x
|
Quarterly
report pursuant to section 13 or 15(d) of the Securities Exchange
Act of
1934
|
For
the quarter ended September 30, 2006 or
|
|
o
|
Transition
report pursuant to section 13 or 15(d) of the Securities Exchange
Act of
1934
|
For
the transition period from ___________ to
____________
|
U.S.
ENERGY CORP.
|
(Exact
Name of Company as Specified in its
Charter)
|
Wyoming
|
83-0205516
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
877
North 8th
West, Riverton, WY
|
82501
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
Company's
telephone number, including area code:
|
(307)
856-9271
|
Not
Applicable
|
Former
name, address and fiscal year, if changed since last
report
|
Class
|
Outstanding
Shares at November 14, 2006
|
|
Common
stock, $.01 par value
|
19,704,434
|
Page
No.
|
||
PART
I.
|
FINANCIAL
INFORMATION
|
|
ITEM
1.
|
Financial
Statements.
|
|
Condensed
Consolidated Balance Sheets September 30, 2006 (unaudited) and December
31, 2005 (audited)
|
4-5
|
|
Condensed
Consolidated Statements of Operations for the Three and Nine Months
Ended
September 30, 2006 and 2005 (unaudited)
|
6-7
|
|
Condensed
Consolidated Statements of Cash Flows for the Three and Nine Months
Ended
September 30, 2006 and 2005 (unaudited)
|
8-10
|
|
Notes
to Condensed Consolidated Financial Statements (unaudited)
|
11-22
|
|
ITEM
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
23-39
|
ITEM
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
40-41
|
ITEM
4.
|
Controls
and Procedures
|
42
|
PART
II.
|
OTHER
INFORMATION
|
|
ITEM
1.
|
Legal
Proceedings
|
43-45
|
ITEM
2.
|
Changes
in Securities and Use of Proceeds
|
45
|
ITEM
3.
|
Defaults
Upon Senior Securities
|
45
|
ITEM
4.
|
Submission
of Matters to a Vote of Shareholders
|
45
|
ITEM
5.
|
Other
Information
|
45
|
ITEM
6.
|
Exhibits
and Reports on Form 8-K
|
46
|
Signatures
|
47
|
|
Certifications
|
See
Exhibits
|
U.S.
ENERGY CORP. AND SUBSIDIARIES
|
|||||||
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|||||||
ASSETS
|
|||||||
September
30,
|
December
31,
|
||||||
2006
|
2005
|
||||||
(Unaudited)
|
|||||||
CURRENT
ASSETS:
|
|||||||
Cash
and cash equivalents
|
$
|
20,290,400
|
$
|
6,998,700
|
|||
Marketable
securities
|
|||||||
Trading
securities
|
149,300
|
--
|
|||||
Held
for resale securities
|
590,900
|
328,700
|
|||||
Accounts
receivable
|
|||||||
Trade,
net of allowance of $0 and $32,300, respectively
|
238,100
|
251,400
|
|||||
Affiliates
|
126,300
|
14,100
|
|||||
Prepaid
expenses and other current assets
|
173,200
|
215,000
|
|||||
Inventories
|
37,500
|
32,700
|
|||||
Total
current assets
|
21,605,700
|
7,840,600
|
|||||
INVESTMENTS:
|
|||||||
Non-affiliated
companies
|
--
|
14,760,800
|
|||||
Marketable
securities, held-to-maturity
|
6,753,100
|
6,761,200
|
|||||
Other
|
54,900
|
54,900
|
|||||
Total
investments
|
6,808,000
|
21,576,900
|
|||||
PROPERTIES
AND EQUIPMENT:
|
14,801,200
|
13,847,600
|
|||||
Less
accumulated depreciation,
|
|||||||
depletion
and amortization
|
(7,333,000
|
)
|
(7,481,800
|
)
|
|||
Net
properties and equipment
|
7,468,200
|
6,365,800
|
|||||
OTHER
ASSETS:
|
|||||||
Note
receivable trade
|
10,400
|
20,800
|
|||||
Real
estate held for resale
|
1,819,700
|
1,819,700
|
|||||
Deposits
and other
|
1,137,700
|
482,900
|
|||||
Total
other assets
|
2,967,800
|
2,323,400
|
|||||
Total
assets
|
$
|
38,849,700
|
$
|
38,106,700
|
|||
U.S.
