FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal quarter ended August 31, 1999 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
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Commission file number 0-6814
U.S. ENERGY CORP.
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(Exact Name of Company as Specified in its Charter)
Wyoming 83-0205516
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
877 North 8th West, Riverton, WY 82501
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(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (307) 856-9271
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Not Applicable
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(Former name, address and fiscal year, if changed since last report)
Check whether the Company: (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 Company was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. YES X NO
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State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 15, 1999
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Common stock, $.01 par value 8,771,330 Shares
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U.S. ENERGY CORP. & SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Condensed Consolidated Balance Sheets
August 31, 1999 and May 31, 1999...............................3-4
Condensed Consolidated Statements of
Operations Three Months Ended
August 31, 1999 and 1998.........................................5
Condensed Consolidated Statements of Cash Flows
Three Months Ended August 31, 1999 and 1998......................6
Notes to Condensed Consolidated
Financial Statements.............................................7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................8-11
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings............................................12-13
ITEM 6. Exhibits and Reports on Form 8-K................................13
Signatures......................................................14
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
U.S. ENERGY CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
August 31, May 31,
1999 1999
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(Unaudited)
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CURRENT ASSETS:
Cash and cash equivalents $8,632,700 $10,173,000
Accounts receivable
Trade, net of allowance for
doubtful accounts of $30,900 158,200 223,100
Affiliates 1,031,300 1,063,400
Assets held for resale & other 1,300,500 1,116,200
Inventory 160,300 143,200
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TOTAL CURRENT ASSETS 11,283,000 12,718,900
INVESTMENTS AND ADVANCES
Affiliates 751,200 751,600
Restricted investments 9,277,800 9,160,400
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10,029,000 9,912,000
PROPERTIES AND EQUIPMENT 19,829,200 19,607,800
Less accumulated depreciation
depletion and amortization (10,292,500) (10,171,300)
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9,536,700 9,436,500
OTHER ASSETS:
Accounts and notes receivable:
Real estate sales 27,800 20,400
Employees 368,600 366,600
Deposits and other 888,700 936,600
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1,285,100 1,323,600
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$32,133,800 $33,391,000
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</TABLE>
See notes to condensed consolidated financial statements.
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U.S. ENERGY CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
August 31, May 31,
1999 1999
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(Unaudited)
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CURRENT LIABILITIES:
Accounts payable and accrued expenses $1,131,900 $1,229,600
GMMV purchase option 4,000,000 4,000,000
Current portion of long-term debt 276,000 126,000
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TOTAL CURRENT LIABILITIES 5,407,900 5,355,600
LONG-TERM DEBT 763,500 786,700
RECLAMATION LIABILITY 8,860,900 8,860,900
OTHER ACCRUED LIABILITIES 3,585,200 3,734,500
DEFERRED TAX LIABILITY 1,144,800 1,144,800
MINORITY INTERESTS 624,000 856,500
COMMITMENTS AND CONTINGENCIES
FORFEITABLE COMMON STOCK, $.01 par value;
339,208 shares issued,
forfeitable until earned 2,471,700 2,471,700
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value;
100,000 shares authorized
none issued or outstanding -- --
Common stock, $.01 par value;
20,000,000 shares authorized;
8,608,376 and 8,550,624 shares issued
and outstanding respectively 86,200 85,600
Additional paid-in capital 33,221,400 33,014,900
Accumulated deficit (20,520,200) (19,408,600)
Treasury stock at cost, 930,532 shares (2,584,600) (2,584,600)
Unallocated ESOP contribution (927,000) (927,000)
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TOTAL SHAREHOLDERS' EQUITY 9,275,800 10,180,300
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$32,133,800 $33,391,000
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See notes to condensed consolidated financial statements.
