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SHAREHOLDERS' EQUITY | 12 Months Ended
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Dec. 31, 2011
SHAREHOLDERS' EQUITY [Abstract] |
SHAREHOLDERS' EQUITY | M. SHAREHOLDERS' EQUITY Stock Option Plans The Board of Directors adopted the U.S. Energy Corp. 1989 Stock Option Plan for the benefit of USE's employees. The Option Plan, as amended and renamed the 1998 Incentive Stock Option Plan (“1998 ISOP”), reserved 3,250,000 shares of USE's $.01 par value common stock for issuance under the 1998 ISOP. Options which expired without exercise were available for reissue until the 1998 ISOP was replaced by the 2001 ISOP. All options issued under the 1998 ISOP have been exercised or have expired and the 1998 ISOP terminated on January 9, 2011. In December 2001, the Board of Directors adopted (and the shareholders subsequently approved) the U.S. Energy Corp. 2001 Incentive Stock Option Plan (the "2001 ISOP") for the benefit of USE's employees. The 2001 ISOP (amended by approval of the shareholders in 2004 and 2007) reserved for issuance 25% of USE's shares of common stock issued and outstanding at any time. The 2001 ISOP had a term of 10 years and expired on December 6, 2011. Options issued under the 2001 ISOP remain exercisable until their expiration date under the terms of the 2001 ISOP. A summary of the Employee Stock Option Plans activity in all plans for the year ended December 31, 2011, 2010 and 2009 is as follows:
|  | Year ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
|  | Options |  |  | Weighted Average Exercise Price |  |  | Options |  |  | Weighted Average Exercise Price |  |  | Options |  |  | Weighted Average Exercise Price |
Outstanding at beginning |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
of the period |  |  | 3,011,647 |  |  | $ | 3.87 |  |  |  | 3,711,114 |  |  | $ | 3.64 |  |  |  | 3,717,098 |  |  | $ | 3.63 |
Granted |  |  | -- |  |  | $ | -- |  |  |  | -- |  |  | $ | -- |  |  |  | -- |  |  | $ | -- |
Forfeited |  |  | -- |  |  | $ | -- |  |  |  | -- |  |  | $ | -- |  |  |  | -- |  |  | $ | -- |
Expired |  |  | (200,000 | ) |  | $ | 3.90 |  |  |  | -- |  |  | $ | -- |  |  |  | (4,000 | ) |  | $ | 2.46 |
Exercised |  |  | (493,248 | ) |  | $ | 3.51 |  |  |  | (699,467 | ) |  | $ | 2.63 |  |  |  | (1,984 | ) |  | $ | 2.52 |
Outstanding at period end |  |  | 2,318,399 |  |  | $ | 3.94 |  |  |  | 3,011,647 |  |  | $ | 3.87 |  |  |  | 3,711,114 |  |  | $ | 3.64 |
Exercisable at period end |  |  | 2,108,399 |  |  | $ | 3.84 |  |  |  | 2,404,148 |  |  | $ | 3.78 |  |  |  | 2,614,453 |  |  | $ | 3.43 |
Weighted average fair |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
value of options |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
granted during |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
the period |  |  |  |  |  | $ | -- |  |  |  |  |  |  | $ | -- |  |  |  |  |  |  | $ | -- |
During the year ended December 31, 2011, a total of 493,248 options were exercised by employees by the payment of $34,000 in cash and the surrender of 368,804 shares valued at $1.9 million. In the year ended December 31, 2010, 699,467 options were exercised by the payment of $63,000 in cash and surrender of 325,195 shares valued at $1.8 million. In the year ended December 31, 2009, 1,984 options were exercised by the payment of $5,000. Option related compensation expense is recognized over the vesting period of the options and is calculated using the Black Scholes option pricing model. USE initially assumed no forfeitures, but has subsequently reduced the cumulative expense based on historical forfeiture. Total future expense for the option plan is $2,000 to be recognized in 2012. The following table summarizes information about employee stock options outstanding and exercisable at December 31, 2011:
Grant Price Range |  |  | Options Outstanding at December 31, 2011 |  |  | Weighted average remaining contractual life in years |  |  | Weighted average exercise price |  |  | Options exercisable at December 31, 2011 |  |  | Weighted average exercise price |
