Edgar Filing: US ENERGY CORP

Post-Effective Amendment No. 1 FORM S-1

As filed with the Securities and Exchange Commission on October __, 2005

Registration No. 333-115477

Securities and Exchange Commission

Washington, D.C. 20549 - 2001

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Post-Effective Amendment No. 1

FORM S-1

Registration Statement

Under the Securities Act of 1933

U.S. ENERGY CORP.

(Exact name of registrant as specified in its charter)

Wyoming

(State or other jurisdiction of incorporation or organization)

83-0205516

(I.R.S. Employer Identification No.)

877 North 8th West, Riverton, Wyoming 82501; Tel. 307.856.9271

(Address, including zip code, and telephone number, including area code,

of issuer's principal executive offices)

Daniel P. Svilar, 877 North 8th West

Riverton, WY 82501; Tel. 307.856.9271

(Name, address, including zip code, and telephone number of agent for service)

Copies to: Stephen E. Rounds, Esq.

The Law Office of Stephen E. Rounds

1544 York Street, Suite 110, Denver, CO 80206

Tel: 303.377.6997; Fax: 303.377.0231

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Approximate date of commencement and end of proposed sale to the public: From time to time after the registration statement becomes effective.

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ]

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X ]

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:[ ] ________

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ________

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

Delaying amendment under rule 473(a): The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant to section 8(a), may determine.

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The information in this prospectus is subject to completion or amendment. The securities covered by this prospectus cannot be sold until the registration statement filed with the Securities and Exchange Commission becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that state.

U.S. Energy Corp.

1,509,562 Shares of Common Stock

This prospectus, included in the October __, 2005 post-effective amendment to the Form S-1 registration statement (originally declared effective on June 18, 2004), covers the offer and sale of up to 745,336 shares of common stock ($0.01 par value) of U.S. Energy Corp. ("USE") by shareholders; and up to 764,226 shares of common stock by holders of warrants and options on exercise thereof. Collectively, those persons are referred to as the "selling shareholders" in this prospectus. See "Selling Shareholders."

The selling shareholders, and the shares offered by them for sale, are comprised of those persons who have not sold such shares as of the date of this prospectus. No longer included in the prospectus are (a) those persons who sold all of their shares; (b) those persons whose warrants or options have expired; and (c) those persons who have held shares (originally issued as restricted securities) more than two years, and who thereby are entitled to sell their shares under rule 144(k).

In this prospectus, "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, or under rule 144. See "Plan of Distribution." Although we will receive proceeds if and to the extent options and warrants are exercised, we will not receive proceeds from sale of any of the shares offered by the selling shareholders.

USE is traded ("USEG") on the Nasdaq Small Cap Market ($4.11 on October 5, 2005).

An investment in the shares offered by this prospectus is speculative and subject to risk of loss. See "Risk Factors" beginning on page 11 and the table of contents on page 5.

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 October __, 2005

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TABLE OF CONTENTS

				Page No.
Summary Information
	The Company
		Capital Activities in 2004 and First Quarter 2005		6
			USE	7
			RMG	7
			Sutter Gold Mining Inc.	8
			Molybdenum	9
			Uranium	9
		Capital Activities in Second Quarter 2005		9
			RMG	9

		Summary Information About the Subsidiaries		12
		Segment Information		13

Business of the Company				13

	Business and Properties			13

	Research and Development			25

	Environmental			25

	Employees			26

	Mining Claim Holdings			26

	Legal Proceedings			27

	The Offering			29

Risk Factors				29

	Risk Factors Involving the Company			29

	We have a history of operating losses, and in 2005 and 2006, our working capital needs are expected to come mostly from liquidating investments. These sources of capital may not be sufficient to develop our mineral properties, none of which have proved reserves.			29

	Uncertainties in the value of the mineral properties. We are subject to certain kinds of risk which are unique to the minerals business			30

	Compliance with environmental regulations may be costly			31

	The Company’s poison pill could discourage some advantageous transactions			31

	Risk Factors Involving This Offering			32

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	Future equity transactions, including exercise of options or warrants, could result in dilution; and registration for public resale of the common stock in these transactions may depress stock prices	32

	Terms of subsequent financings may adversely impact your investment	32

Representations About This Offering		32

Forward Looking Statements		33

Use of Proceeds		33

Dilution		33

Capitalization		35

Selling Shareholders		35

Plan of Distribution		42

Market for Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities		43

Selected Financial Data		45

Management's Discussion and Analysis of Financial Condition and Results of Operations		49

Directors and Officers		75

Certain Relationships and Related Transactions		86

Principal Accounting Fees and Services		94

Description of Securities		94

Disclosure of Commission Position on Indemnification		96

Where to Find More Information About Us		96

Legal Matters		97

Experts		97

Financial Statements for the Three Years Ended December 31, 2004		98

Financial Statements for the Six Months Ended June 30, 2005		157

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Summary Information

The following summarizes all material information found elsewhere in this prospectus. This summary is qualified by the more detailed information in this prospectus and the exhibits filed with the registration statement which contains this prospectus.

The Company

U.S. Energy Corp. ("USE") is a Wyoming corporation (formed in 1966) in the business of acquiring, exploring, developing and/or selling or leasing mineral properties. USE and Crested Corp. ("Crested") originally were independent companies, with two common affiliates (John L. Larsen and Max T. Evans; Mr. Evans died in February 2002). In 1980, USE and Crested formed a joint venture ("USECC") to do business together (unless one or the other elected not to pursue an individual project). From time to time, USE has funded many of Crested's obligations because Crested did not have the funds to pay its own obligations. Crested has paid a portion of this debt by issuing common stock to USE. At June 30, 2005, Crested owed $11,540,000 to USE.

Historically, our business strategy has been, and will continue to be, acquiring grass roots and/or developed mineral properties when commodity prices are low (such as they have been in natural gas, gold, uranium and molybdenum), then operating, selling, leasing or joint venturing the properties, or selling the companies we set up to hold and explore or develop the properties to other companies in the mineral sector when prices are moving upward.

Typically, projects initially are acquired, financed and operated by USE and Crested in their joint venture (see below). From time to time, some of the projects are then transferred to separate companies organized for that purpose, with the objective of raising capital from an outside source for further development and/or joint venturing with other companies. Examples of this corporate strategy are: for gold properties, Sutter Gold Mining Inc. (formerly Globemin Resources Inc., a publicly traded British Columbia company, which acquired Sutter Gold Mining Company, and then changed its name to Sutter Gold Mining Inc.); and Rocky Mountain Gas, Inc. for coalbed methane (“CBM”). Additional subsidiaries have been organized but are not fully operational at October 5, 2005: U.S. Uranium Ltd. for uranium and U.S. Moly Corp. for molybdenum. Initial ownership of these subsidiaries will be by USE and Crested, with additional stock (plus options) held by their officers, directors and employees. Additional subsidiaries may be organized in the future for discrete projects.

In 2002 and 2003, USE's primary business focus was in the CBM business conducted through its subsidiary Rocky Mountain Gas, Inc. ("RMG"). In 2004 and into 2005, commodity prices for the minerals in all our properties (and for molybdenum, the property that we expect to receive back from Phelps Dodge Corporation) increased significantly. Accordingly, in 2004 and continuing into 2005, our business activity has been expanding to include the gold, uranium and molybdenum properties. RMG was sold in June 2005 (see “Capital Activities in Second Quarter 2005”).

Principal executive offices of USE and Crested are located in the Glen L. Larsen building at 877 North 8th West, Riverton, Wyoming 82501, telephone 307-856-9271. Sutter Gold Mining Inc. has an office in Sutter Creek, California.

In this prospectus, "we," "Company" or "USE" refer to U.S. Energy Corp. including Crested Corp. ("Crested") and other subsidiaries unless otherwise specifically noted. The Company's fiscal year ends December 31.

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Capital Activities in 2004 and First Quarter 2005

USE

$350,000 Equity - 2004. In the first quarter 2004, we obtained $350,000 of equity funding from an accredited investor (100,000 shares of USE common stock, three year warrants to purchase 50,000 shares of USE common stock, at $3.00 per share; and five year warrants to purchase 200,000 shares at $3.00 per share).

$3,000,000 Loan - 2004. In the third quarter 2004, we borrowed $3,000,000 from Geddes and Company of Phoenix, Arizona. The loan had an original maturity date of July 30, 2006, with 10% annual interest, and was secured principally by RMG's CBM properties in the Castle Rock prospect and 4,000,000 shares of RMG stock held by USE. This loan was restructured on June 1, 2005 (see “Capital Activities in Second Quarter 2005”). The loan may be prepaid in cash without penalty.

$4,720,000 Loan - First Quarter 2005. On February 9, 2005, we borrowed $4,000,000 from seven accredited investors, issuing $4,720,000 face amount of debentures (including three years of annual interest at 6%). Net proceeds to USE were $3,700,000 after paying a commission and lenders' legal costs.

The debentures were unsecured; the face amount of the debentures was payable every six months from February 4, 2005, in five installments of 20%, in cash or in restricted common stock of USE. USE had the right to pay this amortization payment in cash or in stock at the lower of $2.43 per share (the “set price”) or 90% of the volume weighted average price of USE’s stock for the 90 trading days prior to the repayment date. The set price was determined on the formula of 90% of the volume weighted average price of the stock over the 90 trading days prior to February 4, 2005. The debentures were convertible to restricted common stock of USE at the set price.

At any time, USE had the right to redeem some or all of the debentures in cash or stock, in an amount equal to 120% of the face amount of the debentures until February 4, 2006; 115% from February 5, 2006 to February 4, 2007; and 110% from February 5, 2007 until maturity.

The preceding is a summary of the principal terms of the debentures. The form of debenture is filed as an exhibit to the registration statement of which this prospectus is a part.

USE issued warrants to the investors, expiring February 4, 2008, to purchase 971,195 shares of restricted common stock, at $3.63 per share (equal to 110% of the Nasdaq closing price on February 3, 2005). The number of shares underlying the warrants equals 50% of the shares issuable on full conversion of the debentures at the set price (as if the debentures were so converted on February 4, 2005). Warrants to purchase 100,000 shares, at the same price and for the same term as the warrants issued to the investors, have been issued to HPC Capital Management (a registered broker-dealer) as compensation (in addition to a 7% cash commission) for its services in connection with the transaction.

If in any period of 20 consecutive trading days (after registration has been approved) USE’s stock price exceeds 200% of the warrants’ exercise price, on each of the trading days, all of the warrants will expire on the 30^th day after USE sends a call notice to the warrant holders.

Pursuant to agreement with the debenture investors, USE filed with the Securities and Exchange Commission a registration statement (SEC File No. 333-124277) to cover the future public sale of shares issuable in payment and/or conversion of the debentures, and the shares issuable on exercise of the warrants, as well as the future sale by HPC Capital Management of the shares issuable on exercise of the warrants issued to HPC. The registration statement was declared effective by the SEC on June 13, 2005.

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As of July 18, 2005, all of the debenture holders had converted the entire $4,720,000 of the debt to 1,942,387 shares of USE common stock. Some of the warrants were exercised (for 320,494 shares) as of October 5, 2005.

RMG

On June 1, 2005, RMG was acquired by Enterra Energy Trust (see “Capital Activities in Second Quarter 2005”)

Preferred Stock - 2004. In the first quarter 2004, RMG raised $1,800,000 of equity financing from the sale of shares of Series A Preferred Stock in RMG, and warrants to purchase shares of common stock of USE, to institutional investors. Proceeds were used to pay part of the Hi-Pro acquisition price, and for RMG working capital. Terms of the securities:

1. 600,000 shares of Series A Preferred Stock at $3.00 per share, 10% cumulative annual dividend payable at RMG's election in cash or shares of common stock of RMG (at $3.00 per share) or shares of common stock of USE (at 90% of USE's volume weighted average price for the five days, referred to as the "set price"). The Series A Preferred Stock was convertible at the holder's election into shares of common stock of RMG, at $3.00 per share, or shares of common stock of USE at the set price, until February 2006.

2. Warrants to purchase 150,000 shares of common stock of USE, at the set price.

As of March 3, 2005, all Series A Preferred Stock including dividends has been converted to and paid with USE common stock (894,299 shares), and all warrants have been exercised (150,000 shares of USE common stock).

