As filed with the Securities and Exchange Commission March 26, 1996.
SEC File No. ________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
Registration Statement Under Securities Act of 1933
U.S. ENERGY CORP.
-------------------
(Exact Name of registrant as specified in its charter)
Wyoming 83-0205516
- ------------------------------------ ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
877 North 8th West, Riverton, Wyoming 82501, Tel. 307/856-9271
-------------------------------------------------------------------
(Address and telephone of registrant's principal executive offices)
Daniel P. Svilar (same address and telephone number)
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(Name, address and telephone of agent for service of process)
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement is declared effective.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933,or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. _____
If any of the securities being registered on this Form are being
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered in connection
with dividend or interest reinvestment plans, check the following box.
X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offerings.
_____
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. _____
<PAGE>
Calculation of Registration Fee
Title of each Proposed Proposed
class of maximum maximum Amount
securities Amount offering aggregate of
to be to be price offering regis.
registered registered per share price fee
Common stock, 457,780 $17.25(2) $7,896,705(2) $2,723
par value shares(1)
$0.01 per share
Warrants 200,000(3) N/A N/A -0-
to purchase
common stock
Common stock, 200,000(4) $17.25(2) $3,450,000 $1,190
par value ---------- ------
$0.01 per share
Totals $11,346,705 $3,913
----------- ------
----------- ------
(1) Shares registered are held by certain shareholders of
Registrant and are being registered for public resale.
(2) Pursuant to Rule 457(c), the registration fee is based on the
last sale price of Registrant's common stock on NASDAQ/NMS on March
25, 1996.
(3) Held by Shamrock Partners, Ltd.
(4) Issuable on exercise of warrants held by Shamrock Partners,
Ltd.
<PAGE>
Information contained herein is subject to completion or amendment.
A Registration Statement relating to these securities has been
filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior
to the time this Registration Statement becomes effective. This
Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of the
securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such State.
Prospectus Subject to Completion
March 26, 1996
U.S. ENERGY CORP.
657,780 COMMON SHARES
__________________________________________
457,780 shares of common stock, par value $0.01 per share (the
"Placement Shares"), are offered for sale by certain shareholders
of U.S. Energy Corp. ("USE", the "Company" or "Registrant"), a
Wyoming corporation. The holders thereof are referred to as
"Selling Shareholders". The Selling Shareholders purchased 343,333
Placement Shares from USE as part of a private placement of 400,000
shares of USE common stock in fiscal 1995. The Brunton Company
("Brunton") purchased the remaining 56,667 shares of USE common
stock in that private placement, but is not a participant in this
offering. The entire 400,000 shares of USE common stock originally
purchased were redeemable in August 1995 by USE paying cash
therefor ($3.50 per share); however, in lieu of cash redemption,
USE had the right to issue one additional share of its common stock
for every three shares of such USE common stock originally
purchased. In the second quarter of fiscal 1996, USE elected to
issue an additional 133,336 shares of its common stock to the
holders of the 400,000 shares of USE common stock originally
purchased, in lieu of paying cash redemptions. The Selling
Shareholders acquired 114,447 of these additional shares of USE
common stock in lieu of redemption in cash and such additional
shares are covered by this Prospectus. These additional shares,
while resulting in a slight dilution in the voting power of
Registrant's outstanding shareholders, enabled USE to not pay
$1,400,000 in cash from its working capital, which amount would
have been required to redeem the original shares of its common
stock in cash.
Warrants to purchase 200,000 shares of USE common stock
("Warrants"), and the 200,000 shares underlying the Warrants, are
being registered by the filing of the Registration Statement (of
which this Prospectus is a part). The Warrants were issued to
Shamrock Partners, Ltd. ("Shamrock") by USE on March 26, 1996
pursuant to a consulting agreement dated January 9, 1996 as payment
for financial consulting and advisory services. See "Material
Changes." The Warrants are exercisable until January 9, 1997, for
$5.00 per share. By filing this Registration Statement with the
Commission under the 1933 Act, USE has registered the Warrants, and
the shares underlying the Warrants, for sale to the public by
Shamrock, but the Warrants are subject to a one year lockup, and
therefore are not transferable without the approval of USE. As of
March 26, 1996 none of the Warrants have been exercised.
Hereafter, unless otherwise indicated, the Placement Shares and the
200,000 shares of USE common stock underlying the Warrants are
collectively referred to as the "Shares", and the term "Selling
Shareholders" includes the holders of shares issuable on exercise
of the Warrants.
The Shares constitute approximately 10% of the outstanding shares
of USE common stock on the date of this Prospectus on a pro forma
basis assuming exercise of the Warrants. The Shares have been
registered for sale to the public by the Selling Shareholders, by
the filing of the Registration Statement (of which this Prospectus
is a part) with the Securities and Exchange Commission
("Commission") under the Securities Act of 1933, as amended ("1933
Act"). None of the foregoing shares of USE common stock acquired
by Brunton in the fiscal 1995 private placement are being
registered under this Registration Statement and there are no plans
to register for resale those Brunton shares, or any of the other
shares of USE common stock that had been held by Brunton prior to
its sale to Silva Production AB (see "Material Changes").
Common stock of USE is traded on the NASDAQ/NMS quotation system.
At March 25, 1996, the closing bid price was $17.25 per share.
The Shares will be offered by the Selling Shareholders, at market
prices from time to time. Selling commissions will be paid by the
Selling Shareholders for Shares sold by them. No sales proceeds
will be paid to the Company or any subsidiary of the Company. See
"Plan of Distribution." Proceeds from exercise of the Warrants
will be used by the Company for working capital.
_______________________________________________
These are Speculative Securities.
Such Securities Involve a High Degree of Risk.
See "Risk Factors" starting on page 9.
_______________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, OR ANY
STATE SECURITIES COMMISSION, PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_____________________________________________________
The date of this Prospectus is March _____, 1996.
_____________________________________________________
<PAGE>
No one is authorized to give any information, or make any
representation on behalf of USE, or the Selling Shareholders, or
any of them, if not contained or incorporated by reference in this
Prospectus and if given or made, such information or representation
must not be relied upon as having been authorized by USE, or any of
the Selling Shareholders. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to purchase, the
securities offered hereby, by any person in any jurisdiction in
which such an offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do
so, or to any person to whom it is unlawful to make such an offer
or solicitation.
Neither delivery of this Prospectus nor sale of the securities
offered hereby, shall create an implication that there has been no
change in the information set forth herein since date of this
Prospectus.
AVAILABLE INFORMATION
USE is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other statements and
information with the Commission. The reports and other documents
so filed can be inspected and copied at the Commission's public
reference room located at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's public reference
facilities at Commission regional offices located at: 7 World Trade
Center, 13th Floor, New York, New York 10048; and Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such documents can be obtained at
prescribed rates by writing to the Securities and Exchange
Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
This Prospectus does not contain all of the information set forth
in the Registration Statement and its exhibits, covering the Common
Shares offered hereby, certain portions of which have been omitted
pursuant to Commission rules and regulations. Each statement made
in this Prospectus concerning a document filed as an exhibit to the
Registration Statement, is qualified in its entirety by reference
to such exhibit for a complete statement of its provisions. Any
interested party may inspect the Registration Statement (and any
amendments thereto) and its exhibits, without charge, at the public
reference facilities of the Commission at its offices as stated
above.
<PAGE>
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
This Prospectus incorporates by reference documents not presented
herein or delivered herewith. Documents relating to USE are
available without charge upon request to Secretary, U.S. Energy
Corp., 877 North 8th West, Riverton, Wyoming 82501. Telephone
requests may be directed to Sharon Miller at (307) 856-9271.
The following documents filed with the Commission by USE
(Commission File No. 0-6814) are incorporated herein by reference:
(a) Annual Report on Form 10-K for fiscal year ended May 31, 1995;
(b) Quarterly Reports on Form 10-Q for the quarters ended August
31, 1995 and November 30, 1995; (c) Proxy Statement for Annual
Meeting held on November 29, 1995; (d) Report on Form 8-K as of
February 16, 1996; (e) Registration Statement on Form 10 filed with
the Commission on January 23, 1973 registering the Company's common
stock class under Section 12(g) of the Exchange Act; and (f) Annual
Report on Form 10-K filed with the Commission in September 1992
(which Annual Report had filed as an exhibit an amendment to the
USE Articles of Incorporation).
All documents filed by USE under Section 13(a) or 13(b), or Section
14 of the Exchange Act subsequent to date of this Prospectus and
prior to the termination date of the offering shall be deemed to be
incorporated herein by reference and to be a part hereof from the
date of such filing. Any statement contained herein or in a
document all or a portion of which is incorporated by reference, or
deemed to be incorporated herein by reference, shall be deemed to
be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is, or is deemed to be,
incorporated herein by reference modifies or supersedes such
statement. Any such statement so modified or superseded shall not
be deemed to constitute a part of this Prospectus, except as so
modified or superseded.
SUMMARY OF THE OFFERING
The following summary is not intended to be complete and is
qualified in all respects by the more detailed information included
elsewhere in this Prospectus or contained in documents which are
incorporated by reference into this Prospectus. See "Incorporation
of Certain Documents by Reference."
<PAGE>
The Company
U.S. Energy Corp. ("USE", the "Company" or "Registrant") is in the
general minerals business of acquiring, developing, exploring
and/or selling or leasing of mineral properties and, from time to
time, mining and marketing of minerals. USE is now engaged in two
principal mineral sectors: uranium and gold. Interests are held in
other mineral properties (principally molybdenum), but are either
non-operating interests or undeveloped claims. Its minerals
business with respect to uranium and gold can be characterized as
in the development stage according to the Commission's definition
of that term. USE also carries on a small oil and gas operation.
Other USE business segments on the date of this Prospectus are
commercial operations (real estate and general aviation) and
construction operations.
Most USE operations are conducted through a joint venture with
Crested Corp. a majority-owned Colorado corporation ("Crested"),and
various joint subsidiaries of USE and Crested. The joint venture
with Crested is hereafter referred to as "USECC." Construction
operations are carried on primarily through USE's 50.9% subsidiary
Four Nines Gold, Inc. ("FNG"). Manufacturing and/or marketing of
professional and recreational outdoor products was conducted
through The Brunton Company ("Brunton"), a wholly-owned USE
subsidiary that was sold in February 1996. USE and Crested also
own limited oil and gas operations in Montana and Wyoming, which
are carried on through Energx, Ltd.("Energx"), a 90% subsidiary of
the Company and Crested.
