**United States Securities and Exchange Commission**

**Washington,D.C. 20549**

** **

### **FORM 10-QSB**

**(MarkOne)**

ý**         QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**For thequarterly period ended:  September 30,2001**

**OR**

** **

o**         TRANSITION REPORT PURSUANTSECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**Forthe transition period from:  ________ to________**

** **

**Commissionfile number:  000-30570**

** **

**Phoenix Metals U.S.A. II, Inc.**

(Exact name of small business issuer as specified in its charter)

 

| **Nevada**                                                                          |   | **95-4571729**                        |
|-------------------------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization)                     |   | (I.R.S. Employer  Identification No.) |
|                                                                                |   |                                  |
| **2816  Coastline Court, Las Vegas, Nevada 89117**                                  |
| (Address of principal  executive offices)                                           |
|                                                                                |   |                                  |
| **(702)  947-2178**                                                                 |
| (Issuer’s telephone  number)                                                   |
|                                                                                |   |                                  |
| **801  South Rampart Boulevard, Suite 178, Las Vegas, Nevada 89128**                |
| (Former name, former  address and former fiscal year, if changed since last report) |

Check whether the issuer(1) filed all reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

YES  ý NO  o

APPLICABLEONLY TO ISSUERS INVOLVED IN BANKRUPTCYPROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether theregistrant filed all documents and reports required to be filed by Section 12,13 or 15(d) of the Exchange Act after the distribution of securities under aplan confirmed by court.

YES  o NO  o

APPLICABLE ONLY TO CORPORATE ISSUERS

State the numberof shares outstanding of each of the issuer’s classes of common equity, as ofthe latest practicable date:    186,360,335 shares of common stock, $.0001 par value, as of October 31,2001.

Transitional SmallBusiness Disclosure Format (check one);

YES  o NO  ý

** **

 

**FORM 10-QSB**

 

**TABLE OF CONTENTS**

 

 
| PART I – FINANCIAL  INFORMATION |                                                            |
|--------------------------------------|-----------------------------------------------------------------|
|                                 |                                                            |
| Item 1.                              | Financial Statements                                            |   |
|                                 |                                                            |   |
|                                 | BALANCE SHEET                                                   |   |
|                                 |                                                            |   |
|                                 | STATEMENTS  OF OPERATIONS                                       |   |
|                                 |                                                            |   |
|                                 | STATEMENTS  OF CASH FLOWS                                       |   |
|                                 |                                                            |   |
|                                 | NOTES TO FINANCIAL  STATEMENTS                                  |   |
|                                 |                                                            |   |
| Item  2.                             | Management’s  Discussion and Analysis or Plan of Operation |   |
|                                 |                                                            |   |
| PART II – OTHER INFORMATION     |                                                            |
|                                 |                                                            |
| Item 1.                              | Legal Proceedings                                               |   |
|                                      |                                                                 |  |  |

