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, 1995 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 Registrant as Specified in its Charter)
Colorado 84-0608126
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
877 North 8th West, Riverton, WY 82501
(Address of principal executive offices) (Zip Code)
Registrant's telephone Number, including area code: (307) 856-9272
NONE
(Former name, former address and former 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
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 6, 1995
Common stock, $.001 par value 10,208,094 Shares
CRESTED CORP.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Condensed Consolidated Balance Sheets
August 31, 1995 and May 31, 1995 . . . . . . . . . . . . 3-4
Condensed Consolidated Statements of Operations
Three Months Ended August 31, 1995 and 1994. . . . . . . . 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended August 31, 1995 and 1994. . . . . . . 6-7
Notes to Condensed Consolidated Financial Statements . . . 8
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. . . . . . . . . . . . . . . . 9-11
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings. . . . . . . . . . . . . . . 11
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . 12
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CRESTED CORP. AND AFFILIATE
Condensed Consolidated Balance Sheets
ASSETS
August 31, May 31,
1995 1995
---------- ----------
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash $ 4,700 $ 24,400
Accounts receivable
Trade 52,600 49,700
Affiliates 193,300 115,600
Current portion of
long-term receivable
Related parties 199,900 196,500
Other 35,000 71,100
Inventory and other 31,300 55,300
---------- ----------
TOTAL CURRENT ASSETS 516,800 512,600
LONG-TERM NOTES RECEIVABLE 673,400 657,900
INVESTMENTS IN AFFILIATES 5,295,500 5,393,300
PROPERTIES AND EQUIPMENT 6,030,300 6,054,000
Less accumulated depreciation,
depletion and amortization (3,348,400) (3,311,700)
---------- ----------
2,681,900 2,742,300
OTHER ASSETS 57,800 57,800
---------- ----------
$9,225,400 $9,363,900
---------- ----------
---------- ----------
See notes to condensed consolidated financial statements.
CRESTED CORP. AND AFFILIATE
Condensed Consolidated Balance Sheets
LIABILITIES AND SHAREHOLDERS' EQUITY
August 31, May 31,
1995 1995
----------- -----------
(Unaudited) (Unaudited)
CURRENT LIABILITIES:
Accounts payable
and accrued expenses $ 156,500 $ 819,100
Accounts payable - affiliates 1,295,700 110,000
Line of credit -- 480,000
Current portion of long-term
debt to affiliates and others 4,083,200 4,109,400
---------- ----------
TOTAL CURRENT LIABILITIES 5,535,400 5,518,500
ACCRUED RECLAMATION COSTS (See Note 5) 725,900 725,900
DEFERRED GAIN ON SALE OF ASSETS 127,800 127,800
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.001 par value;
authorized, 100,000 shares;
none issued or outstanding -- --
Common stock, $.001 par value;
authorized 20,000,000 shares;
issued 10,208,094 shares 10,200 10,200
Additional paid-in capital 6,354,000 6,354,000
Retained earnings (deficit) (4,962,400) (4,807,000)
Unrealized holding gain
on investments 1,434,500 1,434,500
---------- ----------
2,836,300 2,991,700
---------- ----------
$9,225,400 $9,363,900
---------- ----------
---------- ----------
See notes to condensed consolidated financial statements.
CRESTED CORP. AND AFFILIATE
Condensed Consolidated Statements of Operations
Three Months Ended
August 31,
-------------------------
1995 1994
---------- ----------
REVENUES:
Mineral property transactions $ -- $ 20,600
Mineral sales and option 1,087,200 --
Oil and gas sales 20,700 21,800
Rental 85,300 39,300
Interest 4,100 4,100
Gain on sale of assets 16,500 --
Other 85,300 80,000
1,299,100 165,800
COSTS AND EXPENSES:
Mineral operations 30,800 205,200
Cost of mineral sales 912,200 --
Interest expense 16,000 8,100
General and administrative 195,400 248,800
Cost of sales 29,600 30,800
Depreciation and amortization 63,600 64,700
---------- ----------
1,247,600 557,600
---------- ----------
INCOME BEFORE EQUITY LOSS AND
INCOME TAX PROVISION 51,500 (391,800)
EQUITY IN (LOSS) GAIN
INCOME OF AFFILIATES (206,900) 45,800
---------- ----------
INCOME BEFORE PROVISION
FOR INCOME TAXES (155,400) (346,000)
PROVISION FOR INCOME TAXES -- --
---------- ----------
NET (LOSS) $ (155,400) $ (346,000)
---------- ----------
---------- ----------
NET (LOSS) INCOME PER SHARE $ (.02) $ (.03)
---------- ----------
---------- ----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 10,208,094 10,201,594
---------- ----------
---------- ----------
See notes to condensed consolidated financial statements.
