FORM 10-Q/A
AMENDMENT NO. 1
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 November 30, 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)
Check whether the Registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at January 13, 1997
- ------------------------------ --------------------------------
Common stock, $.01 par value 6,714,009 Shares
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U.S. ENERGY CORP.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Condensed Consolidated Balance Sheets
November 30, 1996 and May 31, 1996..................................3-4
Condensed Consolidated Statements of
Operations Three and Six Months
Ended November 30, 1996 and 1995....................................5-6
Condensed Consolidated Statements of Cash Flows
Six Months Ended November 30, 1996 and 1995.........................7-8
Notes to Condensed Consolidated
Financial Statements...............................................9-10
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................11-14
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.................................................14-15
ITEM 5. Other Information.................................................15-16
ITEM 6. Exhibits and Reports on Form 8-K.....................................16
Signatures...........................................................17
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Balance Sheets
ASSETS
November 30, May 31,
1996 1996
----------- -----------
(Unaudited) (Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 4,338,200 $ 992,600
Accounts receivable
Trade 199,900 570,900
Related parties 461,300 281,800
Current portion long-term
notes receivables 435,100 438,700
Inventory 143,300 118,700
Assets held for resale and other 1,076,700 509,700
------------ ------------
TOTAL CURRENT ASSETS 6,654,500 2,912,400
------------ ------------
INVESTMENTS AND ADVANCES
Affiliates 3,812,500 3,658,500
Restricted 8,373,600 8,200,800
------------ ------------
12,186,100 11,859,300
PROPERTIES AND EQUIPMENT 26,788,700 26,694,300
Less accumulated depreciation,
depletion and amortization (9,318,200) (9,047,900)
------------ ------------
17,470,500 17,646,400
OTHER ASSETS
Notes receivable:
Real estate and other 1,558,500 1,648,900
Affiliates and related parties 717,000 532,400
Deposits and other 207,100 193,900
------------ ------------
2,482,600 2,375,200
------------ ------------
$ 38,793,700 $ 34,793,300
============ ============
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Balance Sheets
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
November 30, May 31,
1996 1996
----------- -----------
CURRENT LIABILITIES: (Unaudited) (Unaudited)
<S> <C> <C>
Accounts payable and
accrued expenses $ 943,700 $ 1,292,300
Deferred income (Note 7) 4,207,700 --
Lines of credit -- 499,000
Current portion of long-term debt 447,400 239,900
------------ ------------
TOTAL CURRENT LIABILITIES 5,598,800 2,031,200
LONG-TERM DEBT (Note 4) 364,000 444,300
RECLAMATION LIABILITY (Note 5) 3,978,800 3,978,800
OTHER ACCRUED LIABILITIES (Note 5) 10,043,500 10,414,300
DEFERRED TAX LIABILITY 183,300 183,300
MINORITY INTERESTS 2,552,300 1,637,900
FORFEITABLE COMMON STOCK 1,486,500 1,486,500
COMMITMENTS AND CONTINGENCIES
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, 6,556,406 and 6,324,306 65,500 63,100
Additional paid-in capital 21,807,600 20,775,700
Accumulated deficit (4,117,200) (3,052,400)
Treasury stock, 769,943
shares, at cost (2,242,400) (2,242,400)
Unallocated ESOP contribution (927,000) (927,000)
------------ ------------
14,586,500 14,617,000
------------ ------------
$ 38,793,700 $ 34,793,300
============ ============
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
------------------------------ ------------------------------
1996 1995 1996 1995
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
REVENUES:
Mineral property
transactions and
mineral sales $ 27,500 $ -- $ 48,400 $2,174,300
Construction contract
revenues 261,800 1,190,000 777,700 2,817,100
Commercial operations 456,300 321,600 1,068,800 760,800
Oil sales 23,200 40,500 62,300 82,000
Gain (loss) on sale
of assets (19,900) 27,600 (19,900) 44,200
Interest 159,500 243,800 286,600 265,700
Management fees
and other 44,000 67,300 67,600 132,000
----------- ---------- ----------- ----------
952,400 1,890,800 2,291,500 6,276,100
----------- ---------- ----------- ----------
COSTS AND EXPENSES:
Costs of mineral sales -- -- -- 1,824,300
Mineral operations 154,100 349,900 316,900 411,500
Construction costs 201,400 888,900 564,600 2,095,300
Commercial operations 720,200 530,100 1,450,800 1,068,300
Oil production 14,600 13,900 38,700 31,400
General and
administrative 619,200 563,100 1,034,500 1,006,500
Abandoned gas leases -- -- -- 328,700
Interest 26,300 41,300 62,200 101,700
----------- ---------- ----------- ----------
1,735,800 2,387,200 3,467,700 6,867,700
----------- ---------- ----------- ----------
(Continued)
See notes to condensed consolidated financial statements.
