<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
-------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 0-17480
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CROWN RESOURCES CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
WASHINGTON 84-1097086
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1675 BROADWAY SUITE 2400, DENVER, COLORADO 80202
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 534-1030
--------------
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Shares outstanding as of July 31, 1996: 13,187,984 shares of common stock,
$0.01 par value.
<PAGE>
TABLE OF CONTENTS
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Page
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PART I - FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements................... 3
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 7
PART II - OTHER INFORMATION
Item 1 Legal Proceedings................................... 9
Item 2 Changes in Securities............................... 9
Item 3 Defaults Upon Senior Securities..................... 9
Item 4 Submission of Matters to a Vote
of Security Holders............................... 9
Item 5 Other Information................................... 9
Item 6 Exhibits and Reports on Form 8-K.................... 9
SIGNATURES....................................................10
2
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Consolidated Financial Statements
---------------------------------
CROWN RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
(in thousands) 1996 1995
-------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,197 $ 7,623
Short-term investments 88 135
Bullion inventories 88 43
Prepaid expenses and other 401 424
------- -------
TOTAL CURRENT ASSETS 8,774 8,225
MINERAL PROPERTIES, NET 28,688 27,267
OTHER ASSETS:
Debt issuance costs, net 528 579
Other 446 593
-------- -------
974 1,172
-------- -------
$ 38,436 $36,664
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 360 $ 304
Other 292 289
-------- -------
TOTAL CURRENT LIABILITIES 652 593
LONG TERM LIABILITIES:
Convertible debentures 15,000 15,000
Deferred income taxes 1,413 857
Other - 47
-------- -------
16,413 15,904
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 3,358 1,737
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value - -
Common stock, $0.01 par value 132 132
Additional paid-in capital 27,887 27,549
Accumulated deficit (10,002) (9,242)
Unrealized loss on marketable
equity securities (4) (9)
-------- -------
18,013 18,430
-------- -------
$ 38,436 $36,664
======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
CROWN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands, except per Three months ended June 30, Six months ended June 30,
share amounts) ----------------------------- ---------------------------
1996 1995 1996 1995
-------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
REVENUES:
Mineral property option proceeds $ 151 $ - $ 151 $ -
Royalty income 80 114 122 262
Interest income 110 153 234 330
------- ------- ------- -------
341 267 507 592
------- ------- ------- -------
COSTS AND EXPENSES:
Depreciation, depletion and
amortization 57 75 90 137
General and administrative 479 694 916 1,113
Interest expense 242 242 485 485
Abandonment and impairment of
mining claims and leases 153 (2) 164 3
Other, net (3) (9) 3 (28)
------- ------- ------- -------
928 1,000 1,658 1,710
------- ------- ------- -------
LOSS BEFORE INCOME TAXES AND
MINORITY INTEREST (587) (733) (1,151) (1,118)
INCOME TAX BENEFIT (89) (225) (233) (332)
------- ------- ------- -------
LOSS BEFORE MINORITY INTEREST (498) (508) (918) (786)
MINORITY INTEREST IN LOSS OF
SUBSIDIARY 113 40 158 73
------- ------- ------- -------
NET LOSS $ (385) $ (468) $ (760) $ (713)
======= ======= ======= =======
NET LOSS PER COMMON AND
COMMON EQUIVALENT SHARE $ (0.03) $ (0.03) $ (0.06) $ (0.05)
======= ======= ======= =======
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 13,188 13,156 13,182 13,156
======= ======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
CROWN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
(in thousands) 1996 1995
--------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (760) $ (713)
Adjustments:
Depreciation, depletion & amortization 141 188
Deferred income taxes (233) (332)
Abandonment of mining claims
and leases 164 3
Minority interest (158) (73)
Changes in operating assets and liabilities:
Inventories (45) (33)
Prepaid expenses and other (65) (73)
Accounts payable and other
current liabilities 59 (268)
------- -------
Net cash used in operating activities (897) (1,301)
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INVESTING ACTIVITIES:
Additions to mineral properties (1,359) (1,609)
Sale of short-term investments 47 8
Receipts on mineral property transactions 96 -
Decrease in other assets 24 19
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Net cash used in investing activities (1,192) (1,582)
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FINANCING ACTIVITIES:
Common stock issued under options 53 -
Issuance of common stock of subsidiary 2,610 -
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Net cash provided by financing activities 2,663 -
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 574 (2,883)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 7,623 12,253
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,197 $ 9,370
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid (received) during the
period for:
Interest $ 432 $ 432
Noncash investing and financing activities:
Deferred tax benefit of non-qualified
stock option exercises 15 -
Acquisition of additional interest in subsidiary 240 -
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
CROWN RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES
The accompanying consolidated financial statements of Crown Resources
Corporation ("Crown" or the "Company") for the six months ended June 30,
1996 and 1995 are unaudited, but in the opinion of management, include all
adjustments, consisting only of normal recurring items, necessary for a
fair presentation. Interim results are not necessarily indicative of
results which may be achieved in the future.
