As filed with the Securities and Exchange Commission May 7, 1996.
SEC File No. 33-64773
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective Amendment No. 1 to
FORM S-3
Registration Statement Under Securities Act of 1933
U.S. ENERGY CORP.
------------------
(Exact Name of registrant as specified in its charter)
Wyoming 83-0205516
- ----------------------------------- -------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
877 North 8th West, Riverton, Wyoming 82501, Tel. 307/856-9271
- ----------------------------------------------------------------------
(Address and telephone of registrant's principal executive offices)
Daniel P. Svilar (same address and telephone number)
- ----------------------------------------------------------------------
(Name, address and telephone of agent for service of process)
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement is declared effective.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933,or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. _____
If any of the securities being registered on this Form are being
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered in connection
with dividend or interest reinvestment plans, check the following box.
X
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offerings.
_____
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. _____
Prospectus
U.S. ENERGY CORP.
893,675 COMMON SHARES
__________________________________________
812,432 shares of common stock, par value $0.01 per share, (the
"Placement Shares") are offered for sale by certain shareholders
("Selling Shareholders") of U.S. Energy Corp. ("USE", the "Company" or
"Registrant"), a Wyoming corporation. The Selling Shareholders
purchased the Placement Shares from USE in July 1995. The Placement
Shares constitute approximately 14% of the outstanding shares of common
stock of USE on the date of this Prospectus. The Placement Shares have
been registered for sale to the public by the Selling Shareholders, by
the filing of the Registration Statement (of which this Prospectus is
a part) with the Securities and Exchange Commission ("Commission")
under the Securities Act of 1933, as amended ("1933 Act").
81,243 shares of USE common stock (the "RAF Shares"), are offered for
sale by RAF Financial Corporation ("RAF") and Robert L. Long, one of
its officers ("Long"). RAF was the placement agent for the USE private
offering of the Placement Shares in July 1995, and as compensation
therefor, RAF and Long acquired 40,622 and 40,621 Warrants,
respectively, for $4.80 per share of common stock, in connection with
such private offering. The Warrants were exercised by RAF and Long on
March 7, 1996 and May 1, 1996, respectively. By filing this
Registration Statement with the Commission under the 1933 Act, USE has
registered the RAF Shares, for sale to the public by RAF and Long.The
Placement Shares and the RAF Shares are hereinafter collectively
referred to as the "Common Shares."
Common stock of USE is traded on the NASDAQ/NMS quotation system. At
May 3, 1996, the closing bid price was $16.75 per share.
The Common Shares will be offered by the Selling Shareholders, RAF and
Long, at market prices from time to time. Selling commissions will be
paid by the Selling Shareholders and RAF for Common Shares sold by
them. No sales proceeds will be paid to RAF or to the Company or any
affiliate of the Company with respect to Placement Shares sold by the
Selling Shareholders. No sales proceeds will be paid to the Company or
any affiliate of the Company with respect to the RAF Shares. See "Plan
of Distribution."
_______________________________________________
These are Speculative Securities.
Such Securities Involve a High Degree of Risk.
See "Risk Factors" starting on page 7.
______________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES
COMMISSION, PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________________________________________________
The date of this Prospectus is May 7, 1996.
_____________________________________________________
2
No one is authorized to give any information, or make any
representation on behalf of USE, RAF or the Selling Shareholders, or
any of them, if not contained or incorporated by reference in this
Prospectus and if given or made, such information or representation
must not be relied upon as having been authorized by USE, RAF or any of
the Selling Shareholders. This Prospectus does not constitute an offer
to sell, or a solicitation of an offer to purchase, the securities
offered hereby, by any person in any jurisdiction in which such an
offer or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so, or to any person
to whom it is unlawful to make such an offer or solicitation.
Neither delivery of this Prospectus nor sale of the securities offered
hereby, shall create an implication that there has been no change in
the information set forth herein since date of this Prospectus.
AVAILABLE INFORMATION
USE is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith
files reports, proxy statements and other statements and information
with the Commission. The reports and other documents so filed can be
inspected and copied at the Commission's public reference room located
at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the Commission's public reference facilities at Commission regional
offices located at: 7 World Trade Center, 13th Floor, New York, New
York 10048; and Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such documents can
be obtained at prescribed rates by writing to the Securities and
Exchange Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
This Prospectus does not contain all of the information set forth in
the Registration Statement and its exhibits, covering the Common Shares
offered hereby, certain portions of which have been omitted pursuant to
Commission rules and regulations. Each statement made in this
Prospectus concerning a document filed as an exhibit to the
Registration Statement, is qualified in its entirety by reference to
such exhibit for a complete statement of its provisions. Any
interested party may inspect the Registration Statement (and any
amendments thereto) and its exhibits, without charge, at the public
reference facilities of the Commission at its offices as stated above.
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
This Prospectus incorporates by reference documents not presented
herein or delivered herewith. Documents relating to USE are available
without charge upon request to Secretary, U.S. Energy Corp., 877 North
8th West, Riverton, Wyoming 82501. Telephone requests may be directed
to Sharon Miller at (307) 856-9271.
3
The following documents filed with the Commission by USE (Commission
File No. 0-6814) are incorporated herein by reference: (a) Annual
Report on Form 10-K for fiscal year ended May 31, 1995; (b) Quarterly
Reports on Form 10-Q for the quarters ended August 31, 1995 and
November 30, 1995; (c) Proxy Statement for Annual Meeting held on
November 29, 1995; (d) Reports on Form 8-K as of February 16, 1996 and
April 18, 1996; (e) Registration Statement on Form 10 filed with the
Commission on January 23, 1973 registering the Company's common stock
class under Section 12(g) of the Exchange Act; and (f) Annual Report on
Form 10-K filed with the Commission in September 1992 (which Annual
Report had filed as an exhibit an amendment to the USE Articles of
Incorporation).
All documents filed by USE under Section 13(a) or 13(b), or Section 14
of the Exchange Act subsequent to date of this Prospectus and prior to
the termination date of the offering shall be deemed to be incorporated
herein by reference and to be a part hereof from the date of such
filing. Any statement contained herein or in a document all or a
portion of which is incorporated by reference, or deemed to be
incorporated herein by reference, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document
which also is, or is deemed to be, incorporated herein by reference
modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed to constitute a part of this
Prospectus, except as so modified or superseded.
SUMMARY OF THE OFFERING
The following summary is not intended to be complete and is qualified
in all respects by the more detailed information included elsewhere in
this Prospectus or contained in documents which are incorporated by
reference into this Prospectus. See "Incorporation of Certain
Documents by Reference."
The Company
U.S. Energy Corp. ("USE", the "Company" or "Registrant") is in the
general minerals business of acquiring, developing, exploring and/or
selling or leasing of mineral properties and, from time to time, mining
and marketing of minerals. USE is now engaged in two principal mineral
sectors: uranium and gold. Interests are held in other mineral
properties (principally molybdenum), but are either non-operating
interests or undeveloped claims. Its minerals business with respect to
uranium and gold can be characterized as in the development stage
according to the Commission's definition of that term. USE also carries
on a small oil and gas operation. Other USE business segments on the
date of this Prospectus are commercial operations (real estate and
general aviation) and construction operations.
4
Most USE operations are conducted through a joint venture with Crested
Corp. a majority-owned Colorado corporation ("Crested"),and various
joint subsidiaries of USE and Crested. The joint venture with Crested
is hereafter referred to as "USECC." Construction operations are
carried on primarily through USE's 50.9% subsidiary Four Nines Gold,
Inc. ("FNG"). Manufacturing and/or marketing of professional and
recreational outdoor products was conducted through The Brunton Company
("Brunton"), a wholly-owned USE subsidiary that was sold in February
1996. USE and Crested also own limited oil and gas operations in
Montana and Wyoming, which are carried on through Energx,
Ltd.("Energx"), a 90% subsidiary of the Company and Crested.
On February 16, 1996 Registrant sold all of the shares of Brunton to
Silva Production AB for $4,300,000 plus 45% of the net profits before
taxes derived from the sale of Brunton products for four years and
three months (see "Material Changes" for details of this sale
transaction, and Risk Factor 2 for information on the impact of this
transaction).
The sale will eliminate Brunton's manufacturing and/or marketing of
professional and recreational outdoor products from the commercial
segment of Registrant's business, except to the extent that there are
net profit payments from Silva over the next four years, of which there
can be no assurance. For the fiscal year ended May 31, 1995 and for
the six months ended November 30, 1995, Brunton's sales provided 49%
and 29%, respectively, of net revenues of USE.
On the other hand, the February 1996 receipt of $2,900,000 in net cash
from the sale (and future payments on Silva's $1,000,000 promissory
note and any profits payments) will enhance the Company's financial
condition and medium term liquidity as well as providing additional
resources to put the Company's Plateau uranium mill into operation and
develop the Company's uranium and gold properties.
The sale was prompted in part by Registrant's desire to focus on its
core business of acquiring and developing mineral properties and mining
and marketing minerals, particularly uranium and gold. Registrant
plans to consolidate all of its uranium assets into a single subsidiary
and finance the startup of its mines and mill operations with debt or
equity funding. Of course, there can be no assurance uranium prices
will remain at their current level, that Registrant will succeed in its
efforts to obtain long-term uranium supply contracts required to
operate its uranium properties profitably, or that the required
financing will be available to put such properties into operation.
Reference is made to the Form 8-K Report dated February 16, 1996
(incorporated by reference into this Prospectus), which contains USE's
pro forma condensed consolidated balance sheet as of November 30, 1995,
and pro forma condensed consolidated income statements for the six
months then ended, and for the year ended May 31, 1995, in both
instances giving effect to the Brunton sale as if effected at the
beginning of such periods. See also Risk Factor 2.
5
USE was incorporated in Wyoming in 1966. All operations are in the
United States. Principal executive offices are located at 877 North
8th West, Riverton, Wyoming 82501, telephone (307) 856-9271.
USE and Crested originally were independent companies, with two common
affiliates (John L. Larsen and Max T. Evans). In 1980, USE and Crested
formed a joint venture to do business together (unless one or the other
elected not to pursue an individual project). As a result of USE
funding certain of Crested's obligations from time to time (due to
Crested's lack of cash on hand), and later payment of the debts by
Crested issuing common stock to USE, Crested became a majority owned
subsidiary of USE in fiscal 1993.