On February 16, 1996 Registrant sold all of the shares of Brunton
to Silva Production AB for $4,300,000 plus 45% of the net profits
before taxes derived from the sale of Brunton products for four
years and three months (see "Material Changes" for details of this
sale transaction, and Risk Factor 2 for information on the impact
of this transaction).
The sale will eliminate Brunton's manufacturing and/or marketing of
professional and recreational outdoor products from the commercial
segment of Registrant's business, except to the extent that there
are net profit payments from Silva over the next four years and
three months, of which there can be no assurance. For the fiscal
year ended May 31, 1995 and for the six months ended November 30,
1995, Brunton's sales provided 49% and 29%, respectively, of net
revenues of USE.
On the other hand, the February 1996 receipt of approximately
$2,900,000 in net cash from the sale (and future payments on
Silva's $1,000,000 promissory note and any profits payments) will
enhance the Company's financial condition and medium term liquidity
as well as providing additional resources to put the Company's
Plateau uranium mill into operation and develop the Company's
uranium and gold properties.
<PAGE>
The sale was prompted in part by Registrant's desire to focus on
its core business of acquiring and developing mineral properties
and mining and marketing minerals, particularly uranium and gold.
Registrant plans to consolidate all of its uranium assets into a
single subsidiary and finance the startup of its mines and mill
operations with debt or equity funding. Of course, there can be no
assurance uranium prices will remain at their current level, that
Registrant will succeed in its efforts to obtain long-term uranium
supply contracts required to operate its uranium properties
profitably, or that the required financing will be available to put
such properties into operation.
Reference is made to the Form 8-K Report dated February 16, 1996
(incorporated by reference into this Prospectus), which contains
USE's pro forma condensed consolidated balance sheet as of November
30, 1995, and pro forma condensed consolidated income statements
for the six months then ended, and for the year ended May 31, 1995,
in both instances giving effect to the Brunton sale as if effected
at the beginning of such periods. See also Risk Factor 2.
USE was incorporated in Wyoming in 1966. All operations are in the
United States. Principal executive offices are located at 877
North 8th West, Riverton, Wyoming 82501, telephone (307) 856-9271.
USE and Crested originally were independent companies, with two
common affiliates (John L. Larsen and Max T. Evans). In 1980, USE
and Crested formed a joint venture to do business together (unless
one or the other elected not to pursue an individual project). As
a result of USE funding certain of Crested's obligations from time
to time (due to Crested's lack of cash on hand), and later payment
of the debts by Crested issuing common stock to USE, Crested became
a majority owned subsidiary of USE in fiscal 1993.
Except for approximately 1,400 ounces of gold recovered in fiscal
1992 in a bulk sampling program at the Sutter gold property in
California, USE has not received revenues from the mining of either
uranium or gold during its five fiscal years ended May 31, 1995.
Mineral revenues have been received from sales of mineral
properties, advance royalties in respect of the Company's interests
in an undeveloped molybdenum property that was sold to AMAX Inc. in
1980, and from sales of uranium under certain of the utility supply
contracts held by Sheep Mountain Partners ("SMP", a partnership),
by USE and Crested delivering their one-half share or all of the
uranium and receiving sales proceeds therefrom. The majority of
profits on these deliveries have been retained by SMP in an
interest bearing account which is to be distributed by a panel of
arbitrators. In the future, such uranium contract revenues could
be affected by the outcome of the SMP litigation/arbitration (see
"Risk Factor 3 - Litigation/Arbitration - Sheep Mountain Partners")
because gross revenues from future performance of all the SMP
contracts are expected to flow to the prevailing parties, USE and
Crested, or Cycle Resource Investment Corporation ("CRIC") and its
parent Nukem, Inc. ("Nukem"). Regardless of the outcome of such
proceedings, however, commencement of uranium mining at Green
Mountain, Wyoming and/or Ticaboo, Utah may result in utility supply
contracts for Green Mountain Mining Venture ("GMMV"), of which USE
and Crested are joint venture partners with Kennecott Uranium
Company, and/or Plateau Resources Limited ("Plateau"), a subsidiary
of USE. There can be no assurance such mining operations will
commence, or that new utility supply contracts will result.
For a discussion of why revenues from mineral sales decreased in
the fiscal year ended May 31, 1995, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Results of Operations for Fiscal 1995 Compared to Fiscal 1994, in
Registrant's Form 10-K, for fiscal year ended May 31, 1995 ("1995
Form 10-K")." For operating results for the six months ended
November 30, 1995, see "Material Changes."
Risk Factors
An investment in the Shares involves substantial risks, including
the risks of USE's failure to obtain necessary capital to put its
principal properties into production, a recurrence of low uranium
prices, litigation and competition. See "RISK FACTORS" beginning
on the next page.
The Offering
Securities Offered (1). . . . . 657,780 Shares of common stock(2)
USE Common Stock Outstanding
Before and After Offering . . . . . .. . . 6,619,708 shares(3)
NASDAQ/NMS Symbol . . . . . . . . . . . . . . . . . . . . "USEG"
________________
(1) See "Description of Securities." (2) See "Plan of
Distribution." (3) Assumes 40,621 warrants to purchase USE common
stock that were issued to Robert Long ("Long"), an officer of RAF
Financial Corporation ("RAF"), in July 1996 and are exercisable
until July 25, 2000 for $4.80 per share of USE common stock (the
"Warrants") are exercised by Long. As of March 7, 1996, the 40,622
Warrants issued to RAF Financial Corporation had been exercised,
but the 40,621 Warrants issued to Robert Long had not been
exercised. The Warrants and 81,243 shares of USE common stock
underlying the Warrants are part of the 893,695 shares of USE
common stock registered for resale under the Company's Registration
Statement on From S-3 on file with the Commission (SEC File No. 33-
64773), which became effective on February 28, 1996 (see Risk
Factor 5). (4) Includes 200,000 shares of USE common stock
issuable on exercise of Warrants issued to Shamrock Partners, Ltd.
See "Material Changes - Investment Banking Consultant Agreement."
<PAGE>
RISK FACTORS
Prospective investors should note that the business of USE is
subject to certain risks, including the following:
1. Working Capital Requirements. USE's cash requirements for
fiscal 1996 are the funding of on-going general and administrative
expenses, including legal costs incurred as a result of the SMP
litigation/arbitration proceedings described in Risk Factor 3
below; mine and mill development and holding costs of the Sutter
gold property described below; Plateau mill holding (standby)
costs; SMP mines care and maintenance costs; and costs to acquire
uranium oxide which USE may be obligated to deliver under the SMP
contracts. As a result of the disputes between the SMP partners
(see Risk Factor 3 below), Registrant and Crested have been
delivering certain of the U3O8 concentrates required to fill various
delivery requirements on long-term U3O8 contracts with domestic
utilities. Recently, Nukem/CRIC have made most of the SMP
deliveries of U3O8. It is not known how long this arrangement will
continue. The capital requirements to fill Registrant's and
Crested's portion of the remaining commitments in fiscal 1996 will
depend on the outcome of the arbitration proceedings involving
Nukem/CRIC.
The primary source of Registrant's capital resources for the
remainder of fiscal 1996, will be (i) cash on hand November 30,
1995; (ii) cash received from the sale of Brunton (see "Material
Changes" and Risk Factor 2); (iii) possible sale of equity or
interests in investment properties or other affiliated companies;
(iv) sale of equipment; (v) possible proceeds from the resolution
of pending litigation/arbitration; (vi) sale of royalties or
interests in mineral properties; (vii) proceeds from the sale of
uranium under the SMP contracts, and (viii) borrowings from
financial institutions. Construction revenues from FNG, fees from
oil production, rentals of various real estate holdings and
equipment and the sale of aviation fuel are also expected to
provide cash.
Registrant's working capital increased during the six months ended
November 30, 1995 by $1,738,000 to working capital of $1,760,000
principally due to the sale of the 812,432 shares of the Company's
common stock in June and July 1995, resulting in net proceeds to
Registrant of $2,842,200. Registrant utilized $1,523,700 in its
investing activities during the six months ended November 30, 1995.
This was primarily as a result of Registrant and Crested funding
SMP property care and maintenance costs, Plateau mill holding
costs, Energx activities and the Sutter Gold Mining Company
("SGMC") property holding costs. Additionally, Registrant and its
affiliates purchased $809,600 of additional equipment during the
six months ended November 30, 1995. Other changes in working
capital were decreases in accounts payable and accrued expenses of
$823,700.
Working capital in addition to funds on hand at November 30, 1995
and funds provided from the sale of Brunton (see "Material
<PAGE>
Changes") will be required to hold and maintain existing mineral
properties; fund the mine and mill permitting and the construction
of a gold processing mill and mine development of SGMC; finance the
development of Plateau and its associated properties; and pay for
administration costs. Registrant and Crested are currently seeking
a joint venture partner and/or other means of financing the
construction of the SGMC gold processing mill and mine development,
but there can be no assurance that such financing can be arranged.
Monthly operating expense to hold properties and fund general and
administrative expense is estimated at $300,000 to $350,000 for the
last two quarters of fiscal 1996. Revenues from commercial
operations are expected to provide approximately $110,000 monthly.
Operating expense estimates reflect elimination of most legal
expenses associated with the SMP litigation/arbitration
proceedings, because a decision is expected from the arbitration
panel in April 1996 (see "Material Changes"). Conventional lending
sources and cash from the sale of Brunton are expected to be
sufficient to cover the operating deficits for property holding and
general and administrative expense; however, significant funding in
excess of such sources will be required to put the principal
mineral properties into production (Plateau's uranium mines and
mill and the Sutter gold property).
Continued operating losses without offsetting replacements of
working capital will adversely affect USE's ability to continue to
operate its business as described in this Prospectus. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Registrant's 1995 Form 10-K, and
Registrant's Form 10-Q for fiscal quarter ended November 30, 1995
for additional information on future working capital requirements
and capital resources. See the Form 8-K Report for February 16,
1996, for pro forma financial information as the result of the
Brunton sale. See also Risk Factor 2 below.
