U.S. ENERGY CORP.
1,104,898 SHARES OF COMMON STOCK
THIS PROSPECTUS COVERS THE OFFER AND SALE OF UP TO 202,593 SHARES OF COMMON
STOCK ($0.01 PAR VALUE) BY SHAREHOLDERS; UP TO 296,875 SHARES OF COMMON STOCK BY
HOLDERS OF WARRANTS AND OPTIONS ON EXERCISE OF THE WARRANTS AND OPTIONS; UP TO
450,000 SHARES WHICH MAY BE ISSUED ON EXCHANGE OF OUTSTANDING COMMON STOCK IN
ROCKY MOUNTAIN GAS, INC. ("RMG"), A MAJORITY-OWNED SUBSIDIARY OF USE) FOR COMMON
STOCK OF USE; AND UP TO 155,430 SHARES WHICH MAY BE ISSUED ON CONVERSION OF
INTEREST AND PRINCIPAL ON CONVERSION OF DEBT.
IN THIS PROSPECTUS, "SELLING SHAREHOLDER" OR "SELLING SHAREHOLDERS" REFERS
TO CAYDAL, LLC AND FIVE INDIVIDUALS WHO HOLD WARRANTS TO PURCHASE STOCK IN USE,
ALL OF WHOM ALSO PURCHASED STOCK IN RMG WHICH MAY BE EXCHANGED FOR STOCK IN USE;
AN INDIVIDUAL AND FOUR ENTITIES WHICH HOLD OUTSTANDING STOCK IN USE; TWELVE
INDIVIDUALS AND FIVE ENTITIES WHICH HOLD WARRANTS OR OPTIONS TO PURCHASE STOCK
IN USE; AND CAYDAL, LLC AND TSUNAMI PARTNERS L.P., WHICH HOLD DEBT CONVERTIBLE
TO STOCK IN USE. FOR INFORMATION ABOUT THE SELLING SHAREHOLDERS, AND THE
TRANSACTIONS IN WHICH THEY ACQUIRED THE VARIOUS SHARES, OPTIONS, WARRANTS, AND
RIGHTS TO EXCHANGE RMG STOCK FOR USE STOCK, SEE "SELLING SHAREHOLDERS."
IN THIS PROSPECTUS, AND THE INFORMATION INCORPORATED BY REFERENCE, "WE,"
"COMPANY," AND "USE" REFER TO U.S. ENERGY CORP. (AND ITS SUBSIDIARIES UNLESS
OTHERWISE SPECIFICALLY STATED).
THE SELLING SHAREHOLDERS MAY SELL THE SHARES FROM TIME TO TIME IN
NEGOTIATED TRANSACTIONS, BROKERS' TRANSACTIONS OR A COMBINATION OF SUCH METHODS
OF SALE AT MARKET PRICES PREVAILING AT THE TIME OF SALE OR AT NEGOTIATED PRICES.
ALTHOUGH WE WILL RECEIVE PROCEEDS IF AND TO THE EXTENT THE OPTIONS AND WARRANTS
ARE EXERCISED, WE WILL NOT RECEIVE ANY PROCEEDS FROM SALE OF ANY OF THE SHARES
OFFERED BY THE SELLING SHAREHOLDERS. NONE OF THE OPTIONS OR WARRANTS HAVE BEEN
EXERCISED AT PROSPECTUS DATE.
USE IS TRADED ("USEG") ON THE NASDAQ SMALL CAP MARKET ($2.59 ON DECEMBER 2,
2003).
AN INVESTMENT IN THE SHARES OFFERED BY THIS PROSPECTUS IS SPECULATIVE AND
SUBJECT TO RISK OF LOSS. SEE "RISK FACTORS" BEGINNING ON PAGE 9 AND THE TABLE OF
CONTENTS ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS DECEMBER 10, 2003.
TABLE OF CONTENTS
PAGE NO.
SUMMARY INFORMATION
THE COMPANY. . . . . . . . . . . . . . . . . . . . . 8
THE OFFERING . . . . . . . . . . . . . . . . . . . . 9
RISK FACTORS . . . . . . . . . . . . . . . . . . . . 10
RISK FACTORS INVOLVING THE COMPANY. . . . . . . . 10
LACK OF COALBED METHANE PRODUCTION
AND ESTABLISHED RESERVES FOR THE COALBED
METHANE PROPERTIES MAY SLOW DOWN
FUTURE EXPLORATION OF THESE PROPERTIES. . . . . 10
LOW GAS PRICES FOR POWDER RIVER
BASIN PRODUCTION MAY HURT OUR BUSINESS. . . . . 10
WE MAY HAVE TO BEGIN TO CURTAIL
OPERATIONS IF WE DON'T RAISE
MORE CAPITAL BY DECEMBER 2004 . . . . . . . . . 10
WE ARE SUBJECT TO CERTAIN KINDS OF RISKS
WHICH ARE UNIQUE TO THE MINERALS BUSINESS . . . 11
DELAYS IN OBTAINING PERMITS FOR METHANE
WELLS COULD IMPAIR OUR BUSINESS . . . . . . . . 11
THE COMPANY'S POISON PILL COULD DISCOURAGE
SOME ADVANTAGEOUS TRANSACTIONS. . . . . . . . . 11
COMPLIANCE WITH ENVIRONMENTAL
REGULATIONS MAY BE COSTLY . . . . . . . . . . . 11
COMMODITY PRICE FLUCTUATIONS MAY BE
DIFFICULT TO MANAGE AND COULD CAUSE LOSSES. . . 12
FUTURE EQUITY TRANSACTIONS, INCLUDING EXERCISE OF
OPTIONS OR WARRANTS, COULD RESULT IN DILUTION . 12
TERMS OF SUBSEQUENT FINANCINGS MAY
ADVERSELY IMPACT YOUR INVESTMENT. . . . . . . . 12
RISK FACTOR INVOLVING THIS OFFERING . . . . . . . 13
REPRESENTATIONS ABOUT THIS OFFERING . . . . . . . 13
FORWARD LOOKING STATEMENTS. . . . . . . . . . . . 13
DESCRIPTION OF SECURITIES . . . . . . . . . . . . 14
USE OF PROCEEDS . . . . . . . . . . . . . . . . . 17
SELLING SHAREHOLDERS. . . . . . . . . . . . . . . 17
PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . 22
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION 23
WHERE TO FIND MORE INFORMATION ABOUT US . . . . . 24
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE 24
LEGAL MATTERS . . . . . . . . . . . . . . . . . . 25
EXPERTS . . . . . . . . . . . . . . . . . . . . . 25
SUMMARY INFORMATION
THE FOLLOWING SUMMARIZES ALL MATERIAL INFORMATION FOUND ELSEWHERE IN THIS
PROSPECTUS AND THE INFORMATION INCORPORATED INTO IT BY REFERENCE. THIS SUMMARY
IS QUALIFIED BY THE MORE DETAILED INFORMATION IN THIS PROSPECTUS AND THE
INFORMATION INCORPORATED BY REFERENCE.
THE COMPANY
U.S. ENERGY CORP. IS A WYOMING CORPORATION, FORMED IN 1966, IN THE BUSINESS
OF ACQUIRING, EXPLORING, DEVELOPING AND/OR SELLING OR LEASING MINERAL
PROPERTIES, AND THE MINING AND MARKETING OF MINERALS. WE NOW ARE ENGAGED IN THE
ACQUISITION AND EXPLORATION OF COALBED METHANE GAS PROPERTIES, WHICH IS OUR
PRIMARY BUSINESS FOCUS. THE ONLY ACTIVITIES OF A SIGNIFICANT AND RECURRING
NATURE ARE IN COALBED METHANE, ALTHOUGH FROM TIME TO TIME WE MAY DRILL
CONVENTIONAL GAS WELLS WHERE WE OR THIRD PARTIES ARE THE OPERATORS.
WE ALSO HOLD MINING PROPERTIES, BUT THESE PROPERTIES (URANIUM AND A
PROPERTY IN SUTTER CREEK, CALIFORNIA WE BOUGHT FOR GOLD EXPLORATION) ARE SHUT
DOWN. THE MOST SIGNIFICANT URANIUM PROPERTIES ARE LOCATED ON SHEEP MOUNTAIN IN
WYOMING, AND IN SOUTHEAST UTAH. WE ALSO HOLD A ROYALTY INTEREST IN CLAIMS ON
GREEN MOUNTAIN, WYOMING, NOW HELD BY KENNECOTT URANIUM COMPANY (SEE BELOW).
INTERESTS ARE HELD IN OTHER MINERAL PROPERTIES (PRINCIPALLY MOLYBDENUM), BUT ARE
EITHER NON-OPERATING INTERESTS OR UNDEVELOPED CLAIMS. WE KNOW OF NO CURRENT
PLANS FOR THE MOLYBDENUM PROPERTY TO BE PUT INTO PRODUCTION (THIS PROPERTY IS
OWNED BY PHELPS DODGE). SMALL OIL AND GAS OPERATIONS IN MONTANA ARE CONDUCTED AS
WELL. OUR FISCAL YEAR ENDS DECEMBER 31.
THE ACQUISITION AND EXPLORATION OF COALBED METHANE PROPERTIES IS CONDUCTED
THROUGH ROCKY MOUNTAIN GAS, INC. ("RMG"). WE OWN, TOGETHER WITH CRESTED CORP.
("CRESTED") 89.2% OF RMG, A WYOMING CORPORATION. CRESTED IS A 70.5%
MAJORITY-OWNED SUBSIDIARY OF U. S. ENERGY CORP. (SEE BELOW). PROPERTIES OF RMG
ARE HELD IN SOUTHEASTERN MONTANA AND NORTHEASTERN AND SOUTHWESTERN WYOMING. IN
APRIL 2002, A LAWSUIT WAS FILED CHALLENGING THE VALIDITY OF BUREAU OF LAND
MANAGEMENT LEASES IN MONTANA. APPROXIMATELY 38% (72,211 ACRES) OF RMG'S TOTAL
GROSS ACREAGE IS LEASED FROM THE BLM IN MONTANA. SEE ITEM 3 (LEGAL PROCEEDINGS)
IN THE FORM 10-K FOR THE SEVEN MONTHS ENDED DECEMBER 31, 2002. THE STATUS OF
THIS LITIGATION WILL BE UPDATED IN SUBSEQUENT SEC FILINGS.
WE DON'T KNOW IF ANYTHING OF VALUE WILL RESULT FROM OUR ACTIVITIES IN THE
COALBED METHANE AREA: ONLY A LIMITED NUMBER OF EXPLORATORY WELLS HAVE BEEN
DRILLED, AND THERE IS NOT YET ENOUGH INFORMATION FROM THESE WELLS TO DETERMINE
IF THEY CONTAIN PROVED RESERVES; GAS PRICES ARE LOWER IN THE POWDER RIVER BASIN
(OUR AREA OF ACTIVITY) THAN NATIONWIDE GAS PRICES; PERMITTING ISSUES MAY DELAY
FURTHER WORK; AND MORE FUNDING MAY BE NEEDED BUT NOT AVAILABLE.
USE AND CRESTED ORIGINALLY WERE INDEPENDENT COMPANIES, WITH TWO COMMON
AFFILIATES (JOHN L. LARSEN AND MAX T. EVANS, MR. EVANS IS NOW DECEASED). IN
1980, USE AND CRESTED FORMED A JOINT VENTURE, REFERRED TO AS THE USECC JOINT
VENTURE, TO DO BUSINESS TOGETHER (UNLESS ONE OR THE OTHER ELECTED NOT TO PURSUE
AN INDIVIDUAL PROJECT). AS A RESULT OF USE FUNDING CERTAIN OF CRESTED'S
OBLIGATIONS FROM TIME TO TIME (DUE TO CRESTED'S LACK OF CASH ON HAND), AND LATER
PAYMENT OF DEBTS BY CRESTED ISSUING COMMON STOCK TO USE, CRESTED BECAME A
MAJORITY-OWNED SUBSIDIARY OF USE IN FISCAL 1993.
ALL OF USE'S AND CRESTED'S OPERATIONS ARE IN THE UNITED STATES. PRINCIPAL
EXECUTIVE OFFICES FOR USE AND CRESTED ARE LOCATED IN THE GLEN L. LARSEN BUILDING
AT 877 NORTH 8TH STREET WEST, RIVERTON, WYOMING 82501, TELEPHONE 307.856.9271;
FAX 307.857.3050.
MOST OF THE COMPANY'S (USE'S) OPERATIONS ARE CONDUCTED THROUGH
SUBSIDIARIES, THE USECC JOINT VENTURE WITH CRESTED, AND VARIOUS JOINTLY-OWNED
SUBSIDIARIES OF USE AND CRESTED.
UNTIL SEPTEMBER 11, 2000, USE, CRESTED AND KENNECOTT URANIUM COMPANY
("KENNECOTT"), OWNED THE GREEN MOUNTAIN MINING VENTURE ("GMMV"), WHICH HELD A
LARGE URANIUM DEPOSIT AND URANIUM MILL IN WYOMING. ON SEPTEMBER 11, 2000, USE
AND CRESTED SETTLED LITIGATION WITH KENNECOTT INVOLVING THE GMMV BY SELLING
THEIR INTEREST IN THE GMMV AND ITS PROPERTIES BACK TO KENNECOTT FOR $3.25
MILLION AND RECEIVING A ROYALTY INTEREST IN THE URANIUM PROPERTIES. KENNECOTT
ALSO ASSUMED ALL RECLAMATION OBLIGATIONS ON THE GMMV PROPERTIES. OTHER PRINCIPAL
URANIUM PROPERTIES AND A URANIUM MILL IN SOUTHEAST UTAH ARE HELD BY PLATEAU
RESOURCES LTD., A WHOLLY-OWNED SUBSIDIARY OF USE. THE UTAH URANIUM PROPERTIES
ARE SHUT DOWN.