Except for approximately 1,400 ounces of gold recovered in fiscal 1992
in a bulk sampling program at the Sutter gold property in California,
USE has not received revenues from the mining of either uranium or gold
during its five fiscal years ended May 31, 1995. Mineral revenues have
been received from sales of mineral properties, advance royalties in
respect of the Company's interests in an undeveloped molybdenum
property that was sold to AMAX Inc. in 1980, and from sales of uranium
under certain of the utility supply contracts held by Sheep Mountain
Partners ("SMP", a partnership), by USE and Crested delivering their
one-half share or all of the uranium and receiving sales proceeds
therefrom. The majority of profits on these deliveries have been
retained by SMP in an interest bearing account which is to be
distributed by a panel of arbitrators. See "Material Changes - Update
on Sheep Mountain Partners Arbitration." Commencement of uranium
mining at Green Mountain, Wyoming and/or Ticaboo, Utah may result in
utility supply contracts for Green Mountain Mining Venture ("GMMV"), of
which USE and Crested are joint venture partners with Kennecott Uranium
Company, and/or Plateau Resources Limited ("Plateau"), a subsidiary of
USE. There can be no assurance such mining operations will commence,
or that new utility supply contracts will result.
For a discussion of why revenues from mineral sales decreased in the
fiscal year ended May 31, 1995, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Results of
Operations for Fiscal 1995 Compared to Fiscal 1994, in Registrant's
Form 10-K, for fiscal year ended May 31, 1995 ("1995 Form 10-K")." For
operating results for the six months ended November 30, 1995, see
"Material Changes."
Risk Factors
An investment in the Common Shares of USE involves substantial risks,
including the risks of failure to obtain necessary capital to put
principal properties into production, continued low uranium prices,
litigation and competition. See "RISK FACTORS" beginning on the next
page.
6
The Offering
Securities Offered (1). . . . . . . . . . 893,675 Common Shares(2)
USE Common Stock Outstanding
Before and After Offering . . . . . . . 6,419,708 shares(3)
NASDAQ/NMS Symbol . . . . . . . . . . . "USEG"
________________
(1) See "Description of Securities." (2) 812,432 Common Shares are
offered for sale by the Selling Shareholders; 81,243 Common Shares are
offered for sale by RAF. See "Plan of Distribution."
RISK FACTORS
Prospective investors should note that the business of USE is
subject to certain risks, including the following:
1. Working Capital Requirements. USE's cash requirements for
fiscal 1996 are the funding of on-going general and administrative
expenses, including legal costs incurred as a result of the SMP
litigation/arbitration proceedings described in Risk Factor 3
below; mine and mill development and holding costs of the Sutter
gold property described below; Plateau mill holding (standby)
costs; SMP mines care and maintenance costs; and costs to acquire
uranium oxide which USE may be obligated to deliver under the SMP
contracts. As a result of the disputes between the SMP partners
(see Risk Factor 3 below), Registrant and Crested have been
delivering certain of the U3O8 concentrates required to fill various
delivery requirements on long-term U3O8 contracts with domestic
utilities. Recently, Nukem/CRIC have made most of the SMP
deliveries of U3O8. It is not known how long this arrangement will
continue. The capital requirements to fill Registrant's and
Crested's portion of the remaining commitments in fiscal 1996 will
depend on timing of payments to the Registrant and Crested by
Nukem/CRIC under the arbitration award, and whether SMP will be
wound up and dissolved as a partnership and its assets distributed
to partners Registrant/Crested and Nukem/CRIC. See "Material
Changes - Update on Sheep Mountain Partners Arbitration."
The primary source of Registrant's capital resources for the
remainder of fiscal 1996, will be (i) cash on hand; (ii) cash
received from the sale of Brunton (see "Material Changes" and Risk
Factor 2); (iii) possible sale of equity or interests in investment
properties or other affiliated companies; (iv) sale of equipment;
(v) possible proceeds from the resolution of pending
litigation/arbitration; (vi) sale of royalties or interests in
mineral properties; (vii) proceeds from the sale of uranium under
the SMP contracts, and (viii) borrowings from financial
institutions. Construction revenues from FNG, fees from oil
production, rentals of various real estate holdings and equipment,
and the sale of aviation fuel are also expected to provide cash.
7
Registrant's working capital increased during the six months ended
November 30, 1995 by $1,738,000 to working capital of $1,760,000
principally due to the sale of the Placement Shares in June and
July 1995, resulting in net proceeds to Registrant of $2,842,200.
Registrant utilized $1,523,700 in its investing activities during
the six months ended November 30, 1995. This was primarily as a
result of Registrant and Crested funding SMP property care and
maintenance costs, Plateau mill holding costs, Energx activities
and the Sutter Gold Mining Company ("SGMC") property holding costs.
Additionally, Registrant and its affiliates purchased $809,600 of
additional equipment during the six months ended November 30, 1995.
Other changes in working capital were decreases in accounts payable
and accrued expenses of $823,700.
Working capital in addition to funds on hand at November 30, 1995
and funds provided from the sale of Brunton (see "Material
Changes") will be required to hold and maintain existing mineral
properties; fund the mine and mill permitting and the construction
of a gold processing mill and mine development of SGMC; finance the
development of Plateau and its associated properties; and pay for
administration costs. Registrant and Crested are currently seeking
a joint venture partner and/or other means of financing the
construction of the SGMC gold processing mill and mine development,
but there can be no assurance that such financing can be arranged.
Monthly operating expense to hold properties and fund general and
administrative expense is estimated at $300,000 to $350,000 for the
last two quarters of fiscal 1996. Revenues from commercial
operations are expected to provide approximately $110,000 monthly.
Operating expense estimates reflect elimination of most legal
expenses associated with the SMP litigation/arbitration
proceedings, because a decision was received from the arbitration
panel in April 1996 (see "Material Changes"). Conventional
lending sources and cash from the sale of Brunton are expected to
be sufficient to cover the operating deficits for property holding
and general and administrative expense; however, significant
funding in excess of such sources will be required to put the
principal mineral properties into production (Plateau's uranium
mines and mill and the Sutter gold property).
Continued operating losses without offsetting replacements of
working capital will adversely affect USE's ability to continue to
operate its business as described in this Prospectus. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Registrant's 1995 Form 10-K, and
Registrant's Form 10-Q for fiscal quarter ended November 30, 1995
for additional information on future working capital requirements
and capital resources. See the Form 8-K Report for February 16,
1996, for pro forma financial information as the result of the
Brunton sale. See also Risk Factor 2 below.
8
2. Loss of Future Operating Income Due to Brunton Sale. In fiscal
1995, 49% of Registrant's net revenues were provided by Brunton's
professional and outdoor recreational product sales (29% in the six
months ended November 30, 1996). Brunton was sold in February
1996. The inability to include Brunton's operations with
Registrant's other operating revenues in the future could result in
continued operating losses for Registrant, unless Registrant is
able to develop other profitable businesses, such as Registrant's
uranium business or FNG's construction business, to replace profits
from Brunton. Continued operating losses without offsetting
replacements of working capital will adversely affect USE's ability
to continue its operations as described in this Prospectus. See
also Risk Factor 1 above and "Management's Discussion and Analysis
of Financial Condition and Results of Operations," in Registrant's
1995 Form 10-K.
3. Litigation/Arbitration - Sheep Mountain Partners. Because of
USE and Crested litigation/arbitration against Nukem/CRIC, their
partner in the Sheep Mountain Partners Partnership ("SMP"), USE and
Crested have been required to fund $4,521,600 in standby mine
maintenance and related costs, including $136,500 for the purchase
of U3O8, of the SMP mines in Fremont County, Wyoming, from June 1991
through May 31, 1995. Another $326,700 was spent on such costs in
the six months ended November 30, 1995. USE and Crested are
seeking to recover these amounts from Nukem and CRIC, along with
interest which has not been booked on the financial statements of
the Registrant and Crested
Recovery by USE and Crested of their funds advanced to the SMP
partnership will depend on the outcome of the litigation/
arbitration, which presently is uncertain. See Item 3 - "Legal
Proceedings - Sheep Mountain Partners Arbitration/Litigation" in
Registrant's 1995 Form 10-K, and the audited USE Consolidated
Financial Statements contained in Registrant's 1995 Form 10-K and
"Legal Proceedings" in USE's Form 10-Q for the quarter ended
November 30, 1995.
On July 3, 1991, USE and Crested ("plaintiffs") filed a complaint
in the United States District Court for the District of Colorado
against CRIC, Nukem and various affiliates of CRIC and Nukem
(together, the "defendants"), alleging that CRIC and Nukem
misrepresented material facts to and concealed material information
from the plaintiffs to induce their entry into the SMP Partnership
Agreement and various related agreements. Plaintiffs also claim
CRIC and Nukem have wrongfully pursued a plan to obtain ownership
of the USE-Crested interests in SMP through various means,
including overcharging SMP for uranium "sold" to SMP by defendants.
Plaintiffs further allege that defendants refused to provide a
complete accounting with respect to dealings in uranium with and on
behalf of SMP, and that certain defendants misappropriated SMP
property and engaged in other wrongful acts relating to the
acquisition of uranium by SMP.
9
Plaintiffs requested that the court order rescission of the SMP
Partnership Agreement and related contracts, and asked the court
to determine the amounts payable to CRIC by USECC as a result of
any such rescission order to place the parties in status quo. USE
and Crested also requested that the court order defendants to make
a complete accounting to them concerning the matters alleged in the
amended complaint. They requested an award of damages (including
punitive, exemplary and treble damages under the Racketeer
Influenced and Corrupt Organization Act ("RICO") and its Colorado
State equivalent, interest, costs and attorneys' fees) in an amount
to be determined at trial. Plaintiffs further requested imposition
of a constructive trust on all property of SMP held by defendants
and on profits wrongfully realized by defendants on transactions
with SMP.