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U.S. ENERGY CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
August 31
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1999 1998
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(Unaudited) (Unaudited)
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REVENUES:
Mineral sales $ 34,300 $ 49,100
Commercial operations 1,083,300 1,543,100
Oil sales 10,900 19,000
Gain on sales of assets - - 54,300
Interest 225,900 179,900
Management fees and other 119,700 318,000
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1,474,100 2,163,400
COSTS AND EXPENSES:
Mineral operations 549,400 654,400
Construction costs 2,700 6,300
Commercial operations 925,600 957,900
Oil production 1,900 22,100
General and administrative 1,165,800 2,010,500
Interest 4,900 16,600
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2,650,300 3,667,800
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LOSS BEFORE MINORITY INTEREST,
EQUITY IN LOSS OF AFFILIATES AND
PROVISION FOR INCOME TAX (1,176,200) (1,504,400)
MINORITY INTEREST IN LOSS OF
CONSOLIDATED SUBSIDIARIES 65,000 323,600
EQUITY IN LOSS OF AFFILIATES (400) (76,400)
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LOSS BEFORE INCOME TAXES (1,111,600) (1,257,200)
PROVISION FOR INCOME TAXES - - - -
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NET LOSS $(1,111,600) $(1,257,200)
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NET LOSS PER SHARE, BASIC AND DILUTED $ (0.15) $ (0.18)
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BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING 7,258,291 6,969,927
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</TABLE>
See notes to condensed consolidated financial statements.
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U.S. ENERGY CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
August 31,
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1999 1998
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(Unaudited) (Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,111,600) $(1,257,200)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Minority interest in loss of
consolidated subsidiaries (65,000) (260,700)
Issuance of stock for additional YSFC in August 207,100 - -
Depreciation 121,200 203,200
Equity in loss from affiliates 400 13,500
Gain on sale of assets - - (54,300)
Other 47,900 34,500
Net changes in components of working capital (351,400) 2,832,700
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NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (1,151,400) 1,511,700
CASH FLOWS FROM INVESTING ACTIVITIES:
Development of mining properties (8,800) (1,700)
Proceeds from sale of property and equipment - - 203,900
Increase in restricted investments (117,400) - -
Purchase of property and equipment (212,600) (139,500)
Changes in notes receivable, net (9,400) 38,600
Investments in affiliates (167,500) (30,800)
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NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (515,700) 70,500
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 181,300 201,000
Repayment of long-term debt (54,500) (31,800)
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NET CASH PROVIDED BY
FINANCING ACTIVITIES 126,800 169,200
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NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (1,540,300) 1,751,400
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 10,173,000 5,650,500
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD $8,632,700 $7,401,900
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SUPPLEMENTAL DISCLOSURES:
Income tax paid $ - - $ - -
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Interest paid $ 4,900 $ 16,600
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</TABLE>
See notes to condensed consolidated financial statements.
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U.S. ENERGY CORP. & SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1) The Condensed Consolidated Balance Sheet as of August 31, 1999, the
Condensed Consolidated Statements of Operations and Cash Flows for the three
months ended August 31, 1999 and 1998 have been prepared by the Company without
audit. The Condensed Consolidated Balance Sheet as of May 31, 1999, has been
taken from the audited financial statements included in the Company's Annual
Report on Form 10-K for the period then ended. In the opinion of the Company,
the accompanying financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly the financial
position of Company as of August 31, 1999 and May 31, 1999, the results of
operations and cash flows for the three months ended August 31, 1999 and 1998.
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 Company's May 31, 1999 Form 10-K. The
results of operations for the periods ended August 31, 1999 and 1998 are not
necessarily indicative of the operating results for the full year.
3) The consolidated financial statements of the Company include 100% of the
accounts of USECB Joint Venture ("USECB" or "USECC") which is owned 50% by the
Company and 50% by the Company's subsidiary, Crested Corp. (Crested). The
consolidated financial statements also reflect 100% of the accounts of its
majority-owned subsidiaries: Energx Ltd. (90%), Crested (52%), Plateau Resources
Limited (100%), Sutter Gold Mining Co. (63%), Yellow Stone Fuels Corp. ("YSFC")
(35.9%) and Four Nines Gold, Inc. (50.9%) All material intercompany profits and
balances have been eliminated.
4) Accrued reclamation obligations and standby costs of $12,446,100 are the
Company's share of a reclamation liability at the SMP mining properties and the
full obligation at the Shootaring Uranium Mill. The reclamation work may be
performed over several years.
5) In February 1998, SFAS No. 128 "Earnings per Share" was issued and
specifies the computation, presentation and disclosure requirements for earnings
per share. SFAS 128 is effective for periods ended after December 15, 1998 and
requires retroactive restatement of prior period earnings per share. The
statement replaces "primary earnings per share" with "basic earnings per share"
and replaces "fully diluted earnings per share" with "diluted earnings per
share." Adoption of SFAS 128 did not have an effect on the Company's previously
reported net income (loss) per common share.
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U.S. ENERGY CORP. & SUBSIDIARIES
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 Company's liquidity, capital resources and
results of operations during the periods included in the accompanying financial
statements.
