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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 Form 10-Q/A  QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the period ended March 31, 2004
  [  ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period
fromto
 Commission file number 1-11887 CANYON RESOURCES CORPORATION (a Delaware Corporation) I.R.S. Employer Identification Number 84-0800747
14142 Denver West Parkway, Suite 250
Golden, CO 80401
(303) 278-8464 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 2b-2 of the Exchange Act.) Yes  [  ]  No  [X] Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date: 27,932,865 shares of
the Companys Common Stock were outstanding as of May 3, 2004.




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Explanatory Note This Amendment on Form 10-Q/A (Amendment) amends in its entirety the
Companys Quarterly Report on Form 10-Q for the period ended March 31, 2004,
which was filed with the Securities and Exchange Commission on May 24, 2004.
The purpose of this Amendment is to restate the Companys financial statements
for the impacts resulting from i) correcting the Companys impairment analyses
model used for impairment testing of the Briggs Mine assets and the associated
impact on the impairment of long-lived assets, depreciation, depletion and
amortization capitalized as part of metal inventories and the related inventory
valuation, and cost of sales calculations; ii) expensing exploration costs
previously recorded as a note receivable; iii) correcting the fair market value
of stock issued to an employee as compensation for services; and iv)
recognizing and amortizing a beneficial conversion feature associated with the
Companys 6% convertible debentures that were issued in March 2003. These
adjustments are more fully described in Note 12 to the Interim Consolidated
Financial Statements included in Part 1 of this Form 10-Q/A. All information
contained in this Amendment is as of March 31, 2004 and does not reflect any
subsequent information or events other than the restatement of financial
information referred to above.




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CANYON RESOURCES CORPORATION
FORM 10-Q/A
For the Quarter ended March 31, 2004 TABLE OF CONTENTS PART I FINANCIAL INFORMATIONItem 1. Financial Statements
    
    Page 1Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    Page 21Item 3. Quantitative and Qualitative Disclosures About
Market Risk
    
    Page 27Item 4. Controls and Procedures
    
    Page 27PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    Page 30Item 2. Changes in Securities, Use of Proceeds and
Issuer Purchases of Equity Securities
    
    Page 30Item 3. Defaults Upon Senior Securities
    
    Page 30Item 4. Submission of Matters to a Vote of
Security Holders
    
    Page 30Item 5. Other Information
    
    Page 30Item 6. Exhibits and Reports on Form 8-K
    
    Page 30SIGNATURES
    
    Page 33




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PART I FINANCIAL INFORMATION 
 Item 1. Financial Statements The following consolidated financial statements have been prepared by
Canyon Resources Corporation (the Company) pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules and regulations. These consolidated financial statements should be read in conjunction with
the financial statements and accompanying notes included in the Companys
Amendment No. 2 on Form 10-K/A for the fiscal year ended December 31, 2003. Consolidated Balance Sheets
    
    Page 2Consolidated Statements of Operations
    
    Page 3Consolidated Statements of Cash Flows
    
    Page 4-5Consolidated Statements of Changes in Stockholders Equity
    
    Page 6Notes to Interim Consolidated Financial Statements
    
    Page 7-20Item 2.Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    Page 21Item 3.Quantitative and Qualitative Disclosures About
Market Risk
    
    Page 27Item 4. Controls and Procedures
    
    Page 27Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  1




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CANYON RESOURCES CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS
  March 31,
    
    December 31,2004
    
    2003(Restated)ASSETSCash and cash equivalents
    
    $
    9,326,300
    
    
    $
    4,139,800Restricted cash
    
    
    307,100
    
    
    
    307,100Accounts receivable
    
    
    33,400
    
    
    
    128,200Metal inventories
    
    
    7,884,500
    
    
    
    4,238,200Materials and supplies
    
    
    126,900
    
    
    
    128,900Prepaid and other assets
    
    
    884,300
    
    
    
    561,100Total current assets
    
    
    18,562,500
    
    
    
    9,503,300Property and equipment, at costProducing properties
    
    
    6,603,800
    
    
    
    6,237,000Other
    
    
    915,200
    
    
    
    940,0007,519,000
    
    
    
    7,177,000Accumulated depreciation and depletion
    
    
    (5,555,300
    )
    
    
    (2,275,500
    )Net property and equipment
    
    
    1,963,700
    
    
    
    4,901,500Undeveloped mineral claims and leases, net
    
    
    15,363,400
    
    
    
    16,031,400Restricted cash
    
    
    2,824,600
    
    
    
    2,819,900Other assets
    
    
    57,100
    
    
    
    57,100Total Assets
    
    $
    38,771,300
    
    
    $
    33,313,200LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable
    
    $
    2,405,300
    
    
    $
    2,138,200Notes payable  current
    
    
    3,651,700
    
    
    
    1,037,400Capital leases  current
    
    
    19,400
    
    
    
    20,400Asset retirement obligations
    
    
    932,500
    
    
    
    932,500Unrealized loss on derivative instruments
    
    
    
    
    
    
    147,200Other current liabilities
    
    
    332,800
    
    
    
    340,200Total current liabilities
    
    
    7,341,700
    
    
    
    4,615,900Notes payable  long term
    
    
    
    
    
    
    2,599,000Capital leases  long term
    
    
    29,700
    
    
    
    33,600Asset retirement obligations
    
    
    3,296,100
    
    
    
    3,371,200Total Liabilities
    
    
    10,667,500
    
    
    
    10,619,700Commitments and contingencies (Note 9)Common stock ($.01 par value) 50,000,000 shares authorized;
issued and outstanding: 27,775,700 at March 31, 2004, and
25,593,800 at December 31, 2003
    
    
    277,800
    
    
    
    255,900Capital in excess of par value
    
    
    126,359,300
    
    
    
    117,111,700Deferred compensation
    
    
    (246,900
    )
    
    
    (264,200
    )Retained deficit
    
    
    (98,286,400
    )
    
    
    (94,409,900
    )Total Stockholders Equity
    
    
    28,103,800
    
    
    
    22,693,500Total Liabilities and Stockholders Equity
    
    $
    38,771,300
    
    
    $
    33,313,200
 The accompanying notes are an integral part of these consolidated financial statements. 2




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CANYON RESOURCES CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS - RESTATED
  Three months ended March 31,2004
    
    2003REVENUESales
    
    $
    1,737,500
    
    
    $
    3,862,600EXPENSESCost of sales (exclusive of depreciation, depletion, and amortization)
    
    
    2,355,100
    
    
    
    3,113,100Depreciation, depletion, and amortization
    
    
    1,102,600
    
    
    
    1,689,800Selling, general and administrative
    
    
    1,998,300
    
    
    
    453,600Exploration and development costs
    
    
    214,400
    
    
    
    225,000Accretion expense
    
    
    43,300
    
    
    
    46,500Gain on asset disposals
    
    
    
    
    
    
    (76,300
    )5,713,700
    
    
    
    5,451,700OTHER INCOME (EXPENSE)Interest income
    
    
    15,500
    
    
    
    9,600Interest expense
    
    
    (74,000
    )
    
    
    (80,000
    )Gain on derivative instruments
    
    
    147,200
    
    
    
    487,600Other
    
    
    11,000
    
    
    
    150,00099,700
    
    
    
    567,200Loss before cumulative effect of change in
accounting principle
    
    
    (3,876,500
    )
    
    
    (1,021,900
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    (11,700
    )Net loss
    
    ($
    3,876,500
    )
    
    ($
    1,033,600
    )Basic and diluted loss per share:Loss before cumulative effect of change in
accounting principle
    
    ($
    0.15
    )
    
    ($
    0.05
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    Basic and diluted net loss per share
    
    ($
    0.15
    )
    
    ($
    0.05
    )Weighted average shares outstanding
    
    
    26,377,900
    
    
    
    20,300,500
 The accompanying notes are an integral part of these consolidated financial statements. 3




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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS - RESTATED
 (Unaudited)
 Three months ended March 312004
    
    2003Cash flows from operating activities:Net loss
    
    ($
    3,876,500
    )
    
    ($
    1,033,600
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation, depletion and amortization
    
    
    1,102,600
    
    
    
    1,689,800Amortization of financing costs
    
    
    
    
    
    
    12,200Amortization of beneficial conversion feature
    
    
    15,300
    
    
    
    5,800Cumulative effect of change in accounting principle
    
    
    
    
    
    
    11,700Inventory impairment
    
    
    552,300
    
    
    
    Gain on asset dispositions
    
    
    
    
    
    
    (76,300
    )Gain on derivative instruments
    
    
    (147,200
    )
    
    
    (487,600
    )Non-cash compensation expense
    
    
    1,339,100
    
    
    
    85,100Interest accretion
    
    
    43,300
    
    
    
    46,500Changes in operating assets and liabilities:Decrease
(increase) in accounts receivable
    
    
    94,800
    
    
    
    (500
    )Increase in inventories
    
    
    (1,319,900
    )
    
    
    (132,000
    )Increase in prepaid and other assets
    
    
    (323,200
    )
    
    
    (35,200
    )Increase (decrease) in accounts payable and accrued liabilities
    
    
    224,100
    
    
    
    (308,500
    )Decrease in other liabilities
    
    
    (75,100
    )
    
    
    (11,300
    )Increase in restricted cash
    
    
    (4,700
    )
    
    
    (374,500
    )Total adjustments
    
    
    1,501,400
    
    
    
    425,200Net cash used in operating activities
    
    
    (2,375,100
    )
    
    
    (608,400
    )Cash flows from investing activities:Purchases and development of property and equipment
    
    
    (381,200
    )
    
    
    ( 25,400
    )Proceeds from asset sales
    
    
    
    
    
    
    186,600Increase in restricted cash
    
    
    
    
    
    
    (43,800
    )Net cash provided by (used in) investing activities
    
    
    (381,200
    )
    
    
    117,400Cash flows from financing activities:Issuance of stock
    
    
    7,947,700
    
    
    
    26,000Proceeds from sale of debentures
    
    
    
    
    
    
    3,299,000Payments on debt
    
    
    
    
    
    
    (1,612,100
    )Payments on capital lease obligations
    
    
    (4,900
    )
    
    
    (93,500
    )Net cash provided by financing activities
    
    
    7,942,800
    
    
    
    1,619,400Net increase in cash and cash equivalents
    
    
    5,186,500
    
    
    
    1,128,400Cash and cash equivalents, beginning of year
    
    
    4,139,800
    
    
    
    430,800Cash and cash equivalents, end of period
    
    $
    9,326,300
    
    
    $
    1,559,200
 The accompanying notes are an integral part of these consolidated financial statements. 4




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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
(Unaudited) Supplemental disclosures of cash flow information:  1.
    
    The Company paid $58,700 of interest during the first three months of 2004,
and $62,000 during the corresponding period of 2003.2.
    
    The Company paid no income taxes during the first three months of 2004 nor
the corresponding period of 2003. Supplemental schedule of noncash investing and financing activities:  1.
    
    The Company financed an equipment lease buy-out in the amount of $1,582,800
during the first three months of 2003.2.
    
    The Company issued 2,099,600 shares of common stock with a fair market value
of $1,952,600 to a creditor as payment for services during the first three
months of 2003.3.
    
