UNITED STATES
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
OR
[ ] 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 0-19365
CROWN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Utah 87-0368981
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
215 South State, Suite 550, Salt Lake City, Utah, 84111
(Address of principal executive offices, zip code)
(801) 537-5610
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
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.
There were 11,501,465 shares of $.02 par value common stock outstanding as of
May 1, 1997.
CROWN ENERGY CORPORATION
INDEX
PAGE(S)
PART I. Financial Information
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet at March 31,
1997 (unaudited) and December 31, 1996 3
Condensed Consolidated Statement of Income for the Three
Months ended March 31, 1997 and 1996 (unaudited) 5
Condensed Consolidated Statement of Stockholder's Equity
(unaudited) 6
Condensed Consolidated Statement of Cash Flows for the
Three Months ended March 31, 1997 and 1996 (unaudited) 8
Notes to Condensed Consolidated Financial Statements
(unaudited) 9
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. Other Information
ITEM 1. Legal Proceedings 14
ITEM 2. Changes in Securities 14
ITEM 3. Defaults upon Senior Securities 14
ITEM 4. Submission of Matters to a Vote of Security Holders 14
ITEM 5. Other Information 14
ITEM 6. Exhibits and Reports on Form 8-K 14
PART III. Signatures 15
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CROWN ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<S> <C> <C>
March 31,
1997 December 31,
[unaudited] 1996
CURRENT ASSETS:
Cash $27,796 $142,772
Joint interest and trade accounts
receivable 10,163 30,379
Other current assets 107,516 72,780
Total Current Assets 145,475 245,931
PROPERTY AND EQUIPMENT 1,318 1,758
(net of accumulated depreciation)
INVESTMENT IN OIL AND GAS PROPERTIES 1,068,410 1,083,882
(full cost method, net of
accumulated depletion)
INVESTMENT IN OIL SAND PROPERTIES 2,954,703 2,919,077
OTHER ASSETS 340,726 340,726
TOTAL ASSETS $4,510,632 $4,591,374
</TABLE>
<TABLE>
CROWN ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
March 31,
1997 December 31,
[unaudited] 1996
CURRENT LIABILITIES
Accounts payable $68,785 $92,663
Current portion of long-term debt 152,336 185,984
Other current liabilities 225,430 225,322
Total Current Liabilities 446,558 503,969
LONG TERM DEBT 61,372 60,845
LONG TERM DEBT -- RELATED PARTIES 123,974 121,248
DEFERRED TAX LIABILITY 405,886 434,056
Total Liabilities 1,037,783 1,120,118
STOCKHOLDERS' EQUITY:
Preferred stock, $.005 par value,
1,000,000 shares authorized, no shares
issued and outstanding ----- -----
Common stock, $.02 par value, 50,000,000
shares authorized, 11,501,465 and
11,430,571 issued and
outstanding at 1996 and 1995 230,029 228,611
Capital in excess of par value 5,553,069 5,497,772
Retained earnings (2,310,249) (2,255,127)
Total Stockholders' Equity 3,472,849 3,471,256
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $4,510,632 $4,591,374
</TABLE>
<TABLE>
CROWN ENERGY CORPORATION
[Unaudited]
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<S> <C> <C> <C>
For the Three Months Ended
March 31,
1997 1996
REVENUE:
Oil and gas production $50,503 $44,552
Total Revenue 50,503 44,552
EXPENSES:
Production costs and related taxes 28,157 29,871
General and administrative expenses 82,879 121,175
Depletion, depreciation and amortization 14,912 14,188
Total Expenses 125,948 165,234
OPERATING INCOME (LOSS) (75,445) (120,682)
OTHER INCOME (EXPENSES):
Interest and other income 898 2,615
Gain (loss) on sale of properties 0 0
Interest and other expense (8,745) (5,256)
Total Other Income (Expenses) (7,847) (2,641)
INCOME (LOSS) BEFORE TAX PROVISION ($83,292) ($123,323)
PROVISION FOR TAXES:
Current tax expense (benefit) 0 0
Deferred tax expense (benefit) (28,170) (41,930)
NET INCOME (LOSS) ($55,122) ($81,393)
NET INCOME (LOSS) PER SHARE ($0.00) ($0.01)
</TABLE>
<TABLE>
CROWN ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENT
OF STOCKHOLDERS' EQUITY
[Unaudited]
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<C> <C> <C> <C> <C> <C> <C>
Common Stock Capital in
Excess of Retained
Shares Amount Par Value (Deficit) Total
BALANCE, DECEMBER
31, 1996 11,430,571 $228,611 $5,497,772 ($2,255,127) $3,471,256
Net Income (loss) for
