Prospectus
U.S. ENERGY CORP.
457,780 COMMON SHARES
__________________________________________
457,780 shares of common stock, par value $0.01 per share (the
"Shares"), are offered for sale by certain shareholders of U.S. Energy
Corp. ("USE", the "Company" or "Registrant"), a Wyoming corporation.
The holders thereof are referred to as "Selling Shareholders". The
Selling Shareholders purchased 343,333 of the Shares from USE as part
of a private placement of 400,000 shares of USE common stock in fiscal
1995. The Brunton Company ("Brunton") purchased the remaining 56,667
shares of USE common stock in that private placement, but is not a
participant in this offering. The entire 400,000 shares of USE common
stock originally purchased 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 share of its common stock for
every three shares of such USE common 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 USE common stock originally purchased, in lieu of paying cash
redemptions. The Selling Shareholders acquired 114,447 of these
additional Shares in lieu of redemption in cash and such additional
Shares are covered by this Prospectus. The issuance of 133,335
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 its common stock in
cash.
The Shares constitute approximately 7% of the outstanding shares of USE
common stock on the date of this Prospectus. The 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"). None of the
foregoing shares of USE common stock acquired by Brunton in the fiscal
1995 private placement are being registered under this Registration
Statement and there are no plans to register for resale those Brunton
shares, or any of the other shares of USE common stock that had been
held by Brunton prior to its sale to Silva Production AB (see "Material
Changes").
Common stock of USE is traded on the NASDAQ/NMS quotation system. At
May 22, 1996, the closing bid price was $26.50 per share.
The Shares will be offered by the Selling Shareholders, at market
prices from time to time. Selling commissions will be paid by the
Selling Shareholders for Shares sold by them. No sales proceeds will
be paid to the Company or any subsidiary of the Company. See "Plan of
Distribution."
_______________________________________________
These are Speculative Securities.
Such Securities Involve a High Degree of Risk.
See "Risk Factors" starting on page 6.
_______________________________________________
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 30, 1996.
_____________________________________________________
No one is authorized to give any information, or make any
representation on behalf of USE, 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, 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.
2
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.
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, November 30, 1995 and February 29, 1996; (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."
3
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.
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 and
three months, 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 approximately
$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.
4
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.
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 six fiscal years ended May 31, 1996.
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.
5
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 Shares involves substantial risks, including
the risks of USE's failure to obtain necessary capital to put its
principal properties into production, a recurrence of low uranium
prices, litigation and competition. See "RISK FACTORS" beginning
on the next page.
The Offering
Securities Offered (1). . . . . . . . . . . . 457,780 shares
of common stock(2)
USE Common Stock Outstanding
Before and After Offering . . . . . . . . . 6,460,309 shares(3)
NASDAQ/NMS Symbol . . . . . . . . . . . . . . "USEG"
________________
(1) See "Description of Securities." (2) See "Plan of
Distribution." (3) Includes 81,243 shares of USE common stock
that were issued to RAF Financial Corporation ("RAF") and Robert
Long ("Long"), an officer of RAF The shares were issued to RAF and
Long upon exercise of Warrants issued to RAF and Long and are part
of the 893,675 shares of USE common stock registered for resale
under the Company's Registration Statement on Form S-3 on file with
the Commission (SEC File No. 33-64773), which became effective on
February 28, 1996 (see Risk Factor 5).
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
6
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 November 30,
1995; (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.
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 812,432 shares of the Company's
common stock 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.
7
Monthly operating expense to hold properties and fund general and
administrative expense is estimated at $600,000 to $700,000 for
fiscal 1997. 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 February 29, 1996
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.
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, 1995). 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 sought
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.
8
Recovery by USE and Crested of their funds advanced to the SMP
partnership will depend on the timing of payment on awards in the
litigation/arbitration, which timing presently is uncertain but is
expected to be in May 1996. 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.
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
9
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.
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.
