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, 1997 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
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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
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 17, 1997
- --------------------------------------- -----------------------------------
Common stock, $.001 par value 10,302,694 Shares
CRESTED CORP.
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Condensed Consolidated Balance Sheets
August 31, 1997 and May 31, 1997.............................
Condensed Consolidated Statements of Operations
Three Months Ended August 31, 1997 and 1996..................
Condensed Consolidated Statements of Cash Flows
Three Months Ended August 31, 1997 and 1996..................
Notes to Condensed Consolidated Financial Statements............
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings...............................................
ITEM 6. Exhibits and Reports on Form 8-K................................
Signatures......................................................
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CRESTED CORP. AND AFFILIATE
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
August 31, May 31,
1997 1997
-------------- --------------
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash $ 1,451,900 $ 37,100
Accounts receivable
Trade 90,500 63,900
Affiliates 887,800 596,200
Current portion of long-term receivable
Related parties 308,700 304,000
Other 79,000 --
Inventory and other 32,700 48,300
------------- --------------
TOTAL CURRENT ASSETS 2,850,600 1,049,500
LONG-TERM NOTES RECEIVABLE 406,700 474,600
INVESTMENTS IN AFFILIATES 1,845,300 1,796,800
INVESTMENT IN CONTINGENT WARRANT 651,000 651,000
PROPERTIES AND EQUIPMENT 5,213,300 5,181,300
Less accumulated depreciation,
depletion and amortization (3,061,800) (3,017,700)
------------- --------------
2,151,500 2,163,600
OTHER ASSETS 150,400 150,200
------------- --------------
$ 8,055,500 $ 6,285,700
============= ==============
See notes to Condensed Consolidated Financial Statements.
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CRESTED CORP. AND AFFILIATE
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
August 31, May 31,
1997 1997
------------- -------------
(Unaudited) (Unaudited)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 76,000 $ 556,600
Deferred income 2,000,000 --
Current portion of long-term debt (Note 4)
Affiliates 6,039,600 6,023,400
Others 3,700 12,400
------------- --------------
TOTAL CURRENT LIABILITIES 8,119,300 6,592,400
LONG-TERM DEBT 12,800 15,800
ACCRUED RECLAMATION COSTS (Note 5) 725,900 725,900
COMMITMENTS AND CONTINGENCIES
FORFEITABLE COMMON STOCK, $.001 par value
65,000 shares 43,900 43,900
SHAREHOLDERS' EQUITY:
Preferred stock, $.001 par value;
authorized, 100,000 shares;
none issued or outstanding -- --
Common stock, $.001 par value;
authorized 20,000,000 shares;
issued 10,237,694 shares 10,200 10,200
Additional paid-in capital 6,375,400 6,375,400
Accumulated deficit (7,232,000) (7,477,900)
------------- --------------
(846,400) (1,092,300)
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$ 8,055,500 $ 6,285,700
============= ==============
See notes to Condensed Consolidated Financial Statements.
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CRESTED CORP. AND AFFILIATE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
August 31,
----------------------------
1997 1996
---- ----
REVENUES:
Mineral sales $ 429,300 $ --
Oil and gas sales 24,300 19,500
Mineral property transactions 28,800 20,900
Interest 28,300 6,400
Rental 220,700 27,400
Gain on sale of assets 400 --
Other 155,000 111,100
--------- ----------
886,800 185,300
COSTS AND EXPENSES:
Cost of sales 27,600 26,500
Mineral operations 187,400 81,400
Interest expense 4,400 7,500
General and administrative 330,100 179,000
Depreciation and amortization 44,100 44,100
--------- ----------
593,600 338,500
--------- ----------
INCOME (LOSS) BEFORE EQUITY LOSS
AND INCOME TAX PROVISION 293,200 (153,200)
EQUITY IN (LOSS) GAIN
INCOME OF AFFILIATE (47,300) (58,800)
--------- ----------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES 245,900 (212,000)
PROVISION FOR INCOME TAXES -- --
--------- ----------
NET INCOME (LOSS) $ 245,900 $ (212,000)
========= ==========
NET INCOME (LOSS) PER SHARE $ .02 $ (.02)
========= ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 10,302,694 10,213,094
========== ==========
See notes to Condensed Consolidated Financial Statements.