    During the first three months of 2004, the Company issued 52,300 shares of
common stock with a fair value of $79,400 (restated) to an employee as
compensation for services. During the first three months of 2003, the Company
issued 27,900 shares of common stock with a fair value of $40,500 (restated) to
an employee as compensation for services.4.
    
    Non-cash compensation expense for the Companys stock option plans under
variable plan accounting was $1,259,700 and $44,600 during the first three
months of 2004 and 2003, respectively. The accompanying notes are an integral part of these consolidated financial statements. 5




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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS
OF CHANGES IN STOCKHOLDERS EQUITY - RESTATED
  Common
StockNumber of
    
    At Par
    
    Capital in
Excess of Par
    
    Deferred
    
    Retained
    
    Common
StockholdersShares
    
    Value
    
    Value
    
    Compensation
    
    Deficit
    
    EquityBalances, January 1, 2004
    
    
    25,593,800
    
    
    $
    255,900
    
    
    $
    117,111,700
    
    
    ($
    264,200
    )
    
    ($
    94,409,900
    )
    
    $
    22,693,500Stock issued for cash
    
    
    1,631,000
    
    
    
    16,300
    
    
    
    7,111,000
    
    
    
    
    
    
    
    
    
    
    
    7,127,300Exercise of warrants
    
    
    483,600
    
    
    
    4,900
    
    
    
    811,400
    
    
    
    
    
    
    
    
    
    
    
    816,300Exercise of stock options
    
    
    15,000
    
    
    
    200
    
    
    
    3,900
    
    
    
    
    
    
    
    
    
    
    
    4,100Other stock issued
    
    
    52,300
    
    
    
    500
    
    
    
    78,900
    
    
    
    
    
    
    
    
    
    
    
    79,400Other equity changes(1)
    
    
    
    
    
    
    
    
    
    
    1,242,400
    
    
    
    17,300
    
    
    
    
    
    
    
    1,259,700Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,876,500
    )
    
    
    (3,876,500
    )Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,876,500
    )
    
    
    (3,876,500
    )Balances, March 31, 2004
    
    
    27,775,700
    
    
    $
    277,800
    
    
    $
    126,359,300
    
    
    ($
    246,900
    )
    
    ($
    98,286,400
    )
    
    $
    28,103,800
  (1)
    
    Compensation expense determined under variable plan accounting for the Companys stock option plans. The accompanying notes are an integral part of these consolidated financial statements.  6




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CANYON RESOURCES
CORPORATION 
 NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Basis of Presentation: During
interim periods, Canyon Resources Corporation (the Company) follows the
accounting policies set forth in its Annual Report to Stockholders and its
Report on Form 10-K/A filed with the Securities and Exchange Commission. Users
of financial information produced for interim periods are encouraged to refer
to the footnotes contained in the Annual Report to Stockholders when reviewing
interim financial results. In the opinion of management, the accompanying interim financial
statements contain all material adjustments, consisting only of normal
recurring adjustments necessary to present fairly the financial position, the
results of operations, and the cash flows of Canyon Resources
Corporation and its
consolidated subsidiaries for interim periods. These interim results are not
necessarily indicative of the results of operations or cash flows for the full
year ending December 31, 2004. The Company has restated its financial statements related to 2004 and
2003. For additional information, see Note 12. 2. Management Estimates and Assumptions: Certain amounts included in or affecting the Companys financial
statements and related disclosures must be estimated, requiring that certain
assumptions be made with respect to values or conditions which cannot be made
with certainty at the time the financial statements are prepared. Therefore,
the reported amounts of the Companys assets and liabilities, revenues and
expenses, and associated disclosures with respect to contingent assets and
obligations are necessarily affected by these estimates. The Company evaluates
these estimates on an ongoing basis, utilizing historical experience,
consultation with experts, and other methods considered reasonable in the
particular circumstances. Nevertheless, actual results may differ significantly
from the Companys estimates. 3. Stock Based Compensation: In accordance with the provisions of SFAS No. 123, Accounting for
Stock-Based Compensation(SFAS No. 123), the Company measures compensation cost
using the intrinsic value method prescribed by Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations to account for its stock option plans. However, because the
Company had allowed option holders to exercise options by surrendering shares
underlying vested but unexercised options in payment of the exercise price of
the options, the Companys outstanding options are accounted for using variable
plan accounting. As a result, while no compensation cost has been recognized at
the grant date, as the exercise price of all stock option grants was at least
equal to 100% of the market price of the Companys common stock as of the date
of grant, subsequent changes in the market price of the Companys stock to the
date of exercise or forfeiture result in a change in the measure of
compensation cost for the award being recognized. In December 2002, the
Financial Accounting Standards Board issued Financial Accounting Standards No.
148, Accounting for Stock-Based Compensation  Transition and Disclosure(SFAS
No. 148). SFAS No. 148 amends SFAS No. 123 to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The amendments to SFAS No. 123 are effective for financial statements for
fiscal years ending after December 15, 2002. Had compensation cost been
determined under the provisions of SFAS No. 123, the following pro forma net
loss and per share amounts would have been recorded for the three months ended
March 31: 7




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CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 3. Stock Based Compensation, continued: 2004
    
    2003(Restated)
    
    (Restated)Net loss, as reported
    
    
    ($3,876,500
    )
    
    
    ($1,033,600
    )Add: compensation expense credit determined
under variable plan accounting
    
    
    1,259,700
    
    
    
    44,600Deduct: compensation expense determined
under fair value based method
    
    
    (16,200
    )
    
    
    (29,000
    )Pro forma net loss
    
    
    ($2,633,000
    )
    
    
    ($1,018,000
    )Basic and diluted loss per share As reported
    
    
    ($0.15
    )
    
    
    ($0.05
    ) Pro forma
    
    
    ($0.10
    )
    
    
    ($0.05
    )
 4. Equity Activity: The
Company computes earnings per share (EPS) by applying the provisions of Financial
Accounting Standards No. 128, Earnings per Share. As the Company reported net
losses for the periods presented, inclusion of common stock equivalents would
have an antidilutive effect on per share amounts. Accordingly, the Companys
basic and diluted EPS computations are the same for the periods presented.
Common stock equivalents for the three months ended March 31, 2004 and 2003
that were not included in the computation of diluted EPS because the effect
would have been antidilutive were 6,787,700 and 3,271,200, respectively. During the first
quarter of 2004, the Company received: i) $7,127,300 through
the sale of 1,631,000 shares of common stock at a price of $4.37 per
share, ii) $816,300 through the exercise of certain warrants and the
issuance of 483,600 shares of common stock, and iii)$4,100 in connection
with stock option exercises and the issuance of 15,000 shares of common stock. 5. Restricted Cash: Restricted cash consisted of the following at: March 31,
    
    December 31,2004
    
    2003Collateral for Letter of Credit (a)
    
    $
    249,000
    
    
    $
    249,000Collateral for reclamation bonds and other
contingent events (b)
    
    
    151,200
    
    
    
    150,800Kendall Mine reclamation (c)
    
    
    1,924,400
    
    
    
    1,920,100McDonald Gold Project cash reclamation bond (d)
    
    
    500,000
    
    
    
    500,000Net proceeds from property sales (e)
    
    
    272,100
    
    
    
    272,100Escrow deposits (f)
    
    
    35,000
    
    
    
    35,0003,131,700
    
    
    
    3,127,000Current portion
    
    
    307,100
    
    
    
    307,100Noncurrent portion
    
    $
    2,824,600
    
    
    $
    2,819,900
  (a)
    
    In connection with the issuance of certain bonds for the
performance of reclamation obligations and other contingent
events at the Briggs Mine, a bank Letter of Credit was provided
in favor of the Surety as partial collateral for such bond
obligations. The Letter of Credit is fully collateralized with
cash and will expire 8




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CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 5. Restricted Cash, continued:  no earlier than December 31, 2004, and at
the banks option, may be renewed for successive one-year
periods.(b)
    
    Held directly by the Surety as partial collateral for
reclamation and other contingent events at the BriggsMine.(c)
    
    Held directly by the Montana Department of Environmental
Quality in an interest bearing account for use in continuing
reclamation at the Kendall minesite. (See Note 9(a))(d)
    
    Held directly by the Montana Department of Environmental
Quality for reclamation at the McDonald Gold Property.(e)
    
    In connection with the auction of certain properties,
cash has been sequestered by court order. (See Note 9(e)).(f)
    
    Earnest money received in connection with contracted
property sales in 2002 which have not yet closed are being held
by the Companys escrow agent. 6. Inventories: Metal inventories consisted of the following at: March 31, 2004(Restated)
    
    December 31, 2003Broken ore under leach
    
    $
    7,365,200
    
    
    $
    4,191,300Doré
    
    
    519,300
    
    
    
    46,900$
    7,884,500
    
    
    $
    4,238,200
 The Company wrote down its metal inventory at the Briggs Mine to net
realizable value by $552,300 (restated) during the first quarter of 2004. 7. Undeveloped Mineral Claims and Leases: The carrying value of the Companys undeveloped mineral claims and leases
consists of the following components at: MARCH 31, 2004
    
    DECEMBER 31, 2003Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Net Book
    
    Carrying
    
    Accumulated
    
    Net BookValue
    
    Amortization
    
    Value
    
    Value
    
    Amortization
    
    ValueProperty:Mcdonald
    
    $
    16,200,200
    
    
    
    ($4,556,300
    )
    
    $
    11,643,900
    
    
    $
    16,200,200
    
    
    
    ($4,050,000
    )
    
    $
    12,150,200Seven-up Pete
    
    
    5,175,000
    
    
    
    (1,455,500
    )
    
    
    3,719,500
    
    
    
    5,175,000
    
    
    
    (1,293,800
    )
    
    
    3,881,200$
    21,375,200
    
    
    
    ($6,011,800
    )
    
    $
    15,363,400
    
    
    $
    21,375,200
    
    
    
    ($5,343,800
    )
    
    $
    16,031,400
 Amortization of these properties commenced in 2002 at the rate of
$2,671,900 per year. The properties are being amortized over eight years with
no residual value. Future amortization of $2,671,900 per year will be
recognized until the 9




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CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 7. Undeveloped Mineral
Claims and Leases, continued: properties are fully amortized or events or circumstances
change. See Note 9(d) for a discussion of the legal status of the properties. 8. Notes Payable: Notes payable consisted of the following at: March 31, 2004(Restated)
    
    December 31, 2003Caterpillar
Finance (a)
    
    $
    1,037,400
    
    
    $
    1,037,400Debentures
(b)
    
    
    2,674,000
    
    
    
    2,674,000- discount
    
    
    (59,700
    )
    
    
    (75,000
    )3,651,700
    
    
    
    3,636,400Current portion
    
    
    3,651,700
    
    
    
    1,037,400Notes
payable  Noncurrent
    
    $
    
    
    
    $
    2,599,000
  (a)
    
    In January 2003, the Company exercised a lease purchase option
to buy the mining fleet at the Briggs Mine for approximately $1.6
million and has arranged to finance the purchase price for one year
at an interest rate of 6.75%. Remaining principal is due in the
second quarter of 2004.(b)
    