2. Loss of Future Operating Income Due to Brunton Sale. In fiscal
1995, 49% of Registrant's net revenues were provided by Brunton's
professional and outdoor recreational product sales (29% in the six
months ended November 30, 1995). Brunton was sold in February
1996. The inability to include Brunton's operations with
Registrant's other operating revenues in the future could result in
continued operating losses for Registrant, unless Registrant is
able to develop other profitable businesses, such as Registrant's
uranium business or FNG's construction business, to replace profits
from Brunton. Continued operating losses without offsetting
replacements of working capital will adversely affect USE's ability
to continue its operations as described in this Prospectus. See
also Risk Factor 1 above and "Management's Discussion and Analysis
of Financial Condition and Results of Operations," in Registrant's
1995 Form 10-K.
3. Litigation/Arbitration - Sheep Mountain Partners. Because of
USE and Crested litigation/arbitration against Nukem/CRIC, their
partner in the Sheep Mountain Partners Partnership ("SMP"), USE and
Crested have been required to fund $4,521,600 in standby mine
<PAGE>
maintenance and related costs (including $136,500 for the purchase
of U3O8) of the SMP mines in Fremont County, Wyoming, from June 1991
through May 31, 1995. Another $326,700 was spent on such costs in
the six months ended November 30, 1995. USE and Crested are
seeking to recover these amounts from Nukem and CRIC, along with
interest which has not been booked on the financial statements of
the Registrant and Crested
Recovery by USE and Crested of their funds advanced to the SMP
partnership will depend on the outcome of the litigation/
arbitration, which presently is uncertain. See Item 3 - "Legal
Proceedings - Sheep Mountain Partners Arbitration/Litigation" in
Registrant's 1995 Form 10-K, and the audited USE Consolidated
Financial Statements contained in Registrant's 1995 Form 10-K and
"Legal Proceedings" in USE's Form 10-Q for the quarter ended
November 30, 1995.
On July 3, 1991, USE and Crested ("plaintiffs") filed a complaint
in the United States District Court for the District of Colorado
against CRIC, Nukem and various affiliates of CRIC and Nukem
(together, the "defendants"), alleging that CRIC and Nukem
misrepresented material facts to and concealed material information
from the plaintiffs to induce their entry into the SMP Partnership
Agreement and various related agreements. Plaintiffs also claim
CRIC and Nukem have wrongfully pursued a plan to obtain ownership
of the USE-Crested interests in SMP through various means,
including overcharging SMP for uranium "sold" to SMP by defendants.
Plaintiffs further allege that defendants refused to provide a
complete accounting with respect to dealings in uranium with and on
behalf of SMP, and that certain defendants misappropriated SMP
property and engaged in other wrongful acts relating to the
acquisition of uranium by SMP.
Plaintiffs requested that the court order rescission of the SMP
Partnership Agreement and related contracts, and asked the court
to determine the amounts payable to CRIC by USECC as a result of
any such rescission order to place the parties in status quo. USE
and Crested also requested that the court order defendants to make
a complete accounting to them concerning the matters alleged in the
amended complaint. They requested an award of damages (including
punitive, exemplary and treble damages under the Racketeer
Influenced and Corrupt Organization Act ("RICO") and its Colorado
State equivalent, interest, costs and attorneys' fees) in an amount
to be determined at trial. Plaintiffs further requested imposition
of a constructive trust on all property of SMP held by defendants
and on profits wrongfully realized by defendants on transactions
with SMP.
The defendants filed various motions, including an application to
stay judicial process and compel arbitration and motions to dismiss
certain of plaintiffs' claims. The defendants also filed an answer
and counterclaims against plaintiffs, claiming plaintiffs breached
the SMP Agreement and misappropriated a partnership opportunity by
providing certain information about SMP to Kennecott and entering
into the GMMV with Kennecott involving the Green Mountain uranium
<PAGE>
properties. The defendants also claim that plaintiffs wrongfully
sold an interest in SMP to Kennecott through the GMMV without
CRIC's consent and without providing CRIC a right of first refusal
to purchase such interests; that Registrant breached the uranium
marketing agreement between CRIC and SMP, which had been assigned
by CRIC to Nukem, by agreeing with Kennecott in the GMMV that
Kennecott could market all the uranium from Green Mountain, thereby
depriving Nukem of commissions to be earned under such marketing
agreement; that Registrant and Crested interfered with certain SMP
supply contracts, costing CRIC legal fees and costs; that CRIC and
Nukem are entitled to be indemnified for purchases of uranium made
on behalf of SMP; that Registrant and Crested failed to perform
their obligations under an Operating Agreement with SMP in a proper
manner, resulting in additional costs to SMP; that Registrant and
Crested overcharged SMP for certain services under the SMP
Partnership Agreement and refused to allow SMP to pay certain
marketing fees to Nukem under the Uranium Marketing Agreement; that
Registrant and Crested breached the SMP Partnership Agreement by
failing to maintain a toll milling agreement with Pathfinder Mines
Corporation, thereby rendering SMP's uranium resources worthless;
and that Registrant and Crested have engaged in vexatious
litigation against CRIC and Nukem. Defendants also requested
damages (including punitive, exemplary and treble damages under
RICO, interest costs and attorney fees). See the further
information set forth below in this Risk Factor, concerning the
damages requested by defendants.
After more than three years of pretrial motions and discovery the
plaintiffs and defendants agreed in November 1994 to proceed with
exclusive, binding arbitration before a panel of three arbitrators
with respect to any and all post-December 21, 1988 disputes, claims
and controversies, that any party may assert against the other.
All pre-December 21, 1988 claims, disputes and controversies
pending before the U.S. District Court have been stayed by
stipulation between the parties, until the arbitrators enter an
order and award in the arbitration proceedings.
An unfavorable outcome to the litigation and/or arbitration could
result in loss of the funds advanced for standby maintenance at the
SMP mines and loss of the utility supply contracts held by SMP. In
addition, Nukem and CRIC are seeking $47 million in damages (their
RICO claim was dropped) from USE and Crested in these proceedings.
Although management of USE does not expect Nukem and CRIC to
prevail in such proceedings and, in fact, USE and Crested are
seeking approximately $258 million in damages from Nukem and CRIC
(with a request that such amount be trebled under RICO), an award
of damages against USE and Crested in any substantial amount could
have a material adverse effect on the ability of USE and Crested to
carry on their business in the manner described in this Prospectus
(see also "Material Changes").
4. Sutter Gold - No Current Mining Operations or Gold Production.
As of May 31, 1995, USE and Crested have invested more than
$10,374,400 in capitalized costs (in addition to approximately
$2,000,000 in costs that have been expensed) to acquire, permit and
<PAGE>
develop a gold property in California, held through a subsidiary,
Sutter Gold Mining Company. This investment represents a
significant portion of USE's consolidated assets. There is no
assurance current efforts will be successful in financing the mill
construction and mine development costs needed to put the property
into full production. If third-party financing cannot be obtained
and USE is unable to fund development and production costs from
internally generated funds over the next two years the property may
be sold at a loss. See Item 1 "Description of Business - Gold -
Lincoln Project (California)" in Registrant's 1995 Form 10-K.
5. Additional Shares to Market; Possible Dilution. In addition to
the Shares registered for resale by the Selling Shareholders as
described in this Prospectus, Registrant sold 812,432 shares of its
common stock (the "Placement Shares") to private investors in June
and July 1995.
As compensation for their services as Placement Agent, on a best
efforts basis, for the Placement Shares, Registrant granted RAF
Financial Corporation ("RAF") and Robert Long ("Long"), one of its
officers, warrants to purchase 81,243 shares of USE common stock
for $4.80 per share until July 25, 2000 (the "Warrants"). The
Placement Shares, the Warrants and 81,243 shares of USE common
stock underlying the Warrants (the "RAF Shares") were registered
under the 1933 Act for resale by the holders of such Placement
Shares and by RAF and Long, respectively, by Registrant filing its
Registration Statement on From S-3 with the Commission (SEC File
No. 33-64773) which was declared effective by the Commission on
February 28, 1996. RAF exercised its Warrants on March 7, 1996.
The public sale of the Placement Shares, the RAF Shares and of
Long's Warrants following exercise of his Warrants, may depress the
market price for the Company's common stock.
Registrant may also issue additional common stock in a public
offering pursuant to the 1933 Act if needed for future working
capital (see Risk Factor 1 above). The issuance of such additional
shares could result in dilution to the equity of outstanding
shareholders of Registrant, depending on the price at which such
shares are issued and sold, and would result in some dilution to
the voting power of the outstanding shares of Registrant's common
stock.
6. Project Delay. Registrant's minerals business is subject to
the risk of unanticipated delays in developing and permitting its
uranium and gold projects. Such delays may be caused by
fluctuations in commodity prices (see Risk Factor 7), mining risks
(see Risk Factor 10), difficulty in arranging needed financing,
unanticipated permitting requirements or legal obstruction in the
permitting process by project opponents. In addition to adding to
project capital costs (and possibly operating costs), such delays,
if protracted, could result in a write off of all or a portion of
the carrying value of the delayed project and/or could trigger
certain reclamation obligations sooner than planned.
<PAGE>
7. Commodity Price Fluctuations. The ability of the Company to
develop and operate its uranium and gold projects profitably can be
significantly affected by changes in the market price of uranium
and gold, respectively. Until very recently the spot market price
for uranium concentrates has been depressed (less than $15.00 per
pound) since 1988 and has been below $8.00 per pound as recently as
1992. See Item 1, "Description of Business - Uranium - Uranium
Market Information" in Registrant's 1995 Form 10-K for additional
information on the uranium markets and pricing. Uranium prices are
subject to a number of factors beyond Registrant's control
including imports of uranium from Russia and other CIS countries,
the amount of uranium produced and sold from the blending of highly
enriched uranium recovered from U. S. and Russian nuclear weapons
to produce lower enriched uranium for nuclear fuel, the build up by
utilities of uranium fuel inventories and the sale of excess
inventories into the market, the rate of consumption of uranium
inventories by utilities, the rate of uranium production in the
United States, Canada, Australia and elsewhere by other producers
and the rate of new construction of nuclear generating facilities,
verses the rate of shutdown and decommissioning of older nuclear
generating facilities, particularly in the United States.
Market prices for uranium concentrates in the United States have
recovered to between $15.00 and $15.50 per pound as of March 4,
1996. The Company believes that if the price remains at this level
or higher, United States utilities will seek long term price
stabilizing uranium supply contracts. If the Company is able to
obtain long term uranium supply contracts with assured prices
exceeding $18.00 per pound, that should be sufficient to operate
the Company's Utah uranium properties profitably. It should also
be sufficient to proceed with development of the GMMV Jackpot Mine
and operation of the Sweetwater uranium mill, although there can be
no assurance that Kennecott, which controls the management
committee of GMMV, would be of the same opinion. There also can be
no assurance that this recent upward price movement will continue.
