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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 June 30, 2003 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 Company 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
- ------------------------------------ -----------------------------
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (307) 856-9271
-----------------------------
NONE
- --------------------------------------------------------------------------------
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the Company (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 Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES X NO
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES 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 August 13, 2003
- --------------------------------- -----------------------------------
Common stock, $0.001 par value 17,133,098 Shares
1
CRESTED CORP.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
Condensed Balance Sheets
June 30, 2003 and December 31, 2002. . . . . . . . . . .3
Condensed Statements of Operations
Three and Six Months Ended June 30, 2003 and 2002. . . . . . .4
Condensed Statements of Cash Flows
Six Months Ended June 30, 2003 and 2002. . . . . . . . . . . .5
Notes to Condensed Financial Statements. . . . . . . . . . .6-8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . .9-11
ITEM 4. Controls and Procedures. . . . . . . . . . . . . . . . . . .11-12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .13
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .13
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Certifications . . . . . . . . . . . . . . . . . . . . . . . .15-18
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRESTED CORP.
CONDENSED BALANCE SHEETS
ASSETS
June 30, December 31,
2003 2002
------------ -------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 3,300 $ 3,300
INVESTMENTS IN AFFILIATES 5,169,500 5,876,600
PROPERTIES AND EQUIPMENT 896,800 896,800
Less accumulated depreciation,
depletion and amortization (886,800) (886,800)
-------------- --------------
10,000 10,000
-------------- --------------
$ 5,182,800 $ 5,889,900
============== ==============
LIABILITIES AND SHAREHOLDERS' DEFICIT
June 30, December 31,
2003 2002
-------------- --------------
CURRENT LIABILITIES:
Current debt to affiliate 9,326,400 8,553,900
COMMITMENT TO FUND EQUITY INVESTEES 215,600 215,600
ASSET RETIREMENT OBLIGATION 1,087,600 748,400
COMMITMENTS AND CONTINGENCIES
FORFEITABLE COMMON STOCK, $.001 par value
15,000 shares issued, forfeitable until earned 10,100 10,100
SHAREHOLDERS' DEFICIT
Common stock, $.001 par value; unlimited shares
authorized; 17,115,137 and 17,099,276
shares issued and outstanding 17,200 17,200
Additional paid-in capital 11,804,800 11,795,200
Accumulated deficit (17,278,900) (15,450,500)
-------------- --------------
TOTAL SHAREHOLDERS' DEFICIT (5,456,900) (3,638,100)
-------------- --------------
$ 5,182,800 $ 5,889,900
============== ==============
See accompanying notes to condensed financial statements
3
CRESTED CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
2003 2002 2003 2002
------------- ---------- ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUES: $ -- $ -- $ -- $ --
COSTS AND EXPENSES:
Accretion of asset retirement
obligation 22,700 -- 45,400 --
General and administrative 52,500 37,400 89,000 75,600
------------- ---------- ------------ ------------
75,200 37,400 134,400 75,600
------------- ---------- ------------ ------------
LOSS BEFORE EQUITY LOSS, PROVISION
FOR INCOME TAXES AND CUMMULATIVE
EFFECT OF ACCOUNTING CHANGE (75,200) (37,400) (134,400) (75,600)
EQUITY IN LOSS OF AFFILIATES (1,026,800) (505,800) (1,400,300) (1,008,600)
------------- ---------- ------------ ------------
LOSS BEFORE PROVISION FOR INCOME
TAXES AND CUMMULATIVE
EFFECT OF ACCOUNTING CHANGE (1,102,000) (543,200) (1,534,700) (1,084,200)
PROVISION FOR INCOME TAXES -- -- -- --
------------- ---------- ------------ ------------
LOSS BEFORE CUMMULATIVE EFFECT
OF ACCOUNTING CHANGE (1,102,000) (543,200) (1,534,700) (1,084,200)
CUMMULATIVE EFFECT OF
ACCOUNTING CHANGE -- -- (293,800) --
------------- ---------- ------------ ------------
NET LOSS $ (1,102,000) $(543,200) $(1,828,500) $(1,084,200)
============= ========== ============ ============
PER SHARE DATA
NET LOSS PER SHARE,
BASIC AND DILUTED
FROM CONTINUED OPERATIONS $ (0.06) $ (0.03) $ (0.09) $ (0.06)
FROM EFFECT OF ACCOUNTING
CHANGE * * (0.02) *
BASIC AND DILUTED $ (0.06) $ (0.03) $ (0.11) $ (0.06)
============= ========== ============ ============
BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING 17,099,276 17,074,325 17,116,634 17,075,320
============= ========== ============ ============
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 17,099,276 17,074,325 17,116,634 17,075,320
============= ========== ============ ============
* Less than $0.01 per share
See accompanying notes to condensed financial statements