    In March 2003, the Company completed a private placement
financing of 6%, two year convertible debentures. Approximately $1.2
million of the proceeds was used to pay off the Briggs Mine
debt with the balance retained for general corporate purposes. The
debentures require quarterly interest payments, and the holders have
the right to convert principal to common stock of the Company,
subject to certain adjustments, at any time at a conversion rate of
$1.38 per share of common stock. The principal amount, unless
otherwise converted, is due March 1, 2005. The Companys stock price
at the end of March 2004 was $4.72 per share. 9. Commitments and Contingencies:  (a)
    
    Kendall Mine ReclamationThe Kendall Mine holds permits granted by the Montana Department of
Environmental Quality (DEQ). In February 2002, the DEQ issued a
decision that a comprehensive Environmental Impact Statement (EIS) is
needed for completion of remaining reclamation at Kendall. The Company
feels that it is crucial that reclamation proceed at Kendall without
further delay and, therefore, disagrees with the agency decision, and
is presently evaluating its course of action with regard to the DEQs
decision. The Companys estimate to achieve mine closure could be
impacted by the outcome of an agency decision following an EIS. The
Company has $1,924,400 on deposit in an interest bearing account with
the DEQ for reclamation at the Kendall Mine.(b)
    
    Briggs Mine Surety BondsThe Briggs Mine operates under permits granted by various agencies
including the U.S. Bureau of Land Management (BLM), Inyo County, the
California Department of Conservation, and the Lahontan Regional Water
Quality Control Board (Lahontan). These agencies have jointly required
the Company to post a reclamation bond in the amount of $3,030,000 to
ensure appropriate reclamation. Additionally, the Company was required
by Lahontan to post a $1,010,000 bond to ensure adequate funds to
mitigate any foreseeable release, as defined, of pollutants to state
waters. Both bonds are subject to annual review and adjustment. 10




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CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 9. Commitments and Contingencies, continued:  In 2000, in response to a demand for an increase in collateral by the
Surety who issued the above described bonds, the Company granted a
security interest in 28,000 acres of mineral interests in Montana. In
addition, the Company agreed to make cash deposits with the Surety
totaling $1.5 million over a three year period at the rate of $0.5
million per year, commencing June 30, 2001. The Company has not
made any deposits to date, and is in discussions with the Surety to reschedule the deposit requirements. If
an acceptable rescheduling of the deposit requirements cannot be agreed
to, the Surety could seek to terminate the bonds which could result in
the Company becoming liable for the principal amounts under its
collateral agreement with the Surety. In April 2004, the Company ceased
active mining at Briggs and has commenced reclamation activities.(c)
    
    Contingent LiabilityOn September 25, 1997, the Company, together with its wholly-owned
subsidiary, CR Montana Corporation (CR Montana), purchased a 72.25%
participating interest and underlying assets in the Seven-Up Pete
Venture (SPV) from CR Montanas partner in the SPV, Phelps Dodge
Corporation (Phelps Dodge). The Company and its wholly-owned subsidiary
now own 100% of the SPV. The SPV includes the McDonald Gold Project
near Lincoln, Montana.The Company made an initial payment of $5 million and is required to
make a final payment of $10.0 million upon issuance of all permits
required for construction of the McDonald Gold Project, or
alternatively, one-third of any proceeds received from any potential
takings lawsuit. Due to the contingent nature of the transaction, the
Company recorded only the initial payment of $5 million as additions to
mining claims and leases.The purchase payments are collateralized only by the 72.25%
participating interest and underlying assets in the SPV transferred
from Phelps Dodge to the Company and CR Montana in this transaction,
and the 50% co-tenancy interest in certain real property also
transferred to the Company and CR Montana.(d)
    
    Anti-Mining Initiative (I-137)In November 1998, the Montana electorate passed an anti-mining
initiative (I-137) by a vote of 52% to 48%. I-137, as modified by the
State Legislature in April 1999, bans development of new gold and
silver mines, which use open-pit mining methods and cyanide in the
treatment and recovery process. In April 2000, the SPV filed lawsuits
in Montana State District Court and in the United States District
Court, seeking to have I-137 declared unconstitutional, or,
alternatively, to obtain a takings or damage award for the lost value
of the McDonald, Seven-Up Pete and Keep Cool mineral properties. These
lawsuits are based on, amongst others, (i) the right not to be deprived
of property without due process of law; (ii) the right to equal
protection under the laws; and (iii) the right to be protected against
laws which impair the obligations of existing contracts. The United
States District Court issued a ruling August 30, 2001 in which the
Court dismissed the SPVs substantive due process claim but, as
requested by the SPV, ruled that the remainder of the SPVs claims
could be pursued at such time as the State lawsuit was concluded. The
Montana State District Court issued a ruling November 1, 2001 in
response to a Motion to Dismiss and a Motion For Summary Judgment by
the State of Montana. In this ruling, the Court dismissed four of the
SPVs fourteen counts, including its substantive due process and equal
protection challenges to I-137s validity. The decision maintained for
adjudication the contract impairment validity challenge, contract
damage claims, and all of the takings claims. Following the November
2001 ruling by the State District Court, the State filed a new Motion
for Summary Judgment as to all claims. In an Order dated December 9,
2002, the Court granted the State Summary Judgment on all of the
remaining legal claims of the Companys lawsuit. On January 14, 2003,
the Company filed an appeal with the Montana State Supreme Court. Oral
arguments were heard by the Montana Supreme Court on October 28, 2003.
The Company expects a ruling during 2004. 11




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CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 9. Commitments and Contingencies, continued:  On March 2, 2004, a local citizens group (Miners, Merchants and
Montanans for Jobs and Economic Opportunity FOR I-147), filed the
language of a new initiative, I-147, to be placed before the voters of
Montana at the November 2, 2004 ballot which, if enacted, would
allow use of cyanide leaching in open-pit gold mines with
specific, rigorous engineering practices and environmental safeguards.
If qualified for the ballot and then enacted by citizen vote in
November 2004, I-147 would make unnecessary any favorable court action
on behalf of the
Companys legal actions and would allow the Company to resume
permitting of the McDonald Gold Project. In any case, the Company will
continue its legal efforts until the I-137 impediment is removed.Should I-137 be overturned through the legal process or by voter
initiative, significant capital will be required to resume permitting
and ultimately develop the McDonald Gold Project. No assurances can be
made regarding the Companys ability to obtain additional financing
through capital markets, joint ventures, or other arrangements in the
future.(e)
    
    McDonald Gold Project - State LeasesOn September 24, 1998, the Montana Department of Natural Resources
(DNRC), the entity that administers state mineral leases, unilaterally
decided to cancel the permitting extension of the 10-year lease term of
the state leases that pertain to the McDonald Gold Project which would
require the Company, after a period of approximately seventeen months,
to commence paying a delay rental of $150,000 per month in order
to maintain the leases.In February 2000, pursuant to its September 1998 decision, the DNRC
determined that the primary terms of the mineral leases had expired.
The Company appealed the action of the DNRC in an administrative
hearing process and the DNRC Hearing Examiner affirmed the DNRC action.
It is the Companys position that the permitting process has been
interrupted by the threat and passage of I-137 and, thus, the permit
extension is continued until the governmental impediment is resolved.
As part of the I-137 lawsuit filed in April 2000 against the State of
Montana, the Company asked the court to review and invalidate the
DNRCs action, however, the court, in its December 9, 2002 order as
described in the preceding paragraph, denied the Companys petition for
judicial review. On January 14, 2003, the Company filed an appeal with
the Montana State Supreme Court. Oral arguments were heard by the
Montana State Supreme Court on October 28, 2003. The Company expects a
ruling during 2004.The proposed new initiative, I-147, described above contains a
provision which, if enacted, would restore all contractual interest or
right in a mineral estate which was diminished or lost as a consequence
of the enactment of I-137 to the same rights at the date of the
enactment of I-137 (November 3, 1998). Since the state mineral leases
were in full force and effect on November 3, 1998, the proposed new
initiative, if qualified for the ballot and then enacted by citizen
vote in November 2004, would restore the state mineral leases to full
validity.(f)
    
    Kendall Mine LawsuitIn October 2001, a Plaintiff group filed suit in Montana District Court
against the Company and its wholly-owned subsidiary, CR Kendall
Corporation, alleging violation of water rights and other torts in
connection with the operation of the Kendall Mine. The Complaint seeks
unspecified damages and punitive damages. The Company believes the
allegations are completely without merit and that the Company will
prevail in this matter.In August 2002, a Preliminary Injunction was issued in Montana District
Court on behalf of the Plaintiff group in connection with the Companys
auction of certain mineral rights and fee lands in western Montana. In
October 2002, the Court issued a Supplemental Order which will
sequester up to $528,000 of any proceeds realized from the auction
until such time as the lawsuit is concluded. As of March 31, 2004,
$267,800 had been remitted to the 12




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##### Table of Contents



CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 9. Commitments and Contingencies, continued:  Court as required by the Order.
Including interest earned on the funds remitted, the Court held
$272,100 as of March 31, 2004.(g)
    
    Assignment of Royalty ProceedsIn October 2001, the Company issued 1,050,000 shares of common stock
with a fair market value of $1,207,500 to Franco-Nevada Mining
Corporation in connection with the assignment of a 2% net smelter
returns royalty on the first 175,000 ounces of gold production from the
Companys Briggs Mine, commencing April 1, 2001.From April 1, 2001 through March 31, 2004, the Briggs Mine had
produced 172,997 ounces of gold and will be subject to a 3% net smelter
returns royalty on all remaining production once the 175,000 ounce
threshold is achieved.(h)
    
    Other ItemsDuring 2003, the Company entered into an agreement with Gold Resource
Corporation, a private Colorado Corporation, which is an affiliate of,
and 40% owned by, U. S. Gold Corporation, a public Colorado
Corporation, to finance the exploration and possible development
of a gold/silver project in the State of Oaxaca, Mexico.The Company, through March 31, 2004, had funded $500,000 of exploration
and metallurgical test work. The Company is presently evaluating those
results and will make a determination in the third quarter of 2004
whether to proceed to the next phase, which would require a $3.0
million commitment and allow the Company to earn a 50% interest in the
project. Should the Company elect to not proceed with this phase, it
will receive 600,000 shares of Gold Resource Corporation as
consideration for its funding of $500,000 of exploration, engineering
and metallurgical test work. 10. Derivative Instruments and Price Protection Arrangements: During the first three months of 2004, the Company delivered gold against
a forward contract that existed at December 31, 2003 (3,820 ounces at an
average price of approximately $377 per ounce) which resulted in a gain of
$147,200. During the first quarter of 2003, a mark-to-market gain of $487,600
was recorded. These gains are shown as a separate line item in the other income
(expense) section in the Statement of Operations. 11. Income Taxes: The Company has not recorded a tax benefit for the current period as the
realization is not expected to be likely during the year. The benefit is also
not expected to be realizable as a deferred tax asset at year end as the
Company anticipates recording a full valuation allowance for all deferred tax
assets, except to the extent of offsetting reversals of expected deferred tax
liabilities. 12. Restatement of Financial Information:  Briggs Asset ImpairmentsAs a result of corrections to the Companys impairment analyses, the
Company has determined that certain long-lived assets at the Briggs Mine
were impaired in earlier periods. The previous impairment analyses, in
addition to the projected revenues from the estimated gold contained
in the ore at the Briggs Mine, incorrectly included projected revenues
from the sale of metals inventory. The reduction in the projected revenues
due to the elimination of 13