USE would be adversely affected if the United States utilities with
nuclear power plants do not seek long term uranium supply contracts
during the balance of the 1990s. Although the extent of such
adverse impact cannot be predicted, if uranium prices remained so
depressed through the 1990s that USE's properties and facilities
were not put into operation, the book value of such assets might
decrease and USE could be required to reclaim or restore such
properties sooner than planned (see also Risk Factor 12).
The market price of gold has fluctuated widely and is affected by
numerous factors beyond the Company's control, including
international economic trends, currency exchange fluctuations,
expectations for inflation, the extent of forward sales of gold by
other producers, consumption patterns (such as purchases of gold
jewelry and the development of gold coin programs), purchases and
sales of gold bullion holdings by central banks or other large gold
bullion holders or dealers and global or regional political events,
particularly in major gold-producing countries such as South Africa
and some of the CIS countries. Gold market prices are also
affected by worldwide production levels, which have increased in
<PAGE>
recent years. The aggregate effect of these factors, all of which
are beyond the Company's control, is impossible for the Company to
predict. In addition, the market price of gold has on occasion
been subject to rapid short-term changes because of market
speculation. As of March 22, 1996 the Comex spot price of gold was
$398.30 per ounce.
8. Proposed Federal Legislation. The U.S. Congress has, in
legislative sessions in recent years, actively considered several
proposals for major revision of the General Mining Law, which
governs mining claims and related activities on federal public
lands. If any of the recent proposals become law, it could result
in the imposition of a royalty upon production of minerals from
federal lands and new requirements for mined land reclamation and
other environmental control measures. It remains unclear whether
the current Congress will pass such legislation and, if passed, the
extent such new legislation will affect existing mining claims and
operations. The effect of any revision of the General Mining Law
on the Company's operations cannot be determined conclusively until
such revision is enacted; however, such legislation could
materially increase the carrying costs of the Green Mountain
mineral properties, the SMP properties and some of Plateau's
mineral properties which are located on federal unpatented mining
claims, and could increase both the capital and operating costs for
such projects and impair the Company's ability to hold or develop
such properties, as well as other mineral prospects on federal
unpatented mining claims.
9. Exploration Risks. Mineral exploration, particularly for gold,
is highly speculative in nature, involves many risks and frequently
is nonproductive. There can be no assurance that the Company's
efforts at the Sutter Gold Project to identify additional gold ore
reserves will be successful. Moreover, substantial expenditures
are required to establish additional ore reserves through drilling,
to determine metallurgical processes to extract the metal from the
ore and to construct mining and processing facilities. During the
time required to establish additional ore reserves, determine
suitable metallurgical processes and construct such mining and
processing facilities, the economic feasibility of production may
change because of fluctuating gold prices (see Risk Factor 7).
10. Mining Risks and Insurance. The business of uranium and gold
mining generally is subject to a number of risks and hazards,
including environmental hazards, industrial accidents and rock
falls, flooding, interruptions due to weather conditions and other
acts of God. Such risks could result in damage to or destruction
of Registrant's mineral properties and production facilities, as
well as to properties of others in the area, personal injury,
environmental damage and process and production delays, causing
Registrant monetary losses and possible legal liability. While the
Company maintains, and intends to continue to maintain, liability,
property damage and other insurance consistent with industry
practice, no assurance can be given that such insurance will
continue to be available, be available at economically acceptable
premiums or be adequate to cover any resulting liability.
<PAGE>
11. Title to Properties. Nearly all the uranium mining properties
held by GMMV, SMP, and Plateau are on federal unpatented claims.
Unpatented claims are located upon federal public land pursuant to
procedure established by the General Mining Law. Requirements for
the location of a valid mining claim on public land depend on the
type of claim being staked, but generally include discovery of
valuable minerals, erecting a discovery monument and posting
thereon a location notice, marking the boundaries of the claim with
monuments, and filing a certificate of location with the county in
which the claim is located and with the U. S. Bureau of Land
Management ("BLM"). If the statutes and regulations for the
location of a mining claim are complied with, the locator obtains
a valid possessory right to the contained minerals. To preserve an
otherwise valid claim, a claimant must also annually pay certain
rental fees to the federal government (currently $100 per claim)
and make certain additional filings with the county and the BLM.
Failure to pay such fees or make the required filings may render
the mining claim void or voidable. Because mining claims are self-
initiated and self-maintained, they possess some unique
vulnerabilities not associated with other types of property
interests. It is impossible to ascertain the validity of unpatented
mining claims solely from public real estate records and it can be
difficult or impossible to confirm that all of the requisite steps
have been followed for location and maintenance of a claim. If the
validity of an unpatented mining claim is challenged by the
government, the claimant has the burden of proving the present
economic feasibility of mining minerals located thereon. Thus, it
is conceivable that during times of falling metal prices, claims
which were valid when located could become invalid if challenged.
Disputes can also arise with adjoining property owners for
encroachment or under the doctrine of extralateral rights (see Risk
Factor 17).
12. Reclamation and Environmental Liabilities. Registrant's
projects and operations are subject to various federal, state and
local laws and regulations regarding the discharge of materials
into the environment or otherwise relating to the protection of the
environment, including the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act and the Comprehensive
Environmental Response Compensation Liability Act. With respect to
mining operations conducted in Wyoming, Wyoming's mine permitting
statutes, Abandoned Mine Reclamation Act and industrial development
and siting laws and regulations will impact USE. Similar laws in
California affect SGMC operations and in Utah will affect Plateau's
operations. In addition, Registrant's uranium mills are subject to
jurisdiction of the Nuclear Regulatory Commission ("NRC").
To Registrant's knowledge, it is in compliance in all material
respects with current environmental regulations. To the extent
that production by SMP, GMMV or SGMC is delayed, interrupted or
discontinued due to need to satisfy present or future laws or
regulations which relate to environmental protection, future USE
earnings could be adversely affected. For additional information
concerning the effect such environmental laws and regulations have
on the Company's capital expenditures, see Registrant's 1995 Form
10-K.
<PAGE>
USE is a joint venturer in the GMMV, which entity is responsible
for mine reclamation, environmental restoration and decommissioning
associated with mineral properties on Green Mountain, in south
central Wyoming, and the nearby Sweetwater Mill. Future costs to
comply with these obligations are now estimated at approximately
$25,000,000. If actual costs are higher, USE could be adversely
impacted. There is no assurance the properties will generate
sufficient revenues to fund reclamation, restoration and
decommissioning costs in excess of current estimates. See Note K
to the audited USE Consolidated Financial Statements in
Registrant's 1995 Form 10-K, and the notes to the unaudited USE
Consolidated Financial Statements in Registrant's Form 10-Q for
fiscal quarter ended November 30, 1995, for further information.
Current bonds and funds in escrow are deemed adequate for
reclamation and decommissioning liabilities associated with the
Shootaring Mill in Utah.
USE and Crested have assumed the reclamation obligations,
environmental liabilities and contingent liabilities for employee
injuries, from mining the SMP properties and other properties in
the Sheep and Green Mountain Mining Districts. The reclamation
obligations, which are established by governmental regulators, were
most recently set at $1,451,800, which amount is shown on USE's
balance sheet as a long-term obligation.
To assure the reclamation work will be performed, regulatory
agencies require posting of a bond or other security. USE and
Crested satisfied this requirement with respect to SMP properties
by mortgaging their executive office building and a trailer park,
both located in Riverton, Wyoming. A portion of the funds for the
reclamation of SMP's properties was to have been provided by SMP,
which agreed to pay up to $.50 per pound of uranium concentrates
produced from its properties to USE and Crested for reclamation
work. The status of this commitment could be impacted by the
ultimate resolution of the arbitration/litigation with Nukem/CRIC
(see Risk Factor 3 above).
The GMMV and Sweetwater Mill reclamation liabilities are self
bonded by Kennecott pursuant to written agreements with the NRC and
the State of Wyoming, and accordingly these liabilities are not
recorded in the USE or Crested financial statements. The SMP and
Plateau reclamation liabilities were recorded at $1,451,800 and
$2,500,000 respectively (total $3,951,800) in the audited USE
Consolidated Financial Statements. See the USE 1995 Form 10-K. A
cash bond of approximately $40,000 is posted for miscellaneous
reclamation costs at the Sutter gold property (carried under "Other
Assets-Deposits and Other" on the USE financial statements).
Reclamation and environmental obligations for the oil and gas
properties held by USE are deemed insignificant and manageable in
the ordinary course of business.
13. Possible Losses on Uranium Contracts. As of May 31, 1995, SMP
held contracts for delivery of an estimated 5.5 million pounds of
U3O8 to domestic utilities from 1996 through 2000. Actual
quantities of U3O8 purchased by utilities over that period of time
<PAGE>
may vary by 10 to 25 percent, as provided in the contracts (see
Item 1 "Description of Business - Uranium - Sheep Mountain Partners
- - SMP Marketing" in Registrant's 1995 Form 10-K), and profit or
loss to SMP on the deliveries will depend on the cost of inventory.
Profits on such future deliveries cannot be predicted, however,
management of the Company does not anticipate any material losses
from the sales of U3O8 pursuant to these contracts. As of the date
of this Prospectus, the prices under the one remaining base
escalated contract exceed the current market price, however, there
can be no assurance this situation will not change in the future.
Increases in the spot market price would increase USE's and
Crested's cost of delivering on certain of the SMP contracts prior
to the time that their uranium properties are in production, thus
reducing potential profits or possibly producing losses, while spot
market price decreases would be likely to increase profits on such
contracts. USE recorded a loss of $162,900 in fiscal 1994 on
deliveries of its portion of certain of the SMP contracts, as the
cost of uranium exceeded the contracted price. Due to the SMP
dispute, earlier arrangements between the partners to deliver their
shares of the SMP contracts in spite of the dispute were abandoned,
and USE made no deliveries (and therefore recorded no revenues or
losses) on any SMP contracts during fiscal 1995.
All but one of the uranium supply contracts referred to above are
held by SMP. USE could lose the contracts depending on the
decision of the arbitrators in the SMP arbitration proceedings.
14. Competition. There is keen competition in the domestic
minerals industry and the oil and gas business for properties and
capital. USE's competitors include a number of major mining and
oil and gas companies, most of which are larger than USE in all
respects. In the production and marketing of uranium concentrates
there are more than 10 major international entities (some of which
are government controlled) that are significantly larger and better
capitalized than USE. Although the Registrant presently is not
engaged in the mining or milling of uranium, and therefore should
not be counted in the top ten uranium producers, the Registrant's
competitive stature may improve significantly at such time as it
commences uranium mining and production.
