UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarter and six months ended June 30, 2005 or
	For the quarter ended June 30, 2006 or
o	Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from ___________ to ____________

Commission file number 0-8773

CRESTED CORP.

(Exact Name of Company as Specified in its Charter)

Colorado		84-0608126
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

877 North 8^th West, Riverton, WY		82501
(Address of principal executive offices)		(Zip Code)

Company's telephone number, including area code:		(307) 856-9271

Not Applicable (Former name, address and fiscal year, if changed since last report)

~~(Former~~Indicate ~~name,~~by ~~address~~check ~~and~~mark ~~fiscal~~if ~~year~~the registrant is a well-known seasoned issuer, ifas ~~changed~~defined in Rule ~~since~~405 ~~last~~of ~~report)~~the Securities Act.

~~Indicate~~YES ~~by check mark whether the Company (1) has filed all reports required to be~~o NO filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing x

~~requirements~~Indicate ~~for~~by check mark if the ~~past~~registrant 90is ~~days~~not required to file reports to Section 13 or Section 15(d) of the Act.

YES o NO x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. ~~(as~~See ~~defined~~definition inof “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange ~~Act)~~ act.

Large accelerated filer o Accelerated filer o Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

YES o NO o

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class		Outstanding Shares at August 1211, ~~2005~~2006
Common stock, $.001 par value		17,164,298

-2-

CRESTED CORP.

INDEX

		Page No.
PART I.	FINANCIAL INFORMATION
ITEM 1.	Financial Statements.
	Condensed Balance Sheets
	Condensed Balance Sheets (Unaudited)
	June 30, 2005 (Unaudited) and December 31, 2004 (Audited)	3-4
	June 30, 2006 and December 31, 2005	4-5
	Condensed Statements of Operations (Unaudited)
	Three and Six Months Ended June 30, 2005 and 2004	5
	Three and Six Months Ended June 30, 2006 and 2005	6
	Condensed Statements of Cash Flows (Unaudited)
	Six Months Ended June 30, 2005 and 2004	6
	Six Months Ended June 30, 2006 and 2005	7-8
	Notes to Condensed Financial Statements (Unaudited)	79-11
ITEM 2.	Management’s Discussion and Analysis of
	Financial Condition and Results of Operations	12-1924
ITEM 4.	Controls and Procedures	20
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	24-26
PART II.	OTHER INFORMATION
ITEM 4.	Controls and Procedures	26
ITEM 1.	Legal Proceedings	21-22
PART II.	OTHER INFORMATION	27
ITEM 2.	Changes in Securities and Use of Proceeds	22
ITEM 1.	Legal Proceedings	27-28
ITEM 3.	Defaults upon Senior Securities	22
ITEM 2.	Changes in Securities and Use of Proceeds	28
ITEM 4.	Submission of Matters to a Vote of Security Holders	22
ITEM 3.	Defaults upon Senior Securities	28
ITEM 5.	Other Information	22
ITEM 4.	Submission of Matters to a Vote of Security Holders	29
ITEM 6.	Exhibits and Reports on Form 8-K	23
ITEM 5.	Other Information	29
	Signatures	24
ITEM 6.	Exhibits and Reports on Form 8-K	29-30
	Signatures	31
	Certifications	See Exhibits

-2-

CRESTED CORP.
CONDENSED BALANCE SHEETS
ASSETS
	June 30,			December 31,
	2005			2004
	(Unaudited)			(Audited)
CURRENT ASSETS:
Cash and cash equivalents	$	3,800		$	3,800
Marketable securities		2,164,600			--
		2,168,400			3,800
INVESTMENTS:
Affiliates		2,810,900			2,969,800
Non-affiliated companies		5,004,700			--
		7,815,600			2,969,800
PROPERTIES AND EQUIPMENT:
Machinery and other equipment		10,000			10,000
Developed oil properties, full cost method		886,800			886,800
		896,800			896,800
Less accumulated depreciation, depletion and amortization		(886,800	)		(886,800	)
		10,000			10,000
Total assets	$	9,994,000		$	2,983,600

The accompanying notes are an integral part of these statements.

-3-

CONDENSED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' DEFICIT
	June 30,			December 31,
	2005			2004
	(Unaudited)			(Audited)
CURRENT LIABILITIES:
Current debt to affiliate	$	11,540,000		$	9,650,900
Deferred income		424,500			--
Taxes payable		100,000			--
Asset retirement obligation		96,400			96,400
		12,160,900			9,747,300
COMMITMENT TO FUND EQUITY INVESTEES		215,600			215,600
ASSET RETIREMENT OBLIGATION		1,118,900			1,073,500
COMMITMENTS AND CONTINGENCIES
FORFEITABLE COMMON STOCK, $.001 par value
15,000 shares issued, forfeitable until earned		10,100			10,100
SHAREHOLDERS' DEFICIT:
Preferred stock, $.001 par value;
100,000 shares authorized none issued or outstanding		--			--
Common stock, $.001 par value; unlimited shares
authorized; 17,149,298 and 17,137,298 shares
issued and outstanding		17,200			17,200
Additional paid-in capital		11,814,400			11,809,600
Unrealized gain on securities		435,100			--
Accumulated deficit		(15,778,200	)		(19,889,700	)
		(3,511,500	)		(8,062,900	)
Total liabilities and shareholders' deficit	$	9,994,000		$	2,983,600

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

CRESTED CORP.
BALANCE SHEETS
ASSETS

	June 30,			December 31,
	2006			2005
	(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	1,418,900		$	95,100
Trading securities		1,966,300			-
		3,385,200			95,100
INVESTMENTS IN AFFILIATES
Affiliated companies		4,335,500			3,348,800
Non-affiliated companies		335,200			5,228,300
		4,670,700			8,577,100
PROPERTIES AND EQUIPMENT
Machinery and other equipment		10,000			10,000
Developed oil properties, full cost method		886,800			886,800
		896,800			896,800
Less accumulated depreciation, depletion and amortization		(886,800	)		(886,800	)
		10,000			10,000
	$	8,065,900		$	8,682,200

The accompanying notes are an integral part of these statements.

-4-

CRESTED CORP.
CONDENSED STATEMENTS OF OPERATIONS
BALANCE SHEETS
(Unaudited)
LIABILITIES AND SHAREHOLDERS' DEFICIT
	Three months ended June 30,						Six months ended June 30,
	June 30,			December 31,
	2005			2004			2005			2004
	2006			2005
REVENUES:	$	--		$	--		$	--		$	--
	(Unaudited)
COSTS AND EXPENSES:
CURRENT LIABILITIES:
Accretion of asset retirement obligation		22,700			27,900			45,400			45,400
Current debt to affiliate	$	12,329,600		$	10,821,800
Change in estimate of asset retirement obligation		--			25,800			--			25,800
Asset retirement obligation		106,200			106,200
General and administrative		81,900			92,900			110,800			132,900
		12,435,800			10,928,000
		104,600			146,600			156,200			204,100
COMMITMENT TO FUND EQUITY INVESTEES		215,600			215,600
OPERATING LOSS		(104,600	)		(146,600	)		(156,200	)		(204,100	)
ASSET RETIREMENT OBLIGATION		1,145,000			1,045,200
OTHER INCOME & ESPENSES:
COMMITMENTS AND CONTINGENCIES		--			--
Gain on sale of investment		5,458,000			--			5,458,000			--
FORFEITABLE COMMON STOCK, $.001 par value
GAIN (LOSS) BEFORE EQUITY LOSS, AND
15,000 shares issued, forfeitable until earned		10,100			10,100
PROVISION FOR INCOME TAXES		5,353,400			(146,600	)		5,301,800			(204,100	)
SHAREHOLDERS' DEFICIT
EQUITY IN LOSS OF AFFILIATE		(717,400	)		(318,800	)		(1,090,300	)		(788,700	)
Preferred stock, $.001 par value;
GAIN (LOSS) BEFORE PROVISION
100,000 shares authorized none issued or outstanding		--			--
FOR INCOME TAXES		4,636,000			(465,400	)		4,211,500			(992,800	)
Common stock, $.001 par value; 100,000,000 shares authorized;
PROVISION FOR INCOME TAXES		(100,000	)		--			(100,000	)		--
17,149,298 shares issued and outstanding each period
NET GAIN (LOSS)	$	4,536,000		$	(465,400	)	$	4,111,500		$	(992,800	)
shares issued and outstanding		17,200			17,200
PER SHARE DATA
Additional paid-in capital		11,814,400			11,814,400
NET GAIN (LOSS) PER SHARE, BASIC	$	0.26		$	(0.03	)	$	0.24		$	(0.06	)
Accumulated deficit		(17,572,200	)		(15,348,300	)
NET GAIN (LOSS) PER SHARE, DILUTED	$	0.26		$	(0.03	)	$	0.24		$	(0.06	)
		(5,740,600	)		(3,516,700	)
BASIC WEIGHTED AVERAGE
	$	8,065,900		$	8,682,200
SHARES OUTSTANDING		17,137,298			17,118,098			17,143,265			17,118,098
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING		17,152,298			17,118,098			17,158,265			17,118,098

The accompanying notes are an integral part of these statements.

