<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 March 31, 1997
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-17480
CROWN RESOURCES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WASHINGTON 84-1097086
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1675 BROADWAY, SUITE 2400, 80202
DENVER, COLORADO (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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, 1997: 13,254,404 shares of common stock,
$0.01 par value.
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Consolidated Financial Statements
---------------------------------
CROWN RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands, except March 31, December 31,
per share amounts) 1997 1996
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 8,892 $ 5,447
Short-term investments 89 89
Bullion inventories 106 106
Prepaid expenses and other 183 377
------- -------
TOTAL CURRENT ASSETS 9,270 6,019
MINERAL PROPERTIES, NET 30,832 30,229
OTHER ASSETS:
Debt issuance costs, net 451 477
Other 390 388
------- -------
841 865
------- -------
$40,943 $37,113
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 304 $ 345
Other 75 290
------ -------
TOTAL CURRENT LIABILITIES 379 635
LONG TERM LIABILITIES:
Convertible debentures 15,000 15,000
Deferred income taxes 1,601 1,140
------ -------
16,601 16,140
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 5,705 3,141
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value - -
Common stock, $0.01 par value 133 132
Additional paid-in capital 29,345 27,886
Accumulated deficit (11,222) (10,813)
Unrealized gain (loss) on
marketable equity securities 2 (8)
------ -------
18,258 17,197
------ -------
$40,943 $37,113
====== =======
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
CROWN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
(in thousands, except per March 31,
share amounts) ----------
1997 1996
-------- ----------
<S> <C> <C>
REVENUES:
Royalty income $ 70 $ 42
Interest income 98 124
------- -------
168 166
------- -------
COSTS AND EXPENSES:
Depreciation, depletion and amortization 41 33
General and administrative 553 437
Interest expense 243 243
Abandonment and impairment of mining
claims and leases 3 11
Other, net (56) 6
------- -------
784 730
------- -------
LOSS BEFORE INCOME TAXES AND
MINORITY INTEREST (616) (564)
INCOME TAX BENEFIT (178) (144)
------- -------
LOSS BEFORE MINORITY INTEREST (438) (420)
MINORITY INTEREST IN LOSS OF SUBSIDIARY 29 45
------- -------
NET LOSS $ (409) $ (375)
======= =======
NET LOSS PER COMMON AND COMMON
EQUIVALENT SHARE $(0.03) $(0.03)
======= =======
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 13,235 13,176
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
CROWN RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
(in thousands) 1997 1996
------ ------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (409) $ (375)
Adjustments:
Depreciation, depletion & amortization 67 59
Deferred income taxes (178) (144)
Abandonment of mining claims
and leases 3 11
Common stock issued for services 140 -
Minority interest (29) (45)
Changes in operating assets and liabilities:
Inventories - (24)
Prepaid expenses and other (56) 6
Accounts payable and other
current liabilities (256) (194)
------ ------
Net cash used in operating activities (718) (706)
------ ------
INVESTING ACTIVITIES:
Additions to mineral properties (615) (510)
Receipts on mineral property transactions 250 88
(Increase) decrease in other assets (19) 50
------ ------
Net cash used in investing activities (384) (372)
------ ------
FINANCING ACTIVITIES:
Common stock issued under options 57 53
Issuance of common stock of subsidiary 4,490 2,610
------ ------
Net cash provided by financing activities 4,547 2,663
------ ------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,445 1,585
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,447 7,623
------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $8,892 $9,208
====== ======
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 20 15
Acquisition of additional interest in subsidiary - 240
Securities received for mineral property
transactions 9 -
</TABLE>
See Notes to Consolidated Financial Statements.
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,
1997 and 1996 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, 1996. 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.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share." SFAS No. 128 establishes standards for
computing and presenting earnings per share. The statement is effective
for financial statements issued in periods ending after December 15, 1997,
including interim periods; early adoption is not permitted. The Company
will adopt SFAS No. 128 in the fourth quarter of 1997 and will restate all
prior period earnings per share data presented as required. The Company
has not yet determined the impact of adopting this statement on its
reported net income per share.
2. ISSUANCE OF COMMON STOCK OF SUBSIDARY
In February 1997, the Company sold 1,500,000 of its shares in Solitario
Resources Corporation ("Solitario"), receiving net proceeds of $4,448,000
from the market transaction. The Company reinvested the proceeds by
acquiring, through a private placement into Solitario, 1,500,000 new shares
of Solitario plus 1,500,000 warrants, exercisable into shares of Solitario
at Cdn$4.83 per share until February 27, 1999. Upon completion of the
private placement, the Company's interest in Solitario was approximately
54.5%.