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CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 12. Restatement of
Financial Information, continued:  revenues from the sale of metals inventory
resulted in the impairment of the long-lived assets at the Briggs Mine in
prior periods. The impairment of the long-lived assets also reduced the
Companys annual depreciation, depletion and amortization (DD&A)
capitalized as part of metals inventory and the related inventory
valuation and cost of sales
calculations. Changes in the asset impairments also impact the amount of
gain (loss) recognized on the subsequent sales of mine assets. These
adjustments decreased the Companys net loss by $1,974,000, or $0.08 per
share in the first quarter of 2004 and $915,300 or $0.04 per share in the
first quarter of 2003.Expense Funding of Exploration ActivitiesDuring 2003, the Company entered into an agreement with Gold Resources
Corporation (GRC), which was in substance an agreement to fund GRCs
exploration efforts at a project in the State of Oaxaca, Mexico. (See
Note 9(h)). Through December 31, 2003, the Company had
provided GRC $400,000, with an additional $100,000 of funding in the first quarter of
2004, which the Company originally recorded as a note receivable. The Company
has subsequently determined that the advances related to funding
exploration costs should be expensed as incurred. This adjustment
increased the Companys net loss by $100,000, or $0.01 per share in the
first quarter of 2004 and $400,000 for the year ended December 31, 2003.Stock Compensation AdjustmentPrior to 2004, the Company issued 235,200 shares of unregistered common
stock as partial compensation to an individual pursuant to an employment
agreement. The Company originally recorded compensation expense for these
unregistered shares using a share price which was approximately 15% lower
than the market price. The Company has subsequently determined that
compensation expense should be calculated using the market price of
unregistered shares in accordance with APB 25, Accounting for Stock-Based
Compensation. These adjustments increased the Companys net loss by
$12,700 in the first quarter of 2004 and $14,500 in the first quarter of
2003, which had no material effect on per share amounts.Beneficial Conversion Feature for Convertible DebtIn March 2003, the Company completed a private placement financing of its
6% two year convertible debentures which can be converted at any time into
common stock at $1.38 per share. For certain investors, the common stock
had a fair value at the commitment date in excess of the conversion price
resulting in a beneficial conversion feature. Emerging Issues Task
Force (EITF) No. 98-5, Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Convertible Ratios, requires that the intrinsic value of a
beneficial conversion feature be recorded to additional paid-in capital
and a discount on the convertible debt. The discount is then amortized to
interest expense over the term of the debt using the effective interest
rate method. This adjustment increased the Companys net loss by $15,300
in the first quarter of 2004 and $5,800 in the first quarter of 2003,
which had no material effect on per share amounts. The following sets forth the effects of the aforementioned adjustments to
the Companys Consolidated Balance Sheet at March 31, 2004 and its
Consolidated Statements of Operations and Cash Flow for the three months ended
March 31, 2004 and 2003. 14




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CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 12. Restatement of Financial Information, continued: CONDENSED CONSOLIDATED BALANCE SHEET March 31, 2004As Previously
    
    
    
    
    
    AsReported
    
    Adjustments
    
    RestatedASSETSCash and cash equivalents
    
    $
    9,326,300
    
    
    $
    
    
    
    $
    9,326,300Restricted cash
    
    
    307,100
    
    
    
    
    
    
    
    307,100Accounts receivable
    
    
    33,400
    
    
    
    
    
    
    
    33,400Metal inventories
    
    
    8,227,400
    
    
    
    (342,900
    ) (1)
    
    
    7,884,500Materials and supplies
    
    
    126,900
    
    
    
    
    
    
    
    126,900Prepaid and other assets
    
    
    884,300
    
    
    
    
    
    
    
    884,300Total current assets
    
    
    18,905,400
    
    
    
    (342,900
    )
    
    
    18,562,500Property and equipment, at cost
    
    
    51,547,100
    
    
    
    (44,028,100
    ) (1)
    
    
    7,519,000Accumulated depreciation and depletion
    
    
    (49,205,900
    )
    
    
    43,650,600
    (1)
    
    
    ( 5,555,300
    )Net property and equipment
    
    
    2,341,200
    
    
    
    (377,500
    )
    
    
    1,963,700Undeveloped mineral interests, net
    
    
    15,363,400
    
    
    
    
    
    
    
    15,363,400Restricted cash
    
    
    2,824,600
    
    
    
    
    
    
    
    2,824,600Other assets
    
    
    557,100
    
    
    
    (500,000
    ) (2)
    
    
    57,100Total Assets
    
    $
    39,991,700
    
    
    ($
    1,220,400
    )
    
    $
    38,771,300LIABILITIES AND STOCKHOLDERS EQUITYTotal Liabilities
    
    
    10,727,200
    
    
    
    (59,700
    ) (4)
    
    
    10,667,500Common stock
    
    
    277,800
    
    
    
    
    
    
    
    277,800Capital in excess of par value
    
    
    126,099,300
    
    
    
    104,300
    (3)
    
    
    
    155,700
    (4)
    
    
    126,359,300Deferred compensation
    
    
    (246,900
    )
    
    
    
    
    
    
    (246,900
    )Deficit
    
    
    (96,865,700
    )
    
    
    (720,400
    ) (1)
    
    
    
    (500,000
    ) (2)
    
    
    
    (104,300
    ) (3)
    
    
    
    (96,000
    ) (4)
    
    
    (98,286,400
    )Total Stockholders Equity
    
    
    29,264,500
    
    
    
    (1,160,700
    )
    
    
    28,103,800Total Liabilities and Stockholders Equity
    
    $
    39,991,700
    
    
    ($
    1,220,400
    )
    
    $
    38,771,300
  (1)
    
    Briggs Mine asset impairment(2)
    
    Expense funding of exploration activities(3)
    
    Stock compensation adjustment(4)
    
    Beneficial conversion feature for convertible debt 15




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CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 12. Restatement of Financial Information, continued: CONSOLIDATED STATEMENT OF OPERATIONS Three months ended March 31, 2004As Previously
    
    
    
    
    

    AsReported
    
    Adjustments
    

    RestatedREVENUESales
    
    $
    1,737,500
    
    
    
    
    
    
    $
    1,737,500EXPENSESCost of sales
    
    
    3,821,000
    
    
    
    (1,465,900
    ) (1)
    
    
    2,355,100Depreciation, depletion and amortization
    
    
    1,610,700
    
    
    
    (508,100
    )(1)
    
    
    1,102,600Selling, general and administrative
    
    
    1,721,600
    
    
    
    276,700
    (2) (5)
    
    
    1,998,300Exploration costs
    
    
    378,400
    
    
    
    (164,000
    ) (3) (5)
    
    
    214,400Accretion expense
    
    
    43,300
    
    
    
    
    
    
    
    43,3007,575,000
    
    
    
    (1,861,300
    )
    
    
    5,713,700OTHER INCOME (EXPENSE)Interest income
    
    
    15,500
    
    
    
    
    
    
    
    15,500Interest expense
    
    
    (58,700
    )
    
    
    (15,300
    ) (4)
    
    
    (74,000
    )Gain on derivative instruments
    
    
    147,200
    
    
    
    
    
    
    
    147,200Other
    
    
    11,000
    
    
    
    
    
    
    
    11,000115,000
    
    
    
    (15,300
    )
    
    
    99,700Net loss
    
    ($
    5,722,500
    )
    
    $
    1,846,000
    
    
    $
    (3,876,500
    )Basic and diluted net loss per share
    
    ($
    0.22
    )
    
    $
    0.07
    
    
    ($
    0.15
    )Weighted average shares outstanding
    
    
    26,377,900
    
    
    
    26,377,900
    
    
    
    26,377,900
  (1)
    
    Briggs Mine asset impairment(2)
    
    Stock compensation adjustment(3)
    
    Expense funding of exploration activities(4)
    
    Beneficial conversion feature for convertible debt(5)
    
    Adjustment includes the reclassification of $264,000 for certain administrative costs 16




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CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 12. Restatement of Financial Information, continued: CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended March 31, 2003As Previously
    
    
    
    
    
    AsReported
    
    Adjustments
    
    RestatedREVENUESales
    
    $
    3,862,600
    
    
    $
    
    
    
    $
    3,862,600EXPENSESCost of sales
    
    
    3,633,600
    
    
    
    (520,500
    )(1)
    
    
    3,113,100Depreciation, depletion and amortization
    
    
    2,084,600
    
    
    
    (394,800
    )(1)
    
    
    1,689,800Selling, general and administrative
    
    
    439,100
    
    
    
    14,500
    (2)
    
    
    453,600Exploration costs
    
    
    225,000
    
    
    
    
    
    
    
    225,000Accretion expense
    
    
    46,500
    
    
    
    
    
    
    
    46,500Gain on asset disposals
    
    
    (76,300
    )
    
    
    
    
    
    
    (76,300
    )6,352,500
    
    
    
    (900,800
    )
    
    
    5,451,700OTHER INCOME (EXPENSE)Interest income
    
    
    9,600
    
    
    
    
    
    
    
    9,600Interest expense
    
    
    (74,200
    )
    
    
    (5,800
    )(3)
    
    
    (80,000
    )Gain on derivative instruments
    
    
    487,600
    
    
    
    
    
    
    
    487,600Other
    
    
    150,000
    
    
    
    
    
    
    
    150,000573,000
    
    
    
    (5,800
    )
    
    
    567,200Loss before cumulative effect of change
in accounting principle
    
    
    (1,916,900
    )
    
    
    895,000
    
    
    
    (1,021,900
    )Cumulative effect of change in accounting
principle
    
    
    (11,700
    )
    
    
    
    
    
    
    (11,700
    )Net loss
    
    ($
    1,928,600
    )
    
    $
    895,000
    
    
    ($
    1,033,600
    )Basic and diluted net loss per share
    
    ($
    0.10
    )
    
    $
    0.05
    
    
    ($
    0.05
    )Weighted average shares outstanding
    
    
    20,300,500
    
    
    
    20,300,500
    
    
    
    20,300,500
  (1)
    
    Briggs Mine asset impairment(2)
    
    Stock compensation adjustment(3)
    
    Beneficial conversion feature for convertible debt 17




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##### Table of Contents



CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 12. Restatement of Financial Information, continued: CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Three months ended March 31, 2004As Previously
    
    
    
    
    
    AsReported
    
    Adjustments
    
    RestatedCash flows from operating activities:Net loss
    
    ($
    5,722,500
    )
    
    $
    1,846,000
    
    
    ($
    3,876,500
    )Adjustments to reconcile net loss to
net cash used in operating activities
    
    
    3,347,400
    
    
    
    (1,974,000
    )(1)
    
    
    
    12,700
    (2)
    
    
    
    100,000
    (3)
    
    
    
    15,300
    (4)Total adjustments
    
    
    3,347,400
    
    
    
    (1,846,000
    )
    
    
    1,501,400Net cash used in operating activities
    
    
    (2,375,100
    )
    
    
    
    
    
    
    (2,375,100
    )Net cash used in investing activities
    
    
    (381,200
    )
    