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CRESTED CORP. AND AFFILIATE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
August 31,
------------------------------
1997 1996
---- ----
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 245,900 $ (212,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, depletion and amortization 44,100 44,100
Equity loss from investments 47,300 58,800
Deferred income 2,000,000 --
Net changes in components
of working capital (783,400) (83,700)
----------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 1,553,900 (192,800)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable (27,500) (77,900)
Proceeds from collection
of notes receivable 11,700 33,900
Investments in affiliates (95,800) (105,200)
Purchase of property and equipment (32,000) (6,400)
----------- ----------
NET CASH (USED IN)INVESTING ACTIVITIES (143,600) (155,600)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in debt 16,200 331,400
Payment on long-term debt (11,700) (900)
----------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 4,500 330,500
----------- ----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 1,414,800 (17,900)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 37,100 52,600
----------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD 1,451,900 34,700
----------- ----------
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 4,400 $ 7,500
=========== ==========
See notes to Condensed Consolidated Financial Statements.
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CRESTED CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) The Condensed Consolidated Balance Sheet as of August 31, 1997, the
Condensed Consolidated Statements of Operations for the three months ended
August 31, 1997 and 1996, and the Condensed Consolidated Statements of Cash
Flows for the three months ended August 31, 1997 and 1996, have been prepared by
the Registrant without audit. The Condensed Consolidated Balance Sheet of May
31, 1997, 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, 1997 and May 31, 1997, the results of operations for the three months ended
August 31, 1997 and 1996, 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, 1997 Form 10-K.
The results of operations for the periods ended August 31, 1997 and 1996 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"
or "USECC") 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 the balance on a note payable to the
Registrant's parent USE of $6,039,600. The remaining long-term debt of $12,800
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, 1997
financial statements to conform to the classifications used in August 31, 1997.
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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 Registrant's liquidity, capital resources and
results of operations during the periods included in the accompanying financial
statements.
LIQUIDITY AND CAPITAL RESOURCES
On June 23, 1997, the Company and its parent company, U.S. Energy Corp.
("USE"), entered into an Acquisition Agreement with Kennecott Uranium Company
("Kennecott") whereby the Company and USE received a signing bonus from
Kennecott of $4,000,000 and a loan to develop the Green Mountain Mining Venture
("GMMV") properties of $16,000,000. The $4,000,000 is forfeitable until such
time as a closing takes place on December 1, 1997 or certain other actions are
taken by the Company and USE at that date. The $4,000,000, one half of which is
attributable to the Company, is therefore carried on the liability portion of
the balance sheet as a current deferred income item. Additionally, the Company
received cash from the sale of uranium under the Sheep Mountain Partners ("SMP")
contracts of $429,300; its advance royalty from Cyprus Amax of $28,000; $220,000
from the rental of equipment to the GMMV and real estate properties, and
$109,800 in the form of management fees. The receipt of these funds increased
the Company's liquidity position significantly.
The Company utilized $143,600 in its investing activities during the
three months ended August 31, 1997. This was primarily as a result of the
Company and USE funding SMP and Plateau Resources Limited ("Plateau"). As the
Company and USE provide various services for the GMMV and SMP, the
non-affiliated participants are invoiced for their proportionate share of the
approved operating costs. The GMMV is current on its reimbursements to the
Company and USE for all the operating costs. Due to disputes existing between
the SMP partners, the Company and USE have not been reimbursed for care and
maintenance costs expended on the SMP mineral properties in Wyoming since the
spring of 1996. 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
addition to increasing investments, the Company utilized $32,000 of the cash
received to purchase additional equipment.