4
CRESTED CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six months ended
June 30, June 30,
------------- -------------
2003 2002
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,828,500) $ (1,084,200)
Adjustments to reconcile net loss to net cash
used in by operating activities:
Equity in loss of affiliates 1,400,300 1,008,600
Accretion of asset retirement obligation 45,400 --
Non cash cummulative effect
of accounting change 293,800 --
Noncash compensation 9,600 11,400
Net changes in assets and liabilities -- (100)
------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (79,400) (64,300)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in affiliates (693,100) (1,116,500)
CASH FLOWS FROM FINANCING ACTIVITES:
Net activity on debt to affiliate 772,500 1,180,900
------------- -------------
NET INCREASE IN
CASH AND CASH EQUIVALENTS -- 100
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,300 3,200
------------- -------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 3,300 $ 3,300
============= =============
SUPPLEMENTAL DISCLOSURES:
Interest paid $ - $ -
============= =============
Income tax paid $ -- $ --
============= =============
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of stock to outside directors $ 9,600 $ --
============= =============
Net noncash change in reclamation liabilities $ 316,500 $ --
============= =============
See accompanying notes to condensed financial statements
5
CRESTED CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1) The Condensed Balance Sheet as of June 30, 2003 and the Condensed
Statements of Operations and Cash Flows for the three and six months ended June
30, 2003 and 2002, have been prepared by the Company without audit. The
Condensed Balance Sheet at December 31, 2002, has been derived from the audited
financial statements included in the Company's Annual Report on Form 10-K/A for
the period then ended. In the opinion of the Company, the accompanying financial
statements contain all adjustments (consisting of only normal recurring accruals
except for the cumulative effect of a change in accounting principle in 2003)
necessary to fairly present the financial position of the Company as of June 30,
2003 and the results of operations and cash flows for the three and six months
ended June 30, 2003 and 2002.
2) Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. It is
suggested that these financial statements be read in conjunction with the
Company's December 31, 2002 Form 10-K/A. The results of operations for the
periods ended June 30, 2003 and 2002 are not necessarily indicative of the
operating results for the full year.
3) Debt at June 30, 2003 and December 31, 2002, consists of debt payable to
the Company's parent U.S. Energy Corp. ("USE") of $9,326,400 and $8,553,900,
respectively
4) The Company presents basic and diluted earnings per share in accordance
with the provisions of Statement of Financial Accounting Standards No. 128,
"Earnings per Share." Basic earnings per common share is based on the weighted
average number of common shares outstanding during the period.
5) Certain reclassifications have been made in the December 31, 2002
financial statements to conform to the classifications used in June 30, 2003.
6) Although the Company does not have an Incentive Stock Option Plan in
place as of June 30, 2003, it will be proposing one for shareholder approval at
its next annual meeting. In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation", which requires the Company to record
non-employee stock-based compensation at fair value. In December 2002, the FASB
issued SFAS No. 148, "Accounting for Stock Based Compensation - Transition and
Disclosure". The Company has adopted the disclosure requirements of SFAS No. 148
but has elected to continue to record employee compensation expense utilizing
the intrinsic value method permitted under Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees." The Company will
account for its employees' stock based compensation plan under APB Opinion No.
25 and its related interpretations. Accordingly, any deferred compensation
expense will be recorded for stock options based on the excess of the market
value of the common stock on date the options were granted over the aggregate
exercise price of the options. This deferred compensation will be amortized over
the over the vesting period of each option. There were no options granted to
employees during either the three or six months ended June 30, 2003.
7) The Company has mine properties that are in a shut down mode in central
Wyoming for which it is responsible for one half of the reclamation expense.
These reclamation activities are scheduled to be completed over the next seven
years. The Company cannot predict the exact amount of such future asset
retirement obligations. Estimated future reclamation costs are based on the
Company's best engineering estimates considering legal and regulatory
requirements.
