FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal quarter ended February 29, 1996 or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____ to ____
Commission file number 0-6814
U.S. ENERGY CORP.
- -------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Wyoming 83-0205516
- ---------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
877 North 8th West, Riverton, WY 82501
- ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (307) 856-9271
---------------
Not Applicable
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(Former name, former address and former fiscal year, if changed
since last report)
Check whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
State the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 12, 1996
- ------------------------------ --------------------------------
Common stock, $.01 par value 6,379,066 Shares
<PAGE>
U.S. ENERGY CORP.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Condensed Consolidated Balance Sheets
February 29, 1996 and May 31, 1995 . . . . . . . . .3-4
Condensed Consolidated Statements of
Operations Three and Nine Months
Ended February 29, 1996 and
February 28, 1995. . . . . . . . . . . . . . . . . .5-7
Condensed Consolidated Statements of Cash Flows
Nine Months Ended February 29, 1996
and February 28, 1995. . . . . . . . . . . . . . . .8-9
Notes to Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . .10-11
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . .12-15
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings. . . . . . . . . . . . . . . . . . 16
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 17
Signatures . . . . . . . . . . . . . . . . . . . . . 18
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Balance Sheets
<TABLE>
ASSETS
<CAPTION>
February 29, May 31,
1996 1995
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,279,100 $ 360,600
Accounts receivable
Trade 425,300 709,700
Related parties 312,000 231,600
Inventory 86,200 86,100
Current portion long-term
notes receivables 38,300 74,400
Other 87,800 86,100
Net Current Assets of
Discontinued Operations -- 1,841,600
----------- -----------
TOTAL CURRENT ASSETS 2,228,700 3,390,100
INVESTMENTS AND ADVANCES
Affiliates 4,159,500 3,244,600
Restricted 8,056,900 7,757,400
----------- -----------
12,216,400 11,002,000
PROPERTIES AND EQUIPMENT 28,101,900 27,079,200
Less accumulated depreciation,
depletion and amortization (10,176,900) (9,659,400)
----------- -----------
17,925,000 17,419,800
OTHER ASSETS:
Accounts and notes receivable:
Real estate and other 1,905,600 912,700
Affiliates and related parties 25,000 25,000
Employees 525,500 505,100
Buildings and improvements
held for sale 7,500 7,500
Deferred compensation, long-term -- 5,100
Deposits and other 117,200 117,200
----------- -----------
2,580,800 1,572,600
----------- -----------
$34,950,900 $33,384,500
----------- -----------
----------- -----------
See notes to condensed consolidated financial statements.
</TABLE>
3
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U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Balance Sheets
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
February 29, May 31,
1996 1995
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 622,100 $ 2,067,000
Income taxes payable 50,000 --
Line of credit -- 1,140,000
Current portion of long-term debt 418,900 161,200
----------- -----------
TOTAL CURRENT LIABILITIES 1,091,000 3,368,200
LONG-TERM DEBT (See Note 4) 651,300 277,500
RECLAMATION LIABILITY (See Note 5) 3,951,800 3,951,800
OTHER ACCRUED LIABILITIES (See Note 5) 10,546,300 10,818,700
DEFERRED TAX LIABILITY 267,000 183,300
NET NONCURRENT LIABILITIES OF
DISCONTINUED OPERATIONS -- 538,300
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 949,300 708,200
Common stock, 187,817
shares forfeitable 1,486,500 1,370,100
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value;
authorized, 100,000 shares;
none issued or outstanding -- --
Common stock, $.01 par value;
authorized, 20,000,000 shares;
issued, 6,379,066 and 5,262,794 62,300 52,500
Additional paid-in capital 21,619,300 18,629,000