The defendants filed various motions, including an application to
stay judicial process and compel arbitration and motions to dismiss
certain of plaintiffs' claims. The defendants also filed an answer
and counterclaims against plaintiffs, claiming plaintiffs breached
the SMP Agreement and misappropriated a partnership opportunity by
providing certain information about SMP to Kennecott and entering
into the GMMV with Kennecott involving the Green Mountain uranium
properties. The defendants also claim that plaintiffs wrongfully
sold an interest in SMP to Kennecott through the GMMV without
CRIC's consent and without providing CRIC a right of first refusal
to purchase such interests; that Registrant breached the uranium
marketing agreement between CRIC and SMP, which had been assigned
by CRIC to Nukem, by agreeing with Kennecott in the GMMV that
Kennecott could market all the uranium from Green Mountain, thereby
depriving Nukem of commissions to be earned under such marketing
agreement; that Registrant and Crested interfered with certain SMP
supply contracts, costing CRIC legal fees and costs; that CRIC and
Nukem are entitled to be indemnified for purchases of uranium made
on behalf of SMP; that Registrant and Crested failed to perform
their obligations under an Operating Agreement with SMP in a proper
manner, resulting in additional costs to SMP; that Registrant and
Crested overcharged SMP for certain services under the SMP
Partnership Agreement and refused to allow SMP to pay certain
marketing fees to Nukem under the Uranium Marketing Agreement; that
Registrant and Crested breached the SMP Partnership Agreement by
failing to maintain a toll milling agreement with Pathfinder Mines
Corporation, thereby rendering SMP's uranium resources worthless;
and that Registrant and Crested have engaged in vexatious
litigation against CRIC and Nukem. Defendants also requested
damages (including punitive, exemplary and treble damages under
RICO, interest costs and attorney fees). See the further
information set forth below in this Risk Factor, concerning the
damages requested by defendants.
10
After more than three years of pretrial motions and discovery the
plaintiffs and defendants agreed in November 1994 to proceed with
exclusive, binding arbitration before a panel of three arbitrators
with respect to any and all post-December 21, 1988 disputes, claims
and controversies, that any party may assert against the other.
All pre-December 21, 1988 claims, disputes and controversies
pending before the U.S. District Court have been stayed by
stipulation between the parties, until the arbitrators enter an
order and award in the arbitration proceedings.
On April 18, 1996 the arbitration panel entered its Arbitration
Order and Award. Although future limited proceedings are
contemplated regarding clarification of the timing of payments, the
panel overall found in favor of the Registrant and Crested on
several monetary claims, and other issues. See "Material Changes".
4. Sutter Gold - No Current Mining Operations or Gold Production.
As of May 31, 1995, USE and Crested have invested more than
$10,374,400 in capitalized costs (in addition to approximately
$2,000,000 in costs that have been expensed) to acquire, permit and
develop a gold property in California, held through a subsidiary,
Sutter Gold Mining Company. This investment represents a
significant portion of USE's consolidated assets. There is no
assurance current efforts will be successful in financing the mill
construction and mine development costs needed to put the property
into full production. If third-party financing cannot be obtained
and USE is unable to fund development and production costs from
internally generated funds over the next two years the property may
be sold at a loss. See Item 1 "Description of Business - Gold -
Lincoln Project (California)" in Registrant's 1995 Form 10-K.
5. Additional Shares to Market; Possible Dilution. In addition to
the Common Shares sold to the Selling Shareholders (in the first
quarter of fiscal 1996), Registrant sold 400,000 redeemable common
shares of its stock (the "Redeemable Stock") to private investors
in fiscal 1995. The 400,000 shares of Redeemable Stock were
redeemable in August 1995 by USE paying cash therefor ($3.50 per
share); however, in lieu of cash redemption, USE had the right to
issue one additional common share of its stock for every three
shares of Redeemable Stock originally purchased. In the second
quarter of fiscal 1996, USE elected to issue an additional 133,336
shares of its common stock to the holders of the 400,000 shares of
Redeemable Stock, in lieu of paying cash redemptions. These
additional shares, while resulting in a slight dilution in the
voting power of Registrant's outstanding shareholders, enabled USE
to not pay $1,400,000 in cash from its working capital, which
amount would have been required to redeem the original shares of
Redeemable Stock in cash.
11
Pursuant to the terms of the private placement offering to the
Redeemable Stock investors, USE registered the 457,780 shares of
its common stock (which excludes 56,667 shares originally acquired
by Brunton, as well as 18,889 shares issued thereon as payment of
the redemption premium) for public resale, by filing with the
Commission a registration statement on Form S-3 under the 1933 Act
(SEC File No. 333-1967) which was declared effective on April 4,
1996. Public sale of such shares by the investors may depress
market prices for the Company's common stock.There are no present
plans to register the resale of the shares which had been held by
Brunton, which shares (plus an added 150,000 USE shares) were not
acquired by Silva in the Brunton sale. See "Material Changes."
Registrant may also issue additional common stock in a public
offering pursuant to the 1933 Act if needed for future working
capital (see Risk Factor 1 above). The issuance of such additional
shares could result in dilution to the equity of outstanding
shareholders of Registrant, depending on the price at which such
shares are issued and sold, and would result in some dilution to
the voting power of the outstanding shares of Registrant's common
stock.
6. Project Delay. Registrant's minerals business is subject to
the risk of unanticipated delays in developing and permitting its
uranium and gold projects. Such delays may be caused by
fluctuations in commodity prices (see Risk Factor 7), mining risks
(see Risk Factor 10), difficulty in arranging needed financing,
unanticipated permitting requirements or legal obstruction in the
permitting process by project opponents. In addition to adding to
project capital costs (and possibly operating costs), such delays,
if protracted, could result in a write off of all or a portion of
the carrying value of the delayed project and/or could trigger
certain reclamation obligations sooner than planned.
7. Commodity Price Fluctuations. The ability of the Company to
develop and operate its uranium and gold projects profitably can be
significantly affected by changes in the market price of uranium
and gold, respectively. Until very recently the spot market price
for uranium concentrates has been depressed (less than $15.00 per
pound) since 1988 and has been below $8.00 per pound as recently as
1992. See Item 1, "Description of Business - Uranium - Uranium
Market Information" in Registrant's 1995 Form 10-K for additional
information on the uranium markets and pricing. Uranium prices are
subject to a number of factors beyond Registrant's control
including imports of uranium from Russia and other CIS countries,
the amount of uranium produced and sold from the blending of highly
enriched uranium recovered from U. S. and Russian nuclear weapons
to produce lower enriched uranium for nuclear fuel, the build up by
12
utilities of uranium fuel inventories and the sale of excess
inventories into the market, the rate of consumption of uranium
inventories by utilities, the rate of uranium production in the
United States and elsewhere by other producers and the rate of new
construction of nuclear generating facilities, verses the rate of
shutdown and decommissioning of older nuclear generating
facilities, particularly in the United States.
Uranium market prices in the United States have recovered to
between $14.75 and $15.00 per pound as of February 20, 1996. The
Company believes that if the price remains at this level or higher,
United States utilities will seek long term price stabilizing
uranium supply contracts. If the Company is able to obtain long
term uranium supply contracts with assured prices exceeding $18.00
per pound, that should be sufficient to operate the Company's Utah
uranium properties profitably. It should also be sufficient to
proceed with development of the GMMV Jackpot Mine and operation of
the Sweetwater uranium mill, although there can be no assurance
that Kennecott, which controls the management committee of GMMV,
would be of the same opinion. There also can be no assurance that
this recent upward price movement will continue. USE would be
adversely affected if the United States utilities with nuclear
power plants do not seek long term uranium supply contracts in the
1990s. Although the extent of such adverse impact cannot be
predicted, if uranium prices remained so depressed through the
1990s that USE's properties and facilities were not put into
operation, the book value of such assets might decrease and USE
could be required to reclaim or restore such properties.
The market price of gold has fluctuated widely and is affected by
numerous factors beyond the Company's control, including
international economic trends, currency exchange fluctuations,
expectations for inflation, the extent of forward sales of gold by
other producers, consumption patterns (such as purchases of gold
jewelry and the development of gold coin programs), purchases and
sales of gold bullion holdings by central banks or other large gold
bullion holders or dealers and global or regional political events,
particularly in major gold-producing countries such as South Africa
and some of the CIS countries. Gold market prices are also
affected by worldwide production levels, which have increased in
recent years. The aggregate effect of these factors, all of which
are beyond the Company's control, is impossible for the Company to
predict. In addition, the market price of gold has on occasion
been subject to rapid short-term changes because of market
speculation. As of February 15, 1996 the Comex spot price of gold
was $403.40.
13
8. Proposed Federal Legislation. The U.S. Congress has, in
legislative sessions in recent years, actively considered several
proposals for major revision of the General Mining Law, which
governs mining claims and related activities on federal public
lands. If any of the recent proposals become law, it could result
in the imposition of a royalty upon production of minerals from
federal lands and new requirements for mined land reclamation and
other environmental control measures. It remains unclear whether
the current Congress will pass such legislation and, if passed, the
extent such new legislation will affect existing mining claims and
operations. The effect of any revision of the General Mining Law
on the Company's United States operations cannot be determined
conclusively until such revision is enacted; however, such
legislation could materially increase the carrying costs of the
Green Mountain mineral properties, the SMP properties and some of
Plateau's mineral properties which are located on federal
unpatented mining claims, and could increase both the capital and
operating costs for such projects and impair the Company's ability
to hold or develop such properties, as well as other mineral
prospects on federal unpatented mining claims.
9. Exploration Risks. Mineral exploration, particularly for gold,
is highly speculative in nature, involves many risks and frequently
is nonproductive. There can be no assurance that the Company's
efforts at the Sutter Gold Project to identify additional gold ore
reserves will be successful. Moreover, substantial expenditures
are required to establish additional ore reserves through drilling,
to determine metallurgical processes to extract the metal from the
ore and to construct mining and processing facilities. During the
time required to establish additional ore reserves, determine
suitable metallurgical processes and construct such mining and
processing facilities, the economic feasibility of production may
change because of fluctuating gold prices (see Risk Factor 7).
10. Mining Risks and Insurance. The business of uranium and gold
mining generally is subject to a number of risks and hazards,
including environmental hazards, industrial accidents and rock
falls, flooding, interruptions due to weather conditions and other
acts of God. Such risks could result in damage to or destruction
of Registrant's mineral properties and production facilities, as
well as to properties of others in the area, personal injury,
environmental damage and process and production delays, causing
Registrant monetary losses and possible legal liability. While the
Company maintains, and intends to continue to maintain, liability,
property damage and other insurance consistent with industry
practice, no assurance can be given that such insurance will
continue to be available, be available at economically acceptable
premiums or be adequate to cover any resulting liability.
