, the
Company's outstanding trade debt at October 31 ($648,000, including
approximately $562,000 representing advances from shareholders for operating
expenses) significantly exceeded the Company's current assets at that date.
During the quarter ended October 31, the Company received a cash payment of
$30,000 under an option agreement granted to Cameco (U.S.) Inc. and $15,000 from
the sub-lease of certain additional properties. See Item 5 of Part II below.
Proceeds were applied to outstanding trade debt. After the close of the quarter,
the Company concluded a sale of one parcel of land for $20,000. The Company does
not expect any further cash receipts during the year ending January 31, 1999.
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.
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<PAGE>
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-
<PAGE>
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. As previously reported, 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 an initial cash 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.
Effective October 30, 1998, the Company concluded an agreement
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. The sale proceeds were received after
October 31, 1998, and are not reflected in the statement of
operations for the period ended October 31, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) None
(b) Reports on Form 8-K: None
-9-
<PAGE>
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)
December 5, 1998 By: /s/ C. B. Robertson, III
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C. B. Robertson, III - Chairman and Principal
Executive Officer
December 5, 1998 /s/ Harrison Nesbit, II
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Harrison Nesbit, II - Treasurer and Chief Financial
and Accounting Officer
-10-
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
FINANCIAL STATEMENTS OF ST. GEORGE METALS, INC. (A DEVELOPMENT STAGE COMPANY)
INCLUDED IN ITS FORM 10-QSB FOR THE QUARTER ENDED OCTOBER 31, 1998
</LEGEND>
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