The location and composition of mineral ore bodies are of great
importance to the competitive position of a mining company.
Producers of high-grade ore with readily extractable minerals are
in an advantageous position. Producers of one mineral may be able
to efficiently recover other minerals as by-products, with
significant competitive impact on primary producers. Substantial
capital costs for equipment and mine-works are often needed. As a
result, owners of producing properties, particularly if purchase
contracts for the production are in place, generally enjoy
substantial competitive advantages over organizations that propose
to develop non-producing properties. Competition is also keen in
the search for mineral properties and prospects and in the
employment and retention of qualified personnel.
USE believes that if and when market prices improve, it will be
able to compete with other uranium producers, primarily because it
holds significant uranium resources in place, along with the
necessary mining and milling facilities, all of which it acquired
for little or no cost. Applications have been submitted to upgrade
the mill licenses to operating levels, however, delays in final
permitting may be encountered, as the uranium refining industry is
closely regulated by the NRC.
Nonetheless, USE expects competition from larger producers in
Canada, Australia and Africa, as well as from U.S. in situ
producers of uranium and other producers that recover uranium as a
byproduct of other mineral recovery processes, and from uranium
recovered from the de-enrichment of highly enriched uranium
obtained from the dismantlement of U.S. and Russian nuclear weapons
and sold in the market by the United States Enrichment Corporation
and/or the United States Department of Energy, as well as from
imports to the United States of uranium from the Commonwealth of
Independent States (formerly the Soviet Union). See Item 1
"Description of Business - Uranium - Uranium Market Information"
and "NUEXCO Exchange Value" in Registrant's 1995 Form 10-K.
USE's affiliate FNG encounters strong competition with a number of
larger civil engineering construction firms in the western United
States.
15. Reserves Estimates. While the ore reserve estimates at GMMV
Round Park ore deposit in Wyoming and SGMC's Lincoln project in
California have been reviewed by independent consultants, such ore
reserve estimates are necessarily imprecise and depend to some
extent on statistical inferences drawn from limited drilling, which
may, on occasion, prove unreliable. Should the Company encounter
mineralization or formations at any of its mines or projects
different from those predicted by drilling, sampling and similar
examinations, ore reserve estimates may have to be adjusted and
mining plans may have to be altered in a way that could adversely
affect the Company's operations. Moreover, short-term operating
factors relating to the ore reserves, such as the need for
sequential development of ore bodies and the processing of new or
different ore grades, may adversely affect the Company's
profitability in any particular accounting period.
16. Variable Revenues and Recent Losses. Due to the nature of
USE's business, there are from time to time major increases in
gross revenues from sale of mineral properties. During fiscal
1991, $7,193,600 was recognized from sale of a partial interest in
a uranium property to Kennecott Uranium Company (a GMMV partner).
No such revenues were recognized from fiscal 1992 through fiscal
1995. Further, USE realized a net gain in fiscal 1992 of $613,000,
but net losses were realized from fiscal 1993 through fiscal 1995
(in the respective amounts of $221,900, $3,370,800 and $2,070,600).
17. Bullfrog Litigation. Registrant, Crested, Parador Mining
Company, Inc. ("Parador") and H. B. Layne Contractor, Inc.
("Layne") are defendants and counter- or cross-claimants in certain
<PAGE>
litigation in the District Court of Nye County, Nevada, brought by
Bond Gold Bullfrog Inc. ("BGBI") in July 1991. BGBI (now known as
Barrick Bullfrog, Inc.) is an affiliate of Barrick Corp., a large
international gold producer headquartered in Toronto, Canada. The
litigation primarily concerns extralateral rights associated with
two patented mining claims owned by Parador and initially leased to
a predecessor of BGBI, which claims are in and adjacent to BGBI's
Bullfrog open pit and underground mine. USE and Crested assert
certain interests in the claims under an April 1991 assignment and
lease from Parador, which is subject to the lease to BGBI's
predecessor.
Parador, USE and Crested had previously advised BGBI that they are
entitled to royalty payments with respect to extralateral rights of
the subject claims on minerals produced at the Bullfrog Mine,
claiming that the lode or vein containing the gold mineralization
apexes on the Parador claims and dips under the claims leased to
BGBI by Layne.
BGBI seeks to quiet title to its leasehold interest in the subject
claims, alleging that Parador's lease thereof to USE and Crested is
adverse to the interest claimed by BGBI, and that the assertions by
USE and Crested of an interest in the claims have no foundation.
BGBI seeks a determination that USE and Crested have no rights in
the claims and an order enjoining USE and Crested from asserting
any interest in them. BGBI further asserts that, in attempting to
lease an interest in the subject claims to USE and Crested, Parador
breached the provisions of its lease to BGBI, and that Parador is
responsible for the legal fees and costs incurred by BGBI in the
quiet title action, which may be offset against royalties. Under
an arrangement to pay certain legal expenses of Parador, USE and
Crested may be responsible for any such amounts.
BGBI alleges that by entering into the Assignment and Lease of
Mining Claims with Parador, USE and Crested disrupted the
contractual relationship between BGBI and Parador. In addition,
BGBI claims that the USECC-Parador agreement slanders BGBI's title
to the claims. BGBI seeks compensatory damages from Parador, USE,
and Crested; punitive damages from USE and Crested; and costs and
other appropriate relief from Parador, USE and Crested, all in
amounts to be determined.
A partial or bifurcated trial to the court of the extralateral
rights issues was held on December 11 and 12, 1995. The purpose of
the hearing was to determine whether the Bullfrog orebody is a
"vein, lode or ledge" as described in the General Mining Law and,
if so, whether the facts of the case warrant the application of the
doctrine of extralateral rights as set forth in such statute.
Although the Court sat as both the finder of fact and law with
respect to such issues, the Court concluded that the questions are
ultimately one of law which must be decided based on the testimony
and exhibits introduced at the trial concerning the description of
the orebody. Registrant and defendants Crested Corp. and Parador
presented five experts in the field of geology, including the
person who was responsible for the discovery of the gold deposit at
the mine. All five experts opined that the deposit was a lode and
<PAGE>
it apexed on a portion of Parador's two mining claims. The
defendant Layne presented a single witness who testified that there
was no apex within the Parador claims. The Court nevertheless
found that Parador had failed to meet its burden of proof and
therefore Parador, Registrant and Crested have no right, title and
interest in the minerals lying beneath the claims of Layne pursuant
to extralateral rights. The Court entered a partial judgment in
favor of Layne and ordered that Parador pay Court costs to Layne.
Defendants intend to appeal the Court's ruling as erroneous as a
matter of law at such time as it is appropriate to do so.
The partial trial did not address any of the other issues pending
in the litigation other than those required to decide the question
of whether the doctrine of extralateral rights is applicable to
this case. All other claims and counterclaims remain pending
before the Court and no hearing date has been set for those issues.
If USE's and Crested's position concerning extralateral rights is
ultimately sustained, substantial additional revenues and income
may be received by USE and Crested from royalties payable with
respect to gold produced from the Bullfrog Mine. If, however, the
final decision of the appellate court is adverse to USE and
Crested, an award of damages against USE and Crested in any
substantial amount by this Court could have a material adverse
effect on the ability of USE and Crested to carry on their business
in the manner described in this Prospectus.
18. Potential Issuance of Preferred Stock. Under the USE Restated
Articles of Incorporation, as amended ("Restated Articles") and as
permitted by the Wyoming Business Corporation Act ("WBCA"), the USE
Board of Directors has authority to create series of preferred
stock and to issue shares thereof, without the approval of any USE
shareholders. The creation and issue of USE preferred stock with
dividend rights senior to the USE common stock could adversely
affect common stockholder participation in future earnings through
dividends that otherwise would be available for distribution to
holders of the common stock, including those purchasing the
Shares.
Such preferred stock also could inhibit a takeover of USE. Under
the WBCA, separate voting approval by classes of stock is required
for certain substantive corporate transactions. If the interests
of preferred stockholders is perceived to be different from those
of the common stockholders, the preferred stockholders could
withhold approval of the transactions needed to effect the
takeover.
19. Potential Anti-Takeover Effects of Staggered Board. The USE
Board of Directors is presently divided into three classes of two
directors each. Pursuant to the USE Restated Articles and as
permitted by the WBCA, the directors in each class serve a three
year term, and only those directors in one class are reelected each
year. This board classification could stall a takeover of USE,
even if a majority of the common stock were to be held by persons
desiring a change in control of the Board. See "Description of
Securities to be Registered."
<PAGE>
SELLING SECURITY HOLDERS
The following is a listing of the Selling Shareholders, the amount
of Shares to be offered for each such Selling Shareholder's account
and the amount of USE's common stock owned by each Selling
Shareholder prior to the offering and to be held by such Selling
Shareholder after completion of the offering. Except as noted
below, none of the Selling Shareholders (i) has had any position,
office or other material relationship with the Registrant or any of
its affiliates within the past three years, or (ii) to the
knowledge of the Company, owns one percent or more of the Company's
outstanding common stock. It is anticipated each seller will own
none of the securities of the Company hereby offered, after
completion of the offering.
No. of
No. of No. of Shares of
Shares to Shares of USE USE Common
be Offered Common Stock Stock to be
by Selling Owned Prior Owned After
Name Shareholder to Offering* Offering
---- ------------- -------------- ------------
Keith G. Larsen(1) 88,891 128,696 39,805
Mark J. Larsen(2) 86,668 109,872 23,204
Robert Scott Lorimer(3)
and Desiree Lorimer(4)
Jt. Ten. WROS 11,111 45,614 34,503
George F. Smith(5)
and Marilyn M. Smith(4)
Jt. Ten. WROS 22,267 50,187 27,920
DMS, Co.(6) 22,267 110,638 (14) 88,371
Sandra Lee Sweeney(4) 13,333 43,426 30,093
Richard P. Larsen(1) 33,333 56,263 22,930
Max T. Evans(7) and
Lois B. Evans(4)
Jt. Ten. WROS 8,889 62,377 53,488
Thomas M. Evans(2) 19,555 24,651 5,096
Kenneth Webber(2)
and Deanna Webber(4)
Jt. Ten. WROS 18,223 33,749 15,526
William W. DeLapp(8)
and Lauren K. DeLapp(4)
Jt. Ten. WROS 4,444 4,979 535
M. Shane Larsen(2) 10,972 20,260 9,288
Hanifen, Imhoff Inc.
