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 0-8773
CRESTED CORP.
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(Exact Name of Company as Specified in its Charter)
Colorado 84-060812
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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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NONE
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(Former name, address and fiscal year, if changed since last report)
Indicate by check mark 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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Indicate 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, $.001 par value 10,349,664 Shares
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CRESTED CORP. AND AFFILIATE
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
2
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
CRESTED CORP. AND AFFILIATE
Condensed Consolidated Balance Sheets
ASSETS
August 31, May 31,
1999 1999
----------- ---------
(Unaudited)
<TABLE>
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $2,928,800 $3,509,000
Accounts receivable
Trade, net of allowance for doubtful accounts 63,800 72,200
Affiliates 2,144,700 1,875,300
Current portion of long-term receivable
Related parties 116,000 115,000
Inventory and other 122,800 34,200
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TOTAL CURRENT ASSETS 5,376,100 5,605,700
LONG-TERM NOTES RECEIVABLE
Related parties 13,900 10,200
INVESTMENTS IN AFFILIATES 103,500 126,000
INVESTMENT IN CONTINGENT
STOCK PURCHASE WARRANT -- --
PROPERTIES AND EQUIPMENT 5,964,800 5,951,800
Less accumulated depreciation,
depletion and amortization (3,472,800) (3,437,400)
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2,492,000 2,514,400
OTHER ASSETS 159,700 158,700
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$8,145,200 $8,415,000
========== ==========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
3
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CRESTED CORP. AND AFFILIATE
Condensed Consolidated Balance Sheets
LIABILITIES AND SHAREHOLDERS' DEFICIT
August 31, May 31,
1999 1999
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(Unaudited)
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 307,300 $ 371,700
Deferred GMMV purchase option 2,000,000 2,000,000
Current portion of long-term debt
Affiliate 7,266,800 7,054,000
Others 106,200 25,300
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TOTAL CURRENT LIABILITIES 9,680,300 9,451,000
LONG-TERM DEBT 9,000 16,700
RECLAMATION LIABILITY 725,900 725,900
COMMITMENTS AND CONTINGENCIES
FORFEITABLE COMMON STOCK, $.001 par value
65,000 shares issued, forfeitable until earned 43,900 43,900
SHAREHOLDERS' DEFICIT:
Preferred stock, $.001 par value;
100,000 shares authorized;
none issued or outstanding -- --
Common stock, $.001 par value;
20,000,000 shares authorized;
10,349,664 and 10,284,694 shares
issued and outstanding, respectfully 10,300 10,300
Additional paid-in capital 6,387,300 6,387,300
Accumulated deficit (8,711,500) (8,220,100)
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TOTAL SHAREHOLDERS' DEFICIT (2,313,900) (1,822,500)
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$8,145,200 $8,415,000
========== ==========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
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CRESTED CORP. AND AFFILIATE
Condensed Consolidated Statements of Operations
Three Months Ended
August 31,
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1999 1998
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(Unaudited) (Unaudited)
<TABLE>
<S> <C> <C>
REVENUES:
Mineral revenue $ 17,100 $ 24,500
Commercial operations 105,200 329,800
Interest 40,200 37,400
Oil sales 5,500 9,500
Management fees and other 77,700 220,900
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245,700 622,100
COSTS AND EXPENSES:
Mineral operations $260,200 $327,200
Commercial operations 209,500 202,200
General and administrative 242,000 627,100
Oil production 900 11,100
Interest 2,000 6,700
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714,600 1,174,300
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LOSS BEFORE
EQUITY LOSS
AND INCOME TAX PROVISION (468,900) (552,200)
EQUITY IN LOSS OF AFFILIATES (22,500) (62,900)
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LOSS BEFORE
PROVISION FOR INCOME TAXES (491,400) (615,100)
PROVISION FOR INCOME TAXES -- --
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NET LOSS $(491,400) $(615,100)
========= =========
NET LOSS PER SHARE,
BASIC AND DILUTED $ (.05) $ (.06)
========= =========
BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING 10,349,664 10,237,694
========== ==========
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 10,349,664 10,302,694
========== ==========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
5
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CRESTED CORP. AND AFFILIATE
Condensed Consolidated Statements of Cash Flows
Three Months Ended
August 31,
--------------------------
1999 1998
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(Unaudited) (Unaudited)
<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(491,400) $(615,100)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation, depletion and amortization 35,400 63,700
Equity in loss of affiliates 22,500 62,900
Net changes in components
of working capital (414,000) 1,218,400
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NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (847,500) 729,900
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CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in long-term receivables (4,700) 19,300
Purchases of property and equipment (13,000) (25,700)
Increase in other assets (1,000) (1,400)
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NET CASH USED IN
INVESTING ACTIVITIES: (18,700) (7,800)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 90,700 100,500
Payment on long-term debt (17,500) (6,100)
Net activity on long-term debt to affiliate 212,800 398,400
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 286,000 492,800
--------- ---------
NET (DECREASE) INCREASE
IN CASH AND CASH EQUIVALENTS (580,200) 1,214,900
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,509,000 1,012,700
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 2,928,800 2,227,600
=========== =========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 2,000 $ 6,700
========= ========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
6
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CRESTED CORP.