6
Effective January 1, 2003, the Company adopted SFAS No. 143, "Accounting
for Asset Retirement Obligation." The statement requires the Company to record
the fair value of the reclamation liability on its shut down mining properties
as of the date that the liability is incurred with a corresponding increase in
the book value of the properties. The statement further requires that the
Company review the liability each quarter to determine whether its estimates of
timing or cash flows have changed as well the accretion of the total liability
on a quarterly basis for the passage of time.
The Company will also deduct from the accrued liability any actual funds
expended for reclamation during the quarter in which it is expended. As a result
of the Company taking impairment allowances in prior periods on its shut down
mining properties, it has no remaining book value for the properties. All
accretion amounts will therefore be expensed in the quarter in which they are
recorded. Accretion expense was $22,700 for each of the three month periods
ended March 31, 2003, and June 30, 2003.
The following is a reconciliation of the total liability for asset
retirement obligations (unaudited)
Balance December 31, 2002 $ 748,400
Impact of adoption of SFAS No. 143 293,800
Addition to Liability --
Liability Settled --
Accretion Expense - 8% discount rate 45,400
----------
Balance June 30, 2003 $1,087,600
==========
The following table shows what the Company's net loss and net loss per
share would have been in the three and six months of 2002 if the provisions of
SFAS No. 143 had been applied in that period, compared with net loss and net
loss per share recorded in the three and six months of 2003.
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- --------------------------
2003 2002 2003 2002
---- ---- ---- ----
Pro-Forma net loss $(1,102,000) $(565,900) $(1,534,700) $(1,128,800)
============ ============ ============ ============
Pro-Forma earnings per share
Basic and Diluted $ (0.06) $ (0.03) $ (0.09) $ (0.07)
============ ============ ============ ============
The Company has reviewed other current outstanding statements from the
Financial Accounting Standards Board and does not believe that any of those
statements will have a material adverse affect on the financial statements of
the Company when adopted.
8) Subsequent to June 30, 2003, the Company and USE sold their interest in
the Ticaboo town site in southern Utah as the result of Plateau Resources
Limited, a wholly-owned subsidiary of USE, entering into a Stock Purchase
Agreement to sell all the outstanding shares of Canyon Homesteads, Inc.
("Canyon") to The Cactus Group LLC, a newly formed Colorado limited liability
company. The Agreement closed on August 14, 2003.
7
The Cactus Group purchased all of the outstanding stock of Canyon for
$3,470,000. Of that amount, $349,250 was paid in cash at closing and the balance
of $3,120,750 is to be paid under the terms of a promissory note. Interest on
the note is computed at 7.5% annually and the monthly payments are based on a
twenty year amortization of the note balance with a balloon payment of
$2,940,581 due in August 2008. The note is secured with all the assets of The
Cactus Group and Canyon along with a personal guarantee by the six principals of
The Cactus Group. The Company and USE will also receive the first $210,000 in
net proceeds from the sale of either single family or mobile home lots in
Ticaboo.
8
CRESTED CORP.
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 Company's liquidity, capital resources and
results of operations during the periods included in the accompanying financial
statements. For a detailed explanation of the Company's Business Overview, it is
suggested that Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three and six months ended June 30, 2003 be read
in conjunction with the Company's Form 10-K/A for the year ended December 31,
2002.
The following should be read together with the disclosures under "Forward
Looking Statements."
OVERVIEW OF BUSINESS
At June 30, 2003, the Company has interests in a uranium mine and mill in
Southern Utah; uranium mines in central Wyoming; a gold property in California;
coalbed methane properties in the Powder River Basin of Wyoming and Montana, and
an interest in cash flows from various real estate properties including the
townsite near Lake Powell, Utah which was sold on August 14, 2003. See Note 8 to
the financial statements. The mine properties are all in a shut down mode. All
these businesses are operated in conjunction with the Company's parent, U.S.
Energy Corp. ("USE") through a joint venture between the two companies, the
USECB Joint Venture ("USECB"). The Company accounts for USECB using the equity
method of accounting.
CRITICAL ACCOUNTING POLICIES
- ------------------------------
RECLAMATION LIABILITIES - The Company's policy is to accrue the liability
for future reclamation costs of its mineral properties (under SFAS No. 143)
based on the current estimate of the future reclamation costs as determined by
internal and external experts. The present value of the obligation is accreted
each period as the obligation settlement approaches.
