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 September 30, 2003 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to ____________
Commission file number 0-8773
CRESTED CORP.
- --------------------------------------------------------------------------------
(Exact Name of Company 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 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
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES NO X
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES 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 November 13, 2003
- ----------------------------------- -----------------------------------
Common stock, $0.001 par value 17,133,098 Shares
1
CRESTED CORP.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Condensed Balance Sheets
September 30, 2003 and December 31, 2002. . . . . . . . . . . . . 3
Condensed Statements of Operations
Three and Nine Months Ended September 30, 2003 and 2002. . . . . .4
Condensed Statements of Cash Flows
Nine Months Ended September 30, 2003 and 2002. . . . . . . . . . .5
Notes to Condensed Financial Statements. . . . . . . . . . . . . .6-8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . .9-11
ITEM 4. Controls and Procedures. . . . . . . . . . . . . . . . . . . . .11-12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . .13
ITEM 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . .13
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Certifications . . . . . . . . . . . . . . . . . . . . . . . . .15-18
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRESTED CORP.
CONDENSED BALANCE SHEETS
ASSETS
September 30, December 31,
2003 2002
----------- ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 3,300 $ 3,300
INVESTMENTS IN AFFILIATES 4,896,100 5,876,600
PROPERTIES AND EQUIPMENT 896,800 896,800
Less accumulated depreciation
depletion and amortization (886,800) (886,800)
----------- ------------
10,000 10,000
----------- ------------
$ 4,909,400 $ 5,889,900
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt to affiliate $ 9,465,800 $ 8,553,900
COMMITMENT TO FUND EQUITY INVESTEES 215,600 215,600
ASSET RETIREMENT OBLIGATION 1,110,300 748,400
COMMITMENTS AND CONTINGENCIES
FORFEITABLE COMMON STOCK, $.001 par value
15,000 shares issued, forfeitable until earned 10,100 10,100
SHAREHOLDERS' EQUITY
Common stock, $.001 par value; unlimited shares authorized;
17,118,098 and 17,099,276 issued and outstanding 17,200 17,200
Additional paid-in capital 11,804,800 11,795,200
Accumulated deficit (17,714,400)(15,450,500)
----------- ------------
TOTAL SHAREHOLDERS' EQUITY (5,892,400) (3,638,100)
----------- ------------
$ 4,909,400 $ 5,889,900
=========== ============
See accompanying notes to condensed financial statements.
3
CRESTED CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2003 2002 2003 2002
---- ---- ---- ----
REVENUES: $ -- $ -- $ -- $ --
COSTS AND EXPENSES:
Accretion of asset retirement
obligation 22,800 -- 68,200 --
General and administrative 41,400 38,500 130,400 114,100
------------ ------------ ------------ ------------
64,200 38,500 198,600 114,100
------------ ------------ ------------ ------------
LOSS BEFORE EQUITY LOSS, PROVISION
FOR INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (64,200) (38,500) (198,600) (114,100)
EQUITY IN LOSS OF AFFILIATES (371,200) (346,500) (1,771,500) (1,355,100)
------------ ------------ ------------ ------------
LOSS BEFORE PROVISION FOR INCOME
TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (435,400) (385,000) (1,970,100) (1,469,200)
PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
LOSS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (435,400) (385,000) (1,970,100) (1,469,200)
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE -- -- (293,800) --
------------ ------------ ------------ ------------
NET LOSS $ (435,400) $ (385,000) $(2,263,900) $(1,469,200)
============ ============ ============ ============
PERSHARE DATA
NET LOSS PER SHARE, BASIC
AND DILUTED
FROM CONTINUED OPERATION $ (0.03) $ (0.02) $ (0.12) $ (0.09)
FROM EFFECT OF ACCOUNTING
CHANGE -- -- (0.02) --
------------ ------------ ------------ ------------
BASIC AND DILUTED $ (0.03) $ (0.02) $ (0.13) $ (0.09)
============ ============ ============ ============
BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING 17,099,276 17,074,325 17,117,129 17,075,320
============ ============ ============ ============
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 17,099,276 17,074,325 17,117,129 17,075,320
============ ============ ============ ============
See accompanying notes to condensed financial statements.
