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 August 31, 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
- ------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO _____
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 October 14, 1996
- ----------------------------- -------------------------------
Common stock, $.01 par value 6,744,009 Shares
<PAGE>
U.S. ENERGY CORP.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Condensed Consolidated Balance Sheets
August 31, 1996 and May 31, 1996. . . . . . . . . 3-4
Condensed Consolidated Statements of Operations
Three Months Ended August 31, 1996 and 1995 . . . 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended August 31, 1996 and 1995 . . 6-7
Notes to Condensed Consolidated
Financial Statements. . . . . . . . . . . . . . . 8-9
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . 9-11
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 12
ITEM 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 12
Signatures. . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Balance Sheets
ASSETS
August 31, May 31,
1996 1996
----------- ----------
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,504,000 $ 992,600
Accounts receivable
Trade 456,300 570,900
Related parties 259,700 281,800
Inventory 106,100 118,700
Current portion long-term
notes receivables 434,700 438,700
Assets held for resale and other 975,800 509,700
----------- -----------
TOTAL CURRENT ASSETS 3,736,600 2,912,400
----------- -----------
INVESTMENTS AND ADVANCES
Affiliates 3,811,700 3,658,500
Restricted 8,245,200 8,200,800
----------- -----------
12,056,900 11,859,300
PROPERTIES AND EQUIPMENT 26,840,600 26,694,300
Less accumulated depreciation,
depletion and amortization (9,199,700) (9,047,900)
----------- -----------
17,640,900 17,646,400
OTHER ASSETS:
Accounts and notes receivable:
Real estate and other 1,559,400 1,648,900
Affiliates and related parties 713,300 532,400
Deposits and other 197,000 193,900
----------- -----------
2,469,700 2,375,200
----------- -----------
$ 35,904,100 $34,793,300
=========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Balance Sheets
LIABILITIES AND SHAREHOLDERS' EQUITY
August 31, May 31,
1996 1996
---------- ----------
(Unaudited) (Unaudited)
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 1,229,300 $ 1,292,300
Line of credit 937,000 499,000
Current portion of long-term debt 260,300 239,900
----------- -----------
TOTAL CURRENT LIABILITIES 2,426,600 2,031,200
LONG-TERM DEBT (See Note 4) 516,900 444,300
RECLAMATION LIABILITY (See Note 5) 3,978,800 3,978,800
OTHER ACCRUED LIABILITIES (See Note 5) 10,263,000 10,414,300
DEFERRED TAX LIABILITY 183,300 183,300
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 2,492,000 1,637,900
Common stock, 195,520
shares forfeitable 1,486,500 1,486,500
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, 6,556,909 and 5,262,794 64,000 63,100
Additional paid-in capital 21,103,400 20,775,700
Retained earnings (deficit) (3,441,000) (3,052,400)
Treasury stock, 769,943
shares, at cost (2,242,400) (2,242,400)
Unallocated ESOP contribution (927,000) (927,000)
------------ -----------
14,557,000 14,617,000
------------ -----------
$35,904,100 $34,793,300
=========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
August 31,
---------------------------
1996 1995
REVENUES: ----------- -----------
Mineral sales and option $ -- $ 2,174,300
Construction contract revenues 515,900 1,627,100
Oil sales 39,100 41,500
Commercial revenues 612,500 471,100
Gain from restructuring
mining properties agreements 20,900 --
Gain on sale of assets -- 16,600
Interest 127,100 21,900
Management and other fees 23,600 32,800
----------- -----------
1,339,100 4,385,300
----------- -----------
COSTS AND EXPENSES:
Costs of mineral sales -- 1,824,300
Mineral operations 162,800 61,600
Construction costs 363,200 1,206,400
Abandoned gas leases -- 328,700
General and administrative 415,300 443,400
Commercial operations 730,600 538,200
Oil production 24,100 17,500
Interest 35,900 60,400
----------- ------------
1,731,900 4,480,500
----------- ------------
INCOME (LOSS) BEFORE
EQUITY INCOME OF AFFILIATE
AND PROVISION FOR INCOME TAXES (392,800) (95,200)
MINORITY INTEREST IN (GAIN)
LOSS OF CONSOLIDATED SUBSIDIARIES 113,800 (35,600)
EQUITY IN LOSS OF AFFILIATES - NET (109,600) (75,600)
----------- ------------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES (388,600) (206,400)
PROVISION FOR INCOME TAXES -- --
----------- ------------
LOSS BEFORE DISCONTINUED OPERATIONS (388,600) (206,400)
INCOME FROM DISCONTINUED OPERATIONS -- 184,000
(Note 6)
NET INCOME (LOSS) $ (388,600) $ (22,400)
=========== ============
NET INCOME (LOSS)
PER SHARE (see Note 7) $ (.06) *
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,512,670 5,728,784
=========== ===========
*Less than $.01 per share.
