Prospectus
U.S. ENERGY CORP.
457,780 COMMON SHARES
__________________________________________
457,780 shares of common stock, par value $0.01 per share (the
"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 of the
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
in lieu of redemption in cash and such additional Shares are
covered by this Prospectus. The issuance of 133,335 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.
The Shares constitute approximately 7% of the outstanding shares
of USE common stock on the date of this Prospectus. 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 April 1, 1996, the closing bid price was $16.625 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."
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_______________________________________________
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 April 4, 1996.
_____________________________________________________
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.
<PAGE>
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.
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.
<PAGE>
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."
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.
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 page 7.
The Offering
Securities Offered (1). . . . . . . . . . . . 457,780 shares
of common stock(2)
USE Common Stock Outstanding
Before and After Offering . . . . . . . . . 6,460,309 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
"RAF Warrants") are exercised by Long. As of April 3, 1996, the
40,622 RAF Warrants issued to RAF Financial Corporation had been
exercised, but the 40,621 RAF Warrants issued to Robert Long had
not been exercised. The RAF Warrants and 81,243 shares of USE
common stock underlying the RAF Warrants are part of the 893,695
shares of USE common stock registered for resale under the
Company's Registration Statement on Form S-3 on file with the
Commission (SEC File No. 33-64773), which became effective on
February 28, 1996 (see Risk Factor 5).
<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
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
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 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 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 "RAF
Warrants"). The Placement Shares, the RAF Warrants and 81,243
shares of USE common stock underlying the RAF 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 RAF Warrants on March 7, 1996. The public sale of
the Placement Shares, the RAF Shares and of Long's RAF Warrants
following exercise of his RAF 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 $15.75 and $15.90 per pound as of March 26,
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 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 29,
1996 the Comex spot price of gold was $395.80 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 (see also Risk
Factor 8). 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.
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 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.
<PAGE>
USE believes that with the recent improvements in market prices
for uranium concentrates, 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 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 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."
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 Shares 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) 88,891 133,310 44,419
Mark J. Larsen(2) 86,668 111,449 24,781
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 53,282 31,015
DMS, Co.(6) 22,267 110,638 (14) 88,371
Sandra Lee Sweeney(4) 13,333 48,375 35,042
Richard P. Larsen(1) 33,333 58,877 25,544
Max T. Evans(7) and
Lois B. Evans(4)
Jt. Ten. WROS 8,889 62,377 53,488
Thomas M. Evans(2) 19,555 25,592 6,037
Kenneth Webber(2)
and Deanna Webber(4)
Jt. Ten. WROS 18,223 36,127 17,904
William W. DeLapp(8)
and Lauren K. DeLapp(4)
Jt. Ten. WROS 4,444 4,979 535
M. Shane Larsen(2) 10,972 21,734 10,762
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(16) 44,444 44,444 -0-
Nucor, Inc.(10) 11,111 26,061 (15) 14,950
Charles M. Wojcieszak(11)
and Judy L. Wojcieszak
Jt. Ten. WFROS 2,267 2,417 150
Maureen E. Evans 10,667 10,667 -0-
Albert E. Dearth(12) 22,667 26,066 3,399
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-
* 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.
(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).
(16) Stuart Kobrovsky, Trustee of FMS Profit Sharing Plan was
a financial consultant to USE from April 11, 1992 to
May 31, 1995.
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.
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 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 SGMC.
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.
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.
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.
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.
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.
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,shares of common stock held by Plateau
may be voted by Plateau and shares of common stock held by SGMC
may be voted by SGMC 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 approximately 8% the outstanding
shares. Plateau owns125,556 shares of Registrant's common stock,
as well as options to purchase 75,000 shares of Registrant's
common stock for $3.50 per share and SGMC owns 100,000 shares of
Registrant's common stock and options to purchase 75,000 shares
of Registrant's common stock for $3.50 per share. If such options
are exercised, Plateau and SGMC together would own approximately
6% of Registrant's outstanding common stock.
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.