Purchase of the Hi-Pro Production, LLC ("Hi-Pro") Properties. In 2004, RMG organized a wholly-owned subsidiary RMG I, LLC for the purchase of producing and non-producing CBM properties (the "Hi-Pro properties) near Gillette, Wyoming. RMG and USE participated in raising equity capital and mezzanine financing for this transaction.

Agreement for Acquisition of RMG by with Enterra Energy Trust. As of April 11, 2005, RMG entered into a binding agreement with Enterra Energy Trust ("Enterra," listed on the Toronto Stock Exchange and the Nasdaq National Market), for the acquisition of RMG by Enterra. See “Capital Activities in Second Quarter 2005”

Sutter Gold Mining Inc.

In 2004, Sutter Gold Mining Company, a majority-owned subsidiary with gold properties in California, was acquired by Globemin Resources Inc., a British Columbia corporation which is traded on the TSX Venture Exchange (“TSX-V) under its new name, Sutter Gold Mining Inc. A total of Cdn $1,061,800 of equity capital has been raised to continue exploration work on the properties.

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Molybdenum

In February 2005, the United States District Court in Colorado issued an order authorizing Phelps Dodge to return mining claims at Mt. Emmons (near Crested Butte, Colorado) to USE and Crested, including a water treatment plant and the responsibility for operating it. The mining claims contain a world class molybdenum deposit. In 2005, USE and Crested expect to receive back from Phelps Dodge Corporation the patented and unpatented mining claims containing the molybdenum deposit. There are no current plans to put these properties into production but various strategies are being evaluated, including putting the property into production; selling or leasing the property to (or joint venturing the property with) other entities. These strategies will require resolution of significant permitting issues and substantial amounts of capital. In 2005, we expect to transfer the properties to a new subsidiary, U.S. Moly Corp. The Company and Crested each own 50% of U.S. Moly Corp.

Uranium

In December 2004, USE and Crested agreed to sell a 50% interest in the Sheep Mountain (Wyoming) uranium properties to Bell Coast Capital Corp., now named Uranium Power Corp. ("UPC"), a British Columbia company trading on the TSX Venture Exchange, for $4,050,000 and 4,000,000 shares of UPC common stock payable by installments through December 2007. The parties signed a Mining Venture Agreement with UPC as of April 11, 2005 for the Sheep Mountain property and other properties to be acquired. UPC may provide up to $10,000,000 for up to 20 different projects.

Plateau Resources Limited (a wholly-owned subsidiary of USE) agreed in December 2004 to lease uranium properties now controlled or owned (and to be acquired) by a third party in reasonable proximity to Plateau’s Shootaring Canyon Mill ("Shootaring Mill") in southeastern Utah. The purpose of this agreement is to obtain uranium properties for future mining to supply the Shootaring Mill, which we plan to put into production.

In 2005, we expect to transfer the uranium claims, and Plateau Resources Limited to a new subsidiary, U.S. Uranium Ltd. (“USUL”) We have filed a request with the State of Utah for an operational license to reopen and operate the Shootaring Mill. The Company and Crested each own 50% of U.S. Uranium Ltd.

Capital Activities in Second Quarter 2005

RMG

General. As of April 11, 2005, USE, Crested, and their joint-majority-owned subsidiary RMG, entered into a binding agreement with Enterra Energy Trust (“Enterra”) for the acquisition of RMG by Enterra in consideration of $20,000,000, payable pro rata to the RMG shareholders in the amounts of $6,000,000 in cash and $14,000,000 in exchangeable shares of one of the subsidiary companies of Enterra. Enterra (Calgary, Alberta) is an open ended unincorporated investment trust; units of Enterra are traded on the Toronto Stock Exchange (the "TSX") and Nasdaq. The purchase price was subject to a minor adjustment of $266,000 if certain overriding royalty interests were purchased.

On May 20, 2005, the agreement with Enterra was amended to provide for payment of the $6,000,000 component with $500,000 cash and $5,500,000 with Enterra units, subject to the minor adjustment.

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On June 1, 2005, the agreement, as amended, was closed: Enterra US Acquisitions Inc. (a privately-held Washington corporation organized by Enterra for purposes of the RMG acquisition, hereafter "Acquisitions") acquired all the outstanding stock of RMG, for which Enterra paid $500,000 cash and issued $5,234,000 of Enterra units (the "Enterra Initial Units"), net of the $266,000 adjustment for the purchase of overriding royalty interests (effected May 1, 2005); and Acquisitions issued $14,000,000 of class D shares of Acquisitions. The Enterra Initial Units and the class D shares were issued pro rata to the RMG shareholders, with certain adjustments (see below). USE’s and Crested's participation in the consideration received was approximately $17,841,700. USE’s consolidated subsidiary, Yellowstone Fuels, Corp. (“YSFC”) also received approximately $296,700.

RMG was acquired with approximately $3,500,000 of debt (at December 31, 2004) owed by its subsidiary (RMG I, LLC) to its mezzanine lenders, USE will no longer carry this debt on its consolidated balance sheet. As a result of the RMG disposition, USE and Crested no longer directly hold coalbed methane properties, although with their holdings in securities of Enterra (and Acquisitions), and Pinnacle Gas Resources, Inc.(“Pinnacle”) (a private coalbed methane company in which USE and Crested hold an equity interest), both companies will continue with investments in the oil and gas sector.

The Enterra Initial Units presently are tradable on the TSX. On June 1, 2006, the class D shares of Acquisitions (not traded anywhere) will be exchangeable, on a one-for-one basis, for additional Enterra units (the "Enterra Additional Units"); the Enterra Additional Units will be tradable on the TSX at that time. For purposes of the Securities Act of 1933, the class D shares of Acquisitions and the Enterra Initial Units have been issued (and the Enterra Additional Units will be issued on June 1, 2006) as restricted securities under rule 144. The Enterra Initial Units will not be tradable on Nasdaq until June 1, 2006, and the Enterra Additional Units will not be tradable on Nasdaq until June 1, 2007, in both instances subject to compliance with rule 144. Proceeds from liquidation over time of the Enterra Initial Units and the to-be-received Enterra Additional Units will fund exploration and development work on other mineral properties held by USE and Crested, and to retire USE debt (see "Restructuring of USE Debt" below).

RMG’s minority equity ownership of Pinnacle (see below) was not included in the disposition of RMG, but was assigned to USE and Crested in proportion to their ownership of RMG. Enterra is entitled to be paid by USE an amount of up to (but not more than) $2,000,000, if proceeds from a future disposition by USE and Crested to a third party of the minority equity interest in Pinnacle exceed $10,000,000. Currently, we have no information about whether or when Pinnacle might become a public company or might be purchased by third parties. The value of the minority equity position upon a future disposition could be more or less than $10,000,000. The boards of directors of USE and Crested determined that the value of RMG’s minority equity interest in Pinnacle is approximately $6,250,000; based upon Pinnacle’s recent sales of equity to its shareholders (RMG did not participate in those sales). To compensate the minority shareholders of RMG (including officers, directors and employees of USE and Crested, Mark J. Larsen (former president and a former director of RMG), Yellowstone Fuels, Corp. (“YSFC”) and Tom Swank (a former director of RMG) for their pro rata beneficially-owned 5.9% ($370,916) of the $6,250,000 value of the minority Pinnacle interest transferred to USE and Crested, on September 28, 2005, USE issued 87,689 restricted shares of common stock to the former minority shareholders of RMG, pro rata for their May 31, 2005 percentage beneficial ownership in Pinnacle (through their former ownership in RMG). These USE shares were valued at market for the ten trading days beginning September 12, 2005.

For information on the participation in the Enterra agreement consideration of certain of the officers and directors of USE and Crested, and two of the (former) officers and directors of RMG, see “Certain Relationships and Related Transactions."

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Participation in the Disposition by USE and Crested. On May 10, 2005, RMG issued 3,893,584 shares of common stock to USE and 502,130 shares of common stock to Crested, in consideration of the cancellation by USE and Crested of approximately $6,268,700 and $808,400 owed to USE and Crested, respectively, for USE issuing USE stock on conversion of RMG common and preferred stock purchased by third party investors, payment of RMG’s general and administrative overhead, and RMG’s operating deficits. As a result of this transaction, prior to closing of the Enterra agreement, RMG had issued and outstanding 16,851,453 shares of common stock, of which USE owned 10,228,527 shares (60.7%), Crested owned 5,620,464 shares (33.4%), and YSFC (an affiliate of USE) owned 250,000 shares (1.5%). Individuals owned 4.4% of RMG (including 2.5% which was owned by certain of the officers and directors of USE, Crested and RMG - see “Certain Relationships and Related Transactions”). The holders of all these RMG shares received their pro rata share of the Enterra Initial Units and the class D shares of Acquisitions, with the following exceptions:

USE’s and Crested's portions of Enterra Initial Units was reduced by 16,983 and 9,331 Enterra Initial Units (for their portions of the $500,000 cash component); and by another 9,035 and 4,965 Enterra Initial Units (for their portions of $266,000 of the total amount paid to buy out and cancel overriding royalty interests held by mezzanine lenders on certain gas properties owned by RMG, which buy out was required by the agreement with Enterra). USE issued to the mezzanine lenders warrants to purchase a total of 50,000 shares of common stock of USE; the exercise price will be valued at the Nasdaq Official Close Price at a date to be selected, anticipated to be in the third quarter of 2005.

·	USE's portion of the class D shares of Acquisitions was reduced by 10,664 class D shares which were issued to a secured lender of USE (see "Restructuring of USE Debt" below).

Restructuring of USE Debt. On June 1, 2005, USE and Geddes and Company ("Geddes") agreed to restructure a $3,000,000 secured debt; extinguish Geddes' right to convert the debt to RMG shares; retire outstanding RMG warrants, and issue USE shares (and transfer class D shares of Acquisitions) to Geddes.

Pursuant to the agreement, USE agreed to pay Geddes $500,000 cash, and pay the $2,500,000 balance in ten monthly installments of $250,000 (plus interest) beginning July 1, 2005. USE also transferred to Geddes 10,664 of the class D shares of Acquisitions (valued at $225,000 or $21.10 per class D share) which USE would have received on closing of the Enterra agreement, and USE agreed to issue $225,000 in restricted shares of USE common stock (at market for the ten trading days beginning September 12, 2005).; 53,191 shares were issued on September 28, 2005). As of June 1, 2005, Geddes' option to convert the debt to RMG shares and all RMG warrants were extinguished, which was required under the Enterra agreement. The debt was secured with 157,895 of the Enterra Initial Units out of USE's portion thereof (to be released back to USE in tranches as installments were paid), and with the other original collateral securing Geddes' loan which is unrelated to RMG. At July 1, 2005 the entire debt to Geddes had been paid in full, and as of October 5, 2005, all remaining obligations to Geddes have been fulfilled and all collateral has been released.

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Summary Information about the Subsidiaries. Most operations are conducted through subsidiaries, the USECC Joint Venture with Crested, and jointly-owned subsidiaries of USE and Crested. The following information is as of December 31, 2004, except as noted.

	Percent	Primary
Subsidiary	Owned by USE⁽¹⁾	Business Conducted
Plateau Resources Limited	100%	Uranium (Utah) - inactive mill - shut down, application filed to reopen and operate
Rocky Mountain Gas, Inc.⁽²⁾⁽³⁾	91.1%	CBM - active
Crested Corp.	70.1%	Uranium and molybdenum (inactive and shut down, with limited reactivation in uranium planned for 2005), gold (being reactivated on a limited basis), and exploration and production activities on CBM properties.
Sutter Gold Mining Inc.⁽²⁾	65.5%	Gold (California) - inactive - being reactivated
Four Nines Gold, Inc.	50.9%	Contract Drilling/Construction - inactive
USECC Joint Venture	50.0%	Uranium and molybdenum (inactive and shut down, with limited reactivation in Wyoming uranium planned for 2005), gold (being reactivated), and CBM. Limited real estate and airport operations.
Yellowstone Fuels, Corp.	35.9%	Uranium (Wyoming) - inactive - shut down
Pinnacle Gas Resources, Inc^.(2)	16.7%	CBM exploration and production - active

(1) As of December 31, 2004

(2)

Includes ownership of Crested Corp. in RMG, Sutter Gold Mining Inc., and Pinnacle Gas Resources, Inc.