the three months
ended March 31, 1997 --- --- --- (55,122) (55,122)
Shares issued for
services at $.86 to
$1.00 per share 45,000 900 42,706 --- 43,606
Shares issued for
payment of note
payable 25,894 518 12,591 --- 13,109
BALANCE, MARCH
31, 1997 11,501,465 $230,029 $5,553,069 ($2,310,249) $3,472,849
</TABLE>
<TABLE>
CROWN ENERGY CORPORATION
[Unaudited]
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C>
For the Three Months Ended
March 31,
1997 1996
Cash Flows From (To) Operating Activities:
Net income (loss) ($55,122) ($81,393)
Adjustments to reconcile net loss to
net cash used by operating activities:
Amortization, depreciation and
depletion 15,912 14,188
Non-cash (income) expense 5,483 4,018
Change in assets and liabilities:
Joint interest and accounts
receivable 20,216 20,080
Other assets (26,130) (68,365)
Accounts payable (23,878) (17,306)
Other current liabilities 5,448 (3,316)
Deferred tax liability (28,170) (41,930)
Total adjustments (31,119) (92,631)
Net Cash Used by Operating
Activities (86,241) (174,024)
Cash Flows From (To) Investing Activities:
Additions to oil sand properties (626) (39,477)
Net Cash Provided (Used) in
Investing Activities (626) (39,477)
Cash Flows From (To) Financing Activities:
Net changes in long-term debt (28,109) 0
Net proceeds from sale of common stock 0 385,000
Net Cash Provided by Financing
Activities ($28,109) $385,000
</TABLE>
<TABLE>
CROWN ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[Continued]
<S> <C> <C>
For the Three Months Ended
March 31,
1997 1996
Net Increase (Decrease) in Cash: ($114,976) $171,499
Cash at Beginning of Period $142,772 $97,247
Cash at End of Period $27,796 $268,746
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest 3,262 ---
Income taxes --- ---
Supplemental Schedule of Non-cash Investing and Financing Activities:
For the period ended March 31, 1997:
The Company issued 45,000 shares of common stock in payment of accounts
payable and oil sand costs.
The Company issued 25,894 shares of common stock in payment of note
payable.
The Company converted accrued interest of $5,483 into notes payable.
For the period ended March 31, 1996:
The Company issued 181,547 shares of common stock in payment of $179,375
in consulting fees.
The Company issued 10,000 shares of common stock to restructure an oil
sand lease.
The Company converted accrued interest of $4,018 into notes payable.
</TABLE>
CROWN ENERGY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared by the
Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of
operations and changes in stockholders' equity and cash flows at
March 31, 1997 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It
is suggested that these condensed financial statements be read in
conjunction with the financial statements and notes thereto
included in the Company's December 31, 1996 audited financial
statements. The results of operations for the period ended
March 31, 1997 are not necessarily indicative of the operating
results for the full year.
ORGANIZATION
Crown Energy Corporation ["Crown"], a Utah corporation, was
organized on March 17, 1981. Crown's primary activities have been
the acquisition and development of oil and gas leases.
BuenaVentura Resources Corporation ["BVRC"], a Utah corporation,
was organized October 24, 1985. BVRC is active in the mining and
development of oil sand deposits and owns the rights to a
patented technology for the extraction of oil from oil sands.
Crown acquired 100% of BVRC on September 30, 1992.
Gavilan Petroleum, Inc. ["Gavilan"], a Utah corporation, was
organized on September 9, 1985. Gavilan is engaged in the
production and selling of oil and gas from leases it operates in
the state of Utah. Gavilan became a 100% subsidiary of Crown on
January 24, 1991.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.
OIL AND GAS PROPERTIES
Oil and gas properties are accounted for on the full cost method,
whereby all costs associated with acquisition, exploration and
development of oil and gas properties are capitalized on a
country-by-country, cost center basis. All oil and gas revenues
are derived from reserves located in the state of Utah.
Amortization of such costs is determined by the ratio of current
period production to estimated proved reserves. Estimated proved
reserves are based upon reports of petroleum engineers.