THE PROPERTY HELD BY SUTTER GOLD MINING COMPANY ("SGMC"), A MAJORITY-OWNED
SUBSIDIARY OF USE, HAS BEEN SHUT DOWN SO FAR AS A PROSPECTIVE MINING OPERATION
IS CONCERNED, BECAUSE THE HISTORICAL PRICE OF GOLD WAS TOO LOW TO RAISE THE
CAPITAL NECESSARY TO PUT THE PROPERTIES INTO PRODUCTION. MANAGEMENT IS WORKING
ON PLANS TO START MINING ACTIVITIES AT SUTTER WHEN FINANCING CAN BE OBTAINED.
THE OFFERING
SECURITIES OUTSTANDING 12,743,097 SHARES OF COMMON STOCK, $0.01 PAR
VALUE.
SECURITIES TO BE OUTSTANDING 13,600,958 SHARES OF COMMON STOCK, $0.01 PAR
VALUE, ASSUMING THE OPTIONS AND WARRANTS ON
296,875 SHARES HELD BY THE SELLING
SHAREHOLDERS WERE EXERCISED AS OF THE DATE OF
THIS PROSPECTUS; THE OUTSTANDING RMG STOCK IS
EXCHANGED FOR 450,000 SHARES OF USE; AND
155,430 SHARES ARE ISSUED ON CONVERSION OF
PRINCIPAL AND INTEREST ON RESTRUCTURED DEBT
(1 SHARE FOR EACH $2.25 PRINCIPAL AND
INTEREST). THE ACTUAL NUMBER OF USE SHARES
ISSUED IN EXCHANGE FOR RMG STOCK WILL DEPEND
ON THE MARKET PRICE FOR USE STOCK AT
CONVERSION DATES. THE NUMBER OF SHARES
ISSUABLE ON CONVERSION OF PRINCIPAL AND
INTEREST ON THE RESTRUCTURED DEBT DOES NOT
INCLUDE 422,222 SHARES ISSUABLE ON CONVERSION
OF THE ORIGINAL DEBT (PRINCIPAL ONLY, 1 SHARE
FOR EACH $3.00 PRINCIPAL), BEFORE A
RESTRUCTURING OF THE DEBT IN OCTOBER 2003 TO
EXTEND MATURITY DATE, REDUCE THE INTEREST
RATE, AND REDUCE THE CONVERSION PRICE. RESALE
OF THE OTHER 466,667 SHARES IS COVERED BY
SEPARATE PROSPECTUS. SEE "DESCRIPTION OF
SECURITIES - WARRANTS, OPTIONS, AND
CONVERTIBLE DEBT" AND "SELLING SHAREHOLDERS."
SECURITIES OFFERED 1,104,898 SHARES OF COMMON STOCK OWNED OR TO
BE OWNED BY THE SELLING SHAREHOLDERS.
USE OF PROCEEDS WE WILL NOT RECEIVE ANY PROCEEDS FROM SALE OF
SHARES BY THE SELLING SHAREHOLDERS, BUT WE
WILL RECEIVE UP TO $1,282,125 IN PROCEEDS
FROM EXERCISE OF THE WARRANTS AND OPTIONS, IF
THEY ARE EXERCISED, WHICH WILL BE USED BY THE
COMPANY FOR WORKING CAPITAL.
PLAN OF DISTRIBUTION THE OFFERING IS MADE BY THE SELLING
SHAREHOLDERS NAMED IN THIS PROSPECTUS, TO THE
EXTENT THEY SELL SHARES. SALES MAY BE MADE IN
THE OPEN MARKET OR IN PRIVATE NEGOTIATED
TRANSACTIONS, AT FIXED OR NEGOTIATED PRICES.
SEE "PLAN OF DISTRIBUTION."
RISK FACTORS AN INVESTMENT IS SUBJECT TO RISK. SEE
"RISK FACTORS."
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK IS SPECULATIVE IN NATURE AND INVOLVES A
HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS AND THE
OTHER INFORMATION IN THIS PROSPECTUS (INCLUDING THE INFORMATION INCORPORATED BY
REFERENCE) BEFORE INVESTING.
RISK FACTORS INVOLVING THE COMPANY
LACK OF COALBED METHANE PRODUCTION AND ESTABLISHED RESERVES FOR MOST OF THE
COALBED METHANE PROPERTIES MAY SLOW DOWN FURTHER EXPLORATION OF THESE
PROPERTIES. IN JUNE 2003, RMG TRANSFERRED COALBED METHANE PROPERTIES, INCLUDING
RMG'S ONLY COALBED METHANE PRODUCING WELLS (THE BOBCAT PROPERTY) TO PINNACLE GAS
RESOURCES, INC.("PINNACLE") IN EXCHANGE FOR AN EQUITY POSITION IN PINNACLE (SEE
THE FORM 8-K REPORTS FILED WITH THE SEC ON JULY 15 AND JULY 21, 2003). WE WILL
NOT BE RECEIVING ANY MORE PRODUCTION REVENUES FROM THESE PROPERTIES. AS A RESULT
WE HAVE NO PROPERTIES IN PRODUCTION. NO RESERVES HAVE BEEN ESTABLISHED FOR ANY
OF OUR PROPERTIES, BECAUSE WE HAVE NOT DRILLED AND TESTED ENOUGH WELLS ON THE
PROPERTIES TO DETERMINE IF WE HAVE ECONOMIC RESERVES OF COALBED METHANE IN
PLACE. FOR SOME PROPERTIES, WE WILL HAVE TO ESTABLISH AT LEAST SOME RESERVE
PARAMETERS BEFORE GAS TRANSMISSION COMPANIES WILL BUILD GAS LINES TO OUR
PROPERTIES, AND CONSTRUCTION OF LINES WILL DEPEND ALSO ON THEN-CURRENT AND
PROJECTED MARKET PRICES FOR GAS. IF WE HAVE THE NECESSARY CAPITAL, WE MAY ELECT
TO BUILD OUR OWN LINES OVER TO EXISTING TRANSMISSION LINES NEAR OUR PROPERTIES
IN THE POWDER RIVER BASIN IN WYOMING AND MONTANA. WE CAN'T SELL PRODUCTION UNTIL
THE LINES AND ASSOCIATED GATHERING LINES AND COMPRESSION STATIONS ARE
CONSTRUCTED.
DUE TO PERMITTING DELAYS IN MONTANA, WE MAY NOT REALIZE PRODUCTION FROM
THESE MONTANA PROPERTIES UNTIL MID-2004, OR LATER. OTHER WYOMING PROPERTIES
COULD BE IN PRODUCTION IN 2004, BUT PRODUCTION MIGHT BE DELAYED DUE TO LOW
MARKET PRICES FOR GAS. LOW MARKET PRICES COULD DELAY GAS PURCHASERS FROM
BUILDING THE NECESSARY LINES TO MOVE GAS FROM OUR PROPERTIES TO THE MAJOR GAS
TRANSMISSION LINES.
THESE FACTORS MAY MAKE IT DIFFICULT TO RAISE THE AMOUNT OF CAPITAL NEEDED
TO FURTHER EXPLORE THE COALBED METHANE PRODUCTION POTENTIAL IN OUR PROPERTIES IN
A RAPID MANNER. THEREFORE, WE MAY HAVE TO SEEK TO RAISE CAPITAL. IN THE
MEANTIME, WE HAVE ONLY LIMITED WORKING CAPITAL. SEE BELOW.
CONTINUED LOW GAS PRICES FOR POWDER RIVER BASIN PRODUCTION MAY HURT OUR
BUSINESS. FOR THE SIX MONTHS ENDED JUNE 30, 2003, RMG RECEIVED AN AVERAGE PRICE
OF $3.90 PER MILLION BTU (MMBTU) OF GAS PRODUCED FROM THE BOBCAT PROPERTY, WITH
PRICES RANGING FROM $3.04 TO $4.66 PER MMBTU. THE ENERGY CONTENT OF CBM IN THE
POWDER RIVER BASIN IS CLOSE TO ONE MMBTU PER MCF (FROM .96 TO .98 MMBTU IN 1.00
MCF). THE BOBCAT PROPERTY WAS TRANSFERRED TO PINNACLE GAS RESOURCES, INC. IN
LATE JUNE. SEE THE FORM 8-K REPORTS FILED JULY 15 AND 21, 2003. THESE PRICES
APPROXIMATE WHAT OTHER PRODUCERS IN THE AREA WERE RECEIVING IN THE FIRST SIX
MONTHS OF 2003, AND REPRESENT A NEGATIVE PRICE DIFFERENTIAL OF APPROXIMATELY 35%
COMPARED TO THE AVERAGE PRICE OF APPROXIMATELY $6.00 PER MMBTU RECEIVED BY
PRODUCERS NATIONWIDE.
THERE IS NO GUARANTEE THAT INCREASED PIPELINE CAPACITY PLANNED OR UNDER
CONSTRUCTION WILL ELIMINATE THE NEGATIVE PRICE DIFFERENTIAL OR EVEN
SIGNIFICANTLY REDUCE IT.
NATIONWIDE GAS PRICES WERE $5.291 PER MMBTU AT JULY 2003 COMPARED TO $3.278
IN JULY 2002. HOWEVER, A RETURN OF SUSTAINED LOW GAS PRICES WOULD IMPAIR OUR
ABILITY TO RAISE CAPITAL FOR RMG AND REDUCE REVENUES FROM PRODUCTION COMING ON
LINE. SEE THE DISCUSSION UNDER THE CAPTION "GATHERING AND TRANSMISSION OF CBM
GAS" IN THE FORM 10-K FOR THE SEVEN MONTHS ENDED DECEMBER 31, 2002.
WE MAY HAVE TO BEGIN TO CURTAIL OPERATIONS IF WE DON'T RAISE MORE CAPITAL
BY DECEMBER 2004. AT SEPTEMBER 30, 2003, WE HAD WORKING CAPITAL OF $2,500,000,
AND AN ACCUMULATED DEFICIT OF $42,300,000. OUR CURRENT LEVEL OF OPERATIONS,
INCLUDING GENERAL AND ADMINISTRATIVE OVERHEAD, MINERAL OPERATIONS (PRIMARILY
HOLDING COSTS FOR THE URANIUM AND GOLD PROPERTIES), AND COSTS TO COMPLY WITH
LEASE AND PERMITTING OBLIGATIONS FOR THE COALBED PROPERTIES, ARE ESTIMATED TO
COST $1.0 MILLION FOR THE THREE MONTHS ENDING DECEMBER 31, 2003. HOWEVER, IF WE
DO NOT REALIZE CASH FROM LIQUIDATING ASSETS, OR OTHER SOURCES, OR IF RMG SPENDS
MORE MONEY ON EXPLORATION THAN WILL BE COVERED BY CURRENT ARRANGEMENTS, THEN
UNDER THESE CIRCUMSTANCES ADDITIONAL EQUITY FINANCING MAY BE NECESSARY TO
SUSTAIN OPERATIONS THROUGH THE FOURTH QUARTER 2004. THERE ARE NO CURRENT
COMMITMENTS FOR SUCH FUTURE FINANCING AS MAY BE NECESSARY.
OUR STRATEGY FOR RMG CONTEMPLATES A TOTAL CAPITAL BUDGET OF UP TO $1.5
MILLION THROUGH 2004 TO CONTINUE EXPLORING OUR COALBED METHANE PROPERTIES. THE
CASH REQUIREMENTS FOR OUR COALBED METHANE BUSINESS ARE IN ADDITION TO WORKING
CAPITAL REQUIREMENTS. LACK OF PRODUCTION AND ESTABLISHED RESERVES MAY MAKE IT
DIFFICULT TO RAISE THIS AMOUNT OF MONEY IN THE NEAR FUTURE. THEREFORE, WE MAY
HAVE TO SEEK TO RAISE CAPITAL IN SMALLER AMOUNTS OVER TIME, WHICH EFFORTS COULD
WELL EXTEND INTO CALENDAR 2005. SEE THE PRECEDING RISK FACTOR.
WE ARE SUBJECT TO CERTAIN KINDS OF RISK WHICH ARE UNIQUE TO THE MINERALS
BUSINESS. THE EXPLORATION FOR AND PRODUCTION OF MINERALS IS HIGHLY SPECULATIVE
AND INVOLVES RISKS DIFFERENT FROM AND IN SOME INSTANCES GREATER THAN RISKS
ENCOUNTERED BY COMPANIES IN OTHER INDUSTRIES. MANY EXPLORATION PROGRAMS DO NOT
RESULT IN THE DISCOVERY OF MINERALIZATION AND ANY MINERALIZATION DISCOVERED MAY
NOT BE OF SUFFICIENT QUANTITY OR QUALITY. ALSO, THE MERE DISCOVERY OF PROMISING
MINERALIZATION MAY NOT WARRANT PRODUCTION, BECAUSE THE MINERALS (INCLUDING
METHANE GAS) MAY BE DIFFICULT OR IMPOSSIBLE TO EXTRACT (PRODUCE) ON A PROFITABLE
BASIS.
PROFITABILITY OF ANY MINING AND PRODUCTION WE MAY CONDUCT WILL INVOLVE A
NUMBER OF FACTORS, INCLUDING, BUT NOT LIMITED TO: THE ABILITY TO OBTAIN ALL
REQUIRED PERMITS; COSTS OF BRINGING THE PROPERTY INTO PRODUCTION; THE
CONSTRUCTION OF ADEQUATE PRODUCTION FACILITIES; THE AVAILABILITY AND COSTS OF
FINANCING; KEEPING ONGOING COSTS OF PRODUCTION AT ECONOMIC LEVELS, AND MARKET
PRICES FOR THE METALS OR HYDROCARBONS TO BE PRODUCED STAYING ABOVE PRODUCTION
COSTS. OUR PROPERTIES, OR PROPERTIES WE MIGHT ACQUIRE IN THE FUTURE, MAY NOT
CONTAIN DEPOSITS OF MINERALS OR COALBED METHANE GAS THAT WILL BE PROFITABLE TO
PRODUCE.
IN ADDITION, ALL FORMS OF MINERAL (AND OIL AND GAS AND COALBED METHANE)
EXPLORATION AND PRODUCTION REQUIRE PERMITS TO HAVE BEEN ISSUED BY VARIOUS
FEDERAL AND STATE AGENCIES. SEE BELOW.
