SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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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 March 31, 1996
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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
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(Exact name of registrant as specified in its charter)
Washington 84-1097086
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1675 Broadway, Suite 2400, Denver, Colorado 80202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 534-1030
----------------
Indicate by checkmark 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 April 30, 1996: 13,187,984 shares
of common stock, $0.01 par value.
<PAGE>
TABLE OF CONTENTS
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
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
(in thousands) 1996 1995
----------- ------------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,208 $ 7,623
Short-term investments 135 135
Bullion inventories 67 43
Prepaid expenses and other 330 424
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Total current assets 9,740 8,225
Mineral properties, net 28,000 27,267
Other assets:
Debt issuance costs, net 553 579
Other 486 593
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1,039 1,172
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$38,779 $36,664
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 324 $ 304
Other 75 289
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Total current liabilities 399 593
Long term liabilities:
Convertible debentures 15,000 15,000
Deferred income taxes 1,504 857
Other - 47
------- -------
16,504 15,904
Minority interest in consolidated
subsidiary 3,472 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 (9,617) (9,242)
Unrealized gain (loss) on
marketable equity securities 2 (9)
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18,404 18,430
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$38,779 $36,664
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
3
<PAGE>
CROWN RESOURCES CORPORATION
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended March 31,
(in thousands, except per ---------------------
share amounts) 1996 1995
------ ------
<S> <C> <C>
Revenues:
Royalty income $ 42 $ 148
Interest income 124 177
------ ------
166 325
------ ------
Costs and expenses:
Depreciation, depletion and
amortization 33 62
General and administrative 437 419
Interest expense 243 243
Abandonment and impairment of
mining claims and leases 11 5
Other, net 6 (19)
------ ------
730 710
------ ------
Loss before income taxes and minority
interest (564) (385)
Income tax benefit (144) (107)
------ ------
Loss before minority interest (420) (278)
Minority interest in loss of subsidiary 45 33
------ ------
Net loss $ (375) $ (245)
======= =======
Net loss per common and
common equivalent share $ (0.03) $ (0.02)
======= =======
Weighted average number of
common and common equivalent
shares outstanding 13,176 13,156
======= =======
See Notes to Consolidated Financial Statements.
</TABLE>
4
<PAGE>
CROWN RESOURCES CORPORATION
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
(in thousands) 1996 1995
---------- --------
<S> <C> <C>
Operating activities:
Net loss $ (375) $ (245)
Adjustments:
Depreciation, depletion & amortization 59 88
Deferred income taxes (144) (107)
Abandonment of mining claims
and leases 11 5
Minority interest (45) (33)
Changes in operating assets and liabilities:
Inventories (24) 42
Prepaid expenses and other 6 (135)
Accounts payable and other
current liabilities (194) (422)
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Net cash used in operating activities (706) (807)
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Investing activities:
Additions to mineral properties (510) (676)
Receipts on mineral property transactions 88 -
Decrease in other assets 50 6
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Net cash used in investing activities (372) (670)
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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 1,585 (1,477)
Cash and cash equivalents, beginning
of period 7,623 12,253
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Cash and cash equivalents, end of period $ 9,208 $10,776
======= =======
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 -
See Notes to Consolidated Financial Statements.
</TABLE>
5
<PAGE>
CROWN RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The accompanying consolidated financial statements of Crown Resources
Corporation ("Crown" or the "Company") for the three months ended
March 31, 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
The Company had a net loss of $375,000, or $0.03 per share, for the first
quarter of 1996 compared with a net loss of $245,000, or $0.02 per share,
for the first quarter of 1995. The higher loss in 1996 is primarily the
result of lower revenues in the current quarter.
Revenues for the first quarter of 1996 were $166,000 compared with $325,000
for first quarter 1995. Included in total revenues were royalty income of
$42,000 and $148,000 and interest income of $124,000 and $177,000 in 1996
and 1995, respectively. The lower royalty income in 1996 is due to lower
royalties from 1996 Kendall mine production, somewhat offset by 1996 income
recognized from the Company's royalty interest in the Lamefoot deposit at
the Kettle River mine in Washington.
General and administrative expenses in first quarter 1996 were $437,000
compared with expenses of $419,000 in first quarter 1995. Interest expense
of $243,000 for first quarter 1996 was the same as in the year earlier
quarter.
Liquidity and Capital Resources
During the current quarter, the Company spent $510,000 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 budgeted approximately
$2,500,000 of exploration- related expenditures for the full year of 1996,
including approximately $2,100,000 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 from
third party exercises were approximately $44,000.
Working capital at March 31, 1996 was $9,341,000 compared with $7,632,000
at December 31, 1995. Cash and cash equivalents at March 31, 1996 were
$9,208,000, including $4,025,000 held in Solitario.
The Company's revenues in 1996 are expected to decline from last year's
levels, due primarily to lower expected royalty revenues from the Kendall
mine in Montana. The Company believes, however, that its existing funds and
projected sources of funds will be
7
<PAGE>
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 currently 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
realistically could cause results to differ materially from those projected
in the forward-looking statements are set forth in Business, Properties and
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Company's Form 10-K for the year ended December 31, 1995.
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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None
Item 2. Changes in Securities
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Not Applicable
Item 3. Defaults Upon Senior Securities
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None
Item 4. Submission of Matters to a Vote of Security Holders
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None
Item 5. Other Information
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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
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
May 15, 1996 By: JOHN A. LABATE
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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.
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27 Financial Data Schedule
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,208,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 67,000
<CURRENT-ASSETS> 9,740,000
<PP&E> 29,690,000
<DEPRECIATION> 1,446,000
<TOTAL-ASSETS> 38,779,000
<CURRENT-LIABILITIES> 399,000
<BONDS> 15,000,000
28,019,000
0
<COMMON> 0
<OTHER-SE> (9,615,000)
<TOTAL-LIABILITY-AND-EQUITY> 38,779,000
<SALES> 42,000
<TOTAL-REVENUES> 166,000
<CGS> 0
<TOTAL-COSTS> 487,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 243,000
<INCOME-PRETAX> (564,000)
<INCOME-TAX> (144,000)
<INCOME-CONTINUING> (375,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (375,000)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