ENERGY CORP. AND SUBSIDIARIES
|
|||||||
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|||||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||
September
30,
|
December
31,
|
||||||
2006
|
2005
|
||||||
(Unaudited)
|
|||||||
CURRENT
LIABILITIES:
|
|||||||
Accounts
payable
|
$
|
365,300
|
$
|
433,000
|
|||
Accrued
compensation expense
|
1,208,100
|
177,100
|
|||||
Current
portion of asset retirement obligations
|
233,200
|
233,200
|
|||||
Current
portion of long-term debt
|
207,500
|
156,500
|
|||||
Other
current liabilities
|
2,971,500
|
232,400
|
|||||
Total
current liabilities
|
4,985,600
|
1,232,200
|
|||||
LONG-TERM
DEBT, net of current portion
|
1,042,400
|
880,300
|
|||||
ASSET
RETIREMENT OBLIGATIONS,
|
|||||||
net
of current portion
|
6,330,800
|
5,669,000
|
|||||
OTHER
ACCRUED LIABILITIES
|
1,641,700
|
1,400,500
|
|||||
MINORITY
INTERESTS
|
5,204,500
|
1,767,500
|
|||||
COMMITMENTS
AND CONTINGENCIES
|
|||||||
FORFEITABLE
COMMON STOCK, $.01 par value
|
|||||||
297,540
and 442,740 shares issued, respectively
|
|||||||
forfeitable
until earned
|
1,746,600
|
2,599,000
|
|||||
PREFERRED
STOCK,
|
|||||||
$.01
par value; 100,000 shares authorized
|
|||||||
No
shares issued or outstanding
|
--
|
--
|
|||||
SHAREHOLDERS'
EQUITY:
|
|||||||
Common
stock, $.01 par value;
|
|||||||
unlimited
shares authorized; 19,536,827
|
|||||||
and
18,825,134 shares issued net of
|
|||||||
treasury
stock, respectively
|
195,400
|
188,200
|
|||||
Additional
paid-in capital
|
71,677,500
|
68,005,600
|
|||||
Accumulated
deficit
|
(50,433,800
|
)
|
(40,154,100
|
)
|
|||
Treasury
stock at cost,
|
|||||||
1,004,174
and 999,174 shares respectively
|
(2,923,500
|
)
|
(2,892,900
|
)
|
|||
Unrealized
loss on marketable securities
|
(127,000
|
)
|
(98,100
|
)
|
|||
Unallocated
ESOP contribution
|
(490,500
|
)
|
(490,500
|
)
|
|||
Total
shareholders' equity
|
17,898,100
|
24,558,200
|
|||||
Total
liabilities and shareholders' equity
|
$
|
38,849,700
|
$
|
38,106,700
|
|||
U.S.