DELAYS IN OBTAINING PERMITS FOR METHANE WELLS COULD IMPAIR OUR BUSINESS.
DRILLING AND PRODUCING COALBED METHANE WELLS REQUIRES OBTAINING PERMITS FROM
VARIOUS GOVERNMENTAL AGENCIES. THE EASE OF OBTAINING THE NECESSARY PERMITS
DEPENDS ON THE TYPE OF MINERAL OWNERSHIP AND THE STATE IN WHICH THE PROPERTY IS
LOCATED. INTERMITTENT DELAYS IN THE PERMITTING PROCESS CAN REASONABLY BE
EXPECTED THROUGHOUT THE DEVELOPMENT OF ANY PROPERTY. FOR EXAMPLE, THERE IS
CURRENTLY A TEMPORARY MORATORIUM FOR DRILLING COALBED METHANE WELLS ON FEE AND
STATE LANDS IN MONTANA. WE MAY SHIFT OUR EXPLORATION AND DEVELOPMENT STRATEGY AS
NEEDED TO ACCOMMODATE THE PERMITTING PROCESS. AS WITH ALL GOVERNMENTAL PERMIT
PROCESSES, PERMITS MAY NOT BE ISSUED IN A TIMELY FASHION OR IN A FORM CONSISTENT
WITH OUR PLAN OF OPERATIONS.
THE COMPANY'S POISON PILL COULD DISCOURAGE SOME ADVANTAGEOUS TRANSACTIONS.
WE HAVE ADOPTED A SHAREHOLDER RIGHTS PLAN, ALSO KNOWN AS A POISON PILL (SEE
"DESCRIPTION OF SECURITIES"). THE PLAN IS DESIGNED TO DISCOURAGE A TAKEOVER OF
THE COMPANY AT AN UNFAIR LOW PRICE. HOWEVER, IT IS POSSIBLE THAT THE BOARD OF
DIRECTORS AND THE TAKEOVER ACQUIROR WOULD NOT AGREE ON A HIGHER PRICE, IN WHICH
CASE THE TAKEOVER MIGHT BE ABANDONED, EVEN THOUGH THE TAKEOVER PRICE WAS AT A
SIGNIFICANT PREMIUM TO MARKET PRICES. THEREFORE, AS A RESULT OF THE MERE
EXISTENCE OF THE PLAN, SHAREHOLDERS WOULD NOT RECEIVE THE PREMIUM PRICE.
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS MAY BE COSTLY. OUR BUSINESS
(MOSTLY COALBED METHANE) IS INTENSELY REGULATED BY GOVERNMENT AGENCIES. PERMITS
ARE REQUIRED TO DRILL AND PUMP METHANE WELLS, EXPLORE FOR MINERALS, OPERATE
MINES, BUILD AND OPERATE PROCESSING PLANTS, AND HANDLE AND STORE WASTE. THE
REGULATIONS UNDER WHICH PERMITS ARE ISSUED CHANGE FROM TIME TO TIME TO REFLECT
CHANGES IN PUBLIC POLICY OR SCIENTIFIC UNDERSTANDING OF ISSUES. IF THE ECONOMICS
OF A PROJECT WOULD NOT JUSTIFY THE CHANGES, WE MIGHT HAVE TO ABANDON THE
PROJECT.
THE COMPANY MUST COMPLY WITH NUMEROUS ENVIRONMENTAL REGULATIONS ON A
CONTINUOUS BASIS, TO COMPLY WITH THE UNITED STATES CLEAN AIR ACT, THE CLEAN
WATER ACT, THE RESOURCE CONSERVATION AND RECOVERY ACT ("RCRA"), AND THE
COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION LIABILITY ACT ("CERCLA"). FOR
EXAMPLE, WATER AND DUST DISCHARGED FROM MINES AND TAILINGS FROM PRIOR MINING OR
MILLING OPERATIONS MUST BE MONITORED AND CONTAINED AND REPORTS FILED WITH
FEDERAL, STATE AND COUNTY REGULATORY AUTHORITIES. ADDITIONAL MONITORING AND
REPORTING IS REQUIRED BY THE UNITED STATES NUCLEAR REGULATORY COMMISSION FOR
URANIUM MILLS EVEN IF NOT CURRENTLY OPERATING (LIKE THE COMPANY'S URANIUM MILL
AT TICABOO, UTAH). THE ABANDONED MINE RECLAMATION ACT IN WYOMING AND SIMILAR
LAWS IN OTHER STATES WHERE WE HAVE PROPERTIES IMPOSE RECLAMATION OBLIGATIONS ON
ABANDONED MINING PROPERTIES, IN ADDITION TO OR IN CONJUNCTION WITH FEDERAL
STATUTES.
FAILURE TO COMPLY WITH THESE REGULATIONS COULD RESULT IN SUBSTANTIAL FINES
AND ENVIRONMENTAL REMEDIATION ORDERS. FOR INFORMATION ON THE COMPANY'S BONDING
REQUIREMENTS TO DATE, SEE NOTE K TO THE AUDITED FINANCIAL STATEMENTS IN THE FORM
10-K FOR THE SEVEN MONTHS ENDED DECEMBER 31, 2002.
COMMODITY PRICE FLUCTUATIONS MAY BE DIFFICULT TO MANAGE AND COULD CAUSE
LOSSES. GAS, GOLD AND URANIUM PRICES CAN BE VOLATILE. SHARP SWINGS IN MARKET
PRICES MAKE BUDGETING AND OPERATIONS MORE DIFFICULT. SUSTAINED LOWER PRICES CAN
RESULT IN IMPAIRMENT OF THE FINANCIAL VALUE OF THE MINERAL PROPERTY PURCHASED AS
WELL AS THE FACILITIES BUILT TO PROCESS THE MATERIAL (SUCH AS MILLS OR GAS
COMPRESSION STATIONS). HEDGING ACTIVITIES, IF AVAILABLE FOR THE COMMODITY, CAN
PROTECT AGAINST PRICE SWINGS BUT MAY RESULT IN LOCKING A COMPANY INTO A LOWER
THAN MARKET PRICE OVER TIME.
FUTURE EQUITY TRANSACTIONS, INCLUDING EXERCISE OF OPTIONS OR WARRANTS,
COULD RESULT IN DILUTION. FROM TIME TO TIME, THE COMPANY SELLS RESTRICTED STOCK
AND WARRANTS, AND CONVERTIBLE DEBT, TO INVESTORS IN PRIVATE PLACEMENTS CONDUCTED
BY BROKER-DEALERS, OR IN NEGOTIATED TRANSACTIONS. BECAUSE THE STOCK IS
RESTRICTED, THE STOCK IS SOLD AT A GREATER DISCOUNT TO MARKET PRICES COMPARED TO
A PUBLIC STOCK OFFERING, AND THE EXERCISE PRICE OF THE WARRANTS SOMETIMES IS AT
OR EVEN LOWER THAN MARKET PRICES. THESE TRANSACTIONS CAUSE DILUTION TO EXISTING
SHAREHOLDERS. ALSO, FROM TIME TO TIME, OPTIONS ARE ISSUED TO EMPLOYEES AND THIRD
PARTIES, WITH EXERCISE PRICES EQUAL TO MARKET. EXERCISE OF IN-THE-MONEY OPTIONS
AND WARRANTS WILL RESULT IN DILUTION TO EXISTING SHAREHOLDERS; THE AMOUNT OF
DILUTION WILL DEPEND ON THE SPREAD BETWEEN MARKET AND EXERCISE PRICE, AND THE
NUMBER OF SHARES INVOLVED. THE COMPANY WILL CONTINUE TO GRANT OPTIONS TO
EMPLOYEES WITH EXERCISE PRICES EQUAL TO MARKET PRICE AT THE GRANT DATE, AND IN
THE FUTURE MAY SELL RESTRICTED STOCK AND WARRANTS, ALL OF WHICH MAY RESULT IN
DILUTION TO EXISTING SHAREHOLDERS.
FOR EXAMPLE, FIVE OF THE SELLING SHAREHOLDERS HAVE THE RIGHT TO CONVERT
THEIR INVESTMENT IN RMG STOCK INTO SHARES OF USE STOCK, AND SELL THE USE STOCK
PURSUANT TO THIS PROSPECTUS. THE CONVERSION PRICE IS 77.5% OF MARKET PRICE, BUT
NOT MORE THAN $5.00 PER SHARE. AND, EXCEPT FOR WARRANTS ON 75,000 SHARES
(WARRANTS ON 50,000 SHARES HELD BY SANDERS MORRIS HARRIS INC. AT $5.00 PER
SHARE, AND WARRANTS ON 25,000 SHARES HELD BY C.C.R.I. CORPORATION AT $5.50 PER
SHARE), ALL OF THE OPTIONS AND WARRANTS HELD BY SELLING SHAREHOLDERS ARE
EXERCISABLE FOR LESS THAN $5.00 PER SHARE. FOR FURTHER INFORMATION, SEE "SELLING
SHAREHOLDERS." TO A GREATER OR LESSER EXTENT DEPENDING ON MARKET PRICE AT THE
TIME, THESE CONVERSIONS AND/OR EXERCISES OF DERIVATIVE SECURITIES COULD RESULT
IN DILUTION TO CURRENT SHAREHOLDERS.
TERMS OF SUBSEQUENT FINANCINGS MAY ADVERSELY IMPACT YOUR INVESTMENT. WE MAY
HAVE TO RAISE EQUITY, DEBT OR PREFERRED STOCK FINANCING IN THE FUTURE. YOUR
RIGHTS AND THE VALUE OF YOUR INVESTMENT IN THE COMMON STOCK COULD BE REDUCED.
FOR EXAMPLE, IF WE HAVE TO ISSUE SECURED DEBT SECURITIES, THE HOLDERS OF THE
DEBT WOULD HAVE A CLAIM TO OUR ASSETS THAT WOULD BE PRIOR TO THE RIGHTS OF
STOCKHOLDERS UNTIL THE DEBT IS PAID. INTEREST ON THESE DEBT SECURITIES WOULD
INCREASE COSTS AND NEGATIVELY IMPACT OPERATING RESULTS. PREFERRED STOCK COULD BE
ISSUED IN SERIES FROM TIME TO TIME WITH SUCH DESIGNATIONS, RIGHTS, PREFERENCES,
AND LIMITATIONS AS NEEDED TO RAISE CAPITAL. THE TERMS OF PREFERRED STOCK COULD
BE MORE ADVANTAGEOUS TO THOSE INVESTORS THAN TO THE HOLDERS OF COMMON STOCK. IN
ADDITION, IF WE NEED TO RAISE MORE EQUITY CAPITAL FROM SALE OF COMMON STOCK,
INSTITUTIONAL OR OTHER INVESTORS MAY NEGOTIATE TERMS AT LEAST AND POSSIBLY MORE
FAVORABLE THAN THE TERMS OF THIS OFFERING. SHARES OF COMMON STOCK WHICH WE SELL
COULD BE SOLD INTO THE MARKET, WHICH COULD ADVERSELY AFFECT MARKET PRICE. SEE
"RISK FACTOR INVOLVING THIS OFFERING" BELOW.
RISK FACTOR INVOLVING THIS OFFERING
REGISTRATION FOR RESALE OF ADDITIONAL SHARES MAY DEPRESS MARKET PRICES.
FROM TIME TO TIME, WE HAVE FUNDED OPERATIONS BY SELLING RESTRICTED SECURITIES OF
SUBSIDIARY COMPANIES FOR THEIR OPERATIONS, THEN LATER REACQUIRED THOSE
SECURITIES BY EXCHANGE FOR SHARES AND WARRANTS OF USE. FOR EXAMPLE, IN JANUARY
2002, WE ISSUED 1,423,460 RESTRICTED SHARES OF COMMON STOCK IN EXCHANGE FOR
RESTRICTED SHARES OF ROCKY MOUNTAIN GAS, INC. AND IN CONVERSION OF PREFERRED
STOCK OF USE, FOR WHICH THE EXCHANGING SHAREHOLDERS, AND THE HOLDER OF THE
PREFERRED STOCK, ORIGINALLY HAD INVESTED $5,309,000. THE SHARES OF COMMON STOCK
OF USE WERE ISSUED BASED ON THE MARKET PRICE OF $3.92 PER SHARE ON DECEMBER 5,
2001, AND THE ORIGINAL INVESTMENT AMOUNT FOR RMG AND PREFERRED STOCK, PLUS
$270,959 OF INTEREST OWED THREE OF THE INVESTORS. RESALE OF THESE RESTRICTED
SECURITIES IS COVERED BY A REGISTRATION STATEMENT ON FORM S-3, DECLARED
EFFECTIVE BY THE SEC ON APRIL 4, 2003 (SEC FILE NUMBER 333-103692).
FROM TIME TO TIME, WE MAY SELL MORE RESTRICTED SHARES IN RMG (CONVERTIBLE
INTO COMPANY SHARES), OR SELL RESTRICTED SHARES IN THE COMPANY, TO RAISE
CAPITAL. REGISTRATION FOR RESALE OF SUCH ADDITIONAL SHARES OF THE COMPANY COULD
ADVERSELY AFFECT MARKET PRICES FOR INVESTORS WHO BUY SHARES IN THIS OFFERING.
REPRESENTATIONS ABOUT THIS OFFERING
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT
FROM THAT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL
NOR DOES IT SEEK AN OFFER TO BUY THE SHARES IN ANY JURISDICTION WHERE THIS OFFER
OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS (OR ANY SUPPLEMENT), REGARDLESS
OF WHEN IT IS DELIVERED OR WHEN ANY SHARES ARE SOLD.