These financial statements should be read in conjunction with the financial
statements and notes thereto which are included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995. The accounting
policies set forth in those annual financial statements are the same as the
accounting policies utilized in the preparation of these financial
statements, except as modified for appropriate interim financial statement
presentation and except for the adoption of Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of."
The Company adopted SFAS No. 121 effective January 1, 1996. SFAS No. 121
requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable, and establishes guidelines for determining
recoverability based on future net cash flows from the use of the asset and
for the measurement of the impairment loss. The adoption of SFAS No. 121
did not have a material effect on the Company's results of operations or
financial position.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
------------------------------------
RESULTS OF OPERATIONS
- ---------------------
SECOND QUARTER 1996 COMPARED WITH SECOND QUARTER 1995
The Company had a net loss of $385,000, or $0.03 per share, for the second
quarter of 1996 compared with a loss of $468,000, or $0.03 per share, for the
second quarter of 1995.
Total revenues for the second quarter of 1996 were $341,000 compared with
$267,000 for second quarter 1995. During the current quarter, the Company
received $151,000 of mineral property option proceeds, while there were no such
receipts in the year earlier quarter.
Royalty and interest income for the second quarter of 1996 were $80,000 and
$110,000, respectively, compared with $114,000 and $153,000, respectively, for
second quarter 1995. The lower royalty income in 1996 was primarily the result
of lower royalties from the Kendall mine in Montana, at which mining has ceased.
Somewhat offsetting the lower Kendall royalties in the current quarter was
income from the Company's royalty interest in the Lamefoot deposit at the Kettle
River mine in Washington. The Lamefoot royalty is expected to be the Company's
primary source of royalty income for the foreseeable future, providing an
expected revenue stream of approximately $200,000 annually.
General and administrative expenses for the second quarter of 1996 were $479,000
compared with $694,000 for the same period last year. The prior year expenses
reflect certain one-time consulting and legal costs in 1995 incurred in
connection with a merger proposal received and later rejected by the Company.
Interest expense of $242,000 for second quarter 1996 was the same as the year
earlier quarter. During the second quarter of 1996, the Company recorded
property abandonments of $153,000, relating primarily to certain properties in
South America. There were no such writedowns in the second quarter of 1995.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995
Net loss for the six months ended June 30, 1996 was $760,000, or $0.03 per
share, compared with a net loss of $713,000, or $0.05 per share, for the six
months ended June 30, 1995.
Total revenues for the six months ended June 30, 1996 were $507,000, including
option proceeds of $151,000, compared with $592,000 for the six months ended
June 30, 1995. Royalty and interest income for the six months ended June 30,
1996 were $122,000 and $234,000, respectively, compared with $262,000 and
$330,000, respectively, for the same period last year.
7
<PAGE>
General and administrative expenses for the first half of 1996 were $916,000
compared with first half 1995 expenses of $1,113,000. Interest expense of
$485,000 for the first six months of 1996 was the same as for the first six
months of 1995.
Property abandonments and writedowns for the six months ended June 30, 1996 were
$164,000 compared with writedowns of $3,000 for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the six months ended June 30, 1996, the Company spent $1,359,000 for
mineral property additions, primarily for exploration activities on its projects
in Peru and Argentina, which are held through its 60.4%-owned subsidiary,
Solitario Resources Corporation ("Solitario"). The Company has forecast
approximately $2,800,000 of exploration-related expenditures for the full year
of 1996, including approximately $2,300,000 to be spent in South America by
Solitario.
