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 February 29, 2000 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 Registrant as Specified in its Charter)
Colorado 84-0608126
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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 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
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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 April 14, 2000
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Common stock, $.001 par value 10,381,664 Shares
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CRESTED CORP. AND AFFILIATE
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Condensed Consolidated Balance Sheets
February 29, 2000 and May 31, 1999...............................3-4
Condensed Consolidated Statements of Operations
Three and Nine Months Ended February 29, 2000 and 1999 ............5
Condensed Consolidated Statements of Cash Flows
Nine Months Ended February 29, 2000 and 1999......................6
Notes to Condensed Consolidated Financial Statements.................7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................8-12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings................................................13-14
ITEM 4. Submission of Matters to Security Holders for Vote..................14
ITEM 6. Exhibits and Reports on Form 8-K....................................14
Signatures..........................................................15
2
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
CRESTED CORP. AND AFFILIATE
Condensed Consolidated Balance Sheets
ASSETS
February 29, May 31,
2000 1999
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(Unaudited)
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CURRENT ASSETS:
Cash and cash equivalents $ 284,800 $ 3,509,000
Accounts receivable
Trade, net of allowance
for doubtful accounts 568,900 72,200
Affiliates 2,075,900 1,875,300
Current portion of long-term receivable
Related parties 270,500 115,000
Inventory and other 54,900 34,200
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TOTAL CURRENT ASSETS 3,255,000 5,605,700
LONG-TERM NOTES RECEIVABLE
Related parties 24,200 10,200
INVESTMENTS IN AFFILIATES 432,100 126,000
PROPERTIES AND EQUIPMENT 6,673,800 5,951,800
Less accumulated depreciation,
depletion and amortization (3,620,800) (3,437,400)
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3,053,000 2,514,400
OTHER ASSETS 159,700 158,700
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$ 6,924,000 $ 8,415,000
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</TABLE>
See notes to Condensed Consolidated Financial Statements.
3
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CRESTED CORP. AND AFFILIATE
Condensed Consolidated Balance Sheets
LIABILITIES AND SHAREHOLDERS' EQUITY
February 29, May 31,
2000 1999
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(Unaudited)
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CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 227,400 $ 371,700
Deferred GMMV purchase option 2,000,000 2,000,000
Current portion of long-term debt
Affiliate 7,374,600 7,054,000
Others 85,700 25,300
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TOTAL CURRENT LIABILITIES 9,687,700 9,451,000
LONG-TERM DEBT 26,200 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' EQUITY:
Preferred stock, $.001 par value;
100,000 shares authorized;
none issued or outstanding -- --
Common stock, $.001 par value;
20,000,000 shares authorized;
issued 10,316,664 and 10,284,664 shares 10,300 10,300
Additional paid-in capital 6,400,100 6,387,300
Accumulated deficit (9,970,100) (8,220,100)
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TOTAL SHAREHOLDERS' DEFICIT (3,559,700) (1,822,500)
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$ 6,924,000 $ 8,415,000
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</TABLE>
See notes to Condensed Consolidated Financial Statements.
4
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CRESTED CORP. AND AFFILIATE
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
February 29 and 28, February 29 and 28,
------------------------ ---------------------------
2000 1999 2000 1999
---- ---- ---- ----
REVENUES:
Mineral revenue $ 16,600 $ 34,000 $ 50,100 $ 76,300
Commercial operations 67,700 52,600 255,200 439,900
Coalbed methane operations 680,900 -- 1,062,500 --
Oil sales 27,000 14,800 50,000 41,700
Gain on sale of assets 2,800 (4,600) 2,800 (4,600)
Interest 21,300 37,100 90,800 105,500
Litigation settlement -- 3,038,600 -- 3,038,600
Management fees and other 41,300 142,800 269,200 438,400
------------ ------------ ------------ ------------
857,600 3,315,300 1,780,600 4,135,800
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Mineral operations 489,100 337,600 1,017,300 889,600
Commercial operations 176,000 446,800 586,200 870,700
Coalbed methane operations 591,100 -- 742,400 --
Oil Production 10,200 8,900 18,700 28,400
Interest 3,400 10,100 9,500 23,200
General and administrative 427,900 515,100 1,081,300 1,436,000
------------ ------------ ------------ ------------
1,697,700 1,318,500 3,455,400 3,247,900
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE EQUITY LOSS
AND TAX PROVISION (840,100) 1,996,800 (1,674,800) 887,900
EQUITY IN (LOSS) INCOME OF AFFILIATE (33,100) 96,600 (75,200) (214,300)
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE
PROVISION FOR INCOME TAXES (873,200) 2,093,400 (1,750,000) 673,600
PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (873,200) $ 2,093,400 $ (1,750,000) $ 673,600
============ ============ ============ ============
NET (LOSS) INCOME PER SHARE,
BASIC AND DILUTED $ (0.08) 0.20 (0.17) 0.07
============ ============ ============ ============
BASIC AND DILUTED WEIGHTED
AVERAGE SHARES OUTSTANDING 10,363,531 10,302,694 10,354,219 10,302,694
============ ============ ============ ============
See notes to Condensed Consolidated Financial Statements.