ENERGY CORP. AND SUBSIDIARIES
|
|||||||||||||
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|||||||||||||
(Unaudited)
|
|||||||||||||
Three
months ended September 30,
|
Nine
months ended September 30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
OPERATING
REVENUES:
|
|||||||||||||
Real
estate operations
|
$
|
35,000
|
$
|
60,700
|
$
|
137,800
|
$
|
217,900
|
|||||
Management
fees and other
|
246,100
|
106,400
|
468,200
|
474,100
|
|||||||||
281,100
|
167,100
|
606,000
|
692,000
|
||||||||||
OPERATING
COSTS AND EXPENSES:
|
|||||||||||||
Real
estate operations
|
85,200
|
76,400
|
221,500
|
211,800
|
|||||||||
Mineral
holding costs
|
1,078,900
|
565,000
|
2,262,300
|
1,234,900
|
|||||||||
General
and administrative
|
5,593,000
|
1,007,300
|
10,509,000
|
4,331,800
|
|||||||||
6,757,100
|
1,648,700
|
12,992,800
|
5,778,500
|
||||||||||
OPERATING
LOSS
|
(6,476,000
|
)
|
(1,481,600
|
)
|
(12,386,800
|
)
|
(5,086,500
|
)
|
|||||
OTHER
INCOME & (EXPENSES):
|
|||||||||||||
Gain
on sales of assets
|
240,000
|
1,219,900
|
3,063,500
|
1,229,400
|
|||||||||
(Loss)
gain on sale of marketable securities
|
(860,500
|
)
|
1,038,500
|
(860,500
|
)
|
1,038,500
|
|||||||
Gain
on sale of investment
|
10,869,800
|
--
|
10,842,300
|
117,700
|
|||||||||
(Loss)
gain from valuation of derivatives
|
--
|
727,900
|
(630,900
|
)
|
4,194,300
|
||||||||
Loss
from Enterra share exchange
|
--
|
--
|
(3,845,800
|
)
|
--
|
||||||||
Settlement
of litagation
|
(7,000,000
|
)
|
--
|
(7,000,000
|
)
|
--
|
|||||||
Dividends
|
136,600
|
43,400
|
141,600
|
43,400
|
|||||||||
Interest
income
|
168,200
|
50,800
|
418,200
|
241,200
|
|||||||||
Interest
expense
|
(40,500
|
)
|
(467,100
|
)
|
(97,600
|
)
|
(4,099,100
|
)
|
|||||
3,513,600
|
2,613,400
|
2,030,800
|
2,765,400
|
||||||||||
(LOSS)
GAIN BEFORE MINORITY INTEREST,
|
|||||||||||||
DISCONTINUED
OPERATIONS AND
|
|||||||||||||
PROVISION
FOR INCOME TAXES
|
(2,962,400
|
)
|
1,131,800
|
(10,356,000
|
)
|
(2,321,100
|
)
|
||||||
MINORITY
INTEREST IN LOSS OF
|
|||||||||||||
CONSOLIDATED
SUBSIDIARIES
|
28,700
|
96,800
|
76,300
|
458,200
|
|||||||||
(LOSS)
GAIN BEFORE DISCONTINUED
|
|||||||||||||
OPERATIONS
AND PROVISION
|
|||||||||||||
FOR
INCOME TAXES
|
(2,933,700
|
)
|
1,228,600
|
(10,279,700
|
)
|
(1,862,900
|
)
|
||||||
DISCONTINUED
OPERATIONS, net of taxes
|
|||||||||||||
Gain
(loss) on sale of discontinued segment
|
--
|
(188,100
|
)
|
--
|
15,533,500
|
||||||||
Loss
from discontinued operations
|
--
|
--
|
--
|
(326,100
|
)
|
||||||||
|
--
|
(188,100
|
)
|
--
|
15,207,400
|
||||||||
(LOSS)
GAIN BEFORE PROVISION FOR
|
|||||||||||||
INCOME
TAXES
|
(2,933,700
|
)
|
1,040,500
|
(10,279,700
|
)
|
13,344,500
|
|||||||
U.S.
ENERGY CORP. AND SUBSIDIARIES
|
|||||||||||||
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|||||||||||||
(Unaudited)
|
|||||||||||||
Three
months ended September 30,
|
Nine
months ended September 30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
PROVISION
FOR INCOME TAXES
|
--
|
--
|
--
|
--
|
|||||||||
NET
(LOSS) GAIN
|
$
|
(2,933,700
|
)
|
$
|
1,040,500
|
$
|
(10,279,700
|
)
|
$
|
13,344,500
|
|||
PER
SHARE DATA
|
|||||||||||||
Loss
from continuing operations
|
$
|
(0.16
|
)
|
$
|
0.07
|
$
|
(0.56
|
)
|
$
|
(0.12
|
)
|
||
(Loss)
gain from discontinued operations
|
--
|
$
|
(0.01
|
)
|
--
|
$
|
0.97
|
||||||
$
|
(0.16
|
)
|
$
|
0.06
|
$
|
(0.56
|
)
|
$
|
0.85
|
||||
BASIC
WEIGHTED AVERAGE
|
|||||||||||||
SHARES
OUTSTANDING
|
18,367,198
|
17,229,336
|
18,283,573
|
15,681,519
|
|||||||||
DILUTED
WEIGHTED AVERAGE
|
|||||||||||||
SHARES
OUTSTANDING
|
18,809,938
|
19,160,917
|
18,283,573
|
16,124,259
|
|||||||||
U.S.