The Company netted $4,500 from its financing activities as it increased
its long term debt to USE as a result of USE paying certain expenses on the
Company's behalf. Cash provided by operations, $1,553,900 and financing
activities, $4,500 less the cash used in investing activities, $143,600 resulted
in a net increase in cash and cash equivalents of $1,414,800. This increase
places the Company in a strong cash position of $1,451,900 at August 31, 1997 as
compared to $34,700 at the same date of the prior year. Transactions that could
potentially impact the Company's liquidity position are the indebtedness to USE,
$6,039,600 and the Company's potential refundable portion of the $4,000,000
signing bonus from Kennecott. It is believed by management of the Company that
it and USE will be able to satisfy the terms of the Kennecott agreement and the
signing bonus will not have to be refunded.
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 the 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 Company's and USE's portion of the remaining commitments in fiscal 1998
will depend on the spot market price of
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uranium concentrates and is also dependent on the outcome of the arbitration
proceedings involving Nukem/CRIC.
The primary source of the Company's capital resources for the remainder
of fiscal 1998 will be financing available through the GMMV, see discussion
below; cash on hand; eventual settlement of the Nukem/CRIC
arbitration/Litigation; uranium deliveries pursuant to the SMP contracts;
borrowing from financial institutions (primarily the line of credit), 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 Company and USE are currently seeking
additional financing for the construction of the gold processing mill and mine
development of Sutter Gold Mining Company ("SGMC"). See discussion under Sutter
below. 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.
GMMV
As a result of agreements being reached with Kennecott during the
quarter ended August 31, 1997, it is believed that no funding will be required
by the Company for the GMMV at either the Sweetwater Mill or the Jackpot Mine.
On June 23, 1997 USE, the Company and USE d/b/a USECC signed an Acquisition
Agreement with Kennecott for the right to acquire Kennecott's interest in the
GMMV for $15,000,000 and other consideration. Kennecott paid USE and USECC a
bonus of $4,000,000 on signing, and committed to provide the GMMV up to
$16,000,000 for payment of reimbursable costs incurred by USECC in developing
the proposed underground Jackpot Uranium Mine for production and in changing the
status of the Sweetwater Mill from standby to operational.
The $16,000,000 being loaned by Kennecott to the GMMV was advanced to
Kennecott by an affiliate, Kennecott Energy Company ("KEC") under a secured
recourse Promissory Note (the "Note") bearing interest at 10.5% per annum
starting in April 1999 until paid in full. The Note is payable quarterly out of
20% of cash flow from the GMMV properties, but not more than 50% of the earnings
for such quarter from the GMMV operations, before interest, income tax,
depreciation and amortization, however, the Note is payable (i) in full on June
23, 2010 regardless of cash flow and earnings of the GMMV, or (ii) sooner (on
December 31, 2005) if an economically viable uranium mine has not been placed
into production by such date. The Note is secured by a first mortgage lien
against Kennecott's interest in the GMMV pursuant to a Mortgage, Security
Agreement, Financing Statement and Assignment of Proceeds, Rents and Leases
granted by Kennecott to KEC (the "Mortgage"). USE and USECC will assume the
Note, and the assets of the GMMV will be subject to the Mortgage, at closing of
the acquisition.
Pursuant to the Acquisition Agreement, the Mineral Lease, and the Mill
Contract, USECC is to develop the proposed Jackpot Mine and work with Kennecott
in preparing the Sweetwater Mill for renewed operations. Such work will be
funded from the $16,000,000 being provided to the GMMV by Kennecott. Under the
Fourth Amendment of the GMMV Agreement, Kennecott will be entitled to a credit
against Kennecott's original $50,000,000 commitment to fund the GMMV, in the
amount of two dollars of credit for each one dollar of such funds out of the
$16,000,000 provided by Kennecott to the GMMV, plus the $4,000,000 paid to USE
and USECC on signing of the Acquisition Agreement. It is anticipated that such
credits will satisfy the balance of Kennecott's initial funding commitment to
acquire a 50% interest in the GMMV.