14
11. Title to Properties. Nearly all the uranium mining properties
held by GMMV, SMP, and Plateau are on federal unpatented claims.
Unpatented claims are located upon federal public land pursuant to
procedure established by the General Mining Law (see also Risk
Factor 8). Requirements for the location of a valid mining claim
on public land depend on the type of claim being staked, but
generally include discovery of valuable minerals, erecting a
monument and posting thereon a location notice, marking the
boundaries of the claim, and filing a certificate of location with
the county in which the claim is located and with the BLM. If the
statutes and regulations for the location of a mining claim are
complied with, the locator obtains a valid possessory right to the
contained minerals. To preserve an otherwise valid claim, a
claimant must also annually pay certain rental fees to the federal
government (currently $100 per claim) and make certain additional
filings with the county and the BLM. Failure to pay such fees or
make the required filings may render the mining claim void or
voidable. Because mining claims are self-initiated and self-
maintained, they possess some unique vulnerabilities not associated
with other types of property interests. It is impossible to
ascertain the validity of unpatented mining claims solely from
public real estate records and it can be difficult or impossible to
confirm that all of the requisite steps have been followed for
location and maintenance of a claim. If the validity of an
unpatented mining claim is challenged by the government, the
claimant has the burden of proving the present economic feasibility
of mining minerals located thereon. Thus, it is conceivable that
during times of falling metal prices, claims which were valid when
located could become invalid if challenged. Disputes can also
arise with adjoining property owners for encroachment or under the
doctrine of extralateral rights (see Risk Factor 17).
12. Reclamation and Environmental Liabilities. Registrant's
projects and operations are subject to various federal, state and
local laws and regulations regarding the discharge of materials
into the environment or otherwise relating to the protection of the
environment, including the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act and the Comprehensive
Environmental Response Compensation Liability Act. With respect to
mining operations conducted in Wyoming, Wyoming's mine permitting
statutes, Abandoned Mine Reclamation Act and industrial development
and siting laws and regulations will impact USE. Similar laws in
California affect SGMC operations and in Utah will affect Plateau's
operations. In addition, Registrant's uranium mills are subject to
jurisdiction of the Nuclear Regulatory Commission ("NRC").
15
To Registrant's knowledge, it is in compliance in all material
respects with current environmental regulations. To the extent
that production by SMP, GMMV or SGMC is delayed, interrupted or
discontinued due to need to satisfy present or future laws or
regulations which relate to environmental protection, future USE
earnings could be adversely affected. For additional information
concerning the effect such environmental laws and regulations have
on the Company's capital expenditures, see Registrant's 1995 Form
10-K.
USE is a joint venturer in the GMMV, which entity is responsible
for mine reclamation, environmental restoration and decommissioning
associated with mineral properties on Green Mountain, in south
central Wyoming, and the nearby Sweetwater Mill. Future costs to
comply with these obligations are now estimated at approximately
$25,000,000. If actual costs are higher, USE could be adversely
impacted. There is no assurance the properties will generate
sufficient revenues to fund reclamation, restoration and
decommissioning costs in excess of current estimates. See Note K
to the audited USE Consolidated Financial Statements in
Registrant's 1995 Form 10-K, and the notes to the unaudited USE
Consolidated Financial Statements in Registrant's Form 10-Q for
fiscal quarter ended November 30, 1995, for further information.
Current bonds and funds in escrow are deemed adequate for
reclamation and decommissioning liabilities associated with the
Shootaring Mill in Utah.
USE and Crested have assumed the reclamation obligations,
environmental liabilities and contingent liabilities for employee
injuries, from mining the Crooks Gap and other properties in the
Sheep and Green Mountain Mining Districts. The reclamation
obligations, which are established by governmental regulators, were
most recently set at $1,451,800, which amount is shown on USE's
balance sheet as a long-term obligation.
To assure the reclamation work will be performed, regulatory
agencies require posting of a bond or other security. USE and
Crested satisfied this requirement with respect to SMP properties
by mortgaging their executive office building and a trailer park
in Riverton, Wyoming. A portion of the funds for the reclamation
of SMP's properties was to have been provided by SMP, which agreed
to pay up to $.50 per pound of uranium produced from its properties
to USE and Crested for reclamation work. The status of this
commitment could be impacted by the ultimate resolution of the
arbitration/litigation with Nukem/CRIC (see Risk Factor 3 above).
16
The GMMV and Sweetwater Mill reclamation liabilities are self
bonded by Kennecott pursuant to written agreements with the NRC and
the State of Wyoming, and accordingly these liabilities are not
recorded in the USE or Crested financial statements. The SMP and
Plateau reclamation liabilities were recorded at $1,451,800 and
$2,500,000 respectively (total $3,951,800) in the audited USE
Consolidated Financial Statements. See the USE 1995 Form 10-K. A
cash bond of approximately $40,000 is posted for miscellaneous
reclamation costs at the Sutter gold property (carried under "Other
Assets-Deposits and Other" on the USE financial statements).
Reclamation and environmental obligations for the oil and gas
properties held by USE are deemed insignificant and manageable in
the ordinary course of business.
13. Possible Losses on Uranium Contracts. As of May 31, 1995, SMP
held contracts for delivery of an estimated 5.5 million pounds of
U3O8 to domestic utilities from 1996 through 2000. The arbitration
panel found that another contract for an estimated 810,000 pounds
to be delivered from 1996 to 2000 was to be assigned to SMP by
Nukem/CRIC. See "Material Changes". Actual quantities of U3O8
purchased by utilities over that period of time may vary by 10 to
25 percent, as provided in the contracts (see Item 1 "Description
of Business - Uranium - Sheep Mountain Partners - SMP Marketing" in
Registrant's 1995 Form 10-K), and profit or loss to SMP on the
deliveries will depend on the cost of inventory. Profits on such
future deliveries cannot be predicted, however, management of the
Company does not anticipate any material losses from the sales of
U3O8 pursuant to these contracts. As of the date of this
Prospectus, all of the remaining base escalated contract prices
exceed the current market price, however, there can be no assurance
this situation will not change in the future.
Increases in the spot market price would increase USE's and
Crested's cost of delivering on certain of the SMP contracts prior
to the time that their uranium properties are in production, thus
reducing potential profits or possibly producing losses, while spot
market price decreases would be likely to increase profits on such
contracts. USE recorded a loss of $162,900 in fiscal 1994 on
deliveries of its portion of certain of the SMP contracts, as the
cost of uranium exceeded the contracted price. Due to the SMP
dispute, earlier arrangements between the partners to deliver their
shares of the SMP contracts in spite of the dispute were abandoned,
and USE made no deliveries (and therefore recorded no revenues or
losses) on any SMP contracts during fiscal 1995. For information
on the status of the contracts in SMP, see "Material Changes".
17
14. Competition. There is keen competition in the domestic
minerals industry, and the oil and gas business, for properties and
capital. USE's competitors include a number of major mining and
oil and gas companies, most of which are larger than USE in all
respects. In the production and marketing of uranium concentrates
there are more than 10 major international entities (some of which
are government controlled) that are significantly larger and better
capitalized than USE. Although the Registrant presently is not
engaged in the mining or milling of uranium, and therefore should
not be counted in the top ten uranium producers, the Registrant's
competitive stature may improve significantly at such time as it
commences uranium mining and production.
The location and composition of mineral ore bodies are of great
importance to the competitive position of a mining company.
Producers of high-grade ore with readily extractable minerals are
in an advantageous position. Producers of one mineral may be able
to efficiently recover other minerals as by-products, with
significant competitive impact on primary producers. Substantial
capital costs for equipment and mine-works are often needed. As a
result, owners of producing properties, particularly if purchase
contracts for the production are in place, generally enjoy
substantial competitive advantages over organizations that propose
to develop non-producing properties. Competition is also keen in
the search for mineral properties and prospects and in the
employment and retention of qualified personnel.
USE believes that with the recent improvements in market prices for
uranium concentrates, it will be able to compete with other uranium
producers, primarily because it holds significant uranium resources
in place, along with the necessary mining and milling facilities.
Applications have been submitted to upgrade the mill facilities'
licenses to operating levels, however, delays in final permitting
may be encountered, as the uranium refining industry is closely
regulated by the NRC.
Nonetheless, USE expects competition from larger producers in
Canada, Australia and Africa, as well as from U.S. in situ
producers of uranium and other producers that recover uranium as a
byproduct of other mineral recovery processes, and uranium
recovered from the de-enrichment of highly enriched uranium
obtained from the dismantlement of U.S. and Russian nuclear weapons
and sold in the market by the United States Enrichment Corporation
and/or the United States Department of Energy, and from imports to
the United States of uranium from the Commonwealth of Independent
States (formerly the Soviet Union). See Item 1 "Description of
Business - Uranium - Uranium Market Information" and "NUEXCO
Exchange Value" in Registrant's 1995 Form 10-K.
18
In its other business segments, USE's affiliate FNG encounters
strong competition with a number of larger civil engineering
construction firms in the western United States, and Brunton
competes with domestic and foreign sporting and professional
equipment manufacturers, some of which are larger and better
capitalized. See Registrant's 1995 Form 10-K for additional
information concerning Brunton's competition.
15. Reserves Estimates. While the ore reserve estimates at GMMV
Round Park ore deposit in Wyoming and SGMC's Lincoln project in
California have been reviewed by independent consultants, such ore
reserve estimates are necessarily imprecise and depend to some
extent on statistical inferences drawn from limited drilling, which
may, on occasion, prove unreliable. Should the Company encounter
mineralization or formations at any of its mines or projects
different from those predicted by drilling, sampling and similar
examinations, reserve estimates may have to be adjusted and mining
plans may have to be altered in a way that could adversely affect
the Company's operations. Moreover, short-term operating factors
relating to the ore reserves, such as the need for sequential
development of ore bodies and the processing of new or different
ore grades, may adversely affect the Company's profitability in any
particular accounting period.
16. Variable Revenues and Recent Losses. Due to the nature of
USE's business, there are from time to time major increases in
gross revenues from sale of mineral properties. During fiscal
1991, $7,193,600 was recognized from sale of a partial interest in
a uranium property to Kennecott Uranium Company (a GMMV partner).