(3) RMG was acquired by Enterra Energy Trust on June 1. 2005. See “Capital Activities in Second Quarter 2005”

The foregoing does not include information on ownership of subsidiaries which have been formed but are not yet active (U.S. Uranium Ltd. and U.S. Moly Corp.).

Financial information about industry segments.

From June 1, 2002 to December 31, 2003, for technical financial presentation purposes, we operated in two business segments: (i) CBM gas exploration and development (and holding shut down mines and mineral properties); and (ii) commercial operations (motel, real estate, and airport). By December 31, 2003, all activities in minerals (except CBM) and some of the commercial (motel/real estate/airport) had ceased or were curtailed, and the motel/commercial properties in Utah had been sold.

Through March 31, 2005, USE’s primary activities of a material and recurring nature were in CBM. However, in 2004 and continuing in 2005, activities in gold and uranium were initiated, and activities are expected to start up in molybdenum in 2005, and RMG was acquired on June 1, 2005. Therefore, in 2005 and beyond, we expect to continue to have one active industry segment - exploration and development of mineral properties in gold, molybdenum and uranium.

The principal products of operating units within each of the reportable industry segments for the full years 2004 and 2003, the seven months ended December 31, 2002 and the (former) fiscal year ended May 31, 2002 are shown below. For more information, see note I to the audited consolidated financial statements included in this prospectus.

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Industry Segments and Principal Products

Minerals: Acquisition and exploration of CBM properties. This activity is material and recurring, and was our principal business focus in these periods. Sales and leases of other mineral-bearing properties and, from time to time, the production and/or marketing of minerals. Activities in uranium and gold were largely shut down as recurring activities in the periods but uranium and gold are being reactivated.

Commercial: Operation of an aircraft fixed based operation (fuel sales, flight instruction and aircraft maintenance) was shut down in the (former) fiscal year 2002. The motel in Utah was sold in 2003. Real estate rental and various contract services continue, including management services for subsidiary companies.

Business and Properties

Coalbed Methane

RMG was acquired by Enterra Energy Trust on June 1, 2005. The following is selected information about RMG before that date.

General.

RMG was incorporated in Wyoming on November 1, 1999 for business in the CBM industry in Wyoming and Montana. RMG was a subsidiary of USE (owned 51.3% by USE and 39.8% by Crested at December 31, 2004). At December 31, 2004, RMG was indebted to the Company in the amount of $6,059,300. The obligation was incurred by RMG's continuing operating deficits (funded by USE) and for USE issuing common stock on conversion of RMG common stock, as well as preferred stock and payment of dividends on the preferred stock. In addition, a small percentage of RMG stock was held by employees, officers and directors of USE, Crested and RMG (plus options to buy more subsidiary stock) as an equity incentive for those persons to work for the subsidiary in addition to their responsibilities to USE and Crested. The shares and options were forfeitable if service were to be terminated before retirement.

In 2003, RMG transferred all of its interest in certain CBM properties, including a producing property, to Pinnacle.

On January 30, 2004, RMG, through its wholly-owned subsidiary RMG I, LLC ("RMG I"), acquired CBM properties in the Powder River Basin of Wyoming. See "Acquisition of Producing and Non-Producing Properties from Hi-Pro." Part of the purchase price was financed under a $25 million mezzanine credit facility.

RMG held leases and options on approximately 237,200 gross mineral acres (not including acreage held by Pinnacle) of federal, state and private (fee) land in the Powder River Basin of Wyoming and Montana, and adjacent to the Green River Basin of Wyoming.

From RMG's inception, through December 31, 2004, 88 exploratory wells were drilled primarily with funds provided by our industry partner CCBM (and another oil and gas company under a farmout agreement (completed in 2002) for exploration on our Castle Rock, Montana property). Forty-three of the wells were on properties transferred to Pinnacle in mid-2003. The balance of 45 wells, (15 of which have been plugged and abandoned) are on properties held by RMG. Proven reserves have not been established for any of the properties on which the exploratory wells were drilled. No wells were drilled in the six months ended June 30, 2005.

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The Castle Rock property in southeast Montana, and the Oyster Ridge property adjacent to the Green River Basin (southwest Wyoming), are large properties which would require the drilling of numerous exploratory wells and extensive dewatering for each group of wells (possibly as much as 3-12 months after drilling and completion) before an assessment of proven reserves could be made.

Transaction with Pinnacle Gas Resources, Inc.

On June 23, 2003, RMG, CCBM and its parent company Carrizo Oil & Gas, Inc., and seven affiliates of Credit Suisse First Boston Private Equity (the "CSFB Parties") signed and closed agreements for a transaction with Pinnacle. The transaction included: (1) the contribution to Pinnacle by RMG and CCBM of all their ownership of a portion of the CBM properties owned by RMG and CCBM, in exchange for common stock and options to buy common stock in Pinnacle; and (2) $17,640,000 cash to Pinnacle by the CSFB Parties for common stock and series A preferred stock of Pinnacle, and warrants to purchase series A preferred stock of Pinnacle. The CSFB Parties have contributed significant additional capital to Pinnacle since June 2003.

RMG’s original stake in Pinnacle was transferred to USE and Crested in connection with the sale of RMG on June 1, 2005. At December 31, 2004, RMG's ownership in Pinnacle's common stock was 16.7% on a fully diluted basis. This percentage has been reduced through capital calls in which USE and Crested have not participated, and further dilution may occur in the future.

Pinnacle is a private corporation. Only that information about Pinnacle which its board of directors elects to release is available to the public. All other information about Pinnacle is subject to confidentiality agreements between Pinnacle and its shareholders.

Pinnacle is authorized to issue common and preferred stock. Pinnacle has issued series A preferred stock, all held by the CSFB Parties: Liquidation preference of $100.00 per share; 10.5% compounded cumulative annual dividend (12.5% after July 1, 2010); redeemable at Pinnacle's option after July 1, 2004 at a premium declining to par after July 1, 2009; and with voting rights (a) pari passu with the common stock on regular matters, and (b) as a separate class, to authorize changes in the series A preferred stock, and to authorize certain other substantive matters.

Reserve Data

Netherland Sewell and Associates, Inc. ("NSAI," Houston, Texas), independent petroleum engineers, prepared a report on RMG’s proved reserves, as of December 31, 2004, estimating recoverable reserves from the CBM properties, and the present value (discounted 10%) of future cash flow therefrom. NSAI's report takes into account fixed pricing for some production in 2005, reflects the reduction in RMG's net revenue interests due to the overriding royalty interests held by lenders, and (except for fixed pricing in 2005) is based on the CIG Spot market price of $5.515 per Mmbtu, adjusted by lease for energy content, transportation fees and regional price differentials on December 31, 2004, without price escalation. Following is a summary of the December 31, 2004 reserve report:

		Net Present
	Reserves	Value
	(MCF)	(discounted at 10%)
Proved Developed Producing	1,651,666	$3,486,400
Proved Developed Non-Producing	889,051	$2,304,800
Proved Undeveloped	515,224	$ 723,400
Total	3,055,941	$6,514,600

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The present value, discounted 10% value ("PV10 value") was prepared after ad valorem and production taxes on a pre-income tax basis, and is not intended to represent the current market value of the estimated gas reserves purchased from Hi-Pro.

The PV10 value takes into account RMG I's contracts to sell 1,000 Mmbtu per day in 2005 at a fixed price of $4.14 per Mmbtu and 500 Mmbtu per day for January 1, 2005 through March 31, 2005 at a fixed price of $8.10 per Mmbtu. From time to time, RMG I may sign fixed price contracts for more production. In addition, gas market prices will vary, possibly by significant amounts, throughout each year, and on an average basis from year to year. For these reasons, the cash flow realized from production likely will vary from the estimates of cash flow used to determine the PV10 value.

Estimates of the economically recoverable quantities of gas attributable to any particular property, the classification of reserves as to proved developed and proved undeveloped based on risk of recovery, and estimates of the future net cash flows expected from the properties, as prepared by different engineers or by the same engineers but at different times, may vary substantially, and the estimates may be revised up or down as assumptions change.

The PV10 discount factor, which is required by the SEC for use in calculating discounted future net cash flows for reporting purposes, is not necessarily the most appropriate discount factor, based on interest rates in effect in the financial markets, and risks associated with the gas business.

Volumes, Prices and Gas Operating Expense

This table shows the volume of gas sold (net of usage to fuel compressors); and average sales prices for gas sold and average production costs calculated on a per mcf basis, for RMG’s production in 2004.

		Year Ended December 31,
		2004

Sales volume (mcf)		728,051
Average sales price per mcf⁽¹⁾		$4.05
Average cost per mcf⁽²⁾		$3.19

(1)	Represents the weighted average of selling 92% of production at fixed contract prices and 8% at the market.
(2)	Includes direct lifting costs (labor, repairs and maintenance, materials and supplies, workover costs, insurance and property, gathering, compression, marketing and severance taxes).

Acquisition and Exploration Capital Expenditures - All CBM Properties Through December 31, 2004

From inception on November 1, 1999 through December 31, 2004, RMG incurred net acquisition (purchase price and holding costs) and exploration costs (drilling and completion) on CBM properties of approximately $8,897,300, which does not include approximately $2,500,000 funded by CCBM on RMG's behalf for leasehold, drilling and completion costs. Unproved properties on the balance sheet at December 31, 2004 reflect the reduction (by $5,706,600) to reflect the reduction of the full cost price as a result of principal payments made by CCBM under its agreement with RMG and by payments from other industry partners. The foregoing does not include $957,700 spent by RMG on properties transferred to Pinnacle, which we recorded at December 31, 2003 as an investment in Pinnacle.

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The following table shows certain information regarding the gross costs incurred by RMG.

	Year Ended		Year Ended		Seven Months Ended		Year Ended
	December 31,		December 31,		December 31,		May 31,
	2004		2003		2002		2002
Acquisition costs	$	6,613,900	$	107,100	$	936,200	$	192,600
Development		1,642,600		158,300		97,200		87,400
	$	8,256,500	$	265,400	$	1,033,400	$	280,000

The acquisition costs included amounts paid for properties, delay rentals, lease option payments, and general and administrative costs directly attributable to the acquisitions.

The recorded amounts for acquisition and exploration of $8,256,500, $265,400, $1,033,400 and $280,000 represent 26.9%, 1.1%, 3.6% and 1.0% of total assets at December 31, 2004, 2003 and 2003, and May 31, 2002.

We use the full-cost method of accounting for gas properties. Under this method, all acquisition and exploration costs are capitalized in a "full-cost pool" as incurred. Depletion of the pool will be recorded using the unit-of-production method. To the extent capitalized costs in the full-cost pool (net of depreciation, depletion and amortization and related deferred taxes) exceed the present value (using a 10% discount rate) of estimated future net pre-tax cash flows from proved gas reserves as established by reserve reports, the excess costs will be charged to operations.

All acquisition and exploration costs for a property are capitalized until such time as proven reserves can be established, or not, for the property. If no proven reserves are established, those capitalized costs will be transferred to the amortization basis and be subject to an impairment test. To the extent proven reserves are established for an exploration property to be less than such costs, the costs will be written-down to the amount of present value of the proven reserves. In this event, assets would decrease and expenses would increase. Once incurred, a write-down of gas properties can't later be reversed.

In addition, if future exploration work (in particular the larger prospects) is delayed because of lack of capital or permitting delays, or both, with the result that it cannot be established whether or not proved reserves exist on the properties, the exploration costs for those properties would be written-off.

Inactive Mining Properties - Uranium

General. We have interests in several uranium-bearing properties in Wyoming, Arizona, and Utah, the Shootaring Mill, in Garfield County, Utah, and properties in proximity to the mill. All the uranium-bearing properties are in areas which produced significant amounts of uranium in the 1970s and 1980s. At some future date, we could develop and operate these properties (directly or through a subsidiary company or a joint venture) to produce uranium concentrates ("U₃O₈") for sale to public utilities with nuclear powered electricity generating plants. Uranium concentrate spot prices have increased substantially to $32/lb. at October 3, 2005, compared to $10/lb. in 2002. However, further increases to sustained higher prices will be needed to warrant putting the properties in production. All of the uranium properties are shut down; work is performed on the mines to prevent flooding and permitting work is done as needed (monitoring and reporting) to keep existing permits in effect.