-5-

CRESTED CORP.
CONDENSED STATEMENTS OF CASH FLOWS
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
	Six months ended June 30,
	Three months ended June 30,						Six months ended June 30,
	2005			2004
	2006			2005			2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
REVENUES:	$	--		$	--		$	--		$	--
Net gain (loss)	$	4,111,500		$	(992,800	)
COSTS AND EXPENSES:
Adjustments to reconcile net gain (loss) to net cash
Accretion of asset retirement obligation		29,200			22,700			99,800			45,400
used in operating activities:
General and administrative		61,100			81,900			149,400			110,800
Equity in loss of affiliate		1,090,300			788,700
		90,300			104,600			249,200			156,200
Gain on sale of affiliate		(5,458,000	)		--
LOSS FROM CONTINUING OPERATIONS		(90,300	)		(104,600	)		(249,200	)		(156,200	)
Change in asset retirement obligation		--			25,800
OTHER REVENUES AND (EXPENSES):
Accretion of asset retirement obligation		45,400			45,400
Interest		500			--			900			--
Noncash compensation		4,800			--
Loss on exchange of Enterra Acquisition shares		(1,354,200	)		--			(1,354,200	)		--
Taxes payable		100,000			--
Loss on sale of marketable securities		(53,500	)		--			(53,500	)		--
NET CASH USED IN OPERATING ACTIVITIES		(106,000	)		(132,900	)
Gain (loss) on valuation of derivatives		(16,100	)		1,228,800			(223,600	)		1,228,800
CASH FLOWS FROM INVESTING ACTIVITIES:
Gain on sale of investment		--			5,882,500			--			5,882,500
Investment in affiliate		(1,582,700	)		(1,669,300	)
		(1,423,300	)		7,111,300			(1,630,400	)		7,111,300
CASH FLOWS FROM FINANCING ACTIVITIES:
(LOSS) GAIN BEFORE EQUITY LOSS,
Net activity on debt to affiliate		1,688,700			1,802,200
AND PROVISION FOR INCOME TAXES		(1,513,600	)		7,006,700			(1,879,600	)		6,955,100
NET INCREASE IN CASH AND CASH EQUIVALENTS		--			--
EQUITY IN LOSS OF AFFILIATE		(633,600	)		(717,400	)		(344,300	)		(1,090,300	)
CASH AND CASH EQUIVALENTS AT
(LOSS) GAIN BEFORE PROVISION
BEGINNING OF PERIOD		3,800			3,300
FOR INCOME TAXES		(2,147,200	)		6,289,300			(2,223,900	)		5,864,800
CASH AND CASH EQUIVALENTS AT
PROVISION FOR INCOME TAXES					(100,000	)					(100,000	)
END OF PERIOD	$	3,800		$	3,300
NET (LOSS) GAIN	$	(2,147,200	)	$	6,189,300		$	(2,223,900	)	$	5,764,800
SUPPLEMENTAL DISCLOSURES:
PER SHARE DATA
Interest paid	$	--		$	--
NET (LOSS) GAIN PER SHARE, BASIC	$	(0.13	)	$	0.36		$	(0.13	)	$	0.34
Income tax paid	$	--		$	--
NET (LOSS) GAIN PER SHARE, DILUTED	$	(0.13	)	$	0.36		$	(0.13	)	$	0.34
NONCASH INVESTING AND FINANCING ACTIVITIES:
BASIC WEIGHTED AVERAGE
Issuance of stock to outside directors	$	4,800		$	--
SHARES OUTSTANDING		17,149,298			17,137,298			17,149,298			17,143,265
Investment in Non-affiliated companies	$	6,734,200		$	--
DILUTED WEIGHTED AVERAGE
Investment in affiliate	$	651,300		$	--
SHARES OUTSTANDING		17,149,298			17,152,298			17,149,298			17,158,265
Deferred gain on sale of Rocky Mountain Gas	$	424,500		$	--
Unrealized gain on securities	$	435,100		$	--
Net activity on debt to affiliate	$	200,400		$	--

The accompanying notes are an integral part of these statements.

-6-

CRESTED CORP.

CRESTED CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
	Six months ended June 30,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(2,223,900	)	$	5,764,800
Adjustments to reconcile net (loss) income to net cash
used in by operating activities:
Equity in loss of affiliate		344,300			1,090,300
Loss on exchange of Enterra units		1,354,200			--
Loss on sale of marketable securities		53,500			--
Gain on sale of affiliate		--			(5,882,500	)
Noncash compensation		94,200			4,800
Change in valuation of derivatives		223,600			(1,228,800	)
Accretion of asset retirement obligation		99,800			45,400
Proceeds from sale of trading securities		1,295,500			--
Taxes payable		--			100,000
NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES		1,241,200			(106,000	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in affiliate		(1,331,000	)		(1,582,700	)
NET CASH USED IN INVESTING ACTIVITIES		(1,331,000	)		(1,582,700	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net activity on debt to affiliate		1,413,600			1,688,700
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,413,600			1,688,700

NET INCREASE IN
CASH AND CASH EQUIVALENTS		1,323,800			--

CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD		95,100			3,800

CASH AND CASH EQUIVALENTS AT
END OF PERIOD	$	1,418,900		$	3,800

~~Notes~~The to accompanying ~~Condensed~~notes ~~Financial~~are ~~Statements~~an ~~(Unaudited)~~integral part of these statements.

1) The Condensed Balance Sheet as of June 30, 2005 and the Condensed Statements of Operations for the three and six months ended June 30, 2005 and 2004 and Statements of Cash Flows for the six months ended June 30, 2005 and 2004 have been prepared by the Company without audit. The Condensed Balance Sheet at December 31, 2004, has been derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the period then ended. In the opinion of the Company, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to fairly present the financial position of the Company as of June 30, 2005 and the results of operations for the three and six months ended June 30, 2005 and 2004 and cash flows for the six months ended June 30, 2005 and 2004.

2) Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the Company's December 31, 2004 Form 10-K. The results of operations for the periods ended June 30, 2005 and 2004 are not necessarily indicative of the operating results for the full year.

3) The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates for these reclamation expenses based on certain assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

4) On June 1, 2005 the sale of all the outstanding common stock of Rocky Mountain Gas, Inc. (“RMG”) to Enterra US Acquisitions Inc. (“Acquisitions”)(a privately-held Washington corporation organized by Enterra Energy Trust (“Enterra”) was closed. Enterra paid $500,000 cash and issued Enterra units (the "Enterra Initial Units"), valued at $5,234,000, net of the $266,000 adjustment for the purchase of overriding royalty interests (effective June 1, 2005); and Acquisitions issued class D shares of Acquisitions valued at $14,000,000. The Enterra Initial Units and the class D shares were issued pro rata to the RMG shareholders, with certain adjustments.