</TABLE>
5
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<TABLE>
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Statements of Operations
(Unaudited)
(Continued)
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
------------------------------ ------------------------------
1996 1995 1996 1995
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
LOSS BEFORE EQUITY LOSS
OF AFFILIATES AND
PROVISION FOR
INCOME TAXES (783,400) (496,400) (1,176,200) (591,600)
MINORITY INTEREST IN
LOSS OF CONSOLIDATED
SUBSIDIARIES 230,100 102,100 343,900 66,500
EQUITY IN LOSS OF
AFFILIATES-NET (122,900) (90,300) (232,500) (165,900)
---------- ---------- ----------- -----------
LOSS BEFORE PROVISION
FOR INCOME TAXES (676,200) (484,600) (1,064,800) (691,000)
PROVISION FOR INCOME TAXES -- -- -- --
---------- ---------- ----------- -----------
INCOME FROM DISCONTINUED
OPERATIONS (Note 8) -- 134,100 -- 318,100
---------- ---------- ----------- -----------
NET LOSS $ (676,200) $ (350,500) $(1,064,800) $ (372,900)
========== ========== =========== ===========
NET LOSS PER SHARE $ (.10) $ (.06) $ (.16) $ (.06)
========== ========== =========== ===========
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 6,654,863 6,343,465 6,630,099 6,034,465
========== ========== =========== ===========
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Statement of Cash Flows
(Unaudited)
<CAPTION>
Six Months Ended
November 30,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(1,064,800) $ (372,900)
Adjustments to reconcile
net income to net cash provided by
(used in) operating activities:
Minority interest in (gain) loss
of consolidated subsidiaries 343,900 (66,500)
Depreciation, depletion
and amortization 327,900 428,700
Abandoned mineral leases -- 328,700
Equity in (gain) loss of affiliates 232,500 165,900
(Gain) loss on sale assets 19,900 (28,600)
Other (13,500) 30,800
Deferred income from SMP 4,207,700 --
Net changes in components
of working capital (1,124,600) (1,183,100)
----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 2,927,100 (697,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in notes receivable (90,400) 42,800
Investments in affiliates 184,000 (326,800)
Investments in others (172,800) (225,600)
Development of mining properties (274,900) (219,600)
Development of gas properties (28,500) (23,400)
Purchase of property and equipment (55,300) (809,600)
Proceeds from sale of assets 192,000 38,500
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (245,900) (1,523,700)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt 400,200 1,648,000
Payment on long-term debt (772,000) (1,845,300)
Exercise of stock options 1,034,300 2,842,200
Cancellation of stock for services -- (23,100)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 662,500 2,621,800
----------- -----------
(Continued)
See notes to condensed consolidated financial statements.
</TABLE>
7
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<TABLE>
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Statement of Cash Flows
(Unaudited)
<CAPTION>
Six Months Ended
November 30,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
NET INCREASE IN CASH AND
CASH EQUIVALENTS 3,345,600 401,100
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 992,600 551,300
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 4,338,200 $ 952,400
=========== ===========
SUPPLEMENTAL DISCLOSURES:
Income taxes paid $ -- $ --
=========== ===========
Interest paid $ 62,200 $ 145,000
=========== ===========
See notes to condensed consolidated financial statements.
</TABLE>
8
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U.S. ENERGY CORP. AND AFFILIATES
Notes to Condensed Consolidated Financial Statements
1) The Condensed Consolidated Balance Sheet as of November 30, 1996, the
Condensed Consolidated Statements of Operations for the three and six months
ended November 30, 1996 and 1995, and the Condensed Consolidated Statements of
Cash Flows for the six months ended November 30, 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 November 30, 1996
and May 31, 1996, the results of operations for the three and six months ended
November 30, 1996 and 1995, and the cash flows for the six 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 November 30, 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) 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) (89%), Plateau Resources Limited (100%) and Four Nines
Gold, Inc. (50.9%) All material intercompany profits and balances have been
eliminated.