Liquidity and Capital Resources
During the quarter ended August 31, 1999, working capital decreased by
$1,488,200, to $5,875,100 from working capital of $7,363,300 at May 31, 1999.
This decrease was primarily as a result of cash and cash equivalents of
$1,540,300. Other changes in working capital were an increase the current
portion of long term debt of $150,000 and the decrease in accounts payable and
accrued expenses of $97,700.
Operations and investing activities for the quarter ended August 31, 1999,
used $1,151,400 while investing activities used $515,700. Financing activities
generated $126,800. Cash consumed in investing activities was used to purchase
equipment and fund the operations of various of the Company's subsidiaries.
Financing activities provided cash through the increase of long term debt in the
amount of $181,300 and the issuance of common stock for the purchase of the
remaining Yellow Stone Fuels Corp. minority share holders through the issuance
of 57,752 shares of the Company's common stock.
The increases in other current assets and the current portion of long term
debt are primarily as a result of the Company financing its annual prepaid
liability insurance premiums with a financial institution. The prepaid insurance
is amortized over the term of the policy which covers the twelve months of 2000.
The Company reported a $4,000,000 deferred purchase option at August 31,
1999 and May 31, 1999. This option is as the result of Kennecott Energy paying
the Company a signing bonus upon the execution of the Acquisition Agreement on
June 23, 1997. The option is non-refundable and will be offset against any
future cash commitments the Company may incur on the GMMV properties.
Capital Resources
General: The primary source of the Company's capital resources for the
remaining nine months of fiscal 2000 are the cash on hand at August 31, 1999;
the potential receipt of cash from the SMP Arbitration Award; possible equity
financing from affiliated companies, and proceeds under the line of credit.
Additionally, the Company will continue to offer for sale various assets such
as, lots and homes in Ticaboo, Utah, real estate holdings in Wyoming, Colorado
and Utah and mineral interests. Interest, rentals of real estate holdings and
equipment and aviation fuel sales, also will provide cash.
Line of Credit: The Company has a $1,000,000 line of credit with a
commercial bank. The line of credit is secured by various real estate holdings
and equipment belonging to the Company. It is anticipated that this line of
credit may be used to finance short term working capital needs. The Company is
currently seeking an increase in the line of credit through financial
institutions to fund expanding operations in the coal bed methane exploration
and development business, as well as, the alternative feed and waste disposal
businesses.
Financing: Equity financing for Sutter Gold Mining Company ("SGMC") and
Plateau Resources Ltd. ("Plateau") are dependent on the market price of gold and
uranium among other conditions. As of August 31, 1999, the prices for these
metals remained depressed and it is not known when they will recover. The
Company continues to be optimistic concerning the future markets for these
metals but can not accurately forecast what the prices will be in the short or
long term markets. If the price for these metals do not increase in the short
term, working capital of the Company will be impacted negatively due to holding
costs of the properties and the ability to raise equity funding could be
impaired. The Company continues
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to pursue alternative uses for these properties including tourism at the SGMC
properties in California and alternate feed or waste disposal at the Plateau
properties.
The Company is also seeking financing through equity markets for expansion
into the coal bed methane gas and alternative feed/waste disposal management
businesses. Discussions are currently underway regarding these financing efforts
with various investment banking firms.
During the quarter ended August 31, 1999, the Company became involved in
the exploration phase of coal bed methane gas as a drilling contractor with
third parties. The Company will use existing drilling assets in these drilling
projects. This opportunity allows the Company to become involved in the
acquisition of coal bed methane properties and develop gas producing fields for
its own account. The Company has committed capital resources to the coal bed
methane gas project for the purchase of equipment, mineral leases and operating
costs until such time as equity financing is obtained.
Summary: The Company believes that cash on hand at August 31, 1999, as well
as proceeds from its line of credit, if needed, will be adequate to fund working
capital requirements through fiscal 2000. However, these capital resources will
not be sufficient to provide the funding for major capital expansions and
development of the Company's mineral properties and projected business
expansions.
Capital Requirements
General: The primary requirements for the Company's working capital during
fiscal 2000 are expected to be the costs associated with the development
activities of Plateau, care and maintenance costs of the former SMP uranium
properties, payments of holding fees for mining claims, the Company's portion of
the costs associated with the GMMV properties, should the Company elect to
participate in the annual budgets, business expansion and development costs
associated with the coal bed methane gas and alternative feed/waste disposal
businesses and corporate general and administrative expenses.