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 $409,000, or $0.03 per share, for the first
quarter of 1997 compared with a loss of $375,000, or $0.03 per share, for the
first quarter of 1996.
Total revenues for the first quarter of 1997 were $168,000 compared with
$166,000 for first quarter 1996. Higher royalty revenues in 1997, primarily
from the Kettle River mine in Washington, were mostly offset by lower interest
income during the current period.
General and administrative expenses for the first quarter of 1997 were $553,000
compared with $437,000 for the same period last year. The increase was mainly
due to a non-recurring issuance of common stock for services. Interest expense
of $243,000 for first quarter 1997 was the same as in the year earlier quarter.
During the first quarter of 1997, the Company recorded other income of $56,000,
relating primarily to a termination payment received on a previously joint
ventured exploration project. There was no such income in the year earlier
quarter.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the quarter ended March 31, 1997, the Company spent $615,000 for mineral
property additions, of which $428,000 related to exploration activities on its
projects in Peru and Argentina, which are held through its 54%-owned subsidiary,
Solitario. Also during the quarter, Solitario received a payment of $250,000
from Cominco Ltd. on the execution of its agreement with Cominco to joint
venture its Bongara zinc project in Peru.
During the first quarter of 1997, the Company sold 1,500,000 of its shares in
Solitario, receiving net proceeds of $4,448,000 from the market transaction.
The Company reinvested the proceeds by acquiring 1,500,000 new shares of
Solitario through a private placement into Solitario.
Working capital at March 31, 1997 increased to $8,891,000 from $5,384,000 at
December 31, 1996. Cash and cash equivalents at March 31, 1997 were $8,892,000,
including $5,786,000 held in Solitario.
The Company expects to spend approximately $3,600,000 in 1997 on its exploration
programs, including $2,600,000 to be spent by Solitario. Existing funds and
projected sources of funds are believed to be sufficient to finance currently
planned activities for the foreseeable future. The Company's long term funding
opportunities and operating results continue to be largely
7
<PAGE>
dependent on the successful commencement of commercial production at the Crown
Jewel project.
The Crown Jewel property is in the permitting phase, with work currently
underway to obtain the permits necessary to construct and operate the mine.
Historically, there have been appeals associated with the permitting process,
and it is difficult to predict their impact and duration. Assuming timely
permit issuance and absent an injunction, the 14-month construction process
could begin in 1997. See Legal Proceedings, elsewhere in this report.
-----------------
The information set forth in this report includes "forward-looking" statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, and is subject to the safe harbor
created by those sections. 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
-----------------
In March 1997, appeals of the Record of Decision ("ROD") for the Final
Environmental Impact Statement ("FEIS") for the Crown Jewel Mine were filed with
the U.S. Forest Service by the following parties: (i) a joint appeal by the
Okanogan Highlands Alliance, Washington Environmental Council, Colville Indian
Environmental Protection Alliance, Washington Wilderness Coalition, Rivers
Council of Washington, and Sierra Club, Cascade Chapter; (ii) Confederated
Tribes of the Colville Reservation; (iii) Columbia River Bioregional Education
Project; and (iv) Kettle Range Conservation Group.
On May 5, 1997, the U.S. Forest Service Deputy Regional Forester upheld the
ROD to approve the Crown Jewel Mine project, and denied all four appeals. The
decision constitutes the final administrative determination of the U.S.
Department of Agriculture on the ROD and FEIS, but could be appealed to U.S.
Federal District Court.
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
---------------------------------------------------
None
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
May 12, 1997 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> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 8,892,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 106,000
<CURRENT-ASSETS> 9,270,000
<PP&E> 32,770,000
<DEPRECIATION> 1,589,000
<TOTAL-ASSETS> 40,943,000
<CURRENT-LIABILITIES> 379,000
<BONDS> 15,000,000
0
0
<COMMON> 29,478,000
<OTHER-SE> (11,220,000)
<TOTAL-LIABILITY-AND-EQUITY> 40,943,000
<SALES> 168,000
<TOTAL-REVENUES> 168,000
<CGS> 0
<TOTAL-COSTS> 597,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 243,000
<INCOME-PRETAX> (616,000)
<INCOME-TAX> (178,000)
<INCOME-CONTINUING> (409,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (409,000)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