** **

**PARTI – FINANCIAL INFORMATION**

**Item 1.    Financial Statements**

**PHOENIX METALS U.S.A. II, INC.**

**(A Development Stage Enterprise)**

**BALANCE SHEET**

**SEPTEMBER 30, 2001**

**UNAUDITED**

** **
| **ASSETS**                                                                                                                                            |   |       | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|------------|
|                                                                                                                                                  |   |       | ** ** |
| **Current  assets**                                                                                                                                   |   |       | ** ** |
|                                                                                                                                                  |   |       |       |
| Cash                                                                                                                                                  |   | $          | 25,513     |   |
| Inventories                                                                                                                                           |   | 93,193     |       |
| Prepaid expenses                                                                                                                                      |   | 18,947     |       |
|                                                                                                                                                  |   | 137,653    |       |
|                                                                                                                                                  |   |       |       |
| **Property  and equipment,**net  of accumulated depreciation and amortization                                                                         |   | 343,819    |       |
|                                                                                                                                                  |   |       |       |
| **Mining claims and mineral ore rights**                                                                                                              |   | 1,712,144  |       |
|                                                                                                                                                  |   | $          | 2,193,616  |   |
|                                                                                                                                                  |   |       |       |
|                                                                                                                                                  |   |       |       |
| **LIABILITIES  AND STOCKHOLDERS EQUITY (DEFICIENCY)**                                                                                                 |   |       |       |
|                                                                                                                                                  |   |       |       |
| **Current  liabilities**                                                                                                                              |   |       |       |
|                                                                                                                                                  |   |       |       |
| Current portion of long-term  debt                                                                                                                    |   | $          | 140,844    |   |
| Notes payable                                                                                                                                         |   | 23,498     |       |
| Accounts payable                                                                                                                                      |   | 66,449     |       |
| Accrued expenses                                                                                                                                      |   | 10,561     |       |
|                                                                                                                                                  |   | 241,352    |       |
|                                                                                                                                                  |   |       |       |
| **Long-term  debt, net of current portion**                                                                                                           |   | 129,549    |       |
|                                                                                                                                                  |   |       |       |
| **Advances from stockholders, including accrued  interest**                                                                                           |   | 811,439    |       |
|                                                                                                                                                  |   |       |       |
| **Stockholders equity (deficiency)**                                                                                                                  |   |       |       |
| Preferred stock (preferences to be determined by the  Board of Directors upon issuance), $0.01 par value, 300,000,000 shares  authorized, none issued |   |       |       |
| Common stock, $0.0001 par,  500,000,000 shares authorized, 186,360,335 shares issued and outstanding                                                  |   | 18,673     |       |
| Additional paid-in capital                                                                                                                            |   | 8,372,899  |       |
| Deficit accumulated in the  development stage                                                                                                         |   | (6,970,296 | )          |
| Less stock subscription  receivable, due December 30, 2001                                                                                            |   | (410,000   | )          |
|                                                                                                                                                  |   | 1,011,276  |       |
|                                                                                                                                                  |   | $          | 2,193,616  |   |

 

See accompanying notes tounaudited financial statements

 

**PHOENIX METALS U.S.A. II, INC.**

**(A Development Stage Enterprise)**

**STATEMENTS OFOPERATIONS**

**FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND 2000AND THECUMULATIVE PERIOD FROM JULY 1, 1993 THROUGH SEPTEMBER 30, 2001**

**UNAUDITED**

** **
|                                                      |   | **Three months ended   September 30,** |       | **Cumulative   July 1, 1993   through   September 30,** |       |
|-----------------------------------------------------------|--------|----------------------------------------|------------|---------------------------------------------------------|------------|
|                                                      |   | **2001**                               |       | **2000**                                                |       | **2001** |   |
| **Operating  costs and expenses**                         |   |                                   | ** ** |                                                    | ** ** |   | ** ** |
|                                                      |   |                                   | ** ** |                                                    | ** ** |   | ** ** |
| General and administrative                                |   | $                                      | 101,452    |                                                    | $          | 231,998 |   | $ | 2,615,596 |   |
| Research and development                                  |   | 46,884                                 |       | 72,774                                                  |       | 2,509,216 |   |
| Depreciation                                              |   | 22,632                                 |       | 22,177                                                  |       | 330,541 |   |
|                                                      |   |                                   |       |                                                    |       |   |   |
| **Loss from operations**                                  |   | (170,968                               | )          | (326,949                                                | )          | (5,455,353 | ) |
|                                                      |   |                                   |       |                                                    |       |   |   |
| Impairment writedown                                      |   |                                   |       |                                                    |       | (704,169 | ) |
|                                                      |   |                                   |       |                                                    |       |   |   |
| Settlement expense                                        |   |                                   |       |                                                    |       | (275,000 | ) |
|                                                      |   |                                   |       |                                                    |       |   |   |
| Interest expense                                          |   | (17,453                                | )          | (12,275                                                 | )          | (535,774 | ) |
|                                                      |   |                                   |       |                                                    |       |   |   |
| **Net  loss**                                             |   | $                                      | (188,421   | )                                                       | $          | (339,224 | ) | $ | (6,970,296 | ) |
|                                                      |   |                                   |       |                                                    |       |   |   |
| **Net  loss per common share**                            |   | $                                      | (0.001     | )                                                       | $          | (0.002 | ) | $ | (0.046 | ) |
|                                                      |   |                                   |       |                                                    |       |   |   |
| **Weighted  average number of common shares outstanding** |   | 186,360,335                            |       | 182,833,124                                             |       | 152,788,564 |   |

 

 

See accompanyingnotes to unaudited financial statements

 

**PHOENIX METALS U.S.A. II, INC.**

**(A Development Stage Enterprise)**

**STATEMENTS OF CASHFLOWS**

**FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND 2000AND THECUMULATIVE PERIOD FROM JULY 1, 1993 THROUGH SEPTEMBER 30, 2001**