SGMC: The Company owns a majority interest in SGMC and is therefore
potentially responsible for the ongoing administrative and development costs of
the properties owned by SGMC. The Company is assisting SGMC in its efforts to
secure financing to place the properties into production. SGMC has sufficient
cash reserves to fund its ongoing permitting and administrative expenses. It is
anticipated that an additional $15 million is needed to complete the development
of the mine and construction of the cyanide- flotation mill. Prior to the time
that such construction and development costs are undertaken, SGMC will require
either additional debt or equity financing.
SGMC is developing alternate uses of its mineral properties until such time
as production of gold is profitable. SGMC is developing various facilities to
utilize its properties in the tourism business. It is not anticipated that any
of the Company's cash resources will be needed to complete the development of
these assets. It is projected that cash flows will be generated from this
business early in the third quarter of 2000.
Sheep Mountain Mines: The holding and reclamation costs associated with
these uranium mineral properties are the responsibility of the Company and
Crested. The holding costs during 1999 were approximately $57,000 per month. The
Company continues to search for improved techniques that will reduce these
monthly costs. The future reclamation costs on the Sheep Mountain properties are
covered by a reclamation bond which is secured by the pledge of certain of the
Company's real estate assets. The reclamation bond amount is reviewed annually
by State regulatory agencies. The Company's portion of the reclamation liability
on the Sheep Mountain properties is $1,451,800 and is included as a reclamation
liability in the Company's accompanying financial statements.
It is not anticipated that the Sheep Mountain properties will be placed
into production during Fiscal 2000. The Company determined that the Sheep
Mountain mining properties should be maintained and prepared for production in
the future when the price of uranium increases to the level where Company is
able to obtain long term delivery contracts with favorable price terms and the
Sweetwater Mill which is owned
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and operated by the GMMV, is placed into production. There are no major
reclamation expenditures expected during Fiscal 2000, that the Company and
Crested are aware of on the properties.
GMMV: In July 1998, the GMMV management committee unanimously agreed to
place the Jackpot Mine and Sweetwater Mill on active standby status. This
decision was made as a result of uncertainties in the short term uranium market.
The management committee of the GMMV is endeavoring to reduce the holding costs
of the GMMV mineral and mill properties. The Company notified the GMMV
management committee that it elected to be a non-participating partner in
funding current holding and any reclamation costs. By making this election, the
Company will be diluted pursuant to the terms of the GMMV contract. It is not
believed that the dilution in the short term will be material to the Company's
ownership interest in the GMMV.
Plateau: Plateau owns and operates the Ticaboo town site, motel,
convenience store and restaurant. Additionally, Plateau owns and maintains the
Tony M uranium mine and Shootaring uranium mill. The Company is currently
seeking joint venture partners and equity financing to enter into the
alternative feed and waste disposal businesses. Currently discussions are
underway with third party companies and investment banking firms regarding the
expansion into these business opportunities. The Company will continue to fund
the costs of permitting and stand-by costs associated with the properties.
Expansion into the alternate feed and waste disposal businesses will require
additional capital.
Yellow Stone Fuels Corp. ("YSFC"): In Management's opinion, YSFC has
sufficient cash to fund its limited operations. YSFC continues to maintain its
mineral interests and look for additional business opportunities. It is not
anticipated that the Company will be obligated to advance funds on behalf of
YSFC.
Term Debt: Debt to non-related parties at August 31, 1999 was $1,039,500 as
compared to $912,700 at May 31, 1999. The increase in debt to non-related
parties consists primary of debt due on the financing of annual insurance
premiums and various purchases of equipment. The balance of the debt to
non-related parties is for the purchase of various pieces of heavy equipment and
bears different interest rates with various maturity dates. All payments on the
debt are current.
Reclamation Obligations: It is not anticipated that any of the Company's
working capital will be used in Fiscal 2000 for the reclamation of any of its
mineral property interests. The reclamation costs are long term and are either
bonded through the use of cash bonds or the pledge of assets. It is not
anticipated that any of the mining properties in which the Company owns an
interest in will enter the reclamation phase prior to May 31, 2000. GMMV is in
the process of starting the reclamation of an open pit mine which was developed
by a previous owner. It is believed the cost of reclamation will be covered by a
commitment by the prior owner to provide the initial $8 million in reclamation.
These funds are to be recovered from a future production override until such
time as they are repaid.
