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SHAREHOLDERS' EQUITY
 12 Months Ended
Dec. 31, 2013
SHAREHOLDERS' EQUITY [Abstract]  
SHAREHOLDERS' EQUITY
K.           SHAREHOLDERS’ EQUITY

Stock Option Plans

Employee Stock Option Plans.  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 with the 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.

In June 2012, the Board of Directors adopted (and the shareholders approved) the U.S. Energy Corp. 2012 Equity and Performance Incentive Plan (the “2012 Equity Plan”) for the benefit of USE’s employees.  The 2012 Equity Plan reserved for issuance 1,200,000 shares of USE’s common stock.  The 2012 Equity Plan has a term of 10 years.
 
A summary of the Employee Stock Option Plans activity in all plans for the year ended December 31, 2013, 2012 and 2011 is as follows:
 
    For the years ended December 31, 
   
2013
  
2012
  
2011
 
   
Employee Options
  
Weighted Average Exercise Price
  
Employee Options
  
Weighted Average Exercise Price
  
Employee Options
  
Weighted Average Exercise Price
 
Outstanding at beginning
                  
of the year
  2,259,282  $3.80   2,318,399  $3.94   3,011,647  $3.87 
Granted
  270,000  $2.08   150,000  $2.32   --  $-- 
Forfeited
  --  $--   (10,000) $2.32   --  $-- 
Expired
  (28,333) $4.68   (194,950) $4.47   (200,000) $3.90 
Exercised
  --  $--   (4,167) $2.52   (493,248) $3.51 
Outstanding at year end
  2,500,949  $3.60   2,259,282  $3.80   2,318,399  $3.94 
Exercisable at year end
  2,137,619  $3.85   2,119,282  $3.90   2,108,399  $3.84 
                          
Weighted average fair
                        
value of options
                        
granted during
                        
the year
     $1.20      $1.30      $-- 
                          

No employee options were exercised during the year ended December 31, 2013.  During the year ended December 31, 2012, a total of 4,167 options were exercised by employees by the surrender of 3,097 shares valued at $10,000.  In the year ended December 31, 2011, 493,248 options were exercised by the payment of $34,000 in cash and surrender of 368,804 shares with a fair market value of $1.9 million.

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 forfeitures.  The total expense associated with employee stock options for the years ended December 31, 2013, 2012 and 2011 was $120,000, $33,000 and $947,000, respectively.  As of December 31, 2013, there was $370,000 of total unrecognized expense related to unvested stock options, which is being amortized through 2016.
 
The following table summarizes information about employee stock options outstanding and exercisable at December 31, 2013:

Grant Price Range
  
Employee Options Outstanding at December 31, 2013
  
Weighted average remaining contractual life in years
  
Weighted average exercise price
  
Employee Options exercisable at December 31, 2013
  
Weighted average exercise price
 
                 
$2.08   270,000   9.50  $2.08   --  $-- 
$2.09 - $2.32   140,000   8.53  $2.32   46,670  $2.32 
$2.33 - $2.46   386,869   0.50  $2.46   386,869  $2.46 
$2.47 - $2.52   405,312   4.73  $2.52   405,312  $2.52 
$2.53 - $3.86   273,768   1.79  $3.86   273,768  $3.86 
$3.87 - $4.97   1,025,000   3.57  $4.97   1,025,000  $4.97 
     2,500,949   4.00  $3.60   2,137,619  $3.85 
                       
 
The following table sets forth the number of options available for grant as well as the intrinsic value of the options outstanding and exercisable at:

           
   At December 31, 
   
2013
  
2012
  
2011
 
Available for future grant
  790,000   1,060,000   -- 
Intrinsic value of options exercised
 $--  $4,000  $888,000 
Aggregate intrinsic value of options outstanding
 $1,661,000  $--  $351,000 
Aggregate intrinsic value of options exercisable
 $1,073,000  $--  $351,000 
              
 
Director Option Plan.  As of December 31, 2013, there were 146,000 director options outstanding to purchase shares of USE's common stock.  USE values these options using the Black-Scholes option pricing model and expenses that value over various terms based on the nature of the award.  Activity for the years ended December 31, 2013, 2012 and 2011 for director options is presented in the following table:
 