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Over a period of at least 18 months, substantial and expensive work would be required to put the uranium mines into production, including permitting, cleaning rock and other debris from shafts and tunnels, pumping water out of the mines, extending shafts and tunnels, and drill sampling to ascertain whether a commercially viable ore body exists on any of the properties.

A decision to put the uranium properties into production will depend upon uranium prices, mining and milling costs and the ability to raise the necessary funds.

At June 30, 2005, $166,100 was carried on the balance sheet for uranium properties.

We believe the uranium properties we now hold have significant value because uranium prices continue to rise and stabilize at higher prices. Our decision to proceed will be based on our efforts to raise capital through joint ventures or otherwise, to explore the properties further; put the mines into production, and refurbish the Shootaring Mill in Utah. To that end, we have signed an agreement to sell a 50% interest in the Sheep Mountain properties in Wyoming and enter into a joint venture agreement for those properties (and others to be acquired) with Bell Coast Capital Corp., now named Uranium Power Corp. ("UPC") and a separate agreement to lease and acquire more uranium properties in Utah.

On-going acquisition and exploration activities have resulted in a current property base in excess of 32,000 acres. All of these properties are actively being evaluated and currently comprise eleven separate projects. Future drilling is planned for all of these properties, to follow the Sheep Mountain (Wyoming) and Breccia Pipe (Arizona) drilling programs in an orderly manner.

Sheep Mountain - Wyoming

Unpatented lode mining claims, underground and open pit uranium mines and mining equipment in the Crooks Gap area are located on Sheep Mountain in Fremont County, Wyoming. From December 31, 1988 to June 1, 1998, these properties were held by Sheep Mountain Partners ("SMP") a Colorado general partnership. In February 1988, USE and Crested acquired from Western Nuclear, Inc. unpatented lode uranium mines, mining equipment and mineralized properties (including underground and open pit mines) at Crooks Gap in south-central Fremont County, Wyoming. The mines were first operated by Western Nuclear in the 1970s. USECC mined and milled uranium ore from one of the underground Sheep Mines in 1988 and 1989. In December 1988, USECC sold 50 percent of the interest in the Crooks Gap properties to a subsidiary of Nukem, Inc. and formed Sheep Mountain Partners ("SMP"), in which USECC received an undivided 50 percent interest.

On June 1, 1998, USE and Crested received back from SMP all of the Sheep Mountain mineral properties and equipment, in partial settlement of certain disputes with Nukem, Inc. Other of those disputes remain in litigation - see Item 3, "Legal Proceedings."

We have recorded reclamation liabilities for the SMP properties (see note K to the consolidated financial statements). All historical costs in the SMP properties were offset against a monetary award which was received from Nukem during fiscal 1999. Permits are in place only for standby maintenance of the mines and discharge of waste water pumped from the mines.

At June 15, 2005, we own 139 unpatented lode mining claims and a 644 acre Wyoming State Mineral Lease on Sheep Mountain in the Crooks Gap area (Fremont County). To date, six holes have been completed and logged, for a total of 3,740 feet. This property is subject to agreements with Uranium Power Corp. (see below).

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The primary goal of this drilling program is to define the extension of previous high grade intersections at stratigraphic horizons deeper than the currently defined mineral horizons at the Sheep 1 and 2 mines. Hole SM16-1010 intersected 7.5 feet at an average grade of 0.13% U₃O₈. This intersection is at a depth of 527 feet, and is believed to be in the same roll front system as the high grade intersections from earlier drilling. The significance of the intersection is that it appears to demonstrate continuity of the roll front system. Hole SM16-1021 intersected a low grade zone at a depth of 465 feet with a gamma signature that indicates proximity to, but at a location ahead of, the nose of the roll front. Hole SM16-1023 intersected 3 feet of 8.03% U₃O₈at 92 feet. This encounter is thought to be an isolated pocket of mineralization contained in a carbonaceous zone of limited extent which is not uncommon in this type of sandstone hosted deposit. Hole SM16-1009 intersected 6.5 feet of .11% U₃O₈ at a depth of 120 feet. Hole SM16-1023 intersected 15 feet of .09% U₃O₈ at a depth of 19 feet and 5.5 feet of .06% U₃O₈ at a depth of 56 feet. Hole SM16-1025 intersected 19 feet of .05% U₃O₈ at a depth of 120 feet. These three holes may be indicative of potential for an open pit if further drilling identifies additional shallow mineralization. Results from the drilling program will assist in the mapping of the overall extent of the system, and in its full evaluation.

- UPC Joint Venture.

Purchase and Sale Agreement. On December 8, 2004, USE and Crested entered into a Purchase and Sale Agreement (the “agreement”) with Bell Coast Capital Corp. now named Uranium Power Corp. (“UPC”), a British Columbia corporation (TSX-V “UCP-V”) for the sale to UPC of an undivided 50% interest in the Sheep Mountain properties. A summary of certain provisions in the agreement follows.

The initial purchase price for the 50% interest in the properties is $4,050,000 and 4,000,000 shares of common stock of UPC, payable by installments.

Initial cash and equity purchase price:

October 29, 2004	$ 175,000	Paid

November 29, 2004	$ 175,000	Paid

June 29, 2005	$ 500,000	Paid on July 6, 2005 and 1,000,000 common shares of UPC stock delivered on July 24, 2005

June 29, 2006	$ 800,000	and 750,000 common shares of UPC stock

December 29, 2006	$ 800,000	and 750,000 common shares of UPC stock

June 29, 2007	$ 800,000	and 750,000 common shares of UPC stock

December 29, 2007	$ 800,000	and 750,000 common shares of UPC stock

Total	$ 4,050,000	and 4,000,000 common shares of UPC stock

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The cash portion of the initial purchase price was subject to increase by $3,000,000 (in two $1,500,000 installments) after the uranium oxide price (long term indicator) is at or exceeds $30.00/lb for four consecutive weeks (the “price benchmark”). The price benchmark was achieved on June 20, 2005. Since the price benchmark occurred during the first 18 months after execution of the October 29, 2004 Agreement, the first payment of $1.5 million is due on April 26, 2006 and the second payment of $1.5 million is due on October 29, 2006. These payment obligations will survive closing of the purchase of the 50% interest in the properties; if the installments are not timely paid, UPC will forfeit all of its 50% interest in the properties, and in the joint venture to be formed.

USE and Crested, and UPC, will each be responsible for paying 50% of (i) current and future Sheep Mountain reclamation costs in excess of $1,600,000 held by USE and Crested, and (ii) all costs to maintain and hold the properties.

Closing of the agreement is required on or before December 29, 2007, with UPC’s last payment of the initial purchase price. At the closing, UPC will contribute its 50% interest in the properties, and USE and Crested will contribute their aggregate 50% interest in the properties, to the joint venture (see below), wherein UPC and USE/Crested each hold a 50% interest.

UPC will contribute up to $10,000,000 to the joint venture (at $500,000 for each of 20 exploration projects). USE/Crested, and UPC, each will be responsible for 50% of costs on each project in excess of $500,000.

UPC may terminate the agreement before closing, in which event UPC (i) would forfeit all payments made to termination date, (ii) lose all of its interest in the properties to be contributed by USE/Crested under the agreement and (iii) be relieved of its share of reclamation liabilities existing at December 8, 2004.

- Mining Venture Agreement

As of April 11, 2005, the Company and Crested (as the USECC Joint Venture) signed a Mining Venture Agreement with UPC to establish a joint venture, with a term of 30 years, to explore, develop and mine the properties being purchased by UPC under the Purchase and Sale Agreement, and acquire, explore and develop additional uranium properties. The joint venture generally covers uranium properties in Wyoming and other properties identified in the USECC Joint Venture uranium property data base, but excluding; the Green Mountain area, Kennecott’s Sweetwater uranium mill, the Shootaring Canyon uranium mill in southeast Utah (and properties within ten miles of that mill), and properties acquired in connection with a future joint venture involving that mill.

The initial participating interests in the joint venture (profits, losses and capital calls) are 50% for the USECC Joint Venture and 50% for UPC, based on their contributions of the Sheep Mountain properties. Operations will be funded by cash capital contributions of the parties; failure by a party to fund a capital call may result in a reduction or the elimination of its participating interest. In addition, a failure by UPC to pay for its 50% interest in the Sheep Mountain properties may result in a reduction or the elimination of UPC’s participating interest. A budget of $567,842 for the seven months ending December 31, 2005 has been approved, relating to reclamation work at the Sheep Mountain properties, exploration drilling, geological and engineering work, and other costs. A substantial portion of this work will be performed by (and be paid to) USECC Joint Venture as manager.

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The manager of the joint venture is the USECC Joint Venture; the manager will implement the decisions of the management committee and operate the business of the joint venture. UPC and the USECC Joint Venture each have two representatives on the four person management committee, subject to change if the participating interests of the parties are adjusted. The manager is entitled to a management fee from the joint venture equal to a minimum of 10% of the manager’s costs to provide services and materials to the joint venture (excluding capital costs) for field work and personnel, office overhead and general and administrative expenses, and 2% of capital costs. The manager may be replaced if its participating interest becomes less than 50%.

The preceding is a summary of certain provisions of the Mining Venture Agreement and the Purchase and Sale Agreement, and is qualified by reference to those agreements which are filed as exhibits to the registration statement that includes this prospectus.

On August 22, 2005, USE and Crested, and UPC, signed an agreement to add another uranium project (now totaling four) to the joint venture. The property, known as the Breccia Pipes Project, consists of 54 lode mining claims (principally, the Star and Java claims) on BLM land in Mohave and Coconino counties, Arizona. The exploration target on these properties is breccia pipe uranium deposits.

These properties were acquired by U.S. Uranium Ltd. (“USUL”) pursuant to an agreement between USUL and Nu Star Exploration, LLC for $200,000 ($35,000 paid, with the balance payable in annual installments from September 21, 2005 through September 21, 2008). If USUL becomes a public company, the seller may take stock in lieu of annual cash payments, at 90% of USUL’s stock market price. Production from the principal properties are subject to a 4% net value royalty (proceeds from sale of processed U₃O₈, less mining and processing costs, fees, and taxes); a minor property is subject to a 1% royalty. USUL has the right to buy 3% of the 4% royalty for ten years at a price of $1 million.

Under the terms of the agreement between USUL and UPC, UPC will earn a 50% interest in the project by contributing the first $500,000 in acquisition and exploration expenses for the project. Additionally, UPC has agreed to issue up to 500,000 common shares of UPC stock to USECC (subject to regulations of the TSX Venture Exchange) within six months of the date drilling results outline an Inferred Mineral Resource on the Breccia Pipes Project as follows: 1) 250,000 common shares for the first 500,000 lbs. of contained U₃O₈identified and 2) an additional 250,000 common shares for the second 500,000 lbs. of contained U₃O₈identified. These commitments are in addition to those contained in the joint venture agreement with UPC.

The Arizona Strip was the site of a major uranium staking rush in the early 1980’s. Uranium-bearing breccia pipes were first located in the Hack Canyon area of Mohave County and the mineralized material was typically of a higher grade than other uranium deposits located in surrounding areas of the Colorado Plateau. Historic mining in the Arizona Strip had produced average uranium contents of up to 0.80% U₃O₈. The total production from individual mines in this district has ranged from about 1,000,000 lbs to 7,000,000 lbs U₃O₈.

The Star claims are contiguous with the partially mined Arizona I mine. The area is located within a short distance to the south of the Hack Canyon mining area. Mapping on the Star claims indicates the presence of 23 potential pipes, with the potential for 4 additional targets on the Java claims.

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The joint venture plans to explore these targets in the very near future. Airphoto mapping and field reconnaissance have already been completed and permitting for a stratigraphic drilling program has also been initiated with the BLM. A 30-40 hole program of shallow stratigraphic holes is planned to commence as soon as the permitting process is completed. A Phase 2 follow-up drilling program is also planned to provide a deep test (maximum 2,000 feet in depth) of up to four pipes based on initial drilling results. If any of the targets are developed to a mining stage, then the Shootaring Canyon Mill would be the likely location for ore processing.