Other: The Company is currently not in production on any mineral
properties. The Company is not using hazardous substances or known pollutants to
any great degree in these activities. Consequently, recurring costs for managing
hazardous substances, and capital expenditures for monitoring hazardous
substances or pollutants have not been significant. The Company is also not
aware of any claims for personal injury or property damages that need to be
accrued or funded. The Company maintains both Workers Compensation and Liability
Insurance coverage which it believes cover any claims that may exist.
The tax years through May 31, 1994 are closed after audit by the IRS. The
Company is currently meeting with the Appeals Office of the IRS in Denver,
Colorado to discuss resolving issues raised for Fiscal 1995 and 1996. Although
no definite outcome can be predicted, the Company believes that there will not
be a material cash impact from these hearings
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Results of Operations
Three Months Ended August 31, 1999 Compared to Three Months Ended August
31, 1998
During the quarter ended August 31, 1999, revenues decreased by $689,300 to
$1,474,100 as compared to revenues of $2,163,400 during the quarter ended August
31, 1998. This decrease was primarily associated with the curtailment of
contract work that the Company had been doing for the GMMV. The reduction of
work on the GMMV properties was as a result of low spot prices for uranium and
the inability of the Company to raise the funds to purchase Kennecott Energy's
50% interest in the GMMV. The GMMV management committee decided in late July
1998 to significantly reduce expenditures on its mineral properties. This
curtailment reduced the rental of equipment revenues and management fees
previously received by the Company from GMMV.
Costs and Expenses were $2,650,300 for the quarter ended August 31, 1999 as
compared to $3,667,800 for the quarter ended August 31, 1998. This decrease of
$1,017,500 was also related to the reduction of activities at the GMMV
properties. In addition to the reduction of activity at the GMMV properties, the
Company granted a bonus to two of its employees for services related to the SMP
arbitration/litigation during the quarter ended August 31, 1998. There were no
similar bonuses granted during the quarter ended August 31, 1999.
Operations for the quarter ended August 31, 1999 resulted in a loss of
$1,111,600 or $0.15 per share as compared to a loss of $1,257,200 or $0.18 per
share for the quarter ended August 31, 1998.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Sheep Mountain Partners Arbitration/Litigation
In 1991, disputes arose between USE/Crested (USECC), and Nukem, Inc. and
its subsidiary Cycle Resource Investment Corp. ("CRIC"), concerning the
formation and operation of the Sheep Mountain Partners ("SMP") partnership for
uranium mining and marketing, and activities of the parties outside SMP.
Arbitration proceedings were initiated by CRIC in June 1991 and in July 1991,
USECC filed a lawsuit against Nukem, CRIC and others in the U.S. District Court
of Colorado. Later, USECC filed another suit for the standby costs at the SMP
mines against SMP in the Colorado State Court. The Federal Court stayed the
arbitration proceedings and the State Court case was also stayed. In fiscal
1994, all of the parties agreed to exclusive and binding arbitration of the
disputes before the American Arbitration Association ("AAA"), for which the
legal claims made by both sides included fraud and misrepresentation, breach of
contract, breach of duties owed to the SMP partnership, and other claims.
Following hearings before a three member panel of the AAA, the Panel
entered an Order and Award in April 1996 and supplemented it in July 1996, which
were ultimately confirmed by the U.S. District Court of Colorado in its Second
Amended Judgment (the "Judgment"). Please see Item 3. Company's 1999 Form 10-K
for more details of this arbitration/litigation. Nukem appealed the Judgment of
the U.S. District Court to the 10th Circuit Court of Appeals (10th CCA). On
October 22, 1998, the 10th CCA issued its Order and Judgment affirming the
District Court's Judgment (without modification). The Judgment ordered that the
uranium purchase contracts Nukem entered into with three CIS republics including
the purchase rights, the uranium acquired pursuant to those rights and the
profits therefrom were impressed with a constructive trust in favor of SMP.
On November 13, 1998, Nukem/CRIC filed motions for entry of full
satisfaction of the Judgment if Nukem/CRIC paid only the balance remaining due
on the monetary portion of the Judgment. USECC responded opposing the motions
and requesting payment of the balance of the monetary award. On February 8,
1999, the District Court denied the motion of Nukem/CRIC for entry of final
satisfaction of the Judgment and ordered Nukem/CRIC to forthwith pay USECC the
balance of $5,971,600 plus interest of $105,700. Nukem/CRIC made that payment to
USECC on February 9, 1999.