    
    
    
    
    
    (381,200
    )Net cash provided by financing activities
    
    
    7,942,800
    
    
    
    
    
    
    
    7,942,800Net increase in cash and cash equivalents
    
    
    5,186,500
    
    
    
    
    
    
    
    5,186,500Cash and cash equivalents, beginning of year
    
    
    4,139,800
    
    
    
    
    
    
    
    4,139,800Cash and cash equivalents, end of period
    
    
    9,326,300
    
    
    
    
    
    
    
    9,326,300
  (1)
    
    Briggs Mine asset impairment(2)
    
    Stock compensation adjustment(3)
    
    Expense funding of exploration activities(4)
    
    Beneficial conversion feature for convertible debt 18




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##### Table of Contents



CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 12. Restatement of Financial Information, continued: CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Three months ended March 31, 2003As Previously
    
    
    
    
    
    AsReported
    
    Adjustments
    
    RestatedCash flows from operating activities:Net loss
    
    ($
    1,928,600
    )
    
    $
    895,000
    
    
    ($
    1,033,600
    )Adjustments to reconcile net loss to net cash
used in operating activities
    
    
    1,320,200
    
    
    
    (915,300
    )(1)
    
    
    
    14,500
    (2)
    
    
    
    5,800
    (3)Total adjustments
    
    
    1,320,200
    
    
    
    (895,000
    )
    
    
    425,200Net cash used in operating activities
    
    
    (608,400
    )
    
    
    
    
    
    
    (608,400
    )Net cash provided by investing activities
    
    
    117,400
    
    
    
    
    
    
    
    117,400Net cash provided by financing activities
    
    
    1,619,400
    
    
    
    
    
    
    
    1,619,400Net increase in cash and cash equivalents
    
    
    1,128,400
    
    
    
    
    
    
    
    1,128,400Cash and cash equivalents, beginning of year
    
    
    430,800
    
    
    
    
    
    
    
    430,800Cash and cash equivalents, end of period
    
    $
    1,559,200
    
    
    $
    
    
    
    $
    1,559,200
  (1)
    
    Briggs Mine asset impairment(2)

    
    Stock compensation adjustment(3)

    
    Beneficial conversion feature for convertible debt 19




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##### Table of Contents



CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 13. Recently Issued Financial Accounting Standards: In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, Consolidation of Variable Interest Entities, (FIN No.
46) which provides guidance on the identification and reporting for entities
over which control is achieved through means other than voting rights. FIN No.
46 defines such entities as variable interest entities (VIEs). A FASB Staff
Position (FSP) issued in October 2003 deferred the effective date of FIN No. 46
to the first interim or annual period ending after December 15, 2003 for
entities created before February 1, 2003 if certain criteria are met.
Subsequently, during December 2003, the FASB issued a revision to FIN No. 46
(FIN No. 46R) which replaces the original interpretation. Application of this
revised interpretation is required in financial statements for companies that
have interests in VIEs or potential VIEs commonly referred to as
special-purpose entities created after December 15, 2003. Application for
entities created before January 1, 2004 is required in financial statements for
periods ending after March 15, 2004. The Company believes it has no such
variable interest entities and as a result FIN No. 46 did not have an impact on
the Companys financial position, results of operations, or cash flows. The EITF formed a committee (Committee) to evaluate certain mining
industry accounting issues, including issues arising from the application of
SFAS No. 141, Business Combinations(SFAS No. 141) and SFAS No. 142, Goodwill
and Other Tangible Assets(SFAS No. 142) to business combinations within the
mining industry, accounting for goodwill and other intangibles and the
capitalization of costs after the commencement of production, including
deferred stripping. The issues discussed also included whether mineral
interests conveyed by leases represent tangible or intangible assets and the
amortization of such assets. In March 2004, the EITF reached a consensus,
subject to ratification by the FASB, that mineral interests conveyed by leases
should be considered tangible assets. The EITF also reached a consensus,
subject to ratification by the FASB, on other mining related issues involving
impairment and business combinations. On March 31, 2004, the FASB ratified the consensus of the EITF on other
mining related issues involving impairment and business combinations. This did
not have an impact to the Companys financial statements since it did not
change the Companys accounting. The FASB also ratified the consensus of the
EITF that mineral interests conveyed by leases should be considered tangible
assets subject to the finalization of a FSP in this regard. On April 30, 2004, the FASB issued a FSP amending SFAS No. 141 and SFAS
No. 142 to provide that certain mineral use rights are considered tangible
assets and that mineral use rights should be accounted for based on their
substance. The FSP is effective for the first reporting period beginning after
April 29, 2004, with early adoption permitted. The Company is presently
evaluating the impact that adoption of the FSP will have on its financial
position, results of operations, and cash flows. The Committee is continuing its evaluation of mining industry accounting
issues, which may have an impact on the Companys accounting in the future. 20




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations Cautionary Statement for Purposes of the Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995. The matters discussed in this report on Form 10-Q/A, when not historical
matters, are forward-looking statements that involve a number of risks and
uncertainties that could cause actual results to differ materially from
projected results. Such factors include, among others, the speculative nature
of mineral exploration, commodity prices, production and reserve estimates,
environmental and government regulations, availability of financing, judicial
proceedings, force majeure events, and other risk factors as described from
time to time in the Companys filings with the Securities and Exchange
Commission. Many of these factors are beyond the Companys ability to control
or predict. The Company disclaims any intent or obligation to update its
forward-looking statements, whether as a result of receiving new information,
the occurrence of future events, or otherwise. Restatement of Financial Statements The Company has restated its financial statements for the impacts
resulting from i) correcting the Companys impairment analyses model used for
impairment testing of the Briggs Mine assets and the associated impact on the
impairment of long-lived assets, depreciation, depletion and amortization
capitalized as part of metal inventories and related inventory valuation and
cost of sales calculations; ii) expensing exploration costs previously recorded
as a note receivable; iii) correcting the fair market value calculation of
stock issued to an employee as compensation for services; and iv) recognizing
and amortizing a beneficial conversion feature associated with the Companys
6% convertible debentures that were issued in March 2003. These adjustments
decreased the Companys previously reported net loss for the three months ended
March 31, 2004 and 2003 by $1.8 million, or $0.07 per share and $0.9 million,
or $0.04 per share, respectively. The ensuing discussion gives effect to the
aforementioned adjustments. Overview The Companys financial condition and liquidity improved from December 31,
2003 to March 31, 2004, primarily due to an equity financing which resulted in
proceeds of $7.1 million and the exercise of certain warrants, which resulted
in proceeds of $0.8 million. These inflows allowed the Company to absorb
negative operating cash flow of $2.3 million and spend $0.4 million on
development of the last area of known reserves at the Briggs Mine. The Company
ended the quarter with $9.3 million of cash and cash equivalents. Revenues declined 55% from the prior period, due to lower production
levels, as the Briggs operation nears the end of its mine life. Improving spot
gold prices resulted in price realizations of $383 per ounce during the first
three months of 2004, as compared to $307 per ounce in the first three months
of 2003. Overall, the Companys results of operations reflect a higher net loss
in 2004 as the improvement in price realizations was more than offset by lower
aggregate revenues and higher unit costs of sales. On March 2, 2004, a local citizens group (Miners, Merchants and Montanans
for Jobs and Economic Opportunity, FOR I-147) filed the language of a proposed
new initiative, I-147, to be placed before the voters of Montana at the
November 2, 2004 ballot which, if enacted, would allow use of cyanide leaching
in open-pit gold mines with specific, rigorous engineering practices and
environmental safeguards. If qualified for the ballot and then enacted by
citizen vote in November 2004, I-147 would make unnecessary any favorable court
action on behalf of the Companys legal actions and would allow the Company to
resume permitting of the McDonald Gold Project. In any case, the Company will
continue its legal efforts until the I-137 impediment is removed. 21




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##### Table of Contents



Critical Accounting Policies and Estimates The ensuing discussion and analysis of financial condition and results of
operations are based on the Companys consolidated financial statements,
prepared in accordance with accounting principles generally accepted in the
United States of America. Certain amounts included in or affecting the
Companys financial statements and related disclosures must be estimated,
requiring that certain assumptions be made with respect to values or conditions
which cannot be made with certainty at the time the financial statements are
prepared. Therefore, the reported amounts of the Companys assets and
liabilities, revenues and expenses, and associated disclosures with respect to
contingent assets and obligations are necessarily affected by these estimates.
The more significant areas requiring the use of management estimates and
assumptions relate to mineral reserves that are the basis for future cash flow
estimates and units-of-production amortization determination; recoverability
and timing of gold production from the heap leaching process; environmental,
reclamation and closure obligations; asset impairments (including estimates of
future cash flows); useful lives and residual values of intangible assets; fair
value of financial instruments; valuation allowances for deferred tax assets;
and contingencies and litigation. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions. Users of financial information produced
for interim periods are encouraged to refer to the Companys accounting
policies, footnotes to the financial statements, and detailed discussion of
critical accounting policies and estimates set forth in its Annual Report on
Form 10-K/A. Results of Operations The Company recorded a net loss of $3.9 million, or $0.15 per share, on
revenues of $1.7 million for the three months ended March 31, 2004. For the
comparable period of 2003, the Company recorded a net loss of $1.0 million, or
$0.05 per share, on revenues of $3.9 million. For the three months ended March 31, 2004, the Company sold 4,540 ounces
of gold and at an average price of $383 per equivalent gold ounce. For the
comparable period of 2003, the Company sold 12,550 ounces of gold and 4,300
ounces of silver at an average realized price of $307 per equivalent gold
ounce. The New York Commodity Exchange (COMEX) gold price averaged $409 and
$352 per ounce for the three months ended March 31, 2004 and 2003,
respectively. The following table summaries the Companys gold deliveries and revenues: Three Months Ended
    
    Three Months EndedMarch 31, 2004
    
    March 31, 2003Average
    
    
    
    
    
    
    
    
    
    AverageGold
    
    Price Per
    
    Revenue
    
    Gold
    
    Price Per
    
    RevenueOunces
    
    Ounce
    
    $000s
    
    Ounces
    
    Ounce
    
    $000sDeliveriesForwards
    
    
    3,820
    
    
    $
    377
    
    
    $
    1,442
    
    
    
    4,200
    
    
    $
    270
    
    
    $
    1,133Spot sales
    
    
    720
    
    
    $
    410
    
    
    
    295
    
    
    
    8,350
    
    
    $
    345
    
    
    
    2,883Cash settlement of
forwards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (173
    )4,540
    
    
    $
    383
    
    
    
    1,737
    
    
    
    12,550
    
    
    $
    306
    
    
    
    3,843Other transactionsSilver proceeds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    204,540
    
    
    $
    383
    
    
    $
    1,737
    
    
    
    12,550
    
    
    $
    307
    
    
    $
    3,863
 Cost of sales was $2.4 million for the three months ended March 31, 2004,
as compared to $3.1 million in the prior period. These amounts include write
downs of inventory at the Briggs Mine to net realizable value of $0.6 million
for the three months ended March 31, 2004. 22