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 at May 31, 1999, has been taken
from the audited financial statements included in the Company's Annual Report on
Form 10-K filed for the year then ended. In the opinion of the Company, the
accompanying financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to fairly present the financial position of
the Company and its affiliate as of August 31, 1999, the results of operations
and cash flows for the three months ended August 31, 1999 and August 31, 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 condensed consolidated financial statements of the Company include
its proportionate share of the accounts of USECB Joint Venture ("USECB" or
"USECC") which is owned 50% by the Company and 50% by the Company's parent, U.S.
Energy Corp. ("USE"). All material inter-company profits and balances have been
eliminated.
4) Debt at August 31, 1999 and May 31, 1999 consists primarily of the
balance on a note payable to USE of $7,266,800 and $7,054,000, respectively. The
remaining current portion long-term debt of $106,200 and $25,300 at August 31,
1999 and May 31, 1999 respectively is for various equipment purchases and the
financing of annual insurance premiums through financial institutions.
5) The reclamation liability of $725,900 represents the Company's share of
the liability at the Sheep Mountain Mines in the Crooks Gap Mining District.
This reclamation work may be performed over several years and will not be
commenced until such time as all the uranium mineralization contained in the
properties is produced or the properties are abandoned. It is not anticipated
that either of these events will occur for sometime into the future.
6) Certain reclassifications have been made in the May 31, 1999 financial
statements to conform to the classifications used in August 31, 1999.
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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 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, the Company experienced a
decrease in working capital in the amount of $458,900. This decrease in working
capital increased the working capital deficit of the Company at August 31, 1999
to $4.3 million from a working capital deficit of $3.8 million at May 31, 1999.
The primary changes in working capital were reductions of $580,200 in cash and
cash equivalents, an increase of $303,500 in long term debt and an increase in
accounts receivable affiliates of $269,400.
Cash was consumed by operations, $847,500, and investing activities,
$18,700, while financing activities increased cash by $286,000. The increase in
financing activities came as a result of increased debt due to the Company's
parent, U.S. Energy Corp. ("USE"), in the amount of $212,800 and debt to third
parties primarily for the financing of prepaid insurance premiums in the amount
of $90,700. During the quarter ended August 31, 1999, long term debt was also
reduced by $17,500.
Accounts receivable affiliates increased as a result of amounts advanced
on behalf of various affiliated companies. The majority of these advances were
to Plateau Resources Ltd. ("Plateau"). During the quarter ended August 31, 1999,
the Company advanced $257,100 to Plateau for construction projects. These
projects were the construction of boat storage and gravel crushing facilities.
It is believed that upon completion, both of these facilities will provide cash
flows to the Company and USE.
The Company reported a $2,000,000 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 in the
future.
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. The
Company will continue to rely on USE to provide funding for its expenditures for
the remaining nine months of fiscal 2000. Additionally, the Company and USE will
continue to offer for sale various assets such as equipment, 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 and USE have 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 and USE. It is anticipated that this line
of credit may be used to finance short term working capital needs. The Company
and USE are currently seeking an increase in their line of credit through
financial institutions to fund expanding operations in the current coal bed
methane exploration and development programs as well as alternate feed and waste
disposal businesses.
8
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Financing: Equity financing for Sutter Gold Mining Company ("SGMC") and
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 and USE
continue to be optimistic concerning the future markets for these metals but
cannot 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, the
working capital of the Company and USE could be impacted negatively due to
holding costs of the properties. The Company and USE continue to pursue
alternative uses for these properties including tourism at the SGMC properties
and alternate feed or waste disposal at the Plateau properties.
The Company and USE are also seeking financing through equity markets for
their expansion into the coal bed methane and alternative feed/waste management
businesses. Discussions are currently underway regarding these financing efforts
with investment banking firms.