The Company’s participation in the consideration received was approximately $6,399,000 resulting in a gain of $5,458,000. The carrying value of the Company’s interest in RMG was $422,500 at the date of disposition. The Company received 91,029 Enterra Initial Units, recorded on the Company’s Balance Sheet at June 30, 2005 as current marketable securities of $2,164,600, and 245,759 Class D shares of Acquisitions, recorded on the June 30, 2005 balance sheet as long term investments in non affiliates of $4,669,500. The Company is required to hold the class D shares of Acquisitions for a period of one year from June 1, 2005. After the holding period is satisfied the Company can exchange these shares on a one for one basis for units in Enterra which will then be saleable on the Toronto Stock Exchange - Vancouver (“TSX-V”).

-7-

CRESTED CORP.

CRESTED CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
	Six months ended June 30,
	2006		2005

SUPPLEMENTAL DISCLOSURES:
Interest paid	$	--	$	--

Income tax paid	$	--	$	--

NONCASH INVESTING AND FINANCING ACTIVITIES:
Exchange of Enterra Acquisition Shares for
Enterra Trust Units	$	3,315,300	$	--

Issuance of stock to outside directors	$	--	$	4,800

Investment in Non-affiliated companes	$	--	$	6,734,200

Investment in affiliate	$	--	$	651,300

Deferred gain on sale of Rocky Mountain Gas	$	--	$	424,500

Net activity on debt to affiliate	$	--	$	200,400

~~Notes~~The to accompanying ~~Condensed~~notes ~~Financial~~are ~~Statements~~an ~~(Unaudited)~~integral part of these statements.

(Continued)

5) Comprehensive Income

Unrealized gains on investments, which consist of Enterra Initial Units are excluded from net income but are reported as comprehensive income on the Balance Sheet under Shareholder’s equity. The following table illustrates the effect on net income and earnings per share if the company had recognized comprehensive income:

	Six months Ended
	June 30,
	2005		2004
Net Gain (Loss)	$	4,111,500	$	( 992,800	)
Add : Comprehensive income from unrealized gain on marketable securities	$	435,100		--
Comprehensive Income (loss)	$	4,546,600	$	( 992,800	)

6) Based on the provisions of SFAS No. 115, the Company accounts for marketable equity securities as marketable securities which are available for sale. Available for-sale securities are measured at fair value, with net unrealized gains and losses excluded from earnings and reported as a separate component of comprehensive income until realized.

Investments in marketable securities consisted of the following at June 30, 2005:

			Cost				Market Value		Unrealized Gain
Equity Securities			$ 1,729,600			$ 2,164,600			$ 435,000

These securities were acquired in connection with the Enterra transaction discussed in Note 3. Other than these securities, there were no other transactions in marketable securities during the three and six months ended June 30, 2005.

7) Debt at June 30, 2005 and December 31, 2004, consists of debt payable to the Company's parent U.S. Energy Corp. ("USE") of $11,540,000 and $9,650,900, respectively. This debt has been incurred as a result of USE funding the Company’s portion of joint operations, investments and obligations. The Company will either have to retire this debt by the payment of cash, conveyance of property or the issuance of additional shares of common stock to USE. USE has agreed not to call the note for the next 14 months. Management of the Company anticipates reducing this debt by paying all or a portion of the cash received from the sale of securities received as a result of the sale of Rocky Mountain Gas, Inc. (RMG) (described in item 2).

-8-

CRESTED CORP.

Notes to Condensed Financial Statements (Unaudited)

1) The Condensed Balance Sheets as of June 30, 2006, the Condensed Statements of Operations for the three and six months ended June 30, 2006 and 2005 and Statements of Cash Flows for the six months ended June 30, 2006 and 2005 have been prepared by the Company without audit. The Condensed Balance Sheet at December 31, 2005, has been derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the period then ended. In the opinion of the Company, the accompanying financial statements contain all adjustments (~~Continued~~consisting of only normal recurring accruals) necessary to fairly present the financial position of the Company as of June 30, 2006 and the results of operations for the three and six months ended June 30, 2006 and 2005 and cash flows for the six months ended June 30, 2006 and 2005.

82) Certain ~~INCOME~~ information and footnote disclosures normally included in financial statements ~~TAXES~~ prepared ~~- The~~in accordance with accounting principles generally accepted in the ~~components~~ United States of ~~deferred~~America ~~taxes~~have asbeen condensed or omitted. It is suggested that these financial statements be read in conjunction with the Company's December 31, 2005 Form 10-K. The results of ~~June~~operations for the periods ended June 30, 2006 and 2005 are asnot ~~follows:~~necessarily indicative of the operating results for the full year.

	June 30, 2005
Deferred tax assets:
Deferred compensation	$	3,500
Deferred gains		109,300
Allowances and impairments		254,600
Net operating loss carry-forwards		4,450,500
Tax credits including AMT		115,400
Total deferred tax assets		4,933,300
Deferred tax liabilities:
Basis difference of investments		(789,700)
Development and exploration costs		(37,200)
Total deferred tax liabilities		(826,900)
Net deferred tax assets - all non-current		4,106,400
Valuation allowance		(4,106,400)
Net deferred tax asset	$	--

3) The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates of reclamation expenses based on certain assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

At4) During ~~December~~ the 31six months ended June 30, ~~2004~~2006 the Company ~~had~~recorded ~~available~~a loss of $2,223,900. With ~~for~~the ~~federal~~exception ~~income~~of ~~tax~~the ~~purposes~~year ended December 31, ~~net~~ ~~operating~~2005 ~~loss~~when ~~carry-forwards~~the ofCompany ~~approximately~~recorded a net gain of $164,~~715~~541,~~700~~400 ~~which~~it ~~expire from 2006~~has ~~through~~generated ~~2022.~~significant ~~Based~~net onlosses ~~anticipated~~during ~~income~~prior years. ~~for~~The loss recognized during the ~~year~~six ~~ending~~months ~~December 31~~ended June 30, ~~2005,~~ 2006 and the prior ~~company~~year ~~expects~~losses toresult ~~utilize~~in ~~approximately~~an accumulated deficit of $417,~~000~~572,~~000~~200 ofat ~~this NOL.~~June ~~The~~ 30, 2006. The Company also has ~~established~~ a ~~valuation~~working ~~allowance~~capital ~~for~~deficit ~~the~~of ~~full~~$9,050,600 ~~amount~~at ofJune 30, 2006. Included in the ~~net deferred~~working ~~tax~~capital ~~assets~~deficit was $12,329,600 due to the Company’s ~~recurring~~major ~~losses~~shareholder, ofU.S. ~~the~~Energy ~~Company~~Corp. ~~and~~(“USE”). At June 30, 2006, the ~~uncertainty~~ Company ofdoes ~~the~~not ~~Company’s~~have ~~ability~~sufficient tocash ~~generate~~or ~~future~~cash ~~taxable~~flows ~~income~~from operations to meet ~~utilize~~ its on ~~the~~going ~~NOL~~general ~~carry-forwards.~~and Inadministrative ~~addition,~~costs and retire the ~~use~~debt ofdue ~~the~~to ~~NOL~~USE. All ~~carry-forwards~~of ~~may~~ these befactors ~~limited~~raise bysubstantial ~~Internal~~doubt ~~Revenue~~about ~~Service~~the ~~provisions~~Company’s ~~governing~~ability ~~significant~~to continue as ~~change~~ a ingoing ~~company~~concern ~~ownership~~during the upcoming year.

~~The~~In ~~income~~ order to ~~tax~~improve ~~provision is different from~~ the ~~amounts~~liquidity ~~computed~~of ~~by applying~~ the ~~statutory~~ ~~federal~~Company, ~~income~~management ~~tax~~intends ~~rate~~ to ~~income~~do ~~before taxes. The reasons for these~~the ~~differences are as follows~~ following:

	Six Month Ended
	June 30, 2005
Expected federal income tax expense	$	1,474,000
Losses from subsidiaries not consolidated for tax purposes, utilization of net operating losses and other		(74,000	)
Valuation allowance (decrease)		(1,300,000	)
Income taxes	$	100,000

·	Continue working with Uranium Power Corp. (“UPC”) and USE to explore and develop jointly held uranium properties along with seeking a joint venture partner.