FORWARD LOOKING STATEMENTS
WE MAKE STATEMENTS IN THIS PROSPECTUS WHICH ARE CONSIDERED TO BE "FORWARD
LOOKING" STATEMENTS. ALL STATEMENTS (OTHER THAN STATEMENTS OF HISTORICAL FACT)
ABOUT FINANCIAL AND BUSINESS STRATEGY AND THE PERFORMANCE OBJECTIVES OF
MANAGEMENT ARE FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE
BASED ON THE BELIEFS OF MANAGEMENT, AS WELL AS ASSUMPTIONS MADE BY AND
INFORMATION CURRENTLY AVAILABLE TO THEM. THESE STATEMENTS INVOLVE RISKS THAT ARE
BOTH KNOWN AND UNKNOWN, INCLUDING UNEXPECTED ECONOMIC AND MARKET FACTORS,
FAILURE TO ACCURATELY FORECAST OPERATING AND CAPITAL EXPENDITURES AND CAPITAL
NEEDS (DUE TO RISING COSTS AND/OR DIFFERENT DRILLING AND PRODUCTION CONDITIONS
IN THE FIELD), CHANGES IN TIMING OR CONDITIONS FOR GETTING REGULATORY APPROVALS
TO DRILL COALBED METHANE WELLS WHERE NEEDED, AND OTHER BUSINESS FACTORS. THE USE
OF THE WORDS "ANTICIPATE," "BELIEVE," "ESTIMATE," "EXPECT," "MAY," "WILL,"
"SHOULD," "CONTINUE," "INTEND" AND SIMILAR WORDS OR PHRASES, ARE INTENDED BY US
TO IDENTIFY FORWARD-LOOKING STATEMENTS (ALSO KNOWN AS "CAUTIONARY STATEMENTS"
BECAUSE YOU SHOULD BE CAUTIOUS IN EVALUATING SUCH STATEMENTS IN THE CONTEXT OF
ALL THE INFORMATION IN THIS PROSPECTUS AND THE INFORMATION INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS). THESE STATEMENTS REFLECT OUR CURRENT VIEWS WITH
RESPECT TO FUTURE EVENTS. THEY ARE SUBJECT TO THE REALIZATION IN FACT OF
ASSUMPTIONS, BUT WHAT WE NOW THINK WILL HAPPEN, MAY TURN OUT MUCH DIFFERENT, AND
OUR ASSUMPTIONS MAY PROVE TO HAVE BEEN INACCURATE OR INCOMPLETE.
THE INVESTMENT RISKS DISCUSSED UNDER "RISK FACTORS" SPECIFICALLY ADDRESS
ALL OF THE MATERIAL RISK FACTORS THAT MAY INFLUENCE FUTURE OPERATING RESULTS AND
FINANCIAL PERFORMANCE. THOSE INVESTMENT RISKS ARE NOT "BOILER PLATE" BUT ARE
INTENDED TO TELL YOU ABOUT THE UNCERTAINTIES AND RISKS INHERENT IN OUR BUSINESS
AT THE PRESENT TIME WHICH YOU NEED TO EVALUATE BEFORE MAKING YOUR INVESTMENT
DECISION.
IN ADDITION, YOU SHOULD NOTE THAT THIS PROSPECTUS INCORPORATES INFORMATION
ABOUT THE COMPANY WHICH HAS BEEN, AND IN THE FUTURE WILL BE, CONTAINED IN
REPORTS FILED WITH THE SEC. SEE "INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE." THOSE REPORTS WILL IDENTIFY FORWARD LOOKING STATEMENTS AND SPECIFY
THE RISKS TO WHICH THOSE FORWARD LOOKING STATEMENTS ARE SUBJECT. YOU SHOULD READ
THE REPORTS CAREFULLY.
DESCRIPTION OF SECURITIES
COMMON STOCK. WE ARE AUTHORIZED BY OUR ARTICLES OF INCORPORATION TO ISSUE
AN UNLIMITED NUMBER OF SHARES OF COMMON STOCK, $0.01 PAR VALUE, AND 100,000
SHARES OF PREFERRED STOCK, $0.01 PAR VALUE.
SHARES OF COMMON STOCK MAY BE ISSUED FOR SUCH CONSIDERATION AND ON SUCH
TERMS AS DETERMINED BY THE BOARD OF DIRECTORS, WITHOUT SHAREHOLDER APPROVAL.
HOLDERS ARE ENTITLED TO RECEIVE DIVIDENDS WHEN AND AS DECLARED BY THE BOARD OF
DIRECTORS OUT OF FUNDS LEGALLY AVAILABLE THEREFORE. THERE ARE NO RESTRICTIONS ON
PAYMENT OF CASH DIVIDENDS. CASH DIVIDENDS HAVE NOT BEEN DECLARED ON THE COMMON
STOCK, ALTHOUGH A 1 FOR 10 STOCK DIVIDEND WAS DECLARED IN NOVEMBER 1990. IT IS
ANTICIPATED THAT FUTURE EARNINGS WOULD BE REINVESTED INTO OPERATIONS AND NOT
DECLARED AS DIVIDENDS ON THE COMMON STOCK. ALL HOLDERS OF SHARES OF COMMON STOCK
HAVE EQUAL VOTING RIGHTS, AND THE SHARES OF COMMON STOCK SOLD IN THIS OFFERING
WILL HAVE THE SAME RIGHTS. HOLDERS OF SHARES OF COMMON STOCK ARE ENTITLED TO ONE
VOTE PER SHARE ON ALL MATTERS UPON WHICH SUCH HOLDERS ARE ENTITLED TO VOTE, AND
FURTHER HAVE THE RIGHT TO CUMULATE THEIR VOTES IN ELECTIONS OF DIRECTORS.
CUMULATION MEANS MULTIPLYING THE NUMBER OF SHARES HELD, BY THE NUMBER OF
NOMINEES TO THE BOARD OF DIRECTORS, THEN VOTING THE PRODUCT AMONG THE NOMINEES
AS DESIRED. DIRECTORS ARE ELECTED BY A PLURALITY OF THE VOTES CAST.
SHARES OF COMMON STOCK SOLD IN THIS OFFERING ARE FULLY-PAID AND
NONASSESSABLE SHARES OF U.S. ENERGY CORP.
PURSUANT TO OUR ARTICLES OF INCORPORATION AND AS PERMITTED BY WYOMING LAW,
SHARES OF COMMON STOCK HELD BY OUR SUBSIDIARIES MAY BE VOTED BY SUCH
SUBSIDIARIES AS DETERMINED BY THE BOARD OF DIRECTORS OF EACH, IN ELECTIONS OF
DIRECTORS AND OTHER MATTERS BROUGHT BEFORE SHAREHOLDERS.
IN SEPTEMBER 2001, THE COMPANY ADOPTED A SHAREHOLDER RIGHTS PLAN ("POISON
PILL") AND FILED THE PLAN WITH THE SECURITIES AND EXCHANGE COMMISSION AS AN
EXHIBIT TO FORM 8-A. THE FOLLOWING THREE PARAGRAPHS BRIEFLY STATE PRINCIPAL
FEATURES OF THE PLAN, WHICH ARE QUALIFIED BY REFERENCE TO THE COMPLETE PLAN,
WHICH IS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
UNDER THE PLAN, THE HOLDER OF EACH SHARE OF COMMON STOCK HAS THE RIGHT TO
PURCHASE (WHEN THE RIGHTS BECOME EXERCISABLE) FROM THE COMPANY ONE-ONE
THOUSANDTH (1/1,000TH) OF ONE (1) SHARE OF SERIES P PREFERRED STOCK AT A PRICE
OF $200.00 FOR EACH ONE-ONE THOUSANDTH (1/1,000TH) SHARE OF SUCH PREFERRED
STOCK. THE PURPOSE OF THE PLAN IS TO DETER AN UNFAIRLY LOW PRICED HOSTILE
TAKEOVER OF THE COMPANY, BY ENCOURAGING A HOSTILE PARTY TO NEGOTIATE A FAIR
OFFER WITH THE BOARD OF DIRECTORS AND THUS ELIMINATE THE POISON PILL.
THE RIGHTS TRADE WITH THE COMMON STOCK AND AREN'T SEPARABLE THEREFROM; NO
SEPARATE CERTIFICATE FOR THE RIGHTS IS ISSUED UNLESS AND UNTIL THERE IS A
HOSTILE TAKEOVER ATTEMPTED, AFTER WHICH TIME SEPARATE AND TRADABLE RIGHTS
CERTIFICATES WOULD BE ISSUED.
THE RIGHTS ARE NOT EXERCISABLE AND NEVER CAN BE UNLESS AND UNTIL A HOSTILE
(NOT NEGOTIATED WITH THE BOARD) TAKEOVER OF THE COMPANY IS INITIATED WITH THE
OBJECTIVE OF ACQUIRING 15% OF THE COMPANY'S VOTING STOCK. IF BEFORE THE TAKEOVER
IS LAUNCHED THE HOSTILE PARTY COMES TO AGREEMENT WITH THE BOARD OF DIRECTORS
ABOUT PRICE AND TERMS AND MAKES A "QUALIFIED OFFER" TO BUY THE STOCK OF THE
COMPANY, THEN THE BOARD OF DIRECTORS MAY REDEEM (BUY BACK) THE RIGHTS FOR $0.01
EACH. BUT, IF SUCH A "QUALIFIED OFFER" ISN'T AGREED UPON, THEN THE RIGHTS ARE
EXERCISABLE FOR PREFERRED STOCK, WHICH IN TURN WOULD ENABLE THE HOLDER TO
CONVERT THE PREFERRED STOCK INTO VOTING COMMON STOCK OF THE COMPANY AT A PRICE
EQUAL TO ONE-HALF THE MARKET PRICE.
PREFERRED STOCK. SHARES OF PREFERRED STOCK MAY BE ISSUED BY THE BOARD OF
DIRECTORS WITH SUCH DIVIDEND, LIQUIDATION, VOTING AND CONVERSION FEATURES AS MAY
BE DETERMINED BY THE BOARD OF DIRECTORS WITHOUT SHAREHOLDER APPROVAL. IN JUNE
2000, WE ESTABLISHED A SERIES A CONVERTIBLE PREFERRED STOCK, FOR WHICH 1,000
SHARES OF PREFERRED STOCK WERE RESERVED FOR SALE AT $10,000 PER SHARE AND 200
SHARES WERE ISSUED AND OUTSTANDING AT NOVEMBER 30, 2001. IN JANUARY 2002, WE
CONVERTED THE 200 OUTSTANDING SHARES OF SERIES A STOCK BY ISSUING 513,140 SHARES
OF RESTRICTED COMMON STOCK TO THE HOLDER, BASED ON $2,000,000 INVESTED PLUS
$11,507 OF INTEREST (ANNUAL RATE OF 7.5%) WHICH ACCRUED IN DECEMBER 2001
(PREVIOUS INTEREST HAD BEEN PAID IN CASH), DIVIDED BY $3.92 (MARKET PRICE FOR
USE STOCK ON DECEMBER 5, 2001).
WARRANTS, OPTIONS, AND CONVERTIBLE DEBT. AS OF THE DATE OF THIS PROSPECTUS,
WARRANTS AND OPTIONS (TO PERSONS OR ENTITIES OTHER THAN EMPLOYEES, OFFICERS OR
DIRECTORS OF THE COMPANY) ARE ISSUED AND OUTSTANDING TO PURCHASE A TOTAL OF
812,358 SHARES OF COMMON STOCK, AND $1,300,000 OF OUTSTANDING PRINCIPAL, PLUS
INTEREST, ON TWO LOANS IS CONVERTIBLE TO 699,780 SHARES (RESALE OF 466,666
SHARES ARE COVERED BY SEPARATE PROSPECTUS, AND RESALE OF THE BALANCE OF 155,430
SHARES IS COVERED BY THIS PROSPECTUS). RESALES OF 296,875 SHARES UNDERLYING
WARRANTS AND OPTIONS ARE COVERED BY THIS PROSPECTUS (SEE "SELLING
SHAREHOLDERS"). RESALES OF 447,349 SHARES UNDERLYING OTHER WARRANTS AND OPTIONS
ARE COVERED BY SEPARATE PROSPECTUSES.
- OPTIONS TO PURCHASE 18,000 SHARES AT $3.00 HELD BY ROBERT A. NICHOLAS,
ISSUED FEBRUARY 3, 2003 AND EXPIRING FEBRUARY 2, 2004, ISSUED AS PARTIAL PAYMENT
FOR LEGAL SERVICES. RESALE OF SHARES ACQUIRED ON EXERCISE OF THESE OPTIONS IS
COVERED BY A SEPARATE RESALE PROSPECTUS.
- OPTIONS ISSUED FEBRUARY 8, 1999 TO PURCHASE 75,000 SHARES AT $2.25 PER
SHARE (EXPIRING FEBRUARY 8, 2004), ARE HELD BY FORMER CONSULTANT MICHAEL BAYBAK.
RESALE OF THE SHARES ACQUIRED ON EXERCISE OF THESE OPTIONS IS NOT COVERED BY A
RESALE PROSPECTUS, AND THE COMPANY DOES NOT INTEND TO FILE A REGISTRATION
STATEMENT FOR RESALE OF THESE SHARES.
- WARRANTS TO PURCHASE 120,000 SHARES AT $3.00 HELD BY CAYDAL, LLC, ISSUED
ON MAY 30, 2002 AND EXPIRING MAY 30, 2006, ISSUED IN CONNECTION WITH A
CONVERTIBLE LOAN TO THE COMPANY FROM CAYDAL. THE CURRENT PRINCIPAL BALANCE ON
THIS LOAN NOW IS CONVERTIBLE TO 355,556 SHARES (SEE BELOW). A SEPARATE
PROSPECTUS COVERS RESALE OF SHARES ACQUIRED ON EXERCISE OF THE WARRANTS, AND
255,556 OF THE SHARES ISSUABLE ON CONVERSION OF THE PRINCIPAL OF THE LOAN.
ADDITIONAL SHARES NOW ARE ISSUABLE DUE TO DEBT RESTRUCTURING, SEE THE NEXT
PARAGRAPH.