4
CRESTED CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30 September 30
------------ ------------
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,263,900) $(1,469,200)
Adjustments to reconcile net loss to net cash
used in operating activities:
Equity in loss of affiliates 1,771,500 1,355,100
Accretion of asset retirement obligation 68,200 --
Non cash cummulative effect
of accounting change 293,700 --
Non cash compensation 9,600 11,400
Net changes in assets and liabilities -- (100)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (120,900) (102,800)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in affiliates (791,000) (1,225,900)
CASH FLOWS FROM FINANCING ACTIVITES:
Net activity on debt to affiliate 911,900 1,328,800
------------ ------------
NET DECREASE IN CASH
AND CASH EQUIVALENTS -- 100
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,300 3,200
------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 3,300 $ 3,300
============ ============
SUPPLEMENTAL DISCLOSURES:
Interest paid $ -- $ --
============ ============
Income tax paid $ -- $ --
============ ============
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of stock to outside directors $ 9,600 $ --
============ ============
See accompanying notes to condensed financial statements.
5
CRESTED CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1) The Condensed Balance Sheet as of September 30, 2003, the Condensed
Statements of Operations for the three and nine months ended June 30, 2003 and
2002, and the Condensed Statement of Cash Flows for the nine months ended
September 30, 2003 and 2002, have been prepared by the Company without audit.
The Condensed Balance Sheet at December 31, 2002, has been derived from the
audited financial statements included in the Company's Annual Report on Form
10-K/A for the period then ended. In the opinion of the Company, the
accompanying financial statements contain all adjustments (consisting of only
normal recurring accruals except for the cumulative effect of a change in
accounting principle in 2003) necessary to fairly present the financial position
of the Company as of September 30, 2003 and the results of operations and cash
flows for the three and nine months ended September 30, 2003 and 2002.
2) Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. It is
suggested that these financial statements be read in conjunction with the
Company's December 31, 2002 Form 10-K/A. The results of operations for the
periods ended September 30, 2003 and 2002 are not necessarily indicative of the
operating results for the full year.
3) Debt at September 30, 2003 and December 31, 2002, consists of debt
payable to the Company's parent U.S. Energy Corp. ("USE") of $9,465,800 and
$8,553,900, respectively
4) The Company presents basic and diluted earnings per share in
accordance with the provisions of Statement of Financial Accounting Standards
No. 128, "Earnings per Share." Basic earnings per common share is based on the
weighted average number of common shares outstanding during the period.
Diluted earnings per share does not include the dilutive effect of common stock
equivalents for the three and nine months ended September 30, 2003 and 2002
because stock options and warrants which comprised common stock equivalents
would have been anti-dilutive.
5) Certain reclassifications have been made in the December 31, 2002
financial statements to conform to the classifications used in the September 30,
2003 financial statements.
6) Although the Company does not have an incentive stock option plan in
place as of September 30, 2003, it will be proposing one for shareholder
approval at its next annual meeting. In October 1995, the FASB issued SFAS No.
123, "Accounting for Stock-Based Compensation", which requires the Company to
record non-employee stock-based compensation at fair value. In December 2002,
the FASB issued SFAS No. 148, "Accounting for Stock Based Compensation -
Transition and Disclosure". The Company has adopted the disclosure requirements
of SFAS No. 148 and has elected to record employee compensation expense
utilizing the intrinsic value method permitted under Accounting Principles Board
(APB) Opinion No. 25, "Accounting for Stock Issued to Employees." The Company
will account for its employees' stock based compensation plan under APB Opinion
No. 25 and its related interpretations. Accordingly, any deferred compensation
expense will be recorded for stock options based on the excess of the market
value of the common stock on the date the options were granted over the
aggregate exercise price of the options. This deferred compensation will be
amortized over the vesting period of each option. There were no options granted
to employees during either the nine months or quarter ended September 30, 2003.
6
7) The Company has mine properties that are in a shut down mode in
central Wyoming for which it is responsible for one half of the reclamation
expense. These reclamation activities are scheduled to be completed over the
next seven years. The Company cannot predict the exact amount of such future
asset retirement obligations. Estimated future reclamation costs are based upon
the Company's best engineering estimates considering legal and regulatory
requirements.
Effective January 1, 2003, the Company adopted SFAS No. 143, "Accounting
for Asset Retirement Obligations." The statement requires the Company to record
the fair value of the reclamation liability on its shut down mining properties
as of the date that the liability is incurred with a corresponding increase in
the properties. The statement further requires that the Company review the
liability each quarter to determine whether its estimates of timing or cash
flows have changed as well the accretion of the total liability on a quarterly
basis for the passage of time.
The Company will also deduct from the accrued liability any actual funds
expended for reclamation during the quarter in which it is expended. As a
result of the Company taking impairment allowances in prior periods on its shut
down mining properties, it has no remaining book value for the properties and
has no economic benefits to be received in future periods. All changes in
estimates will therefore be charged to operations in the quarter in which they
are recorded.