$ | 2.46 |  |  |  | 389,319 |  |  |  | 2.50 |  |  | $ | 2.46 |  |  |  | 389,319 |  |  | $ | 2.46 |
$ | 2.47 - $2.52 |  |  |  | 450,312 |  |  |  | 6.67 |  |  | $ | 2.52 |  |  |  | 450,312 |  |  | $ | 2.52 |
$ | 2.53 - $3.86 |  |  |  | 273,768 |  |  |  | 3.79 |  |  | $ | 3.86 |  |  |  | 273,768 |  |  | $ | 3.86 |
$ | 3.91 - $4.97 |  |  |  | 1,205,000 |  |  |  | 5.34 |  |  | $ | 4.97 |  |  |  | 995,000 |  |  | $ | 4.97 |
|  |  |  |  | 2,318,399 |  |  |  | 4.94 |  |  | $ | 3.94 |  |  |  | 2,108,399 |  |  | $ | 3.84 |
The following table sets forth the number of options available for grant as well as the intrinsic value of the options outstanding and exercisable:
|  | 2011 |  |  | 2010 |  |  | 2009 |
Available for future grant |  |  | -- |  |  |  | 3,765,506 |  |  |  | 3,327,780 |
Intrinsic value of option exercised |  | $ | 888,000 |  |  | $ | 1,956,000 |  |  | $ | 14,000 |
Aggregate intrinsic value of options outstanding |  | $ | 351,000 |  |  | $ | 6,660,000 |  |  | $ | 8,514,000 |
Aggregate intrinsic value of options exercisable |  | $ | 351,000 |  |  | $ | 5,526,000 |  |  | $ | 6,543,000 |
Employee Stock Ownership Plan The Board of Directors of USE adopted the U.S. Energy Corp. 1989 Employee Stock Ownership Plan ("ESOP") in 1989, for the benefit of all USE's employees. Employees become eligible to participate in the ESOP after one year of service which must consist of at least 1,000 hours worked. After the employee becomes a participant in the plan, he or she must have a minimum of 1,000 hours of service in each plan year to be considered for allocations of funding from USE. Employees become 20% vested after three years of service and increase their vesting by 20% each year thereafter until such time as they are fully vested after eight years of service. An employee's total compensation paid, which is subject to federal income tax, up to an annual limit of $245,000 for the years ended December 31, 2011, 2010 and 2009, is the basis for computing how much of the total annual funding is contributed into his or her personal account. An employee's compensation divided by the total eligible compensation paid to all plan participants is the percentage that each participant receives on an annual basis. USE funds 10% of all eligible compensation annually in the form of common stock and may fund up to an additional 15% to the plan in common stock. As of December 31, 2011, all shares of USE's stock that have been contributed to the ESOP have been allocated. The estimated fair value of shares that are not vested is approximately $37,000. During the year ended December 31, 2011, the Board of Directors of USE approved a contribution of 98,958 shares to the ESOP at the price of $2.91 for a total expense of $287,000. This compares to contributions to the ESOP during the year ended December 31, 2010 and 2009 of 42,802 and 36,583 shares to the ESOP at prices of $6.08 and $5.93 per share, respectively. The expense for the contributions during the years ended December 31, 2010 and 2009 were $260,000 and $217,000, respectively. Warrants to Others As of December 31, 2011, there were 210,000 warrants outstanding to purchase shares of USE's common stock. Of the total outstanding warrants, 183,334 were exercisable. USE values these warrants using the Black-Scholes option pricing model and expenses that value over various terms based on the nature of the award. Activity for the periods ended December 31, 2011, 2010 and 2009 for warrants is presented in the following table:
|  | Year ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
|  | Warrants |  |  | Weighted Average Exercise Price |  |  | Warrants |  |  | Weighted Average Exercise Price |  |  | Warrants |  |  | Weighted Average Exercise Price |
Outstanding at beginning |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
of the period |  |  | 320,000 |  |  | $ | 2.95 |  |  |  | 581,367 |  |  | $ | 2.91 |  |  |  | 1,036,387 |  |  | $ | 3.43 |