ENERGY CORP. AND SUBSIDIARIES
|
|||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
||||||
(Unaudited)
|
|
||||||
|
|
|
|
|
|
||
|
|
Nine
months ended September 30,
|
|
||||
|
|
2006
|
|
2005
|
|
||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
(loss) gain
|
$
|
(10,279,700
|
)
|
$
|
13,344,500
|
||
Adjustments
to reconcile net (loss) gain
|
|||||||
to
net cash used in operating activities:
|
|||||||
Minority
interest in loss of
|
|||||||
consolidated
subsidiaries
|
(76,300
|
)
|
(458,200
|
)
|
|||
Amortization
of deferred charge
|
--
|
441,300
|
|||||
Depreciation
|
380,700
|
289,100
|
|||||
Accretion
of asset
|
|||||||
retirement
obligations
|
578,400
|
275,000
|
|||||
Initial
valuation of asset
|
|||||||
retirement
obligation
|
83,400
|
--
|
|||||
Amortization
of debt discount
|
--
|
3,136,100
|
|||||
Noncash
interest expense
|
--
|
720,000
|
|||||
(Gain)
on sale of assets
|
(3,063,500
|
)
|
(890,600
|
)
|
|||
Loss
on valuation of Enterra units
|
3,845,800
|
--
|
|||||
Loss
(gain) on valuation of derivatives
|
630,900
|
(4,194,300
|
)
|
||||
Gain
on sale of discontinued segment
|
--
|
(15,533,500
|
)
|
||||
Loss
(gain) on sale of marketable securities
|
860,500
|
(1,156,200
|
)
|
||||
Proceeds
from the sale of trading securities
|
8,304,300
|
--
|
|||||
Gain
on sale of Pinnacle Resources
|
(10,842,300
|
)
|
--
|
||||
Noncash
compensation
|
1,481,200
|
270,900
|
|||||
Noncash
services
|
670,200
|
35,600
|
|||||
Net
changes in assets and liabilities:
|
1,295,300
|
(178,600
|
)
|
||||
NET
CASH USED IN
|
|||||||
OPERATING
ACTIVITIES
|
(6,131,100
|
)
|
(3,898,900
|
)
|
|||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Proceeds
from sale of marketable securities
|
491,600
|
5,916,600
|
|||||
Sale
of RMG
|
--
|
(270,000
|
)
|
||||
Proceeds
from sale of investments
|
13,800,000
|
117,700
|
|||||
Acquisition
of unproved mining claims
|
(644,800
|
)
|
(602,600
|
)
|
|||
Proceeds
on sale of property and equipment
|
2,410,400
|
925,200
|
|||||
Purchase
of property and equipment
|
(599,800
|
)
|
(361,600
|
)
|
|||
Investment
in marketable securities
|
--
|
(338,800
|
)
|
||||
Net
change in restricted investments
|
8,100
|
111,500
|
|||||
Net
change in notes receivable
|
(20,200
|
)
|
500
|
||||
Net
change in investments in affiliates
|
30,600
|
--
|
|||||
NET
CASH PROVIDED BY
|
|||||||
BY
INVESTING ACTIVITIES
|
15,475,900
|
5,498,500
|
|||||
U.S.
