UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of
Report (date of earliest event reported): May 9, 2006 (May 5, 2006)
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U.S.
ENERGY CORP.
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(Exact
Name of Company as Specified in its
Charter)
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Wyoming
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0-6814
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83-0205516
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(State
or other jurisdiction of
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(Commission
File No.)
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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Glen
L. Larsen Building
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877
North 8th
West
Riverton,
WY
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82501
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
telephone number, including area code: (307)
856-9271
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Not
Applicable
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Former
Name, Former Address or Former Fiscal Year
(If
Changed From Last Report)
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2):
o
Written
communications pursuant to Rule 425 under the Securities Act
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
Section
1. Registrant’s Business and Operations.
Item
1.01. Entry into Material Definitive Agreements - Cornell Capital Partners,
LP.
On
April
11, 2006, U.S. Energy Corp. (the “company”) signed a Standby Equity Distribution
Agreement with Cornell Capital Partners, LP (”Cornell”), under which Cornell had
committed to provide up to $50 million of equity financing over 36 months.
As of
May 5, 2006, that agreement, and all related agreements, were terminated,
and a
new Standby Equity Distribution Agreement (“SEDA”) has been executed. The
following is a summary of the terms of the SEDA, and related agreements;
all
references to SEDA and the related agreements.
Under
the
SEDA, Cornell has committed to provide up to $50 million of equity financing
over 36 months. Each advance under the SEDA will have a maximum amount
of $5
million, and there must be at least five trading days between each advance.
Access to the SEDA financing is subject to the company having an effective
re-sale registration statement on file with the SEC for the securities
underlying the SEDA.
Each
advance under the SEDA will be a sale by us to Cornell of newly-issued
shares of
common stock. Subject to a re-sale registration statement being in effect,
we
will determine whether and when to request an advance, and the amount of
the
advance (subject to the $5 million maximum). The number of shares to be
sold to
Cornell will be determined by dividing the advance amount by 98% of market
price
for our stock. Market price is defined in the SEDA as the lowest daily
volume
weighted average price (“VWAP”) of our common stock during the five trading days
(the “pricing period”) immediately following the date we send an advance notice
to Cornell.
The
SEDA
(of May 5, 2006) gives the company a floor price below which we can’t sell stock
to Cornell: The “market price” cannot be less than 95% of the VWAP price
(defined in the SEDA as the “minimum acceptable price”) on the trading day
before we send an advance notice to Cornell. If, during the pricing period,
the
market price is less than the minimum acceptable price, then the amount
of the
advance (and the number of shares sold) will be reduced 20% for each day
in the
pricing period when the minimum acceptable price is less than the market
price
during the pricing period. We also will pay Cornell a cash fee equal to
2% of
each advance we receive, plus $500, for each advance under the
SEDA.
On
signing of the original agreement, we paid Cornell $20,000 for a structuring
and
due diligence fee, and issued to Cornell 68,531 shares of restricted common
stock (the “investor shares”). These payments have been treated as fully earned
for purposes of the SEDA signed on May 5, 2006. We also have issued a new
three
year warrant (the “initial warrant”), replacing the warrant signed on April 11,
2006) to purchase 100,000 shares of restricted common stock at $7.15 per
share.
The terms of this warrant are unchanged from the original warrant. If the
closing bid price for our stock exceeds 150% of the exercise price of the
applicable exercise price in a ten consecutive trading day period, the
warrant
will expire 20 trading days later unless exercised (but will not expire
to the
extent not exercised, if the closing bid price should be equal to or lower
than
$7.15 during the 20 day period). This kind of provision is often referred
to as
“forced exercise.”
In
addition, each time we take advances aggregating $5 million under the SEDA,
we
will issue a “milestone warrant” to Cornell, to purchase 100,000 shares at the
average VWAP for our stock for the ten trading days immediately preceding
the
date of the $5 million advance (or the last advance which brings the aggregate
to $5 million). Like the warrant already issued, the milestone warrants
will
have a forced exercise provision.
We
have
engaged Newbridge Securities Corporation, a registered broker-dealer, to
act as
our placement agent in connection with the SEDA. We have issued 1,399 restricted
shares of common stock (the “Newbridge shares”) to Newbridge as compensation for
services. The prior agreement with Newbridge was terminated, however, the
Newbridge shares are being treated as fully earned.
By
a
registration rights agreement with Cornell, we have agreed to file with the
SEC
a registration statement covering public resale of the shares to be sold
to
Cornell under the SEDA, the investor shares issued to Cornell, the Newbridge
shares, and the shares issuable under the initial warrant issued to Cornell.
If
we issue milestone warrants to Cornell, we will file additional registration
statements to cover resale of shares issued on exercise
thereof.
Section
9 - Financial Statements and Exhibits.
Item
9.01 Financial Statements and Exhibits.
10.1 Termination
Agreement
10.2 Standby
Equity Distribution Agreement
10.3 Registration
Rights Agreement
10.4 Warrant
10.5 Placement
Agent Agreement.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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U.S.
ENERGY CORP.
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Dated:
May 9, 2006
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By:
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/s/Mark
J. Larsen
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Mark
J. Larsen, President
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