No such revenues were recognized from fiscal 1992 through fiscal
1995. Further, USE realized a net gain in fiscal 1992 of $613,000,
but net losses were realized from fiscal 1993 through fiscal 1995
(in the respective amounts of $221,900, $3,370,800 and $2,070,600).
17. Bullfrog Litigation. Registrant, Crested, Parador Mining
Company, Inc. ("Parador") and H. B. Layne Contractor, Inc.
("Layne") are defendants and counter- or cross-claimants in certain
litigation in the District Court of Nye County, Nevada, brought by
Bond Gold Bullfrog Inc. ("BGBI") in July 1991. BGBI (now known as
Barrick Bullfrog, Inc.) is an affiliate of Barrick Corp., a large
international gold producer headquartered in Toronto, Canada. The
litigation primarily concerns extralateral rights associated with
two patented mining claims owned by Parador and initially leased to
a predecessor of BGBI, which claims are in and adjacent to BGBI's
Bullfrog open pit and underground mine. USE and Crested assert
certain interests in the claims under an April 1991 assignment and
lease from Parador, which is subject to the lease to BGBI's
predecessor.
19
Parador, USE and Crested had previously advised BGBI that they are
entitled to royalty payments with respect to extralateral rights of
the subject claims on minerals produced at the Bullfrog Mine,
claiming that the lode or vein containing the gold mineralization
apexes on the Parador claims and dips under the claims leased to
BGBI by Layne.
BGBI seeks to quiet title to its leasehold interest in the subject
claims, alleging that Parador's lease thereof to USE and Crested is
adverse to the interest claimed by BGBI, and that the assertions by
USE and Crested of an interest in the claims have no foundation.
BGBI seeks a determination that USE and Crested have no rights in
the claims and an order enjoining USE and Crested from asserting
any interest in them. BGBI further asserts that, in attempting to
lease an interest in the subject claims to USE and Crested, Parador
breached the provisions of its lease to BGBI, and that Parador is
responsible for the legal fees and costs incurred by BGBI in the
quiet title action, which may be offset against royalties. Under
an arrangement to pay certain legal expenses of Parador, USE and
Crested may be responsible for any such amounts.
BGBI alleges that by entering into the Assignment and Lease of
Mining Claims with Parador, USE and Crested disrupted the
contractual relationship between BGBI and Parador. In addition,
BGBI claims that the USECC-Parador agreement slanders BGBI's title
to the claims. BGBI seeks compensatory damages from Parador, USE,
and Crested; punitive damages from USE and Crested; and costs and
other appropriate relief from Parador, USE and Crested, all in
amounts to be determined.
A partial or bifurcated trial to the court of the extralateral
rights issues was held on December 11 and 12, 1995. The purpose of
the hearing was to determine whether the Bullfrog orebody in
question is a "vein, lode or ledge" as described in the General
Mining Law and, if so, whether the facts of the case warrant the
application of the doctrine of extralateral rights as set forth in
such statute. Although the Court sat as both the finder of fact
and law with respect to such issues, the Court concluded that the
questions are ultimately one of law which must be decided based on
the testimony and exhibits introduced at the trial concerning the
description of the orebody. Registrant and defendants Crested
Corp. and Parador presented five experts in the field of geology,
including the person who was responsible for the discovery of the
gold deposit at the mine. All five experts opined that the deposit
was a lode and it apexed on a portion of Parador's two mining
claims. The defendant Layne presented a single witness who
testified that there was no apex within the Parador claims. The
Court nevertheless found that Parador had failed to meet its burden
20
of proof and therefore Parador, Registrant and Crested have no
right, title and interest in the minerals lying beneath the claims
of Layne pursuant to extralateral rights. The Court entered a
partial judgment in favor of Layne and ordered that Parador pay
Court costs to Layne. Defendants intend to appeal the Court's
ruling as erroneous as a matter of law at such time as it is
appropriate to do so.
The partial trial did not address any of the other issues pending
in the litigation other than those required to decide the question
of whether the doctrine of extralateral rights is applicable to
this case. All other claims and counterclaims remain pending
before the Court and no hearing date has been set for those issues.
If USE's and Crested's position concerning extralateral rights is
ultimately sustained, substantial additional revenues and income
may be received by USE and Crested from royalties payable with
respect to gold produced from the Bullfrog Mine. If, however, the
final decision of the appellate court is adverse to USE and
Crested, an award of damages against USE and Crested in any
substantial amount by this Court could have a material adverse
effect on the ability of USE and Crested to carry on their business
in the manner described in this Prospectus.
18. Potential Issuance of Preferred Stock. Under the USE Restated
Articles of Incorporation, as amended ("Restated Articles") and as
permitted by the Wyoming Business Corporation Act ("WBCA"), the USE
Board of Directors has authority to create series of preferred
stock and to issue shares thereof, without the approval of any USE
shareholders. The creation and issue of USE preferred stock with
dividend rights senior to the USE common stock could adversely
affect common stockholder participation in future earnings through
dividends that otherwise would be available for distribution to
holders of the common stock, including purchasing of the Common
Shares.
Such preferred stock also could inhibit a takeover of USE. Under
the WBCA, separate voting approval by classes of stock is required
for certain substantive corporate transactions. If the interests
of preferred stockholders is perceived to be different from those
of the common stockholders, the preferred stockholders could
withhold approval of the transactions needed to effect the
takeover.
19. Potential Anti-Takeover Effects of Staggered Board. The USE
Board of Directors is presently divided into three classes of two
directors each. Pursuant to the USE Restated Articles and as
permitted by the WBCA, the directors in each class serve a three
year term, and only those directors in one class are reelected each
year. This board classification could stall a takeover of USE,
even if a majority of the common stock were to be held by persons
desiring a change in control of the Board. See "Description of
Securities to be Registered."
21
SELLING SECURITY HOLDERS
None of RAF, Robert L. Long, nor any Selling Shareholder (i) has
held any position, office or material relationship with the Company
or any of its affiliates within the past three years, or (ii) to
the knowledge of the Company, owns one percent or more of the
Company's outstanding Common Shares. It is anticipated each seller
will own none of the securities of the Company after completion of
the offering.
No. of Common Number of
Shares Owned Shares Owned
Prior to by Selling
Name Offering Shareholder
Robert Ableman 5,000 5,000
Michael J. Alfano 7,500 7,500
Amantea Restaurant Inc. 10,000 10,000
Michael Robert Andriani 5,000 5,000
Cotton O'Neil Profit Sharing
Plan FBO Dennis Charles Artzer 5,000 5,000
Robert Eugene Barnett &
Deidre Marie Barnett Jt Ten WROS 2,500 2,500
Delaware Charter Tr UA Jun 14 95
FBO Jerald W. Blosfeld 5,000 5,000
Samuel D. Boney 5,000 5,000
Shirley D. Branch 10,000 10,000
John R. Carvell 5,000 5,000
Phyllis M. Chancy 2,500 2,500
Robert Coker 5,000 5,000
Consulting on Government
Procurement Defined
Benefit Plan & Trust 20,000 20,000
Robert W. Braun Tr of the
Cotton O'Neil Clinic PA
Employee Profit Sharing 15,000 15,000
Cotton O'Neil Clinic Profit
Sharing Trust FBO
Howard N. Ward 10,000 10,000
John Louis Courembis 5,000 5,000
Robert Croonquist 10,000 10,000
Delaware Charter TR UA Jun 23 95
FBO Eleanor Crosswait 55,982 55,982
Margaret M. DeCourcey 5,000 5,000
Diaman Associates Limited
Inc. Pension Plan 10,000 10,000
Equity L.P. 80 34,000 34,000
Stephen A. Folio &
Diane Folio Jt Ten WROS 2,500 2,500
Dennis Ford 2,500 2,500
Forest L. Fowler, Jr. 5,000 5,000
Cecil Franseen 5,000 5,000
Fundamental Growth
Partners, Ltd. 25,000 25,000
22
Cary B. Gilman 5,000 5,000
Michael M. Wafer &
Susan L. Wafer TR of the
GMJ Family Trust UA Feb 15 85 3,700 3,700
Delaware Charter TR UA Feb 1 95
FBO Kennith L. Goddard 5,000 5,000
William Bruce Goodwin 10,000 10,000
Norbert Gottenberg 2,500 2,500
Delaware Charter TR UA Mar 29 95
FBO Ronald P. Green 5,000 5,000
Jeffrey M. Groh 1,500 1,500
Fredric E. Grundeman 2,500 2,500
Fred M. Harris 25,000 25,000
Hedge Fund
Partners, Ltd. 25,000 25,000
Delawar Charter TR UA May 16 95
FBO Robert L. Johnson 5,000 5,000
James F. Kenefick 25,000 25,000
Floyd L. Kittrell 5,000 5,000
Komatz Joint Account 5,000 5,000
Jack D. Koser 5,000 5,000
Ross T. Kruger MD PA
Profit Sharing Plan 5,000 5,000
Joseph Lazzara 5,000 5,000
Forrest Walton Lee 3,000 3,000
F. Walton Lee, Jr. 5,000 5,000
Donald J. Lippert 1,500 1,500
Mark W. Longman 2,000 2,000
Mark A. Lowenstein 5,000 5,000
James H. Lutz 2,500 2,500
John M. Madfis 5,000 5,000
John Frederick Mahaney &
Paula Jean Mahaney Jt Ten WROS 1,250 1,250
Ramon Martin-Busutil & Bridget
Martin-Busutil Jt Ten WROS 13,000 13,000
William Irvin McClanahan & Barbara
Toney McClanahan Jt Ten WROS 5,000 5,000
Merwin Assoc. L.P. 14,000 14,000
John L. Moran 10,000 10,000
Tadahiko Nakamurs 60,000 60,000
Delaware Charter TR UA June 9 95
FBO Charles E. Nightengale 10,000 10,000
Charles E. Nightengale &
B. Jeanne Nightengale Jt Ten WROS 5,000 5,000
A. L. Park 5,000 5,000
Samuel Peak 1,250 1,250
Vannette Forbes Poole 10,000 10,000
Robert C. Pyle 1,250 1,250
Lynden L. Rader 5,000 5,000
Tony L. Rampey 5,000 5,000
Richard Rasure &
Sidney Rasure Jt Ten WROS 3,500 3,500
23
Rand Redfern 5,000 5,000
Ralph M. Reitan 50,000 50,000
Delaware Charter TR FBO
Ralph M. Reitan UA Aug 25 94 25,000 25,000
Harvey Donald Rhoads 1,250 1,250
Richard J. Ruggiero &
Maryanne Ruggiero Jt Ten WROS 1,250 1,250
William B. Saeger 5,000 5,000
Delaware Charter TR UA Jun 9 95
FBO George Sauble 1,250 1,250
Eugene P. Schumacher 5,000 5,000
John R. Serafini Sr. 5,000 5,000
Serafini Serafini & Darling
Profit Sharing Plan FBP
John R. Serafini Jr. 5,000 5,000
Patrick J. Sharkitt &
Nellie E. Sharkitt Jt Ten WROS 5,000 5,000
Ardell J. Schelich TR of the
Ardell J. Schelich Trust
UA Sep 10 90 5,000 5,000
Fred Simmons 5,000 5,000
Barry Slosberg 15,000 15,000
Larry Brooks Smith 5,000 5,000
Charles D. Snow &
Bonnie Belle Snow Jt Ten WROS 5,000 5,000
Robert Wells Streett 10,000 10,000
Garner R. Stroud TR of the
Garner R. Stroud Trust
UA May 6 86 3,750 3,750
William R. Teele 5,000 5,000
J. David Thompson 1,500 1,500
United Sovereign Trust
Company Limited 10,000 10,000
Mary Fowler Virden 5,000 5,000
James F. Wagner &
Kathryn J. Wagner Jt Ten WROS 2,500 2,500
Luther M. Wikle 5,000 5,000
Martin G. Williams, Jr. 5,000 5,000
James Michael Wilson 5,000 5,000
Deborah Wolfson 25,000 25,000
Takuwa Yamamoto 5,000 5,000
812,432 812,432
No. of
Warrants No. of
Owned Prior Warrants
Name to Offering Offered
RAF Financial Corporation 40,922 40,922
Robert Long 40,921 40,921
24
PLAN OF DISTRIBUTION
The Common Shares will be offered from time to time by the Selling
Shareholders and RAF (i) in transactions in the over-the-counter
market, automated inter-dealer system on which the Common Shares
are then listed in negotiated transactions or a combination of such
methods of sale, and (ii) at market prices prevailing at the time
of sale, at prices related to such prevailing market prices, or at
negotiated prices. The Selling Shareholders and RAF may effect
such transactions directly with the broker-dealers. Such broker-
dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders and/or the
purchasers of the Common Shares for whom such broker-dealers may
act as agents or to whom they sell as principals, or both (which
compensation as to a particular broker-dealer might be in excess of
customary commissions). Sales of the Common Shares and Warrants
may be made pursuant to this Prospectus or pursuant to Rule 144
adopted under the 1933 Act.