ENERGY CORP. AND SUBSIDIARIES
|
|||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||
(Unaudited)
|
|||||||
Nine
months ended September 30,
|
|||||||
2006
|
|
2005
|
|||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Issuance
of common stock
|
$
|
915,900
|
$
|
2,834,900
|
|||
Issuance
of subsidiary stock
|
3,173,700
|
--
|
|||||
Proceeds
from long term debt
|
184,300
|
3,764,900
|
|||||
Repayments
of long term debt
|
(327,000
|
)
|
(3,285,000
|
)
|
|||
NET
CASH PROVIDED BY
|
|||||||
FINANCING
ACTIVITIES
|
3,946,900
|
3,314,800
|
|||||
Net
cash used in operating activities of
|
|||||||
discontinued
operations
|
--
|
(453,500
|
)
|
||||
Net
cash used in investing activities of
|
|||||||
discontinued
operations
|
--
|
(215,000
|
)
|
||||
Net
cash used in financing activities of
|
|||||||
discontinued
operations
|
--
|
(8,500
|
)
|
||||
NET
INCREASE IN
|
|||||||
CASH
AND CASH EQUIVALENTS
|
13,291,700
|
4,237,400
|
|||||
CASH
AND CASH EQUIVALENTS
|
|||||||
AT
BEGINNING OF PERIOD
|
6,998,700
|
3,842,500
|
|||||
CASH
AND CASH EQUIVALENTS
|
|||||||
AT
END OF PERIOD
|
$
|
20,290,400
|
$
|
8,079,900
|
|||
SUPPLEMENTAL
DISCLOSURES:
|
|||||||
Income
tax paid
|
$
|
--
|
$
|
--
|
|||
Interest
paid
|
$
|
97,600
|
$
|
242,800
|
|||
U.S.
ENERGY CORP. AND SUBSIDIARIES
|
|||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||
(Unaudited)
|
|||||||
Nine
months ended September 30,
|
|||||||
2006
|
|
2005
|
|||||
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|||||||
Conversion
of Enterra shares
|
|||||||
to
tradable units
|
$
|
13,880,100
|
$
|
--
|
|||
Issuance
of stock warrants in
|
|||||||
conjunction
with agreements
|
$
|
727,300
|
$
|
--
|
|||
Acquisition
of assets
|
|||||||
through
issuance of debt
|
$
|
355,800
|
$
|
113,400
|
|||
Unrealized
loss/gain
|
$
|
42,200
|
$
|
--
|
|||
Satisfaction
of receivable - employee
|
|||||||
with
stock in company
|
$
|
30,600
|
$
|
20,500
|
|||
Issuance
of stock warrants in
|
|||||||
conjunction
with debt
|
$
|
--
|
$
|
1,226,200
|
|||
Issuance
of stock as conversion of
|
|||||||
subsidiary
stock
|
$
|
--
|
$
|
499,700
|
|||
Issuance
of stock for services
|
$
|
--
|
$
|
35,600
|
|||
Issuance
of stock to satisfy debt
|
$
|
--
|
$
|
4,000,000
|
|||
Nine
Months Ended
|
||||
September
30,
|
||||
2005
|
||||
Net
gain
|
$
|
13,344,500
|
||
Deduct:
|
||||
Stock-based
employee compensation determined under fair value method for all
awards,
net of related tax effects
|
$
|
(311,100
|
)
|
|
Net
income available to common stockholders - pro forma
|
$
|
13,033,400
|
||
Basic
gain per share as reported
|
$
|
0.85
|
||
Diluted
gain per share as reported
|
$
|
0.83
|
||
Basic
gain per share pro forma
|
$
|
0.83
|
||
Diluted
gain per share pro forma
|
$
|
0.81
|
||
Weighted
average basic common stock outstanding
|
$
|
15,681,519
|
||
Weighted
average diluted common stock outstanding
|
$
|
16,124,259
|
||
|
|
Accumulated
|
|
|
|
|||||
|
|
|
|
Amortization
|
|
|
|
|||
|
|
|
|
Depletion
and
|
|
Net
|
|
|||
|
|
Cost
|
|
Depreciation
|
|
Book
Value
|
|
|||
|
|
|
|
|
|
|
||||
Mining
and oil properties
|
$
|
3,129,400
|
$
|
(1,773,600
|
)
|
$
|
1,355,800
|
|||
Buildings,
land and equipment
|
11,671,800
|
(5,559,400
|
)
|
6,112,400
|
||||||
Totals