THIS PROSPECTUS COVERS A TOTAL OF 88,014 ADDITIONAL SHARES NOW ISSUABLE AND
ISSUABLE IN THE FUTURE, TO CAYDAL ON CONVERSION OF PRINCIPAL (DUE TO A REDUCED
CONVERSION PRICE), AND INTEREST ON PRINCIPAL, AS FOLLOWS: THE ORIGINAL 2002
TRANSACTION WITH CAYDAL PROVIDED FOR CONVERSION OF THE ORIGINAL PRINCIPAL AMOUNT
OF THE LOAN ($1,000,000), BUT NOT INTEREST, TO SHARES AT A CONVERSION RATE OF 1
SHARE FOR EACH $3.00 OF PRINCIPAL. PRIOR TO THE DATE OF THIS PROSPECTUS, CAYDAL
CONVERTED $200,000 OF THE PRINCIPAL TO 77,777 SHARES. ON OCTOBER 28, 2003, THE
COMPANY AND CAYDAL AMENDED THE LOAN TO (I) REDUCE THE INTEREST RATE, STARTING
SEPTEMBER 1, 2003, FROM THE ORIGINAL 8% ANNUAL RATE, TO BE EQUAL TO THE FEDERAL
SHORT TERM RATE FOR ANNUAL COMPOUNDING (THE "FEDERAL SHORT TERM RATE" AS DEFINED
IN SECTION 1274(D) OF THE INTERNAL REVENUE CODE), AS THAT RATE CHANGES FROM TIME
TO TIME; (II) ALLOW CONVERSION OF INTEREST, AS WELL AS PRINCIPAL, TO SHARES;
(III) NOT REQUIRE QUARTERLY PAYMENT OF INTEREST WITH CASH, BUT ADD ACCRUING
INTEREST TO PRINCIPAL; (IV) EXTEND THE MATURITY DATE FOR THE LOAN TO DECEMBER
31, 2004; (V) REDUCE THE CONVERSION RATE FOR PRINCIPAL TO (AND ESTABLISH THE
CONVERSION RATE FOR INTEREST AT) 1 SHARE FOR EACH $2.25 OF PRINCIPAL AND
INTEREST; AND (VI) PROVIDE FOR MANDATORY CONVERSION OF PRINCIPAL AND ACCRUED
INTEREST OUTSTANDING AT MATURITY TO SHARES AT THE SAME CONVERSION RATE OF 1
SHARE FOR EACH $2.25 OF PRINCIPAL AND INTEREST. OPTIONAL CONVERSION OF PRINCIPAL
AND ACCRUED INTEREST PRIOR TO MATURITY IS PERMITTED. ALSO, IN CONNECTION WITH
THE RESTRUCTURING OF DEBT, THE EXPIRATION DATE OF THE WARRANTS ISSUED TO CAYDAL
WAS EXTENDED 12 MONTHS (FROM THE ORIGINAL MAY 30, 2005 TO THE NEW DATE OF MAY
30, 2006). THE DEBT TRANSACTION WITH TSUNAMI PARTNERS L.P. ALSO WAS RESTRUCTURED
ON OCTOBER 28, 2003 (SEE BELOW), ON THE SAME TERMS AS CAYDAL'S DEBT.
- WARRANTS TO PURCHASE 60,000 SHARES AT $3.00 HELD BY TSUNAMI PARTNERS, L.
P., ISSUED ON NOVEMBER 19, 2002 AND EXPIRING NOVEMBER 19, 2006, ISSUED IN
CONNECTION WITH A $500,000 CONVERTIBLE LOAN TO THE COMPANY FROM TSUNAMI, L.P.
THE PRINCIPAL AMOUNT OF THIS LOAN NOW IS CONVERTIBLE TO 222,222 SHARES. A
SEPARATE PROSPECTUS COVERS RESALE OF SHARES ACQUIRED ON EXERCISE OF THE WARRANTS
AND 166,667 SHARES ISSUABLE ON CONVERSION OF THE PRINCIPAL OF THE LOAN IS
COVERED BY A SEPARATE RESALE PROSPECTUS.
THIS PROSPECTUS COVERS A TOTAL OF 67,416 ADDITIONAL SHARES NOW ISSUABLE AND
ISSUABLE IN THE FUTURE, TO TSUNAMI ON CONVERSION OF PRINCIPAL (DUE TO A REDUCED
CONVERSION PRICE), AND INTEREST ON PRINCIPAL, AS FOLLOWS: THE ORIGINAL 2002
TRANSACTION WITH TSUNAMI PROVIDED FOR CONVERSION OF THE ORIGINAL PRINCIPAL
AMOUNT OF THE LOAN ($500,000), BUT NOT INTEREST, TO SHARES AT A CONVERSION RATE
OF 1 SHARE FOR EACH $3.00 OF PRINCIPAL. ON OCTOBER 28, 2003, THE COMPANY AND
TSUNAMI AMENDED THE LOAN TO (I) REDUCE THE INTEREST RATE, STARTING SEPTEMBER 1,
2003, FROM THE ORIGINAL 8% ANNUAL RATE, TO BE EQUAL TO THE FEDERAL SHORT TERM
RATE FOR ANNUAL COMPOUNDING (THE "FEDERAL SHORT TERM RATE" AS DEFINED IN SECTION
1274(D) OF THE INTERNAL REVENUE CODE), AS THAT RATE CHANGES FROM TIME TO TIME;
(II) ALLOW CONVERSION OF INTEREST, AS WELL AS PRINCIPAL, TO SHARES; (III) NOT
REQUIRE QUARTERLY PAYMENT OF INTEREST WITH CASH, BUT ADD ACCRUING INTEREST TO
PRINCIPAL; (IV) EXTEND THE MATURITY DATE FOR THE LOAN TO DECEMBER 31, 2004; (V)
REDUCE THE CONVERSION RATE FOR PRINCIPAL TO (AND ESTABLISH THE CONVERSION RATE
FOR INTEREST AT) 1 SHARE FOR EACH $2.25 OF PRINCIPAL AND INTEREST; AND (VI)
PROVIDE FOR MANDATORY CONVERSION OF PRINCIPAL AND ACCRUED INTEREST OUTSTANDING
AT MATURITY TO SHARES AT THE SAME CONVERSION RATE OF 1 SHARE FOR $2.25 OF
PRINCIPAL AND INTEREST. OPTIONAL CONVERSION OF PRINCIPAL AND ACCRUED INTEREST
PRIOR TO MATURITY IS PERMITTED. ALSO, IN CONNECTION WITH THE RESTRUCTURING OF
DEBT, THE EXPIRATION DATE OF THE WARRANTS ISSUED TO TSUNAMI WAS EXTENDED 12
MONTHS (FROM THE ORIGINAL MAY 30, 2005 TO THE NEW DATE OF MAY 30, 2006).
- WARRANTS TO PURCHASE 56,383 SHARES AT $4.00 PER SHARE, HELD BY 16
INVESTORS WHO PURCHASED SHARES AND WARRANTS IN PRIVATE TRANSACTIONS WITH THE
COMPANY IN FEBRUARY AND MARCH, 2002. THESE WARRANTS WERE ISSUED IN FEBRUARY AND
APRIL 2002, AND WILL EXPIRE TWO YEARS AFTER ISSUANCE. RESALE OF THE SHARES
ACQUIRED ON EXERCISE OF THESE OPTIONS IS COVERED BY A SEPARATE RESALE
PROSPECTUS.
- WARRANTS TO PURCHASE 14,799 SHARES AT $3.00 HELD BY 32 PERSONS WHO OWN
EQUITY INTERESTS IN MCKIM & COMPANY, LLC (FORMERLY VENTUREROUND GROUP), A
LICENSED BROKER-DEALER, WHICH SERVED AS FINANCIAL ADVISOR IN CONNECTION WITH THE
TSUNAMI LOAN TRANSACTION. THE WARRANTS WERE ISSUED AS OF NOVEMBER 19, 2002,
EXPIRING ON NOVEMBER 19, 2005. RESALE OF SHARES ACQUIRED ON EXERCISE OF THESE
WARRANTS IS COVERED BY A SEPARATE RESALE PROSPECTUS.
- WARRANTS TO PURCHASE 29,559 SHARES AT $3.00 HELD BY 29 PERSONS WHO OWN
EQUITY INTERESTS IN MCKIM & COMPANY, WHICH SERVED AS FINANCIAL ADVISOR IN
CONNECTION WITH THE CAYDAL LOAN TRANSACTION. THE WARRANTS WERE ISSUED AS OF MAY
30, 2002, EXPIRING ON MAY 30, 2005. RESALE OF SHARES ACQUIRED ON EXERCISE OF
THESE WARRANTS IS COVERED BY A SEPARATE RESALE PROSPECTUS.
- WARRANTS TO PURCHASE 27,813 SHARES AT $4.00 HELD BY 34 PERSONS WHO OWN
EQUITY INTERESTS IN MCKIM & COMPANY, ISSUED AS OF MARCH 25, 2002, EXPIRING ON
MARCH 25, 2004. MCKIM & COMPANY SERVED AS THE FINANCIAL ADVISOR TO THE COMPANY
IN CONNECTION WITH THE PRIVATE TRANSACTIONS IN FEBRUARY AND MARCH 2002. RESALE
OF SHARES ACQUIRED ON EXERCISE OF THESE WARRANTS IS COVERED BY A SEPARATE RESALE
PROSPECTUS.
- WARRANTS TO PURCHASE 35,966 SHARES AT $3.75 HELD BY 7 PERSONS WHO OWN
EQUITY INTERESTS IN MCKIM & COMPANY, WHICH SERVED AS THE FINANCIAL ADVISOR TO
THE COMPANY IN CONNECTION WITH THE PRIVATE TRANSACTIONS FROM JUNE TO OCTOBER
2001 (SEE ABOVE). THESE WARRANTS WERE ISSUED AS PARTIAL COMPENSATION FOR
SERVICES PROVIDED TO THE COMPANY BY PERSONS WHO OWN EQUITY INTERESTS IN MCKIM &
COMPANY, WHICH SERVICES WERE PROVIDED BY LICENSED BROKERS. THESE WARRANTS WERE
ISSUED AS OF OCTOBER 18, 2001 AND EXPIRE OCTOBER 18, 2006. RESALE OF SHARES
ACQUIRED ON EXERCISE OF THESE WARRANTS IS COVERED BY A SEPARATE RESALE
PROSPECTUS.
- WARRANTS TO PURCHASE 9,829 SHARES AT $3.75 HELD BY 21 PERSONS WHO OWN
EQUITY INTERESTS IN MCKIM & COMPANY. THESE WARRANTS WERE ISSUED FOR FINANCIAL
CONSULTING SERVICES PROVIDED BY PERSONS WHO OWN EQUITY INTERESTS IN MCKIM &
COMPANY. THE SERVICES WERE PROVIDED BY LICENSED BROKERS. THESE WARRANTS WERE
ISSUED AS OF NOVEMBER 2, 2001 AND EXPIRE NOVEMBER 2, 2006. RESALE OF SHARES
ACQUIRED ON EXERCISE OF THESE WARRANTS IS COVERED BY A SEPARATE RESALE
PROSPECTUS.
OPTIONS. USE HAS GRANTED OPTIONS TO EMPLOYEES, OFFICERS AND DIRECTORS TO
PURCHASE SHARES AT EXERCISE PRICES FROM $2.00 TO $3.90 PER SHARE. AT DECEMBER
10, 2003, A TOTAL OF 3,205,429 SHARES MAY BE ISSUED UPON EXERCISE OF THESE
OPTIONS. THESE OPTIONS EXPIRE AT VARIOUS TIMES FROM 2008 TO 2012.
USE OF PROCEEDS
WE WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF THE SHARES BY THE
SELLING SHAREHOLDERS PURSUANT TO THIS PROSPECTUS, BUT WE WILL RECEIVE UP TO
$1,282,125 IN PROCEEDS FROM THE EXERCISE OF THE OPTIONS AND WARRANTS, IF THEY
EXERCISE ALL THE OPTIONS AND WARRANTS, (PURSUANT TO WHICH THE SHARES UNDERLYING
SUCH OPTIONS AND WARRANTS WILL BE SOLD PURSUANT TO THIS PROSPECTUS), WHICH WILL
BE USED BY THE COMPANY FOR WORKING CAPITAL.
SELLING SHAREHOLDERS
THIS PROSPECTUS COVERS THE OFFER AND SALE BY THE SELLING SHAREHOLDERS OF UP
TO 1,104,898 SHARES OF COMMON STOCK ($0.01 PAR VALUE) OWNED OR TO BE OWNED ON
EXERCISE OF OPTIONS AND WARRANTS BY THE SELLING SHAREHOLDERS, ON CONVERSION OF
RMG STOCK, AND CONVERSION OF DEBT. THE FOOTNOTES TO THE TABLE BELOW GIVE
INFORMATION ABOUT SHARES ISSUABLE ON EXERCISE OF THE OPTIONS AND WARRANTS BY THE
SELLING SHAREHOLDERS. ALL SHARES ISSUED (AND ALL SHARES ISSUABLE ON EXERCISE OF
OPTIONS AND WARRANTS, AND CONVERSION OF RMG STOCK) ARE (AND WILL BE) RESTRICTED
SECURITIES AS THAT TERM IS DEFINED IN RULE 144 OF THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AND WILL REMAIN RESTRICTED UNLESS
AND UNTIL SUCH SHARES ARE SOLD PURSUANT TO THIS PROSPECTUS, OR OTHERWISE ARE
SOLD IN COMPLIANCE WITH RULE 144 OR THE RESTRICTION REMOVED IN ACCORDANCE WITH
RULE 144(K).
NONE OF THE SELLING SHAREHOLDERS ARE AFFILIATES OF THE COMPANY OR ANY
SUBSIDIARY OF THE COMPANY.
THE SHARES COVERED BY THIS PROSPECTUS, AND THE TRANSACTIONS IN WHICH THE
SELLING SHAREHOLDERS ACQUIRED THEIR SHARES (OR OPTIONS OR WARRANTS), ARE
SUMMARIZED BELOW:
- 1,913 SHARES WERE ISSUED TO DALE MAY AND HIS WIFE JEANNE MAY IN MARCH 2002,
IN EXCHANGE FOR 2,500 RMG SHARES WHICH WERE ISSUED TO MR. MAY IN JANUARY
2002 AS A FINDER'S FEE FOR HIS INTRODUCTION TO RMG OF SEVERAL INVESTORS.
MR. MAY HAS REPRESENTED TO THE COMPANY THAT HE IS NOT A SECURITIES 'DEALER'
AS THAT TERM IS DEFINED IN THE SECURITIES ACT OF 1933.