No underwriting arrangements exist as of the date of this
Prospectus. Upon being advised of any underwriting arrangements
that may be entered into by the Selling Shareholders or RAF after
the date of this Prospectus, the Company will prepare and file a
post-effective amendment to this Registration Statement including
a supplement to this Prospectus to disclose the name of such
underwriters and such arrangements.
Expense of any sales pursuant to this Prospectus will be borne by
the Selling Shareholders, except that the Company is paying certain
of the expenses, which are estimated at $14,500, of registering the
Selling Shareholders' Common Shares under the 1933 Act, consisting
of all costs incurred in connection with the preparation of the
registration statement (except for any fees of counsel for the
Selling Shareholders or RAF). The Selling Shareholders and RAF
will pay or assume brokerage commissions, or underwriting
discounts, incurred in the sale of the Common Shares, which
commissions or discounts are not being paid or assumed by the
Company.
Registrant will bear the complete cost and expense of the
registration of the Warrants and the RAF Shares and any
qualification under securities laws of one state selected by each
holder of the Warrants desiring to sell the Warrants or the RAF
Shares, other than any selling commissions relating to the sale of
the Warrants and the RAF Shares.
RAF and its officer are not permitted by the terms of the Warrants
issued by the Company to sell or transfer the Warrants prior to
July 25, 1996. They are permitted, however, to exercise the
Warrants and sell the underlying Common Shares prior to July 25,
1996.
25
SELECTED FINANCIAL DATA
May 31,
--------------------------------------------------------
1994 1993 1992 1991
----------- ----------- ----------- -----------
Current assets $ 3,866,600 $ 1,650,300 $ 3,260,500 $ 7,302,300
Current liabilities 1,291,700 1,592,100 681,900 816,000
Working capital 2,574,900 58,200 2,578,600 6,486,300
Total assets 33,090,300 24,037,200 24,583,000 20,500,100
Long-term
obligations(1) 16,612,500 2,900,000 4,540,400 3,244,100
Shareholders' equity 12,559,100 15,063,200 14,982,900 15,045,500
November 30, 1995
May 31, 1995 (unaudited)
------------ -----------------
Current assets $ 4,058,000 $ 4,557,400
Current liabilities 4,036,000 2,797,400
Working capital 22,000 1,760,000
Total assets 34,165,000 35,179,600
Long-term obligations(1)(2) 15,882,300 15,917,800
Shareholders' equity 12,168,400 14,614,700
(1) Includes $3,951,800, $3,951,800, $1,695,600, $1,695,600, and
$725,900 of reclamation liabilities, and additional amounts of
other accrued liabilities, on uranium properties at May 31, 1995,
1994, 1993, 1992, and 1991, respectively. See Notes F and K to the
Consolidated Financial Statements contained in Registrant's 1995
Form 10-K.
(2) See Notes 4 and 5 to the unaudited Condensed Consolidated
Financial Statements contained in Registrant's Form 10-Q for fiscal
quarter ended November 30, 1995.
See the Form 8-K Report for February 16, 1996 for pro forma
condensed consolidated financial information, giving effect to the
Brunton sale.
26
Years Ended May 31,
-------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
Revenues $ 9,148,000 $ 8,776,300 $ 9,045,500 $ 6,353,600 $ 9,569,100
Income (loss) before
equity in income
(loss) of affiliates,
provision for
income taxes and
extraordinary item (2,281,500) (3,587,900) (103,100) 819,200 6,082,900
Equity in (loss) of
affiliates (442,300) (390,700) (444,700) (324,900) (96,100)
Net income (loss) (2,070,600) (3,370,800) (221,900) 613,200 6,164,900
Income (loss) per
share before
extraordinary item $ (.42) $ (.70) $ (.05) $ .09 $ .93
Extraordinary item -- -- -- .06 .62
----------- ----------- ----------- ----------- -----------
Income (loss) per
share before
cumulative effect
of accounting change (.42) (.70) (.05) .15 1.55
----------- ----------- ----------- ----------- -----------
Cumulative effect at
June 1, 1993 of
income tax
accounting change -- (.06) -- -- --
----------- ----------- ----------- ----------- -----------
Net income (loss)
per share $ (.42) $ (.76) $ (.05) $ .15 $ 1.55
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Cash dividends
per share $ -0- $ -0- $ -0- $ -0- $ -0-
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
27
Three Months Ended Six Months Ended
November 30, November 30
-------------------------- -------------------------
1995 1994 1995 1994
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
Revenues $ 3,229,500 $ 1,804,100 $ 8,894,800 $ 4,456,100
Income (loss) before
equity in
loss of affiliates
and provision for
income taxes (362,300) (656,800) (273,500) (1,152,800)
Equity in loss
of affiliates (90,300) (80,400) (165,900) (176,800)
Net loss (350,500) (534,200) (372,900) (987,400)
Net loss per share $ (.06) (.11) $ (.06) (.21)
Cash dividends per share -0- -0- -0- -0-
See the Form 8-K Report for February 16, 1996 for pro forma condensed
consolidated financial information, giving effect to the Brunton sale.
28
MATERIAL CHANGES
Brunton.
On February 16, 1996 Registrant completed the sale of 8,267,450
shares of common stock, $0.01 par value, (the "Stock") of Brunton
to Silva Production AB, a closely held Swedish corporation
("Silva"), pursuant to the terms of a Stock Purchase Agreement
dated January 30, 1996 (the "Agreement") by and between Registrant
and Silva. The Brunton transaction was prompted in part by
Registrant's desire to focus on its core business of acquiring and
developing mineral properties and mining and marketing minerals,
particularly uranium and gold. The Stock constitutes all of the
issued and outstanding shares of Brunton owned by Registrant as of
the date of the sale including 90,750 shares held in Brunton's
treasury.
The purchase price for the Stock was $4,300,000, which was a
negotiated price based on an Adjusted Shareholder's Equity in
Brunton (as defined in the Agreement) as of January 31, 1996 of
$2,399,103. Registrant received $300,000 upon execution and
delivery of the Agreement, approximately $3,000,000 by wire
transfer from Silva at closing and an agreement by Silva to pay
Registrant $1,000,000 in three annual installments of $333,333
together with interest at the rate of 7% per annum, such
installments to be paid on February 15, 1997, February 15, 1998 and
February 15, 1999.
In addition, Silva agreed that, in the operation of Brunton, Silva
will cause the existing Brunton products and operations (including
lasers and other new products being developed by Brunton at the
time of the sale) to be a separate profit center and to pay
Registrant 45% of the net profits before taxes derived from that
profit center for a period of four years and three months
commencing February 1, 1996. The first such net profits payment
will be made on or before July 15, 1997 for the period from
February 1, 1996 through April 30, 1997, if net profits are earned
for such period. Additional net profits payments will be made, on
July 15, 1998, July 15, 1999 and July 15, 2000, if net profits are
earned for the corresponding twelve month period. There can be no
assurance that Brunton will earn net profits for any such period
and therefore there can be no assurance that any such net profits
payment will be received by Registrant.