Retained earnings (deficit) (2,417,200) (3,256,400)
Treasury stock, 769,943
shares, at cost (2,242,400) (2,242,400)
Unallocated ESOP contribution (1,014,300) (1,014,300)
----------- -----------
16,007,700 12,168,400
----------- -----------
$34,950,900 $33,384,500
----------- -----------
----------- -----------
See notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
<TABLE>
Condensed Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
February February
-------------------------- ----------------------------
29, 1996 28, 1995 29, 1996 28, 1995
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Mineral sales
and option $ 942,400 $ -- $ 3,116,700 $ --
Oil sales 55,200 47,400 137,300 138,200
Commercial revenues 161,100 178,700 684,400 741,500
Gain on restructuring
mining properties
agreements -- -- -- 85,500
Construction contract
revenues 552,500 29,100 3,369,600 919,600
Gain on sale of assets 24,100 975,000 68,300 1,288,900
Interest 125,700 79,200 391,400 249,100
Management and
other fees 14,600 76,900 384,100 215,700
----------- ---------- ----------- -----------
1,875,600 1,386,300 8,151,800 3,638,500
----------- ---------- ----------- -----------
COSTS AND EXPENSES:
Costs of mineral sales 942,400 -- 2,766,700 --
Mineral operations 190,900 299,300 602,400 1,005,500
Construction costs 474,400 36,500 2,569,700 790,500
Abandoned gas leases -- -- 328,700 --
General and
administrative 959,200 618,600 1,965,800 1,469,100
Commercial operations 490,300 580,100 1,558,600 1,670,500
Oil production 36,700 24,100 68,100 52,700
Loss on sale
of investments -- -- -- 89,900
Interest 72,600 46,100 174,300 111,500
----------- ---------- ----------- -----------
3,166,500 1,604,700 10,034,300 5,189,700
----------- ---------- ----------- -----------
(Continued)
See notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
<TABLE>
Condensed Consolidated Statements of Operations
(Unaudited)
(Continued)
<CAPTION>
Three Months Ended Nine Months Ended
February February
-------------------------- ----------------------------
29, 1996 28, 1995 29, 1996 28, 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Loss before
Equity In Loss
of Affiliates,
Provision for
Income Taxes (1,290,900) (218,400) (1,882,500) (1,551,200)
Minority Interest in
Loss of Consolidated
Subsidiaries 332,200 76,200 398,700 418,400
Equity in Loss of
Affiliates-net (115,700) (128,100) (281,600) (304,900)
Provision for
Income Taxes -- -- -- --
----------- ---------- ----------- -----------
Loss from Continuing
Operations (1,074,400) (270,300) (1,765,400) (1,437,700)
----------- ---------- ----------- -----------
Discontinued Operations
(Note 8)
Income from Discontinued
Operations Net of
Income Taxes of $0 (9,200) (58,100) 308,900 121,900
Gain on Disposal of
Subsidiary Operations
in Discontinued
Segment Net of Income
Taxes of $50,000 2,295,700 -- 2,295,700 --
----------- ---------- ----------- -----------
Income (Loss) from
Discontinued Operations 2,286,500 (58,100) 2,604,600 121,900
----------- ---------- ----------- -----------
NET INCOME (LOSS) $ 1,212,100 $ (328,400) $ 839,200 $(1,315,800)
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
(Continued)
See notes to condensed consolidated financial statements.
</TABLE>
6
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
<TABLE>
Condensed Consolidated Statements of Operations
(Unaudited)
(Continued)
<CAPTION>
Three Months Ended Nine Months Ended
February February
-------------------------- ----------------------------
29, 1996 28, 1995 29, 1996 28, 1995
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) PER SHARE
Loss from Continuing
Operations $ (.17) $ (.06) $ (.28) $ (.29)
Income (Loss) from
Discontinued
Operations .00 (.01) .05 .02
Gain on Disposal
of Subsidiary
Operating in
Discontinued
Segment .36 -- .37 --
---------- ---------- ----------- -----------
NET INCOME (LOSS)
PER SHARE $ .19 $ (.07) $ .14 $ (.27)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 6,364,089 5,012,216 6,142,925 4,877,776
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
See notes to condensed consolidated financial statements.