The following is a reconciliation of the total liability for asset
retirement obligations (unaudited)
Balance December 31, 2002 $ 748,400
Impact of adoption of SFAS No. 143 293,700
Addition to Liability --
Liability Settled --
Accretion Expense - 8% discount rate 68,200
----------
Balance September 30, 2003 $1,110,300
==========
The following table shows what the Company's net loss and net loss per
share would have been in the three and nine months ended September 30, 2002 if
the provisions of SFAS No. 143 had been applied during those periods, compared
with a net loss and a net loss per share recorded during the three and nine
months ended September 30, 2003.
Three months ended Nine months ended
September 30 September 30
--------------------- -------------------------
2003 2002 2003 2002
NET LOSS:
Reported net loss $(435,400) $(385,000) $(2,263,900) $(1,469,200)
Cumulative effect of adoption
of SFAS No. 143 -- -- 293,800 --
Pro-Forma SFAS No. 143 accretion -- (22,800) -- (68,200)
--------- --------- ----------- -----------
Adjusted net loss: $(435,400) $(407,800) $(1,970,100) $(1,537,400)
========= ========= =========== ===========
PER SHARE OF COMMON STOCK:
Reported net loss $ (0.03) $ (0.02) $ (0.13) $ (0.09)
Cumulative effect of adoption
of SFAS No. 143 -- -- .02 $ --
Pro-Forma SFAS No. 143 accretion -- * -- *
--------- --------- ----------- -----------
Adjusted net loss: $ (0.03) $ (0.02) $ (0.11) $ (0.09)
========= ========= =========== ===========
* Less than $.01 per share
7
The Company has reviewed other current outstanding statements from the
Financial Accounting Standards Board and does not believe that any of those
statements will have a material adverse affect on the financial statements of
the Company when adopted.
8) Subsequent Event - On October 31, 2003 USE's wholly owned subsidiary
Plateau Resources Limited (PRL) received approval from the U.S. Nuclear
Regulatory Commission (NRC) to release about $2.9 Million of excess reclamation
bond funds on the Shootaring Canyon Uranium Mill located in southeastern Utah.
In 1993, when USEG acquired the Mill, PRL had posted a surety reclamation bond
with the NRC of $2.5 Million for the reclamation of the Shootaring Canyon
Uranium Mill. In fiscal 1997, PRL requested that the status of the Mill license
be changed from standby to operational. As a result of the change of the Mill
license to operational status, the NRC required that the cash bond be increased
to $6.7 Million. Due to uranium market conditions in 2002, PRL decided to
change the license status from operational back to reclamation and filed
a new reclamation plan. The NRC has reviewed the revised reclamation and
decommissioning plan and has agreed to a $6.1 million reclamation plan. The NRC
therefore approved the release of $2.9 Million from the existing cash bond to
PRL and retained $6.1 Million to cover the new reclamation plan. The Company
through an agreement with USE will receive the benefit of one-half of the cash
received.
8
CRESTED CORP.
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. For a detailed explanation of the Company's Business Overview, it
is suggested that Management's Discussion and Analysis of Financial Condition
and Results of Operations for the three and nine months ended September 30, 2003
be read in conjunction with the Company's Form 10-K/A for the year ended
December 31, 2002.
OVERVIEW OF BUSINESS
The Company has interests in a uranium mine and mill in Southern Utah;
uranium mines in central Wyoming; a gold property in California; coalbed methane
properties in southwestern Wyoming and the Powder River Basin of Wyoming and
Montana, and various real estate. The mine properties are all in a shut down
mode. All these businesses are operated in conjunction with the Company's
parent, U.S. Energy Corp. ("USE") through a joint venture between the two
companies, the USECB Joint Venture ("USECB"). The Company accounts for USECB
using the equity method of accounting.
CRITICAL ACCOUNTING POLICIES
- ------------------------------
RECLAMATION LIABILITIES - The Company's policy is to accrue the liability
for future reclamation costs of its mineral properties under SFAS 143 based on
the current estimate of the future reclamation costs as determined by internal
and external experts. The present value of the obligation is accreted each
period as the date of obligation settlement approaches.