~~$100,000 in~~· ~~alternative~~Seek ~~minimum~~joint ~~tax~~venture ~~due~~partners ason ofother ~~June~~mineral ~~30,~~properties ~~2005~~which ~~as a result of~~ the sale of RMG to Enterra. There were no taxes due at June 30, 2004. For information regarding the tax to book differences and components of deferred taxes at December 31, 2004, please refer to the Company’s ~~Form~~owns ~~10-K~~an ~~for~~interest ~~that period~~in.

~~9) During the~~· ~~six~~Sell ~~months~~its ~~ended~~holdings ~~June~~in ~~30,~~Enterra ~~2005,~~Entergy ~~the~~Trust ~~Company issued 12,000 shares of common stock as compensation for services rendered during 2004 to an outside director~~(“Enterra”).

5) Debt at June 30, 2006 and December 31, 2005, consists of debt payable to the Company's parent USE of $12,329,600 and $10,821,800, respectively. This debt has been incurred as a result of USE funding the Company’s portion of joint operations and investments. The Company will either have to retire this debt by the payment of cash, conveyance of property or the issuance of additional shares of common stock to USE. USE has agreed not to call the note for the next 11 months.

6) During the six months ended June 30, 2006, the Company did not issue any shares of common stock.

-9-

CRESTED CORP.

Notes to Condensed Financial Statements (Unaudited)

(Continued)

107) The Company presents basic and diluted earnings per share in accordance with the provisions of Statement of Financial Accounting Standards No. 128, "Earnings per Share.". Basic ~~and diluted~~ earnings per common share ~~are~~is based on the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed based on the weighted average number of common shares outstanding adjusted ~~during~~for the ~~period~~incremental shares attributed to outstanding options to purchase common stock, if dilutive. Potential common shares relating to employee options are excluded from the computation of diluted earnings (loss) per share, because they are anti-dilutive. These options totaled 1,700,000 at June 30, 2006 and 2005. Stock options have a weighted average exercise price of $1.71 per share. Potential common shares relating to convertible debt are excluded from the computation of diluted loss per share, because they are anti-dilutive.

118) The Company's management ~~has~~ adopted an Incentive Stock Option Plan (ISOP), which was approved by the Company’s shareholders on September 2, 2004. 2,000,000 shares of common stock are reserved for grant under the ISOP, but the number of ~~shares~~ shares so reserved will be automatically increased to always equal not more than 20% of the Company’s issued and outstanding shares of common stock. ~~The~~As ~~Company~~of June 30, 2006 ~~had~~ a total of 1,700,000 ~~outstanding~~options ~~stock~~under the ISOP had been issued to officers and employees of USE and the Company and directors of USE. These options atwere issued on June 3010, 2005, ~~and~~have noan ~~outstanding stock~~exercise ~~options~~price atof ~~December~~$1.71 31per share and expire on June 9, ~~2004~~2015.

The Company has adopted the disclosure requirements of SFAS No. ~~148~~123(R) "Accounting for Stock - Based Compensation - Transition and Disclosure". ~~and has elected to continue to record employee compensation expense utilizing the intrinsic value method permitted under Accounting Principles Board (APB) Opinion~~ No. ~~25, "Accounting for Stock Issued to Employees" and its related interpretations. There were 1.7 million options granted to employees or directors under either employee~~ stock ~~incentive plan during the six months ended June 30, 2005. No stock~~-based employee compensation cost is reflected in net income, as all options granted under the plans had an exercise price equal to the market value of the underlying common stock on the date of grant. ~~The~~and ~~following~~they ~~table illustrates~~were ~~the~~issued ~~effect~~prior onto June 15, ~~net~~2005. ~~income~~All ~~and~~future ~~earnings~~issuances ~~per~~of ~~share~~options ifunder the ~~Company~~plan will be evaluated ~~had~~ using ~~applied~~ the ~~fair~~Black ~~value~~Scholes ~~recognition~~model ~~provisions~~and ofexpensed ~~Financial~~over ~~Accounting~~the ~~Standards Board~~term ~~Statement~~of ~~("FASB")~~the Nooption. ~~123, Accounting for Stock-Based Compensation, to stock-based employee compensation.~~

	Six months Ended
	June 30,
	2005			2004
Net Gain (Loss), as reported	$	4,111,500		$	( 922,800	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all award, net of related tax effects	$	(1,956,400	)		--
Pro forma net profit (loss)	$	2,155,100		$	( 922,800	)
Earnings per share:
Basic - as reported	$	0.24		$	(0.06	)
Basic - pro forma	$	0.13		$	(0.06	)
Diluted - as reported	$	0.24		$	(0.06	)
Diluted - pro forma	$	0.13		$	(0.06	)

9) The Company has uranium properties that are in a shut down status in Wyoming for which it is responsible for the reclamation expense. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates for these reclamation expenses based on certain assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

1210) The Company ~~has~~accounts ~~uranium~~for the reclamation of its mineral properties and oil properties pursuant to SFAS No. 143, “Accounting for Asset Retirement Obligation.” Under the provisions of this accounting statement, the Company records the estimated fair value of the reclamation liability on its mineral properties as of the date that ~~are~~the inliability ais ~~shut~~incurred ~~down~~with ~~mode~~a corresponding increase in ~~central~~the ~~Wyoming~~property’s book value. Actual costs could differ from those ~~for~~ estimates. ~~which~~The itreclamation isliabilities ~~responsible~~are reviewed each quarter to determine whether estimates for ~~one~~the ~~half~~total ofasset retirement obligation are sufficient to complete the reclamation ~~expense~~work required.

The Company deducts any actual funds expended for reclamation from the asset retirement obligations during the quarter in which it occurs. As a result of the Company taking impairment allowances in prior periods on its shut-down mining properties, it has no remaining book value for these properties. Any upward revisions of retirement costs on its mineral properties will therefore be expensed in the quarter in which they are recorded.

-10-

CRESTED CORP.

Notes to Condensed Financial Statements (Unaudited)

(Continued)

The Company records the estimated fair value of the reclamation liability on its shut down uranium properties as of the date that the liability is incurred with a corresponding increase in the properties. Actual results could differ from those estimates. The reclamation liabilities are reviewed each quarter to determine whether estimates for the total asset retirement obligation is sufficient to complete the reclamation work required.

The Company deducts actual funds expended from the accrued liability during the quarter in which it is expended. As a result of the Company having no remaining net book value for the properties and no economic benefits to be received in future periods, all changes in estimates are charged to operations in the quarter in which they are recorded.

The following is a reconciliation of the total liability for asset retirement obligations (unaudited):

Balance December 31, 2004	$	1,073,500
Balance December 31, 2005	$	1,151,400
Addition to Liability		--99,800
Liability Settled		--
Accretion Expense - 8% discount rate		~~45,400~~
Balance June 30, 2005	$	1,118,900
Balance June 30, 2006	$	1,251,200

These reclamation activities are scheduled to be completed over the next several years. In the event that the transaction with sxr Uranium One Inc. (“Uranium One” or “SXR”) is concluded, the Company will no longer be liable for this reclamation obligation (see Subsequent Events).

1311) At ~~The~~ June 30, 2006 the Company ~~has~~held ~~reviewed~~145,759 ~~current~~units ~~outstanding~~of ~~statements~~Enterra ~~from~~Energy ~~the~~Trust ~~Financial~~(“Enterra”). ~~Accounting~~ These ~~Standards~~units ~~Board~~of Enterra are recorded as Trading Securities and ~~does~~have ~~not~~a ~~believe~~market value ~~that~~of ~~any~~$1,966,300 at June 30, 2006. The Company plans on selling these units during the third and fourth quarters of ~~those~~2006. ~~statements~~These units of Enterra were ~~will~~ received ~~have~~by athe ~~material~~company ~~adverse~~upon ~~affect~~the conversion of Enterra Acquisition (“Acquisitions”) shares on June 6, 2006. These securities were previously classified in Investments: Non-affiliated companies in the Company’s ~~financial~~balance ~~statements~~sheet. The Acquisition shares were received a portion of the compensation that the Company received when ~~adopted~~it sold its interest in Rocky Mountain Gas (“RMG”).