The assets of Brunton that were acquired by Silva through the
purchase of the Stock consist of certain real estate housing
Brunton's headquarters and manufacturing operations in Riverton,
Wyoming; Brunton's working capital; equipment, inventory,
machinery, personal property and all of Brunton's intellectual
property rights. Certain items of equipment and personal property
were withheld by the Registrant from the Agreement and transferred
29
from Brunton to Registrant, by mutual agreement with Silva, for
Registrant's assumption of the indebtedness thereon. Such items
include off-book inventory and depreciated mining equipment, real
estate not used in Brunton operations, and miscellaneous other
equipment, as well as 225,556 shares of Registrant's common stock,
par value $0.01 per share, and options to purchase 150,000 shares
of Registrant's common stock for $3.50 per share; 160,000 shares of
Crested Corp. common stock, par value $0.001, and options to
purchase (from Crested Corp.) 300,000 shares of Crested Corp.
common stock for $0.40 per share, all of which were previously
owned by Brunton. 125,556 shares of USE (and options to purchase
75,000 shares of USE), plus 60,000 shares of Crested (and options
to purchase 150,000 shares of Crested) were transferred to Plateau
in partial payment of debt owed to Plateau by USECC. The remaining
100,000 USE shares (and options to purchase 75,000 USE shares),
plus 100,000 Crested shares (and options to purchase 150,000 shares
of Crested) were transferred to SGMC.
Also at closing, the Registrant paid Brunton $171,685 for accrued
rentals on mining equipment owned by Brunton and transferred to
Registrant at closing, and the Registrant paid off $273,000 in bank
debt previously incurred by Brunton in connection with a loan to
the Registrant.
The sale will eliminate Brunton's manufacturing and/or marketing of
professional and recreational outdoor products from the commercial
segment of Registrant's business, except to the extent that there
are net profit payments from Silva over the next four years, of
which there can be no assurance. For the fiscal year ended May 31,
1995, Brunton's sales provided 49% of net revenues of USE (29% for
the six months ended November 30, 1995). The inability to include
Brunton's operations with Registrant's other operating revenues in
the future could result in continued operating losses for
Registrant, unless Registrant is able to develop other profitable
businesses, such as Registrant's uranium business or FNG's
construction business, to replace profits from Brunton. Continued
operating losses without offsetting replacements of working capital
will adversely affect USE's ability to continue its operations as
described in this Prospectus. See also Risk Factors 1 and 2 above
and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," in Registrant's 1995 Form 10-K.
On the other hand, receipt in February 1996 of $2,900,000 in net
cash from the sale will enhance the Company's financial condition
and medium term liquidity as well as providing additional resources
to put the Company's Plateau uranium mill into operation and
develop the Company's uranium and gold properties.
30
Plateau Resources.
Registrant intends to consolidated all of its uranium assets into
a wholly-owned subsidiary (Plateau Resources Limited) in the fiscal
year ending May 31, 1996, and fund the start up of its Shootaring
Canyon uranium mill and commencement of mining operations at the
mines now owned by Plateau in Utah, with debt or equity funding.
However, such consolidation has not been effected to date and there
are no agreements for the financing of such uranium operations.
There can be no assurance that uranium prices will remain at the
current level that the Company will succeed in obtaining long-term
uranium supply contracts required to allow Registrant to operate
its uranium properties profitably or that the required financing
will be available to put such properties into operation.
Update on Sheep Mountain Partners Arbitration
On April 18, 1996 the arbitration panel (the "Panel") entered an
Arbitration Order and Award (the "Order") in the Nukem/CRIC
proceedings. The Panel found in favor of the Registrant and
Crested on certain claims made by the Registrant and Crested
(including the claims for reimbursement of standby, maintenance
expense and other expenses on the SMP mines), and in favor of
Nukem/CRIC and against the Registrant and Crested on certain other
claims.
The Registrant and Crested were awarded monetary damages of
approximately $7.4 million, which amount is after deduction of
monetary damages which the panel awarded in favor of Nukem/CRIC and
against the Registrant and Crested. An additional amount of
approximately $4.8 million was awarded by the Panel to the
Registrant and Crested, to be paid out of cash funds held in SMP
bank accounts, which accounts have been accruing operating funds
from SMP since the arbitration/litigation proceedings were
commenced. It is anticipated that such payment out of the SMP bank
accounts will be made in May 1996.
The Panel ordered that one utility supply contract for 980,000
pounds of uranium oxide held by Nukem/CRIC belonged to SMP, and
ordered such contract assigned to SMP. The contract expires in
2000.
The fraud and RICO claims of the Registrant and Crested against
Nukem and CRIC were dismissed.
31
The timing of payment by Nukem/CRIC to the Registrant and Crested
of the $7.4 million monetary damages is presently uncertain. The
Registrant and Crested intend to seek a judicial order that such
amounts be paid out of the SMP additional funds being held in the
bank accounts.
The Panel did not order SMP dissolved. The Registrant and Crested
may seek to reach an agreement with Nukem/CRIC on dissolution of
SMP. If a dissolution is not achievable through negotiation, the
Registrant and Crested may seek judicial intervention and the
appointment of a receiver by the courts, to wind up the partnership
affairs and distribute assets after payment of liabilities. The
timing and ultimate resolution of the partnership dissolution
matter presently is uncertain. Pending such resolution, the
Registrant and Crested are hopeful that delivery obligations under
the various SMP utility supply contracts can be met through the
cooperation of Nukem/CRIC.
Construction - Four Nines Gold, Inc.
The contract awarded to FNG by the City of Lead, South Dakota for
municipal road and drainage construction and rock slide area
stabilization has been increased as a result of change orders by
the City to $3,550,604 as of December 31, 1995. FNG had performed
86 percent of the contract, billing $3,018,023 (including 5 percent
retainage against completion of the project) of which $2,656,224
had been paid as of December 31, 1995. FNG continues to expect the
contract to be profitable.
On September 13, 1995, FNG was awarded a separate construction
contract for $618,270 by the United States Department of the
Interior, Bureau of Reclamation, for the Minor Laterals, North
Canal, Stage 5, Belle Fourche Unit, South Dakota. The work
consists of constructing 3.81 miles of pipeline, approximately 1.4
miles of gravel-surfaced road, removing existing reinforced
concrete hydraulic structures and constructing miscellaneous
concrete structures which include four inlets. Notice to proceed
with the work on this contract was given on September 29, 1995,
with final completion required by May 10, 1996. As of December 31,
1995 FNG had performed 41% of the contract, billing $201,401 and
having received payment for all amounts billed. FNG expects this
contract to be profitable.
Wyoming Real Estate Sale to Arrowstar
On April 26, 1996 the USECC Joint Venture sold its Wind River
Estates Mobile Home Park (including various personal property) in
Riverton, Wyoming to Arrowstar Investments, Inc., a related party,
for $804,000, the appraised value. The total purchase price
consists of $500,000 cash; Arrowstar's unsecured 10% promissory
note due 2006 for $56,000; cancellation of USECC's $47,934.25
promissory note issued to Arrowstar on September 1, 1995 (for real
32
property in connection with a prior transaction); and $161,378.34
by Arrowstar assigning to USECC its entire interest in First-N-Last
L.L.C. Additionally, USECC will credit Arrowstar $38,687.41 for
goodwill due to Arrowstar's investing in First-N-Last. For
information relating to Arrowstar (and the components of the prior
transactions which comprised part of the April 26, 1996
transaction), see the Registrant's Proxy Statement dated October
27, 1995 incorporated by reference herein. Proceeds of the sale
will be applied to working capital. See "Managements Discussion
and Analysis of Financial Condition and Results of Operations," in
Registrant's 1995 Form 10-K.
Wyoming Real Estate Sale to Third Party
On April 25, 1996, the Registrant and Crested entered into an
agreement with a non-related party to sell 10 six-plex townhouses
located in Jeffrey City, Wyoming for $500,000, conditioned upon
purchaser obtaining financing for the full amount within 60 days.
Full real estate title will be transferred to the purchaser upon
closing, however, if purchaser removes the townhouses, purchaser
must reclaim the land and the real property where the townhouses
were located will be assigned and conveyed back to USE and Crested
by quit claim deed for full consideration of $10.00. Proceeds of
the sale will be applied to working capital. See "Managements
Discussion and Analysis of Financial Condition and Results of
Operations," in Registrant's 1995 Form 10-K.
Results of Operations for Three and Six Months Ended November 30,
1995 Compared to Three and Six Months Ended November 30, 1994
The following discussion does not reflect the impact of the sale of
Brunton. For such information, please see the Form 8-K Report for
February 16, 1996 for the pro forma condensed consolidated
statement of operations for the six months ended November 30, 1995.
Revenues for the six month period ended November 30, 1995
increased by $4,438,700 primarily due to increases in mineral sales
and a mineral option, construction contract revenues and the sale
of recreational and professional products.
Revenues from mineral sales and option were $2,174,300. There
were no similar uranium concentrate deliveries or option activities
for the same period in the prior year.
Construction contract revenues for the six and three months
ended November 30, 1995 increased by $1,926,600 and $896,000,
respectively, from profitable contracts awarded late in fiscal 1995
to the Registrant's subsidiary FNG.
33
Recreational product sales for the same periods increased by
$405,800 and $160,700, primarily as a result of continued expansion
into the recreational market and development of new products.
Commercial revenues decreased $172,200 for the six month period
compared to the six months ended November 30, 1994, as a result of
reduced fuel sales and equipment rentals during the six months
ended November 30, 1995, but increased by $69,600 for the three
month period ended November 30, 1995 compared to the same period in
1994, as revenues from fuel sales and equipment rentals increased
during the three months ended November 30, 1995. These
fluctuations are due to seasonal fuel sales and a major
construction project for GMMV during the quarter ended November 30,
1995.
Management fees and other revenues increased by $280,500 and
$102,600 for the six and three months ended November 30, 1995.
This increase is primarily as a result of increased revenues
generated by operations of a motel, convenience store and
restaurant at the Registrant's town of Ticaboo in southern Utah.
The costs of mineral sales increased by $1,824,300 for the six
months ended November 30, 1995 for which there were no
corresponding costs during the same period in 1994. Cost and
expenses associated with mineral operations decreased by $294,700
for the six months ended November 30, 1995 compared to the six
months ended November 30, 1994 primarily as a result of a decrease
in legal costs in connection with the SMP arbitration, but
increased by $54,200 for the three months ended November 30, 1995
compared to the same period in 1994 due to arbitrator fees paid
during the quarter. The cost of construction activities increased
by $1,341,300 and $733,400, respectively for the six month and
three month periods ended November 30, 1995 compared to the same
periods in 1994 as a result of increased contract work.
General and administrative expenses increased by $197,600 and
$263,900, respectively for the six and three months ended November
30, 1995. This increase is due to additional expenses associated
with the expansion of Brunton's products as well as FNG's
contracts. Additionally, interest expense which is included in
general and administrative expense increased by $43,000 during the
six months ended November 30, 1995 as compared to the same period
in 1994. Commercial operations expenses remained relatively
constant.
