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, 1996 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.
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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)
Registrant's telephone Number, including area code: (307) 856-9272
NONE
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(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 14, 1996
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Common stock, $.001 par value 10,213,094 Shares
CRESTED CORP.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Condensed Consolidated Balance Sheets
August 31, 1996 and May 31, 1996 . . . . . . . . . . . . 3-4
Condensed Consolidated Statements of Operations
Three Months Ended August 31, 1996 and 1995. . . . . . . . 5
Condensed Consolidated Statements of Cash Flows
Three Months Ended August 31, 1996 and 1995. . . . . . . 6-7
Notes to Condensed Consolidated Financial Statements . . . 8
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. . . . . . . . . . . . . . . . 9-10
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,
1996 1996
---------- ----------
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash $ 34,700 $ 52,600
Accounts receivable
Trade 55,000 58,200
Affiliates 130,500 141,600
Current portion of
long-term receivable
Related parties 288,000 210,100
Other 98,100 100,100
Inventory and other 80,200 33,600
---------- ----------
TOTAL CURRENT ASSETS 686,500 596,200
LONG-TERM NOTES RECEIVABLE 657,300 689,200
INVESTMENTS IN AFFILIATES 4,391,000 4,344,700
PROPERTIES AND EQUIPMENT 5,195,800 5,189,400
Less accumulated depreciation,
depletion and amortization (2,876,900) (2,832,800)
---------- ----------
2,318,900 2,356,600
OTHER ASSETS 145,800 145,800
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$8,199,500 $8,132,500
========== ==========
See notes to condensed consolidated financial statements.
CRESTED CORP. AND AFFILIATE
Condensed Consolidated Balance Sheets
LIABILITIES AND SHAREHOLDERS' EQUITY
August 31, May 31,
1996 1996
----------- -----------
(Unaudited) (Unaudited)
CURRENT LIABILITIES:
Accounts payable
and accrued expenses $ 248,600 $ 300,000
Accounts payable - affiliates --
Line of credit 288,000 88,000
Current portion of long-term debt
Affiliate (See Note 4) 6,479,100 6,460,300
Others 75,000 --
---------- ----------
TOTAL CURRENT LIABILITIES 7,090,700 6,848,300
LONG-TERM DEBT 36,600 --
ACCRUED RECLAMATION COSTS (See Note 5) 725,900 725,900
DEFERRED GAIN ON SALE OF ASSETS --
FORFEITABLE COMMON STOCK
57,000 shares 36,400 36,400
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 10,213,094 shares 10,100 10,100
Additional paid-in capital 6,319,400 6,319,400
Retained earnings (deficit) (6,019,600) (5,807,600)
---------- ----------
309,900 521,900
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$8,199,500 $8,132,500
========== ==========
See notes to condensed consolidated financial statements.
CRESTED CORP. AND AFFILIATE
Condensed Consolidated Statements of Operations
Three Months Ended
August 31,
-------------------------
1996 1995
REVENUES: ---------- ----------
Mineral property transactions $ 20,900 $ --
Mineral sales and option -- 1,087,200
Oil and gas sales 19,500 20,700
Rental 27,400 85,300
Interest 6,400 4,100
Gain on sale of assets -- 16,500
Other 111,100 85,300
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185,300 1,299,100
COSTS AND EXPENSES:
Cost of mineral sales -- 912,200
Cost of sales 26,500 29,600
Mineral operations 81,400 30,800
Interest expense 7,500 16,000
General and administrative 179,000 195,400
Depreciation and amortization 44,100 63,600
---------- ----------
338,500 1,247,600
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INCOME BEFORE EQUITY LOSS AND
INCOME TAX PROVISION (153,200) 51,500
EQUITY IN (LOSS) GAIN
INCOME OF AFFILIATES (58,800) (206,900)
---------- ----------
INCOME BEFORE PROVISION
FOR INCOME TAXES (212,000) (155,400)
PROVISION FOR INCOME TAXES -- --
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NET (LOSS) $ (212,000) $ (155,400)
========== ==========
NET (LOSS) INCOME PER SHARE $ (.02) $ (.02)
========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 10,213,094 10,208,094
========== ==========
See notes to condensed consolidated financial statements.
CRESTED CORP. AND AFFILIATE
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
August 31,
-------------------------
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (212,000) $(155,400)
Adjustments to reconcile net
income to net cash used
in operating activities:
Depreciation, depletion
and amortization 44,100 63,600
Equity loss (gain) from investments 58,800 206,900
(Gain) loss on sale of assets -- (900)
Net changes in components
of working capital (83,700) 475,900
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NET CASH USED IN OPERATING ACTIVITIES (192,800) 590,100
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CASH FLOWS FROM INVESTING ACTIVITIES:
Issuance of notes receivable (77,900) (4,100)
Proceeds from collection
of notes receivable 33,900 21,300
Investments in affiliates (105,200) (109,100)
Purchase of property and equipment (6,400) (5,600)
Proceeds from sale of assets -- 3,300
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NET CASH PROVIDED BY INVESTING ACTIVITIES (155,600) (94,200)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in debt 331,400 --
Payment on long-term debt (900) (515,600)
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NET CASH USED IN FINANCING ACTIVITIES 330,500 (515,600)
---------- ----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (17,900) (19,700)
(Continued)
See notes to condensed consolidated financial statements.