RECENT ACCOUNTING PRONOUNCEMENTS
- ----------------------------------
SFAS NO. 143 - The Company has implemented the Financial Accounting
Standards Board issued SFAS No. 143 "Accounting for Asset Retirement
Obligations" effective January 1, 2003. The statement requires the Company to
record the fair value of a liability for legal obligations associated with the
retirement of obligations of tangible long-lived assets in the period in which
it is incurred. The Company's reclamation liabilities on its mining properties
are subject to SFAS No. 143. See note 7 of the interim financial statements for
details of the adoption.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, including indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 expands the
information disclosures required by guarantors for obligations under certain
types of guarantees. It also requires initial recognition at fair value of a
liability for such guarantees. The initial recognition and initial measurement
provisions of this Interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantor's fiscal year-end. The disclosure requirements in the Interpretation
are effective for financial statements of interim or annual periods ending after
December 15, 2002. The Company has historically issued guarantees only on a
limited basis and FIN 45 has not had a material effect on its 2003 financial
statements. Disclosures required by FIN 45 are not required because the Company
does not have any existing guarantees at September 30, 2003.
9
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN 46"), which addresses consolidation by
business enterprises where equity investors do not bear the residual economic
risks and rewards. These entities have been commonly referred to as
"special-purpose entities". Companies are required to apply the provision of
FIN 46 prospectively for all variable interest entities created after January
31, 2003. For public companies, all interest acquired before February 1, 2003
must follow the new rules in accounting periods beginning after June 15, 2003.
The Company has determined that the adoption of the provisions of FIN 46 will
not have a material impact on its financial condition or results of operations.
The Company has reviewed all current outstanding statements from the
Financial Accounting Standards Board and does not believe that any of those
statements will have a material adverse effect on the financial statements of
the Company when adopted.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 2003, the Company incurred
$911,900 in additional debt to its parent, USE. This debt was incurred as a
result of USE advancing funds on behalf of the Company to fund its portion of
cash obligations in the various business ventures in which the two companies
jointly participate.
The Company continues to have low cash reserves and is unable to pay its
ongoing administrative costs as well as fund its cash commitments to various
businesses that it and USE operate jointly. The Company must negotiate
favorable terms on the debt due to USE to continue to operate.
The Company anticipates that the ultimate resolution of the litigation with
Nukem, Inc. will improve its liquidity. The Company also will participate
equally in any benefits or liabilities, which may come from the outcome of
litigation that the Company and USE have pending with Phelps Dodge Corporation.
Operations during the nine months ended September 30, 2003 and 2002,
consumed $120,900 and $102,800, respectively. The uses of cash in operations
was the Company's portion of annual audit fees, professional services in
connection with the on-going litigation and other administrative expenditures.
Financing activities during the nine months ended September 30, 2003 and 2002,
generated $911,900 and $1,328,800, respectively, as the Company borrowed money
from USE to fund its cash commitments. Cash consumed in investing activities of
$791,000 at September 30, 2003 and $1,225,900 at September 30, 2002 was as a
result of the Company using the cash borrowed from USE to fund its portion of
operating costs in investments jointly owned with USE.
CAPITAL RESOURCES
The Company and USE have a $750,000 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 September 30, 2003, the total amount of
the line of credit was available to the Company and USE and has been renewed to
June 2004. The line of credit is used for short term working capital needs
associated with operations.
The Company's cash resources at September 30, 2003 will not be sufficient
to sustain operations during the balance of 2003. The Company will continue to
rely upon funding from USE to meet its operating, administration and capital
requirements. It is not anticipated that during 2003 operations will generate
significant capital resources.
10
On August 1, 2003, the Company and USE received a judgment from the United
States District of Colorado in the amount of $20,044,184 against Nukem, Inc.
The Judgment was entered and defendant Nukem posted a supersedeas bond in the
full amount of the Judgment plus interest for one year, which was approved by
the Court. Nukem filed a motion to alter and amend portions of the Order and
Judgment and a motion to remand the case to the Arbitration Panel. USE and
Crested also filed a motion to alter and amend certain portions of the Order and
Judgment. In the event that the Company and USE prevail, one half of the award
belongs to the Company.
The Company and USE sold their interests in the Ticaboo town site by
entering into a stock purchase agreement on August 14, 2003 with The Cactus
Group. The purchase price was $3,470,000 with a cash down payment of $349,250.
The balance of the amount due from The Cactus Group will be paid in monthly
payments ranging from $5,000 to $24,000 through August of 2008 at which time a
balloon payment in the amount of $2,940,581 is due. As of the date of this
report, all payments under the agreement are current. One half of the net cash
proceeds belong to the Company.
The Company and USE may continue to sell surplus equipment or an interest
in its various mineral properties, which are jointly owned with USE. These sales
would generate additional capital resources.