CRESTED CORP. AND AFFILIATE
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
August 31,
-------------------------
1995 1994
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (155,400) $(346,000)
Adjustments to reconcile net
income to net cash used
in operating activities:
Depreciation, depletion
and amortization 63,600 64,700
Equity loss (gain) from investments 206,900 (45,800)
(Gain) loss on sale of assets (900) 100
Gain on sale of
investment securities -- 8,700
Net changes in components
of working capital 475,900 70,600
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES 590,100 (247,700)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Issuance of notes receivable (4,100) (117,300)
Proceeds from collection
of notes receivable 21,300 27,500
Investments in affiliates (109,100) (55,600)
Purchase of property and equipment (5,600) (4,700)
Proceeds from sale of assets 3,300 600
Proceeds from sale
of investment securities -- 22,500
---------- ----------
NET CASH PROVIDED BY INVESTING ACTIVITIES (94,200) (127,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in debt -- 300,000
Payment on long-term debt (515,600) (8,800)
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (515,600) 291,200
---------- ----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (19,700) (83,500)
See notes to condensed consolidated financial statements.
(Continued)
CRESTED CORP. AND AFFILIATE
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
August 31,
-------------------------
1995 1994
---------- ----------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD $ 24,400 $ 102,300
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 4,700 $ 18,800
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURES:
Income tax paid $ -- $ --
---------- ----------
---------- ----------
Interest paid $ 16,100 $ 8,100
---------- ----------
---------- ----------
See notes to condensed consolidated financial statements.
CRESTED CORP.
Notes to Condensed Consolidated Financial Statements
1) The Condensed Consolidated Balance Sheet as of August 31,
1995, the Condensed Consolidated Statements of Operations for the
three months ended August 31, 1995 and 1994, and the Condensed
Consolidated Statements of Cash Flows for the three months ended
August 31, 1995 and 1994, have been prepared by the Company without
audit. The Condensed Consolidated Balance Sheet of May 31, 1995,
has been taken from the audited financial statements included in
the Registrant's Annual Report on Form 10-K filed for the year then
ended. In the opinion of the Registrant, the accompanying
financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to fairly present the
financial position of the Registrant and its affiliate as of August
31, 1995 and May 31, 1995, the results of operations for the three
months ended August 31, 1995 and 1994, and the cash flows for the
three months then ended.
2) Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these financial statements be read
in conjunction with the Registrant's May 31, 1995 Form 10-K. The
results of operations for the periods ended August 31, 1995 and
1994 are not necessarily indicative of the operating results for
the full year.
3) The condensed consolidated financial statements of the
Registrant include its proportionate share of the accounts of USECB
Joint Venture (USECB) which is owned 50% by Registrant and 50% by
Registrant's parent, U.S. Energy Corp. (USE). All material
intercompany profits and balances have been eliminated.
4) Debt consists primarily of a current note to the
Registrant's parent USE of $4,053,400. The remaining debt is for
various equipment loans through financial institutions.
5) Accrued reclamation obligations of $725,900 are the
Registrant's share of the reclamation liability at the Crooks Gap
Mining District. This reclamation work may be performed over
several years.
7) Certain reclassifications have been made in the May 31,
1995 financial statements to conform to the classifications used in
August 31, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following is Management's Discussion and Analysis of
significant factors which have affected the Registrant's liquidity,
capital resources and results of operations during the periods
included in the accompanying financial statements.
Liquidity and Capital Resources
Working capital declined during the three months ended August
31, 1995 by $12,700 to a working capital deficit of $5,018,600.
The decrease in working capital is primarily as a result of an
increase in accounts payable to third parties of $523,100, and a
reduction in the current portion of notes receivable of $32,700.
Offsets to these reductions in working capital were payment on
long-term debt of $26,200, the payoff of the line of credit with a
financial institution of $480,000, and an increase of $80,600 in
accounts receivable. The line of credit has been renegotiated by
the Registrant and USE for $1,000,000 , due July 1996. On the new
line of credit as of report date, $225,000 is outstanding. Cash
and cash equivalents decreased by $19,700 during the three months
ended August 31, 1995. This decrease was primarily as a result of
operating and investing activities.
The Registrant utilized $94,200 in its investing activities
during the three months ended August 31, 1995. This was primarily
as a result of the Registrant and its parent U.S. Energy Corp.
("USE") funding Sheep Mountain Partners ("SMP"), Plateau Resources
Limited ("PRL"), Energx Limited ("Energx") and Sutter Gold Mining
Company ("SGMC"). As the Registrant and USE provide various
services for GMMV and SMP, the non-affiliated participants are
invoiced for their proportionate share of the approved operating
costs. GMMV is current on reimbursements to the Registrant and USE
for all the operating costs. Due to disputes existing between the
SMP partners, the Registrant and USE have not been reimbursed for
care and maintenance costs expended on the SMP mineral properties
in Wyoming since the spring of 1991. As a result of the
uncertainty of the receivable from SMP, it is being reported on the
Financial Statements as an investment in affiliates. In the
investing activities some cash was received from payment on a note
receivable, and the sale of various equipment.