</TABLE>
5
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CRESTED CORP. AND AFFILIATE
Condensed Consolidated Statements of Cash Flows
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Nine Months Ended
February 29 and 28,
2000 1999
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(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(1,750,000) $ 673,600
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation, depletion and amortization 183,400 169,200
Equity in loss of affiliates 75,200 214,300
Non cash compensation 12,800 --
Loss (gain) on sale of assets (2,800) 4,600
Net changes in components
Of working capital (862,300) 1,403,100
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NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (2,343,700) 2,464,800
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CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in long-term receivables (169,500) 18,600
Investments in affiliates (381,300) (3,000)
Purchase of property and equipment (725,500) (35,900)
Proceeds from sale of assets 6,300 50,000
Increase in other assets (1,000) (1,500)
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NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (1,271,000) 28,200
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from third party debt 169,300 100,500
Payment on long term debt (99,400) (103,200)
Net activity on long term debt due to affiliate 320,600 615,500
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 390,500 612,800
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NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (3,224,200) 3,105,800
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 $ 284,800 $ 4,118,500
=========== ===========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 9,500 $ 23,200
=========== ===========
Income tax paid $ -- $ 6,300
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See notes to Condensed Consolidated Financial Statements.
6
</TABLE>
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CRESTED CORP.
Notes to Condensed Consolidated Financial Statements
1) The Condensed Consolidated Balance Sheet as of February 29, 2000 and the
Condensed Consolidated Statements of Operations for the three and nine months
and Cash Flows for the nine months ended February 29, 2000 and February 28, 1999
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 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 subsidiary as of
February 29, 2000 and May 31, 1999, the results of operations for the three and
nine months ended February 29, 2000 and February 28, 1999, and the cash flows
for the nine 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 Company's May 31, 1999 Form 10-K. The
results of operations for the periods ended February 29, 2000 and February 28,
1999 are not necessarily indicative of the operating results for the full year.
3) The consolidated financial statements of the Company include 50% 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").
4) Deferred GMMV Purchase Option at February 29, 2000 and May 31, 1999
consists of the $2,000,000 Signing Bonus received when the Company and USE
entered into an Acquisition Agreement with Kennecott Uranium Company to acquire
properties. (See GMMV discussion in Item 2).
5) Accrued reclamation obligations of $725,900 are the Company's share of
the reclamation liability at the SMP mining properties. The 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 abandoned. It is not anticipated that either of these events will
occur for sometime into the future.
7
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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. The discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from the
results discussed in any such forward-looking statements.
Overview of Business
The Company does its business through USECB Joint Venture ("USECB") which
is owned 50% by the Company and 50% by the Company's parent, U.S. Energy Corp.
("USE"). Certain assets are managed outside USECB such as Sutter Gold Mining
Company ("Sutter"). which is owned 4% by the Company and Plateau Resources
("Plateau") which is owned 100% by USE. The Company participates in 50% of the
cash flows of Plateau.
During the nine and three months ended February 29, 2000, the Company
recognized revenues in four major areas; Coalbed methane contract drilling and
construction work, commercial operations, management fees and interest earned on
cash and cash equivalents. Other sources of revenue continue to be sale of oil
and the receipt of royalty interests on mineral properties.
Due to current depressed uranium prices, the Company has placed its uranium
properties on care and maintenance status. Until uranium market prices improve,
the Company has determined that it would enter into the coalbed methane gas
business. The Company and USE own and have purchased additional drilling and
construction equipment that is currently being used on a contract basis for
non-related companies. In addition, the Company has entered into a contract with
a third party through a newly formed subsidiary, Rocky Mountain Gas, Inc. (RMG),
to purchase a 50% interest in 185,000 acres for coalbed methane exploration and
development in the Powder River Basin of Montana. The Company owns 41% of RMG.
It is anticipated that the business operations of the Company will be largely
directed toward this new venture for at least the next twelve to eighteen
months.