Custodian FBO
Michael D. Zwickl(9)
IRA DTD 4-15-92 4,444 7,444 3,000
Steven P. Accardo 3,200 5,153 1,953
FMS Profit Sharing Plan 44,444 44,444 -0-
Nucor, Inc.(10) 11,111 26,111 (15) 15,000
Charles M. Wojcieszak(11)
and Judy L. Wojcieszak
Jt. Ten. WFROS 2,267 2,417 150
Maureen E. Evans 10,667 10,667 -0-
<PAGE>
Albert E. Dearth(12) 22,667 23,983 1,316
James L. Edwards 4,533 4,533 -0-
Harold I. Gibson 4,980 4,980 -0-
James S. Neiman
Trustee of the
James S. Neiman
Revocable Trust
dated June 13, 1989,
as amended and Restated 2,267 2,267 -0-
Sally Ann Neiman
Trustee of the
Sally Ann Neiman
Revocable Trust
dated June 13, 1989,
as amended and Restated 2,267 2,267 -0-
Ronald J. Pasco(13) and
Mary Anne Pasco
Jt. Ten. WROS 4,980 4,980 -0-
Shamrock Partners, Ltd. 200,000 200,000 200,000
* Includes shares held directly, shares held in the USE
Employee Stock Ownership Plan (the "ESOP") account
established for the benefit of employee's (see Footnotes
below for which Selling Shareholders are employees), shares
held jointly, and shares held directly by immediate family
members in the same household.
(1) USE employee and director of Northwest Gold, Inc., an
affiliate of USE.
(2) USE employee.
(3) Treasurer of USE and Crested Corp., and Chief Financial
Officer and Controller of USE and all affiliate companies.
(4) Spouse of an employee of USE and/or of an affiliate of USE.
(5) USE employee and director of Ruby Mining Company, an
affiliate of USE.
(6) Daniel P. Svilar, general counsel, an officer of USE and an
officer and director of USE affiliates, is a partner in DMS
Co.
(7) Secretary and director of USE; President, Chief Operating
Officer and director of Crested Corp., an affiliate of USE.
(8) President and director of Four Nines Gold, Inc., an
affiliate of USE.
(9) Director of Crested Corp., an affiliate of USE.
(10) Corporation of which Nick Bebout, a director of USE, is
president and a director. Share number includes 9,500
shares held by Mr. Bebout directly or with his wife.
<PAGE>
(11) Is on a cash retainer to perform investigative and security
services for USE.
(12) USE employee, President, Chief Operating Officer and
director of Plateau Resources Limited, a 100% subsidiary of
USE.
(13) President and Chief Executive Officer of First Interstate
Bank of Commerce Gillette, Wyoming, the principal lender to
USE and its affiliates.
(14) Includes shares held by Daniel P. Svilar (see Footnote 6).
(15) Includes shares held by Nick Bebout (see Footnote 10).
PLAN OF DISTRIBUTION
The Shares will be offered from time to time by the Selling
Shareholders (i) in transactions in the over-the-counter market,
automated inter-dealer system on which the Company's common stock
is then listed, in negotiated transactions or a combination of such
methods of sale, and (ii) at market prices prevailing at the time
of sale, at prices related to such prevailing market prices, or at
negotiated prices. The Selling Shareholders may effect such
transactions directly with the broker-dealers. Such broker-dealers
may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of
the Shares for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary
commissions). Sales of the Shares may be made pursuant to this
Prospectus or pursuant to Rule 144 adopted under the 1933 Act.
No underwriting arrangements exist as of the date of this
Prospectus. Upon being advised of any underwriting arrangements
that may be entered into by the Selling Shareholders after the date
of this Prospectus, the Company will prepare and file a post-
effective amendment to this Registration Statement including a
supplement to this Prospectus to disclose the name of such
underwriters and such arrangements.
Expense of any sales pursuant to this Prospectus will be borne by
the Selling Shareholders, except that the Company is paying certain
of the expenses, which are estimated at $10,000, of registering the
Shares under the 1933 Act, consisting of all costs incurred in
connection with the preparation of the registration statement
(except for any fees of counsel for the Selling Shareholders). The
Selling Shareholders will pay or assume brokerage commissions, or
underwriting discounts, incurred in the sale of the Shares, which
commissions or discounts are not being paid or assumed by the
Company.
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
May 31,
----------------------------------------------------
1994 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Current assets $ 3,866,600 $ 1,650,300 $ 3,260,500 $ 7,302,300
Current liabilities 1,291,700 1,592,100 681,900 816,000
Working capital 2,574,900 58,200 2,578,600 6,486,300
Total assets 33,090,300 24,037,200 24,583,000 20,500,100
Long-term
obligations(1) 16,612,500 2,900,000 4,540,400 3,244,100
Shareholders' equity 12,559,100 15,063,200 14,982,900 15,045,500
</TABLE>
<TABLE>
<CAPTION>
November 30, 1995
May 31, 1995 (unaudited)
------------ ------------------
<S> <C> <C>
Current assets $ 4,058,000 $ 4,557,400
Current liabilities 4,036,000 2,797,400
Working capital 22,000 1,760,000
Total assets 34,165,000 35,179,600
Long-term
obligations(1)(2) 15,882,300 15,917,800
Shareholders' equity 12,168,400 14,614,700
</TABLE>
(1) Includes $3,951,800, $3,951,800, $1,695,600, $1,695,600, and
$725,900 of reclamation liabilities, and additional amounts of other
accrued liabilities, on uranium properties at May 31, 1995, 1994, 1993,
1992, and 1991, respectively. See Notes F and K to the Consolidated
Financial Statements contained in Registrant's 1995 Form 10-K.
(2) See Notes 4 and 5 to the unaudited Condensed Consolidated Financial
Statements contained in Registrant's Form 10-Q for fiscal quarter ended
November 30, 1995.
See the Form 8-K Report for February 16, 1996 for pro forma condensed
consolidated financial information, giving effect to the Brunton sale.
<PAGE>
<TABLE>
<CAPTION>
Years Ended May 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 9,148,000 $ 8,776,300 $ 9,045,500 $ 6,353,600 $ 9,569,100
Income (loss) before
equity in income
(loss) of affiliates,
provision for
income taxes and
extraordinary item (2,281,500) (3,587,900) (103,100) 819,200 6,082,900
Equity in (loss) of
affiliates (442,300) (390,700) (444,700) (324,900) (96,100)
Net income (loss) (2,070,600) (3,370,800) (221,900) 613,200 6,164,900
Income (loss) per
share before
extraordinary item $ (.42) $ (.70) $ (.05) $ .09 $ .93
Extraordinary item -- -- -- .06 .62
----------- ----------- ----------- ----------- -----------
Income (loss) per
share before
cumulative effect
of accounting change (.42) (.70) (.05) .15 1.55
Cumulative effect at
June 1, 1993 of income
tax accounting change -- (.06) -- -- --
----------- ----------- ----------- ----------- -----------
Net income (loss)
per share $ (.42) $ (.76) $ (.05) $ .15 $ 1.55
Cash dividends
per share $ -0- $ -0- $ -0- $ -0- $ -0-
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
---------------------------- -----------------------------
1995 1994 1995 1994
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 3,229,500 $ 1,804,100 $ 8,894,800 $ 4,456,100
Income (loss) before
equity in
loss of affiliates
and provision for
income taxes (362,300) (656,800) (273,500) (1,152,800)
Equity in loss
of affiliates (90,300) (80,400) (165,900) (176,800)
Net loss (350,500) (534,200) (372,900) (987,400)
Net loss per share $ (.06) (.11) $ (.06) (.21)
Cash dividends per share -0- -0- -0- -0-
</TABLE>
See the Form 8-K Report for February 16, 1996 for pro forma condensed
consolidated financial information, giving effect to the Brunton sale.
<PAGE>
MATERIAL CHANGES
Brunton.
On February 16, 1996 Registrant completed the sale of 8,267,450
shares of common stock, $0.01 par value, (the "Stock") of Brunton
to Silva Production AB, a closely held Swedish corporation
("Silva"), pursuant to the terms of a Stock Purchase Agreement
dated January 30, 1996 (the "Agreement") by and between Registrant
and Silva. The Brunton transaction was prompted in part by
Registrant's desire to focus on its core business of acquiring and
developing mineral properties and mining and marketing minerals,
particularly uranium and gold. The Stock constitutes all of the
issued and outstanding shares of Brunton owned by Registrant as of
the date of the sale including 90,750 shares held in Brunton's
treasury.
The purchase price for the Stock was $4,300,000, which was a
negotiated price based on an Adjusted Shareholder's Equity in
Brunton (as defined in the Agreement) as of January 31, 1996 of
$2,399,103. Registrant received $300,000 upon execution and
delivery of the Agreement, approximately $3,000,000 by wire
transfer from Silva at closing and an agreement by Silva to pay
Registrant $1,000,000 in three annual installments of $333,333
together with interest at the rate of 7% per annum, such
installments to be paid on February 15, 1997, February 15, 1998 and
February 15, 1999.
In addition, Silva agreed that, in the operation of Brunton, Silva
will cause the existing Brunton products and operations (including
lasers and other new products being developed by Brunton at the
time of the sale) to be a separate profit center and to pay
Registrant 45% of the net profits before taxes derived from that
profit center for a period of four years and three months
commencing February 1, 1996. The first such net profits payment
will be made on or before July 15, 1997 for the period from
February 1, 1996 through April 30, 1997, if net profits are earned
for such period. Additional net profits payments will be made, on
July 15, 1998, July 15, 1999 and July 15, 2000, if net profits are
earned for the corresponding twelve month period. There can be no
assurance that Brunton will earn net profits for any such period
and therefore there can be no assurance that any such net profits
payment will be received by Registrant.