CAPITAL REQUIREMENTS
The Company and USE jointly fund the holding costs of the Sheep Mountain
uranium mines; the Plateau uranium mine and mill; costs associated with their
joint real estate; commercial operations, and the development of the Rocky
Mountain Gas, Inc. ("RMG") natural gas properties.
The Company and USE, through RMG, have obligations to make delay rental
payments on RMG's portion of natural gas leases. RMG has entered into various
agreements with industry partners where a portion or all of its drilling
commitments on the natural gas properties are carried. The Company and USE
through RMG continue to seek additional funding sources to expand their natural
gas business.
The Company owes USE $9,465,800 as a result of USE funding operating and
capital expansion expenses. The Company does not have the resources to repay
this debt and must continue to negotiate terms with USE or find some other means
of retiring the debt. To date, USE has not called the debt and has agreed not
to call the debt. Should the Company and USE prevail in the Nukem litigation a
significant portion of the Company's portion of the award may be used to retire
a portion or all of this indebtedness.
It is anticipated that approximately $70,000 of the Company's working
capital will be used for the reclamation of any of its interests in uranium
properties in Wyoming during 2003. The Company and USE are required to provide
the necessary capital to perform the reclamation work on these properties. The
estimated reclamation costs on these Wyoming uranium properties are covered by a
reclamation bond, which is secured by a pledge of certain of the Company and
USE's real estate assets. The reclamation bond amount is reviewed annually by
State of Wyoming regulatory agencies.
RESULTS OF OPERATIONS
The Company had no revenues during the three and nine months ended
September 30, 2003 and 2002.
11
Costs and expenses for the quarter ended September 30, 2003, increased by
$25,700 from those reported during the same quarter of the previous year. The
main reason for the increase was the accretion of reclamation costs of $22,800
during the quarter ended September 30, 2003. This expense was a result of the
Company adopting SFAS No. 143 on January 1, 2003.
Costs and expenses for the nine months ended September 30, 2003 increased
by $84,500 over the costs of $114,100 recognized during the nine months ended
September 30, 2002. The primary cause again for this increase was the accretion
of an asset retirement obligation during the nine months ended September 30,
2003 of $68,200. The Company recorded equity losses from USECC and RMG of
$1,771,500 and $1,355,100 during the nine months ended September 30, 2003 and
2002, respectively. The primary reason for the increase in the equity losses
from USECC and RMG are legal costs associated with the Phelps Dodge and Nukem
litigations and the costs associated with the formation of Pinnacle Gas
Resources, Inc., a minority owned affiliate of RMG.
The Company recorded a loss of $2,263,900 during the nine months ended
September 30, 2003, as compared to a net loss of $1,469,200 for the nine months
ended September 30, 2002.
ITEM 4. CONTROLS AND PROCEDURES
-------------------------
In the 90 day period before the filing of this Report, the chief executive
and chief financial officers of the Company have evaluated the effectiveness of
the Company's disclosure controls and procedures. These disclosure controls and
procedures are those controls and other procedures we maintain, which are
designed to insure that all of the information required to be disclosed by the
Company in all its periodic reports filed with the SEC is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules
and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by the Company in its reports filed or submitted under the Securities
Exchange Act of 1934 is accumulated and communicated to Company management,
including the chief executive and chief financial officers of the Company, as
appropriate to allow those persons to make timely decisions regarding required
disclosure.
Subsequent to the date when the disclosure controls and procedures were
evaluated, there have not been any significant changes in the Company's
disclosure controls or procedures or in other factors that could significantly
affect such controls or procedures. No significant deficiencies or material
weaknesses in the controls or procedures were detected, so no corrective actions
needed to be taken.
FORWARD LOOKING STATEMENTS
- ----------------------------
This Report on Form 10Q includes "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("the
Exchange Act"). All statements other than statements of historical fact
included in this Report, are forward-looking statements. In addition, when ever
words like "expect", "anticipate: or "believe" are used, we are making forward
looking statements.
12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
------------------
On July 30, 2003, U.S. Energy Corp. ("USE") and Crested Corp. ("Crested")
received an Order and thereafter a Judgment on August 1, 2003 from the U.S.