9
Kennecott has agreed to provide funds to the GMMV each month in an
amount adequate to reimburse USECC for invoiced costs and restore the USECC
working account balance to $1,000,000. Payment by GMMV of the monthly invoiced
costs is subject to Kennecott's confirmation that such costs conform to the
Mineral Lease and Mill Contract budgets. Subject to and at the closing of the
Acquisition Agreement, Kennecott will advance to the GMMV cash equal to any
difference between (i) the $16,000,000 commitment and (ii) amounts advanced to
pay reimbursable costs and maintain the working capital account.
Closing of the Acquisition Agreement is subject to USE and USECC
satisfying several conditions, including: (i) the acquiring entity (which may be
USE, USECC, or an entity formed by USE and USECC to acquire Kennecott's interest
in the GMMV) must have a market capitalization of at least $200,000,000; (ii)
the parties to the Acquisition Agreement must have received all authorizations,
consents, permits and approvals of government agencies required to transfer
Kennecott's interest in the GMMV to the acquiring entity; (iii) USE and USECC
shall have replaced, or caused the replacement of, approximately $25,000,000 of
reclamation bonds, in addition to other guarantees, indemnification and
suretyship agreements posted by Kennecott on behalf of the GMMV; and (iv) USE
and USECC, or the acquiring entity, must pay $15,000,000 in cash to Kennecott at
closing and assume all obligations and liabilities of Kennecott with respect to
the GMMV (including repayment of the $16,000,000 Note and the Mortgage) from and
after the closing. Under very limited circumstances, the scheduled closing date
may be postponed to another date not later than October 30, 1998. The parties to
the Acquisition Agreement also executed a mutual General Release with respect to
any and all claims that they may have with respect to any prior disputes
concerning the GMMV, which General Release would be delivered to all such
parties at closing of the Acquisition Agreement. Upon closing of the Acquisition
Agreement, the Mineral Lease and the Mill Contract will be terminated and USE,
USECC or the acquiring entity will own 50% of the GMMV, although its properties
will remain subject to the Mortgage until the Note is paid in full. The current
50% interest in GMMV held by USE and USECC will not change when the Acquisition
Agreement is closed.
If the Acquisition Agreement is not closed by December 1, 1997, then USE
and USECC (or an entity formed by them to acquire the GMMV interest owned by
Kennecott) are to provide to Kennecott a commitment letter from a recognized
national investment banking firm to complete an underwritten public offering of
the securities of USE (or an entity formed or introduced to acquire Kennecott's
GMMV interest (the "Acquiring Entity")), in amount sufficient to close the
Acquisition Agreement transactions. Such amount is estimated by USE to be
approximately $40,000,000, (for the $15,000,000 closing cash purchase price to
Kennecott, plus $25,000,000 to assume or cause the replacement of reclamation
bonds, guarantees, indemnification agreements and suretyship agreements related
to the GMMV properties and the Sweetwater Mill. Alternatively, USE, USECC or the
Acquiring Entity must provide evidence to Kennecott of a commitment letter from
a bank, other financial institution or industry entity to provide private or
joint venture financing in such approximate amount. Failure to provide evidence
of such financial commitment by December 1, 1997 will terminate the Acquisition
Agreement, the Mineral Lease and the Mill Contract.
If the Acquisition Agreement is not closed, USE and USECC, and
Kennecott, shall own their respective 50% interest in the GMMV, and Kennecott's
obligation to repay the $16,000,000 loaned by KEC shall remain Kennecott's
obligation, without any adverse effect on the 50% interest in the GMMV held by
USE and USECC. However, the Jackpot Mine development work and Sweetwater Mill
upgrade work funded by the $16,000,000 advance, will have benefited all parties
to the GMMV.