Utah

In August 1993, USE purchased from Consumers Power Company ("CPC") all of the outstanding stock of Plateau, which owns the Shootaring Mill, a uranium processing mill in southeastern Utah for nominal cash consideration and the assumption of various reclamation obligations. The Shootaring Mill holds a source materials license from the NRC.

The Shootaring Mill, in southeastern Utah, occupies 19 acres of a 265 acre plant site. The Shootaring Mill was designed to process 750 tpd, but only operated on a trial basis for two months in mid-summer of 1982. In 1984, Plateau (now a wholly-owned subsidiary of USE) placed the mill on standby because CPC had canceled the construction of an additional nuclear energy plant. Plateau also owns approximately 90,000 tons of uranium mineralized material stockpiled at the mill site.

In 2003 and 2004, reclamation work on uranium properties (the Tony M, Velvet, and Woods Complex, then held by Plateau in San Juan County, Utah) was completed. Plateau had relinquished these properties in 2003 and 2004, but has subsequently leased the Velvet from a third party who staked unpatented mining claims on the property (see below).

With recent improvements in uranium concentrate prices, Plateau has obtained an extension to January 2007 to commence reclamation work at the mill (reclamation costs are bonded, see Note K to the financial statements). Plateau has filed a request with the State of Utah for a permit and licenses to put the mill in operating status.

The Shootaring Mill is owned by Plateau Resources Limited ("Plateau"), a subsidiary of USE. Crested has a 50% interest in Plateau’s cash flows. The Shootaring Mill was designed to process 750 tons of material per day (tpd) and should be capable of operating at 1,000 tpd, once refurbishing is completed.

When refurbished and the operational license is issued, the Shootaring Mill will have the capacity to produce 1.5 million pounds of uranium concentrates annually depending on the grade of material fed to the Shootaring Mill. It will cost at least $25 million to modify the Shootaring Mill’s tailings cell to Utah standards; post additional reclamation bonding; and complete other Shootaring Mill upgrades before production can begin. Additionally, a circuit to process the vanadium which is contained in almost all of the nearby mineralized material is planned to be added to the Shootaring Mill.

Except for the lower grade mineralized material which has been stockpiled at the Shootaring Mill for over ten years, the grades of materials controlled at other properties in the vicinity have not been determined. Until such grades have been established with drilling and testing, and a feasibility study completed on the properties to determine the economics of running the Shootaring Mill to process these materials, we cannot determine if the properties contain any uranium reserves. In any event, the feasibility of the mines, and therefore of operating the Shootaring Mill, will be dependent on sustained high prices for uranium concentrates, and overall, the grades of material available for processing being economic (containing sufficient uranium) at such sustained high prices.

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Once required financing is in place, the work is planned to be completed in approximately 18 months after the operating license is granted by the State of Utah, but unforeseen causes may delay the project. Efforts are underway while going through the State of Utah permitting process to raise the necessary financing for the project. However, financing terms have not been finalized, and we cannot predict if and when the financing will be completed.

In addition to the Shootaring Mill site, Plateau holds approximately 710 unpatented lode mining claims which have been acquired through a December 2004 agreement with a third party. Under this agreement, all of the uranium properties currently controlled or owned by the third party have been leased to Plateau (including the Velvet mine, currently shut down), and the third party will assist Plateau in locating additional uranium mineral properties for lease or purchase by Plateau. In return, the third party and Plateau will negotiate a contract mining agreement for the third party to mine and deliver uranium material from those properties to the Shootaring Mill for processing, and pay the third party for that material. In addition to purchasing the material, Plateau will pay the third party a 2.5% gross royalty of the value received by Plateau for uranium concentrates and vanadium recovered at the mill from such material. Plateau has agreed to fund the development of the uranium properties on a project-by-project basis, on terms and in amounts to be agreed upon with the third party.

Included in the properties acquired under the third party agreement is the Velvet Mine, located approximately 178 miles from the Shootaring Mill, which was developed in the 1970s. The prior owner drove several miles of access tunnels (adits) and drifts (access tunnels) and mined material from the workings.

Inactive Mining Properties - Gold

Sutter Gold Mining Inc. In fiscal 1991, USE acquired an interest in gold properties located in the Mother Lode Mining District of Amador County, California. The entire Lincoln Project (which is the name we use for the properties) was owned by Sutter Gold Mining Company, a Wyoming corporation ("SGMC"). SGMC has been acquired by Globemin Resources Inc., a TSX-V listed company, in a reverse takeover stock exchange transaction in 2004. Globemin has changed its name to Sutter Gold Mining Inc. ("SGMI").

This property has never been in production. We do not have a current feasibility study to support a determination that the Lincoln Project contains gold reserves.

SGMC has taken impairments (write-downs), in the 1990s, totaling $13,098,900, of the carrying value of its gold properties. These two impairments wrote off almost 85% of the investment. We determined that we could not produce gold from these properties at a profit as a result of low market price for gold at the time. This resulted in no value allocated to the Lincoln Project; the remaining assets relating to this property include raw land which is no longer needed for mining activity, and buildings and equipment.

Due to the depressed gold prices in the past, litigation (since resolved) and lack of funding, SGMI has deferred the start of construction of a gold mill complex and extension of existing underground workings. A tourist visitor's center has been set up (see below) and leased to a third party for $1,500 per month plus a 4% gross royalty on revenues. The conditional use permit is being kept current as necessary to allow for planned mining activities on the properties in the future.

SGMI holds approximately 535 acres of surface and mineral rights near Sutter Creek, Amador County, California. The properties are located in the western Sierra Nevada Mountains at from 1,000 to 1,500 feet in elevation; year round climate is temperate. Access is by California State Highway 16 from Sacramento to California State Highway 49, then by paved county road approximately .4 mile outside of Sutter Creek.

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Surface and mineral rights holding costs, and property taxes, will be approximately $130,000 and $9,900 respectively, for 2005.

The leases are for varying terms and require rental fees, annual royalty payments and payment of real property taxes and insurance.

The Lincoln Project has been the subject of considerable modern exploration activity, most of it centering on the Lincoln and Comet zones, which are adjacent to each other. A total of 85,085 feet of drilling have been accomplished in prior years, with 190 diamond drill holes, and modern underground development consists of a 2,850-foot declined ramp with 2,400 feet of crosscuts plus four raises.

SGMI plans to begin further exploration work and the construction of a new raise to comply with U.S. Mine Safety Health Administration regulations and improve ventilation.

The Amador County Board of Supervisors has issued a Conditional Use Permit ("CUP") allowing mining and milling of up to 1,000 tons per day, subject to conditions relating to land use, environmental and public safety issues, road construction and improvement, and site reclamation. Application has been made to the California regulatory authorities, to store de-watered tails at a dry stacked surface fill unit, and also use mill tailings for mine back fill. This permit is the final major permit required for the project; a decision is expected in 2005.

The visitor's center, operated by a third party, is an exhibit of the pictures and memorabilia from mining operations on other properties in the Sutter district in the nineteenth century, and a guided tour of the underground workings at the Lincoln Project. Revenues from this tourist operation were $40,300 for 2004, $48,800 for 2003, $26,500 for the seven months ended December 31, 2002, and $41,200 in (former) fiscal year ended May 31, 2002, and are included in "real estate" in the consolidated statements of operations included in this prospectus. These revenues offset a portion of costs for holding the Sutter properties.

Inactive Mining Properties - Molybdenum

In 1974, 1977 and 1987, USE and Crested leased and then sold various mining claims and mines near the town of Crested Butte, Colorado, to AMAX Inc. of Greenwich, Connecticut. AMAX Inc. (acquired by Cyprus Minerals Company and renamed Cyprus Amax Minerals Company in November 1993, then later acquired by Phelps Dodge) delineated a deposit of molybdenum on the leased claims containing approximately 146,000,000 tons of mineralization averaging 0.43% molybdenum disulfide on the properties of USE and Crested.

Since June 2002, USE and Crested have been in litigation with Phelps Dodge concerning the properties and related agreements. In late 2004 and February 2005, the U.S. District Court issued orders in the litigation (see "Legal Proceedings"). Although additional rulings are expected concerning water rights associated with the properties, we expect to receive back from Phelps Dodge, in 2005, the patented and unpatented lode mining claims which contain the molybdenum deposit, as well as a mine water discharge treatment plant located on those properties. Later in 2005, we expect to be receiving clarification from the Colorado Department of Public Health and the Environment (which has jurisdiction over how the treatment plant is operated to comply with environmental laws) as to our responsibilities to operate the plant. Plant operating costs, for which we will be responsible, will likely exceed $1,000,000 annually.

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For more than 20 years, Phelps Dodge and its predecessor companies worked on a mine plan for the Mt. Emmons property, obtaining rights to the water necessary to mine and process molybdenum, and obtaining other permits necessary to put the property into production. We do not know why Phelps Dodge, one of the largest international mining companies, decided to cease trying to put the Mt. Emmons property into production, although the fact that Phelps Dodge is producing molybdenum from other mines may have been a factor in their decision.

In light of the rebound in molybdenum oxide prices to the $30 - $35 per pound range in June 2005 (compared to an average of approximately $3.25 per pound over the last several years), we may seek joint venture partners to work on a new mine plan and obtain the permits required to put the property into production. In this scenario, the properties would be transferred to a new subsidiary of USE and Crested, U.S. Moly Corp., then the subsidiary would seek to raise capital for the project and enlist large mining companies or other entities to enter into a joint mining venture. Ownership of the subsidiary subsequently would be reduced to the extent additional shares are sold to investors.

Development of the Mt. Emmons property for mining will require extensive capital and a long time to implement. We would have to obtain that capital through equity financing and/or a joint venture or other arrangement, however, we have no such arrangements as of the date of this prospectus and may not obtain such. Reportedly, the mine plan of Phelps Dodge and its predecessor companies encountered opposition from local and environmental groups, and that opposition likely will continue, as Mt. Emmons is located close to Crested Butte, Colorado, a year round recreation area. Even with the resources of a joint venture partner, successful resolution of various issues arising with local environmental groups is not assured.

Oil and Gas and Other Properties

Fort Peck Lustre Field (Montana). We operate a small oil production facility (two wells) at the Lustre Oil Field on the Ft. Peck Indian Reservation in northeastern Montana. We receive a fee based on oil produced. This fee and other assets of the Company collateralize a $750,000 line of credit from a bank.

Wyoming. The Company and Crested own a 14-acre tract in Riverton, Wyoming, with a two-story 30,400 square foot office building (including underground parking). The first floor is rented to non-affiliates and government agencies; the second floor is occupied by the Company. The property is mortgaged to the WDEQ as security for future reclamation work on the Sheep Mountain Crooks Gap uranium properties.

The Company also owns a fixed base aircraft facility at the Riverton Regional Airport, including a 10,000 square foot aircraft hangar and 7,000 square feet of associated offices and facilities. This facility is on land leased from the City of Riverton for a term ending December 16, 2005, with an option to renew on mutually agreeable terms for five years. The aircraft fueling operation to the public was shut down late in fiscal 2002.

The Company owns three mountain sites covering 16 acres in Fremont County, Wyoming. In Riverton, Wyoming, the Company owns four city lots and improvements including two smaller office buildings.

Colorado. USECC owns 175 acres of undeveloped land near Gunnison, Colorado.

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Utah. On August 14, 2003, USE's wholly-owned subsidiary Plateau Resources Limited (and Plateau's wholly-owned subsidiary Canyon Homesteads, Inc.) sold all of the outstanding stock of Canyon Homesteads to The Cactus Group, LLC, for $3,470,000: $349,250 cash and $3,120,750 with The Cactus Group's five year promissory note. The note is secured with all the assets of The Cactus Group and Canyon (and is personally guaranteed by the six principals of The Cactus Group). The note is payable monthly (with annual interest at 7.5%) with a $2,940,581 balloon payment due in August 2008. The note was in default as of June 30, 2005. Notice of Default was filed with Garfield County, Utah on September 7, 2005. If the defaults are not cured by December 8, 2005, Plateau has the right to post an official notice of the trustee’s sale which must be published for in the newspaper for three consecutive weeks. The sale will occur at the Garfield County Courthouse. The purchaser has the right to take immediate possession.