The assets of Brunton that were acquired by Silva through the
purchase of the Stock consist of certain real estate housing
Brunton's headquarters and manufacturing operations in Riverton,
Wyoming; Brunton's working capital; equipment, inventory,
machinery, personal property and all of Brunton's intellectual
property rights. Certain items of equipment and personal property
were withheld by the Registrant from the Agreement and transferred
from Brunton to Registrant, by mutual agreement with Silva, for
Registrant's assumption of the indebtedness thereon. Such items
include off-book inventory and depreciated mining equipment, real
estate not used in Brunton operations, and miscellaneous other
<PAGE>
equipment, as well as 225,556 shares of Registrant's common stock,
par value $0.01 per share, and options to purchase 150,000 shares
of Registrant's common stock for $3.50 per share; 160,000 shares of
Crested Corp. common stock, par value $0.001, and options to
purchase (from Crested Corp.) 300,000 shares of Crested Corp.
common stock for $0.40 per share, all of which were previously
owned by Brunton. 125,556 shares of USE (and options to purchase
75,000 shares of USE), plus 60,000 shares of Crested (and options
to purchase 150,000 shares of Crested) were transferred to Plateau
in partial payment of debt owed to Plateau by USECC. The remaining
100,000 USE shares (and options to purchase 75,000 USE shares),
plus 100,000 Crested shares (and options to purchase 150,000 shares
of Crested) were transferred to Sutter Gold Mining Company.
Also at closing, the Registrant paid Brunton $171,685 for accrued
rentals on mining equipment owned by Brunton and transferred to
Registrant at closing, and the Registrant paid off $273,000 in bank
debt previously incurred by Brunton in connection with a loan to
the Registrant.
The sale will eliminate Brunton's manufacturing and/or marketing of
professional and recreational outdoor products from the commercial
segment of Registrant's business, except to the extent that there
are net profit payments from Silva over the next four years and
three months, of which there can be no assurance. For the fiscal
year ended May 31, 1995, Brunton's sales provided 49% of net
revenues of USE (29% for the six months ended November 30, 1995).
The inability to include Brunton's operations with Registrant's
other operating revenues in the future could result in continued
operating losses for Registrant, unless Registrant is able to
develop other profitable businesses, such as Registrant's uranium
business or FNG's construction business, to replace profits from
Brunton. Continued operating losses without offsetting
replacements of working capital will adversely affect USE's ability
to continue its operations as described in this Prospectus. See
also Risk Factors 1 and 2 above and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," in
Registrant's 1995 Form 10-K.
On the other hand, receipt in February 1996 of approximately
$2,900,000 in net cash from the sale (and future payments on
Silva's $1,000,000 promissory note and any profits payments) will
enhance the Company's financial condition and medium term liquidity
as well as providing additional resources to put the Company's
Plateau uranium mill into operation and develop the Company's
uranium and gold properties.
<PAGE>
Plateau Resources.
Registrant intends to consolidate all of its uranium assets into a
wholly-owned subsidiary (Plateau Resources Limited) in the fiscal
year ending May 31, 1996, and fund the start up of its Shootaring
Canyon uranium mill and commencement of mining operations at the
mines now owned by Plateau in Utah, with debt or equity funding.
However, such consolidation has not been effected to date and there
are no agreements in place for the financing of such uranium
operations. There can be no assurance that uranium prices will
remain at the current level, that the Company will succeed in
obtaining long-term uranium supply contracts required to allow
Registrant to operate its uranium properties profitably or that the
required financing will be available to put such properties into
operation.
Update on Sheep Mountain Partners Arbitration
On March 1, 1996, the arbitration panel in the SMP arbitration
proceedings (see Risk Factor 3) concluded that it will need an
additional period of time up to and including April 22, 1996 before
an Award will be issued.
Construction - Four Nines Gold, Inc.
The contract awarded to FNG by the City of Lead, South Dakota for
municipal road and drainage construction and rock slide area
stabilization has been increased as a result of change orders by
the City to $3,550,604 as of December 31, 1995. FNG had performed
86 percent of the contract, billing $3,018,023 (including 5 percent
retainage against completion of the project) of which $2,656,224
had been paid as of December 31, 1995. FNG continues to expect the
contract to be profitable.
On September 13, 1995, FNG was awarded a separate construction
contract for $618,270 by the United States Department of the
Interior, Bureau of Reclamation, for the Minor Laterals, North
Canal, Stage 5, Belle Fourche Unit, South Dakota. The work
consists of constructing 3.81 miles of pipeline, approximately 1.4
miles of gravel-surfaced road, removing existing reinforced
concrete hydraulic structures and constructing miscellaneous
concrete structures which include four inlets. Notice to proceed
with the work on this contract was given on September 29, 1995,
with final completion required by May 10, 1996. As of December 31,
1995 FNG had performed 41% of the contract, billing $201,401 and
having received payment for all amounts billed. FNG expects this
contract to be profitable.
<PAGE>
Results of Operations for Three and Six Months Ended November 30,
1995 Compared to Three and Six Months Ended November 30, 1994
The following discussion does not reflect the impact of the sale of
Brunton. For such information, please see the Form 8-K Report for
February 16, 1996 for the pro forma condensed consolidated
statement of operations for the six months ended November 30, 1995.
Revenues for the six month period ended November 30, 1995
increased by $4,438,700 primarily due to increases in mineral sales
and a mineral option, construction contract revenues and the sale
of recreational and professional products.
Revenues from mineral sales and option were $2,174,300. There
were no similar uranium concentrate deliveries or option activities
for the same period in the prior year.
Construction contract revenues for the six and three months
ended November 30, 1995 increased by $1,926,600 and $896,000,
respectively, from profitable contracts awarded late in fiscal 1995
to the Registrant's subsidiary FNG.
Recreational product sales of Brunton for the same periods
increased by $405,800 and $160,700, primarily as a result of
continued expansion into the recreational market and development of
new products. Commercial revenues decreased $172,200 for the six
month period compared to the six months ended November 30, 1994, as
a result of reduced fuel sales and equipment rentals during the six
months ended November 30, 1995, but increased by $69,600 for the
three month period ended November 30, 1995 compared to the same
period in 1994, as revenues from fuel sales and equipment rentals
increased during the three months ended November 30, 1995. These
fluctuations are due to seasonal fuel sales and a major
construction project for GMMV during the quarter ended November 30,
1995.
Management fees and other revenues increased by $280,500 and
$102,600 for the six and three months ended November 30, 1995.
This increase is primarily as a result of increased revenues
generated by operations of a motel, convenience store and
restaurant at the Registrant's unincorporated townsite of Ticaboo
in southern Utah.
The costs of mineral sales increased by $1,824,300 for the six
months ended November 30, 1995 for which there were no
corresponding costs during the same period in 1994. Cost and
expenses associated with mineral operations decreased by $294,700
for the six months ended November 30, 1995 compared to the six
months ended November 30, 1994 primarily as a result of a decrease
in legal costs in connection with the SMP arbitration, but
increased by $54,200 for the three months ended November 30, 1995
compared to the same period in 1994 due to arbitrator fees paid
during the quarter. The cost of construction activities increased
by $1,341,300 and $733,400, respectively for the six month and
three month periods ended November 30, 1995 compared to the same
periods in 1994 as a result of increased contract work.
<PAGE>
General and administrative expenses increased by $197,600 and
$263,900, respectively for the six and three months ended November
30, 1995. This increase is due to additional expenses associated
with the expansion of Brunton's products as well as FNG's
contracts. Additionally, interest expense which is included in
general and administrative expense increased by $43,000 during the
six months ended November 30, 1995 as compared to the same period
in 1994. Commercial operations expenses remained relatively
constant.
Operations for the six months ended November 30, 1995 resulted
in a pre-tax loss of $273,500 before equity in loss of affiliates
and minority interest in gain of consolidated subsidiaries of
$165,900 and $66,500, respectively, as compared to a loss of
$1,152,800 before equity in loss of affiliates and minority
interest in loss of consolidated subsidiaries of $176,800 and
$342,200, respectively, during the same period of the previous
year. After such equity losses, the Registrant recognized a net
loss of $372,900 compared to a loss of $987,400 for the comparative
period of the previous year.
Investment Banking Consulting Agreement
On January 9, 1996, Registrant retained Shamrock Partners Ltd.,
Investment Bankers ("Consultant") as a financial consultant and
advisor, on a nonexclusive basis, for a one year term subject to
renewal. As compensation for Consultant's services, Registrant has
agreed to grant Consultant Warrants to purchase 200,000 shares of
Registrant's common stock at a price of $5.00 per share. Such
Warrants were issued on March 26, 1996. The Warrants are
exercisable at any time during the term of the Consulting Agreement
and Consultant has a right to demand registration of such shares
under the Securities Act of 1933 with Registrant's next filing
under the Act or at any time after expiration of the term of the
Consulting Agreement.
With the consent of Consultant, Registrant has elected to register
the Warrants and the 200,000 Warrant Shares in this offering and
subject the Warrants to a one-year lock-up, to expedite
registration of the Warrant Shares and save the Registrant the
expense of separately registering the Warrant Shares.
Options and Shares Compensation Proposals
As of December 22, 1995, the Registrant's board of directors
amended the Registrant's 1989 Incentive Stock Option Plan, without
shareholder approval, to increase the number of options issuable to
employees (not including executive officers or directors of the
Registrant) from the present 275,000 options up to the increased
number of 700,000 options. All such newly authorized options will
be nonqualified under IRS regulations. Under the Plan as amended,
the board of directors has issued nonqualified options to purchase
a total of 360,000 shares, subject to continued employment and
exercisable at 20% per year, to employees; the exercise price of
the options is $4.00 (the fair market price at December 22, 1995),
subject to the market price of the shares being above $8.00 per
share for 30 days after grant date.
<PAGE>
The board of directors also has proposed, subject to approval by
the shareholders at the next annual meeting, a stock award program
for the executive officers and directors of the Registrant, for the
award of common shares to each individual, as of March 1 of each
year of continued employment. The first award is tentatively set
to be March 1, 1997, in amounts of 20,000 shares for from three to
5 years per officer or director, however, no awards shall be made
until a formal plan is adopted and approved by the shareholders and
then only upon further decision of the compensation committee as to
other features of the plan (including payment of taxes for the
grantees with pay back arrangements) which may be desirable. The
stock award plan will conform to the Commission's proposed Rule
16b-3 for purposes of complying with Sections 16(a) and (b) of the
Exchange Act regarding shortswing profit prohibitions.
The board of directors expects both the amended 1989 Incentive
Stock Option Plan, and (subject to shareholder approval) the stock
award program for officers and directors, to be registered with the
Commission on Form S-8 in calendar 1996.
DESCRIPTION OF SECURITIES TO BE REGISTERED
The securities to be registered pursuant to this Registration
Statement consist of shares of the Company's $.01 par value common
stock. The Company's Restated Articles authorize issuance of
20,000,000 shares of common stock, $.01 per share par value and
100,000 shares of preferred stock, $.01 per share par value. There
are no shares of preferred stock issued or outstanding as of the
date of this Prospectus.