4) Debt as of November 30, 1996 consists of various equipment and other
property loans totaling $89,700 and debt attributable to consolidated affiliates
of $244,500 on Sutter and $477,200 on Four Nines Gold. Certain inter-affiliate
loans were eliminated during consolidation.
9
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U.S. ENERGY CORP. AND AFFILIATES
Notes to Condensed Consolidated Financial Statements
(Continued)
5) Accrued reclamation obligations of $3,978,800 are the Registrant's
reclamation liability at the Crooks Gap Mining District and the Shootaring
Uranium Mill. The reclamation work may be performed over several years. In
addition, Plateau has recorded additional obligations of $10,043,500 for the
estimated holding and maintenance costs needed until the mill is placed in
service or decommissioning begins. These obligations are secured by cash bonds
and real estate.
6) 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.
7) On November 4, 1996, the U.S. District Court of Colorado confirmed
the Order and Award in the Arbitration proceedings with Nukem and its subsidiary
CRIC. The Arbitration Panel had previously issued the Order and Award on April
18, 1996 and clarified the Award on July 3, 1996. As a result, USECC received a
partial distribution of the funds held in escrow of $4,367,500. A portion of
these funds, $159,800 was paid directly to the Registrant for U3O8 it had
purchased for a SMP delivery and interest thereon. The balance, $4,207,700, is
carried as a deferred income item until final resolution of the SMP arbitration
is reached.
8) In February 1996, the Company completed the sale of 100% of the
8,267,450 outstanding shares of common stock of Brunton to a third party for
$4,300,000 in accordance with a Stock Purchase Agreement dated January 30, 1996
(the "Purchase Agreement"). The Registrant received $300,000 at execution of the
Purchase Agreement and approximately $3,000,000 at closing. USE will also
receive $1,000,000 in three annual installments of $333,333 plus interest at a
rate of 7% per year beginning February 15, 1997. The current portion of this
note receivable is included in current assets and the long-term portion is
included in notes receivable-real estate and other in the accompanying balance
sheet. In addition, the Registrant is entitled to receive 45% of the profits
before taxes as defined in the Purchase Agreement related to Brunton products
existing at the time the Purchase Agreement was executed for a period of 4 years
and three months, beginning February 1, 1996. The first payment will cover
profits from February 1, 1996 through April 30, 1997 and is due no later than
July 15, 1997. Each subsequent payment, due July 15 of subsequent years, will
cover profits for the most recent year ended April 30. For the six months ended
November 30, 1995 a total of $318,100 was reclassified on the statement of
operations to income from discontinued operations.
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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 decreased during the six months ended November 30, 1996
by $174,500 to working capital of $1,055,700. Cash and cash equivalents
increased by $3,345,600 to $4,338,200 during the period ended November 30, 1996.
This increase was as a result of operations, financing activities and the
arbitration settlement discussed below.
During the six months ended November 30, 1996, the Registrant issued
232,100 shares of its common stock as options were exercised by various
individuals and the Registrant received a total of $1,034,300.
On November 4, 1996 the U.S. District Court in Denver, CO entered two
orders and a judgment confirming the April 18, 1996 Order and Award as clarified
on July 3, 1996 by the Arbitration Panel concerning the SMP arbitration. Based
on the Court's judgment, the First Interstate Bank of Riverton and Norwest Bank
of Denver released $367,475 and $4,000,000, respectively, to USE and Crested. A
similar amount was made available to Nukem. To date of this filing, Nukem/CRIC
has only withdrawn its share of the escrowed funds from the First Interstate
Bank of Riverton. All remaining funds, approximately $15 million, remain in the
SMP Norwest Bank escrow account. These funds are in dispute and a decision on
their distribution is pending. A hearing on this and other issues has been set
by the Court for February 21, 1997. Of the $4,367,475 received by USECC $159,800
was paid to the Registrant for its cost with interest for U3O8 it had purchased
for a SMP delivery. The balance of $4,207,700 is carried as a current deferred
income item pending final resolution of the SMP arbitration. The Registrant and
Crested anticipate that resolution in the next 12 months.