|
$
|
14,801,200
|
$
|
(7,333,000
|
)
|
$
|
7,468,200
|
|||
Nine
months ended September 30,
|
|
||||||
|
|
2006
|
|
2005
|
|||
Net
(loss) gain
|
$
|
(10,279,700
|
)
|
$
|
13,344,500
|
||
Comprehensive
loss from the
|
|||||||
unrealized
loss on marketable securities
|
(127,000
|
)
|
(7,700
|
)
|
|||
Comprehensive
loss
|
$
|
(10,406,700
|
)
|
$
|
13,336,800
|
||
|
|
|
|
Unrealized
|
|
|||||
|
|
Cost
|
|
Market
Value
|
|
Loss
|
||||
Equity
Securities
|
||||||||||
UPC
shares
|
$
|
677,700
|
$
|
550,700
|
$
|
(127,000
|
)
|
|||
Dynasty
shares
|
40,200
|
40,200
|
$
|
-
|
||||||
Total
|
$
|
717,900
|
$
|
590,900
|
$
|
(127,000
|
)
|
|||
Current
portion of long term debt for the purchase of aircraft, equipment
and
insurance policies at various interest rates and due dates
|
$
|
207,500
|
||
Long
term portion of debt for the purchase of aircraft, equipment and
insurance
policies at various interest rates and due dates
|
1,042,400
|
|||
$
|
1,249,900
|
Nine
months ended September 30,
|
|
||||||
|
|
2006
|
|
2005
|
|||
Balance
December 31, 2005
|
$
|
5,902,200
|
$
|
8,075,100
|
|||
Addition
to Liability
|
83,400
|
--
|
|||||
Liability
Settled
|
--
|
--
|
|||||
Sale
of RMG
|
--
|
(463,700
|
)
|
||||
Accretion
Expense
|
578,400
|
275,000
|
|||||
Balance
September 30, 2006
|
$
|
6,564,000
|
$
|
7,886,400
|
|||
|
|
|
|
Additional
|
|
|||||
|
|
Common
Stock
|
|
|
|
Paid-In
|
|
|||
|
|
Shares
|
|
Amount
|
|
Capital
|
|
|||
Balance
December 31, 2005
|
18,825,134
|
$
|
188,200
|
$
|
68,005,600
|
|||||
Stock
issued to outside directors
|
3,140
|
100
|
17,900
|
|||||||
2001
stock compensation plan
|
45,000
|
400
|
239,300
|
|||||||
Exercise
of options, net
|
185,129
|
1,900
|
110,400
|
|||||||
Exercise
of warrants
|
221,400
|
2,200
|
801,400
|
|||||||
Expense
of employee options
|
||||||||||
vesting
|
-
|
-
|
273,600
|
|||||||
Forfeitable
stock released for a former
|
||||||||||
employee
|
145,200
|
1,500
|
850,900
|
|||||||
Stock
issued for a professional service
|
||||||||||
agreements
|
111,824
|
1,100
|
635,200
|
|||||||
Value
of company warrants issued
|
||||||||||
for
a professional service agreement
|
-
|
-
|
251,800
|
|||||||
Value
of company warrants issued and
|
||||||||||
extended
|
-
|
-
|
508,100
|
|||||||
Valuation
of Company warrants issued
|
||||||||||
for
professional services
|
-
|
-
|
(16,700
|
)
|
||||||
19,536,827
|
$
|
195,400
|
$
|
71,677,500
|
||||||
Date
or
|
Option
|
||||||
Anniversary*
|
Payment
|
Expenditures
|
|||||
10
business days
|
|||||||
after
Effective Date**
|
$
|
1,450,000
|
-0-
|
||||
By
first anniversary
|
$
|
500,000
|
$
|
3,500,000
|
|||
By
second anniversary
|
$
|
500,000
|
$
|
5,000,000
|
|||
By
third anniversary
|
$
|
500,000
|
$
|
5,000,000
|
|||
By
fourth anniversary
|
$
|
500,000
|
$
|
2,500,000
|
|||
By
fifth anniversary
|
$
|
500,000
|
***
|
||||
$
|
3,950,000
|
$
|
16,000,000
|
*
|
Anniversary
of Effective Date.
|
**
|
If
paid in KBX stock, 10 business days after Canadian regulatory and
stock
exchange approval.
|
***
|
Delivery
of a bankable feasibility study (“BFS”) on the Property. If the total
Option Payments and Expenditures and costs to prepare the BFS are
less
than $50 million, KBX will pay U.S. Moly the difference in cash.