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##### Table of Contents



Depreciation, depletion and amortization was lower in the current period
due to a lower producing property balance as a result of an impairment charge
of $3.4 million taken in 2003. During the first quarter of 2004, the Company recorded a gain on a forward
gold contract of approximately $0.1 million. During the first quarter of 2003,
a mark-to-market gain of approximately $0.5 million was recorded. On January 1, 2003, the Company became subject to the accounting and
reporting requirements of Statement of Financial Accounting Standards No. 143,
Accounting for Asset Retirement Obligations(SFAS No. 143). SFAS No. 143
establishes accounting and reporting standards for obligations associated with
the retirement of tangible long-lived assets and the associated asset
retirement costs. SFAS No. 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. Fair value is
determined by estimating the retirement obligations in the period an asset is
first placed in service and then adjusting the amount for estimated inflation
and market risk contingencies to the projected settlement date of the
liability. The result is then discounted to a present value from the projected
settlement date to the date the asset was first placed in service. The present
value of the asset retirement obligation is recorded as an additional property
cost and as an asset retirement liability. The amortization of the additional
property cost (using the units of production method) is included in
depreciation, depletion and amortization expense and the accretion of the
discounted liability is recorded as a separate operating expense in the
Companys Statement of Operations. Prior to adoption of SFAS No. 143, an
accrual for the Companys estimated asset retirement obligations (site specific
reclamation costs for earthwork, revegetation, water treatment and
dismantlement of facilities) was made using the units of production method over
the life of the property and was included in cost of sales. Upon adoption of
SFAS No. 143, the Company recorded a loss of $11,700 as the cumulative effect
of a change in accounting principle. Liquidity & Capital Resources For the three months ended March 31, 2004, operating activities used $2.4
million of cash, investing activities used $0.4 million of cash and financing
activities provided $8.0 million of cash, resulting in a net increase in cash
of $5.2 million. Cash and cash equivalents at March 31, 2004 was $9.3 million. During the first three months of 2004, the Company (i) raised $7.2 million
through the sale of 1,631,000 shares of common stock at a price of $4.37 per
share and (ii) received proceeds of approximately $0.8 million in connection
with the exercise of certain warrants. Outlook Summary The Company believes that its cash requirements over the next 12 months
can be funded through a combination of existing cash and cash flow from
operations, even though there has been negative cash flow from operations for
the three months ended March 31, 2004,. The Companys long-term liquidity may
be impacted by the scheduled wind down of operations at the Briggs Mine during
2004-2005, which is currently the only internal source of cash flow. The
Company is continually evaluating business opportunities such as joint ventures
and mergers and acquisitions with the objective of creating additional cash
flow to sustain the corporation, provide a future source of funds for growth,
as well as to continue its litigation efforts with respect to the McDonald Gold
Project. Moreover, should the I-137 legal impediment be removed through
litigation or voter initiative (See Other Matters  McDonald Gold Project 
Anti-Mining Initiative), significant capital will be necessary to resume
permitting and ultimately develop the McDonald Gold Project. While the Company
believes it will be able to finance its continuing activities, there are no
assurances of success in this regard or in the Companys ability to obtain
additional financing through capital markets, joint ventures, or other
arrangements in the future. If managements plans are not successful,
operations and liquidity may be adversely impacted. 23




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##### Table of Contents



Operations Active mining at the Briggs Mine was concluded in April 2004. Ore on the
heap leach pad will be actively leached throughout 2004. Reclamation of the
waste dumps will commence in the second quarter of 2004 and continue through
the year, at a cost of approximately $0.7 million. The Briggs Mine is expected
to produce approximately 31,000 ounces of gold in 2004 at cash operating costs
of approximately $200 - $220 per ounce. The Company expects to spend approximately $0.2 million on closure
activities at the Kendall Mine during 2004. This estimate is based on the
likelihood that only pad recontouring work will be undertaken in 2004 as a
result of the Montana Department of Environmental Qualitys decision to require
an Environmental Impact Statement before proceeding with reclamation
activities. See Note 9(a) to the Consolidated Financial Statements. Expenditures at the McDonald Gold Project for legal and land holding costs
are expected to be approximately $0.5 million in 2004. In addition, the Company
expects to participate financially in the proposed new initiative, I-147, for
the November 2004 ballot which, if enacted, would allow use of cyanide leaching
in open-pit mines with appropriate engineering practices and environmental
safeguards. Financing At March 31, 2004, the Company had outstanding warrants issued in
connection with previous transactions as follows: i) warrants to purchase
964,100 shares of common stock at an exercise price of $1.67 per share, which
expire on September 30, 2004 and ii) warrants to purchase 2,251,800 shares of
common stock at a price of $1.98 per share through December 1, 2004, or at a
price of $2.16 per share through December 1, 2005. Aggregate proceeds of
between $6.1 million and $6.5 million would be realized on exercise of these
warrants, depending on the terms in effect at the time of exercise. The Companys 6% convertible debentures ($2.7 million of principal at
March 31, 2004), are convertible by the holders to common stock of the Company
at any time at a conversion rate of $1.38 per share of common stock. The
principal amount, if not otherwise converted, is due March 1, 2005. The
Companys stock price at the end of March 2004 was $4.72 per share. Contractual Obligations The Companys contractual obligations are as follows: PAYMENTS DUE BY PERIODLess than
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    1 year
    
    1  3 years
    
    3  5 years
    
    5 yearsLong-term debt obligations(1)
    
    $
    3,711,400
    
    
    $
    3,711,400
    
    
    $
    
    
    
    $
    
    
    
    $
    Capital lease obligations
    
    
    49,100
    
    
    
    19,400
    
    
    
    29,700
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    161,900
    
    
    
    44,500
    
    
    
    100,300
    
    
    
    17,100
    
    
    
    Purchase obligations (2)
    
    
    1,185,600
    
    
    
    1,185,600
    
    
    
    
    
    
    
    
    
    
    
    Asset retirement obligations
    
    
    4,228,600
    
    
    
    932,500
    
    
    
    3,296,100
    
    
    
    
    
    
    
    Total
    
    $
    9,336,600
    
    
    $
    5,893,400
    
    
    $
    3,426,100
    
    
    $
    17,100
    
    
    $
    
  (1)
    
    Includes $2,674,000 of convertible debentures due March 1,
2005, which can be converted by the holder at any time to common
stock of the Company at a conversion rate of $1.38 per share of
common stock. The Companys stock price at the end of March was
$4.72.(2)
    
    One year purchase contract for cyanide consumption at the
Briggs Mine. 24




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##### Table of Contents



Potential Commitment During 2003, the Company entered into an agreement with Gold Resource
Corporation, a private Colorado corporation, which is an affiliate of, and 40%
owned by U. S. Gold Corporation, a public Colorado Corporation, to finance the
exploration and possible development of a gold/silver project in the State of
Oaxaca, Mexico. The Company, through March 31, 2004, had funded $0.5 million of
exploration and metallurgical test work. The Company is presently evaluating
those results and will make a determination in the third quarter of 2004
whether to proceed to the next phase, which would require a $3.0 million
commitment and allow the Company to earn a 50% interest in the project. Should
the Company elect to not proceed with this phase, it will receive 600,000
shares of Gold Resource Corporation as consideration for its funding of $0.5
million of exploration, engineering and metallurgical test work. Other Matters McDonald Gold Project  Anti-Mining Initiative In November 1998, the Montana electorate passed an anti-mining initiative
(I-137) by a vote of 52% to 48%. I-137, as modified by the State Legislature
in April 1999, bans development of new gold and silver mines, which use
open-pit mining methods and cyanide in the treatment and recovery process. In
April 2000, the SPV filed lawsuits in Montana State District Court and in the
United States District Court, seeking to have I-137 declared unconstitutional,
or, alternatively, to obtain a takings or damage award for the lost value of
the McDonald, Seven-Up Pete and Keep Cool mineral properties. These lawsuits
are based on, amongst others, (i) the right not to be deprived of property
without due process of law; (ii) the right to equal protection under the laws;
and (iii) the right to be protected against laws which impair the obligations
of existing contracts. The United States District Court issued a ruling August
30, 2001 in which the Court dismissed the SPVs substantive due process claim
but, as requested by the SPV, ruled that the remainder of the SPVs claims
could be pursued at such time as the State lawsuit was concluded. The Montana
State District Court issued a ruling November 1, 2001 in response to a Motion
to Dismiss and a Motion For Summary Judgment by the State of Montana. In this
ruling, the Court dismissed four of the SPVs fourteen counts, including its
substantive due process and equal protection challenges to I-137s validity.
The decision maintained for adjudication the contract impairment validity
challenge, contract damage claims, and all of the takings claims. Following
the November 2001 ruling by the State District Court, the State filed a new
Motion for Summary Judgment as to all claims. In an Order dated December 9,
2002, the Court granted the State Summary Judgment on all of the remaining
legal claims of the Companys lawsuit. On January 14, 2003, the Company filed
an appeal with the Montana State Supreme Court of the State District Court
Order. Oral arguments were heard by the Montana State Supreme Court on October
28, 2003. The Company expects a ruling during 2004. On March 2, 2004, the Montana Mining Association filed the language of a
proposed new initiative, I-147, to be placed before the voters of Montana at
the November 2, 2004 ballot which, if enacted, would allow use of cyanide
leaching in open-pit gold mines with appropriate engineering practices and
environmental safeguards. If qualified for the ballot and then enacted by
citizen vote in November 2004, I-147 would make unnecessary any favorable court
action on behalf of the Companys legal actions and would allow the Company to
resume permitting of the McDonald Gold Project. In any case, the Company will
continue its legal efforts until the I-137 impediment is removed. McDonald Gold Project  State Leases On September 24, 1998, the Montana Department of Natural Resources (DNRC),
the entity that administers state mineral leases, unilaterally decided to
cancel the permitting extension of the 10-year lease term of the state leases
that pertain to the McDonald Gold Project which would require the Company,
after a period of approximately seventeen months, to commence paying a delay
rental of $150,000 per month in order to maintain the leases. In February
2000, pursuant to its September 1998 decision, the DNRC determined that the
primary terms of the mineral leases had expired. The Company appealed the
action of the DNRC in an administrative hearing process and the 25