</TABLE>
7
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
<TABLE>
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine Months Ended
February
--------------------------
29, 1996 28, 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 839,200 $(1,315,800)
Adjustments to reconcile
net income to net cash used
in operating activities:
Minority interest in loss
of consolidated subsidiaries (398,700) (418,400)
Depreciation, depletion
and amortization 623,900 577,300
Non-cash compensation 297,400 69,500
Abandoned mineral leases 328,700 --
Equity in loss of affiliates 281,600 304,900
(Gain) on sale assets (68,300) (1,288,900)
(Gain) on sale of subsidiary (2,345,700) --
Net assets disposed of in connection
with sale of subsidiary (1,939,000) --
Loss (gain) on sale of investments -- 89,900
Cumulative effect of accounting changes -- (83,800)
Change in deferred income taxes 83,700 (36,000)
Net changes in components
of working capital 640,500 282,600
----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (1,656,700) (1,818,700)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in affiliates (556,700) (476,800)
Investments in other (299,500) (198,400)
Purchase of property and equipment (1,021,100) (141,000)
Proceeds from sale of assets 77,700 969,100
Proceeds from sale of subsidiary 3,300,000 --
Development of mining properties (349,200) (341,400)
Development of gas properties (23,400) (147,700)
Change in notes receivable 55,800 (128,200)
Proceeds from sale of investments -- 199,300
Deposits and other -- (3,300)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES 1,183,600 (268,400)
----------- -----------
(Continued)
See notes to condensed consolidated financial statements.
</TABLE>
8
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
<TABLE>
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine Months Ended
February
--------------------------
29, 1996 28, 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Private placement of common stock 2,842,200 868,100
Cancellation of stock for services (23,100) --
Company stock purchased by
consolidated affiliate -- (120,000)
Additions to long-term debt 1,348,500 1,740,800
Payment on long-term debt (2,966,700) (802,800)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,200,900 1,686,100
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 727,800 (401,000)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 551,300 1,181,700
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,279,100 $ 780,700
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES:
Income tax paid $ -- $ 118,900
----------- -----------
----------- -----------
Interest paid $ 221,200 $ 175,000
----------- -----------
----------- -----------
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of unowned portion of
affiliate with Company stock $ -- $ 80,000
----------- -----------
----------- -----------
NOTES RECEIVABLE OBTAINED IN
CONNECTION WITH SALE OF SUBSIDIARY $ 1,000,000 $ --
----------- -----------
----------- -----------
See notes to condensed consolidated financial statements.
</TABLE>
9
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
Notes to Condensed Consolidated Financial Statements
1) The Condensed Consolidated Balance Sheets as of February
29, 1996 and May 31, 1995, the Condensed Consolidated Statements of
Operations for the three and nine months ended February 29, 1996
and February 28, 1995, and the Condensed Consolidated Statements of
Cash Flows for the nine months ended February 29, 1996 and February
28, 1995, have been prepared by the Registrant without audit. In
the opinion of the Registrant, the accompanying financial
statements contain all adjustments (consisting of only normal
recurring accruals and reclassifications for amounts associated
with the discontinued operations of The Brunton Company ("Brunton")
which was sold by the Registrant as of January 1996) necessary to
present fairly the financial position of Registrant as of February
29, 1996 and May 31, 1995, the results of operations for the three
and nine months ended February 29, 1996 and February 28, 1995 and
the cash flows for the nine months then ended.
2) Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these financial statements be read
in conjunction with the Registrant's May 31, 1995 Form 10-K. The
results of operations for the periods ended February 29, 1996 and
February 28, 1995 are not necessarily indicative of the operating
results for the full year.