During the six months ended June 30, 2005 the Company recorded a gain on the valuation of the derivative associated with the Acquisition shares which allowed them to be converted into shares of Enterra of $1,228,800. The value of the derivative and the underlying Units increased to $4,893,100 at December 31, 2005. As of the date of conversion the Enterra shares had decreased in value which resulted in a loss of $1,354,200 when the investment was moved to trading securities in addition to a final loss of $223,600 from the valuation of the derivative. At June 30, 2006 the Company had sold 100,000 of the Enterra shares for which it received $1,295,500.

12) On July 20, 2006 hearing was held in the United States District Court of Colorado regarding underlying disputes in the case between the Company, USE and Phelps Dodge Corporation, (“PD”). Pursuant to that hearing, a Judgment for attorney fees and costs was rendered by the Court on July 25, 2006. In its Judgment, the Court awarded PD attorney fees and costs in the amount of $3,223,047 and operational expenses for the water treatment plant on the Lucky Jack Molybdenum property, formerly the Mt. Emmons Molybdenum property, in the amount of $4,315,293. The total amount of the award is $7,538,340. The Company and USE share in this potential liability on a 50 - 50 basis. The Company’s potential exposure from this judgment is therefore $3,769,170. The Company and USE have determined that they will appeal the Judgment to the 10^th Circuit Court of Appeals. The Company has reviewed FAS 5, “Accounting for Contingencies”, and has determined that the likelihood of prevailing in the appeal is reasonably possible. Although a completely accurate prediction can not be made of the ultimate outcome or timing of an appeal, the Company’s legal expert in the matter believes that the Company will ultimately prevail in overturning the U.S. District Court’s award of attorney fees and costs.

-11-

CRESTED CORP.

Notes to Condensed Financial Statements (Unaudited)

(Continued)

CRESTED CORP.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following is Management's Discussion and Analysis (“MD&A”) of significant factors, which have affected the Company's liquidity, capital resources and results of operations during the periods included in the accompanying financial statements. For a detailed explanation of the Company's Business Overview, it is ~~suggested~~ suggested that Management's Discussion and Analysis of Financial Condition and ~~Results~~ Results of Operations for the ~~three and~~ six months ended June 30, ~~2005~~2006 be read in conjunction with the Company's Form 10-K for the year ended December 31, ~~2004~~ 2005. The discussion contains forward-looking statements that involve risks and uncertainties. Due to uncertainties in our business, actual results may differ materially from the discussion below.

General Overview

~~The~~Crested Corp. ("Crested" or the "Company") historically has been involved in the acquisition, exploration, development and production of properties prospective for ~~coalbed methane,~~ hard rock minerals including; lead, zinc, silver, molybdenum, gold, uranium, ~~oil~~ and ~~gas~~ oil and ~~commercial real estate properties~~gas. The Company ~~participates~~also inhas ~~most of these~~been ~~ventures~~engaged ~~with~~to ~~U. S. Energy Corp. (“USE”) through~~ a ~~non~~limited ~~consolidated affiliate,~~extent ~~USECC Joint Venture (“USECC”). USE owns 70.1% of the Company’s common~~in ~~stock.~~ commercial ~~The~~real ~~Company~~estate, ~~and~~primarily ~~USE~~in ~~have~~connection ~~entered~~with ~~into~~acquiring ~~partnerships and formed affiliated~~mineral ~~companies~~ properties ~~through~~ which ~~they~~included ~~either~~commercial ~~joint~~real ~~venture or lease properties with non-related parties for the development and production of certain of their jointly owned mineral properties~~estate.

~~Liquidity~~The Company manages its operations through a non-consolidated joint venture, USECC Joint Venture ("USECC"), with its parent company, U.S. Energy Corp. ("USE"). USE owns 71% of the Company’s common stock. The Company has entered into partnerships through which it either joint ventured or leased properties with non-related parties for the development and ~~Capital~~production ~~Resources~~of certain of its mineral properties. The Company had no production from any of its mineral properties during the six months ended June 30, 2006.

AtUntil ~~June~~ the 30 calendar year ended December 31, 2005, the Company’s ~~had~~uranium ~~nominal~~and ~~cash~~gold onproperties were ~~hand,~~shut adown ~~shareholders’~~due ~~deficit~~to ~~of approximately~~depressed $3metals prices.9 ~~million~~During 2005 and a2006, ~~working capital deficit of approximately $10.4~~the ~~million.~~ market prices ~~The~~for ~~principal~~gold, ~~component~~uranium ofand ~~the~~molybdenum ~~working~~increased ~~capital~~to ~~deficit~~levels ~~was~~which amay ~~debt~~allow ~~payable~~ the Company to ~~USE~~place inthese ~~the~~properties ~~amount~~into ofproduction ~~approximately~~or ~~$11.5~~sell ~~million,~~part ~~which~~or ~~USE~~all ~~has~~of ~~agreed~~ them ~~not~~ to industry ~~demand~~participants. ~~payment~~Exploration ofwork ~~during~~was ~~the~~resumed ~~next~~on 14the ~~months.~~uranium ~~The debt to USE~~properties ~~increased~~ in 2005 ~~$1,889,100~~and ~~during~~new ~~the~~uranium ~~six~~properties ~~months~~have ~~ended~~been ~~June 30, 2005~~acquired.

OnUranium ~~June~~ - The 1, price ~~2005 the sale~~ of ~~all~~uranium ~~the~~concentrate ~~outstanding~~has ~~common~~increased ~~stock~~from ~~of Rocky Mountain Gas, Inc. (“RMG”) to Enterra US Acquisitions Inc. (“Acquisitions”)(~~a ~~privately-held Washington~~five ~~corporation~~year ~~organized~~low byof ~~Enterra Energy Trust (“Enterra”) was closed~~$7.25 ~~Enterra~~ per pound ~~paid~~in ~~$500,000~~January ~~cash~~2001 ~~and~~to ~~issued~~a ~~Enterra~~five ~~units~~year ~~(the~~high ~~"Enterra Initial Units"), valued at $5,234,000, net~~ of ~~the~~ $~~266,000~~46.50 ~~adjustment~~per ~~for~~pound ~~the~~on ~~purchase of overriding royalty interests (effective~~ June 130, ~~2005); and Acquisitions~~ ~~issued class D shares of Acquisitions valued at $14,000,000~~ 2006. ~~The Enterra Initial~~ ~~Units~~ (Ux ~~and the class D shares were issued pro rata to the RMG shareholders, with certain adjustments.~~ Weekly)

Gold - The ~~Company’s~~ five ~~participation~~year inlow ~~the~~for ~~consideration~~gold ~~received~~ was ~~approximately~~ $~~6,399,000.~~265 ~~The~~per ~~Company~~ounce ~~received~~in ~~91,029~~July ~~Enterra~~of ~~Initial~~2001. ~~Units,~~The ~~recorded~~market onprice ~~the~~ for ~~Company’s~~ gold ~~Balance~~has ~~Sheet~~risen atsince ~~June~~that ~~30,~~time ~~2005~~to asa ~~current~~five ~~marketable~~year ~~securities~~high of $~~2,164,600~~719.88 ~~(see~~per ~~Note~~ounce 5)on May 11, ~~and~~2006. ~~245,759~~The ~~Class~~price Dfor ~~shares~~gold ~~of Acquisitions, recorded~~ on ~~the~~ June 30, ~~2005~~2006 ~~balance~~was ~~sheet~~$613.50 asper ~~long~~ounce. ~~term investments in non affiliates~~(Metal ~~of $4,669,500~~ Prices. com).