Operations for the six months ended November 30, 1995 resulted
in a pre-tax loss of $273,500 before equity in loss of affiliates
and minority interest in gain of consolidated subsidiaries of
$165,900 and $66,500, respectively, as compared to a loss of
$1,152,800 before equity in loss of affiliates and minority
interest in loss of consolidated subsidiaries of $176,800 and
$342,200, respectively, during the same period of the previous
year. After such equity losses, the Registrant recognized a net
loss of $372,900 compared to a loss of $987,400 for the comparative
period of the previous year.
34
Investment Banking Consulting Agreement
On January 9, 1996, Registrant retained Shamrock Partners Ltd.,
Investment Bankers ("Consultant") as a financial consultant and
advisor, on a nonexclusive basis, for a one year term subject to
renewal. As compensation for Consultant's services, Registrant has
agreed to grant Consultant a warrant to purchase 200,000 shares of
Registrant's common stock at a price of $5.00 per share. The
warrant is exercisable at any time during the term of the
Consulting Agreement and Consultant has a right to demand
registration of such shares under the Securities Act of 1933 with
Registrant's next filing under the Act or at any time after
expiration of the term of the Consulting Agreement.
Options and Shares Compensation Proposals
As of December 22, 1995, the Registrant's board of directors
amended the Registrant's 1989 Incentive Stock Option Plan, without
shareholder approval, to increase the number of options issuable to
employees (not including executive officers or directors of the
Registrant) from the present 275,000 options up to the increased
number of 700,000 options. All such newly authorized options will
be nonqualified under IRS regulations. Under the Plan as amended,
the board of directors has issued nonqualified options to purchase
a total of 360,000 shares, subject to continued employment and
exercisable at 20% per year, to employees; the exercise price of
the options is $4.00 (the fair market price at December 22, 1995),
subject to the market price of the shares being above $8.00 per
share for 30 days after grant date.
The board of directors also has proposed, subject to approval by
the shareholders at the next annual meeting, a stock award program
for the executive officers and directors of the Registrant, for the
award of common shares to each individual, as of March 1 of each
year of continued employment. The first award is tentatively set
to be March 1, 1997, in amounts of 20,000 shares for from three to
5 years per officer or director, however, no awards shall be made
until a formal plan is adopted and approved by the shareholders and
then only upon further decision of the compensation committee as to
other features of the plan (including payment of taxes for the
grantees with pay back arrangements) which may be desirable. The
stock award plan will conform to the Commission's proposed Rule
16b-3 for purposes of complying with Sections 16(a) and (b) of the
Exchange Act regarding shortswing profit prohibitions.
The board of directors expects both the amended 1989 Incentive
Stock Option Plan, and (subject to shareholder approval) the stock
award program for officers and directors, to be registered with the
Commission on Form S-8 in calendar 1996.
35
DESCRIPTION OF SECURITIES TO BE REGISTERED
The securities to be registered pursuant to this Registration
Statement consist of shares of the Company's $.01 par value common
stock.
Common Stock. The Company's Restated Articles authorize issuance of
20,000,000 shares of common stock, $.01 par value and 100,000
shares of preferred stock, $.01 per share par value. There are no
shares of preferred stock issued or outstanding as of the date of
this Prospectus.
Holders of common stock are entitled to receive dividends when and
as declared by the Board of Directors out of funds legally
available therefor.
Holders of common stock are entitled to one vote per share on all
matters upon which such holders are entitled to vote, and further
have the right to cumulate their votes in elections of directors to
the Company's Board of Directors. Cumulation is effected by
multiplication of shares held by the number of director nominees,
and voting is by casting the product as desired among the nominees;
directors are elected by a plurality of votes cast. Pursuant to
the Company's Restated Articles and the Wyoming Management
Stability Act, shares of common stock held by Crested may be voted
by Crested, shares of common stock held by Plateau may be voted by
Plateau and shares of common stock held by SGMC in elections of USE
directors, so long as USE conducts substantial business in Wyoming
and is "qualified" under such Act as having assets in excess of
$10,000,000, with a class of stock listed on NASDAQ or on a
principal exchange. As of the date of this Prospectus, Crested
owns 510,359 shares of Registrant's common stock or 8% of the
outstanding shares. Plateau owns 125,556 shares of Registrant's
common stock, as well as options to purchase 75,000 shares of
Registrant's common stock for $3.50 per share and SGMC owns 100,000
shares of Registrant's common stock and options to purchase 75,000
shares of Registrant's common stock for $3.50 per share. If such
options are exercised, Plateau and SGMC together would own
approximately 6% of Registrant's outstanding common stock.
In the event of dissolution, liquidation or winding up of USE,
holders of common stock are entitled to share ratably in assets
remaining after creditors (including holders of any preferred
stock, as to liquidation preferences) have been paid.
All outstanding shares of common stock (including the Common Shares
offered for sale by this Prospectus) have been fully paid and are
nonassessable. All shares of common stock issued on exercise of
the Warrants, when paid for as required by the Warrants, will be
issued as fully paid and nonassessable.
36
Warrants. The Company has issued Warrants which entitle the holder
thereof to purchase a total of 81,243 Common Shares. The Warrants
are currently held by RAF and Robert Long, one of RAF's executive
officers (collectively, "RAF"). RAF is entitled to exercise its
Warrants and sell the underlying Common Shares at any time prior to
the expiration of the Warrants on July 25, 2000, but RAF is not
permitted, by the terms of its Warrants, to sell the Warrants prior
to July 25, 1996. The Warrants are exercisable at a price of $4.80
per share, subject to adjustment of the number of Common Shares and
the price to be paid for a Common Share upon the occurrence of
certain events described in the Warrants. Holders of the Warrants
are not entitled to any rights of a shareholder of the Company.
EXPERTS
The consolidated financial statements of USE incorporated by
reference in this Prospectus from the Company's 1995 Form 10-K have
been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto,
and are included herein in reliance upon the authority of said firm
as experts in giving said reports. Reference is made to said
report which includes an explanatory paragraph that describes the
litigation discussed in Notes E and K to such Consolidated
Financial Statements.
LEGAL MATTERS
Stephen E. Rounds, Denver, Colorado, has acted as special counsel
to USE in connection with this offering.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Legal $ 8,000.00*
Audit 4,000.00*
SEC and state fees 2,500.00*
$ 14,500.00*
* Estimate
Item 15. Indemnification of Directors and Officers.
The Wyoming Business Corporation Act ("WBCA"), W.S. 17-16-850 et
seq., provides for indemnification of Registrant's officers,
directors, employees, and agents against liabilities which they may
incur in such capacities. A summarization of circumstances in
which such indemnification may be available follows, but is
qualified by reference to Registrant's Restated Articles of
Incorporation and the text of the statute.
37
In general, any officer, director, employee, or agent may be
indemnified against expenses, fines, settlements, or judgments
arising in connection with a legal proceeding to which such person
is a party, as a result of such relationship, if that person's
actions were in good faith, reasonably believed by him or her to be
in (or at least not opposed to) the Registrant's best interests,
and in the case of any criminal proceeding, he or she had no
reasonable cause to believe his or her conduct was unlawful.
Unless such person is successful upon the merits in such an action,
indemnification may be awarded only after a determination by
decision of the Board of Directors (by directors not at the time
parties to the proceeding) or by majority shareholder vote
(excluding shares held or controlled by directors who are at the
time parties to the proceeding), or by opinion of special legal
counsel.
The circumstances under which indemnification would be made in
connection with an action brought on behalf of the Registrant are
generally the same as stated above, except that indemnification is
permitted only for reasonable expenses.
In addition, Registrant has statutory authority to purchase
insurance to protect its officers, directors, employees, and agents
against any liabilities asserted against them, or incurred in
connection with their service in such capacities. Further, the
Registrant may advance or reimburse funds to a director who is a
party to a proceeding, for reasonable expenses incurred in
connection with a proceeding.
Item 16. Exhibits
5.1 and
23.2 Opinion and Consent of Stephen E. Rounds, Esq.*
10.1 Stock Purchase Agreement including amendments with Silva
Production AB, without exhibits.***
10.2 Agreement for sale of real estate to Arrowstar
Investments, Inc.**
10.3 Agreement for sale of real estate to TAG Development,
Inc.**
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants*
23.3 Consent of Coopers & Lybrand LLP, Independent Public
Accountants to GMMV*
* Previously filed.
** Filed herewith.
*** Incorporated by reference from Registrant's Form 8-K dated
as of February 16, 1996.
38
Item 17. Undertakings.
The Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the Registrations Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (ii) do not apply
if the information required to be included in a post-effective
amendment by such paragraphs, is contained in periodic reports
filed by the Registrant pursuant to Section 13 of the Securities
Exchange Act of 1934 that are incorporated by reference into this
Registration Statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement.
(a)(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(a)(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of this offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
section 13(a) of the Securities Exchange Act of 1934 that is
incorporated by reference in this Registration Statement, shall be
deemed to be a new Registration Statement relating to the
securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
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(h) Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended, may be permitted to
directors, officers, and controlling persons of the Registrant, the
Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, director, or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has
duly caused this Post-Effective Amendment No. 1 to its Registration
Statement on Form S-3 to be signed on its behalf by the
undersigned, duly authorized in the City of Riverton, Wyoming, on
May 6, 1996.
U.S. ENERGY CORP.
(Registrant)
Date: May 6, 1996 By: s/ John L. Larsen
JOHN L. LARSEN, President
and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement was signed by the following persons in
the capacities and on the dates stated.
Date: May 6, 1996 By: s/ John L. Larsen
JOHN L. LARSEN, President
and Director
Date: May 6,1996 By: s/ Max T. Evans
MAX T. EVANS, Director
Date: May 6, 1996 By: s/ Harold F. Herron
HAROLD F. HERRON, Director
Date: May ___, 1996 By:
DON C. ANDERSON, Director
Date: May ___, 1996 By:___________________________
DAVID W. BRENMAN, Director
Date: May 6, 1996 By: s/ Nick Bebout
NICK BEBOUT, Director
Date: May 6, 1996 By: s/ Robert Scott Lorimer
ROBERT SCOTT LORIMER,
Principal Financial
Officer and Chief
Accounting Officer
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