See notes to condensed consolidated financial statements.
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
August 31,
--------------------------
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ (388,600) $ (22,400)
Adjustments to reconcile
net income to net cash used
in operating activities:
Minority interest in (gain) loss
of consolidated subsidiaries (109,600) 35,600
Income from discontinued operations -- (184,000)
Depreciation, depletion
and amortization 161,600 198,400
Abandoned mineral leases -- 328,700
Equity in (gain) loss of affiliates 111,300 75,600
(Gain) loss on sale assets -- (16,600)
Other (3,400) 5,000
Net changes in components
of working capital (98,100) (1,484,700)
Change in deferred income taxes -- 83,700
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (326,800) (980,700)
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in note receivable (87,300) 14,600
Change in investments in affiliates 699,200 (217,000)
Purchase of property and equipment (30,300) (94,600)
Increase in restricted investments (44,400) --
Proceeds from sale of assets -- 21,300
Development of gas properties (20,300) (16,900)
Development of mining properties (102,200) (113,800)
----------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 414,700 (406,400)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of options for common stock 328,500 2,842,200
Payment on long-term debt (130,100) (1,331,900)
Additions to long-term debt 225,100 90,300
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 423,500 1,600,600
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 511,400 213,500
(Continued)
See notes to condensed consolidated financial statements.
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
August 31,
--------------------------
1996 1995
----------- -----------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 992,600 360,600
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,504,000 $ 574,100
=========== ===========
SUPPLEMENTAL DISCLOSURES:
Income tax paid $ -- $ --
=========== ===========
Interest paid $ 35,900 $ 60,400
=========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
Notes to Condensed Consolidated Financial Statements
1) The Condensed Consolidated Balance Sheet as of August 31,
1996, the Condensed Consolidated Statements of Operations for the
three months ended August 31, 1996 and 1995, and the Condensed
Consolidated Statements of Cash Flows for the three months ended
August 31, 1996 and 1995, have been prepared by the Registrant
without audit. The Condensed Consolidated Balance Sheet as of May
31, 1996, has been taken from the audited financial statements
included in the Registrant's Annual Report on Form 10-K for the
period then ended. In the opinion of the Registrant, the
accompanying financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position of Registrant as of August 31, 1996
and May 31, 1996, the results of operations for the three months
ended August 31, 1996 and 1995, and the cash flows for the three
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, 1996 Form 10-K. The
results of operations for the periods ended August 31, 1996 and
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" or
"USECC") 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%),
Sutter Gold Mining Company ("SGMC")(74%), Plateau Resources Limited
(100%) and Four Nines Gold, Inc. (50.9%) All material intercompany
profits and balances have been eliminated.
4) Debt as of August 31, 1996, consists of a line of credit
totaling $576,000; various equipment and other loans totaling
$143,700, and debt attributable to consolidated affiliates of
$746,100 on Four Nines Gold and $248,400 on SGMC. Certain inter-
affiliate loans were eliminated during consolidation.
5) Accrued reclamation obligations of $3,978,800 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
$10,263,200, for the estimated holding and maintenance costs needed
until the mill is placed in service or decommissioning begins.
6) As of February 1, 1996, the Registrant sold 100% of its
wholly-owned subsidiary, The Brunton Company, which manufactures
and markets outdoor sporting goods. The operations of Brunton have
therefore been restated for the three months ended August 31, 1995.
Results of operations for that period are reported as income from
discontinued operations.
<PAGE>
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.
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 three months ended August
31, 1996, by $428,800 to working capital of $1,310,000. Cash and
cash equivalents increased by $511,400 to $1,504,000 during the
period ended August 31, 1996. This increase was as a result of
financing and investing activities.