**UNAUDITED**

** **
|                                       |   | **Three months ended September 30,** |       | **Cumulative   July 1, 1993   through   September 30,** |       |
|--------------------------------------------|--------|--------------------------------------|------------|---------------------------------------------------------|------------|
|                                       |   | **2001**                             |       | **2000**                                                |       | **2001** |   |
| **Operating  activities**                  |   |                                 | ** ** |                                                    | ** ** |   | ** ** |
|                                       |   |                                 |       |                                                    |       |   |   |
| Net cash used in operating  activities     |   | $                                    | (174,574   | )                                                       | $          | (269,746 | ) | $ | (4,450,779 | ) |
|                                       |   |                                 | ** ** |                                                    | ** ** |   | ** ** |
| **Investing  activities**                  |   |                                 |       |                                                    |       |   |   |
|                                       |   |                                 |       |                                                    |       |   |   |
| Purchases of property and  equipment       |   |                                 |       | (53,644                                                 | )          | (1,281,197 | ) |
|                                       |   |                                 |       |                                                    |       |   |   |
| **Financing  activities**                  |   |                                 |       |                                                    |       |   |   |
|                                       |   |                                 |       |                                                    |       |   |   |
| Advances from stockholders                 |   | 208,258                              |       | 2,550                                                   |       | 4,772,003 |   |
| Repayments to stockholders                 |   |                                 |       | (550,000                                                | )          | (550,000 | ) |
| Proceeds from debt                         |   | 2,872                                |       |                                                    |       | 271,651 |   |
| Repayments of debt                         |   | (36,329                              | )          | (6,744                                                  | )          | (244,115 | ) |
| Stock subscription payments  received      |   |                                 |       | 800,000                                                 |       | 901,700 |   |
| Proceeds from sale of common  stock        |   |                                 |       |                                                    |       | 606,250 |   |
|                                       |   |                                 |       |                                                    |       |   |   |
| Net cash provided by financing  activities |   | 174,801                              |       | 245,806                                                 |       | 5,757,489 |   |
|                                       |   |                                 |       |                                                    |       |   |   |
| **Net  increase (decrease) in cash**       |   | 227                                  |       | (77,584                                                 | )          | 25,513 |   |
|                                       |   |                                 |       |                                                    |       |   |   |
| **Cash,  beginning**                       |   | 25,286                               |       | 188,675                                                 |       |   |   |
|                                       |   |                                 |       |                                                    |       |   |   |
| **Cash,  ending**                          |   | $                                    | 25,513     |                                                    | $          | 111,091 |   | $ | 25,513 |   |

 

 

See accompanying notes to unaudited financialstatements

 

**PHOENIX METALS U.S.A. II, INC.**

**(A Development Stage Enterprise)**

**NOTES TO FINANCIAL STATEMENTS**

** **

**UNAUDITED**

 

**1.             Basis of presentation:**

** **

The accompanying unaudited financial statements have been prepared in accordancewith generally accepted accounting principles for interim financial informationand the instructions to Form 10-QSB. Accordingly, they do not include all of the information and disclosuresrequired by generally accepted accounting principles for annual financialstatements.  In the opinion ofmanagement, all adjustments (including normal recurring adjustments) considerednecessary for a fair presentation have been included.  The results of operations for any interim period are notnecessarily indicative of results for the full year.  For further information, please refer to the financial statementsof Phoenix Metals U.S.A. II, Inc. (the “Company”), and the related notes,included within the Company’s Annual Report on Form 10-KSB for the fiscal yearended June 30, 2001, previously filed with the Securities and ExchangeCommission.

**2.             Contingencies:**

** **

**Legal Proceedings**

** **

**On February 24, 1999, a default wasentered against the Company in the amount of $597,913.  The default stems from a disputed transactionthat occurred in a period prior to July 1, 1999.  On November 29, 1999, the court entered an order of finaljudgment including additional interest to $609,912.  The court entered an order granting the Company’s motion for anappeal of judgment.  On June 1, 2001,the parties to the litigation entered into a settlement agreement whereby theCompany agreed to pay $275,000 to the plaintiff, pursuant to a payment schedulethrough June 1, 2003, as full and final settlement of the matters between andamong the parties to the litigation. However, to the extent that the Company provides total principalpayments of $250,000 to the plaintiff by June 1, 2002, the Company and theCompany’s majority stockholders will have satisfied their entire obligationunder the settlement agreement.**