As in all mineral development operations, there is risk involved in the
development of coalbed methane gas fields. Some of the known risks in the
coalbed methane development and production business are: government regulations,
environmental restrictions, market price for methane gas, availability of pipe
lines and capacity in the existing pipe lines. The Company can not accurately
predict what if any of these risks will have on its business in the future.
Liquidity and Capital Resources
During the nine months ended February 29, 2000, the Company's working
capital deficit increased from $3,845,300 at May 31, 1999 to $6,432,700.
Included in the working capital at May 31, 1999 and February 29, 2000 is a
$2,000,000 signing bonus which was paid by Kennecott Uranium Company ("KUC") in
June of 1997 when the Company and USE entered into an Acquisition Agreement with
KUC. This signing bonus of $2,000,000 is non-refundable to KUC and will not be
paid back to KUC. Another large contributor to the working capital deficit is
the amount due to USE. The debt due to USE was $7,374,600 and $7,054,000 as of
February 29, 2000 and May 31, 1999, respectively.
8
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Cash was consumed by operations, $2,343,700, and investing activities,
$1,271,000, while financing activities provided $390,500 in cash and cash
equivalents. The operating loss of $1,750,000 minus non cash depreciation of
$390,500, plus other working capital component decreases of $862,300 resulted in
using $2,343,700 for operations for the nine month period ended February 29,
2000. Cash of $1,271,000 used in investing activities resulted primally from the
Company's decision to invest $381,300 in a newly formed subsidiary company,
Rocky Mountain Gas, Inc. and enter into the exploration, development and
production of coalbed methane gas. In connection therewith, the Company spent
$725,500 in refurbishing existing drilling related equipment and purchasing
additional equipment for use in the drilling business.
The increase in cash from financing activities of $390,500 resulted
primally from equipment financing of $169,300 less equipment debt payments of
$99,400 and increased debt to USE of $320,600.
Capital Resources
The primary sources of the Company's capital resources for the remainder of
Fiscal 2000 are the cash on hand at February 29, 2000; revenues from contract
drilling and construction activities for coalbed methane gas operations;
possible equity financing from affiliated companies; proceeds under the line of
credit, and the potential receipt of cash from the SMP arbitration.
The Company has successfully financed a portion of its new equipment
acquisitions. To preserve cash, the Company will continue to seek equipment
financing opportunities. Additionally, the Company will continue to offer for
sale various assets such as real estate holdings in Wyoming, Colorado and Utah
and mineral interests. Interest, rentals of real-estate holdings and equipment
and aviation fuel sales will also provide cash.
It is contemplated that the Company will begin to generate revenues
sufficient to continue to participate in the coalbed methane gas contracting
work. The entry threshold into the coalbed methane gas business was significant
but now that it has been expended and the summer months have arrived, the
Company anticipates receiving a return on its investment. It is further
anticipated that RMG will receive significant revenues from coalbed methane gas
production for its own account. However, no assurances can be given as to the
actual amount or timing of coalbed methane gas production from the properties in
which RMG owns an interest.
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. At February 29, 2000, the entire
line of credit was available. At the time of the filing of this report a total
of $800,000 was available on the line of credit. The line of credit is being
used for short term working capital needs.
The Company believes that cash on hand at February 29, 2000, proceeds from
drilling and construction contracts, revenues from commercial operations, equity
financings and its line of credit will be adequate to fund working capital
requirements through Fiscal 2000. However, these capital resources will not be
sufficient to provide funding for the Company's development of its coalbed
methane gas business. RMG is seeking additional equity financing to develop its
coalbed methane leases.
9
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Capital Requirements
The primary requirements for the Company's working capital during Fiscal
2000 are expected to be the costs associated with the expansion and development
of the coalbed methane gas and alternative feed /waste management businesses,
the development activities of Plateau and Sutter; the care and maintenance costs
of the former SMP mineral 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 holding costs and corporate
general and administrative expenses.
New Business
To fund the purchase and development of the coalbed methane gas leasehold
interests described above, RMG is seeking equity funding. To acquire a 50%
working interest in 185,000 acres of leaseholds, RMG paid $3,200,000 to Quantum
Energy, ("Quantum") in January 2000. RMG further agreed to pay Quantum an
additional $1,000,000 in May 2000 and $1,300,000 on or before December 31, 2000.
If these payments are not made, RMG's 50% working interest in the leaseholds
could be reduced. RMG also has a $2,500,000 work commitment for drilling wells
or completing infrastructure on the Quantum properties.