During the quarter ended August 31, 1996, employees of the
Registrant and others exercised their options and purchased a total
of 90,000 shares of the Registrant's common stock for a total of
$328,500. The Registrant also increased long-term debt by
$225,000. This increase in long-term debt was offset by the
repayment of various portions of other long-term debt.
Additionally, as a component of working capital, the Registrant and
its subsidiary, Four Nines Gold, Inc. ("FNG"), increased the
borrowings on their lines of credit by $400,000 and $38,000,
respectively.
The Registrant's subsidiary Sutter Gold Mining Company
("SGMC") equity financing of $842,370 during the quarter ended
August 31, 1996. This activity accounted for the majority of the
positive cash flows from investing activities of $414,700 for the
quarter. Offsets to this increase were the use of funds for the
purchase of equipment of $30,300; an increase in restricted
investments of $44,400; development of gas properties of $20,300;
development of mining properties of $102,200 and a net change in
notes receivable of $87,300.
The increase in development costs for mining and gas
properties is primarily as a result of the Registrant and its
subsidiary Crested funding Sheep Mountain Partners ("SMP"), Plateau
Resources, Limited ("Plateau") and Energx, Ltd. ("Energx"). As the
Registrant and Crested provide various services for the Green
Mountain Mining Venture ("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. However,
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.
<PAGE>
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; development of gas properties of Energx; uranium (U3O8)
delivery costs, and property holding costs of SMP. As a result of
the disputes between the SMP partners, the Registrant and Crested
have been delivering certain of their respective portions of the
uranium concentrates (U3O8) required to fill various delivery
requirements on long-term U3O8 contracts with domestic utilities.
Currently, Nukem/CRIC have made most 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 1997 will depend on the spot
market price of uranium and is also dependent on the outcome of the
arbitration proceedings involving Nukem/CRIC.
The primary source of the Registrant's capital resources for
the remainder of fiscal 1997, will be: (i) cash on hand; (ii) sale
of equity or interests in investment properties; (iii) sale of
equipment; (iv) resolution of pending litigations/arbitration;
(v) sale of royalties or interests in mineral properties;
(vi) proceeds from the sale of uranium under the SMP contracts; and
(vii) borrowings from financial institutions. Fees from oil
production, rentals of various real estate holdings and equipment,
aircraft chartering and the sale of aviation fuel will also provide
cash. Additional working capital to that on hand at
August 31, 1996, will be required to hold and maintain existing
mineral properties, permitting, the construction of a gold
processing mill, and mine development of SGMC and the development
of Plateau and its associated properties and administration costs.
The Registrant and Crested are currently seeking financing for the
construction of the gold processing mill and mine development of
their subsidiary Sutter Gold Mining Company ("SGMC"). SGMC has
received $1,121,640 through equity financing at report date. An
additional $12 million in financing is being sought, however, there
is no assurance that the funds will be raised.
The expenditures for the SMP care and maintenance costs may
require additional funding, depending on the outcome of the SMP
arbitration. See Part II, Item 1 "Legal Proceedings" below.
<PAGE>
Results of Operations
Three Months Ended August 31, 1996 Compared to Three Months Ended
August 31, 1995
Revenues for the period ended August 31, 1996, decreased by
$3,046,200 primarily due to reduced mineral sales and option and
construction contract revenues.
Revenues from mineral sales and option for the quarter ended
August 31, 1995 were $2,174,300. There were no similar U3O8
deliveries or option activities for the same period in the current
year. Currently, Nukem/CRIC are making all the SMP U3O8 deliveries.
No assurance can be given as to how long this will continue.
Construction operation revenues for the three months ended
August 31, 1996, decreased by $1,111,200 due to the slow down in
operations of the Registrant's subsidiary Four Nines Gold, Inc.
("FNG").
The costs of mineral sales decreased by $1,824,300 from the
quarter ended August 31, 1995 as a result of there being no
corresponding costs incurred during the same period in fiscal 1996
due to the Registrant not making any SMP U3O8 deliveries during the
quarter ended August 31, 1996. Cost and expenses associated with
construction operations decreased primarily as a result of a slow
down in operations for FNG. The commercial operations, and general
and administrative expenses remained relatively constant.