CRESTED CORP. AND AFFILIATE
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
August 31,
-------------------------
1996 1995
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CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 52,600 24,400
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 34,700 $ 4,700
========== ==========
SUPPLEMENTAL DISCLOSURES:
Income tax paid $ -- $ --
========== ==========
Interest paid $ 7,500 $ 16,100
========== ==========
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,
1996, the Condensed Consolidated Statements of Operations for the
three months ended August 31, 1996 and 1995, and the Condensed
Consolidated Statements of Cash Flows for the three months ended
August 31, 1996 and 1995, have been prepared by the Registrant
without audit. The Condensed Consolidated Balance Sheet of May 31,
1996, 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, 1996 and May 31, 1996, the results of operations for the three
months ended August 31, 1996 and 1995, 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, 1996 Form 10-K. The
results of operations for the periods ended August 31, 1996 and
1995 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 an accounts payable to the
Registrant's parent USE of $6,479,100. 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.
6) Certain reclassifications have been made in the May 31,
1996 financial statements to conform to the classifications used in
August 31, 1996
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, 1996 by $152,100 to a working capital deficit of $6,404,200.
The decrease in working capital is primarily as a result of an
increase in the amounts due under the line of credit of $200,000
and additional debt of $75,000. The line of credit has been
renegotiated by the Registrant and USE for $1,000,000, due October
9, 1997. On the new line of credit as of report date, $576,000 has
been drawn on the line. Cash and cash equivalents decreased by
$17,900 during the three months ended August 31, 1996. This
decrease was primarily as a result of operating and investing
activities.
The Registrant utilized $155,600 in its investing activities
during the three months ended August 31, 1996. 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 ("Plateau") and Energx Limited ("Energx"). As the
Registrant and USE provide various services for Green Mountain
Mining Venture ("GMMV") and SMP, the non-affiliated participants
are invoiced for their proportionate share of the approved
operating costs. GMMV is current on its 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. During the three months ended August 31, 1996, a net
increase of $44,000 occurred in notes receivable as amounts due
from employees were consolidated and extended. This increase was
offset by the payment in full of a note receivable from the sale of
Wind River Estates of $56,500.
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
Plateau 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. 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 1997 will depend on the spot market price of uranium and is
also dependent on the outcome of the arbitration proceedings
involving Nukem/CRIC.
The primary source of the Registrant's capital resources for
the remainder of fiscal 1997 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, and the sale
of aviation fuel will also provide cash. The Registrant and USE
are currently seeking financing for the construction of the gold
processing mill and mine development of their subsidiary Sutter
Gold Mining Company ("SGMC"). SGMC has received $1,121,640 through
equity financing at report date. An additional $12 million in
financing is being sought, however, there is no assurance that the
funds will be raised.
The expenditures for the SMP care and maintenance costs may
require additional funding, depending on the outcome of the SMP
arbitration. See Part II, Item 1 "Legal Proceedings" below.
Results of Operations
Three Months Ended August 31, 1996 Compared to Three Months Ended
August 31, 1995
Total revenues for the three months ended August 31, 1996
decreased by $1,113,800 compared to the same period of the previous
year. Revenues during the three month period ended August 31, 1996
decreased 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 during the prior
period. There were no corresponding revenues in the current
period. This decrease was partially offset by an increase in
mineral property transactions. All other revenues remained
relatively constant with those of the same period of the previous
year.
Operations for the three months ended August 31, 1996 resulted
in a loss of $153,200 before equity in loss of affiliates of
$58,800 as compared to a gain of $51,500 before equity in income of
affiliates of $206,900 during the same period of the previous year.
After recognizing equity losses, the Registrant recognized a net
loss of $212,000 compared to a loss of $346,000 for the comparative
period of the previous year.
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, 1996. Hearings under a consensual arbitration
agreement involving the Registrant and USE d/b/a USECC and
Nukem/CRIC over the Sheep Mountain partnership agreement on uranium
operations in Wyoming were held during 73 hearing days from June
27, 1994 through May 31, 1995. On April 18, 1996, the Panel
awarded USECC a net of approximately $12,200,000 cash and awarded
SMP in constructive trust certain long-term uranium purchase rights
and profits in contracts which were entered into between Nukem and
three CIS Republics. These contracts have significant value to the
SMP Partnership.
USECC then petitioned the U.S. District Court in Colorado for
confirmation of the Award and Nukem filed motions to set aside
portions of the Award, alleging that significant portions of the
Award were erroneous. On May 31, 1996, the District Court remanded
the Award to the Panel for consideration of these motions. On July
3, 1996, the Panel entered a new order affirming both the monetary
award and placing the CIS contracts in constructive trust with SMP
because of Nukem's wrongdoings. Nukem is objecting to and
contesting the Panel's Award.
In addition to the Petition for Confirmation of the Award,
USECC has also filed a petition for appointment of a receiver for
the SMP partnership and a motion for an order directing
distribution of the escrowed proceeds of approximately $19,000,000
in the SMP accounts.
The Registrant and USE were advised by the Court on September
25, 1996 that on motion of opposing counsel because of illness in
such counsel's immediate family, an order had been entered by the
U.S. District Court of Colorado continuing the hearing scheduled
for September 25, 1996 to Friday, November 1, 1996 commencing at
8:00 a.m.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. The Registrant filed two Reports on
Form 8-K under Item 5 - Other - Litigation Update, during the
quarter ended August 31, 1996 reporting events of May 24, 1996 and
July 3, 1996, which were the result of the Arbitration Panel's
affirmation of its April 18, 1996 Order and Award.
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 14, 1996 By: s/ Max T. Evans
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MAX T. EVANS,
President
Date: October 14, 1996 By: s/ Robert Scott Lorimer
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ROBERT SCOTT LORIMER,
Principal Financial Officer
and Chief Accounting Officer