- 50,000 SHARES, AND WARRANTS TO PURCHASE AN ADDITIONAL 50,000 SHARES
(EXERCISABLE AT $5.00 PER SHARE, EXPIRING JUNE 30, 2006), WERE ISSUED TO
SANDERS MORRIS HARRIS INC. ("SMH"), A FINANCIAL ADVISORY FIRM, IN PARTIAL
PAYMENT OF SMH'S SERVICES PROVIDED TO RMG IN CONNECTION WITH RMG'S TRANSFER
OF CERTAIN COALBED METHANE PROPERTIES TO PINNACLE GAS RESOURCES, INC. SEE
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE" (FORM 8-K FILED JULY
15, 2003).
- 7,920 SHARES WERE ISSUED TO RICHES IN RESOURCES, INC., A FINANCIAL
CONSULTING FIRM, FOR SERVICES TO THE COMPANY PROVIDED FROM NOVEMBER 15,
2002 THROUGH JULY 15, 2002. UP TO ANOTHER 7,080 SHARES MAY BE ISSUED FOR
SERVICES DURING THE REMAINING TERM OF THE AGREEMENT (THROUGH MAY 15, 2004)
WITH THIS CONSULTANT. THIS CONSULTING AGREEMENT WAS ENTERED INTO ON MAY 30,
2003.
- 12,000 SHARES WERE ISSUED TO C.C.R.I. CORPORATION, A FINANCIAL CONSULTING
FIRM, UNDER AN AGREEMENT ENTERED INTO MAY 30, 2003, FOR SERVICES TO THE
COMPANY PROVIDED THROUGH JULY, 2003. ANOTHER 12,000 SHARES WERE ISSUED FOR
SERVICES PROVIDED FOR THE MONTHS OF JULY, AUGUST AND SEPTEMBER 2003, BUT
RESALE OF THESE ADDITIONAL 12,000 SHARES IS NOT COVERED BY THIS PROSPECTUS.
PURSUANT TO THE SAME AGREEMENT, THE COMPANY ISSUED TO C.C.R.I. WARRANTS TO
PURCHASE 75,000 SHARES, 25,000 EXERCISABLE AT $3.75 PER SHARE, 25,000
SHARES EXERCISABLE AT $4.50 PER SHARE AND 25,000 SHARES EXERCISABLE AT
$5.50 PER SHARE; AND ISSUED TO AN INDIVIDUAL (JASON WAYNE ASSAD) ASSOCIATED
WITH C.C.R.I. A WARRANT TO PURCHASE 12,500 SHARES, EXERCISABLE AT $3.75 PER
SHARE. ALL OF THESE WARRANTS EXPIRE MARCH 16, 2006.
- 59,000 SHARES WERE ISSUED TO BURG SIMPSON ELDREDGE HERSH JARDINE PC, A LAW
FIRM REPRESENTING THE COMPANY IN LITIGATION, IN PARTIAL PAYMENT OF LEGAL
SERVICES PROVIDED TO THE COMPANY. 25,000 OF THESE SHARES WERE ISSUED IN MAY
AND JULY 2002, AND 34,000 SHARES WERE ISSUED IN JULY 2003.
- 10,000 SHARES WERE ISSUED TO TIM AND BETH CROTTY IN JUNE OF 2003 AS
SETTLEMENT OF A LEASE OBLIGATION RELATING TO A PROPERTY OWNED BY THE
COMPANY'S SUBSIDIARY, SUTTER GOLD MINING COMPANY.
- 12,500 SHARES WERE ISSUED TO ROBERT HOCKERT AND 25,000 SHARES TO MATHEW B.
MURPHY IN MAY OF 2002 AS PARTIAL PAYMENT OF PRODUCING COALBED METHANE
PROPERTIES.
- 24,260 SHARES WERE ISSUED TO JAMES AND VIDA ROEBLING AS PAYMENT FOR A
COALBED METHANE LEASE. THESE SHARES WERE ISSUED IN DECEMBER OF 2001 AND
JANUARY 2002.
- IN 2002, THE COMPANY BORROWED $1,000,000 FROM CAYDAL, LLC AND $500,000 FROM
TSUNAMI PARTNERS L.P.; $800,000 PRESENTLY IS OUTSTANDING ON THE DEBT TO
CAYDAL. THE PRINCIPAL AMOUNT OF THE DEBT, AND ACCRUING INTEREST, IS
CONVERTIBLE INTO SHARES OF THE COMPANY, AT THE RATE OF 1 SHARE FOR EACH
$2.25 OF PRINCIPAL AND INTEREST. SEE "DESCRIPTION OF SECURITIES - WARRANTS,
OPTIONS, AND CONVERTIBLE DEBT." RESALE OF A TOTAL OF UP TO 155,430 SHARES
WHICH WILL BE ISSUED TO CAYDAL AND TSUNAMI ON CONVERSION OF THE DEBT IS
COVERED BY THIS PROSPECTUS. FEWER SHARES MAY BE ISSUED ON CONVERSION OF
INTEREST IF THE RATE PAID IS LESS THAN THE ASSUMED ANNUAL RATE OF 4%.
RESALE OF THE BALANCE OF 422,222 SHARES WHICH MAY BE ISSUED ON CONVERSION
OF THE DEBT IS COVERED BY SEPARATE PROSPECTUS.
- IN JUNE AND JULY 2003, CAYDAL, LLC AND FIVE INDIVIDUALS INVESTED $750,000
IN RMG FOR 333,333 SHARES OF RMG STOCK (AT $2.25 PER SHARE); WARRANTS ON
62,500 RMG SHARES AT $3.00 PER SHARE, EXERCISABLE UNTIL JUNE 3, 2006; AND
WARRANTS ON 46,875 SHARES OF THE COMPANY AT $4.00 PER SHARE, EXERCISABLE
UNTIL JUNE 3, 2006. UNDER THE TERMS OF THE ORIGINAL TRANSACTION, EACH SHARE
OF RMG STOCK WAS CONVERTIBLE INTO THAT NUMBER OF SHARES OF THE COMPANY
OBTAINED BY DIVIDING (I) $2.25 (SUBJECT TO ANTI-DILUTION ADJUSTMENTS) BY
(II) 85% OF THE THEN-CURRENT MARKET PRICE OF THE COMPANY'S SHARES, PROVIDED
THAT (A) THE CONVERSION PRICE CANNOT EXCEED $5.00, AND (B) THE EXCHANGE
RIGHTS EXPIRE 20 BUSINESS DAYS AFTER THE COMPANY'S STOCK PRICE EXCEEDS
$7.50 FOR 20 CONSECUTIVE TRADING DAYS.
- ON OCTOBER 28, 2003, CAYDAL AND ONE INDIVIDUAL (JAMES MCCAUGHEY) ACCEPTED
THE COMPANY'S AND RMG'S OFFER, MADE TO ALL OF THE 2003 INVESTORS IN RMG, TO
RESTRUCTURE THE TRANSACTION BY (I) REFUNDING 50% OF THE INVESTMENT (CAYDAL
WAS REFUNDED $250,000 AND MR. MCCAUGHEY WAS REFUNDED $50,000), AND REDUCING
THE CONVERSION RATE FOR THEIR REMAINING TOTAL OF 133,333 RMG SHARES DOWN TO
77.5%. THE OTHER FOUR INDIVIDUALS ELECTED TO REMAIN FULLY INVESTED, FOR
WHICH ELECTION THE COMPANY AND RMG REDUCED THE CONVERSION RATE FOR THEIR
REMAINING TOTAL OF 66,666 RMG SHARES DOWN TO 70%.
- FOR EXAMPLE, IF THE COMPANY'S STOCK PRICE WAS $5.00 ON CONVERSION DATE,
THE CONVERSION PRICE FOR CAYDAL'S AND MR. MCCAUGHEY'S SHARES WOULD BE
$3.875, RESULTING IN THE ISSUE TO THEM OF A TOTAL OF 77,420 SHARES OF THE
COMPANY. THE CONVERSION PRICE FOR THE OTHER INVESTORS WOULD BE $3.50,
RESULTING IN THE ISSUE TO THEM OF A TOTAL OF 42,857 SHARES OF THE COMPANY.
NOTE THAT THIS PROSPECTUS COVERS THE RESALE OF UP TO 450,000 SHARES OF THE
COMPANY ON CONVERSION OF RMG SHARES, WHICH IS THE NUMBER OF THE COMPANY'S
SHARES WHICH WOULD BE ISSUED IF THE COMPANY'S STOCK PRICE WAS $1.29 ON
CONVERSION DATE (I.E., USING AN ASSUMED CONVERSION PRICE OF $1.00 PER
SHARE). THE ACTUAL NUMBER OF THE COMPANY'S SHARES ISSUED WILL DEPEND ON
MARKET PRICE AT CONVERSION DATES. THE RMG SHARES ISSUABLE ON EXERCISE OF
THE RMG WARRANTS ARE NOT ENTITLED TO CONVERSION INTO USE SHARES.
- IN PARTIAL COMPENSATION FOR SERVICES PROVIDED BY MCKIM & COMPANY, LLC (A
REGISTERED BROKER-DEALER, FORMERLY NAMED VENTUREROUND GROUP) TO RMG AND USE
IN CONNECTION WITH THE INVESTMENTS IN RMG, USE ISSUED TO MCKIM & COMPANY
WARRANTS TO PURCHASE 19,500 SHARES OF USE COMMON STOCK, EXERCISABLE AT
$4.00 PER SHARE. THE WARRANTS EXPIRE JUNE 6, 2006. WARRANTS TO PURCHASE AN
ADDITIONAL 3,000 SHARES, ON THE SAME TERMS, WERE ISSUED TO JOHN SCHLIE, AN
EMPLOYEE OF MCKIM & COMPANY.
- WARRANTS TO PURCHASE 10,000 SHARES WERE ISSUED TO FREDERICK P. LUTZ IN
PARTIAL COMPENSATION FOR CONSULTING SERVICES HE PROVIDED TO THE COMPANY
FROM AUGUST 1, 2002 TO JANUARY 1, 2003. THE WARRANTS ARE EXERCISABLE AT
$2.00 PER SHARE, AND EXPIRE AUGUST 1, 2005.
- TWO OPTIONS TO PURCHASE A TOTAL OF 80,000 SHARES WERE ISSUED TO TWO
INDIVIDUALS (MURRAY ROARK AND ROBERT CRAIG, 40,000 SHARES EACH),
EXERCISABLE AT $4.30 PER SHARE AND EXPIRING JULY 31, 2006. THESE OPTIONS
WERE ISSUED TO COMPENSATE MR. ROARK AND MR. CRAIG AS FINDERS FOR THEIR
INTRODUCING RMG TO CARRIZO OIL & GAS, INC. IN EARLY JULY 2001. MR. ROARK
AND MR. CRAIG ARE LICENSED SECURITIES BROKERS. SINCE JULY 2001, RMG HAS HAD
AN AGREEMENT WITH A SUBSIDIARY OF CARRIZO FOR THE ACQUISITION AND
EXPLORATION OF COALBED METHANE PROPERTIES IN WYOMING AND MONTANA.
THE SELLING SHAREHOLDERS MAY OFFER THEIR SHARES FOR SALE ON A CONTINUOUS
BASIS PURSUANT TO RULE 415 UNDER THE 1933 ACT.
THE FOLLOWING INFORMATION HAS BEEN PROVIDED TO US BY THE SELLING
SHAREHOLDERS. EXCEPT FOR CAYDAL, LLC AND TSUNAMI PARTNERS L.P., ALL NUMBERS OF
SHARES, AND PERCENTAGE OWNERSHIP, ARE STATED ON A PRO FORMA BASIS AS OF NOVEMBER
3, 2003, ASSUMING ISSUANCE OF 296,875 SHARES UPON EXERCISE OF ALL OPTIONS AND
WARRANTS LISTED ABOVE, ISSUANCE OF 450,000 SHARES UPON CONVERSION OF THE RMG
SHARES, AND THE CONVERSION OF DEBT AND INTEREST OWED CAYDAL AND TSUNAMI INTO
155,430 SHARES.
THE NUMBER OF SHARES AND PERCENTAGE OWNERSHIP FOR CAYDAL, LLC AND TSUNAMI
PARTNERS L.P. ARE STATED ON A PRO FORMA BASIS ASSUMING CONVERSION OF ALL DEBT
OWED TO THEM BY THE COMPANY AND EXERCISE OF WARRANTS ON 180,000 SHARES HELD BY
THEM. THERE ARE 12,743,097 SHARES ISSUED AND OUTSTANDING AS OF DECEMBER 10,
2003; ON A PRO FORMA BASIS (NOT INCLUDING SHARES ISSUABLE ON CONVERSION OF DEBT,
OR EXERCISE OF WARRANTS ON 180,000 SHARES, HELD BY CAYDAL AND TSUNAMI), THERE
ARE 13,600,958 SHARES OUTSTANDING. ADDITIONAL SHARES ISSUABLE ON EXERCISE OF
OTHER OPTIONS AND WARRANTS HELD BY PERSONS WHO ARE NOT SELLING SHAREHOLDERS, ARE
NOT INCLUDED IN THE PRO FORMA CALCULATION.