Granted |  |  | 20,000 |  |  | $ | 4.19 |  |  |  | 10,000 |  |  | $ | 5.04 |  |  |  | -- |  |  | $ | -- |
Forfeited |  |  | (20,000 | ) |  | $ | 2.52 |  |  |  | (20,000 | ) |  | $ | 2.52 |  |  |  | -- |  |  | $ | -- |
Expired |  |  | (5,000 | ) |  | $ | 3.90 |  |  |  | -- |  |  | $ | -- |  |  |  | (383,932 | ) |  | $ | 4.26 |
Exercised |  |  | (105,000 | ) |  | $ | 2.92 |  |  |  | (251,367 | ) |  | $ | 2.97 |  |  |  | (71,088 | ) |  | $ | 3.27 |
Outstanding at period end |  |  | 210,000 |  |  | $ | 3.10 |  |  |  | 320,000 |  |  | $ | 2.95 |  |  |  | 581,367 |  |  | $ | 2.91 |
Exercisable at period end |  |  | 183,334 |  |  | $ | 2.91 |  |  |  | 276,667 |  |  | $ | 2.93 |  |  |  | 494,701 |  |  | $ | 2.98 |
Weighted average fair |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
value of options |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
granted during |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
the period |  |  |  |  |  | $ | 2.34 |  |  |  |  |  |  | $ | 2.99 |  |  |  |  |  |  | $ | -- |
During the year ended December 31, 2011, a total of 105,000 warrants were exercised by the payment of $62,000 in cash and the surrender of 62,104 shares valued at $245,000. In the year ended December 31, 2010, 251,367 warrants were exercised by the payment of $746,000 in cash. In the year ended December 31, 2009, 71,088 warrants were exercised by the payment of $232,000 in cash. The following table summarizes information about non-employee warrants outstanding and exercisable at December 31, 2011:
Grant Price Range |  |  | Warrants Outstanding at December 31, 2011 |  |  | Weighted average remaining contractual life in years |  |  | Weighted average exercise price |  |  | Warrants exercisable at December 31, 2011 |  |  | Weighted average exercise price |
$ | 2.46 |  |  |  | 50,000 |  |  |  | 0.48 |  |  | $ | 2.46 |  |  |  | 50,000 |  |  | $ | 2.46 |
$ | 2.47 - $2.52 |  |  |  | 80,000 |  |  |  | 3.61 |  |  | $ | 2.52 |  |  |  | 80,000 |  |  | $ | 2.52 |
$ | 2.53 - $3.86 |  |  |  | 50,000 |  |  |  | 0.48 |  |  | $ | 3.86 |  |  |  | 50,000 |  |  | $ | 3.86 |
$ | 3.87 - $4.19 |  |  |  | 20,000 |  |  |  | 9.48 |  |  | $ | 4.19 |  |  |  | 3,334 |  |  | $ | 4.19 |
$ | 3.91 - $5.04 |  |  |  | 10,000 |  |  |  | 8.48 |  |  | $ | 5.04 |  |  |  | -- |  |  | $ | 5.04 |
|  |  |  |  | 210,000 |  |  |  | 2.91 |  |  | $ | 3.10 |  |  |  | 183,334 |  |  | $ | 2.91 |
These warrants are held by current and former directors of USE. USE has computed the fair values of its options and warrants using the Black Scholes pricing model and the following weighted average assumptions:
| Year Ended
| December 31,
| 2011 | 2010 | 2009
Risk-free interest rate | 1.77% | 2.24% | --
Expected lives (years) | 6.0 | 6.0 | --
Expected volatility | 59.64% | 63.79% | --
Expected dividend yield | -- | -- | --

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- Definition The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB TOPIC 4.E) -URI http://asc.fasb.org/extlink&oid=6228006&loc=d3e74512-122707 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21484-112644 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SAB TOPIC 4.C) -URI http://asc.fasb.org/extlink&oid=6959260&loc=d3e187143-122770 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 129 -Paragraph 2, 3, 4, 5, 6, 7, 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Article 4 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.3-04) -URI http://asc.fasb.org/extlink&oid=6959260&loc=d3e187085-122770 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section C Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21488-112644 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.29-31) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Article 4 -Section 08 -Paragraph d Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section E Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(d),(e)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 43 -Chapter 1 -Section B -Paragraph 7, 11A -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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