The Registrant used $245,900 in its investing activities during the six
months ended November 30, 1996. This was primarily as a result of the Registrant
and its subsidiary Crested funding Sheep Mountain Partners ("SMP"), Plateau
Resources Limited ("Plateau"), Energx, Ltd. ("Energx") and the Sutter Gold
Mining Company ("SGMC"). As the Registrant and Crested provide various services
for GMMV and SMP, the non-affiliated participants are invoiced for their
proportionate share of the approved operating costs. GMMV is current on its
reimbursements to the Registrant and Crested for all the operating costs. Due to
disputes existing between the SMP partners, the Registrant and Crested have not
been reimbursed for care and maintenance costs expended on the SMP
11
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mineral properties since the spring of 1991. Additionally, the Registrant and is
affiliates purchased $55,300 of additional equipment during the six months ended
November 30, 1996.
Other changes in working capital were decreases in accounts payable and
accrued expenses of $348,600. The Registrant and Crested have a line of credit
for $1,000,000 on which the entire amount was available as of November 30, 1996.
Four Nines a consolidated affiliate, has $323,600 outstanding on its line of
credit.
The primary requirements for the Registrant's working capital continue
to be the funding of on-going administrative expenses, the mine and mill
development and holding costs of SGMC; holding costs of Plateau; 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 U3O8 concentrates required to fill
various delivery requirements on long-term U3O8 contracts with domestic
utilities. Currently, Nukem/CRIC have made most of the SMP deliveries of U3O8.
It is not known how long this arrangement will continue. The capital
requirements to fill the Registrant's and Crested's portion of the remaining
commitments in fiscal 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 1996, will be (i) cash on hand; (ii) sale of equity or
interests in investment properties or affiliated companies; (iii) sale of
equipment; (iv) resolution of pending litigation/arbitration; (v) sale of
royalties or interests in mineral properties; (vi) proceeds from the sale of
uranium under the SMP contracts, (vii) and borrowings from financial
institutions. Construction revenues from Four Nines Gold ("FNG"), fees from oil
production, rentals of various real estate holdings and equipment, the sale of
aviation fuel and the receipt of payments pursuant to the sale of The Brunton
Company will also provide cash.
Additional working capital to that on hand at November 30, 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 a joint venture partner and/or
other means of financing the construction of the SGMC gold processing mill and
mine development. The funding of SMP care and maintenance costs may require
additional funding, depending on the outcome of the SMP arbitration.
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Results of Operations
Three and Six Months Ended November 30, 1996 Compared to Three and Six Months
Ended November 30, 1995
Revenues for the six month period ended November 30, 1996 decreased by
$3,984,600 primarily due to reductions in mineral sales and construction
contract revenues.
Revenues from mineral sales decreased by $2,125,900 as there were no
U3O8 deliveries or option activities during the six months ended November 30,
1996 compared to the same period in the prior year. This decrease in revenues
was partially offset by the increase of $48,400 in revenues from royalties from
Cyprus/AMAX. During the six months ended November 30, 1995 no royalties were
received from Cyprus/AMAX as six quarters of royalties were exchanged for
certain real estate.
Construction contract revenues for the three and six months ended
November 30, 1996 decreased by $2,039,400 due to reduced activities on
construction contracts by the Registrant's subsidiary Four Nines Gold. It is not
known how long this trend will continue.
Commercial revenues increased by $547,300 for the six month period ended
November 30, 1996 compared to the same period in 1995. This increase is due
largely to increased operations through the Registrant's subsidiary Plateau
Resources Limited at Ticaboo, UT. Increased revenues at Plateau are from motel
and related business activities.
The costs of mineral sales decreased by $1,824,300 for the six months
ended November 30, 1996. There were no mineral sales of U3O8 during the six
months ended November 30, 1996. Cost and expenses associated with mineral
operations decreased by $94,600 for the six months ended November 30, 1996
compared to the six months ended November 30, 1995 primarily as a result of a
decrease in legal costs in connection with the SMP arbitration. The cost of
construction activities decreased by $1,530,700 for the six month period ended
November 30, 1996 compared to the same period in 1995 as a result of decreased
contract work noted above. General and administrative expenses remand constant.