~~The~~Molybdenum ~~Company~~ - ~~did~~Annual Metal ~~not~~Week ~~receive~~Dealer ~~any~~Oxide ~~cash~~mean prices for molybdic oxide averaged $24.73 per pound during the six months ended June 30, ~~2005 from the~~2006, ~~sale~~compared ofwith ~~RMG~~annual ~~but did receive net proceeds~~ averages of : $232.294 ~~million~~per ~~from~~pound ~~the~~in ~~sale of all~~2005, ~~its~~$16.41 ~~Enterra~~per ~~Initial~~pound ~~Units~~in ~~during~~2004, ~~the month of July 2005~~$5.32 ~~Management anticipates~~per ~~applying~~pound ~~most~~in ~~of these proceeds to the indebtedness owed to USE.~~2003 ~~The~~ and ~~Company~~ $3.77 isper ~~required~~pound toin ~~hold~~2002. ~~the~~The ~~class~~mean Dprice ~~shares of Acquisitions~~ for aDealer ~~period of one~~Oxide ~~year~~on ~~from~~ June 130, ~~2005~~2006 was $25.75 ~~After~~per ~~the~~pound. ~~holding~~(Metal ~~period~~Prices.com). isContinued ~~satisfied~~strong ~~the~~demand, ~~Company can exchange these shares on a one for one basis for units in Enterra~~ which has ~~will then~~ outpaced besupply ~~saleable~~over on the ~~Toronto~~past ~~Stock~~several ~~Exchange~~years -(deficit ~~Vancouver~~market ~~(“TSX-V”~~conditions)., has reduced Atinventory ~~July 31,~~levels ~~2005,~~throughout the ~~market price for Enterra units is approximately $25~~industry.

-12-

~~Capital~~The ~~Resources~~ Company holds mineral and related properties in uranium and gold and, with USE, received the Mt. Emmons project which is now known as the Lucky Jack project, a significant molybdenum property from Phelps Dodge Corporation (“PD”) on February 28, 2006. The rebound in uranium, gold and molybdenum therefore presents an opportunity for the Company to either develop or sell all or a portion of these properties to a third party.

AsManagement’s ~~noted above,~~ strategy ~~the~~to ~~Company~~generate ~~received~~a ~~net~~return ~~proceeds~~on ofshareholder ~~approximately~~equity ~~$2.2~~is ~~million~~first, ~~from the sale~~to ~~of all of its Enterra Initial Units during the third quarter of 2005.~~demonstrate ~~On June~~ prospective 1,value ~~2006,~~in the ~~245,759~~mineral ~~class~~properties Dsufficient ~~shares~~to ofsupport ~~Acquisitions (not traded anywhere)~~substantial ~~owned~~ investments by ~~the~~large ~~Company~~industry ~~will~~partners beand ~~exchangeable~~second, onto astructure ~~one-for-one basis, for~~these ~~additional~~ investments ~~Enterra~~to ~~units~~bring ~~(the~~capital ~~"Enterra~~and ~~Additional~~long ~~Units");~~term ~~the~~development ~~Enterra Additional~~expertise ~~Units~~to ~~will be tradable on the TSX at that time. Although the ultimate~~move ~~disposition of~~ the ~~class D shares of Acquisitions will not be determined until~~ ~~they~~ properties ~~are~~into ~~sold: the market value of the shares at July 31, 2005 was approximately $6~~production.~~1 million. Management of the Company is exploring means of monetizing these shares prior to the expiration of the twelve month holding period.~~

RMG’s minority equity ownership of Pinnacle Gas Resources, Inc. (“Pinnacle”) was not included in the disposition of RMG, but was assigned to the Company and USE in proportion to their ownership of RMG. The ~~Company therefore received 35%~~ ~~ownership~~ principal ofuncertainties ~~the Pinnacle equity and USE 65%. The transfer of this equity ownership of Pinnacle increased the Company’s long term investments~~ in ~~non affiliates by $335,200. Enterra is entitled to be paid by~~ the ~~Company~~successful ~~and~~implementation ~~USE an amount~~ of upour ~~to (but not more than) $2,000,000, if proceeds from a future~~strategy disposition by the Company and USE to a third party of their minority equity interest in Pinnacle exceeds $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 of the Company and USE upon a future disposition could be more or less than $10,000,000. The boards of directors of the Company and USE determined that the value of RMG’s minority equity interest in Pinnacle is approximately $6,250,000; based only upon Pinnacle’s recent sales of equity to its shareholders (RMG did not participate in those sales). Management of the Company anticipates selling its equity in Pinnacle at such time as it is either sold or becomes a public company. are:

~~As of April~~· ~~11,~~Whether ~~2005, the Company and USE, through USECC Joint Venture (“USECC”) signed~~ a ~~Mining~~feasibility ~~Venture~~study ~~Agreement~~will ~~with~~show ~~Uranium~~volumes ~~Power~~and ~~Corp.,~~grades ~~a British Columbia corporation, (“UPC,” formerly Bell Coast Capital Corp.) to establish a joint venture, with a term~~ of 30mineralization ~~years, to explore, develop~~ and ~~mine~~manageable ~~properties prospective~~costs for uranium being purchased by UPC under the December 8, 2004 Purchase and Sale Agreement, and acquire, explore and develop additional uranium properties. The initial purchase price for the UPC 50% interest in the properties is $4,050,000 and 4,000,000 shares of ~~common stock of UPC. As of July 31~~mining, ~~2005,~~transportation ~~the Company~~ and ~~USE through USECC~~processing, ~~have~~which ~~received~~are ~~$850,000~~sufficient ~~($500,000 in July~~to ~~2005).~~make ~~The~~a ~~Company~~profit and ~~USE also received 1,000,000 shares of UPC common stock in July 2005. The remaining $3.2 million and 3 million shares of UPC common stock are~~ to bebring ~~received~~industry inpartners ~~four equal payments every six months beginning June 2006. UPC has also agreed~~ to ~~fund up to $10 million in exploration projects by funding~~ the ~~first~~point ~~$500,000~~ of ~~each~~investment; ~~of 20 projects. If any of the scheduled payments or delivery of stock are not made by UPC the property ownership will revert back to the Company~~ and ~~USE.~~

~~In addition~~· toWhether ~~these~~USECC ~~payments,~~can ~~UPC~~negotiate isterms towith ~~pay~~industry ~~the~~partners ~~Company~~which ~~and~~will ~~USE~~return ana ~~additional $3.0 million~~substantial inprofit ~~two~~to ~~equal payments of $1.5 million after~~ the ~~price~~Company for ~~uranium~~its ~~oxide exceeds~~retained ~~$30.00/lb~~interest ~~for~~and ~~four consecutive weeks. This provision of~~ the ~~contract was met~~project’s ~~during~~development ~~the~~costs ~~six~~to ~~months~~that ~~ended~~point ~~June~~in ~~30, 2005~~time. ~~The Company and USE will therefore be receiving $1.5 million on April 26, 2006 and October 29, 2006.~~

~~The~~To ~~Company~~ some extent, ~~and~~the ~~USE~~economic ~~jointly~~feasibility ~~had~~of a ~~line~~particular ofproperty ~~credit~~can be changed with modifications ato ~~commercial bank in~~ the ~~amount~~ ~~of $750~~mining,~~000~~ ~~which expired on June 30~~transportation, ~~2005.~~milling ~~Management~~and/or ~~has~~processing ~~requested~~plans. ~~that~~ However, the ~~line~~overall ofprincipal ~~credit~~drivers beto ~~reinstated~~attainment ~~and is awaiting the decision~~ of the ~~bank’s~~business ~~loan~~strategy ~~committee.~~ are As the ~~line~~quality ofand ~~credit~~volume ~~has~~of ~~been~~the inminerals ~~place for over 5 years and has always been~~ in ~~good~~the ~~standing~~ground, itcost ~~is anticipated that it will be renewed. The line~~ of ~~credit is secured by certain real estate holdings~~ production, and ~~equipment~~commodity ~~jointly owned with USE~~prices. ~~This line of credit is used for short term working capital needs associated with operations.~~

Please see the risk factor disclosures of this Report for more information on the risks and uncertainties in the business.