If the
total is more than $50 million before the BFS is completed, U.S.
Moly and
KBX each will pay 50% of the balance needed to complete the BFS.
|
· |
Whether
the Company can negotiate terms with industry partners which will
return a
substantial profit to the Company for its retained interest and the
project’s development costs to that point in
time.
|
· |
Whether
a feasibility study will show volumes and grades of mineralization
and
manageable costs of mining, transportation and processing, which
are
sufficient to make a profit and to bring industry partners or other
investors to the point of further
investment.
|
Payments
due by period
|
||||||||||||||||
|
|
Less
|
|
One
to
|
|
Three
to
|
|
More
than
|
|
|||||||
|
|
|
|
than
one
|
|
Three
|
|
Five
|
|
Five
|
|
|||||
|
|
Total
|
|
Year
|
|
Years
|
|
Years
|
|
Years
|
||||||
Long-term
debt obligations
|
$
|
1,249,900
|
$
|
207,500
|
$
|
978,000
|
$
|
64,400
|
-
|
|||||||
Other
long-term liabilities
|
6,564,000
|
233,200
|
430,600
|
2,099,800
|
3,800,400
|
|||||||||||
Totals
|
$
|
7,813,900
|
$
|
440,700
|
$
|
1,408,600
|
$
|
2,164,200
|
$
|
3,800,400
|
||||||
Date
or
|
Option
|
||||||
Anniversary*
|
Payment
|
Expenditures
|
|||||
10
business days
|
|||||||
after
Effective Date**
|
$
|
1,450,000
|
-0-
|
||||
By
first anniversary
|
$
|
500,000
|
$
|
3,500,000
|
|||
By
second anniversary
|
$
|
500,000
|
$
|
5,000,000
|
|||
By
third anniversary
|
$
|
500,000
|
$
|
5,000,000
|
|||
By
fourth anniversary
|
$
|
500,000
|
$
|
2,500,000
|
|||
By
fifth anniversary
|
$
|
500,000
|
***
|
||||
$
|
3,950,000
|
$
|
16,000,000
|
*
|
Anniversary
of Effective Date.
|
**
|
If
paid in KBX stock, 10 business days after Canadian regulatory and
stock
exchange approval.
|
***
|
Delivery
of a bankable feasibility study (“BFS”) on the Property. If the total
Option Payments and Expenditures and costs to prepare the BFS are
less
than $50 million, KBX will pay U.S. Moly the difference in cash.
If the
total is more than $50 million before the BFS is completed, U.S.
Moly and
KBX each will pay 50% of the balance needed to complete the BFS.
|
· |
In
the event that Uranium One does not purchase our uranium assets,
the
Company and Crested will have to continue to pursue an equity or
industry
partner to assist in the development of the properties. Profitability
of
the uranium properties will depend on several factors which include
continued sustained higher prices for uranium oxide, cost controls
at the
Shootaring Canyon Mill and the surrounding uranium properties including
mining, transportation and milling of ores and successful financing
and
commencing refurbishment of the mill. Additional mineral properties
in the
vicinity of the Shootaring Canyon Mill or ore from contract miners
in the
area may need to be acquired to feed the
mill.
|
· |
The
profitable mining and processing of gold by Sutter will depend on
many
factors, including compliance with permit conditions; delineation
through
extensive drilling and sampling of sufficient volumes of mineralized
material, with sufficient grades, to make mining and processing economic
over time; continued sustained high prices for gold; and obtaining
the
capital required to initiate and sustain mining operations and build
and
operate a gold processing mill.