On April 28, 1999, USECC filed a petition in the U.S. District Court to
dissolve SMP and for an accounting. Nukem/CRIC responded that the District Court
did not have jurisdiction and again filed a motion seeking entry of final
satisfaction of the Judgment. On July 16, 1999, the District Court again denied
the motion of Nukem/CRIC for entry of final satisfaction of Judgment and denied
USECC's petition for dissolution because neither USECC nor Nukem/CRIC petitioned
the Court for dissolution of SMP before the Court entered its Second Amended
Judgment. On August 2, 1999, Nukem/CRIC filed a Notice of Appeal to the 10th CCA
of the District Court's July 16, 1999 Order. Thereafter, USECC filed a request
with the District Court for post judgment assistance to compel Nukem to account
for its profits on the CIS contracts. USECC also filed a motion to dismiss the
appeal of Nukem/CRIC to the 10th CCA. The post judgment request and the motion
to dismiss are pending before the Courts.
Ticaboo Townsite Litigation
In fiscal 1998, a prior contract operator of the Ticaboo restaurant and
lounge, and two employees supervising the motel and convenience store in Utah
(owned by Canyon Homesteads, Inc.) and their corporation Dejavue, Inc. sued USE,
Crested and others in Utah State Court 3rd Judicial District. See Item 3 of
Company's 1999 Form 10K for more details. After a five day trial, a jury denied
the claims of two of three plaintiffs but awarded the third plaintiff $156,000
in damages against USE and awarded the plaintiff Dejavue, Inc. $91,668 in
attorney fees. USE posted a supersedeas bond for $275,000 to appeal the judgment
and plaintiffs also appealed the judgment to the Utah Court of Appeals.
Plaintiffs and USE have both filed
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their briefs with the Utah Court of Appeals. The Court set October 25, 1999
for oral arguments in Salt Lake City, UT.
BGBI Litigation
USE and Crested are defendants and counter- or cross-claimants in certain
litigation in the District Court of the Fifth Judicial District of Nye County,
Nevada, brought by Bond Gold Bullfrog Inc. ("BGBI") on July 30, 1991. Please see
Item 3 of Company's 1999 Form 10K. The Trial Court ruled against both the
palintiff and defendants on their respective claims. BGBI and Parador, and
USE/Crested all appealed the decision to the Nevada Supreme Court. BGBI filed
its brief on appeal and Parador and USECC have filed their answer and opening
brief. Defedant and Cross-Respondent H.B. Lane, contractor is seeking to file an
answering brief to Parador's cross-appeal by November 15, 1999.
Sutter Gold Mining Company (SGMC) Litigation
In 1993, Amador County issued a conditional use permit ("CUP") to allow
SGMC to develop the Sutter Gold Mine (SGM) near the town of Sutter Creek, Amador
County, California. A number of conditions were included in the original CUP
which accommodated local citizen and government agency concerns about noise,
waste disposal, traffic and other aspects of the proposed mining operation.
Please see Item 3 of Company's 1999 Form 10K.
In 1997 and 1998, SGMC proposed amendments to the CUP for a new design of
the SGM which would lower its environmental impact by reducing traffic,
potentially eliminating the use of cyanide on-site, and removing two large
tailings dams which would have been built to hold mine and mill waste. In August
and September 1998, the Board of Supervisors approved the amendments to the CUP.
On September 28, 1998 a lawsuit was filed in Amador County Superior Court,
California (Case No. 98 CV 3298) by Concerned Citizens of Amador County as
plaintiffs, against the County of Amador and the Amador County Board of
Supervisors, and against SGMC as a real party in interest. The lawsuit
challenged the actions of Amador County and its Board of Supervisors in
approving the amended CUP. A hearing was held on June 7, 1999 and the Court
denied plaintiffs' lawsuit on August 30, 1999. Plaintiffs have until October 29,
1999 to appeal the decision.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. The Company did not file any Reports on Form 8-K
during the quarter ended August 31, 1999.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.
U.S. ENERGY CORP.
(Company)
Date: October 15, 1999 By: /s/ John L. Larsen
--------------------------------------
JOHN L. LARSEN,
Chief Executive Officer
and Chairman
Date: October 15, 1999 By: /s/ Robert Scott Lorimer
--------------------------------------
ROBERT SCOTT LORIMER,
Principal Financial Officer and
Chief Accounting Officer
14
<PAGE>
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