SHARES OF
SHARES OF COMMON STOCK PERCENT OWNED
NAME AND ADDRESS COMMON STOCK REGISTERED PRIOR TO AFTER
OF BENEFICIAL OWNER OWNED(1) FOR SALE OFFERING OFFERING(2)
---------------------------------------- ------------- ---------- -------- -----------
DALE S. AND JEANNE L. MAY, 1,913 1,913 * *
JTWROS
960 POINT OF THE PINES DRIVE
COLORADO SPRINGS, CO 80919
SANDERS MORRIS HARRIS INC. 100,000(10) 100,000 * *
600 TRAVIS, SUITE 3100
HOUSTON, TX 77002
RICHES IN RESOURCES 22,930 7,920 * *
1433 OAKLEAF CIRCLE
BOULDER, CO 80304
C.C.R.I. CORPORATION 87,000(9) 87,000 * *
3104 E. CAMELBACK RD.
SUITE 539
PHOENIX, AZ 85016
JASON WAYNE ASSAD 12,500(9) 12,500 * *
6585 STERLING DRIVE
SUWANEE, GA 30024
BURG SIMPSON ELDRIDGE HERSH JARDINE P.C. 59,000 59,000 * *
40 INVERNESS DR. EAST
ENGLEWOOD, CO 80112
TIMOTHY AND BETTY CROTTY 10,000 10,000 * *
13575 RIDGE ROAD
SUTTER CREEK, CA 95685
ROBERT HOCKERT 12,500 12,500 * *
PETRO PACIFIC CORPORATION
3212 FITZPATRICK DRIVE
GILLETTE, WY 82718
MATTHEW MURPHY 25,000 25,000 * *
P.O. BOX 1581
3105 E. 2ND STREET
GILLETTE, WY 82717-1581
JAMES AND VIDA ANN ROEBLING 24,260 24,260 * *
P.O. BOX 71
CLEARMONT, WY 82835
CAYDAL, LLC 778,154(3)(4) 369,264 6.4% 5.9%
410 MARION STREET
DENVER, COLORADO 80218
TSUNAMI PARTNERS, L.P. 520,750(5) 294,083 3.7% 1.6%
2011 CEDAR SPRINGS RD., APT. 506
DALLAS, TX 75201
BEVERLY KARNS 106,250(3) 106,250 * *
5424 SOUTH GENEVA WAY
ENGLEWOOD, CO 80111
LINDA MONAHAN & DONALD 41,875(3) 41,875 * *
R. COTNER, JTWROS,
224 ANGLERS DRIVE SOUTH
MARATHON, FL 33050
JAMES MCCAUGHEY 56,250(3) 56,250 * *
3 CUETA DRIVE
RANCHO MIRAGE, CA 92270
WILLIAM G. VAN BUREN 21,250(3) 21,250
6576 FAIRVIEW AVE.
DOWNERS GROVE, IL
MCKIM & COMPANY, LLC 19,500(6) 19,500 * *
8400 E. CRESCENT PARKWAY
SUITE 600
GREENWOOD VILLAGE, CO 80111
JOHN SCHLIE 3,000(6) 3,000 * *
2406 WEST DAVIES AVE.
LITTLETON, CO 80120
FREDERICK P. LUTZ 10,000(8) 10,000 * *
1089 DUNBARTON CHASE
ATLANTA, GEORGIA 30319
MURRAY B. ROARK 40,000(7) 40,000 * *
4400 POST OAK PARKWAY
SUITE 1720
HOUSTON, TX 77027
ROBERT S. CRAIG 40,000(7) 40,000 * *
4400 POST OAK PARKWAY
SUITE 1720
HOUSTON, TX 77027
* LESS THAN 1%.
(1) INCLUDES SHARES UNDERLYING WARRANTS OR OPTIONS WHICH MAY NOT HAVE YET BEEN
EXERCISED AND ARE NOT COVERED BY THIS RESALE PROSPECTUS.
(2) ASSUMES ALL SHARES REGISTERED FOR RESALE UNDER THIS PROSPECTUS ARE SOLD BY
THE SELLING SHAREHOLDER.
(3) INCLUDES SHARES ISSUABLE UPON CONVERSION OF RMG STOCK AND WARRANTS
EXERCISABLE AT $4.00 PER SHARE, COVERED BY THIS PROSPECTUS.
(4) INCLUDES 376,904 SHARES ISSSUABLE ON CONVERSION OF PRINCIPAL AND INTEREST
ON A NOTE, AND 151,250 SHARES ON EXERCISE OF WARRANTS. RESALE OF 255,556 OF
THE NOTE CONVERSION SHARES, AND 120,000 OF THE WARRANT SHARES, ARE COVERED
BY SEPARATE PROSPECTUS (SEC FILE NO. 333-103692). DOES NOT INCLUDE 10,000
SHARES ISSUABLE ON EXERCISE OF A WARRANT HELD BY KEVIN DALY, AN AFFILIATE
OF CAYDAL, LLC.
(5) INCLUDES 234,083 SHARES ISSUABLE ON CONVERSION OF PRINCIPAL AND INTEREST ON
A NOTE, AND 60,000 SHARES ON EXERCISE OF WARRANTS. RESALE OF 166,667 OF THE
NOTE CONVERSION SHARES, AND 60,000 OF THE WARRANT SHARES, ARE COVERED BY
SEPARATE PROSPECTUS (SEC FILE NO. 333-103692).
(6) INCLUDES SHARES ISSUABLE ON EXERCISE OF WARRANTS AT $4.00 PER SHARE.
(7) SHARES ISSUABLE ON EXERCISE OF WARRANTS AT $4.30 PER SHARE.
(8) SHARES ISSUABLE ON EXERCISE OF WARRANTS AT $2.00 PER SHARE.
(9) INCLUDES SHARES ISSUABLE ON EXERCISE OF WARRANTS AT PRICES FROM $3.75 TO
$5.50 PER SHARE, FOR THE WARRANTS HELD BY C.C.R.I., AND AT $3.75 FOR THE
WARRANTS HELD BY MR. ASSAD.
(10) SHARES ISSUABLE ON EXERCISE OF OPTION AT $5.00 PER SHARE.
THE SHARES OWNED OR TO BE OWNED BY THE SELLING SHAREHOLDERS ARE REGISTERED
UNDER RULE 415 OF THE GENERAL RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION, CONCERNING DELAYED AND CONTINUOUS OFFERS AND SALES OF
SECURITIES. IN REGARD TO THE OFFER AND SALE OF SUCH SHARES, WE HAVE MADE CERTAIN
UNDERTAKINGS IN PART II OF THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS
IS PART, BY WHICH, IN GENERAL, WE HAVE COMMITTED TO KEEP THIS PROSPECTUS CURRENT
DURING ANY PERIOD IN WHICH THE SELLING SHAREHOLDERS MAKE OFFERS TO SELL THE
COVERED SECURITIES PURSUANT TO RULE 415.
PLAN OF DISTRIBUTION
THE SELLING SHAREHOLDERS AND ANY OF THEIR PLEDGES, DONEES, ASSIGNEES AND
SUCCESSORS-IN-INTEREST MAY, FROM TIME TO TIME, SELL ANY OR ALL OF THEIR SHARES
OF COMMON STOCK ON ANY STOCK EXCHANGE, MARKET OR TRADING FACILITY ON WHICH THE
SHARES ARE TRADED. THESE SALES MAY BE AT FIXED OR NEGOTIATED PRICES. THE SELLING
SHAREHOLDERS MAY USE ANY ONE OR MORE OF THE FOLLOWING METHODS WHEN SELLING
SHARES:
O ORDINARY BROKERAGE TRANSACTIONS AND TRANSACTIONS IN WHICH THE
BROKER-DEALER SOLICITS PURCHASERS;
O BLOCK TRADES IN WHICH THE BROKER-DEALER WILL ATTEMPT TO SELL THE
SHARES AS AGENT BUT MAY POSITION AND RESELL A PORTION OF THE BLOCK AS
PRINCIPAL TO FACILITATE THE TRANSACTION;
O PURCHASES BY A BROKER-DEALER AS PRINCIPAL AND RESALE BY THE
BROKER-DEALER FOR ITS ACCOUNT;
O AN EXCHANGE DISTRIBUTION IN ACCORDANCE WITH THE RULES OF THE
APPLICABLE EXCHANGE;
O PRIVATELY NEGOTIATED TRANSACTIONS;
O SHORT SALES (SALES OF SHARES NOT OWNED IN HOPES OF A DECLINE IN MARKET
PRICE SO THE SELLER CAN PURCHASE IN THE MARKET AT A LOWER PRICE TO BE
ABLE TO DELIVER THE SHARES SOLD);
O BROKER-DEALERS MAY AGREE WITH THE SELLING SHAREHOLDER TO SELL A
SPECIFIED NUMBER OF SUCH SHARES AT A STIPULATED PRICE PER SHARE;
O A COMBINATION OF ANY SUCH METHODS OF SALE; AND
O ANY OTHER METHOD PERMITTED PURSUANT TO APPLICABLE LAW.
THE SELLING SHAREHOLDERS ALSO MAY RESELL ALL OR A PORTION OF THE SHARES IN
OPEN MARKET TRANSACTIONS IN RELIANCE UPON RULE 144 UNDER THE 1933 ACT, PROVIDED
THEY MEET THE CRITERIA AND CONFORM TO THE REQUIREMENTS OF THE RULE.
THE SELLING SHAREHOLDERS MAY ALSO ENGAGE IN SHORT SALES AGAINST THE BOX (A
SHORT SALE WHERE THE SELLER BORROWS THE STOCK FROM A THIRD PARTY, HOPING THE
MARKET PRICE WILL DECLINE), PUTS AND CALLS AND OTHER TRANSACTIONS IN SECURITIES
OF THE COMPANY OR DERIVATIVES OF COMPANY SECURITIES, AND MAY SELL OR DELIVER
SHARES IN CONNECTION WITH THESE TRADES. THE SELLING SHAREHOLDERS MAY PLEDGE
THEIR SHARES TO THEIR BROKERS UNDER THE MARGIN PROVISIONS OF CUSTOMER
AGREEMENTS. IF A SELLING SHAREHOLDER DEFAULTS ON A MARGIN LOAN, THE BROKER MAY,
FROM TIME TO TIME, OFFER AND SELL THE PLEDGED SHARES. THE SELLING SHAREHOLDERS
HAVE ADVISED THE COMPANY THAT THEY HAVE NOT ENTERED INTO ANY AGREEMENTS,
UNDERSTANDINGS OR ARRANGEMENTS WITH ANY UNDERWRITERS OR BROKER-DEALERS REGARDING
THE SALE OF THEIR HIS SHARES OTHER THAN ORDINARY COURSE BROKERAGE ARRANGEMENTS,
NOR IS THERE AN UNDERWRITER OR COORDINATING BROKER ACTING IN CONNECTION WITH THE
PROPOSED SALE OF SHARES BY THE SELLING SHAREHOLDERS.
BROKER-DEALERS ENGAGED BY THE SELLING SHAREHOLDERS MAY ARRANGE FOR OTHER
BROKERS-DEALERS TO PARTICIPATE IN SALES. BROKER-DEALERS MAY RECEIVE COMMISSIONS
OR DISCOUNTS FROM THE SELLING SHAREHOLDERS (OR, IF ANY BROKER-DEALER ACTS AS
AGENT FOR THE PURCHASER OF SHARES, FROM THE PURCHASER) IN AMOUNTS TO BE
NEGOTIATED. THE SELLING SHAREHOLDERS DO NOT EXPECT THESE COMMISSIONS AND
DISCOUNTS TO EXCEED WHAT IS CUSTOMARY IN THE TYPES OF TRANSACTIONS INVOLVED.
WE ARE REQUIRED TO PAY ALL FEES AND EXPENSES INCIDENT TO THE REGISTRATION
OF RESALE OF THE SHARES COVERED BY THIS PROSPECTUS. HOWEVER, ALL DISCOUNTS,
COMMISSIONS OR FEES INCURRED IN CONNECTION WITH THE SALE OF THE SHARES OFFERED
HEREBY WILL BE PAID BY THE SELLING SHAREHOLDERS. THE COMPANY HAS AGREED TO
INDEMNIFY THE SELLING SHAREHOLDERS AGAINST CERTAIN LOSSES, CLAIMS, DAMAGES AND
LIABILITIES, INCLUDING LIABILITIES UNDER THE 1933 ACT. WE HAVE BEEN ADVISED THAT
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, INDEMNIFICATION FOR
LIABILITIES UNDER THE 1933 ACT IS AGAINST PUBLIC POLICY, AND THEREFORE IS
UNENFORCEABLE. SEE BELOW.
IN ORDER TO COMPLY WITH THE SECURITIES LAWS OF CERTAIN STATES, IF
APPLICABLE, THE SHARES WILL BE SOLD IN SUCH JURISDICTIONS, IF REQUIRED, ONLY
THROUGH REGISTERED OR LICENSED BROKERS OR DEALERS. IN ADDITION, IN CERTAIN
STATES THE SHARES MAY NOT BE SOLD UNLESS THE SHARES HAVE BEEN REGISTERED OR
QUALIFIED FOR SALE IN SUCH STATE OR AN EXEMPTION FROM REGISTRATION OR
QUALIFICATION IS AVAILABLE.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
OUR ARTICLES OF INCORPORATION AND BYLAWS PROVIDE THAT WE SHALL INDEMNIFY
DIRECTORS PROVIDED THAT THE INDEMNIFICATION SHALL NOT ELIMINATE OR LIMIT THE
LIABILITY OF A DIRECTOR FOR BREACH OF THE DIRECTOR'S DUTY OR LOYALTY TO THE
CORPORATION OR ITS STOCKHOLDERS, OR FOR ACTS OF OMISSION NOT IN GOOD FAITH OR
WHICH INVOLVE INTENTIONAL MISCONDUCT OR A KNOWING VIOLATION OF LAW.