10
5. Additional Shares to Market; Possible Dilution. In addition to
the Shares registered for resale by the Selling Shareholders as
described in this Prospectus, Registrant sold 812,432 shares of its
common stock (the "Placement Shares") to private investors in June
and July 1995.
As compensation for their services as Placement Agent, on a best
efforts basis, for the Placement Shares, Registrant granted RAF
Financial Corporation ("RAF") and Robert Long ("Long"), one of its
officers, warrants to purchase 81,243 shares of USE common stock
for $4.80 per share until July 25, 2000 (the "RAF Warrants"). The
Placement Shares, the RAF Warrants and 81,243 shares of USE common
stock underlying the RAF Warrants (the "RAF Shares") were
registered under the 1933 Act for resale by the holders of such
Placement Shares and by RAF and Long, respectively, by Registrant
filing its Registration Statement on From S-3 with the Commission
(SEC File No. 33-64773) which was declared effective by the
Commission on February 28, 1996. RAF and Long exercised their RAF
Warrants on March 7, 1996 and May 1, 1996, respectively. The
public sale of the Placement Shares and the RAF Shares may depress
the market price for the Company's common stock.
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
11
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
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, Canada, Australia 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.
Market prices for uranium concentrates in the United States have
recovered to between $15.75 and $15.90 per pound as of March 26,
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
during the balance of 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 sooner than planned (see also Risk Factor 12).
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 March 29, 1996 the Comex spot price of gold was
$395.80 per ounce.
12
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 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.
13
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
discovery monument and posting thereon a location notice, marking
the boundaries of the claim with monuments, and filing a
certificate of location with the county in which the claim is
located and with the U. S. Bureau of Land Management ("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").
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.
14
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 SMP properties 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,
both located 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 concentrates
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).
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.
15
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 worth an estimated 810,000 pounds
to be delivered form 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, the prices under the one remaining base escalated
contract 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".
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
16
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,
all of which it acquired for little or no cost. Applications have
been submitted to upgrade the mill 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 from 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, as well as 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.
USE's affiliate FNG encounters strong competition with a number of
larger civil engineering construction firms in the western United
States.
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, ore 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.
17
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.
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.
18
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 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 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 those purchasing the
Shares.
19
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."
SELLING SECURITY HOLDERS
The following is a listing of the Selling Shareholders, the amount
of Shares to be offered for each such Selling Shareholder's account
and the amount of USE's common stock owned by each Selling
Shareholder prior to the offering and to be held by such Selling
Shareholder after completion of the offering. Except as noted
below, none of the Selling Shareholders (i) has had any position,
office or other material relationship with the Registrant or any of
its affiliates within the past three years, or (ii) to the
knowledge of the Company, will own one percent or more of the
Company's outstanding common stock after completion of the
offfering. It is anticipated each seller will own none of the
Shares hereby offered, after completion of the offering.
No. of
No. of No. of Shares of
Shares to Shares of USE USE Common
be Offered Common Stock Stock to be
by Selling Owned Prior Owned After
Name Shareholder to Offering* Offering
Keith G. Larsen(1) 88,891 133,310 44,419
Mark J. Larsen(2) 86,668 111,449 24,781
Robert Scott Lorimer(3)
and Desiree Lorimer(4)
Jt. Ten. WROS 11,111 45,614 34,503
George F. Smith(5)
and Marilyn M. Smith(4)
Jt. Ten. WROS 22,267 53,282 31,015
DMS, Co.(6) 22,267 110,638 (14) 88,371 (1.4%)
Sandra Lee Sweeney(4) 13,333 56,875 43,542
Richard P. Larsen(1) 33,333 58,877 25,544
20
Max T. Evans(7) and
Lois B. Evans(4)
Jt. Ten. WROS 8,889 62,377 53,488
Thomas M. Evans(2) 19,555 25,592 6,037
Kenneth Webber(2)
and Deanna Webber(4)
Jt. Ten. WROS 18,223 36,127 17,904
William W. DeLapp(8)
and Lauren K. DeLapp(4)
Jt. Ten. WROS 4,444 4,979 535
M. Shane Larsen(2) 10,972 21,734 10,762
Hanifen, Imhoff Inc.