Forward Looking Statements

This Report on Form 10-Q for the six months ended June 30, 2006 and Form 10-K for the year ended December 31, 2005 includes, "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("the Exchange Act"). All statements other than statements of historical fact included in this Report are forward-looking statements. In addition, whenever words like "expect", "anticipate”, or "believe" are used, the Company is making forward looking statements. Actual results may vary materially from the forward-looking statements and there is no assurance that the assumptions used will be realized in fact.

Critical Accounting Policies

Asset Impairments - We assess the impairment of property and equipment whenever events or circumstances indicate that the carrying value may not be recoverable.

Asset Retirement Obligations - The Company's policy is to accrue the liability for future reclamation costs of its mineral properties based on the current estimate of the future reclamation costs as determined by internal and external experts.

-13-

~~The~~Use ~~Company and USE continue to pursue the settlement~~ of aAccounting ~~long standing~~Estimates ~~arbitration/litigation~~ - ~~regarding the Sheep Mountain Partnership (“SMP”).~~ The ~~litigation~~ preparation ~~involves Nukem, Inc. (“Nukem”) and its subsidiary Cycle Resource Investment Corp.~~ of ~~Danbury,~~financial ~~Connecticut.~~statements ~~The~~in ~~case~~conformity iswith ~~currently~~generally ~~on remand to~~accepted ~~the arbitration~~ accounting ~~panel~~principles ~~following~~requires ~~Nukem’s~~management ~~third appeal~~ to ~~the~~make ~~Tenth~~estimates ~~Circuit~~and ~~Court of Appeals~~assumptions. These ~~Prior~~estimates toand ~~the~~assumptions ~~remand,~~affect ~~there was a $20 million judgment entered by~~ the ~~U.S.~~ ~~Federal~~reported ~~District~~amounts ~~Court~~ of ~~Colorado~~assets ~~in favor of the Company~~ and ~~USE. The~~ ~~timing~~ liabilities and ~~cost~~disclosure of ~~achieving~~contingent ~~final~~assets ~~resolution~~and ~~cannot~~liabilities beat ~~predicted.~~the ~~Management~~date of the ~~Company~~financial ~~believes~~statements, ~~that~~and the ~~ultimate~~reported ~~outcome~~amounts ~~will~~of berevenues ~~positive~~ and ~~in favor~~expenses of during the ~~Company~~reporting ~~and USE~~period. Actual results could differ from those estimates.

Income Taxes - The Company’s ~~capital~~accounts ~~resources~~for atincome ~~June~~taxes ~~30,~~under ~~2005,~~the ~~are~~provisions ~~not~~of ~~sufficient~~Statement toof ~~satisfy all~~Financial ~~the~~ Accounting ~~capital~~Standards ~~requirements of the Company~~No. To109 ~~provide~~(“SFAS ~~the~~109”), ~~capital~~“Accounting ~~resources needed~~ for ~~the~~Income ~~next~~Taxes”. ~~calendar~~This statement ~~year,~~requires ~~the~~recognition ~~Company~~of ~~will~~deferred ~~need~~income ~~to:~~tax ~~(1)~~assets ~~continue~~and toliabilities ~~successfully~~ for the ~~negotiate~~expected ~~the~~future ~~terms~~income oftax ~~its~~consequences, ~~debt~~based ~~with~~on ~~USE~~enacted tax laws, ~~(2)~~of temporary ~~sell~~differences between the ~~Class~~financial ~~D shares~~reporting ofand ~~Acquisitions~~tax ~~and/or~~bases ~~(3)~~of ~~successfully~~assets, liabilities ~~resolve~~and ~~the~~carry ~~Nukem litigation~~forwards.

~~Capital~~SFAS ~~Requirements~~ 109 requires recognition of deferred tax assets for the expected future effects of all deductible temporary differences, loss carry-forwards and tax credit carry-forwards. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for any tax benefits which, based on current circumstances, are not expected to be realized.

AsMarketable a Securities ~~result~~ - ofThe Company ~~the~~accounts ~~RMG~~for ~~disposition,~~its ~~the~~marketable ~~Company~~securities nounder ~~longer~~Statement ~~directly~~of ~~holds coalbed~~Financial ~~methane~~ Accounting ~~properties~~Standards ("SFAS") No. ~~The~~115, ~~Company~~Accounting ~~therefore~~for isCertain noInvestments in Debt ~~longer~~and ~~liable~~Equity toSecurities, ~~fund~~which ~~drilling programs~~requires ~~and~~certain ~~lease~~securities ~~holding~~to ~~costs~~be ~~related~~categorized as toeither: ~~those~~trading, ~~properties~~available-for-sale or held-to-maturity. ~~The~~Based ~~Company~~on ~~will~~the ~~however~~ Company's ~~continue~~intent to ~~participate~~sell in the ~~coalbed~~securities ~~methane~~its ~~business~~equity ~~through~~securities ~~its~~are carried ~~equity~~ at market ~~holdings~~value with net gains or (losses) recorded in ~~securities~~the Statement of ~~Enterra,~~Operations at ~~Acquisitions,~~each ~~and~~reporting period depending on the market value at close of accounting ~~Pinnacle~~ period.

~~Other~~Recent ~~capital~~ Accounting requirements of the Company during 2005 are general and administrative costs; its proportionate amount of drilling expenses related to uranium properties jointly owned with USE and those properties in the venture with UPC; holding costs of the SMP uranium properties in Wyoming; holding costs associated with a uranium mill and uranium properties in southern Utah, and the maintenance of jointly owned real estate.Pronouncements

~~The~~SFAS ~~average~~ 123(R) In December ~~care~~2004, ~~and~~the ~~maintenance~~FASB ~~costs~~issued ~~associated~~its ~~with~~final ~~the~~standard ~~SMP~~on ~~uranium~~accounting ~~mineral~~for employee ~~properties~~ stock inoptions, ~~Wyoming~~FAS No. 123 (ofRevised ~~which~~2004), ~~the~~"Share-Based ~~Company~~Payment" is("FAS123(R)"). FAS ~~responsible~~123(R) replaces FAS No. 123, "Accounting for ~~50%)~~Stock-Based isCompensation” (“FAS ~~approximately~~ 123"), ~~$200~~and supersedes Accounting Principles Board Opinion No. 25,~~000~~ ~~per~~"Accounting for ~~year~~Stock Issued to Employees”. AFAS ~~budget~~123(R) ~~through~~requires ~~December~~companies 31to measure compensation costs for all share-based payments, ~~2005~~including grants of ~~$567~~employee stock options,~~842~~ based on the fair value of the awards on the grant date and ~~has~~ to recognize ~~been~~such ~~approved~~expense over the period during which an employee is required to provide services in exchange for ~~exploration~~the ~~drilling~~award. The pro forma disclosures previously permitted under FAS 123 will no longer be an alternative to financial statement recognition. FAS 123 (R) is effective for all awards granted, ~~geologic~~modified, repurchased or cancelled after, and ~~engineering~~to ~~work~~unvested portions of previously issued and outstanding awards vesting after, interim or annual periods, beginning ~~reclamation~~ after June 15, 2005, which for us was the ~~Sheep~~first ~~Mountain~~quarter ~~properties~~of fiscal 2006. ~~The~~No ~~first~~stock-based employee ~~$500~~compensation cost is reflected in net income for the six months and quarter ended June 30,~~000~~ 2006, as all options granted under the plans had an exercise price equal to the market value of ~~these~~the underlying common stock on ~~funds~~ the date of grant and ~~one~~they ~~half~~were ofissued ~~any~~and ~~amount~~vested ~~over~~prior ~~that~~to ~~amount~~June 15, 2005. All future issuances of options under the plan will be ~~provided~~evaluated byusing ~~UPC.~~the ~~The~~Black ~~Company~~Scholes model and ~~USE~~expensed ~~will~~over bethe ~~required~~term toof ~~fund~~ the ~~balance~~option.