WYOMING LAW PERMITS A CORPORATION, UNDER SPECIFIED CIRCUMSTANCES, TO
INDEMNIFY ITS DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS AGAINST EXPENSES
(INCLUDING ATTORNEY'S FEES), JUDGMENTS, FINES AND AMOUNTS PAID IN SETTLEMENTS
ACTUALLY AND REASONABLY INCURRED BY THEM IN CONNECTION WITH ANY ACTION, SUIT OR
PROCEEDING BROUGHT BY THIRD PARTIES BY REASON OF THE FACT THAT THEY WERE OR ARE
DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS OF THE CORPORATION, IF THESE DIRECTORS,
OFFICERS, EMPLOYEES OR AGENTS ACTED IN GOOD FAITH AND IN A MANNER THEY
REASONABLY BELIEVED TO BE IN OR NOT OPPOSED TO THE BEST INTERESTS OF THE
CORPORATION AND, WITH RESPECT TO ANY CRIMINAL ACTION OR PROCEEDINGS, HAD NO
REASON TO BELIEVE THEIR CONDUCT WAS UNLAWFUL. IN A DERIVATIVE ACTION, I.E., ONE
BY OR IN THE RIGHT OF THE CORPORATION, INDEMNIFICATION MAY BE MADE ONLY FOR
EXPENSES ACTUALLY AND REASONABLY INCURRED BY DIRECTORS, OFFICERS, EMPLOYEES OR
AGENT IN CONNECTION WITH THE DEFENSE OR SETTLEMENT OF AN ACTION OR SUIT, AND
ONLY WITH RESPECT TO A MATTER AS TO WHICH THEY SHALL HAVE ACTED IN GOOD FAITH
AND IN A MANNER THEY REASONABLY BELIEVED TO BE IN OR NOT OPPOSED TO THE BEST
INTERESTS OF THE CORPORATION, EXCEPT THAT NO INDEMNIFICATION SHALL BE MADE IF
SUCH PERSON SHALL HAVE BEEN ADJUDGED LIABLE TO THE CORPORATION, UNLESS AND ONLY
TO THE EXTENT THAT THE COURT IN WHICH THE ACTION OR SUIT WAS BROUGHT SHALL
DETERMINE UPON APPLICATION THAT THE DEFENDANT DIRECTORS, OFFICERS, EMPLOYEES OR
AGENTS ARE FAIRLY AND REASONABLY ENTITLED TO INDEMNIFY FOR SUCH EXPENSES DESPITE
SUCH ADJUDICATION OF LIABILITY.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS AND CONTROLLING PERSONS OF THE
COMPANY PURSUANT TO THE FOREGOING PROVISIONS, OR OTHERWISE (FOR EXAMPLE, IN
CONNECTION WITH THE SALE OF SECURITIES), WE HAVE BEEN ADVISED THAT IN THE
OPINION OF THE COMMISSION SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS
EXPRESSED IN THE 1933 ACT, AND IS, THEREFORE, UNENFORCEABLE. IN THE EVENT THAT A
CLAIM FOR INDEMNIFICATION AGAINST SUCH LIABILITIES (OTHER THAN THE PAYMENT BY
THE COMPANY OF EXPENSES INCURRED OR PAID BY A DIRECTOR, OFFICER OR CONTROLLING
PERSON IN THE SUCCESSFUL DEFENSE OF ANY ACTION, SUIT OR PROCEEDING) IS ASSERTED
BY SUCH DIRECTOR, OFFICER OR CONTROLLING PERSON IN CONNECTION WITH THE
SECURITIES BEING REGISTERED, THE COMPANY WILL, UNLESS IN THE OPINION OF ITS
COUNSEL THE MATTER HAS BEEN SETTLED BY CONTROLLING PRECEDENT, SUBMIT TO A COURT
OF APPROPRIATE JURISDICTION THE QUESTION WHETHER SUCH INDEMNIFICATION BY IT IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE 1933 SECURITIES ACT, AND WILL BE
GOVERNED BY THE FINAL ADJUDICATION OF SUCH ISSUE.
WHERE TO FIND MORE INFORMATION ABOUT US
WE HAVE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") A REGISTRATION STATEMENT ON FORM S-3 UNDER THE 1933 ACT WITH
RESPECT TO THE SHARES OFFERED BY THIS PROSPECTUS. THIS PROSPECTUS, FILED AS A
PART OF THE REGISTRATION STATEMENT, DOES NOT CONTAIN CERTAIN INFORMATION
CONTAINED IN PART II OF THE REGISTRATION STATEMENT OR FILED AS EXHIBITS TO THE
REGISTRATION STATEMENT. WE REFER YOU TO THE REGISTRATION STATEMENT AND EXHIBITS
WHICH MAY BE INSPECTED AND COPIED AT THE PUBLIC REFERENCE SECTION OF THE
COMMISSION, 450 5TH STREET, NW, WASHINGTON, D.C. 20549, AT PRESCRIBED RATES; THE
TELEPHONE NUMBER FOR THE PUBLIC REFERENCE SECTION IS 1.800.SEC.0330. THE
REGISTRATION STATEMENT AND EXHIBITS ALSO ARE AVAILABLE FOR VIEWING AT AND
DOWNLOADING FROM THE EDGAR LOCATION WITHIN THE COMMISSION'S INTERNET WEBSITE
(HTTP://WWW.SEC.GOV).
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
OUR COMMON STOCK IS REGISTERED WITH THE COMMISSION UNDER SECTION 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934 (THE "1934 ACT"). UNDER THE 1934 ACT, WE
FILE WITH THE COMMISSION PERIODIC REPORTS ON FORMS 10-K, 10-Q AND 8-K, AND PROXY
STATEMENTS, AND OUR OFFICERS AND DIRECTORS FILE REPORTS OF STOCK OWNERSHIP ON
FORMS 3, 4 AND 5. THESE FILINGS MAY BE VIEWED AND DOWNLOADED FROM THE
COMMISSION'S INTERNET WEBSITE (HTTP://WWW.SEC.GOV) AT THE EDGAR LOCATION, AND
ALSO MAY BE INSPECTED AND COPIED AT THE PUBLIC REFERENCE SECTION OF THE
COMMISSION, 450 5TH STREET, NW, WASHINGTON, D.C. 20549, AT PRESCRIBED RATES; THE
TELEPHONE NUMBER FOR THE PUBLIC REFERENCE SECTION IS 1.800.SEC.0330. INFORMATION
ON THE OPERATION OF THE PUBLIC REFERENCE ROOM CAN BE OBTAINED BY CALLING THE
COMMISSION AT 1.800.SEC.0330.
ALL OF THE INFORMATION CONTAINED IN THE FOLLOWING DOCUMENTS FILED WITH THE
COMMISSION IS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS:
- FORM 10-K FOR SEVEN MONTHS ENDED DECEMBER 31, 2002 FILED APRIL 1,
2003;
- QUARTERLY REPORT ON FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2003 (FILED NOVEMBER 14, 2003);
- PROXY STATEMENT FOR JUNE 2002 ANNUAL SHAREHOLDERS MEETING (FILED APRIL
25, 2003);
- FORMS 8-K: RESTRUCTURING OF DEBT AND INVESTMENTS IN RMG, AND
CONCERNING PHELPS DODGE CORPORATION LITIGATION (FILED NOVEMBER 20,
2003; FILING NOTICE OF CROSS-APPEAL TO THE 10TH CIRCUIT COURT OF
APPEALS, APPEALING DISTRICT COURT ORDERS ENTERED IN JULY, AUGUST AND
SEPTEMBER 2003 IN THE NUKEM LITIGATION (FILED NOVEMBER 12, 2003);
RECEIPT OF $2.9 MILLION SURPLUS CASH RELEASED FROM AN EXISTING CASH
RECLAMATION BOND ON THE TICABOO URANIUM PROPERTY, BY APPROVAL FROM
NUCLEAR REGULATORY COMMISSION (FILED NOVEMBER 5, 2003); COURT ORDERS
DENYING MOTIONS FILED IN NUKEM LITIGATION (FILED SEPTEMBER 19, 2003);
MOTIONS FILED IN NUKEM LITIGATION (FILED AUGUST 27, 2003); SALE OF
COMMERCIAL PROPERTIES IN UTAH (FILED AUGUST 15, 2003); COURT ORDER IN
FAVOR OF USE AND CRESTED, AGAINST NUKEM, INC. (FILED AUGUST 1, 2003);
TRANSACTION WITH PINNACLE GAS RESOURCES, INC. (FILED JULY 15, 2003),
AND ADDITIONAL INFORMATION CONCERNING THE PINNACLE TRANSACTION (FILED
JULY 21, 2003); LETTER OF INTENT TO SELL TICABOO, UTAH COMMERCIAL
PROPERTIES (FILED JUNE 24, 2003); BRIEFING SCHEDULE RELATING TO
MOTIONS FILED AND TO BE FILED REGARDING THE SPECIAL MASTER'S
ACCOUNTING REPORT ON THE NUKEM LITIGATION (FILED MAY 29, 2003);
RECEIPT OF THE SPECIAL MASTER'S ACCOUNTING REPORT (FILED MAY 12,
2003); RMG'S LETTER OF INTENT ON EARN-IN-JOINT VENTURE WITH GASTAR
EXPLORATION (FILED MAY 12, 2003); EXTENSION OF RMG'S OPTION TO
PURCHASE PROPERTIES, AND EXTENSION OF TIME FOR SPECIAL MASTER TO FILE
ACCOUNTING REPORT (FILED APRIL 9, 2003); AND REPORTING ADOPTION IN
CALENDAR 2001 OF A "SHAREHOLDER RIGHTS PLAN" ALSO COMMONLY KNOWN AS A
"POISON PILL" (FILED SEPTEMBER 20, 2001); AND
- FORM 8-A (FILED SEPTEMBER 20, 2001) REGISTERING THE PREFERRED STOCK
PURCHASE RIGHTS (IN CONNECTION WITH THE SHAREHOLDER RIGHTS PLAN).
THE SEC FILE NUMBER FOR ALL OF THESE FILINGS IS 000-06814.
ALL OF THE INFORMATION WHICH WILL BE CONTAINED IN OUR FUTURE ANNUAL REPORTS
ON FORM 10-K, QUARTERLY REPORTS ON FORM 10-Q, PROXY STATEMENTS, AND REPORTS ON
FORM 8-K, AND ANY OTHER FILINGS WE MAKE PURSUANT TO SECTIONS 13(A), 13(C), 14 OR
15(D) OF THE 1934 ACT, ALL AFTER THE DATE OF THIS PROSPECTUS, ALSO ARE
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS AS OF THE DATES WHEN SUCH
DOCUMENTS ARE FILED WITH THE COMMISSION.
WE WILL PROVIDE TO YOU COPIES OF ANY OR ALL OF THE INFORMATION IN THESE
DOCUMENTS, AND ANY EXHIBITS TO THEM, WITHOUT CHARGE, UPON REQUEST ADDRESSED TO
U.S. ENERGY CORP., 877 NORTH 8TH WEST, RIVERTON, WYOMING 82501, ATTENTION DANIEL
P. SVILAR, SECRETARY. YOU ALSO MAY REQUEST THESE DOCUMENTS BY TELEPHONE:
1.307.856.9271. OUR INTERNET ADDRESS IS WWW.USEG.COM. OUR 1934 ACT FILINGS ARE
NOT DIRECTLY AVAILABLE THROUGH OUR INTERNET ADDRESS (WEBSITE), BUT YOU CAN
ACCESS THOSE FILINGS THROUGH THE LINK TO NASDAQ AT OUR INTERNET ADDRESS
(WEBSITE).
LEGAL MATTERS
THE VALIDITY OF THE ISSUANCE OF THE SHARES OFFERED HAS BEEN PASSED UPON BY
THE LAW OFFICE OF STEPHEN E. ROUNDS, DENVER, COLORADO.
EXPERTS
OUR CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2002, MAY 31, 2002 AND
2001, AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS, SHAREHOLDERS'
EQUITY AND CASH FLOWS FOR THE SEVEN MONTHS ENDED DECEMBER 31, 2002 AND EACH OF
THE TWO YEARS IN THE PERIOD ENDED MAY 31, 2002, HAVE BEEN AUDITED BY GRANT
THORNTON LLP, AND ARE INCLUDED, WITH THE AUDIT REPORT FROM GRANT THORNTON LLP,
IN THE ANNUAL REPORT ON FORM 10-K FOR THE SEVEN MONTHS ENDED MAY 31, 2002 IN
RELIANCE UPON THE AUTHORITY OF SUCH FIRM AS EXPERTS IN ACCOUNTING AND AUDITING.
OUR CONSOLIDATED BALANCE SHEET AS OF MAY 31, 2000 AND THE RELATED
CONSOLIDATED STATEMENTS OF OPERATIONS, SHAREHOLDERS' EQUITY AND CASH FLOWS FOR
THE YEAR ENDED MAY 31, 2000, HAVE BEEN AUDITED BY ARTHUR ANDERSEN LLP, AND ARE
INCLUDED ALONG WITH THE AUDIT REPORT OF ARTHUR ANDERSEN LLP, IN THE ANNUAL
REPORT ON FORM 10-K FOR THE SEVEN MONTHS ENDED DECEMBER 31, 2002, AS AMENDED, IN
RELIANCE UPON THE AUTHORITY OF SUCH FIRM AS EXPERTS IN GIVING SAID REPORT.
ARTHUR ANDERSEN LLP HAS NOT CONSENTED TO THE INCORPORATION BY REFERENCE OF THEIR
REPORT IN THIS PROSPECTUS, AND WE HAVE DISPENSED WITH THE REQUIREMENT TO FILE
THEIR CONSENT IN RELIANCE UPON RULE 437A OF THE SECURITIES ACT OF 1933. BECAUSE
ARTHUR ANDERSEN LLP HAS NOT CONSENTED TO THE INCORPORATION BY REFERENCE OF THEIR
REPORT IN THIS PROSPECTUS, YOU WILL NOT BE ABLE TO RECOVER AGAINST ARTHUR
ANDERSEN LLP UNDER SECTION 11 OF THE SECURITIES ACT OF 1933 FOR ANY UNTRUE
STATEMENTS OF A MATERIAL FACT CONTAINED IN THE FINANCIAL STATEMENTS AUDITED BY
ARTHUR ANDERSEN LLP OR ANY OMISSIONS TO STATE A MATERIAL FACT REQUIRED TO BE
STATED THEREIN.
1,104,898 SHARES COMMON STOCK
U.S. ENERGY CORP.
-------------------
PROSPECTUS
--------------------
DECEMBER 10, 2003
NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR MAKE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THE
PROSPECTUS WITH RESPECT TO THE OFFERING MADE HEREBY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE BUSINESS OF OUR COMPANY
SINCE THE DATE HEREOF.