3) The consolidated financial statements of the Registrant
include 100% of the accounts of USECB Joint Venture (USECB) which
is owned 50% by the Registrant and 50% by the Registrant's
subsidiary, Crested Corp. (Crested). The consolidated financial
statements also reflect 100% of the accounts of its majority-owned
subsidiaries: Energx Ltd. (90%), Crested (51.9%), USECC Gold
Limited Liability Company (100%), Plateau Resources Limited (100%)
and Four Nines Gold, Inc. (50.9%). The Consolidated Financial
Statements reflect the operations of Brunton as discontinued
because Brunton was sold as of January 31, 1996. The 1995
Consolidated Financial Statements have been reclassified for
amounts associated with the discontinued operations of Brunton.
Brunton manufactures and sells outdoor recreation products. All
material intercompany profits and balances have been eliminated.
4) Debt as of February 29, 1996 consists of various
equipment and other property loans totaling $351,900 and debt
attributable to consolidated affiliates of $718,300 on Four Nines
Gold. Certain inter-affiliate loans were eliminated through
consolidation.
10
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
Notes to Condensed Consolidated Financial Statements
(Continued)
5) Accrued reclamation obligations of $3,951,800 are the
Registrant's share of a reclamation liability at the Crooks Gap
Mining District and the full obligation at the Shootaring Uranium
Mill. The reclamation work may be performed over several years.
In addition, Plateau has recorded additional obligations of
$10,546,301 for the estimated holding and maintenance costs needed
until the mill is placed in service or decommissioning begins.
6) During the nine months ended February 29, 1996, the
Registrant completed a private placement of 812,432 of restricted
common shares which resulted in net proceeds to the Company of
$2,842,200. The Registrant also cancelled 5,000 shares of its
common stock which had previously been issued for professional
services. On January 5, 1996, the Registrant issued 32,901 shares
of common stock to certain of its employees for a Christmas bonus,
which represented $180,626 in compensation, one half of which was
paid by Crested. No officers or directors received such stock. On
February 21, 1996 the Registrant issued 7,700 shares under the
Deferred Compensation Plan for a total compensation of $116,385.50
one half of which was paid by Crested.
7) Net income (loss) per share is computed using the
weighted average number of common shares outstanding during each
period. The dilutive effect of stock options is not included in
the computation, as it is not material.
8) The Registrant has reflected the operations of Brunton as
discontinued in each of the accompanying consolidated financial
statements presented because the Registrant sold its 100% interest
in Brunton to Silva A.B. of Sweden (Silva) during the third quarter
of 1996. The purchase price paid by Silva was $4,300,000 and was
in the form of $3,300,000 of cash and a $1,000,000 Promissory Note.
This note will be paid to the Registrant in three annual equal
installments of $333,333 beginning February 15, 1996 and will
accrue interest at 7%. The sale of Brunton resulted in a gain of
approximately $2,295,700.
Sales from Brunton's operations were $244,100 and $2,819,100
for the three and nine months ended February 29, 1996,
respectively, and $1,089,900 and $3,259,200 for the three and nine
months ended February 28, 1995, respectively.
The effective income tax rate for discontinued operations
differs from the U.S. statutory tax rate primarily as a result of
the utilization of net operating loss carryforwards.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
-------------------------------------------------------
The following is management's discussion and analysis of
significant factors which have affected the Registrant's liquidity,
capital resources and results of operations during the period
included in the accompanying financial statements.
Liquidity and Capital Resources
Working capital increased during the nine months ended
February 29, 1996 by $1,115,800 to working capital of $1,137,700.
Cash and cash equivalents increased by $918,500 to $1,279,100
during the period ended February 29, 1996. This increase was the
result of financing activities and Registrant's sale of a
subsidiary.
In June and July 1995, the Registrant sold 812,432 restricted
common shares in a private placement for net proceeds of $2,842,200
The Registrant registered these shares with the SEC during the
Quarter ended February 29, 1996 for resale by the holders of such
shares. In connection with this private placement, warrants to
purchase 81,243 common shares at $4.80 per share, 40,622 of which
were exercised in March of 1996, were issued to the selling agent.
