FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal quarter ended August 31, 1998 or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____ to ____
Commission file number 0-8773
CRESTED CORP.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Colorado 84-0608126
- ------------------------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
877 North 8th West, Riverton, WY 82501
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(Address of principal executive offices) (Zip Code)
Registrant's telephone Number, including area code: (307) 856-9272
--------------------------
NONE
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at October 14, 1998
- --------------------------------------- ------------------------------------
Common stock, $.001 par value 10,302,694 Shares
CRESTED CORP. AND AFFILIATE
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Condensed Consolidated Balance Sheets
August 31, 1998 and May 31, 1998...............................3-4
Condensed Consolidated Statements of Operations
Three Months Ended August 31, 1998 and 1997......................5
Condensed Consolidated Statements of Cash Flows
Three Months Ended August 31, 1998 and 1997......................6
Notes to Condensed Consolidated Financial Statements.................7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................8-11
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings................................................12-13
ITEM 6. Exhibits and Reports on Form 8-K....................................13
Signatures..........................................................14
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CRESTED CORP. AND AFFILIATE
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
August 31, May 31,
1998 1998
---- ----
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 2,227,600 $ 1,012,700
Accounts receivable
Trade, net of allowance for doubtful accounts 62,400 89,500
Affiliates 1,904,700 939,900
Current portion of long-term receivable
Related parties 229,500 227,800
SMP settlement receivable -- 2,513,000
Inventory and other 96,600 26,400
------------ ------------
TOTAL CURRENT ASSETS 4,520,800 4,809,300
LONG-TERM NOTES RECEIVABLE
Related parties 95,500 116,500
Real estate sale, net of valuation allowance of $882,900 182,500 182,500
INVESTMENTS IN AFFILIATES 1,557,800 1,643,300
INVESTMENT IN CONTINGENT WARRANT 651,000 651,000
PROPERTIES AND EQUIPMENT 5,902,400 5,876,700
Less accumulated depreciation,
depletion and amortization (3,285,400) (3,221,700)
------------ ------------
2,617,000 2,655,000
OTHER ASSETS 155,300 153,800
------------ ------------
$ 9,799,900 $ 10,211,400
============ ============
See notes to Condensed Consolidated Financial Statements.
3
CRESTED CORP. AND AFFILIATE
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
August 31, May 31,
1998 1998
---- ----
(Unaudited)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 409,600 $ 698,800
Deferred GMMV purchase option 2,000,000 2,000,000
Current portion of long-term debt
Affiliate 6,945,500 6,547,100
Others 136,900 36,400
------------ ------------
TOTAL CURRENT LIABILITIES 9,492,000 9,282,300
LONG-TERM DEBT 36,000 42,100
RECLAMATION LIABILITY 725,900 725,900
COMMITMENTS AND CONTINGENCIES
FORFEIT ABLE COMMON STOCK, $.001 par value
65,000 shares issued, forfeit able until earned 43,900 43,900
SHAREHOLDERS' (DEFICIT) EQUITY:
Preferred stock, $.001 par value;
100,000 shares authorized;
none issued or outstanding -- --
Common stock, $.001 par value;
20,000,000 shares authorized;
10,237,694 shares issued and outstanding 10,200 10,200
Additional paid-in capital 6,375,400 6,375,400
Accumulated deficit (6,883,500) (6,268,400)
------------ ------------
(435,000) 117,200
------------ ------------
$ 9,799,900 $ 10,211,400
============ ============
See notes to Condensed Consolidated Financial Statements.
4
CRESTED CORP. AND AFFILIATE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
August 31,
-----------------------------
1998 1997
---- ----
(Unaudited) (Unaudited)
REVENUES:
Mineral revenue $ 24,500 $ 458,100
Commercial operations 329,800 220,700
Interest 37,400 28,300
Oil sales 9,500 24,300
Management fees and other 220,900 155,000
Gain on sale of assets -- 400
------------ ------------
622,100 886,800
COSTS AND EXPENSES:
Mineral operations $ 327,200 $ 187,400
Commercial operations 202,200 64,400
General and administration 627,100 330,100
Oil production 11,100 7,300
Interest expense 6,700 4,400
------------ ------------
1,174,300 593,600
------------ ------------
(LOSS) INCOME BEFORE EQUITY IN LOSS OF
AFFILIATE AND INCOME TAX PROVISION (552,200) 293,200
EQUITY IN LOSS OF AFFILIATE (62,900) (47,300)
------------ ------------
(LOSS) INCOME BEFORE PROVISION
FOR INCOME TAXES (615,100) 245,900
PROVISION FOR INCOME TAXES -- --
------------ ------------
NET (LOSS) INCOME $ (615,100) $ 245,900
============ ============
NET (LOSS) INCOME PER SHARE,
BASIC AND DILUTED $ (.06) $ .02
============ ============
BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING 10,237,694 10,237,694
============ ============
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 10,302,694 10,302,694
============ ============
See notes to Condensed Consolidated Financial Statements.