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##### Table of Contents



DNRC Hearing Examiner affirmed the DNRC action. It is the Companys
position that the permitting process has been interrupted by the threat and
passage of I-137 and, thus, the permit extension is continued until the
governmental impediment is resolved. As part of the I-137 lawsuit filed in
April 2000 against the State of Montana, the Company asked the court to review
and invalidate the DNRCs action, however, the court, in its December 9, 2002
order as described in the preceding paragraph, denied the Companys petition
for judicial review. On January 14, 2003, the Company filed an appeal with the
Montana State Supreme Court. Oral arguments were heard by the Montana State
Supreme Court on October 28, 2003. The Company expects a ruling during 2004. The proposed new initiative, I-147, described above contains a provision
which, if enacted, would restore all contractual interest or right in a mineral
estate which was diminished or lost as a consequence of the enactment of I-137
to the same rights at the date of the enactment of I-137 (November 3, 1998).
Since the state mineral leases were in full force and effect on November 3,
1998, the proposed new initiative, if qualified for the ballot and then enacted
by citizen vote in November 2004, would restore the state mineral leases to
full validity. Kendall Mine  Lawsuit and Preliminary Injunction In October 2001, a Plaintiff group filed suit in Montana District Court
against the Company and its wholly-owned subsidiary, CR Kendall Corporation,
alleging violation of water rights and other torts in connection with the
operation of the Kendall Mine. The Complaint seeks unspecified damages and
punitive damages. The Company believes the allegations are completely without
merit and that the Company will prevail in this matter. In August 2002, a Preliminary Injunction was issued in Montana District
Court on behalf of the Plaintiff group in connection with the Companys auction
of certain mineral rights and fee lands in western Montana. In October 2002,
the Court issued a Supplemental Order which will sequester up to $528,000
of any proceeds realized from the auction until such time as the lawsuit is
concluded. As of March 31, 2004, $267,800 had been remitted to the Court as
required by the Order. Including interest earned on the funds remitted, the
Court held $272,100 as of March 31, 2004. Recently Issued Financial Accounting Standards: In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, Consolidation of Variable Interest Entities, (FIN No.
46) which provides guidance on the identification and reporting for entities
over which control is achieved through means other than voting rights. FIN No.
46 defines such entities as variable interest entities (VIEs). A FASB
Staff Position (FSP) issued in
October 2003 deferred the effective date of FIN No. 46 to the first interim or
annual period ending after December 15, 2003 for entities created before
February 1, 2003 if certain criteria are met. Subsequently, during December
2003, the FASB issued a revision to FIN No. 46 (FIN No. 46R) which replaces the
original interpretation. Application of this revised interpretation is required
in financial statements for companies that have interests in VIEs or potential
VIEs commonly referred to as special-purpose entities created after December
15, 2003. Application for entities created before January 1, 2004 is required
in financial statements for periods ending after March 15, 2004. The Company
believes it has no such variable interest entities and as a result FIN No. 46
did not have an impact on the Companys financial position, results of
operations, or cash flows. The Emerging Issues Task Force (EITF) formed a committee (Committee) to
evaluate certain mining industry accounting issues, including issues arising
from the application of SFAS No. 141, Business Combinations(SFAS No. 141) and
SFAS No. 142, Goodwill and Other Tangible Assets(SFAS No. 142) to business
combinations within the mining industry, accounting for goodwill and other
intangibles and the capitalization of costs after the commencement of
production, including deferred stripping. The issues discussed also included
whether mineral interests conveyed by leases represent tangible or intangible
assets and the amortization of such assets. In March 2004, the EITF reached a
consensus, subject to ratification by the FASB, that mineral interests conveyed
by leases should be considered tangible assets. The EITF also reached a
consensus, subject to ratification by the FASB, on other mining related issues
involving impairment and business combinations. 26




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##### Table of Contents



On March 31, 2004, the FASB ratified the consensus of the EITF on other
mining related issues involving impairment and business combinations. This did
not have an impact to the Companys financial statements since it did not
change the Companys accounting. The FASB also ratified the consensus of the
EITF that mineral interests conveyed by leases should be considered tangible
assets subject to the finalization of a FSP in this
regard. On April 30, 2004, the FASB issued a FSP amending SFAS No. 141 and SFAS
No. 142 to provide that certain mineral use rights are considered tangible
assets and that mineral use rights should be accounted for based on their
substance. The FSP is effective for the first reporting period beginning after
April 29, 2004, with early adoption permitted. The Company is presently
evaluating the impact that adoption of the FSP will have on its financial
position, results of operations, and cash flows. The Committee is continuing its evaluation of mining industry accounting
issues, which may have an impact on the Companys accounting in the future. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk Commodity Prices The Companys earnings and cash flow are significantly impacted by changes
in the market price of gold. Gold prices can fluctuate widely and are affected
by numerous factors, such as demand, production levels, economic policies of
central banks, producer hedging, and the strength of the U.S. dollar relative
to other currencies. During the last five years, the average annual market
price has fluctuated between $271 per ounce and $364 per ounce. At March 31, 2004, future production from the Companys Briggs Mine was
unhedged. At current production levels, a $10 per ounce change in the price of
gold will impact the Companys annual profitability and cash flow by
approximately $0.3 million. Interest Rates At March 31, 2004, the Companys debt was approximately $3.7 million of
which $2.7 million relates to its 6% convertible debentures and $1.0 million
relates to a fixed rate (6.75%) financing of a lease buy-out of the mining
fleet at the Briggs Mine. Thus, the Company is not presently subject to
interest rate risk. Foreign Currency The price of gold is denominated in U.S. dollars, and the Companys gold
production operations are in the United States. The Company conducts only a
minor amount of exploration activity in foreign countries and has minimal
foreign currency exposure. 
 Item 4. Controls and Procedures The Companys disclosure controls and procedures are designed to provide
reasonable assurance that the information required to be disclosed in our
Exchange Act reports are recorded, processed, summarized and reported as
specified in the SECs rules. Disclosure controls and procedures are designed
with the objective that information is accumulated and communicated to the
Companys management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow for timely decisions regarding required
disclosures. However, any system of controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance that the objective
of the system are met and management necessarily is required to apply its
judgment in evaluating the cost benefit relationship of possible controls and
procedures. 27




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The Companys management, including our principal executive and financial
officers have evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities and Exchange Act of 1934) as of the end of the period
covered by this first quarter report on Form 10-Q/A for March 31, 2004. At the
time of this evaluation, we were aware of the following weaknesses related to
our internal control over financial reporting and as a result have concluded
that the Companys disclosure controls and procedures were not effective as of
March 31, 2004. During the review of the financial statements for the first quarter ending
March 31, 2004 PricewaterhouseCoopers, our independent registered public
accountants, identified and communicated to the Company and its Audit Committee
a material weakness which is also a reportable condition (as defined under
standards established by the American Institute of Certified Public Accountants
(AICPA)) relating to the Companys internal controls and procedures over its
financial reporting for stock option plans. In response thereto, the Company
performed a review of all stock option plans and the method of all related
stock option exercises by employees since the plans inception in 1982. This
review identified that a minority (approximately 25%) of the employee stock
options were exercised using the share withholding method for payment of the
exercise price. Based on this review, the Company determined that the stock
option plans would have to be recorded in the financial statements under
variable plan accounting, which resulted in the restatement filed as Amendment
No. 1 to Form 10-K/A. During the review of the financial statements for the second quarter
ending June 30, 2004, PricewaterhouseCoopers communicated with both the
Company and its Audit Committee that the method used for testing possible
impairment of the Briggs Mine may be inappropriate. After an evaluation of the
method, the Company determined that it inappropriately included ounces
recovered from the leach pad inventory. The Company changed its model using
only projected ounces from in-ground reserves which resulted in earlier and
more frequent impairments than had previously been recorded. The Company also
determined that the following items should have been reported differently: 1) a
loan made to a private exploration company, the proceeds of which were used for
exploration, should have been accounted for as an exploration expense; 2) the
cost of restricted shares issued under a contract for services should have been
recorded at fair market value at the time the contract was executed and or
amended; 3) a beneficial conversion feature and related amortization expense
should have been recognized with regards to a private placement of a
convertible debenture for certain subscribers that executed the subscription
agreement on a date when the conversion price was lower than the market price
of the Companys common stock. The items discussed in the preceding paragraphs constitute material
weaknesses in internal controls as defined by the standards established by the
AICPA. A material weakness is a reportable condition in which the design or
operation of one or more internal control components does not reduce to a
relatively low level the risk that errors or fraud in amounts that would be
material in relation to the financial statements being audited may occur and
not be detected within a timely period by employees in the normal course of
performing their assigned functions. The Company believes that the material
weaknesses resulted from:  1.
    
    insufficient review of the method used for testing the
impairment of the Briggs Mine;2.
    
    insufficient analysis, documentation and review of the
selection and application of generally accepted accounting principles
related to complex transactions. Our Audit Committee held a meeting with management and the independent
registered public accountants and determined that the Companys financial
statements for 2003 and prior periods and quarterly period ended March 31,
2004, should be restated. The restatement of the Companys financial statements
contained in this Form 10-Q/A are described in Part I, Item 2, Managements
Discussion and Analysis of Financial Condition and Results of Operations under
Restatement of Financial Information, and in Note 12 of the Notes to the
Interim Consolidated Financial Statements included in Part I, Item 1. We have undertaken the following initiatives with respect to our internal
controls and procedures in order to address the material weakness. 28




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##### Table of Contents



1.
    
    adding additional staff at the corporate controller level,2.
    
    scheduled training for accounting staff to heighten awareness
of generally accepted accounting principles,3.
    
    hired outside consultants to document our accounting processes
and identify areas that require control or process improvements, and4.
    
    implementation of initial recommendations by the outside consultants. In connection with the identified internal control weaknesses, we have
performed substantial additional procedures to confirm that the financial
information fairly presents our operating results and financial condition for
the periods presented, therefore our principal executive and financial officers
have concluded that our disclosure controls and procedures were effective as of
October 25, 2004. 29




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##### Table of Contents



PART II OTHER INFORMATION 
 Item 1. Legal Proceedings No material changes. 
 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities During the first three months of 2004, the Company issued 52,300
unregistered shares of its $0.01 par value common stock as compensation
for services to a single sophisticated employee, John C. Doody. The
shares were issued pursuant to the exemption provided by Section 4(2)
of the Securities and Exchange Act of 1933, as amended. 
 Item 3. Defaults Upon Senior Securities
    
    None
 
 Item 4. Submission of Matters to Vote of Security Holders
    
    None
 
 Item 5. Other Information
    
    None
 
 Item 6(a) Exhibits Exhibits, as required by Item 601 of Regulation S-K, are listed on
pages 31 - 32. The exhibit numbers correspond to the numbers assigned
in Item 601 of Regulation S-K. Item 6(b) Reports on Form 8-K A report on Form 8-K was filed under date of March 2, 2004 concerning
the Companys financial results for the fiscal year ended December 31,
2003. 30




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##### Table of Contents



EXHIBITNUMBER
    
    DESCRIPTION3.1
    
    
    Articles of Incorporation of the Company, as amended (1)3.1.1
    
    
    Executed Certificate of Designations, dated December 26, 1990, as
filed with the Delaware Secretary of State on December 26, 1990 (2)3.2
    
    
    Bylaws of the Company, as amended (3)4.1
    
    
    Specimen Common Stock Certificate (4)4.2
    
    
    Specimen Warrant Certificate (5)4.4
    
    
    Rights Agreement dated March 20, 1997, between Canyon Resources
Corporation and American Securities Transfer & Trust, Inc. (6)4.5
    
    
    Specimen Debenture (7)10.1
    
    
    Change of Control Agreements, dated December 6, 1991, between the
Company and Richard H. De Voto and Gary C. Huber (8)10.2
    
    
    Loan Agreement dated December 6, 1995, among CR Briggs Corporation as
Borrower and Banque Paribas as Agent (9)10.2.1
    
    
    Amendment No. 1 to Loan and Guarantee Agreements dated April 8, 1998,
among CR Briggs Corporation, Canyon Resources Corporation, and Banque
Paribas as Agent (10)10.2.2
    
    
    Amendment No. 2 to Loan and Guarantee Agreements dated August 19,
1998, among CR Briggs Corporation, Canyon Resources Corporation, and
Banque Paribas as Agent (10)10.2.3
    