Custodian FBO
Michael D. Zwickl(9)
IRA DTD 4-15-92 4,444 7,444 3,000
Steven P. Accardo 3,200 5,153 1,953
FMS Profit Sharing Plan(16) 44,444 44,444 -0-
Nucor, Inc.(10) 11,111 26,061 (15) 14,950
Charles M. Wojcieszak(11)
and Judy L. Wojcieszak
Jt. Ten. WFROS 2,267 2,417 150
Maureen E. Evans 10,667 10,667 -0-
Albert E. Dearth(12) 22,667 26,066 3,399
James L. Edwards 4,533 4,533 -0-
Harold I. Gibson 4,980 4,980 -0-
James S. Neiman
Trustee of the
James S. Neiman
Revocable Trust
dated June 13, 1989,
as amended and Restated 2,267 2,267 -0-
Sally Ann Neiman
Trustee of the
Sally Ann Neiman
Revocable Trust
dated June 13, 1989,
as amended and Restated 2,267 2,267 -0-
Ronald J. Pasco(13) and
Mary Anne Pasco
Jt. Ten. WROS 4,980 4,980 -0-
* Includes shares held directly, shares held in the USE Employee
Stock Ownership Plan (the "ESOP") account established for the
benefit of employee (see Footnotes below for which Selling
Shareholders are employees), shares held jointly, and shares
held directly by immediate family members in the same
household.
(1) USE employee and director of Northwest Gold, Inc., an
affiliate of USE.
(2) USE employee.
21
(3) Treasurer of USE and Crested Corp., and Chief Financial
Officer and Controller of USE and all affiliate companies.
(4) Spouse of an employee of USE and/or of an affiliate of USE.
(5) USE employee and director of Ruby Mining Company, an affiliate
of USE.
(6) Daniel P. Svilar, general counsel, an officer of USE and an
officer and director of USE affiliates, is a partner in DMS
Co.
(7) Secretary and director of USE; President, Chief Operating
Officer and director of Crested Corp., an affiliate of USE.
(8) President and director of Four Nines Gold, Inc., an affiliate
of USE.
(9) Director of Crested Corp., an affiliate of USE.
(10) Corporation of which Nick Bebout, a director of USE, is
president and a director. Share number includes 9,500 shares
held by Mr. Bebout directly or with his wife.
(11) Is on a cash retainer to perform investigative and security
services for USE.
(12) USE employee, President, Chief Operating Officer and director
of Plateau Resources Limited, a 100% subsidiary of USE.
(13) President and Chief Executive Officer of First Interstate Bank
of Commerce Gillette, Wyoming, the principal lender to USE and
its affiliates.
(14) Includes shares held by Daniel P. Svilar (see Footnote 6).
(15) Includes shares held by Nick Bebout (see Footnote 10).
(16) Stuart Kobrovsky, Trustee of FMS Profit Sharing Plan, was a
financial consultant to USE from April 11, 1992 to May 31,
1995.
PLAN OF DISTRIBUTION
The Shares will be offered from time to time by the Selling
Shareholders (i) in transactions in the over-the-counter market,
automated inter-dealer system on which the Company's common stock
is 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 may effect such
transactions directly with the broker-dealers. Such broker-dealers
22
may receive compensation in the form of discounts, concessions or
commissions from the Selling Shareholders and/or the purchasers of
the 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 Shares 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 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 $10,000, of registering the
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). The
Selling Shareholders will pay or assume brokerage commissions, or
underwriting discounts, incurred in the sale of the Shares, which
commissions or discounts are not being paid or assumed by the
Company.
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
__________
23
(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.
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-
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
24
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.
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.
25
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
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 and
three months, 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).
26
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 approximately
$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.
Plateau Resources.
Registrant intends to consolidate 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 in place 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.
27
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.
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.