5
CRESTED CORP. AND AFFILIATE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
August 31,
-----------------------------
1998 1997
---- ----
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (615,100) $ 245,900
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 63,700 44,100
Equity in loss of affiliates 62,900 47,300
Net changes in components
of working capital 1,218,400 (783,400)
----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 729,900 (446,100)
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred GMMV purchase option -- 2,000,000
Decrease (increase) in long-term receivables 19,300 (15,800)
Investments in affiliates -- (95,800)
Purchases of property and equipment (25,700) (32,000)
Increase in other assets (1,400) --
----------- -----------
NET (CASH USED) PROVIDED BY
INVESTING ACTIVITIES: (7,800) 1,856,400
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on long-term debt (6,100) (11,700)
Increase in long-term debt 100,500 --
Net activity on debt to affiliate 398,400 16,200
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 492,800 4,500
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,214,900 1,414,800
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,012,700 37,100
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD 2,227,600 1,451,900
----------- -----------
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 6,700 $ 4,400
=========== ===========
See notes to Condensed Consolidated Financial Statements.
6
CRESTED CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) The Condensed Consolidated Balance Sheet as of August 31, 1998 the
Condensed Consolidated Statements of Operations and Cash Flows for the three
months ended August 31, 1998 and 1997, have been prepared by the Registrant
without audit. The Condensed Consolidated Balance Sheet at May 31, 1998, has
been taken from the audited financial statements included in the Registrant's
Annual Report on Form 10-K filed for the year then ended. In the opinion of the
Registrant, the accompanying financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to fairly present the
financial position of the Registrant and its affiliate as of August 31, 1998,
the results of operations and cash flows for the three months ended August 31,
1998.
2) Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these financial
statements be read in conjunction with the Registrant's May 31, 1998 Form 10- K.
The results of operations for the periods ended August 31, 1998 and 1997 are not
necessarily indicative of the operating results for the full year.
3) The condensed consolidated financial statements of the Registrant
include its proportionate share of the accounts of USECB Joint Venture ("USECB"
or "USECC") which is owned 50% by Registrant and 50% by Registrant's parent,
U.S. Energy Corp. ("USE"). All material inter-company profits and balances have
been eliminated.
4) Debt at May 31, 1998 and August 31, 1998 consists primarily of the
balance on a note payable to the Registrant's parent USE of $6,547,100 and
6,945,500, respectively. The remaining long-term debt of $172,900 is for various
equipment purchases and the financing of annual insurance premiums through
financial institutions.
5) The reclamation liability of $725,900 represents the Registrant's
share of the liability at the Sheep Mountain Mines in the Crooks Gap Mining
District. This reclamation work may be performed over several years and will not
be commenced until such time as all the uranium mineralization contained in the
properties is produced or the properties are abandoned. It is not anticipated
that either of these events will occur for sometime into the future.
6) In February 1997, SFAS No. 128 "Earnings per Share" was issued and
specifies the computation, presentation and disclosure requirements for earnings
per share. SFAS 128 is effective for periods ended after December 15, 1997 and
requires retroactive restatement of prior period earnings per share. The
statement replaces "primary earnings per share" with "basic earnings per share"
and replaces "fully diluted earnings per share" with "diluted earnings per
share." Adoption of SFAS 128 did not have an effect on the Registrant's
previously reported net income (loss) per common share.