    
    Amendment No. 3 to Loan Agreement and Waiver dated July 8, 1999, among
CR Briggs Corporation and Banque Paribas as Agent (11)10.2.4
    
    
    Amendment No. 4 to Loan Agreement and Waiver dated March 26, 2001,
among CR Briggs Corporation and BNP Paribas, as successor-in-interest to
Banque Paribas as Agent (12)10.2.5
    
    
    Amendment No. 5 to Loan Agreement and Waiver dated March 25, 2002,
among CR Briggs Corporation, Canyon Resources Corporation, and Banque
Paribas, as Agent (13)10.2.6
    
    
    Amendment No. 6 to Loan Agreement and Waiver dated June 14, 2002,
among CR Briggs Corporation and BNP Paribas, as successor-in-interest to
Banque Paribas as Agent (14)10.3
    
    
    Master Tax Lease dated December 27, 1995, between CR Briggs
Corporation and Caterpillar Financial Services Corporation (9)10.4
    
    
    Purchase Agreement dated September 25, 1997, between Phelps Dodge
Corporation, acting through its division, Phelps Dodge Mining Company,
and CR Montana Corporation and Canyon Resources Corporation (15)10.4.1
    
    
    Second Amendment and Supplement to Purchase Agreement dated September
17, 1999, between Phelps Dodge Corporation, acting through its division,
Phelps Dodge Mining Company, CR Montana Corporation and Canyon Resources
Corporation, and Seven-Up Pete Joint Venture (11)10.5
    
    
    Assignment of Royalty Proceeds, effective as of April 1, 2001,
between Canyon Resources Corporation and Franco-Nevada Mining
Corporation, Inc. (16)31.1*
    
    
    Certification of Chief Executive Officer pursuant to Rule
13(a)-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2*
    
    
    Certification of Chief Financial Officer pursuant to Rule
13(a)-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1*
    
    
    Certification of Chief Executive Officer pursuant to U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
200232.2*
    
    
    Certification of Chief Financial Officer pursuant to U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
 * Filed herewith 31




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##### Table of Contents



(1)
    
    Exhibit 3.1 is incorporated by reference from Exhibit 3.1(a) to the
Companys Amended Annual Report on Form 10-K/A for the fiscal year
ended December 31, 2000.(2)
    
    Exhibit 3.1.1 is incorporated by reference from Exhibit 4 of the
Companys Report on Form 8-K filed with the Securities and Exchange
Commission on December 26, 1990.(3)
    
    Exhibit 3.2 is incorporated by reference from Exhibit 3.2 of the
Companys Annual Report on Form 10-K for the fiscal year ended December
31, 1997.(4)
    
    Exhibit 4.1 is incorporated by reference from the Companys
Registration Statement on Form 8-A as declared effective by the
Securities and Exchange Commission on March 18, 1986.(5)
    
    Exhibit 4.2 is incorporated by reference from Exhibit 4.2 of the
Companys Quarterly Report on Form 10-Q for the three months ended March
31, 2002.(6)
    
    Exhibit 4.4 is incorporated by reference from Exhibit 4 of the
Companys Report on Form 8-K filed with the Securities and Exchange
Commission on March 27, 1997.(7)
    
    Exhibit 4.5 is incorporated by reference from Exhibit 4.5 of the
Companys Annual Report on Form 10-K for the fiscal year ended December
31, 2002.(8)
    
    Exhibit 10.1 is incorporated by reference from Exhibit 10.20 of the
Companys Annual Report on Form 10-K for the fiscal year ended December
31, 1992.(9)
    
    Exhibits 10.2 and 10.3 are incorporated by reference from Exhibits
4.9, 4.10, 10.22 and 10.23 of the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 1995.(10)
    
    Exhibits 10.2.1 and 10.2.2 are incorporated by reference from
Exhibits 10.2.1 and 10.2.2 of the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 1998.(11)
    
    Exhibits 10.2.3 and 10.4.1 are incorporated by reference from
Exhibits 10.2.3 and 10.4.1 of the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 1999.(12)
    
    Exhibit 10.2.4 is incorporated by reference from Exhibit 10.2.4 of
the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2000.(13)
    
    Exhibit 10.2.5 is incorporated by reference from Exhibit 10.2.5 of
the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2001.(14)
    
    Exhibit 10.2.6 is incorporated by reference from Exhibit 10.2.6 of
the Companys Quarterly Report on Form 10-Q for the period ended June
30, 2002.(15)
    
    Exhibit 10.4 is incorporated by reference from Exhibit 2 of the
Companys Report on Form 8-K filed with the Securities and Exchange
Commission on October 9, 1997.(16)
    
    Exhibit 10.5 is incorporated by reference from Exhibit 1.1 of the
Companys Report on Form 8-K filed with the Securities and Exchange
Commission on October 9, 2001. 32




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##### Table of Contents



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. CANYON RESOURCES CORPORATIONDate: October 25, 2004
    
    /s/ Richard H. De VotoRichard H. De VotoPresidentDate: October 25, 2004
    
    /s/ Gary C. HuberGary C. HuberVice President-Finance
 33




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##### Table of Contents



Index to Exhibits EXHIBITNUMBER
    
    DESCRIPTION3.1
    
    
    Articles of Incorporation of the Company, as amended (1)3.1.1
    
    
    Executed Certificate of Designations, dated December 26, 1990, as
filed with the Delaware Secretary of State on December 26, 1990 (2)3.2
    
    
    Bylaws of the Company, as amended (3)4.1
    
    
    Specimen Common Stock Certificate (4)4.2
    
    
    Specimen Warrant Certificate (5)4.4
    
    
    Rights Agreement dated March 20, 1997, between Canyon Resources
Corporation and American Securities Transfer & Trust, Inc. (6)4.5
    
    
    Specimen Debenture (7)10.1
    
    
    Change of Control Agreements, dated December 6, 1991, between the
Company and Richard H. De Voto and Gary C. Huber (8)10.2
    
    
    Loan Agreement dated December 6, 1995, among CR Briggs Corporation as
Borrower and Banque Paribas as Agent (9)10.2.1
    
    
    Amendment No. 1 to Loan and Guarantee Agreements dated April 8, 1998,
among CR Briggs Corporation, Canyon Resources Corporation, and Banque
Paribas as Agent (10)10.2.2
    
    
    Amendment No. 2 to Loan and Guarantee Agreements dated August 19,
1998, among CR Briggs Corporation, Canyon Resources Corporation, and
Banque Paribas as Agent (10)10.2.3
    
    
    Amendment No. 3 to Loan Agreement and Waiver dated July 8, 1999, among
CR Briggs Corporation and Banque Paribas as Agent (11)10.2.4
    
    
    Amendment No. 4 to Loan Agreement and Waiver dated March 26, 2001,
among CR Briggs Corporation and BNP Paribas, as successor-in-interest to
Banque Paribas as Agent (12)10.2.5
    
    
    Amendment No. 5 to Loan Agreement and Waiver dated March 25, 2002,
among CR Briggs Corporation, Canyon Resources Corporation, and Banque
Paribas, as Agent (13)10.2.6
    
    
    Amendment No. 6 to Loan Agreement and Waiver dated June 14, 2002,
among CR Briggs Corporation and BNP Paribas, as successor-in-interest to
Banque Paribas as Agent (14)10.3
    
    
    Master Tax Lease dated December 27, 1995, between CR Briggs
Corporation and Caterpillar Financial Services Corporation (9)10.4
    
    
    Purchase Agreement dated September 25, 1997, between Phelps Dodge
Corporation, acting through its division, Phelps Dodge Mining Company,
and CR Montana Corporation and Canyon Resources Corporation (15)10.4.1
    
    
    Second Amendment and Supplement to Purchase Agreement dated September
17, 1999, between Phelps Dodge Corporation, acting through its division,
Phelps Dodge Mining Company, CR Montana Corporation and Canyon Resources
Corporation, and Seven-Up Pete Joint Venture (11)10.5
    
    
    Assignment of Royalty Proceeds, effective as of April 1, 2001,
between Canyon Resources Corporation and Franco-Nevada Mining
Corporation, Inc. (16)31.1*
    
    
    Certification of Chief Executive Officer pursuant to Rule
13(a)-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2*
    
    
    Certification of Chief Financial Officer pursuant to Rule
13(a)-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1*
    
    
    Certification of Chief Executive Officer pursuant to U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
200232.2*
    
    
    Certification of Chief Financial Officer pursuant to U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
 * Filed herewith




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##### Table of Contents



(1)
    
    Exhibit 3.1 is incorporated by reference from Exhibit 3.1(a) to the
Companys Amended Annual Report on Form 10-K/A for the fiscal year
ended December 31, 2000.(2)
    
    Exhibit 3.1.1 is incorporated by reference from Exhibit 4 of the
Companys Report on Form 8-K filed with the Securities and Exchange
Commission on December 26, 1990.(3)
    
    Exhibit 3.2 is incorporated by reference from Exhibit 3.2 of the
Companys Annual Report on Form 10-K for the fiscal year ended December
31, 1997.(4)
    
    Exhibit 4.1 is incorporated by reference from the Companys
Registration Statement on Form 8-A as declared effective by the
Securities and Exchange Commission on March 18, 1986.(5)
    
    Exhibit 4.2 is incorporated by reference from Exhibit 4.2 of the
Companys Quarterly Report on Form 10-Q for the three months ended March
31, 2002.(6)
    
    Exhibit 4.4 is incorporated by reference from Exhibit 4 of the
Companys Report on Form 8-K filed with the Securities and Exchange
Commission on March 27, 1997.(7)
    
    Exhibit 4.5 is incorporated by reference from Exhibit 4.5 of the
Companys Annual Report on Form 10-K for the fiscal year ended December
31, 2002.(8)
    
    Exhibit 10.1 is incorporated by reference from Exhibit 10.20 of the
Companys Annual Report on Form 10-K for the fiscal year ended December
31, 1992.(9)
    
    Exhibits 10.2 and 10.3 are incorporated by reference from Exhibits
4.9, 4.10, 10.22 and 10.23 of the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 1995.(10)
    
    Exhibits 10.2.1 and 10.2.2 are incorporated by reference from
Exhibits 10.2.1 and 10.2.2 of the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 1998.(11)
    
    Exhibits 10.2.3 and 10.4.1 are incorporated by reference from
Exhibits 10.2.3 and 10.4.1 of the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 1999.(12)
    
    Exhibit 10.2.4 is incorporated by reference from Exhibit 10.2.4 of
the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2000.(13)
    
    Exhibit 10.2.5 is incorporated by reference from Exhibit 10.2.5 of
the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2001.(14)
    
    Exhibit 10.2.6 is incorporated by reference from Exhibit 10.2.6 of
the Companys Quarterly Report on Form 10-Q for the period ended June
30, 2002.(15)
    
    Exhibit 10.4 is incorporated by reference from Exhibit 2 of the
Companys Report on Form 8-K filed with the Securities and Exchange
Commission on October 9, 1997.(16)
    
    Exhibit 10.5 is incorporated by reference from Exhibit 1.1 of the
Companys Report on Form 8-K filed with the Securities and Exchange
Commission on October 9, 2001.