Holders of common stock are entitled to receive dividends when and
as declared by the Board of Directors out of funds legally
available therefor.
Holders of common stock are entitled to one vote per share on all
matters upon which such holders are entitled to vote, and further
have the right to cumulate their votes in elections of directors to
the Company's Board of Directors. Cumulation is effected by
multiplication of shares held by the number of director nominees,
and voting is by casting the product as desired among the nominees;
directors are elected by a plurality of votes cast. Pursuant to
the Company's Restated Articles and the Wyoming Management
Stability Act, shares of common stock held by Crested may be voted
by Crested and shares of common stock held by Plateau may be voted
by Plateau in elections of USE directors, so long as USE conducts
substantial business in Wyoming and is "qualified" under such Act
as having assets in excess of $10,000,000, with a class of stock
listed on NASDAQ or on a principal exchange. As of the date of
this Prospectus, Crested owns 510,359 shares of Registrant's common
stock or 8% of the outstanding shares and Plateau owns 225,556
shares of Registrant's common stock, as well as options to purchase
150,000 shares of Registrant's common stock for $3.50 per share.
If such options are exercised, Plateau would own approximately 6%
of Registrant's outstanding common stock.
<PAGE>
In the event of dissolution, liquidation or winding up of USE,
holders of common stock are entitled to share ratably in assets
remaining after creditors (including holders of any preferred
stock, as to liquidation preferences) have been paid.
All outstanding shares of the Company's common stock (including the
Shares offered for sale by this Prospectus) have been fully paid
and are nonassessable.
EXPERTS
The consolidated financial statements of USE incorporated by
reference in this Prospectus from the Company's 1995 Form 10-K have
been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto,
and are included herein in reliance upon the authority of said firm
as experts in giving said reports. Reference is made to said
report which includes an explanatory paragraph that describes the
litigation discussed in Notes E and K to such Consolidated
Financial Statements.
LEGAL MATTERS
Stephen E. Rounds, Denver, Colorado, has acted as special counsel
to USE in connection with this offering.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
-------------------------------------------
Legal $ 5,000
Audit 2,277
SEC and state fees 2,723
-------
$10,000
* Estimate
Item 15. Indemnification of Directors and Officers.
-----------------------------------------
The Wyoming Business Corporation Act ("WBCA"), W.S. 17-16-850 et
seq., provides for indemnification of Registrant's officers,
directors, employees, and agents against liabilities which they may
incur in such capacities. A summarization of circumstances in
which such indemnification may be available follows, but is
qualified by reference to Registrant's Restated Articles of
Incorporation and the text of the statute.
In general, any officer, director, employee, or agent may be
indemnified against expenses, fines, settlements, or judgments
arising in connection with a legal proceeding to which such person
is a party, as a result of such relationship, if that person's
actions were in good faith, reasonably believed by him or her to be
in (or at least not opposed to) the Registrant's best interests,
and in the case of any criminal proceeding, he or she had no
reasonable cause to believe his or her conduct was unlawful.
<PAGE>
Unless such person is successful upon the merits in such an action,
indemnification may be awarded only after a determination by
decision of the Board of Directors (by directors not at the time
parties to the proceeding) or by majority shareholder vote
(excluding shares held or controlled by directors who are at the
time parties to the proceeding), or by opinion of special legal
counsel.
The circumstances under which indemnification would be made in
connection with an action brought on behalf of the Registrant are
generally the same as stated above, except that indemnification is
permitted only for reasonable expenses.
In addition, Registrant has statutory authority to purchase
insurance to protect its officers, directors, employees, and agents
against any liabilities asserted against them, or incurred in
connection with their service in such capacities. Further, the
Registrant may advance or reimburse funds to a director who is a
party to a proceeding, for reasonable expenses incurred in
connection with a proceeding.
Item 16. Exhibits.
--------
5.1 and
23.2 Opinion and Consent of Stephen E. Rounds, Esq.*
10.1 Stock Purchase Agreement including amendments with Silva
Production AB, without exhibits.**
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants*
23.3 Consent of Coopers & Lybrand LLP, Independent Public
Accountants to GMMV*
* Filed herewith.
** Incorporated by reference from Registrant's Form 8-K dated as of
February 16, 1996.
Item 17. Undertakings.
------------
The Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the Registrations Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the Registration Statement;
<PAGE>
provided, however, that paragraphs (a)(1)(i) and (ii) do not apply
if the information required to be included in a post-effective
amendment by such paragraphs, is contained in periodic reports
filed by the Registrant pursuant to Section 13 of the Securities
Exchange Act of 1934 that are incorporated by reference into this
Registration Statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement.
(a)(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(a)(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of this offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
section 13(a) of the Securities Exchange Act of 1934 that is
incorporated by reference in this Registration Statement, shall be
deemed to be a new Registration Statement relating to the
securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(h) Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended, may be permitted to
directors, officers, and controlling persons of the Registrant, the
Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, director, or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement on Form S-3 to be signed on
its behalf by the undersigned, duly authorized in the City of
Riverton, Wyoming, on March 22, 1996.
U.S. ENERGY CORP.
(Registrant)
Date: March 22, 1996 By: s/ John L. Larsen
--------------------------
JOHN L. LARSEN, President
and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement was signed by the following persons in
the capacities and on the dates stated.
Date: March 22, 1996 By: s/ John L. Larsen
--------------------------
JOHN L. LARSEN, President
and Director
Date: March 22, 1996 By: s/ Max T. Evans
--------------------------
MAX T. EVANS, Director
Date: March 22, 1996 By: s/ Harold F. Herron
--------------------------
HAROLD F. HERRON, Director
Date: March ____, 1996 By: __________________________
DON C. ANDERSON, Director
Date: March ____, 1996 By:___________________________
DAVID W. BRENMAN, Director
Date: March 22, 1996 By: s/ Nick Bebout
--------------------------
NICK BEBOUT, Director
Date: March 22, 1996 By: s/ Robert Scott Lorimer
--------------------------
ROBERT SCOTT LORIMER,
Principal Financial
Officer and Chief
Accounting Officer
EXHIBIT 5.1
Stephen E. Rounds
4635 East Eighteenth Ave.
Denver, Colorado 80220
March 25, 1996
U.S. Energy Corp.
877 North 8th West
Riverton, Wyoming 82501
Re: Registration Statement on Form S-3
Gentlemen:
U.S. Energy Corp. ("Company") proposes to file a registration
statement for the offer and sale, to the public, of up to 657,780
shares of common stock, of which 457,780 shares are held by current
shareholders and 200,000 are issuable on exercise of outstanding
warrants to purchase 200,000 shares (hereinafter, collectively
referred to as the "Selling Shareholders"). My opinion is required
in connection with such transaction.
Documents Reviewed
I have examined originals, certified copies or other copies
identified to my satisfaction, of the following:
1. Restated Articles of Incorporation, and Amendment to Restated
Articles of Incorporation, of the Company.
2. Bylaws of the Company, as amended.
3. The Company's Annual Report on Form 10-K for fiscal year ended
May 31, 1995 (including the proxy statement for the annual meeting
of the Company shareholders, held on November 29, 1995); the
Company's Quarterly Report on Form 10-Q for the three months ended
August 31, 1995 (and the Quarterly Report on Form 10-Q for the
three months ended August 31, 1994); amendments filed to date to
the preceding; and all other reports filed by the Company with the
Commission under Section 13 of the Securities Exchange Act of 1934.
4. All exhibits listed as incorporated by reference in Part II of
the registration statement on Form S-3, prepared by the Company and
filed with this opinion as an exhibit.
5. The Company's registration statement on Form S-3, with which
this opinion is filed as an exhibit.
6. Minutes of the proceedings of the Company board of directors
for the last four fiscal years, and for the year ending May 31,
1996 minutes of proceeding through February 1996.
<PAGE>
U.S. Energy Corp.
March 25, 1996
Page -2-
7. Warrants to purchase 200,000 shares of common stock, issued to
Shamrock Partners, Ltd.
I have also consulted with Company officers and representatives
(including but not limited to its transfer agent), and received
representations and assurances concerning disclosures in the
reports described in paragraph 3 and the registration statement
described in paragraph 5, as I have deemed advisable or necessary
under the circumstances. Although I have not undertaken
independent verification of the matters covered by this paragraph,
I have no reason to believe that the representations and assurances
received are materially inaccurate or false.
Opinion
Subject to compliance with applicable state securities laws, and to
declaration of effectiveness of the Company's Form S-3 registration
statement, and based on my review of the documents listed above, it
is my opinion that the common shares to be offered and sold by the
selling shareholders named in the registration statement, are duly
and validly issued, fully paid and non-assessable common shares of
the Company, Assuming, with respect to the 200,000 shares
underlying the warrants held by Shamrock Partners, that such shares
are purchased on exercise of the warrants in accordance with the
terms of the warrants.
My opinion assumes that the selling shareholders deliver copies of
the definitive prospectus to each purchaser of the common shares,
in compliance with the Securities Act of 1933, as amended, and
applicable rules of the Securities and Exchange Commission.
I hereby consent to the filing of this opinion as an exhibit to the
registration statement on Form S-3. However, I do not admit that
I am in the category of those persons whose consent is required to
be so filed by Section 7(a) of the Securities Act of 1993.
Yours Sincerely,
s/ Stephen E. Rounds
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTS
--------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference in this Form S-3 registration statement
of our report dated August 28,1995 included in U.S. Energy Corp.'s
Form 10-K for the year ended May 31, 1995, and to all references to
our firm included in this registration statement
s/ Arthur Andersen LLP
Denver, Colorado,
March 22, 1996
Exhibit 23.2
CONSENT OF COUNSEL
-------------------
I hereby consent to the filing of my opinion as an exhbit to the
registration statement on Form S-3. However, I do not admit that
I am in the category of those persons whose consent is required to
be so filed by Section 7(a) of the Securities Act of 1933.
Yours sincerely,
s/ Stephen E. Rounds
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of U.S. Energy Corp. on Form S-3 of our report dated
April 10, 1995, on our audits of the financial statements of Green
Mountain Mining Venture as of December 31, 1994 and 1993, and for
the years ended December 31, 1994, 1993 and 1992, and the period
from inception (June 1, 1990) to December 31, 1994, which report is
included in the annual report on Form 10-K of U.S. Energy Corp.
COOPERS & LYBRAND
s/ Coopers & Lybrand
Salt Lake City, Utah
March 22, 1996