The net carrying value of oil and gas properties is limited to the
lower of amortized costs or the cost center ceiling [defined as
the sum of the present value [10% discount rate] of estimated,
unescalated future net cash flows from proved reserves, plus the
lower of cost or estimated fair value of unproved properties,
giving effect to income taxes].
OIL SAND PROPERTIES
The Company's investment in oil sand properties, including
acquisition and development costs, are being capitalized and will
be amortized by the unit-of-production method once commercial
production commences, projected to be early 1998. The Company
reviews its investment in oil sand properties for impairment
whenever events or changes in circumstance indicate that the
carrying amount of the investment may not be recoverable. The
Company's basis of determining the recoverability of its
investment is based on estimated future cash flows expected to
result from the extraction and production of products from the oil
sands. The Company is unaware of any events or changes in
circumstance that would merit a review for impairment, however the
Company's estimated future cash flows from its investment in oil
sands exceeds the carrying value of the investment, thus there is
no current impact from the adoption of SFAS 121.
INCOME (LOSS) PER SHARE
The computation of income (loss) per share of common stock is
based on the weighted average number of shares outstanding during
the periods presented.
NOTE 2 - SIGNIFICANT CUSTOMERS
The Company sells substantially all of its oil production to one
purchaser. If this purchaser stopped buying products from the
Company, the Company would then contract with other purchasers
available in the areas where the oil is produced. The effect of
this purchaser pulling out of the area would at least put a
temporary downward pressure on prices in the area, but it is not
currently possible for the Company to estimate how the Company
would be affected. Management believes that its oil is a
commodity that is readily marketable and that the marketing
methods it follows is typical of similar companies in the
industry.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULT OF OPERATIONS
RESULTS OF OPERATIONS
For the three month period ended March 31, 1997, compared to the three
months ended March 31, 1996.
Oil and gas revenue increased from $44,552 for the three months ended
March 31, 1996 to $50,503 for the three months ended March 31, 1997,
an increase of $5,951 (13%). This change was due to an increase in
production and higher oil prices for the period. Total production
increased from 2,193 barrels for the three months ended March 31, 1996
to 2,286 barrels for the same period in 1997, an increase of 4%. Average
oil prices increased from $17.97 for the three months ended March 31, 1996
to $19.84 for the same period in 1997.
Oil and gas production costs decreased from $29,871 for the three months
ended March 31, 1996 to $28,157 for the three months ended March 31, 1997,
an immaterial change of $1,714 (6%).
General and administrative expenses decreased from $121,175 for the three
months ended March 31, 1996 to $82,879 for the three months ended March 31,
1997, a decrease of $38,296 (32%). This change was primarily due to a
decrease in consulting expenses.
Depletion, depreciation and amortization increased from $14,188 for the
three months ended March 31, 1996 to $14,912 for the three months ended
March 31, 1997, an immaterial increase of $724 (5%).
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had cash and other current assets of
$145,475 as compared to cash and other current assets of $245,931 at December
31, 1996. The decrease of $100,456 was primarily due to a loss from
operations and payments on notes payable.
Total debt decreased from $182,093 in long-term debt and $185,984 in
current portion of long-term debt at December 31, 1996 to $185,346 in
long-term debt and $152,336 in current portion of long-term debt at March 31,
1997. This decrease of $30,395 was primarily due to principal payments made
during the period.
The Company's primary objective is to complete financing for construction
and start-up of its commercial asphalt production facility. The Company is
seeking to raise approximately $20,000,000 through a combination of equity
and debt or project financing. The Company is evaluating financing
alternatives with several investor groups who are in the process of
completing their due diligence on the project. No assurance can be given
that financing will be available or, if available, that it will be available
on acceptable terms. If such funds are raised by issuing equity securities,
further dilution to then-existing stockholders may result. If such
additional funds are raised through the issuance of debt securities, the
Company's cash flows will be required to be devoted to service such debt.
If funding is not available, the Company may be required to significantly
curtail or cease its operations.
PART II. - OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities
None.
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
None.
PART III. - 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 ENERGY CORPORATION
(Registrant)
Date: May 1, 1997 By: /s/ JAY MEALEY
Jay Mealey, President
Date: May 1, 1997 By: /s/ RICHARD S. RAWDIN
Richard S. Rawdin, Vice
President of Finance