RECENT ACCOUNTING PRONOUNCEMENTS
- ----------------------------------
The Company has reviewed all current outstanding statements from the
Financial Accounting Standards Board and does not believe that any of those
statements will have a material adverse effect on the financial statements of
the Company when adopted.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 2003, the Company incurred $772,500 in
additional debt to its parent, USE. This debt was incurred as a result of USE
advancing funds on behalf of the Company to fund its portion of cash obligations
in the various business ventures in which the two companies jointly participate.
The Company continues to have low cash reserves and is unable to pay its
ongoing administrative costs or fund its cash commitments to various businesses
that it and USE operate jointly. The Company will need to continue to negotiate
favorable terms with USE to continue to operate. To date, USE has agreed that it
will not call the indebtedness.
9
The Company anticipates that the ultimate resolution of the litigation with
Nukem, Inc. will improve its liquidity, See Part II, Item 1. The Company also
will participate equally in any benefits, which may come from the outcome of
litigation that the Company and USE have pending with Phelps Dodge Corporation.
Operations during the six months ended June 30, 2003 and 2002, consumed
cash of $79,400 and $64,300, respectively. The uses of cash in operations was
the Company's portion of annual audit fees, professional services in connection
with the on-going litigation and other administrative expenditures. Financing
activities during the six months ended June 30, 2003 and 2002, generated cash of
$772,500 and $1,180,900, respectively, as the Company borrowed money from USE to
fund its cash commitments. Cash consumed in investing activities of $693,100 at
June 30, 2003 and $1,116,500 at June 30, 2002 was as a result of the Company
using the cash borrowed from USE to fund its portion of operating costs in
investments jointly owned with USE.
CAPITAL RESOURCES
The Company and USE have a $750,000 line of credit with a commercial bank.
The line of credit is secured by various real estate holdings and equipment
belonging to the Company and USE. At June 30, 2003, the total amount of the line
of credit was available to the Company and USE. The line of credit is being used
for short term working capital needs associated with operations.
The Company's cash resources at June 30, 2003 will not be sufficient to
sustain operations during the balance of 2003. The Company will continue to rely
upon funding from USE to meet its operating, administration and capital
requirements. It is not anticipated that during 2003 operations will generate
significant capital resources.
On August 1, 2003, the Company and USE received a judgment from the United
States District of Colorado in the amount of $20,044,184 against Nukem, Inc.
Nukem has indicated its intention to post a supersedeas bond in the amount of
the Judgment plus one year's interest in anticipation of appealing the Judgment.
In the event that the Company and USE prevail, one half of the award belongs to
the Company.
The Company and USE sold their interests in the Ticaboo town site by
entering into a stock purchase agreement, which closed on August 14, 2003, with
The Cactus Group of Denver, Colorado. The purchase price was $3,470,000 with a
cash down payment of $349,250. The balance of the amount due from The Cactus
Group of $3,120,750, will be paid in monthly payments ranging from $5,000 to
$24,000 through August of 2008, at which time a balloon payment in the amount of
$2,940,581 is due. One half of these proceeds, less expenses associated with the
transaction, belong to the Company, pursuant to a 1993 agreement between USE and
the Company. Some or all of the Company's share of proceeds may be paid to USE
to reduce borrowings from USE.
The Company and USE may continue to sell surplus equipment or an interest
in its various mineral properties, which are jointly owned with USE. These sales
would generate additional capital resources.
CAPITAL REQUIREMENTS
The Company and USE jointly fund the holding costs of the Sheep Mountain
uranium mines; the Plateau uranium mine and mill; costs associated with their
joint real estate; commercial operations, and the development of the Rocky
Mountain Gas, Inc. ("RMG") natural gas properties.
10
The Company and USE, through RMG, have obligations to make delay rental
payments on RMG's portion of coalbed methane and natural gas leases. RMG has
entered into various agreements with industry partners whereby a portion or all
of its drilling commitments on the natural gas properties are carried. The
Company and USE through RMG continue to seek additional funding sources to
expand their natural gas business.
The Company owes USE $9,326,400 as a result of USE funding operations and
capital expansion expenses. The Company does not have the resources to pay this
debt and must negotiate continued terms with USE or find some other means of
retiring the debt. To date, USE has not called the debt and has agreed not to
call the debt. Should the Company and USE prevail in the Nukem litigation a
significant portion of the Company's portion of the award would be used to
retire a portion or all of this indebtedness.
It is anticipated that approximately $110,000 will be expended for the
reclamation by the Company and USE during 2003. This amount will be funded by
USE. Future reclamation costs on the Sheep Mountain uranium properties are
covered by a reclamation bond, which is secured by a pledge of certain of the
Company and USE's real estate assets. The reclamation bond amount is reviewed
annually by State of Wyoming regulatory agencies.