** **

**The Company has been engaged in adispute with the United State Department of Interior, Bureau of Land Management(“BLM”) over its rights of occupancy with respect to its millsite on certainpublic lands under the General Mining Law of 1872.  In November 2001, the Company reached an agreement with the BLMthrough which the Company would be permitted to continue its operations untilApril 1, 2002, but would be required to begin reclamation on the unused portionof the millsite and, after April 1, 2002, cease operations and beginreclamation of the remaining portion of the millsite.  The Company agreed to complete the reclamation of the millsite byDecember 1, 2003, in accordance with a reclamation plan approved by theBLM.  Pursuant to the agreement with theBLM, the Company has recorded an impairment write down against its cost of themillsite and certain related improvements. Additional costs will be incurred to relocate its millsite and to completereclamation of the millsite that cannot be estimated at this time.**

** **

**The Company is also a party to variouslegal proceedings, most of which relate to routine matters incidental to itsbusiness.  Management does not believethat the outcome of such proceedings will have a material adverse effect on theCompany’s financial position or future operations.**

**Environmental Obligations**

** **

**The Company is obligated under federaland state legislation to perform environmental reclamation at its refinery andtesting facility.  Management’s estimateof the costs of meeting such obligations, as approved by the state, is notmaterial.**

** **

**Going Concern**

** **

**The Companyhas not had any revenues to date and has accumulated a development stagedeficit of $6,970,296 as of September 30, 2001.  The Company plans to conduct only a modest level of increasedprocessing and relatively modest capital expenditures and product research anddevelopment during the next 12 months**.  The Company is seekingfinancing to assist the Company in the relocation of its millsite and its continuingoperations.  There is no assurance thatacceptable financing sources will be located by the Company.

** **

**On September11, 2001, the United States was subjected to extensive terrorist attacks likelyto have far-reaching effects on economic activity in the country for anindeterminate period.  The near- andlong-term impact on the southern Nevada economy and the Company’s operationscannot be predicted at this time but may be substantial.**

** **

**3.             Income taxes:**

** **

**Because the Company has not generatedany revenues or otherwise commenced operations, and has engaged in extensivedevelopment stage activities over a period that exceeds eight years, it hasincurred substantial net operating losses for income tax reporting purposes,the realization of benefits of which cannot be viewed at this time as morelikely than not and, accordingly, have effectively been offset by a 100%valuation allowance.**

** **

**Item 2.    Management’s Discussion and Analysis or Planof Operation**

** **

***CAUTION***

The followingdiscussion contains trend information and other forward-looking statements thatinvolve a number of risks and uncertainties. The Company’s actual futureresults could differ materially from our historical results of operations andthose discussed in the forward-looking statements.

***Planof Operation Over the Next 12 Months***

Since theCompany’s inception, the Flahertys, its principal stockholders, agreed toadvance money, from time-to-time, to the Company to cover capital acquisitionsand working capital requirements.  Thisarrangement with the Flahertys was memorialized in December 1999, when theCompany and the Flahertys entered into an Advance Agreement (the “AdvanceAgreement”), as amended, setting forth the terms under which the Flahertysadvanced sums to the Company.  As aresult, generally all of the Company’s future plans are based on the Company’sassumption that the Flahertys will continue to lend their financial supportpursuant to the Advance Agreement. However, there is nothing in the Advance Agreement which requires theFlahertys to advance money to the Company. The Advance Agreement only sets forth the terms and conditions of suchloans if so effected by the Flahertys.

Despite thesignificant investments made by the Company in infrastructure at its millsitein Searchlight, Nevada (the “Black Mountain facility”), the Company has agreedwith the BLM to cease its operations at the Black Mountain facility by April 1,2002.  (See Part II, Item 1 – Legal  Proceedings.)  The Company currently plans to relocate its millsite operations fromthe Black Mountain facility.  For theCompany to relocate its operations, the Company will be required to incur thecosts of dismantling its current operations at the Black Mountain facility andtransporting and reassembling the equipment and machinery to a new site.  There is no assurance that the Company willfind a suitable location of its operations and that, if found, the Company willhave sufficient resources to finance the relocation of its operations.