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SUTTER GOLD MINING COMPANY
Sutter Gold Mining Company is in discussions with two separate,
substantial Canadian investment banking firms in Toronto, Canada, regarding a
proposed public offering of SGMC common stock through the Toronto Stock
Exchange. If such discussions result in a successful securities offering, which
would be made only to Canadian residents, SGMC will be able to fund the
anticipated $12 million development costs with these funds and the funds it
currently has on hand from the 1997 private placements. It is not anticipated
that any of the Company's funds will be required to fund these operations, if
such financing efforts are successful.
SHEEP MOUNTAIN PARTNERS
On June 27, 1997, the District Court entered its Second Amended Judgment
ordering Nukem to assign the PSE&G contract to SMP and impressed a constructive
trust in favor of SMP on Nukem's rights to purchase CIS uranium, the uranium
acquired pursuant to those rights and the profits therefrom. The District Court
also stayed USECC's right to execute on the Judgment against Nukem/CRIC when
Nukem/CRIC posted a supersedeas bond in the amount of $8,613,600. Thereafter,
Nukem/CRIC filed a motion for clarification and/or limited remand of the Second
Amended Judgment. On August 13, 1997, the U.S. District Court denied the motion.
Nukem/CRIC then filed an Amended Notice of Appeal of the District
Court's Judgment and Second Amended Judgment with the Tenth Circuit Court of
Appeals. The Company and USE filed a motion to increase the supersedeas bond to
cover the value of the CIS purchase contracts. Nukem/CRIC filed their response
on October 17, 1997. No assurance can be given on the outcome of these motions.
The Tenth Circuit Court of Appeals set November 6, 1997 as the date that
Nukem/CRIC must file its pleadings in their appeal before the Court. The Company
and USE have until December 6, 1997 to file a response to these pleadings. Some
time after that the issue will be resolved by the Appellate Court. No assurance
can be given as to the ultimate outcome, however management of the Company and
USE are optimistic the ruling will be in their favor.
Until such time as these issues are resolved, the Company and USE may be
required to fund the standby costs of the Sheep Mountain mines. The Company and
USE have filed a lien on the SMP properties as a protection for the payment of
past and future standby costs for which they have not been reimbursed by
Nukem/CRIC.
11
RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1997 COMPARED TO
THREE MONTHS ENDED AUGUST 31, 1996
Revenues for the quarter ended August 31, 1997 increased by $701,500
over the same quarter of the prior year. The increase in revenues primarily are
as a result of a delivery of uranium concentrates under one of the SMP delivery
contracts wherein a net profit of $429,300 was recognized by the Company. There
were no such sales during the quarter ended August 31, 1996 as Nukem/CRIC were
making all deliveries for SMP during that period. Nukem/CRIC likewise made the
SMP delivery for the first quarter of fiscal 1998 and delivered one half of the
reported profits from the sale to the Company and USE. Revenues also increased
for the rental of equipment by $186,400 to a total of $190,100 for the quarter
ended August 31, 1997. This increase is as a result of increased equipment
rentals to the GMMV under the June 23, 1997 agreement discussed above. Finally
other revenues increased by $43,900 during the quarter ended August 31, 1997
over the quarter ended August 31, 1996. This increase was primarily as a result
of management fees increasing by $53,900 due to increased activities provided to
the various subsidiary companies by the Company,
Costs and expenses remained fairly constant with the prior year for the
same quarter of the prior year. The costs that increased were mineral
operations, $106,000 and general and administrative expenses, $151,100. These
increases were due primarily to additional staff to administer the development
of the GMMV as well as accrued vacations being paid to certain employees and
primarily applied to their indebtedness to the Company and USE.
Operations for the quarter ended August 31, 1997 resulted in income of
$245,900 or $0.02 per share as compared to a loss of $212,000 or $0.02 per
share. The increase in earnings is primarily as a result of increased revenues
for the sale of uranium concentrates and the rental of equipment.