Equity financing for the mineral development of Sutter and Plateau are
dependent on the market price of gold and uranium among other things. As of
February 29, 2000, the prices of 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 cannot accurately forecast what the
prices will be in the short or long term markets. If the prices for these metals
do not increase in the short term, the working capital of the Company would be
impacted negatively due to permitting and stand-by costs associated with these
properties.
Plateau owns and operates the Ticaboo townsite, motel, convenience store,
boat storage, restaurant and lounge. Additionally, Plateau owns and maintains
the Tony M uranium mine and Shootaring Canyon Uranium Mill. The Company and USE
share the cash flow streams of the properties on a 50-50 basis. The Company and
USE are pursuing alternative uses for these properties including alternative
feed or waste disposal of low level nuclear waste. The Companies are seeking
joint venture partners and equity financing to enter into the alternative feed
and waste disposal business as the expansion into this business will require
additional capital.
Sutter is also seeking to develop alternate uses of its mineral properties
until such time as the market price of gold increases to a economically viable
level. Sutter is developing a tourism related business that may generate
sufficient cash flows to cover the holding costs of its property. Prior to
placing the property into production additional capital will need to be
obtained.
Mineral Holding Costs
The care and maintenance costs associated with the Sheep Mountain uranium
mineral properties are the responsibility of the Company and USE. The holding
costs during 2000 have been approximately $48,300 per month. The Company and USE
are currently seeking alternative methods of managing the properties in an
effort to reduce these holding costs.
10
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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 relative to the price and supply in the short
term uranium market. The management committee of the GMMV is endeavoring to
reduce the holding costs for 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 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's ownership interest in the GMMV. The Company received
and deferred recognition of a $2,000,000 signing bonus in a prior year. This
bonus payment was received from KUC as a signing upon the execution of the
Acquisition Agreement on June 23, 1997. The Bonus is non-refundable and will be
used to off-set any future costs the Company may incur on the GMMV properties.
On November 10, 1999, KUC and Kennecott Energy Company filed a court action
in the Wyoming State Court against the Company and USE. In its action, KUC
expressed its opinion that the GMMV was no longer economically viable and asked
relief from the court to allow the termination of the GMMV and the distribution
of the assets. The Company and USE do not agree with the allegations made by KUC
and have filed their response. The ultimate outcome of these actions on the cash
requirements of the Company cannot be predicted as of February 29, 2000.
Debt Payments
Debt to non -related parties at February 29, 2000 was $111,900 as compared
to $42,000 at May 31, 1999. The increase in debt to non-related parties consists
primally of debt due on the financing of equipment and annual insurance
premiums. All payments on the debt are current.
Federal Income Tax Issues
The tax years through May 31, 1994 are closed after audit by the IRS. The
Company is currently attending appeals hearings with 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 impact from the ultimate outcome of these hearings.
Reclamation Costs
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. The GMMV is in the process of
reclaiming an open pit mine near the Sweetwater Mill 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 $8,000,000 in reclamation.
These funds are to be repaid from an overriding royalty on future production
through the Sweetwater Mill.
The future reclamation costs on the Sheep Mountain properties are covered
by a reclamation bond which is secured by a pledge of certain of the Company'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.
11
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Results of Operations
Three and Nine months ended February 29, 2000 Compared to the Three and Nine
months ended February 28, 1999
During the three and nine months ended February 29, 2000, revenues
decreased from those revenues reported during the same periods of the previous
year by $2,457,700 and $2,355,200 respectively. During the three and nine months
ended February 28, 1999 the Company received $3,038,600 as a settlement of the
monetary damages in the SMP arbitration/litigation. There were no similar
revenues received in the three and nine months ended February 29, 2000. In
addition to the reduction in SMP settlement revenues, mineral revenues,
management fees and interest revenues decreased during the three and nine months
ended February 29, 2000. These reductions were caused by reduced mineral prices
paid on royalties, no uranium deliveries during the current year and reduced
activity at the GMMV and SMP properties on which management fees were charged.
These reductions in revenues were partially offset by increased revenues in
coalbed methane gas operations and oil sales. As noted above, the Company has
entered into the coalbed methane business and has contracted with third parties
to perform drilling and construction work. Oil sales increased due to increased
market prices for oil which allowed the Company to begin pumping its wells at
the Lustre Field during the nine months ended February 29, 2000.
Costs and Expenses increased by $379,200 and $207,500 respectively for the
three and nine months ended February 29, 2000. Increased costs and expenses came
primary as a result of increased drilling activity in the coalbed methane gas
business which required a certain amount of start up cost. Additionally
construction costs and expenses increased as a result of the contract
construction work being performed for third party companies in the coalbed
methane business. Offsetting to the increases for the nine months ended February
29, 2000 in costs and expenses was a reduction in General and Administrative
expenses. This reduction came as a result of decreased costs and expenses,
including bonus payments, relating to the SMP arbitration/litigation.