During the quarter ended August 31, 1999, the Company and USE became
involved in the exploration phase of coal bed methane as drilling contractors
for third parties. The Company and USE will use existing drilling assets in
these drilling projects. This opportunity allows the Company and USE to become
involved in the acquisition of coal bed methane properties and develop gas
producing fields for their own account. The Company and USE have committed
capital resources to the coal bed methane 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 and the Company's continued reliance on
USE, 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 of the Company's mineral properties and projected
business expansions.
Capital Requirements
General: The primary requirements for the Company's working capital during
the remainder of 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, business expansion and
development costs associated with the coal bed methane and alternative
feed/waste disposal businesses and corporate general and administrative
expenses.
SGMC: The Company owns a minority interest in SGMC and is therefore not
directly responsible for the ongoing administrative and development costs of the
properties owned by SGMC. Through its affiliation with USE however, the Company
assists in the efforts to secure financing to place the SGMC properties in
California into production.
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 or USE'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
the Sheep Mountain uranium mineral properties are the responsibility of the
Company and USE. The holding costs during 1999 were approximately $57,000 per
month. The Company and USE continue to search for improved techniques that will
reduce these monthly costs. The future reclamation costs on the Sheep Mountain
properties are
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covered by a reclamation bond which is secured by the pledge of certain of the
Company's and USE's real estate assets. The reclamation bond amount is reviewed
annually by the state regulatory agencies. The Company's portion of the
reclamation liability on the Sheep Mountain properties is $725,900 and is shown
as "Reclamation liability " within the condensed consolidated balance sheet.
It is not anticipated that the Sheep Mountain properties will be placed
into production during Fiscal 2000. The Company and USE have 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
the Company and USE are able to obtain long term delivery contracts with
favorable price terms and the Sweetwater Mill (which is owned and operated by
the GMMV) is placed into production. There are no major reclamation expenditures
expected during the balance of Fiscal 2000 that the Company and USE are aware of
on the Sheep Mountain 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 and USE have notified the
GMMV management committee that they have elected to be a non-participating
partner in funding current holding and reclamation costs. By making this
election, the Company and USE 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 and USE'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 does not own any
portion of Plateau but shares in the cash flow streams of the properties with
USE on a 50-50 basis. The Company and USE are 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 and USE 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 or USE will be obligated to advance funds on behalf
of YSFC.
Term Debt and Other Obligations: Debt to non-related parties at August 31,
1999, was $115,200 compared to $42,000 at May 31, 1999. The increase in debt to
non-related parties consists primaraly of debt due on the financing of annual
insurance premiums. 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.
As of August 31, 1999, the Company was indebted to USE in the total amount
of $7,266,800. USE has not indicated that it will call the debt, when it is due.
The Company has had preliminary discussions with USE to potentially retire the
note with shares of its common stock.
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
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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 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 that 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 over
ride until such time as they are repaid.
Other: The Company and USE are currently not in production on any mineral
properties. The Company and USE are not using hazardous substances or known
pollutants to any great degree in the maintenance of mineral properties or the
development of new businesses. Consequently, recurring costs for managing
hazardous substances, and capital expenditures for monitoring hazardous
substances or pollutants have not been significant. The Company and USE are not
aware of any claims for personal injury or property damages that need to be
accrued or funded. The Company and USE maintain both workers compensation and
liability insurance coverage which they believe cover any claims that may exist.
The tax years through May 31, 1994 are closed after audit by the IRS. The
Company and USE are currently in hearings 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 and USE believe that
there will not be a material cash impact from the ultimate outcome of these
hearings.
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 $376,400
to $245,700 as compared to revenues of $622,100 during the quarter ended August
31, 1998. This decrease was primarily associated with the curtailment of
contract work that the Company and USE 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 and USE to raise the funds to purchase
Kennecott Energy's 50% interest in the GMMV. The GMMV management committee
determined in late July 1998 to significantly reduce expenditures at its mineral
properties. This curtailment reduced the rental of equipment revenues and
management fees previously received by the Company and USE from GMMV.
Costs and Expenses were $714,600 for the quarter ended August 31, 1999 as
compared to $1,174,300 for the quarter ended August 31, 1998. This decrease of
$459,700 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 and
USE granted a bonus to two of their 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
$491,400 or $0.05 per share as compared to a loss of $615,100 or $0.06 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
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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 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.
CRESTED CORP.
(Company)
Date: October 15, 1999 By: /s/ John L. Larsen
--------------------------------------
JOHN L. LASREN,
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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<LEGEND>
(Replace this text with the legend)
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<NAME> Crested Corp
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0
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<NET-INCOME> (491,400)
<EPS-BASIC> (.05)
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