During the first quarter of 1996, the Company sold 1,570,000 of its shares in
Solitario, receiving net proceeds of $2,566,000 from the market transaction.
The Company reinvested the proceeds by acquiring 1,570,000 new shares of
Solitario through a private placement into Solitario. Also during the quarter,
previously issued warrants to purchase 553,686 Solitario shares at Cdn$2.50
(approximately $1.82) per share were exercised, including 529,000 warrants
exercised by the Company. Net proceeds to Solitario from third party exercises
were approximately $44,000.
Working capital at June 30, 1996 was $8,122,000 compared with $7,632,000 at
December 31, 1995. Cash and cash equivalents at June 30, 1996 were $8,197,000,
including $3,287,000 held in Solitario.
Although revenues in 1996 and 1997 are expected to decline from last year's
levels, the Company believes that its existing funds and projected sources of
funds will be sufficient to finance its currently planned activities for the
foreseeable future. The Company's long term funding opportunities and operating
results are to a large extent dependent on the successful commencement of
commercial production at the Crown Jewel project. The property, which is
currently undergoing permitting, is expected to begin operation in 1998.
The information set forth in this report includes "forward-looking" statements
within the meaning of Section 27A of the Securities Act of 1933 and is subject
to the safe harbor created by that section. Factors that could cause results to
differ materially from those projected in the forward-looking statements include
but are not limited to the timing of receipt of necessary governmental permits,
the market price of gold, results of current exploration activities and other
risk factors detailed in the Company's Securities and Exchange Commission
filings.
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
Not Applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On June 20, 1996, the Company held its Annual Meeting of Shareholders at
which the following two matters were submitted to a vote of security holders:
1. ELECTION OF DIRECTORS. All seven directors were re-elected to serve
until the next Annual Meeting of Shareholders and until their
successors are elected and qualified:
<TABLE>
<CAPTION>
Number of Shares
---------------------
Name For Withheld
------------- --------- -----------
<S> <C> <C>
Mark E. Jones, III 9,787,927 393,675
Christopher E. Herald 9,911,904 269,702
J. Michael Kenyon 9,868,465 313,141
Rodney D. Knutson 9,744,836 436,770
Linder G. Mundy 9,868,467 313,139
Steven A. Webster 9,912,789 268,817
David R. Williamson 9,867,107 314,499
</TABLE>
2. APPOINTMENT OF AUDITORS. The appointment of Deloitte & Touche LLP as
the Company's auditors for fiscal year 1996 was ratified:
Number of Shares
---------------------------------------
For Against Abstain
--------- ----------- ---------
10,128,485 22,406 30,715
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits: The exhibits as indexed on page 11 of this Report are included
as a part of this Form 10-Q.
(b) Reports on Form 8-K:
None
Exhibit Number Description
- --------------- -----------
27 Financial Data Schedule
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.
CROWN RESOURCES CORPORATION
August 6, 1996 By: /s/ John A. Labate
- ----------------- --------------------------------------
Date John A. Labate
Vice President and Chief
Financial Officer (Principal
Financial and Accounting
Officer)
10
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit
Number Description Page No.
- ------- ----------- . . --------
27 Financial Data Schedule . . 12
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 8,197,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 88,000
<CURRENT-ASSETS> 8,774,000
<PP&E> 30,372,000
<DEPRECIATION> 1,444,000
<TOTAL-ASSETS> 38,436,000
<CURRENT-LIABILITIES> 652,000
<BONDS> 15,000,000
<COMMON> 28,019,000
0
0
<OTHER-SE> (10,006,000)
<TOTAL-LIABILITY-AND-EQUITY> 38,436,000
<SALES> 273,000
<TOTAL-REVENUES> 507,000
<CGS> 0
<TOTAL-COSTS> 1,173,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 485,000
<INCOME-PRETAX> (1,151,000)
<INCOME-TAX> (233,000)
<INCOME-CONTINUING> (760,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (760,000)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