RESULTS OF OPERATIONS
The Company had no revenues during the three and six months ended June 30,
2003 and 2002.
Costs and expenses for the three and six months ended June 30, 2003,
increased by $58,800 and $37,800, respectively, from those reported during the
same three and six months of the previous year. The main reason for the increase
was the accretion of reclamation costs of $22,700 and $45,400 during the three
and six months ended June 30, 2003. This expense was as a result of the Company
adopting SFAS No. 143 on January 1, 2003. The Company recorded equity losses
from USECC and RMG of $1,400,300 and $1,088,600 for the six months ended June
30, 2003 and 2002, respectively. The primary reason for the increase in the
equity losses from USECC and RMG are legal costs associated with the Phelps
Dodge and Nukem litigations and the costs associated with the formation of
Pinnacle Gas Resources, Inc., a minority owned affiliate of RMG.
The Company recognized a loss of $1,102,000 and $1,828,500 during the three
and six months ended June 30, 2003, as compared to a net loss of $543,200 and
$1,084,200 for the three and six months ended June 30, 2002.
ITEM 4. CONTROLS AND PROCEDURES
-------------------------
In the 90 day period before the filing of this Report, the chief executive
and chief financial officers of the Company have evaluated the effectiveness of
the Company's disclosure controls and procedures. These disclosure controls and
procedures are those controls and other procedures we maintain, which are
designed to insure that all of the information required to be disclosed by the
Company in all its periodic reports filed with the SEC is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules
and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by the Company in its reports filed or submitted under the Securities
Exchange Act of 1934 is accumulated and communicated to Company management,
including the chief executive and chief financial officers of the Company, as
appropriate to allow those person to make timely decisions regarding required
disclosure.
11
Subsequent to the date when the disclosure controls and procedures were
evaluated, there have not been any significant changes in the Company's
disclosure controls or procedures or in other factors that could significantly
affect such controls or procedures. No significant deficiencies or material
weaknesses in the controls or procedures were detected, so no corrective actions
needed to be taken.
FORWARD LOOKING STATEMENTS
- ----------------------------
The statements contained in all parts of this document, including, but not
limited to, those relating to the Company's schedule, estimates or results of
future drilling, budgeted and other future capital expenditures, use of offering
proceeds, outcome and effects of litigation, the ability of expected sources of
liquidity to implement its business strategy, level of risk and capital and any
other statements regarding future operations, financial results, business plans
and cash needs and other statements that are not historical facts are forward
looking statements. When used in this document, the words "anticipate,"
"estimate," "expect," "may," "project," "believe" and similar expressions are
intended to be among the statements that identify forward looking statements.
Such statements involve risks and uncertainties, including, but not limited to,
those relating to the Company's dependence on its exploratory drilling
activities, the volatility of natural gas prices, operating risks of natural gas
operations, the Company's dependence on its key personnel, factors that affect
the Company's ability to manage its growth and achieve its business strategy,
risks relating to, limited operating history, technological changes, significant
capital requirements of the Company, the potential impact of government
regulations in the United States and elsewhere, litigation, competition, the
uncertainty of reserve information and future net revenue estimates, property
acquisition risks, availability of equipment, weather and other factors, as
detailed in the Company's Annual Report on Form 10-K/A for the year ended
December 31, 2002. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes
may vary materially from those discussed.
Although the U.S. District Court of Colorado has ordered Nukem to pay USE
and Crested Corp. approximately $20,000,000, further Court proceedings in this
matter are likely. See Part II, Item 1, below. It is likely that Nukem's payment
of the judgment will be delayed by the appeals process, and it is possible that
the amount of the judgment may change.
12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
------------------
On July 30, 2003, U.S. Energy Corp. (USE ) and Crested Corp. (Crested)
received an order and thereafter a Judgment on August 1, 2003 from the U.S.
District Court of Colorado wherein Chief Judge Lewis T. Babcock ordered a
Judgment be entered against Nukem in favor of Crested and USE in the amount of
$20,044,184. The Defendant Nukem has indicated to Crested and USE that it
intends to appeal the Judgment to the 10th Circuit Court of Appeals (CCA) and
that it will post a supersedeas bond in the full amount of the Judgment plus
interest for one year. Crested and USE have filed a motion to alter and amend
certain portions of the Order and Judgment. It is anticipated that Nukem will
also file such a motion. It is not known what the outcome will be but management
believes the Court will act on the motions expeditiously. Once the Court rules
on the motions, the parties will have 30 days within which time to file a notice
of appeal to the 10th CCA.