These properties are in Ticaboo, Utah, near Lake Powell, and included a motel, restaurant and lounge, convenience store, recreational boat storage and service facility, and improved residential and mobile home lots. Most of these properties had been acquired when the Shootaring Mill was acquired in the early 1990s.

Research and Development

No research and development expenditures have been incurred, either on the Company's account or sponsored by customer, during the past three fiscal years.

Environmental

General. Operations are subject to various federal, state and local laws and regulations regarding the discharge of materials into the environment or otherwise relating to the protection of the environment, including the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act ("RCRA"), and the Comprehensive Environmental Response Compensation Liability Act ("CERCLA"). With respect to mining operations conducted in Wyoming, Wyoming's mine permitting statues, Abandoned Mine Reclamation Act and industrial development and siting laws and regulations also impact us. Similar law and regulations in California affect SGMI operations and Utah laws and regulations effect Plateau's operations.

Management believes the Company complies in all material respects with existing environmental regulations.

As of June 30, 2005, we have recorded estimated reclamation obligations of $7,794,700. We anticipate paying for those reclamation efforts over several years. For further information on the approximate reclamation costs (decommissioning, decontamination and other reclamation efforts for which we are primarily responsible or potentially responsible), see note K to the audited consolidated financial statements included with this prospectus.

Other Environmental Costs. Actual costs for compliance with environmental laws may vary considerably from estimates, depending upon such factors as changes in environmental law and regulations (e.g., the new Clean Air Act), and conditions encountered in minerals exploration and mining. We do not anticipate that expenditures to comply with law regulating the discharge of materials into the environment, or which are otherwise designed to protect the environment, will have any substantial adverse impact on our competitive position.

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Employees

At October 5, 2005, USE had 29 full-time employees, reflecting a decrease of 8 persons who had been working on RMG’s business. Persons who work only for Sutter Gold Mining Inc. are paid by USE. The expenses associated with USE's employees, including payroll taxes, fringe benefits and retirement plans is shared with Crested for all ventures in which it participates on a percentage ownership basis. Crested uses approximately 50 percent of the time of USE employees, and reimburses USE on a cost reimbursement basis.

Mining Claim Holdings

Title. Nearly all the uranium mining properties held by the Company are on federal unpatented claims. Unpatented claims are located upon federal and public land pursuant to procedures established by the General Mining Law. Requirements for the location of a valid mining claim on public land depend on the type of claim being staked, but generally include discovery of valuable minerals, erecting a discovery monument and posting thereon a location notice, marking the boundaries of the claim with monuments, and filing a certificate of location with the county in which the claim is located and with the BLM. If the statutes and regulations for the location of a mining claim are complied with, the locator obtains a valid possessory right to the contained minerals. To preserve an otherwise valid claim, a claimant must also pay certain rental fees annually to the federal government and make certain additional filings with the county and the BLM. Failure to pay such fees or make the required filing may render the mining claim void or voidable. Because mining claims are self-initiated and self-maintained, they possess some unique vulnerabilities not associated with other types of property interests. It is impossible to ascertain the validity of unpatented mining claims solely from public real estate records and it can be difficult or impossible to confirm that all of the requisite steps have been followed for location and maintenance of a claim. If the validity of an unpatented mining claim is challenged by the government, the claimant has the burden of proving the present economic feasibility of mining minerals located thereon. Thus, it is conceivable that during time of falling metal prices, claims which were valid when located could become invalid if challenged.

Some of the Mt. Emmons claims which the Company expects to receive back from Phelps Dodge Corporation were patented by Phelps Dodge and others are unpatented claims.

Proposed Federal Legislation. The U.S. Congress from time to time has considered proposed revisions to the General Mining Law, which governs mining claims and related activities on federal public lands. If these proposed revisions were enacted, payment of royalties on production of minerals from federal lands could be required as well as new requirements for reclamation of mined land and other environmental control measures. The effect of any revision of the General Mining Law on operations cannot be determined until enactment, however, it is possible that revisions would materially increase the carrying and operating costs of mineral properties located on federal unpatented mining claims.

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Legal Proceedings

Sheep Mountain Partners

On February 24, 2005, a three judge panel of the 10^th Circuit Court of Appeals (10^th Circuit) vacated the judgment of the U.S. District Court of Colorado of $20,044,183 and remanded the case to the Arbitration Panel for clarification of its 1996 Orders and Award. In remanding this case, the 10^th Circuit stated:

"The arbitration award in this case is silent as to the definition of 'purchase rights' and the 'profits therefrom,' including the valuation of either. Also unstated in the award is the duration of the constructive trust and whether and what costs should be deducted when computing the value of the constructive trust. Further, the arbitration panel failed to address whether prejudgment interest should be awarded on the value of the constructive trust. As a result, the district court's valuation of the constructive trust was based upon extensive guesswork. The 10^th Circuit held, “Therefore, a remand to the arbitration panel for clarification is necessary, despite the long and tortured procedural history of this case."

Thereafter, the U.S. District Court remanded the case to the arbitration panel.

The three member arbitration panel held a hearing on August 26, 2005, to consider the procedures, schedule and scope of the remand. The panel entered an Order, ordering that:

“In phase I the parties will make written submissions to resolve the issues concerning the definition of the Constructive Trust and its components (e.g. “purchase rights”). The submissions will not include any additional factual materials. The written submissions will be based solely on the record previously made in the hearings before the arbitration panel.”

Simultaneous written submissions will be made by the parties on or before November 4, 2005 and simultaneous reply written submissions will be made by December 6, 2005. A hearing will be held before the panel on December 20, 2005 in New York City. The timing and ultimate outcome of this litigation is not predicted. We believe that the ultimate outcome will not have an adverse affect on our financial condition or results of operations.

Phelps Dodge

The Company and Crested Corp. were served with a lawsuit on June 19, 2002, filed in the U.S. District/ Court of Colorado (Case No. 02-B-0796(PAC)) by Phelps Dodge Corporation (“PD”) and its subsidiary, Mt. Emmons Mining Company (“MEMCO”), seeking declaratory judgment over contractual obligations in USECC’s agreement with PD’s predecessor companies, concerning mining properties on Mt. Emmons, near Crested Butte, Colorado.

The case was tried starting on November 29, 2004. On February 4, 2005, the Court entered Findings and Fact and Conclusions of Law and ordered that a conveyance by PD of the Mt. Emmons properties under Paragraph 8 of the 1987 AMAX Agreement, includes the transfer of ownership and operational responsibility for the Water Treatment Plant, and that PD does not owe USECC any advanced royalty payments. However, the Order did not address the NPDES permit. NPDES permits are administered and regulated by the Colorado Department of Public Health and the Environment (“CDPHE”). The timing and scope of responsibilities for maintaining and operating the plant will be addressed by the CDPHE later in 2005.

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USECC has filed a motion with the Court to amend the Order to determine that the decreed water rights to PD on the Mt. Emmons properties from the Colorado Supreme Court opinion (decided in 2002, finding that the predecessor owners of the Mt. Emmons property had rights to water to develop a mine), and any other appurtenant water rights, be conveyed to USECC. The motion is pending.

PD and USECC have been engaged in settlement discussions in an attempt to resolve the remaining issues and avoid an appeal of the District Court’s Judgment. In view of the ongoing discussions and in the interest of conserving judicial and party resources, on April 5, 2005, the parties filed a Joint Motion to Stay Ruling on Motion to Amend Judgment and to Extend Stay of Execution Pending Appeal. On April 7, 2005, the Court granted the motion and entered an order staying USE/CC’s Motion to Amend Judgment until ten days after filing of written notice by PD that settlement has not been achieved. The parties have filed joint status reports which have stayed the parties’ various motions. If an agreement is not reached, the various issues will be heard by the Court.

Coastline Capital Partners

On May 16, 2005, Coastline Capital Partners (“Coastline”) filed a complaint against U.S. Energy Corp. (“USE”) in Wyoming Federal District Court, Case NO. 05-CV-0143-J for breach of contract. Coastline is claiming partial performance fees for a private placement that was unsuccessful. Coastline and USE had entered into an engagement letter on July 22, 2004. USE filed an answer and counterclaims on June 22, 2005. The parties are arranging a schedule for depositions in the case.

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The Offering

Securities Outstanding	18,580,199 shares of common stock, $0.01 par value.

Securities To Be Outstanding	19,344,425 shares, assuming warrants on 764,226 shares held by the selling shareholders were exercised as of the date of this prospectus. See "Description of Securities - Options and Warrants" and "Selling Shareholders."

Securities Offered	1,509,562 shares 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 $2,558,800 in proceeds from exercise of the warrants and options, if they are exercised, which will be used 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 before investing.

Risk Factors Involving the Company

We have a history of operating losses, and in 2005 and 2006, our working capital needs are expected to come mostly from liquidating investments. These sources of capital may not be sufficient to develop our mineral properties, none of which have proved reserves.

At June 30, 2005, the Company had working capital of $8,486,400, an accumulated deficit of $39,696,200, and investments of $27,183,300. Of the investments, $19,387,700 are Enterra Energy Trust units, or in shares of Enterra US Acquisitions Inc. (the latter will convert to Trust units on June 1, 2006.

Working capital and future receipt of proceeds from liquidating the Enterra securities are expected to be sufficient to fund general and administrative expenses, and conduct exploration and a limited amount of development work on the mineral properties, through 2006. However, putting mineral properties into production (constructing and operating mines and processing facilities) requires very substantial amounts of capital. We are seeking financing sources or large-company industry partners for our uranium, gold and molybdenum properties (assuming we receive back the molybdenum properties), but have not entered into final agreements therefore. The development of some or all of the properties will likely be delayed to the extent and for so long as we are unsuccessful in obtaining financing, either in direct capital or through arrangements with industry partners.

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Uncertainties in the value of the mineral properties. While we believe that our mineral properties are valuable, substantial work and capital will be needed to establish whether they are valuable in fact.

The profitable mining and processing of uranium and vanadium at and in the vicinity of Plateau’s properties in Utah will depend on many factors: Obtaining properties in proximity to the Shootaring Mill to keep transportation costs economic; delineation through extensive drilling and sampling of sufficient volumes of mineralized material with sufficient grades, to make mining and processing economic over time; continued sustained high prices for uranium oxide and vanadium; obtaining the capital required to upgrade the Shootaring Mill and add a vanadium circuit; and obtaining and continued compliance with operating permits.

The profitable mining at the Sheep Mountain properties in Wyoming will depend on: Evaluations of existing data to define sufficient volumes of mineralized material, with sufficient grades, to make mining and processing economic over time; continued sustained high prices for uranium oxide and UPC and the Company having sufficient capital to complete the drilling and sampling work. In addition, there is no operating mill near Sheep Mountain. The ultimate economics of mining the Sheep Mountain properties will depend on access to the Sweetwater, Wyoming mill (not now in operation) or sufficiently high uranium oxide prices to warrant shipments to faraway mills.

The profitable mining and processing of gold by Sutter Gold Mining Inc. will depend on many factors, including receipt of final permits and keeping in compliance with permit conditions; delineation through extensive drilling and sampling of sufficient volumes of mineralized material, with sufficient grades, to make mining and processing economic over time; continued sustained high prices for gold; and obtaining the capital required to initiate and sustain mining operations and build and operate a gold processing mill.

We have not yet obtained full feasibility studies on any of our mineral properties. These studies would establish the economic viability, or not, of the different properties based on extensive drilling and sampling, the design and costs to build and operate processing mills, the cost of capital, and other factors. Feasibility studies can take many months to complete. These studies are conducted by professional third party consulting and engineering firms, and will have to be completed, at very considerable cost, to determine if the deposits contain proved reserves (amounts of minerals in sufficient grades that can be extracted profitably under current pricing assumptions for development and operating costs and commodity prices). A feasibility study usually must be completed in order to raise the substantial capital needed to put a property into production. In addition, we have not established any if there are any reserves (economic deposits of mineralized materials) on any of our uranium/vanadium or gold properties, and future studies may indicate that some or all of the properties will not be economic to put into production.

The molybdenum property (in which the Company will have a substantial interest at such time as Phelps-Dodge conveys the Mt. Emmons properties back to the Company and Crested) has had extensive work conducted by prior owners, but this data will have to be updated to the level of a current feasibility study to determine the viability of starting mining operations. Obtaining mining and other permits to begin mining the molybdenum property may be very difficult, and, like any mining operation, capital requirements for a molybdenum mining operation will be substantial.