7) Certain reclassifications have been made in the May 31, 1998
financial statements to conform to the classifications used in August 31, 1998.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following is Management's Discussion and Analysis of significant
factors which have affected the Registrant's liquidity, capital resources and
results of operations during the periods included in the accompanying financial
statements.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended August 31, 1998, the Registrant received
$2,513,000 in cash as a result of a partial settlement of the Sheep Mountain
Partners ("SMP") arbitration. This increased the cash position of the Registrant
at August 31, 1998 to $2,227,600 or a net increase for the quarter in cash of
$1,214,900. Other increases in components of working capital were increases in
Inventory and other of $70,200 and Accounts Receivable Affiliates of $964,800.
Inventory and other increased by $70,200 as a result of prepaid insurance being
paid for during the quarter ended August 31, 1998. Accounts Receivable
Affiliates increased due to the Registrant and USE advancing funds for the Green
Mountain Mining Venture ("GMMV") operations that have not yet been reimbursed by
the GMMV from the proceeds of the loan from Kennecott Uranium Company ("KUC").
The major component of decreased working capital during the quarter
ended August 31, 1998, is an increase in the current portion of long-term debt.
Long term debt and the current portion of long term debt increased by $492,800
during the quarter ended August 31, 1998. This increase is due to amounts owed
the Company's parent U.S. Energy Corp. ("USE") for shared expenses that USE paid
on behalf of both companies. These expenses during the quarter ended August 31,
1998 consisted primary of payroll expense which increased the debt to USE by
$398,400. The other increase in debt was as a result of financing the Registrant
and USE's annual insurance premium, which increased debt by $100,500.
CAPITAL RESOURCES
GENERAL: The primary source of the Registrant's capital resources for
the remaining nine months of fiscal 1999 are the cash on hand at August 31,
1998; the potential receipt of cash from the SMP Arbitration Award once the 10th
Circuit Court of Appeals rules on the Nukem appeal; possible equity financing
from affiliated companies, and proceeds under the line of credit. The Registrant
will continue to rely on USE to provide funding for its expenditures for the
remaining nine months of fiscal 1999. Additionally, the Registrant and USE will
continue to offer for sale various non-core assets such as equipment, lots and
homes in Ticaboo, real estate holdings in Wyoming, Colorado and Utah and mineral
interests. Interest, rentals of real estate holdings and equipment, aircraft
chartering and aviation fuel sales, also will provide cash.
LINE OF CREDIT: The Registrant and USE have a $1,000,000 line of credit
with a commercial bank. The line of credit is secured by various real estate
holdings and equipment belonging to the Registrant and USE. It is anticipated
that this line of credit may be used to finance short term working capital
needs.
FINANCING: Equity financing for Sutter Gold Mining Company ("SGMC") and
Plateau Resources Ltd. ("Plateau") are dependent on the market price of gold and
uranium among other conditions. As of August 31, 1998, the prices for these
metals remained depressed and it is not known when they will recover. The
Registrant and USE continue to be optimistic concerning the future markets for
these metals but cannot accurately forecast what the prices will be in the short
or long term markets. If the price for these metals do not increase in the short
term, the working capital of Registrant and USE will be impacted negatively due
to holding costs of the properties and the ability of raising equity funding
could be impaired.
8
SUMMARY: The Registrant believes that cash on hand at August 31, 1998
as well as proceeds from its line of credit, if needed, and the Registrant's
continued reliance on USE, will be adequate to fund working capital requirements
through fiscal 1999. However, these capital resources will not be sufficient to
provide the funding for major capital expansions of the Registrant's mineral
properties.
CAPITAL REQUIREMENTS
GENERAL: The primary requirements for the Registrant's working capital
during the remainder of fiscal 1999 are expected to be the costs associated with
the development activities of Plateau, care and maintenance costs of the former
SMP mineral properties acquired from SMP last June, payments of holding fees for
mining claims, the Registrant's portion of the costs associated with the GMMV
properties and corporate general and administrative expenses.
SGMC: The Registrant owns a minority interest in SGMC and is therefore
not directly responsible for the ongoing administrative and development costs of
the properties owned by SGMC. Through its affiliation with USE however, the
Registrant assists in the efforts to secure financing to place the SGMC
properties into production.