The balance of the warrants are exercisable through July 25, 2000.
The Registrant investing activities provided $1,183,600 during
the nine months ended February 29, 1996. This increase in cash was
a result of proceeds from the sale of assets $77,700 and the sale
of the Brunton Company, $3,300,000. These increases in cash were
partially offset by investments in affiliates due to the Registrant
and its subsidiary Crested funding Sheep Mountain Partners ("SMP"),
Plateau Resources Limited ("Plateau"), Energx, Ltd. ("Energx") and
the Sutter Gold Mining Company ("SGMC"). As the Registrant and
Crested provide various services for GMMV and SMP, the non-
affiliated participants are invoiced for their proportionate share
of the approved operating costs. GMMV is current on its
reimbursements to the Registrant and Crested for all the operating
costs. Due to disputes existing between the SMP partners, the
Registrant and Crested have not been reimbursed for care and
maintenance costs expended on the SMP mineral properties since the
spring of 1991. Additionally, the Registrant and its affiliates
(1)purchased $1,021,100 of additional equipment (2) developed
mineral properties, $349,200 and (3) developed gas properties
$23,400 during the nine months ended February 29, 1996.
During the quarter ended February 29, 1996 the Registrant sold
all of its 100% interest in The Brunton Company to Silva A.B. of
Sweden. Gross proceeds from the sale were $4,300,000 of which
$3,300,000 was paid in cash and $1,000,000 in a Promissory Note
which is payable in three payments of $333,333 on February 15,
1997, 1998 and 1999. The Note from Silva bears interest at 7% per
12
<PAGE>
annum which is due with the principal payments. Other conditions
of the sale were the assumption of certain accounts payable,
accounts receivable, and a Note in the amount of $279,104 with a
bank, and the return of certain equipment and aircraft which
secures the Note. Another condition to the closing was the
retirement of this debt.
Additionally, The Brunton Company returned to the Registrant
160,000 shares of Crested common stock and 225,556 shares of
Registrant's common stock along with options to purchase 150,000
shares of Registrants common stock at $3.50 per share and 300,000
shares of Crested common stock at $0.40 per share. The Registrant,
upon return of these shares, transferred 100,000 shares and 125,556
shares of the common stock to SGMC and Plateau respectively, along
with 75,000 options to purchase Registrant's Common Stock to each
transferee. Additionally, the Registrant transferred 60,000 shares
and 100,000 shares of Crested common stock to Plateau and SGMC
respectively, along with 150,000 options to purchase common shares
of Crested to each transferee. The transfer of such stock and
options to Plateau was made in partial payment of debt owed to
Plateau by USECC. The shares transferred were at the historical
costs basis because the transfer was among entities under common
control. The net gain recognized after the transfer of assets,
assumption of debt and receivables, along with tax provisions, was
$2,295,700.
Other changes in working capital were a decrease in accounts
payable and accrued expenses of $1,444,900 and a decrease in lines
of credit by $1,140,000. The Registrant and Crested have a line of
credit for $1,000,000, with $0 outstanding as of February 29,
1996. Four Nines Gold ("FNG"), has $79,000 outstanding on its line
of credit.
The primary requirements for the Registrant's working capital
continue to be the funding of on-going administrative expenses, the
mine and mill development and holding costs of SGMC; holding costs
of Plateau; and uranium (U3O8) delivery costs and property holding
costs of SMP. As a result of the disputes between the SMP partners
(see Part II Item 1), the Registrant and Crested have been
delivering certain of their respective portions of the U3O8
concentrates required to fill various delivery requirements on
long-term U3O8 contracts with domestic utilities. Currently,
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 the Registrant's and Crested's portion of the
remaining commitments in fiscal 1996 will depend on the spot market
price of uranium and on the outcome of the arbitration proceedings
involving Nukem/CRIC.