|
· |
The
Lucky Jack molybdenum property has had extensive work conducted by
prior
owners, but this data will have to be updated to the level of a current
feasibility study to determine the viability of starting mining
operations. Obtaining mining and other permits to begin mining the
molybdenum property may be very difficult, and, like any mining operation,
capital requirements for a molybdenum mine/mill operation will be
substantial. There is a history of opposition by local government
entities
and environmental organizations to the prior owners seeking permits
to
mine this property. This opposition has been expressed in litigation
from
time to time. Continued legal challenges may delay putting the Lucky
Jack
property into production.
|
· |
The
Company and Crested have not yet obtained feasibility studies on
any of
our mineral properties. These studies would establish the economic
viability, or not, of the different properties based on extensive
drilling
and sampling, the design and costs to build and operate mills, the
cost of
capital, and other factors. Feasibility studies can take many months
to
complete. These studies are conducted by professional third party
consulting and engineering firms, and will have to be completed,
at
considerable cost, to determine if the deposits contain proven reserves
(amounts of minerals in sufficient grades that can be extracted profitably
under current pricing assumptions for development and operating costs
and
commodity prices). A feasibility study usually must be completed
in order
to raise the substantial capital needed to put a property into production.
The Company and Crested have not established any reserves (economic
deposits of mineralized materials) on any of our molybdenum, uranium
or
gold properties, and future studies may indicate that some or all
of the
properties will not be economic to put into production.
|
(a)
|
Exhibits.
|
||
31.1
|
Certification
of Chief Executive Officer Pursuant to Rule 13a-15(e) / Rule
15d-15(e)
|
||
31.2
|
Certification
of Chief Financial Officer Pursuant to Rule 13a-14(a) / Rule
15(e)/15d-15(e)
|
||
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
adopted
by Section 906 of the Sarbanes-Oxley Act of 2002
|
||
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
adopted
by Section 906 of the Sarbanes-Oxley Act of 2002
|
||
10.1
|
Exclusivity
Agreement with sxr “Uranium One” Inc.
|
||
10.2
|
Settlement
Agreement with Phelps Dodge Corp.
|
||
10.3
|
Stock
Purchase Agreement with DLJ MB Partners III, Inc.
|
||
(b)
|
Reports
on Form 8-K.
The Company filed 4 reports on Form 8-K for the quarter ended September
30, 2006. The events reported were as follows:
|
||
1.
|
The
report filed on July 13, 2006, under Item 8.01 referenced the signing
of
an Exclusivity Agreement with sxr “Uranium One” Inc.
|
||
2.
|
The
report filed on July 28, 2006, under Item 8.01 referenced the U.S.
District Court’s Order for Payment of Attorney Fees and Costs related to
litigation with Phelps Dodge Corporation and U.S. Tenth Circuit Court
of
Appeals Affirmation of Court dismissal of Challenges to Mt. Emmons
Patents.
|
||
3.
|
The
report filed on September 6, 2006, under Item 8.01 referenced the
signing
of an amendment to the May 5, 2006 registration rights agreement
with
Cornell Capital Partners, PL.
|
||
4.
|
The
report filed on September 22, 2006, under Item 1.01 referenced signing
of
a stock purchase agreement with DLJ Merchant Banking III, Inc., Item
2.01
referenced sale of Pinnacle Gas Resources Gas, Inc. shares under
the stock
purchase agreement and Item 8.01 referenced entering into a settlement
agreement and the payment of $7.0 million to Phelps Dodge Corporation
to
resolve outstanding litigation and the sale of 100% of the Enterra
Energy
Trust units by the Company.
|
U.S.
ENERGY CORP.
|
||||
(Company)
|
||||
Date:
November 14, 2006
|
By:
|
/s/
Keith G. Larsen
|
||
KEITH
G. LARSEN,
|
||||
Chairman
and CEO
|
||||
Date:
November 14, 2006
|
By:
|
/s/
Robert Scott Lorimer
|
||
ROBERT
SCOTT LORIMER
|
||||
Principal
Financial Officer and
|
||||
Chief
Accounting Officer
|