No other material developments in the other pending Legal Proceedings have
occurred since they were last reported by the Company in Item 3 of its December
31, 2002 Form 10-K/A.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------------
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-------------------------------------
(a) Exhibits.
31 Certification Pursuant to Rule 13a-14(a) and Rule 15d-14(a)
32 Certification Pursuant to Section 1350 of Chapter 63
of title 18 of the United States Code
(b) REPORTS ON FORM 8-K. The Company filed four reports on Form 8-K
for the quarter ended June 30, 2003. The events reported were as follows:
1. The report filed on April 9, 2003, under Item 5, referenced 1)
the extension of Option Agreement for subsidiary, Rocky Mountain
Gas, Inc., to acquire coalbed methane properties and assets in
the Powder River Basin and 2) the U.S. District Court of Colorado
granting the Special Master, in the Nukem accounting case, an
extension of time to file his report to May 1, 2003;
2. The report filed May 12, 2003, under Item 5, referenced the
subsidiary, Rocky Mountain Gas, Inc., signing a Letter of Intent
to enter into an Earn-In Joint Venture with Gastar Exploration,
Ltd.;
3. The report filed May 12, 2003, under Item 5, referenced the
report from the Special Master being filed "under seal";
4. The report filed May 29, 2003, under Item 5, referenced the
Amended Minute Order from the U.S. District Court for Colorado
clarifying the Court's Minute Order of May 19, 2003;
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.
CRESTED CORP.
(Company)
Date: August 13, 2003 By: /s/ John L. Larsen
-------------------------------
JOHN L. LARSEN,
CHAIRMAN and CEO
Date: August 13, 2003 By: /s/ Robert Scott Lorimer
-------------------------------
ROBERT SCOTT LORIMER
Principal Financial Officer and
Chief Accounting Officer
14
CERTIFICATION
-------------
I, Robert Scott Lorimer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Crested Corp.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Dated this 18th day of August, 2003.
/s/ Robert Scott Lorimer
-------------------------------------------
Robert Scott Lorimer,
Chief Financial Officer
15
CERTIFICATION
-------------
I, John L. Larsen, certify that:
6. I have reviewed this quarterly report on Form 10-Q of Crested Corp.;
7. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
8. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
9. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
10. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Dated this 18th day of August, 2003.
/s/ John L. Larsen
-------------------------------------------
John L. Larsen,
Chief Executive Officer
16
EXHIBIT 32
Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code
as adopted pursuant to
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, John L. Larsen, the Chief Executive Officer of Crested Corp., certify
that (i) the Quarterly Report on Form 10-Q for the period ended June 30, 200, as
filed by the Company with the Securities and Exchange Commission, to which this
Certification is an Exhibit, fully complies with the requirements of Section
13(a) of the Securities Exchange Act of 1934, as amended; and (ii) the
information contained in the Quarterly financial statements fairly presents, in
all material respects, the financial condition and results of operations of
Crested Corp.
/s/ John L. Larsen
-------------------------------------
John L. Larsen
Chief Executive Officer
Date: August 18, 2003
This certification accompanies this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 has been
provided to Crested Corp. and will be retained by Crested Corp. and furnished to
the Securities and Exchange Commission or its staff upon request.
17
EXHIBIT 32
Certification Pursuant to Section 1350 of Chapter 63
of Title 18 of the United States Code
as adopted pursuant to
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert Scott Lorimer, the Chief Financial Officer of Crested Corp.,
certify that (i) the Quarterly Report on Form 10-Q for the period ended June 30,
200, as filed by the Company with the Securities and Exchange Commission, to
which this Certification is an Exhibit, fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934, as amended; and (ii) the
information contained in the Quarterly financial statements fairly presents, in
all material respects, the financial condition and results of operations of
Crested Corp.
/s/ Robert Scott Lorimer
-------------------------------------
Robert Scott Lorimer
Chief Financial Officer
Date: August 18, 2003
This certification accompanies this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
A signed original of this written statement required by Section 906 has been
provided to Crested Corp. and will be retained by Crested Corp. and furnished to
the Securities and Exchange Commission or its staff upon request.
18