Commercial operations expenses increased by $382,800 due to increased activity
at Ticaboo.
Operations for the six months ended November 30, 1996 resulted in a
pre-tax loss of $1,176,200 before equity in loss of affiliates and minority
interest in loss of consolidated subsidiaries of $232,500 and $343,900,
respectively, as compared to a loss of 591,600 before equity in loss of
affiliates and minority interest in loss of consolidated subsidiaries of
$165,900 and $66,500, respectively, during the same period of the previous year.
After recognizing equity losses, the Registrant recognized a net loss of
$1,064,800 compared to a loss of $372,900 for the comparative period of the
previous year.
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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
and in Registrant's Form 10-Q (Item 1 of Part II.) for the fiscal quarter ended
August 31, 1996. Hearings under a consensual arbitration agreement involving the
Registrant and Crested d/b/a USECC and Nukem, Inc. and Cycle Resource Investment
Corp. (CRIC) over the Sheep Mountain Partners (SMP) partnership agreement on
uranium operations in Wyoming were held before the U.S. District Court of
Colorado on November 1, 1996. Defendants Nukem/CRIC had filed various documents
including: (1) Objections to Confirmation of the Arbitration Panel's Order and
Award; (2) Motion to Modify and/or Vacate Portions of the Order and Award and
(3) Motion to Confirm Portions of the Order and Award. Registrant and Crested
filed their Second Corrected Amended Petition for the Confirmation and
Correction of the Arbitration Award. On November 4 and 5, 1996, the Court
entered two orders and a Judgment in Civil Action No. 91B-1153 granting
Registrant's and Crested's Motion to Confirm Portions of the Order and Award
consistent with its Order and overruled Nukem/CRIC's Objections to Confirmation
of the Order and Award and denied their Motion to Modify and/or Vacate Portions
of the Order and Award. The Court granted Nukem/CRIC's Motion to Confirm
Portions of the Order and Award to the extent consistent with the Court's Order.
The Court also entered a Judgment consistent with the Order and Award of the
Arbitration Panel with one exception on the named parties to one claim which is
subject of a motion by Registrant and Crested to correct the Order so that the
Judgment is consistent with the Arbitration Panel's Order and Award in naming
the Parties to one paragraph of the Judgment.
Thereafter, plaintiffs Registrant and Crested also filed a Motion to
Enter a Final Judgment on the Orders entered by the Court on November 4, 1996.
In these Orders, the Court confirmed the Registrant's and Crested's Seconded
Corrected Amended Petition for Confirmation which included the confirmation of
the Arbitration Panel's Award placing the contracts defendant Nukem had entered
into with three CIS republics, in constructive trust for the benefit of Sheep
Mountain Partners. Plaintiffs are requesting that the Court reduce its Order to
a Judgment so that the terms of the Order can be enforced in other
jurisdictions. Plaintiffs Registrant and Crested also filed an Amended Motion
for an Order Directing Distribution of the Proceeds on Deposit with the Norwest
Bank of Denver so that plaintiffs will receive the $12,227,460 as provided in
the Judgment entered on November 4, 1996 less $4 million which was distributed
to plaintiffs out of the Norwest account leaving a balance owing to USECC of
$8,227,460 plus interest accrued since November 5, 1996.
Defendant's Nukem/CRIC filed motions for Entry of Judgment on the
Court's Order of November 4, 1996 and Opposition to plaintiffs' Motion to Enter
Final Judgment on Said Order. Defendants contend
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that the Arbitration Panel's Order and Award do not award Sheep Mountain
Partners the CIS contracts Nukem had entered into in constructive trust. On
December 18, 1996, the Court entered an order scheduling a hearing on all
remaining pending motions for Friday, February 21, 1997 at 3:30 p.m. in Denver,
Colorado.