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Compliance with environmental regulations may be costly. Our business is intensely regulated by government agencies. Permits are required to 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 “CAA”), the Clean Water Act (the “CWA”), 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 Utah Division of Radiation Control for uranium mills even if not currently operating (like the Shootaring Canyon 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. Failure to obtain required permits to start operations at a project could cause the failure the project and cause a write off of the investments therein.

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 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 commodities to be produced staying above production costs. Our properties, or properties we might acquire in the future, may not contain deposits of minerals that will be profitable to produce.

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.

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Risk Factors Involving This Offering

Future equity transactions, including exercise of options or warrants, could result in dilution; and registration for public resale of the common stock in these transactions may depress stock prices. From time to time, the Company sells restricted stock and warrants, and convertible debt (or stock in subsidiary companies, convertible to stock in the Company), to investors in private placements conducted by broker-dealers, or in negotiated transactions. Because the stock is restricted, the stock is often sold at a discount to market prices compared to a public stock offering, and the exercise price of the warrants sometimes (and/or the conversion price for stock in subsidiaries) is at or may be lower than market prices. These transactions cause dilution to existing shareholders. Also, from time to time, options are issued to employees, directors and third parties as incentives, 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 and directors with exercise prices equal to market price at the grant date, and in the future may sell restricted stock and warrants (or stock in subsidiary companies convertible to stock in the Company), all of which may result in dilution to existing shareholders.

Public resale (pursuant to registration statements) of such restricted stock, and of stock issued in conversion of debt or stock of subsidiary companies, may depress our price. For example, the stock covered by this prospectus was sold to private investors, or will be issued on exercise of warrants sold to private investors, and those persons are the selling shareholders under this prospectus. In addition, holders of debentures sold in February 2005 have converted the debentures to a total of 1,942,387 shares of stock; resale of those shares is covered by a separate prospectus.

In addition, in the third quarter of 2005, shares of common stock were issued to the former shareholders of RMG, to a former creditor (Geddes and Company), and warrants to purchase common stock were issued to former mezzanine lenders to RMG. The Company will file a registration statement to permit the public resale of these shares. See “Capital Activities in Second Quarter 2005.”

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.

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.

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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; changes in timing or conditions for getting regulatory approvals to develop and mine mineral properties, 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.

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 $2,558,800 in proceeds from the exercise of the options and warrants, if they exercise all the options and warrants, which will be used by the Company for working capital.

Dilution

At June 30, 2005, the net tangible book value ("NTBV") of the Company was $21,442,400, or $1.20 per share. NTBV per share represents the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding at June 30, 2005 of 17,908,466. Dilution in pro forma net tangible book value per share represents the difference between the amount per share paid by purchasers of common stock in this offering and the pro forma NTBV per share of common stock immediately after completion of this offering on a pro forma as adjusted basis.

After giving effect to the exercise of the warrants and options held by the selling shareholders, our pro forma NTBV as of June 30, 2005, on a pro forma basis as above stated, would have been $24,001,200, or $1.29 per share, with 18,672,692 shares outstanding, representing an immediate increase in NTBV of $0.09 per share of common stock to existing shareholders.

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Assuming the selling shareholders sell their shares at an assumed market price of $4.11, new investors in this offering would realize an immediate dilution in pro forma NTBV of $2.82. The table illustrates this per share dilution:

Assumed offering price per share		$4.11

NTBV per share at June 30, 2005		$1.20

Increase in NTBV per share
attributable to
exercise of warrants and options		$0.09

Pro forma NTBV per share
as of June 30, 2005		$1.29

Dilution in pro forma NTBV
per share for new investors		$2.82

The foregoing does not reflect (i) the issuance of shares on exercise of warrants after June 30, 2005; or (ii) the issuance, in September 2005, of stock to former RMG shareholders, and to Geddes and Company, or warrants to mezzanine lenders. In addition, the foregoing assumes no options held by officers, directors and employees of the Company are exercised. At October 5, 2005, there were 3,639,101 options outstanding to purchase common stock at a weighted average exercise price of $2.78 per share. Of the 3,639,101 options outstanding, a total of 2,634,301 were exercisable at October 5, 2005 at a weighted average price of $2.76 per share.

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Capitalization

The capitalization of the Company at June 30, 2005, on a pro forma basis as adjusted for the selling shareholders’ exercise of warrants and options, is shown in the table.

	June 30, 2005
					Pro Forma					Pro Forma
		Actual			Adjustments		⁽¹⁾			As Adjusted
Cash and Cash Equivalents		$	4,703,000		$	2,558,800		⁽²	⁾	$	7,261,800
(excluding investments)

Marketable Securities		$	6,215,500		$	--				$	6,215,500
Investments in Non-Affiliated Companies		$	14,129,800		$	--				$	14,129,800
--
Long-term Debt (Including Current Portias)		$	3,374,900							$	$3,374,900

Shareholders’ Equity

Common stock, unlimited number authorized,			17,908,466			764,226					18,672,692
17,908,466 shares issued and outstanding		$	179,100		$	7,700				$	186,800

Additional Paid-in Capital		$	63,001,000		$	2,551,100				$	65,552,100

Accumulated Deficit		$	(39,696,200	)						$	$(39,696,200	)

Total shareholders’ Equity		$	21,442,400		$	2,558,800				$	24,001,200

(1) Gives effect to the issuance of stock should all the selling shareholders’ outstanding warrants be exercised.

(2) The exercise prices of the warrants range from $2.00 to $4.30 per share.

Selling Shareholders

This prospectus covers the offer and sale by the selling shareholders of up to 1,509,562 shares of common stock owned or to be owned on exercise of options and warrants by the selling shareholders. The footnotes to the table below give information about shares issuable on exercise of the options and warrants by the selling shareholders. None of the selling shareholders are affiliates of the Company or any subsidiary of the Company.

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. All numbers of shares, and percentage ownership, are stated on a pro forma basis as of the date of this prospectus, assuming issuance of 764,226 shares upon exercise of all the selling shareholders’ warrants. Not included in the pro forma calculations are the additional shares issuable on exercise of other options and warrants held by persons who are not selling shareholders.

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	Number of	Number of
	Shares of	Shares	Percent Owned
	Common Stock	To Be	Before	After
	Owned(1)	Registered	Offering	Offering(2)

A. Clinton Allen	18,909(4)(5)	18,909	*	*
1280 Massachusetts Ave. #200
Cambridge, MA 02138

Ardell J. Schelich	29,500	29,500	*
347 Lake View Dr.
Washington, MO 93090

Bathgate McColley & Associates LLC	538	538	*	*
5350 S. Roslyn Street, Suite 308
Greenwood Village, CO 80111

Belmont Navy, LLC	914(4)(5)	914	*	*
111 Sixth Street
Cambridge, MA 02141

Beverly Karns	40,477(6)	40,477	*	*
5424 South Geneva Way
Englewood, CO 80111

Bourne Capital LLC	252,263(4)(6)	252,263	1.3%	*
410 Marion Street
Denver, CO 80218

C.C.R.I. Corporation	74,500	74,500	*	*
3104 E. Camelback Rd., Suite 539
Phoenix, AZ 85016

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	Number of	Number of
	Shares of	Shares	Percent Owned
	Common Stock	To Be	Before	After
	Owned(1)	Registered	Offering	Offering(2)

Curragh Capital Partners, LLC	1,500(4)	1,500	*	*
609 5th Avenue - 2nd Floor
New York, NY 10017

David Gertz	1,167(3)(4)	1,167	*	*
7120 E. Orchard Rd. #300
Greenwood Village, CO 80111

Donald F. Kern	1,542	1,542	*	*
2737 Nestlebrook Trail
Virginia Beach, VA 23456

Donna Schulze	1,116(4)(5)	1,116	*	*
8777 E. Dry Creek Rd., Apt. 1422
Englewood, CO 80112

Edward J. Godin	1,000(4)	1,000	*	*
7424 S. Chapparal Circle East
Aurora, CO 80016

Frederick P. Lutz	10,000(3)	10,000	*	*
1089 Dunbarton Chase
Atlanta, GA 30319

George D. Thompson	222(4)(5)	222	*	*
11710 W. 102 Place
Overland Park, KS 66214

Gulf Projects Investment Company	4,670(4)(5)	4,670	*	*
Kuwait Stock Exchange Building
Safat 13066, Kuwait

James A. McCaughey	28,325(4)(5)(6)	28,325	*	*
3 Cueta Drive
Rancho Mirage, CA 92270

James E. Hosch	1,231	1,231	*	*
7038 Willa Lane
Evergreen, CO 80439

James J. Cahill	26,148(4)(5)	26,148	*	*
57 Lawrence Hill Rd.
Huntington, NY 11743

-37-

James V. Rauh	448(3)(4)(5)	448	*	*
7234 South Uravan Ct.
Aurora, CO 60016

Jason Wayne Assad	12,500	12,500	*	*
6585 Sterling Drive
Suwanee, GA 30024

C & H Capital, Inc.	24,500	24,500	*	*
6585 Sterling Drive
Suwanee, GA 30024

Jeffrey J. Schmitz	213(4)	213	*	*
5834 S. Paris Ct.
Englewood, CO 80111			*	*

John J. Lais, III	448(4)(5)	448	*	*
2602 Woodland Ct
McKinney, TX 75070

John Schlie	3,000(6)	3,000	*	*
2406 West Davies Ave.
Littleton, CO 80120

Lance Herring	2,175(5)	2,175	*	*
7163 S. Chapparal Cir. E
Centennial, CO 80016-2129

Larry A. Bach & Susan A. Bach	222(4)(5)	222	*	*
501 W. Fairbanks Avenue
Winter Park, FL 32789

Linda Monahan	1,875(6)	1,875	*	*
224 Anglers Drive South
Marathon, FL 33050

Mark A. & Kangping K.
Lowenstein Jtwros	135(4)	135	*	*
12512 White Drive
Sliver Spring, MD 20904

Marshall G. Folkes, III	623	623	*	*
3841 Houndstooth Court
Richmond, VA 23233

Martin G. Williams &	448(4)(5)	448	*	*
Margaret M. Williams
13333 Long Leaf Dr.
Clarksville, MD 21029

-38-

Maury Rogow	724(4)(5)	724	*	*
1050 Taylor Street N #709
Arlington, VA 22201

McKim & Company LLC	19,500(6)	19,500	*	*
8400 E. Cresent Parkway, Suite 600
Greenwood Village, CO 82111

Mohamed Ali Ahmed	448(4)(5)	448	*	*
5052 Grimm Dr. #512
Alexandria, VA 23233

Morgan Stanley Dean Witter	448(4)(5)	448	*	*
FBO Thomas Garrity
1857 Wainwright Dr.
Reston, VA 20190

Murray Roark	40,000(7)	40,000	*	*
4400 Post Oak Parkway, Suite 1720
Houston, TX 77027

Peyton N. Jackson & Linda M. Jackson	8,652	8,652	*	*
8704 Standish Rd.
Alexandria, VA 22308

R. A. Fitzner, Jr	235(5)	235	*	*
P. O. Box 8000-260
Mesquite, NV 89024

Richard Huebner	1,731	1,731	*	*
16318 E. Berry Avenue
Centennial, CO 80115

Robert H. Taggart, Jr.	25,148(4)(5)	25,148	*	*
4163 S. Chapparrel Circle East
Aurora, CO 80116

Robert S. Craig	20,000(7)	20,000	*	*
2931 Highland Lakes Dr.
Missouri City, TX 77459

Roger Conan	448	448	*	*
14 Oakley Road
Dublin 6, Ireland

Roy Van Buskirk & Rachel Deutsch	682(4)(5)	682	*	*
1513 Forest Lane
McLean, VA 22101

-39-

Sterne Agee & Leach, Inc.	448(4)(5)	448	*	*
C/F Michael M. Vuocolo IRA
813 Shades Creek Pkwy., Suite
100B, Birmingham, AL 35209

Steven Bathgate	1,835	1,835	*	*
6376 E. Tufts Avenue
Englewood, CO 80112

SJS Holdings c/o Susan Schoch	4,615(4)(5)	4,615	*	*
350 East 84th Street
New York, NY 10028

Troy G. Taggart	8,894(4)(5)	8,894	*	*
21220 Craborchard Ct.
Ashburn, VA 20147

Tsunami Partners	303,169(4)	303,166	1.6%	*
2011 Cedar Springs Rd., Apt. 506
Dallas, TX 75201

Vicki D.E. Barone	51	51	*	*
7854 S. Harrison Circle
Littleton, CO 80122

Vincent Schmitz	1,167	1,167	*	*
4207 Montview Blvd.
Denver, CO 80207

Wayne A. Moore	1,167(4)(5)	1,167	*	*
P. O. Box 68
Rock Falls, IL 61071

William Potter	101(4)	101	*	*
498 Ridgewood Avenue
Glen Ridge, NJ 07028

William G. Van Buren	6,396(6)	6,396	*	*
6576 Fairview Avenue
Downers Grove, IL

Raymond Lynde	65,566	65,566	*	*
501 Clarion Dr.
Gillette, WY 82718

Richard Lynde	65,566	65,566	*	*
P. O. Box 325
Gillette, WY 82718

-40-

Steve Youngbauer*

57,889

25 Buckhorn Flats Rd.

Riverton, WY 82501

Carl Andresen

15,611

8511 W. Donald Dr.

Peoria, AZ 85383

Drawbridge Special

Opportunities Fund, LP

159,233(8)

159,233

1251 Avenue of the Americas

New York, NY 10020

Highbridge/Zwirn Special

159,232(8)

159,232

Opportunities Fund, LP

745 Fifth Avenue, 18th Floor

New York, NY 10151

(1)

Includes shares underlying warrants or options which may not have yet been exercised.