The primary requirements for the Registrant's working capital
continue to be funding of the on-going administrative expenses,
including the mine and mill development and holding costs of SGMC,
and uranium delivery costs and property holding costs of SMP. As
a result of the disputes between the SMP partners, the Registrant
and USE have been delivering certain of their respective portions
of the uranium concentrates required to fill various SMP delivery
requirements on long-term U3O8 contracts with domestic utilities.
The Registrant and USE have made one U3O8 delivery during fiscal
1996. Nukem/CRIC are currently making most of the SMP deliveries.
No assurances can be given that this method of delivery will
continue. The capital requirements to fill the Registrant's and
USE's portion of the remaining commitments in fiscal 1996 will
depend on the spot market price of uranium and is also dependent on
the outcome of proceedings involving Nukem/CRIC.
The primary source of the Registrant's capital resources for
the remainder of fiscal 1996 will be borrowing from financial
institutions (primarily the line of credit), proceeds from the sale
of uranium under the SMP contracts, and the sale of equity or
interests in investment properties. Fees from oil production,
rentals of various real estate holdings and equipment, aircraft
chartering and the sale of aviation fuel will also provide cash.
Additional sources of capital will be required to hold and maintain
mineral properties, permitting, the construction of a gold
processing mill and mine development of SGMC, and administrative
costs. The Registrant and USE are currently seeking a joint
venture partner and/or other means of financing the construction of
the gold processing mill and mine development at SGMC. The funding
of SMP care and maintenance costs may require additional funding,
depending on the outcome of the SMP arbitration. The Registrant
and USE originally sought rescission of the SMP Partnership
Agreement as well as damages from CRIC/Nukem in U.S. District
Court. The parties to the litigation agreed to a consensual
arbitration on claims accruing after the formation of the SMP
partnership. The arbitration hearings have concluded, and it is
anticipated that the arbitration panel will enter its award some
time during the third quarter of fiscal 1996.
Results of Operations
Three Months Ended August 31, 1995 Compared to Three Months Ended
August 31, 1994
Total revenues for the three months ended August 31, 1995
increased by $1,133,300 compared to the same period of the previous
year. Revenues during the three month period ended August 31, 1995
increased primarily as a result of the Registrant reporting
revenues of $1,087,200 from the sale of U3O8 to fill delivery
contracts on behalf of SMP and a mineral option. The Registrant
also reported $16,500 in revenues from the sale of certain
equipment and an increase of $46,000 in rental revenues as a result
of operations at Ticaboo, Utah. There were no corresponding
revenues in the prior period. These increases were partially
offset by a decrease in mineral property transactions resulting
from the exchange in fiscal 1995 of six quarters of mineral
royalties for property in Colorado which was then sold. All other
revenues remained relatively consistent with those of the same
period of the previous year.
Operations for the three months ended August 31, 1995 resulted
in a pre-tax gain of $51,500 before equity in loss of affiliates of
$206,900 as compared to a loss of $391,800 before equity in income
of affiliates of $45,800 during the same period of the previous
year. After recognizing equity losses, the Registrant recognized
a net loss of $155,400 compared to a loss of $346,000 for the
comparative period of the previous year. This gain is primarily
due to increased revenues and small declines in both mineral
operations and general and administrative expenses.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The information called for in this Item 1 has been previously
reported in the Registrant's Form 10-K (Item 3)for the fiscal year
ended May 31, 1995. In the pending arbitration proceedings
involving Sheep Mountain Partners, the Registrant, USE and Nukem,
Inc./CRIC, evidentiary hearings were completed on May 31, 1995.
Proposed findings of fact and conclusions of law; proposed order
and award; briefs of law, and responses to the other's submittals
were all filed by September 23, 1995. The arbitration panel
concluded that at least 90 days from the last filing would be
required before any order and award will be issued. However, the
panel reserved the right to extend that period should it become
necessary.
The case of Illinois Power Company ("IPC") vs. Registrant et
al in the U.S. District Court for the Central District of Illinois
was settled in June 1995 by amending the original uranium
concentrate supply contract. The amendment provides for the sale
of 486,443 pounds U3O8 to be delivered by Sheep Mountain Partners
to IPC in 1995, 1996 and 1997. The first delivery was made on June
30, 1995. Sales proceeds will be held in escrow, with other
escrowed funds to be paid as ordered by the arbitrators in the
Sheep Mountain Partners arbitration proceedings referred to above.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. There were no Reports filed on Form
8-K during the quarter ended August 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CRESTED CORP.
(Registrant)
Date: October 6, 1995 By: s/ Max T. Evans
------------------------------
MAX T. EVANS,
President
Date: October 6, 1995 By: s/ Robert Scott Lorimer
------------------------------
ROBERT SCOTT LORIMER,
Principal Financial Officer
and Chief Accounting Officer