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LIQUIDITY
 12 Months Ended
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
LIQUIDITY
  2. LIQUIDITY

 

As of December 31, 2016, the Company has a working capital deficit of $6,042 and an accumulated deficit of $124,035. Additionally, the Company incurred a net loss of $14.1 million for the year ended December 31, 2016. During 2016, the Company was in violation of certain covenants in its credit agreement and the Company expects future violations in 2017, which requires the entire balance to be classified as a current liability. While the lender has provided limited waivers for the Company’s past noncompliance, there is no assurance that it will continue to do so in the future.

 

During the 2016, the Company completed the following actions which are expected to improve the Company’s operating results in 2017 and increase the ability of the Company to survive the current oil and gas industry price environment.

 

  · In February 2016 the Company completed the disposition of its mining segment, including the Keystone Mine, a related water treatment plant and other related properties. While an impairment charge of $22,620 was recognized related to this disposition, a significant objective for completing the disposition was to improve future profitability. Following the disposition, the Company is no longer required to operate the water treatment plant and will not be responsible for mine holding costs, which are expected to result in estimated annual cash savings of $3,000. Management believes the disposition of the Company’s mining segment is a major step in the transformation of U.S. Energy Corp. to solely focus on its existing oil and gas business.

 

  · On December 21, 2016, the Company completed a registered direct offering of 1,000,000 shares of common stock at a net price of $1.50 per share.  Concurrently, the investors received warrants to purchase 1,000,000 shares of Common Stock of the Company at an exercise price of $2.05 per share, subject to adjustment, for a period of five years from closing. The total net proceeds received by the Company was approximately $1.32 million.  The fair value of the warrants upon issuance was $1.24 million, with the remaining $0.08 million being attributed to common stock. The warrants contain a dilutive issuance and other liability provisions which cause the warrants to be accounted for as a liability. Such warrant instruments are initially recorded as a liability and are accounted for at fair value with changes in fair value reported in earnings.

 

As of December 31, 2016, the Company had cash and equivalents of $2.5 million. Management also expects potential investors and lenders may find the Company’s new singular industry focus, combined with attractive producing properties and a low-cost overhead structure, make the Company an attractive vehicle to partner with during this industry downturn and low commodity price environment provided that the Company is able to address the challenges posed by the upcoming maturity of its Wells Fargo Credit Facility on July 30, 2017.