These reductions in revenues and increased costs and expenses resulted in
losses of $873,200 and $1,750,000 for the three and nine months ended February
29, 2000 respectively as compared to earnings during the comparative periods of
the previous year of $2,093,400 and $673,600.
12
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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 against USECC by CRIC in June 1991 before
the American Arbitration Association ("AAA"). A three member panel of the AAA
held hearings on the SMP issues and entered an Order and Award in April 1996 and
clarifying it in July 1996. The Order and Award were confirmed by the U.S.
District Court of Colorado in its Second Amended Judgment (the "Judgment") in
June 1997. The Judgment ordered Nukem/CRIC to pay USECC a monetary award and
ordered 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, be impressed with a constructive trust in
favor of SMP of which USECC owned one half. Nukem appealed the Judgment 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).
On November 13, 1998, Nukem/CRIC filed a motion 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 motion 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. This request was denied. USECC also filed
a motion to dismiss the appeal of Nukem/CRIC to the 10th CCA, which is pending.
On or about March 7, 2000, Nukem and CRIC filed their opening brief with the
10th CCA. U.S. Energy and Crested Corp. filed their answer brief on April 10,
2000 and Nukem and CRIC may file a reply brief within 20 days thereafter. Please
see Item 3 of the Company's 1999 Form 10-K and Item 1 of PART II of the November
30, 1999 Form 10-Q for more details of this arbitration/litigation.
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 the Utah 3rd Judicial District State Court. See Item 3 of
the Company's 1999 Form 10K and Item 1. of PART II of the November 30, 1999 Form
10-Q
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for more details. USE petitioned the Supreme Court of Utah for a writ of
certiorari to allow the approval of the decision of the Court of Appeals. The
petition is pending.
Kennecott Uranium Litigation
On November 10, 1999, Kennecott Uranium Company and Kennecott Energy
Company ("Kennecott") filed a civil action against defendants U.S. Energy Corp.,
Crested Corp. and USECC in the Sixth Judicial District Court, Campbell County,
Wyoming, No. 22406. Kennecott is seeking to dissolve the GMMV joint venture with
USECC and judicial approval of a plan to sell the GMMV or liquidate its assets
plus attorney fees and costs. Defendants filed a motion to change venue to the
District Court in Fremont County, Wyoming and the Sixth Judicial District Court
granted the motion. The case was then transferred to the Ninth Judicial District
Court of Fremont County, WY in Civil Action No. 31322. The parties have
initiated discovery proceedings each seeking production of documents from the
other and certain documents of the parties have been reviewed.
On March 13, 2000, Defendants U.S. Energy, Crested Corp. and USECC filed an
answer denying the various allegations of Kennecott and counterclaims against
Plaintiff Kennecott and its parent Rio Tinto plc. Defendants also filed a
separate third party complaint against Rio Tinto plc.
In their counterclaims and cross complaint U.S. Energy and Crested Corp.
allege various claims of breach of contract and fiduciary duties including
violation of laws against entry into agreements to prevent competition and
influence the production and market of uranium concentrate. U.S. Energy and
Crested Corp. are seeking $1,250,000,000 in compensatory damages and
$2,000,000,000 in punitive damages. Kennecott has filed a motion to dismiss the
complaint and Rio Tinto has filed a motion for judgment on the pleadings.
Briefings supporting the motions are underway. A hearing date on the respective
motions is currently set for May 30, 2000.
ITEM 4. Submission of Matters to Shareholders Holders for Vote.
On December 4, 1999, an annual meeting of shareholders was held and for the
election of directors. The results of the meeting were reported in the Company's
Form 10Q for the fiscal quarter ended November 30, 1999.
ITEM 5. Other Information.
On December 28, 1999, the Utah Department of Water Quality began public
advertisement of a notice for a public hearing on the water discharge permit for
the Shootaring Canyon uranium mill. The state issued the permit on March 17,
2000 and will be reviewed by the Nuclear Regulatory Commission (NRC) to
determine if the permit is in compliance.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. No reports were filed on Form 8K during the
quarter ended February 29, 2000.
14
<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: April 14, 2000 By: /s/ Max T. Evans
------------------------------
MAX T. EVANS,
President
Date: April 14, 2000 By: /s/ Robert Scott Lorimer
------------------------------
ROBERT SCOTT LORIMER,
Principal Financial Officer
and Chief Accounting Officer
15
<PAGE>
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> FEB-29-2000
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