SMP: As part of a settlement agreement reached during the fourth
quarter of 1998, the SMP mines and associated properties were transferred to the
Registrant and USE. The holding and reclamation costs associated with these
mining properties are the responsibility of the Registrant and USE. The holding
costs historically have been approximately $85,000 per month. The Registrant and
USE continue to search for improved techniques that will reduce these monthly
costs. The future reclamation costs on the SMP properties are covered by a
reclamation bond which is secured by the pledge of certain of the Registrant and
USE's real estate assets. The dollar amount for the reclamation bond is reviewed
annually by the state regulatory agencies. The Registrant's portion of the
reclamation liability on the SMP properties is $725,900 and is shown as
"Reclamation liability " within the condensed consolidated balance sheet.
It is not anticipated that the SMP properties will be placed into
production during Fiscal 1999. The Registrant and USE have determined that the
SMP mining properties should be maintained and prepared for production in the
future when the price of uranium increases into the $15 per pound range or at
such time as the Registrant and USE are able to obtain long term delivery
contracts with favorable price terms and the Sweetwater Mill (which is owned and
operated by the GMMV) is placed into production. There are no major reclamation
obligations during the balance of Fiscal 1999 that the Registrant and USE are
aware of on the properties.
In addition to receiving the SMP mining properties back in the
settlement of a portion of the SMP arbitration issues, the Registrant and USE
also received one of the market related delivery contracts which had previously
belonged to SMP. There is one delivery under this contract during the third
quarter of Fiscal 1999. The delivery requirement was sold to a third party and
the Registrant and USE will make a nominal amount of profit on the sale during
the third quarter of 1999. As of August 31, 1998, the Registrant has no
additional delivery or financing commitments for the sale or purchase of uranium
during Fiscal 1999.
GMMV: During July 1998, the GMMV Management Committee unanimously
agreed to place the Jackpot Mine and Sweetwater Mill on active standby status.
This decision was made as a result of uncertainties in the short term uranium
market. These same uncertainties have made the financing of the acquisition of
Kennecott's interest in the GMMV more difficult. The Registrant and USE have
until October 31, 1998 to complete the financing efforts to purchase Kennecott's
interest. It appears unlikely that the financing will be successfully completed
and the Acquisition Agreement which, was signed on June 23, 1997, will expire on
October 31, 1998.
9
After October 31, 1998 the mines and the mill will continue to be
maintained. Kennecott's obligation to fund the first $50 million in expenditures
is now satisfied and the Registrant and USE will be obligated to fund their 50%
of the ongoing costs. The Management Committee of the GMMV is currently
discussing what level of expenditures should be made to maintain the properties.
A final decision on these expenditures has not been reached but the Registrant,
USE and Kennecott are desirous that the expenses be held to a minimum. It is
anticipated that if the annual expenditures do not exceed $2 million for standby
and maintenance that the Registrant and USE, will be able to fund their portion
of this commitment through fiscal 1999.
Expenditures through July 1998 were covered under the $16 million
dollar loan from Kennecott Energy pursuant to the Acquisition Agreement. As of
the filing of this report, all those costs had not been paid to the Registrant
and USE by the GMMV. The Management Committee of GMMV is currently evaluating
the billings and it is anticipated that they will be completely resolved in the
second quarter of Fiscal 1999.
PLATEAU: Plateau owns and operates the Ticaboo Townsite, motel,
convenience store and restaurant. Additionally Plateau owns and maintains the
Tony M uranium mine and Shootaring Uranium mill. The Registrant and USE are
currently working to obtain the necessary permits from the NRC and State of Utah
to place the Shootaring mill into production. The Registrant and USE are seeking
debt or equity financing of between $6 million and $9 million to put the mill
and Tony M mine into production. Until such time as the financing is received
and profitable contracts are obtained, the Registrant and USE will not put the
properties owned by Plateau into production. Historically, the net holding costs
of the Plateau properties have been $70,000 per month.
YELLOW STONE FUELS CORP. ("YSFC"): In Management's opinion, YSFC has
sufficient cash to complete its projected 1999 exploration program on its
in-situ uranium properties. As of August 31, 1998, YSFC owed the Registrant and
USE $400,000 on a convertible promissory note plus interest at 10% per annum.
YSFC is indebted to the Registrant and USE for the promissory note, the interest
accrued on the note and additional amounts that the Registrant and USE have
advanced for YSFC for a total indebtedness at August 31, 1998 of $709,900. YSFC
has sufficient cash on hand to retire this indebtedness. YSFC has indicated its
desire to pay the total indebtedness in cash but it is not certain that a cash
payment will occur as YSFC may elect, at its option, to pay the promissory note
with shares of its common stock.