To finance therelocation of its operations and the reclamation of the land on which the BlackMountain facility is located, the Company is seeking financingalternatives.  While the Company has haddiscussions with potential joint venture partners, no agreement has beenmade.  If adequate financing is notobtained, the Company may be required to reduce or suspend its operations untiladequate financing is secured.

The transitionfrom an essentially research and development operation into a sustainablecommercial production operation could be a difficult and potentially expensiveeffort, and could be expected to present barriers to both attracting skilledexecutive management and technical manpower. In addition, even though the Company invested in the expanding thecapability of its Black Mountain facility, the Company reached a settlementwith the BLM to cease its operations by April 1, 2002 and, ultimately move itsoperations to another location.  In thisregard, the Company has engaged a real estate broker familiar with itsoperations to search for potential land that the Company could lease orpurchase.  A relocation of thefacilities and equipment would require the Company to shut down its operations,in phases, breakdown the equipment and move it to be re-assembled at the newlocation.  It is possible to relocate insuch a manner that limited production could be performed and maintained on thetwo sites until the entire facility has been relocated.  The costs of relocating would be unknownuntil a new site is located and the existing infrastructure and facilities areassessed for compliance with air quality, environmental, traffic and safetystandards, regulations and conditions.

Management doesnot anticipate the need for additional new equipment during the next 12 months,and it expects that the Company’s research and development expenses will eitherremain at these levels or continue to decrease.  It is always possible, however, that refinements in technologymay offer the Company the opportunity to replace existing equipment with newer,more efficient models.  Thus managementreserves the right to make such replacements or acquisitions over the next 12months.  However, the Company presentlyhas no plans to do so.

The Company hasalso experienced a decrease in its general and administrative costs from$231,998 for three months ended September 30, 2000, to $101,452 for the threemonths ended September 30, 2001. Management attributes this decrease in general and administrativeexpenses as a result of lower attorney’s and accountants’ fees and costs in thecurrent period when compared to the prior year period.  The Company has paid, and expects tocontinue to pay, attorneys’ and accountants’ fees and costs in connection withand as a result of the Company’s reporting responsibilities under the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”).

***Financingand Liquidity***

During its research anddevelopment efforts, the Company has not relied on or used traditional outsidesources of financing to fund its current operations or to develop itsproprietary technology and processes. The Company has received substantial funding from the Flahertys, itsprincipal stockholders, who continue to advance funds pursuant to the AdvanceAgreement to further the research and development activities.  The Company, therefore, has not beenrequired to borrow from banks or other traditional financial or capitalsources.  While the Flahertys continueto promise their financial support during the transition into commercialproduction, there is no assurance that such financial support will continue, orthat the Company may not find it desirable to seek funding from moretraditional financial and capital sources, or that the Company may move toraise additional debt or equity capital to finance its transition into commercialexploitation of its technology.  Thereis no assurance that, if the Flahertys should terminate the Advance Agreementor otherwise discontinue their financial support, the Company will be able toborrow from traditional institutional financial sources on acceptable terms orraise debt or equity capital.  In suchevent, the Company may have to suspend operations, sell its technology, or seeka merger, combination or other strategic alternative.

As of the three monthsended September 30, 2001, the Company had cash of $25,513 compared with cash of$111,091 for the corresponding period in 2000. The decrease in cash resulted from the continued use of cash in theCompany’s operations and the absence of revenue from the Company’soperations.  Over the next 12 months,management believes that the Company will require additional funding from theFlahertys, and other third parties, to cover its relocation and operatingexpenses, including without limitation, payroll, overhead, modest capitalexpenditures, repairs and replacement parts, supplies, compliance andprofessional services, taxes and permit fees in an amount between $1 to $5million.  Because of cash constraintsand in an effort to reduce ongoing office expenses, in November the Companyrelocated its headquarters back to its original offices located in the home ofthe Flahertys.

Notwithstandingthe above, and while the Company does not anticipate a need to raise additionalcapital from outside sources to support its operations during the next 12months in reliance on the Advance Agreement and other potential private equityinvestors, the Company has begun to take measures and explore various optionsin connection with potentially raising additional capital from the sale of itssecurities to the public.  However, noagreements have been negotiated, and no definitive course of action has beenundertaken to register and pursue a public offering or private placement of itssecurities at this time.

 

***ExpectedSignificant Changes in Number of Employees***

                The Company expects to maintain its personnel andcurrent levels until the Company successfully relocates its operations.  Once the Company is successful in relocatingits operations from the Black Mountain facility to another site, the Companymay add key senior management to support the administrative and marketinginfrastructure and to plan, control and grow the business.