28
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 as determined by McDonald
Appraisal Service Inc. as of April 5, 1996. 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 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.
29
Three and Nine Months Ended February 29, 1996 Compared to Three and
Nine Months Ended February 28, 1995
Revenues for the nine month and three month periods ended
February 29, 1996 increased by $4,513,300 and $489,300,
respectively, primarily due to an increase in mineral sales, a
mineral option, and an increase in construction contract revenues.
Revenues from mineral sales and option were $3,116,700 and
$942,400 for the nine and three months ended February 29, 1996.
There were no similar U3O8 deliveries or option activities for the
same period in the prior year.
Construction contract revenues for the nine and three months
ended February 29, 1996 increased by $2,450,000 and $523,400
respectively from profitable contracts awarded late in fiscal 1995
to the Registrant's subsidiary FNG.
Management fees and other revenues increased by $168,400 and
decreased by $62,300 for the nine and three months ended February
29, 1996. The 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 were $2,766,700 for the nine months
and $942,400 for the three months ended February 29, 1996, for
which there were no corresponding costs during the same period in
1995. Cost and expenses associated with mineral operations
decreased by $403,100 and $108,400, respectively, for the nine and
three months ended February 29, 1996, compared to the nine and
three months ended February 28, 1995, primarily as a result of a
decrease in legal costs in connection with the SMP arbitration.
The cost of construction activities increased by $1,779,200, and
$437,900, respectively for the nine month and three month periods
ended February 29, 1996 compared to the same periods in 1995 as a
result of increased contract work.
General and administrative expenses increased by $496,700 and
decreased by $340,600, respectively for the nine and three months
ended February 29, 1996 compared to the comparable 1995 periods.
The increase was due to additional expenses associated with the
FNG's contracts. Additionally, interest expense which is included
in general and administrative expense increased by $46,200 during
the nine months ended February 29, 1996 as compared to the same
period in 1995. General and administration expenses also increased
due to the Christmas bonus paid in stock to certain employees
during the quarter ended February 29, 1996 and to the shares of
stock issued in February 1996 under Registrant's Restricted Stock
Bonus Plan. The total of these stock issuances was compensation of
$297,400. Officers and directors were not issued any stock
compensation (see Note 6). Commercial operations expenses remained
relatively constant.
30
Operations for the nine months and three months ended February
29, 1996 resulted in a loss from continuing operations of
$1,765,400 and $1,074,400, respectively, as compared to a loss of
$1,437,700 and $270,300 during the same periods of the previous
year. During the nine months and quarter ended February 29, 1996
the Registrant recorded a gain of $2,295,700 net of $50,000 in
taxes, on the sale of Brunton. No such gain was recognized in the
prior year's periods. Due to the discontinuance of operations from
Brunton during the quarter ended February 29, 1996, all income from
Brunton is shown as discontinued operations on the Statements of
Operations for the quarter and nine months ended February 29, 1995.
During the nine months and quarter ended February 29, 1996 the
Registrant recognized income of $308,900 and a loss of $9,200,
respectively, from Brunton's discontinued operations as compared to
a gain of $121,900 and a loss of $58,100 for the corresponding
periods of the prior year. The Registrant therefore recognized a
net income of $839,200 ($0.14 per share) compared to a loss of
$1,315,800 ($0.27 per share) for the nine month period and net
income of $1,212,100 ($0.19 per share) compared to a loss of
$328,400 ($0.07 per share) for the three month period, of the
previous year.
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 Warrants to purchase 200,000 shares of
Registrant's common stock at a price of $5.00 per share. Such
Warrants were issued on March 26, 1996. The Warrants are
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.
31
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.
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. The Company's Restated Articles authorize issuance of
20,000,000 shares of common stock, $.01 per share 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 may be voted 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 approximately 8% the outstanding shares. Plateau owns
125,556 shares of Registrant's common stock, as well as options to
32
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 the Company's common stock (including the
Shares offered for sale by this Prospectus) have been fully paid
and are nonassessable.
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.
33