TERM DEBT AND OTHER OBLIGATIONS: Debt to non-related parties at August
31, 1998 was $172,900 as compared to $78,500 at May 31, 1998. The increase in
debt to non-related parties consists primary of debt due on the financing of
annual insurance premiums. The balance of the debt to non-related parties is for
the purchase of various pieces of heavy equipment and bears different interest
rates and has various maturity dates. All payments on the debt are current.
As of August 31, 1998, the Registrant was indebted to USE in the total
amount of $6,945,500. USE has not indicated that it will call the debt, (which
is backed by a promissory note), when it is due. The Registrant will need to
either retire the note with shares of its common stock; pay the debt with any
monies received from the SMP Arbitration Award if additional cash is received or
negotiate with USE to extend the note and or negotiate an alternative method of
repayment.
RECLAMATION OBLIGATIONS: It is not anticipated that any of the
Registrant's working capital will be used in Fiscal 1999 for the reclamation of
any of its mineral property interests. The reclamation costs are long term and
are either bonded through the use of cash bonds or the pledge of assets. It is
not anticipated that any of the mining properties in which the Registrant owns
an interest of will enter the reclamation phase prior to May 31, 1999.
10
OTHER: The Registrant and USE currently are not in production on any
mineral properties, and development work continues on several of their major
investments. The Registrant and USE are not using hazardous substances or known
pollutants to any great degree in these activities. Consequently, recurring
costs for managing hazardous substances, and capital expenditures for monitoring
hazardous substances or pollutants have not been significant. The Registrant and
USE are also not aware of any claims for personal injury or property damages
that need to be accrued or funded.
The tax years through May 31, 1992 are closed after audit by the IRS.
On October 5, 1998 the Registrant and USE met with the Appeals Office of the IRS
in Denver, Colorado to discuss resolving issues raised for Fiscal 1993 and 1994.
The Registrant and USE have resolved all outstanding issues for those years
without incurring any cash commitments for additional taxes due. The IRS is
currently concluding its review of Fiscal 1995 and 1996 for both companies, but
no final reports have been issued therefore no representations can be made as to
their ultimate outcome.
RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1998 COMPARED TO THREE MONTHS ENDED AUGUST 31, 1997
During the three months ended August 31, 1998, revenues decreased from
the same period of the previous year by $264,700 to total revenues of $622,100.
The major reduction resulted from the Registrant not receiving any revenues from
the delivery of uranium from one SMP contract. During the quarter ended August
31, 1997, the Registrant recognized $429,300 in revenue from the profits derived
from a SMP contract delivery. No such revenues were recognized during the three
months ended August 31, 1998. Revenues from Commercial Operations and Management
Fees increased by $109,100 and $65,900 respectively during the three months
ended August 31, 1998 over the same period of the previous year as a result of
equipment rental to the GMMV and increased expenditures at the GMMV on which the
Registrant recognized a management fee.
Costs and expenses for the quarter ended August 31, 1998 increased by
$580,700 over the same period of the previous year. The primary increase in
costs came as a result of increased activity on mineral properties and
commercial operations along with an increase in general and administrative
overhead to supervise the increased activity. The Registrant and USE also paid
bonuses to four employees as recognition of the extraordinary dedication they
had given to their work in the SMP arbitration/litigation. These bonuses, which
included taxes due, were $561,000. The projects which are being developed, are
currently not in the production phase do not generate cash flow. With the
decline in the market price of uranium, it is anticipated that the properties
will not be placed into production in Fiscal 1999. However a decision was made
in July 1998 to place the GMMV mines on active standby status. The Registrant is
therefore anticipating reductions in costs.
As a result of the reduced revenues and increased costs discussed
above, operations for the quarter ended August 31, 1998 resulted in a loss of
$615,100 or $0.06 per share as compared to a profit of $245,900 or $0.02 per
share for the quarter ended August 31, 1997.