   For the years ended December 31, 
   
2013
     
2012
     
2011
    
   
Director Options
  
Weighted Average Exercise Price
  
Director Options
  
Weighted Average Exercise Price
  
Director Options
  
Weighted Average Exercise Price
 
Outstanding at beginning
                  
of the period
  150,000  $3.05   210,000  $3.10   320,000  $2.95 
Granted
  36,000  $2.08   80,000  $2.78   20,000  $4.19 
Forfeited
  --  $--   --  $--   (20,000) $2.52 
Expired
  (40,000) $2.60   (120,000) $3.05   (5,000) $3.90 
Exercised
  --  $--   (20,000) $2.52   (105,000) $2.92 
Outstanding at period end
  146,000  $2.93   150,000  $3.05   210,000  $3.10 
Exercisable at period end
  56,668  $3.46   63,335  $3.01   183,334  $2.91 
                          
Weighted average fair
                        
value of options
                        
granted during
                        
the period
     $1.20      $1.59      $2.34 
                          
 
No director options were exercised during the year ended December 31, 2013.  During the year ended December 31, 2012, a total of 20,000 director options were exercised by the payment of $50,000 in cash.  In the year ended December 31, 2011, 105,000 options were exercised by the payment of $62,000 in cash and the surrender of 62,104 shares with a fair market value of $245,000.  The total expense associated with director stock options for the years ended December 31, 2013, 2012 and 2011 was $64,000, $69,000 and $6,000, respectively.  As of December 31, 2013, there was $90,000 of total unrecognized expense related to unvested stock options, which is being amortized through 2016.
 
The following table summarizes information about director options outstanding and exercisable at December 31, 2013:
 
Grant Price Range
  
Director Options Outstanding at December 31, 2013
  
Weighted average remaining contractual life in years
  
Weighted average exercise price
  
Director Options exercisable at December 31, 2013
  
Weighted average exercise price
 
                 
$2.08   36,000   9.50  $2.08   --  $-- 
$2.09 - $2.32   10,000   8.53  $2.32   3,334  $2.32 
$2.33 - $2.52   10,000   4.73  $2.52   10,000  $2.52 
$2.53 - $2.85   60,000   8.22  $2.85   20,000  $2.85 
$2.86 - $4.19   20,000   7.48  $4.19   13,334  $4.19 
$4.20 - $5.04   10,000   6.48  $5.04   10,000  $5.04 
                       
     146,000   8.10  $2.93   56,668  $3.46 
                       
 
These options are held by current and former directors of USE.

The following table sets forth the number of options available for grant as well as the intrinsic value of the options outstanding and exercisable at:

   
At December 31,
 
   
2013
  
2012
  
2011
 
Available for future grant
  131,359   126,526   164,099 
Intrinsic value of options exercised
 $--  $17,000  $14,000 
Aggregate intrinsic value of options outstanding
 $142,000  $--  $31,000 
Aggregate intrinsic value of options exercisable
 $35,000  $--  $31,000 

USE has computed the fair values of its employee and director options using the Black Scholes pricing model and the following weighted average assumptions:

 
For the years ended December 31,
 
2013
2012
2011
Risk-free interest rate
1.66%
0.82% to 1.41%
1.77%
Expected lives (years)
 6.0
 5.0 to 6.0
 6.0
Expected volatility
62.59%
61.87% to 63.59%
59.64%
Expected dividend yield
 --
 --
 --

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 $255,000 for the year ended December 31, 2013, and $250,000 for the year ended December 31, 2012 and $245,000 for the year ended December 31, 2011, 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, 2013, 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 $14,000.

During the year ended December 31, 2013, the Board of Directors of USE approved a contribution of 53,276 shares to the ESOP at the price of $3.76 for a total expense of $200,000.  This compares to contributions to the ESOP during the years ended December 31, 2012 and 2011 of 161,624 and 98,958 shares to the ESOP at prices of $1.50 and $2.91 per share, respectively.  The expense for the contributions during the years ended December 31, 2012 and 2011 were $242,000 and $287,000, respectively.