On or about December 4, 1996, Defendants Nukem and CRIC filed their
Notice of Appeal to the Tenth Circuit Court of Appeals from the November 4, 1996
Order and the November 5, 1996 Judgment of the District Court. The defendants
raised the issues of the Arbitration Panel's Order and Award to Sheep Mountain
Partners of $31,355,070 plus interest (1/2 of which would be shared by the
Registrant and Crested) asserting that the District Court committed a reversible
error in confirming that portion of the Award. Defendants-Appellants raised
further issues claiming among other things that the District Court committed
reversible error in not making inquiries to the United States Department of
Commerce and not allowing CRIC to expel USECC from the SMP Partnership
Agreement. On January 8, 1997 an Order was entered by the Clerk of the Tenth
Circuit Court of Appeals Tolling the Briefing on the merits of the Appeal. The
Court requested briefs on jurisdictional issues regarding the appealability of
Orders of the District Court since motions are still pending before the District
Court. The Parties have 21 days from January 8, 1997 to file briefs on those
jurisdictional issues.
Item 5. Other Information
-----------------
On November 22, 1996, The Registrant signed a letter of intent with
Kennecott Energy and Coal Company (Kennecott") for Registrant and Crested to
acquire Kennecott's 50% interest in the Green Mountain Mining Venture (GMMV)
through the acquisition of the stock of a Kennecott subsidiary within 18 months.
The GMMV was formed in 1990 to explore for and if warranted, to develop the
uranium deposits in south central Wyoming. The proposed change in the GMMV would
make U.S. Energy Corp. and Crested Corp., dba USECC, 100% owners of the GMMV
should Registrant and Crested arrange the necessary consideration to exercise
the option.
Kennecott originally paid USECC $15 million and agreed to spend an
additional $50 million for a 50% interest in the Green Mountain properties which
were conveyed to the GMMV. To date, Kennecott has spent approximately $17
million on the project in maintaining the GMMV mine and mill properties on a
care and maintenance basis; preparing to file an application with the U. S.
Nuclear Regulatory Commission (NRC) to change the mill license from standby to
production status; obtaining all permits necessary to mine ore from the proposed
Jackpot Mine on the world class Green Mountain uranium deposits, and engineering
the GMMV mine plan.
Under the Letter of Intent, Kennecott has agreed to advance up to $20
million to USECC during the next 15 months for the development of the Jackpot
Mine and changing the Sweetwater Mill status to operational. The agreement
further provides that USECC
15
<PAGE>
<PAGE>
will acquire Kennecott's 50% interest for $15 million in cash or $30 million in
equity and assume a portion or all of the reclamation liability. USECC will be
required to repay Kennecott in cash or stock at USECC's election for the advance
of the additional $20 million investment with interest and will also be required
to take over the operating permit and reclamation bonding liabilities at the
time the sale is closed.
Effective upon the execution of the definitive agreements expected in
January 1997, USECC will take over full management of the Jackpot Mine and
Sweetwater Mill. USECC will be responsible for driving the twin declines into
the ore deposit(s), and will work with Kennecott to permit the Mill for
operation. Various terms of the definitive agreements are still being
negotiated. Nevertheless, mining and construction crews are currently being
hired and additional mining equipment is being moved to the Jackpot site to
commence driving the double declines. The first production of ore from the
Jackpot deposit is planned for calendar year 1997.
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
during the quarter ended November 30, 1996 under Item 5 - Other Events,
reporting events of September 25, 1996, November 1 and 4, 1996 regarding the
Sheep Mountain Partners Arbitration Order and Award.
16
<PAGE>
<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: February 27, 1997 By: s/ Max T. Evans
------------------------------
MAX T. EVANS,
Secretary
Date: February 27, 1997 By: s/ Robert Scott Lorimer
------------------------------
ROBERT SCOTT LORIMER,
Principal Financial Officer
and Chief Accounting Officer
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRATED FROM
U.S. ENERGY CORP. FORM 10-Q/A AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000101594
<NAME> U.S. ENERGY CORP.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 4,338,200
<SECURITIES> 0
<RECEIVABLES> 661,200
<ALLOWANCES> 0
<INVENTORY> 143,300
<CURRENT-ASSETS> 6,654,500
<PP&E> 26,788,700
<DEPRECIATION> (9,318,200)
<TOTAL-ASSETS> 38,793,700
<CURRENT-LIABILITIES> 5,598,800
<BONDS> 0
0
0
<COMMON> 65,500
<OTHER-SE> 14,521,000
<TOTAL-LIABILITY-AND-EQUITY> 38,793,700
<SALES> 1,888,900
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<CGS> 98,400
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