11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
SHEEP MOUNTAIN PARTNERS ARBITRATION/LITIGATION
In 1991, disputes arose between USE/Crested, and Nukem, Inc. and its
subsidiary Cycle Resource Investment Corp. ("CRIC"), concerning the formation
and operation of the Sheep Mountain Partners partnership for uranium mining and
marketing, and activities of the parties outside SMP. Arbitration proceedings
were initiated by CRIC in June 1991 and in July 1991, USECC filed a lawsuit
against Nukem, CRIC and others in the U.S. District Court of Colorado. Later,
USECC filed another suit for the standby costs at the SMP mines against SMP in
the Colorado State Court. The Federal Court stayed the arbitration proceedings
and the State Court case was also stayed. In fiscal 1994, all of the parties
agreed to exclusive and binding arbitration of the disputes before the American
Arbitration Association, ("AAA") for which the legal claims made by both sides
included fraud and misrepresentation, breach of contract, breach of duties owed
to the SMP partnership, and other claims.
Following hearings before a three member panel of the AAA, the Panel
entered an Order and Award in April 1996 and supplemented in July 1996, which
were ultimately confirmed by the U.S. District Court of Colorado. Please see
"Item 3. Legal Proceedings " of the Registrant's 1998 Form 10-K for more details
of this arbitration/litigation. Nukem appealed the decision of the U.S. District
Court to the 10th Circuit Court of Appeals and on September 24, 1998, oral
arguments were made to a three judge panel. The Court has not yet ruled on the
appeal.
TICABOO TOWNSITE LITIGATION
In fiscal 1998, a prior contract operator of the Ticaboo restaurant and
lounge, and two employees supervising the motel and convenience store in Utah
(owned by Canyon Homesteads, Inc.) sued USE, Crested and others in Utah State
Court. After a five day trial, a jury denied the claims of two of three
plaintiffs but awarded the third plaintiff $156,000 in damages against USE. USE
has filed motions including a motion for judgment notwithstanding the verdict
("JNOV"), and the motions are pending. USE intends to appeal the judgment if the
motion for JNOV is not granted.
BGBI LITIGATION
USE and Crested are defendants and counter- or cross-claimants in
certain litigation in the District Court of the Fifth Judicial District of Nye
County, Nevada, brought by Bond Gold Bullfrog Inc. ("BGBI") on July 30, 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 extra lateral rights associated with two patented
mining claims owned by Parador Mining Company Inc. ("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 with Parador, which is
subject to the lease to BGBI's predecessor. Please see "Item 3, Legal
Proceedings " of Registrant's 1998 Form 10-K for more details of this
litigation. The record on appeal has been filed with the Nevada Supreme Court
and the Registrant, USE and Parador have until January 26, 1999 to file their
opening brief and appendix.
12
DEPARTMENT OF ENERGY LITIGATION
On July 20, 1998, eight uranium mining companies with operations in the
United States (including USE, Crested, YSFC) and the Uranium Producers of
America (a trade organization) filed a complaint against the United States
Department of Energy (the "DOE") in a lawsuit (file no. 98 CV 1775) in the
United States District Court, Cheyenne, Wyoming. Please see "Item 3. Legal
Proceedings " of Registrant's 1998 Form 10- K for more details of this
litigation. The DOE has filed a motion to dismiss the complaint claiming that
the U.S. Congress withdrew its consent to be sued in connection with the USEC
Inc. privatization and that USEC Inc. must be joined as an indispensable party.
The motion is pending.
CONTOUR DEVELOPMENT LITIGATION
On July 28, 1998, USE filed a lawsuit in the United States District
Court, Denver, Colorado against Contour Development Company, L.L.C. and entities
and persons associated with Contour Development Company, L.L.C. (together,
"Contour") seeking compensatory and consequential damages of more than $1.3
million from the defendants for dealings in certain real estate. Please see
"Item 3. Legal Proceedings " of Registrant's 1998 Form 10-K for more details on
this litigation. USE has filed an Amended Complaint adding additional parties
defendant and no responsive pleading has been filed to the Amended Complaint.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. The Registrant did not file any Reports on
Form 8-K during the quarter ended August 31, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.
CRESTED CORP.
(Registrant)
Date: October 14, 1998 By: /s/ John L. Larsen
----------------------------
JOHN L. LARSEN,
Chairman and Vice President
Date: October 14, 1998 By: /s/ Robert Scott Lorimer
----------------------------
ROBERT SCOTT LORIMER,
Principal Financial Officer
and Chief Accounting Officer
14