 

**PART II – OTHERINFORMATION**

**Item 1.    Legal Proceedings**

***United States of America v. Phoenix Metals U.S.A. II, Inc.*** On or about September 7, 1999, the BLM served upon the Company itsComplaint for Contest of Mining Claims. This action relates to the Company’s use of the Black Mountain facilitywhich is located on BLM property.  TheBLM asserts that the Company’s use and occupancy of the Black Mountain facilitydoes not meet the qualifications set forth in the Department of the InteriorRegulations.  Specifically, the BLMalleges that the Company is not processing a locatable, valuable mineral in itsreduction efforts.  This allegationresults from an assay by the BLM of a sample of volcanic cinder ore taken fromone ore pile on the property.  The BLMalleges that the sample taken did not contain sufficient amounts of valuableminerals to justify the potential damage to the property.  The Company disputed the allegations made bythe BLM under both federal and state regulations.

From September 12,2000 through September 14, 2000, the parties appeared at trial before anadministrative law judge.  OnMay 29, 2001, the administrative law judge concluded that the Companyfailed to provide sufficient information to rebut the BLM’s allegations by apreponderance of the evidence and to support the Company’s use and occupancy ofthe Black Mountain facility.  The Companyfiled an appeal with the Interior Board of Land Appeals for the BLM (the“IBLA”) on June 28, 2001.

On August 16, 2001,the IBLA dismissed the Company’s appeal of the decision of the administrativelaw judge due to procedural error.  OnAugust 30, 2001, the Company received a letter from the BLM in which theBLM advised the Company that it had 30 days from the receipt of the letter tobegin removing all equipment, structures and foundations from the BlackMountain facility and 90 days to complete the reclamation of the Black Mountainfacility, which would include removing all trash and debris, reshaping thesite, spreading stockpiled topsoil, reestablishing drainage patterns, removingany spilled hydrocarbons and toxic materials, ripping the surface of compactedareas, seeding the site and plugging the water well.  On August 31, 2001, the Company received a letter from the BLM inwhich the BLM rejected the plan of operations submitted by Robert F. Flahertybased upon the decision of the administrative law judge.

On September 20,2001, the Company filed a notice of appeal with the BLM with respect to theBLM’s rejection of the plan of operations submitted by Mr. Flaherty.  On September 28, 2001, the Companyfiled with the BLM a petition for stay of the Decision of the Las Vegas FieldOffice of the BLM of August 31, 2001 pending the outcome of the Company’sappeal filed with the BLM on September 20, 2001.  In addition, on September 21, 2001, the Company filed acomplaint for judicial review and declaratory relief with the United StatesDistrict Court for the District of Nevada to, among other things, stay thedecision of the administrative law judge.

In November 2001, throughits negotiations with the BLM, the Company reached an agreement with the BLMunder which the Company will dismiss with prejudice the complaint filed withthe United States District Court for the District of Nevada and the appealfiled with the BLM.  In exchange for thedismissals, the Company will be permitted to continue its operations at theBlack Mountain facility until April 1, 2002, but will be required to beginreclamation on the unused portion of the property and, by April 1, 2002,cease operations and begin reclamation of the remaining portion of the propertyon which the Black Mountain facility is located.  Under the agreement with the BLM, the Company will be required tocomplete the reclamation of the Black Mountain facility by December 1, 2003, inaccordance with a reclamation plan approved by the BLM.

In relocating itsoperations, the Company will be required to incur the costs of dismantling thecurrent operations at the Black Mountain facility, locating another site forits operations and transporting and reassembling the equipment and machinery tothe new site.  There is no assurancethat the Company will find a suitable location of its operations and that, iffound, the Company will have sufficient resources to finance the relocation ofits operations.  See Item 6 -Management’s Discussion and Analysis or Plan of Operation.

 

**SIGNATURES**

In accordance with therequirements of the Exchange Act, the registrant caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.
|   |              | Phoenix Metals U.S.A.  II, Inc. |
|--------|-------------------|---------------------------------|
|   |              |                            |
|   |              |                            |
| Date:  | November 16, 2001 |                            | /s/ Diana Lee Flaherty |  
 

 

 

Diana Lee Flaherty

 

 

 

Chairperson of the Board, Chief Executive Officer,   Secretary and Treasurer

  |