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, 1997.
This report discloses the status of the consensual arbitration/litigation in the
U.S. District Court of Colorado involving the Registrant and USE d/b/a USECC and
Nukem, Inc. and its wholly-owned subsidiary Cycle Resource Investment Corp.
(CRIC) over disputes involving the Sheep Mountain Partners (SMP) partnership
concerning the marketing and sale of uranium and mining operations in Wyoming.
As was reported earlier, an Amended Judgment was entered on March 6, 1997 by
Judge Lewis T. Babcock of the U.S. District Court of Colorado, wherein the Court
confirmed the Arbitration Award ordering Nukem to pay USECC approximately
$12,594,000 as monetary damages. In November 1996, USECC received $4,367,000 of
these damages out of the SMP escrowed funds and its bank account per the Court's
earlier November 5, 1996 Judgment.
Despite the rulings of the Arbitration Panel imposing a constructive
trust in favor of SMP on Nukem's rights to purchase CIS uranium, the uranium
acquired pursuant to those rights and the profits therefrom, the
defendants-appellants Nukem/CRIC continued to assert in both Court filings and
public news releases that the Arbitration Panel did just the opposite and in
fact, "denied" SMP's rights to the CIS contracts in constructive trust.
12
In the March 6, 1997 Amended Judgment, Judge Babcock again confirmed the
Arbitration Panel's Orders and Award; denied Nukem's motion to modify and/or
vacate portions of the Award; denied Nukem's objections to the confirmation of
the Orders and Award, and granted USECC's motion to modify the Award by
deducting $265,213 from the amounts Nukem and CRIC claimed to have advanced to
purchase uranium for the SMP Partnership. The Amended Judgment of March 6,1997
did not specifically address the Panel's Award to SMP of a supply contract Nukem
had entered into with another utility, or Nukem's uranium purchase contracts
with three CIS Republics.
On or about March 21, 1997, defendants Nukem and CRIC filed a motion to
stay enforcement of USECC's monetary judgment pending the appeal of Nukem/CRIC
and posted a supersedeas bond in the amount of $8,613,600. On March 25, 1997,
USECC filed a motion objecting to defendants' motion on the posting of that
amount for its supersedeas bond and requested the Court to order the defendants
to increase the bond to cover the value of the CIS contracts but the District
Court denied the motion. USECC then filed a motion with the U.S. District Court
to correct clerical omissions in its March 6, 1997 Amended Judgment. Nukem/CRIC
opposed the motion but on June 30, 1997, the District Court entered its Second
Amended Judgment ordering Nukem to assign the PSE&G contract to SMP and
impressing a constructive trust in favor of SMP on Nukem's rights to purchase
CIS uranium, the uranium acquired pursuant to those rights and the profits
therefrom.
Thereafter, Nukem/CRIC filed a motion for clarification and/or limited
remand of the Second Amended Judgment. On August 13, 1997, the U.S. District
Court denied the motion. Nukem and CRIC then filed an amended notice of appeal
of the District Court's Judgment and Second Amended Judgment with the Tenth
Circuit Court of Appeals. USECC filed a motion to increase the supersedeas bond
and Nukem/CRIC filed their response to USECC's motion on October 17, 1997. Also,
Nukem and CRIC are to file their brief in the appeal to the Tenth Circuit Court
of Appeals by November 6, 1997. USECC will then have thirty days to respond to
Nukem/CRIC's appellant brief.
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 during the quarter ended August 31, 1997 reporting events of
June 23, 1997 and June 27, 1997.
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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 17, 1997 By: /S/ MAX T. EVANS
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MAX T. EVANS,
President
Date: October 17, 1997 By: /S/ ROBERT SCOTT LORIMER
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ROBERT SCOTT LORIMER,
Principal Financial Officer
and Chief Accounting Officer
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