(2)

Assumes all shares registered for resale under this prospectus are sold by the selling shareholder.

(3)

Includes shares issuable on exercise of warrants and/or options at $2.00 per share.

(4)

Includes shares issuable on exercise of warrants and/or options at $3.00 per share.

(5)

Includes shares issuable on exercise of warrants and/or options at $3.75 per share.

(6)

Includes shares issuable on exercise of warrants and/or options at $4.00 per share.

(7)

Includes shares issuable on exercise of warrants at $4.30 per share.

(8)

Includes shares issuable on exercise of warrants at $3.30 per share

Mr. Youngbauer is Assistant General Counsel to the Company.

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. However, the Company will not keep this prospectus current past April 30, 2006.

-41-

Plan of Distribution

The selling stockholders and any of their pledgees, 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 or in private transactions. These sales may be at fixed or negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares:

* ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

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;

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

an exchange distribution in accordance with the rules of the applicable exchange;

privately negotiated transactions;

settlement of short sales entered into after the date of this prospectus (a short sale occurs when shares, not owned by the seller, are sold 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);

broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

a combination of any such methods of sale; or

any other method permitted pursuant to applicable law.

The selling stockholders may also sell shares under rule 144 under the 1933 Act, if available, rather than under this prospectus. Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Broker-dealers may agree to sell a specified number of such shares at a stipulated price per share, and, to the extent such broker-dealer is unable to do so acting as agent for us or a selling shareholder, to purchase as principal any unsold shares at the price required to fulfill the broker-dealer commitment. Broker-dealers who acquire shares as principal may thereafter resell such shares from time to time in transactions, which may involve block transactions and sales to and through other broker-dealers, including transactions of the nature described above, in the over-the-counter markets or otherwise at prices and on terms then prevailing at the time of sale, at prices than related to the then-current market price or in negotiated transactions. In connection with such resales, broker-dealers may pay to or receive from the purchasers such share commissions as described above.

-42-

In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the 1933 Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the 1933 Act. The selling stockholders have informed the Company that none of them have any agreement or understanding, directly or indirectly, with any person to distribute the common stock.

The Company is required to pay all fees and expenses incurred by the Company incident to the registration of the shares. The Company has agreed to indemnify certain of the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the 1933 Act.

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.

Market for Common Stock, Related Stockholder Matters

and Issuer Purchases of Equity Securities

(a) Market Information

Shares of USE common stock are traded on the over-the-counter market, and prices are reported on a "last sale" basis on the Nasdaq Small Cap of the National Association of Securities Dealers Automated Quotation System ("Nasdaq"). The range by quarter of high and low sales prices was:

	High		Low
Quarter ended June 30, 2005	$	6.60	$	3.51

Quarter ended March 31, 2005	$	8.07	$	2.64

Quarter ended September 30, 2005	$	4.68	$	3.40

-43-

Fiscal Year ended December 31, 2004	High		Low
First quarter ended 3/31/04	$	3.45	$	2.41
Second quarter ended 6/30/04		3.14		2.11
Third quarter ended 9/30/04		2.59		2.12
Fourth quarter ended 12/31/04		3.05		2.10

Fiscal Year ended December 31, 2003
First quarter ended 3/31/03	$	3.85	$	2.95
Second quarter ended 6/30/03		5.92		3.12
Third quarter ended 9/30/03		5.70		3.15
Fourth quarter ended 12/31/03		3.68		2.30

(b) Holders

(1) At October 5, 2005 the closing market price was $4.11 per share and there were approximately 626 shareholders of record, with 18,860,746 shares of common stock issued and outstanding, including shares owned by our subsidiaries and shares in officers' and directors' names that are subject to forfeiture.

(2) Not applicable.

(c) We have not paid any cash dividends with respect to common stock. There are no contractual restrictions on our present or future ability to pay cash dividends, however, we intend to retain any earnings in the near future for operations.

(d) Equity Plan Compensation Information - Information about Compensation Plans as of October 5, 2005:

Plan category	Number of securities to be issued upon exercise of outstanding options	Weighted average exercise price of outstanding options	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders
1998 USE ISOP 3,250,000 shares of common stock on exercise of outstanding options	1,266,505	$2.67	-0-
2001 USE ISOP 3,772,149 shares of common stock on exercise of outstanding options	2,372,596	$2.85	1,399,553
Equity compensation plans not approved by security holders
None	--	--	--
Total	3,639,101	$2.76	1,399,553

-44-

Selected Historical Financial Data

The following sets forth selected historical financial data for U.S. Energy Corp. as of and for the dates indicated. The selected financial data as of and for the years ended December 31, 2003 and 2004, May 31, 2002, 2001, and 2000, and as of and for the seven months ended December 31, 2002 have been derived from our audited financial statements. The selected historical financial data for the year ended December 31, 2002 and as of and for the year ended December 31, 2001 has been derived from our unaudited financial statements and, in our opinion, has been prepared on the same basis as the audited financial statements, and includes all adjustments consisting of normal recurring adjustments, necessary for a fair presentation of this information.

The financial data for the six months ended June 30, 2005 and June 30, 2004, has been derived from our unaudited financial statements that, in the opinion of management, reflect all adjustments necessary for a fair presentation of the financial data for those periods. Both our audited and unaudited financial statements are included in this registration statement.

The historical results presented below are not necessarily indicative of the results to be expected for any future period.

This information should be read together with "Management’s Discussion and Analysis of Financial Condition and Results of Operations" immediately following these tables.

-45-

	December 31,									May 31,
	2004			2003		2002		2001		2002		2001		2000
								(Unaudited)

Current assets	$	5,421,500		$	5,191,400	$	4,755,300	$	4,597,900	$	4,892,600	$	3,330,000	$	3,456,800
Current liabilities		6,058,000			1,909,700		2,044,400		2,563,800		1,406,400		2,396,700		6,617,900
Working capital deficit		(636,500	)		3,281,700		2,710,900		2,034,100		3,486,200		933,300		(3,161,100	)
Total assets		30,703,700			23,929,700		28,190,600		30,991,700		30,537,900		30,465,200		30,876,100
Long-term obligations (1)		13,615,300			12,036,600		14,047,300		13,596,400		13,804,300		13,836,700		14,025,200
Shareholders' deficit		6,281,300			6,760,800		8,501,600		8,018,700		11,742,000		8,465,400		4,683,800

(1)Includes $7,384,700, of accrued reclamation costs on properties at December 31, 2004; $7,264,700 at December 31, 2003, and $8,906,800, at December 31, 2002, 2001 and May 31, 2001 and 2000, respectively. See Note K of Notes to Consolidated Financial Statements.

	Year Ended						Seven Months Ended
	December 31,						December 31,						For Former Fiscal Years Ended May 31,
	2004			2003			2002			2001			2002			2001			2000
											(Unaudited)

Operating revenues	$	4,641,700		$	837,300		$	673,000		$	545,900		$	2,004,100		$	3,263,000		$	3,303,900
Loss from
continuing operations		(6,659,300	)		(7,237,900	)		(3,524,900	)		(3,914,900	)		(7,454,200	)		(7,517,800	)		(11,356,100	)
Other income & expenses		13,000			(73,000	)		(387,100	)		1,005,000			1,319,500			8,730,800			802,200
Loss before minority interest, equity
in loss of affiliates, income
taxes, discontinued operations,
and cumulative effect of
accounting change		(6,646,300	)		(7,310,900	)		(3,912,000	)		(2,909,900	)		(6,134,700	)		1,213,000			(10,553,900	)
Minority interest in loss
of consolidated subsidiaries		397,700			235,100			54,800			24,500			39,500			220,100			509,300
Equity in loss of affiliates		--			--			--			--			--			--			(2,900	)
Income taxes		--			--			--			--			--			--			--
Discontinued operations, net of tax		--			(349,900	)		17,100			175,000			(85,900	)		488,100			(594,300	)
Cumulative effect of
accounting change		--			1,615,600			--			--			--			--			--
Preferred stock dividends		--			--			--			(75,000	)		(86,500	)		(150,000	)		(20,800	)
Net loss to common shareholders	$	(6,248,600	)	$	(5,810,100	)	$	(3,840,100	)	$	(2,785,400	)	$	(6,267,600	)	$	1,771,200		$	(10,662,600	)

-46-

	Year Ended December 31,						Seven Months Ended December 31,						For Former Fiscal Years Ended May 31,
										(Unaudited)
	2004			2003			2002			2001			2002			2001			2000
Per share financial data

Operating revenues	$	0.35		$	0.07		$	0.06		$	0.07		$	0.22		$	0.42		$	0.43

Loss from
continuing operations		(0.51	)		(0.64	)		(0.33	)		(0.47	)		(0.80	)		(0.96	)		(1.39	)

Other income & expense		0.00			(0.01	)		(0.03	)		0.12			0.14			1.11			0.01

Loss before minority
interest, equity in loss
of affiliates, income taxes,
discontinued operations,
and cumulative effect of
accounting change		(0.50	)		(0.65	)		(0.36	)		(0.35	)		(0.66	)		0.15			(1.38	)

Minority interest in loss (income)
of consolidated subsidiaries		0.03			0.02			--			--			0.01			0.03			0.07

Equity in loss of affiliates		--			--			--			--			--			--			--

Income taxes		--			--			--			--			--			--			--

Discontinued operations,
net of tax		--			(0.03	)		--			0.02			(0.01	)		0.06			(0.08	)

Cumulative effect of
accounting change		--			0.14			--			--			--			--			--

Preferred stock dividends		--			--			--			(0.01	)		(0.01	)		(0.01	)		--

Net (loss) income
per share, basic	$	(0.47	)	$	(0.52	)	$	(0.36	)	$	(0.34	)	$	(0.67	)	$	0.23		$	(1.39	)

Net (loss) income
per share, diluted	$	(0.47	)	$	(0.52	)	$	(0.36	)	$	(0.34	)	$	(0.67	)	$	0.23		$	(1.39	)

-47-

	June 30		December 31
	2005		2004
	(Unaudited)		(Audited)

Current assets	$	11,474,600	$	5,421,500

Current liabilities		2,988,200		6,058,000

Working capital (deficit)		8,486,400		(636.500	)

Total assets		41,868,800		30,703,700

Long term obligations ⁽¹⁾		12,735,100		13,615,300

Shareholders deficit		21,442,400		6,281,300

⁽¹⁾ Includes $7,602,100 at June 30, 2005 and $7,882,400 at December 31, 2004 of accrued reclamation obligation costs on properties


	Six Months Ended
	June 30,
		2005		2004
		(Unaudited)		(Unaudited)

Operating revenues		524,900		278,800

Loss from