The primary source of the Registrant's capital resources for
the remainder of fiscal 1996, will be (i) cash on hand; (ii)
possible sale of equity or interests in investment properties or
affiliated companies; (iii) sale of equipment; (iv) resolution of
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<PAGE>
pending litigation/arbitration; (v) sale of future royalties or
interests in mineral properties; (vi) proceeds from the sale of
uranium under the SMP contracts, (vii) and borrowings under
existing lines of credit. Construction revenues from FNG, fees
from oil production, rentals of various real estate holdings and
equipment, aircraft chartering and the sale of aviation fuel will
also provide cash.
Existing working capital is sufficient to hold and maintain
existing mineral properties, obtain and maintain required permits
for operation and development of such properties and pay
administration costs for the blance of fiscal 1996 and beyond.
Additional working capital to that on hand at February 29, 1996
will be required, however, for the construction of a gold
processing mill and mine development for SGMC and the development
of Plateau's properties. The 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.
The funding of SMP care and maintenance costs may require
additional funding, depending on the outcome of the SMP
arbitration. The Registrant and Crested sought rescission of the
SMP Partnership Agreement as well as damages from Nukem/CRIC in
U.S. District Court. In February 1994, the parties to the
litigation agreed to a consensual binding arbitration on claims
accruing after the formation of the SMP partnership. The
arbitration hearings have concluded, and it is anticipated that the
Arbitration Panel will enter its award some time during fourth
quarter of fiscal 1996.
Results of Operations
Three and Nine Months Ended February 29, 1996 Compared to Three and
Nine Months Ended February 28, 1995
Revenues for the nine month and three month periods ended
February 29, 1996 increased by $4,513,300 and $489,300,
respectively, primarily due to an increase in mineral sales, a
mineral option, and an increase in construction contract revenues.
Revenues from mineral sales and option were $3,116,700 and
$942,400 for the nine and three months ended February 29, 1996.
There were no similar U3O8 deliveries or option activities for the
same period in the prior year.
Construction contract revenues for the nine and three months
ended February 29, 1996 increased by $2,450,000 and $523,400
respectively from profitable contracts awarded late in fiscal 1995
to the Registrant's subsidiary FNG.
Management fees and other revenues increased by $168,400 and
decreased by $62,300 for the nine and three months ended February
29, 1996. The increase is primarily as a result of increased
revenues generated by operations of a motel, convenience store and
restaurant at the Registrant's town of Ticaboo in southern Utah.
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<PAGE>
The costs of mineral sales were $2,766,700 for the nine months
and $942,400 for the three months ended February 29, 1996, for
which there were no corresponding costs during the same period in
1995. Cost and expenses associated with mineral operations
decreased by $403,100 and $108,400, respectively, for the nine and
three months ended February 29, 1996, compared to the nine and
three months ended February 28, 1995, primarily as a result of a
decrease in legal costs in connection with the SMP arbitration.
The cost of construction activities increased by $1,779,200, and
$437,900, respectively for the nine month and three month periods
ended February 29, 1996 compared to the same periods in 1995 as a
result of increased contract work.
General and administrative expenses increased by $496,700 and
decreased by $340,600, respectively for the nine and three months
ended February 29, 1996 compared to the comparable 1995 periods.
The increase was due to additional expenses associated with the
FNG's contracts. Additionally, interest expense which is included
in general and administrative expense increased by $46,200 during
the nine months ended February 29, 1996 as compared to the same
period in 1995. General and administration expenses also increased
due to the Christmas bonus paid in stock to certain employees
during the quarter ended February 29, 1996 and to the shares of
stock issued in February 1996 under Registrant's Restricted Stock
Bonus Plan. The total of these stock issuances was compensation of
$297,400. Officers and directors were not issued any stock
compensation (see Note 6). Commercial operations expenses remained
relatively constant.