On February 1, 1996, the Registrant sold its wholly-owned
subsidiary, The Brunton Company, to a non-related company. The
results of operations for the quarter ended August 31, 1995 have
therefore been restated as income from discontinued operations of
$184,000. Although there are no similar operations during the
quarter ended August 31, 1996, the Registrant will receive 45% of
the net before tax income of Brunton for four years after closing
on product lines existing as of February 1, 1996. These revenues
will be booked during the fourth quarter of each year.
Additionally, the Registrant holds a $1,000,000 note as a result of
the sale of Brunton which bears interest at 7% per annum. The
first payment on this note of $333,333 plus interest is due in the
third quarter of fiscal 1997.
Operations for the three months ended August 31, 1996,
resulted in a pre-tax loss of $392,800 before equity in loss of
affiliates and minority interest in gain of consolidated
subsidiaries of $109,600 and $113,300, respectively as compared to
a loss of $95,200 before equity in income of affiliates and
minority interest in loss of consolidated subsidiaries and
discontinued operations of $75,600, 35,600 and $184,000,
respectively during the same period of the previous year. After
recognizing equity losses, the Registrant recognized a net loss of
$388,600 compared to a loss of $22,400 for the comparative period
of the previous year.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The information called for in this Item 1 has been previously
reported in the Registrant's Form 10-K (Item 3)for the fiscal year
ended May 31, 1996. Hearings under a consensual arbitration
agreement involving the Registrant and Crested d/b/a USECC and
Nukem/CRIC over the Sheep Mountain partnership agreement on uranium
operations in Wyoming were held during 73 hearing days from June
27, 1994 through May 31, 1995. On April 18, 1996, the Panel
awarded USECC a net of approximately $12,200,000 cash and awarded
SMP in constructive trust certain long-term uranium purchase rights
and profits in contracts which were entered into between Nukem and
three CIS Republics. These contracts have significant value to the
SMP Partnership.
USECC then petitioned the U.S. District Court in Colorado for
confirmation of the Award and Nukem filed motions to set aside
portions of the Award, alleging that significant portions of the
Award were erroneous. On May 31, 1996, the District Court remanded
the Award to the Panel for consideration of these motions. On July
3, 1996, the Panel entered a new order affirming both the monetary
award and placing the CIS contracts in constructive trust with SMP
because of Nukem's wrongdoings. Nukem is objecting to and
contesting the Panel's Award.
In addition to the Petition for Confirmation of the Award,
USECC has also filed a petition for appointment of a receiver for
the SMP partnership and a motion for an order directing
distribution of the escrowed proceeds of approximately $19,000,000
in the SMP accounts.
The Registrant and Crested were advised by the Court on
September 25, 1996 that on motion of opposing counsel because of
illness in such counsel's immediate family, an order had been
entered by the U.S. District Court of Colorado continuing the
hearing scheduled for September 25, 1996 to Friday, November 1,
1996 commencing at 8:00 a.m.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. The Registrant filed two Reports on
Form 8-K under Item 5 - Other - Litigation Update, during the
quarter ended August 31, 1996, reporting events of May 24, 1996 and
July 3, 1996, which were the result of the Arbitration Panel's
affirmation of its April 18, 1996 Order and Award.
<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: October 14, 1996 By: s/ John L. Larsen
------------------------------
JOHN L. LARSEN,
Chief Executive Officer
Date: October 14, 1996 By: s/ Robert Scott Lorimer
------------------------------
ROBERT SCOTT LORIMER,
Principal Financial Officer
and Chief Accounting Officer
<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 AUGUST 31, 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> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> AUG-31-1996
<CASH> 1,504,00
<SECURITIES> 0
<RECEIVABLES> 1,150,700
<ALLOWANCES> 0
<INVENTORY> 1,081,900
<CURRENT-ASSETS> 3,736,600
<PP&E> 26,840,600
<DEPRECIATION> 9,199,700
<TOTAL-ASSETS> 35,904,100
<CURRENT-LIABILITIES> 2,426,600
<BONDS> 0
0
0
<COMMON> 64,000
<OTHER-SE> 14,493,000
<TOTAL-LIABILITY-AND-EQUITY> 35,904,100
<SALES> 651,600
<TOTAL-REVENUES> 1,339,100
<CGS> 0
<TOTAL-COSTS> 1,731,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,900
<INCOME-PRETAX> (392,800)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (388,600)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
