FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal quarter ended 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
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(Former name, former address and former fiscal year, if changed
since last report)
Check whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
State the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at January 13, 1997
- ------------------------------ --------------------------------
Common stock, $.01 par value 6,714,009 Shares
<PAGE>
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. . .11-13
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
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Balance Sheets
ASSETS
November 30, May 31,
1996 1996
----------- -----------
(Unaudited) (Unaudited)
CURRENT ASSETS:
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.
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Balance Sheets
LIABILITIES AND SHAREHOLDERS' EQUITY
November 30, May 31,
1996 1996
---------- ----------
CURRENT LIABILITIES: (Unaudited) (Unaudited)
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 5,262,794 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.
<PAGE>
<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 50,400 1,068,800 521,500
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 and
other fees 44,000 338,500 67,600 371,300
---------- ---------- ----------- -----------
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>
<PAGE>
<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 6,654,863 6,034,465
========== ========== =========== ===========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
November 30,
--------------------------
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(1,064,800) $ (372,900)
Adjustments to reconcile
net income to net cash 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 (1,126,500) (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 (770,100) (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 664,400 2,621,800
----------- -----------
(Continued)
See notes to condensed consolidated financial statements.
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
November 30,
---------------------------
1996 1995
----------- -----------
NET INCREASE (DECREASE) 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 tax paid $ -- $ --
=========== ===========
Interest paid $ 62,200 $ 145,000
=========== ===========
See notes to condensed consolidated financial statements.
<PAGE>
U.S. ENERGY CORP. AND AFFILIATES
Notes to Condensed Consolidated Financial Statements
1) The Condensed Consolidated Balance Sheet as of 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 $169,200 and debt
attributable to consolidated affiliates of $244,500 on Sutter and
$652,200 on Four Nines Gold. Certain inter-affiliate loans were
eliminated during consolidation.
<PAGE>
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 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.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
--------------------------------------------------
The following is management's discussion and analysis of
significant factors which have affected the Registrant's liquidity,
capital resources and results of operations during the period
included in the accompanying financial statements.
Liquidity and Capital Resources
Working capital increased during the 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 and financing activities.
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 utilized $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
mineral properties since the spring of 1991. Additionally, the
<PAGE>
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.
<PAGE>
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, a mineral option and construction contract revenues.
Revenues from mineral sales and option 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.
The costs of mineral sales decreased by $1,824,300 for the six
months ended November 30, 1996. There were no costs associated
with the sale 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. 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 gain 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.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
-------------------
The information called for in this Item 1 has been previously
reported in the Registrant's Form 10-K (Item 3) for the fiscal year
ended May 31, 1996 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
that the Arbitration Panel's Order and Award do not award Sheep
<PAGE>
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 to 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
will acquire Kennecott's 50% interest for $15 million in cash or
$30 million in equity. USECC will be required to repay Kennecott
<PAGE>
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.
<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: January 13, 1997 By: s/ Max T. Evans
------------------------------
MAX T. EVANS,
Secretary
Date: January 13, 1997 By: s/ Robert Scott Lorimer
------------------------------
ROBERT SCOTT LORIMER,
Principal Financial Officer
and Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
U.S. ENERGY CORP. FORM 10-Q FOR THE PERIOD ENDED NOVEMBER 30, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000101594
<NAME> U.S. ENERGY CORP.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1996
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0
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