Operations for the nine months and three months ended February
29, 1996 resulted in a loss from continuing operations of
$1,765,400 and $1,074,400, respectively, as compared to a loss of
$1,437,700 and $270,300 during the same periods of the previous
year. During the nine months and quarter ended February 29, 1996
the Registrant recorded a gain of $2,295,700 net of $50,000 in
taxes, on the sale of Brunton. No such gain was recognized in the
prior year's periods. Due to the discontinuance of operations from
Brunton during the quarter ended February 29, 1996, all income from
Brunton is shown as discontinued operations on the Statements of
Operations for the quarter and nine months ended February 29, 1995.
During the nine months and quarter ended February 29, 1996 the
Registrant recognized income of $308,900 and a loss of $9,200,
respectively, from Brunton's discontinued operations as compared to
a gain of $121,900 and a loss of $58,100 for the corresponding
periods of the prior year. The Registrant therefore recognized a
net income of $839,200 ($0.14 per share) compared to a loss of
$1,315,800 ($0.27 per share) for the nine month period and net
income of $1,212,100 ($0.19 per share) compared to a loss of
$328,400 ($0.07 per share) for the three month period, of the
previous year.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
(a) In the pending arbitration proceedings involving Sheep
Mountain Partners, Registrant, Crested and Nukem Inc./CRIC,
reported in Registrant's Form 10-K (Item 3) for the fiscal year
ended May 31, 1995 and Registrant's Form 10Q for the fiscal quarter
ended November 30, 1995 (Part II, Item 1), the three member
Arbitration Panel unanimously concluded that it will need an
additional period of time up to and including April 22, 1996 before
the Panel's Award will be issued.
(b) In the Bond Gold Bullfrog, Inc. "(BGBI") litigation reported
in the Registrant's 1995 Form 10-K (Item 3) a partial or bifurcated
trial to the judge of the extralateral rights issues was held on
December 11 and 12, 1995, as scheduled. The purpose of the hearing
was to determine whether the Bullfrog orebody in question 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 reached based on the testimony
and exhibits introduced at the trial concerning the description of
the orebody. Registrant and defendants Crested and Parador Mining
Co., Inc. ("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 it apexed on a portion of Parador's two
mining claims. The defendant H. B. Layne Contractor, Inc.
("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.
16
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. A Report on Form 8-K was filed as of
February 16, 1996, with respect to Registrant's sale of The Brunton
Company to Silva Production A.B. The report contains Registrant'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.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
U.S. ENERGY CORP.
(Registrant)
Date: April 12, 1996 By: s/ John L. Larsen
------------------------------
JOHN L. LARSEN,
Chief Executive Officer
Date: April 12, 1996 By: s/ Robert Scott Lorimer
------------------------------
ROBERT SCOTT LORIMER,
Principal Financial Officer
and Chief Accounting Officer
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
U.S. ENERGY CORP. FORM 10-Q FOR THE QUARTER ENDED FEBRUARY 29, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000101594
<NAME> U.S. ENERGY CORP.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 1,279,100
<SECURITIES> 0
<RECEIVABLES> 775,600
<ALLOWANCES> 0
<INVENTORY> 174,000
<CURRENT-ASSETS> 2,228,700
<PP&E> 28,101,900
<DEPRECIATION> 10,176,900
<TOTAL-ASSETS> 34,950,900
<CURRENT-LIABILITIES> 1,091,000
<BONDS> 0
0
0
<COMMON> 62,300
<OTHER-SE> 15,945,400
<TOTAL-LIABILITY-AND-EQUITY> 34,950,900
<SALES> 7,308,000
<TOTAL-REVENUES> 8,151,800
<CGS> 6,963,000
<TOTAL-COSTS> 6,963,000
<OTHER-EXPENSES> 2,850,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 221,200
<INCOME-PRETAX> 530,300
<INCOME-TAX> 0
<INCOME-CONTINUING> 530,300
<DISCONTINUED> 308,900
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 839,200
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