District Court of Colorado wherein Chief Judge Lewis T. Babcock entered an Order
that Judgment be entered against Nukem/CRIC ("Nukem") in favor of USE and
Crested in the total amount of $20,044,184. The Judgment was entered and
defendant Nukem posted a supersedeas bond in the full amount of the Judgment
plus interest for one year, which was approved by the Court. Nukem filed a
motion to alter and amend portions of the Order and Judgment and a motion to
remand the case to the Arbitration Panel. USE and Crested also filed a motion
to alter and amend certain portions of the Order and Judgment. These motions
were filed under seal and on September 10, 2003, the District Court overruled
Nukem's motions and on September 11, 2003 the Court overruled the motion of USE
and Crested. On October 3, 2003, Nukem, as Appellants, filed a Notice of Appeal
to the 10th Circuit Court of Appeals and thereafter on October 15, 2003, USE and
Crested filed a Notice of Cross-Appeal to the 10th Circuit. Appellants' opening
brief is due in December 2003 and Appellees' (USE/Crested) brief is due in
January 2004.
No other material developments in the other pending Legal Proceedings have
occurred since they were last reported by the Company in Item 1 of its Form 10-Q
for the quarter ended June 30, 2003.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS NONE
-----------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------
(a) Exhibits.
31 Certification Pursuant to Rule 13a-14(a) and Rule 15d-14(a)
32 Certification Pursuant to Section 1350 of Chapter 63
of title 18 of the United States Code
(b) REPORTS ON FORM 8-K. The Company filed five reports on Form 8-K for
the quarter ended September 30, 2003. The events reported were as follows:
1. The report filed on July 22, 2003, under Item 5, referred to
the Company's subsidiary, Rocky Mountain Gas, Inc. and the
formation of Pinnacle Gas Resources, Inc.;
2. The report filed on August 1, 2003, under Item 5, referred
to the Order received form the U.S. District Court which
ordered Nukem, Inc. to pay the Company and USE $20,044,184;
3. The report filed on August 21, 2003, under Item 5, referred
to the sale of the Ticaboo Townsite in southern Utah to the
Cactus Group, LLC;
4. The report filed on August 26, 2003, under Item 5, referred
to a motion filed by Nukem to approve supersedeas bonds in
the amount of $20,275,600;
5. The report filed on September 19, 2003, under Item 5,
referred to orders from the U.S. District Court in the Nukem
Litigation.
13
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: November 13, 2003 By: /s/John L. Larsen
-----------------------------------
JOHN L. LARSEN,
CHAIRMAN and CEO
Date: November 13, 2003 By: /s/Robert Scott Lorimer
-----------------------------------
ROBERT SCOTT LORIMER
Principal Financial Officer and
Chief Accounting Officer
14
CERTIFICATION
-------------
I, John L. Larsen, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Crested Corp.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) (Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release 34-47986);
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Dated this 13th day of November, 2003.
/s/ John L. Larsen
-------------------------------------
John L. Larsen,
Chief Executive Officer
15
CERTIFICATION
-------------
I, Robert Scott Lorimer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Crested Corp.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) (Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release 34-47986);
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Dated this 13th day of November, 2003.
/s/ Robert Scott Lorimer
-------------------------------------
Robert Scott Lorimer,
Chief Financial Officer
16
EXHIBIT 32
Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code
as adopted pursuant to
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, John L. Larsen, the Chief Executive Officer of Crested Corp., certify
that (i) the Quarterly Report on Form 10-Q for the period ended September 30,
2003, as filed by the Company with the Securities and Exchange Commission, to
which this Certification is an Exhibit, fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934, as amended; and (ii) the
information contained in the Quarterly financial statements fairly presents, in
all material respects, the financial condition and results of operations of
Crested Corp.
/s/ John L. Larsen
-----------------------------------------
John L. Larsen
Chief Executive Officer
Date: November 13, 2003
This certification accompanies this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 has been
provided to Crested Corp. and will be retained by Crested Corp. and furnished to
the Securities and Exchange Commission or its staff upon request.
17
EXHIBIT 32
Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code
as adopted pursuant to
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert Scott Lorimer, the Chief Financial Officer of Crested Corp.,
certify that (i) the Quarterly Report on Form 10-Q for the period ended
September 30, 2003 as filed by the Company with the Securities and Exchange
Commission, to which this Certification is an Exhibit, fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934, as
amended; and (ii) the information contained in the Quarterly financial
statements fairly presents, in all material respects, the financial condition
and results of operations of Crested Corp.
/s/Robert Scott Lorimer
-----------------------------------------
Robert Scott Lorimer
Chief Financial Officer
Date: November 13, 2003
This certification accompanies this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 has been
provided to Crested Corp. and will be retained by Crested Corp. and furnished to
the Securities and Exchange Commission or its staff upon request.
18