The Company ~~contractually~~has ~~participates~~reviewed inother ~~50%~~current ofoutstanding ~~the~~statements ~~cash~~from ~~requirements~~the ~~and cash~~Financial ~~receipts~~ Accounting ofStandards ~~Plateau~~Board ~~Resources~~and ~~Ltd.~~does ~~(“Plateau”).~~not ~~USE~~believe ~~owns~~that ~~100%~~any of ~~the~~those ~~common~~statements ~~stock~~ will ofhave ~~Plateau~~a ~~and~~material isadverse ~~responsible~~affect ~~for~~on the ~~other~~financial ~~50%~~statements of ~~cash requirements. Plateau owns and maintains~~ the ~~Shootaring Canyon Uranium Mill (the “Shootaring Mill”). The~~ Company ~~and USE have agreed to place their rights and ownership in~~ ~~Plateau~~ when ~~and other uranium assets into a newly formed entity, U~~adopted.~~S. Uranium Ltd. (“USUL”).~~

In March 2005, Plateau filed an application with the State of Utah to restart the Shootaring Mill. It will cost at least $25 million to modify the Mill’s tailings cell to Utah standards; post additional reclamation bonding, and complete other mill upgrades before production can begin. Additionally, a circuit to process vanadium which is contained in almost all of the mineralized material found in nearby mines, is planned to be added to the Mill. When refurbished and the operational license is issued, the Mill will have the capacity to produce up to 1.5 million pounds of uranium concentrates annually depending on the grade of material fed to the Mill. In order to fund the refurbishment of the Mill and acquire additional uranium properties from which to produce uranium bearing ores, USUL is seeking joint venture partners or equity participants and is exploring the possibility of becoming a public company.

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OnLiquidity August 14, 2003, Plateau sold all of the outstanding stock of its subsidiary Canyon Homesteads to The Cactus Group, LLC, (“Cactus”) for $3,470,000. Cactus signed a promissory note for $3,120,750 payable to Plateau for the purchase. As of June 30, 2005, the note was in default and aCapital Notice of Default was sent to Cactus who have 45 days from July 6, 2005 to cure the default. Cactus brought the note payments current on July 28, 2005 but is still in default on some of its covenants to maintain the property. Should Cactus default on its commitments or the note, Plateau would receive back the real estate which consists of a motel, boat storage, a C-Store, restaurant - lounge, trailer and home sites. In that event, the Company would be responsible for one half of the costs associated with the returned properties including remediation and operations.Resources

~~The~~As ~~employees~~ of ~~the Company and USE are not given raises on a regular basis. In~~ ~~consideration~~ June of30, ~~this~~2006 ~~and in appreciation of~~ the ~~work~~Company ithad ~~took~~sold ~~to develop and sell RMG~~100,000 ~~management~~units of ~~the~~its ~~Company~~Enterra ~~and USE accepted the recommendation of~~trading ~~the Compensation~~ securities. ~~Committee~~The toCompany ~~pay~~received ~~all~~$1,295,500 ~~employees~~from ~~and directors a bonus upon~~ the ~~closing~~ ofsales ~~the sale~~ of ~~RMG~~this ~~to Enterra. The Company’s share of these expenses is~~stock ~~included~~ and therefore inhad ~~equity~~$1,418,900 in ~~loss~~cash as of ~~affiliates~~June on30, ~~the accompanying condensed statement of operations~~2006. The ~~board~~Company ofalso ~~directors~~ has ~~granted similar bonuses in the past.~~ ~~In addition~~ 145,759 ~~there~~units ~~have been informal discussions between some officers and directors regarding the possible payment~~ of ~~bonuses~~Enterra towhich ~~some~~are ofrecorded ~~the~~as ~~key individuals~~trading ~~involved~~securities ~~over~~with ~~the past 14 years in the Nukem case once it is~~a ~~settled.~~ market value ~~However, the board~~ of ~~directors~~$1,966,400 ~~has~~at ~~not~~June ~~determined~~30, ~~whether such bonuses will be paid~~2006.

Additionally, at June 30, 2006, the Company had a working capital deficit of approximately $9,050,600 and a shareholders’ deficit of approximately $17,572,200. The principal component of the working capital deficit is a debt payable to USE in the amount of approximately $12,329,600, which USE has agreed not to demand payment of during the next 14 months. The debt to USE increased $919,600 during the quarter ended June 30, 2006 and $1,507,800 during the six months then ended.

During the six months ended June 30, 2006 the Company consumed $1,331,000 investing activities while operations and financing activities generated $1,241,200 and $1,413,600 respectfully. Although the Company recorded a net loss of $2,223,900 during the six months ended June 30, 2006 the majority of the loss were non-cash expenditures relating to an equity loss from USECC in the amount of $344,300, the exchange of the Enterra Acquisitions shares of stock to Enterra Energy Trust units of $1,354,200, the change in valuation of the derivative associated with the conversion feature of the Enterra Acquisition units of $223,600, the loss on the sale of Enterra units $53,500, noncash compensation of $94,200 and the accretion of reclamation liabilities of $99,800.

As a result of the decision of the U.S. Federal District Court of Colorado, and the Company’s decision to appeal that decision, the Company and USE must bond $7,538,340 as an award granted by the Court to Phelps Dodge Corporation (“PD”) in relation to ongoing litigation regarding the Lucky Jack molybdenum project in Colorado. The Company will also have to continue to pay interest at the rate of 5 ½% on the judgment until such time as the judgment is either overturned or ultimately paid. The Company has reviewed FAS 5, “Accounting for Contingencies”, and has determined that the likelihood of prevailing in the appeal is reasonably possible. Although a completely accurate prediction can not be made of the ultimate outcome or timing of an appeal, the Company’s legal expert in the matter believes that the Company will ultimately prevail in overturning the U.S. District Court’s award of attorney fees and costs. The proceeds from the sale of the Enterra units are expected to be sufficient to fund the bonding requirements of the appeal.

The Company received $1,295,500 from the sale of Enterra stock during the six months ended June 30, 2006. These funds were invested into USECC in the amount of $1,331,000, which resulted in the consumption of $35,300 in Investing Activities. Financing activities during the six months ended June 30, 2006 consisted of borrowings from USE in the amount of $1,413,600.

The Company believes that the current market prices for gold, uranium and molybdenum are at levels that warrant the exploration and development of the Company’s mineral properties. Management of the Company anticipates these metals prices will remain at levels which will allow the properties to be produced economically. Management of the Company therefore believes that sufficient capital will be available to develop its mineral properties from strategic industry partners, debt financing, and the sale of equity or a combination of the three. The successful development and production of these properties could greatly enhance the liquidity and financial position of the Company.

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Capital Resources

Enterra Energy Trust

The Company received 245,759 units of Enterra Energy Trust (“Enterra”) in June of 2006 as an automatic conversion from Enterra Acquisition shares which it received when it sold its interest in Rocky Mountain Gas, Inc. (“RMG”) during calendar 2005. During the month of June, 2006 the Company sold 100,000 of the Enterra units. It received $1,295,500 for the sale of these units. Management of the Company plans on selling the balance of the Enterra units, 145,759 units, during the third and fourth quarters of calendar 2006. At June 30, 2006 the market price for the Enterra units was $13.49 per share. The price for the Enterra units has decreased since that time and at July 28, 2006 it was $11.97 per share. Part of the decrease in the price of Enterra units is attributed to Enterra announcing that it was reducing its monthly dividend from $0.18 per share to $0.12 per share. In the event that the Company can obtain the current market price for the Enterra units it owns it would receive approximately $1.7 million.

Pinnacle Gas Resources, Inc.

USECC owns a minority interest in Pinnacle Gas Resources, Inc. (“Pinnacle”). Enterra is entitled to be paid an amount of up to (but not more than) $2,000,000, if proceeds from a future disposition by USECC to a third party of their minority equity interest in Pinnacle exceeds $10,000,000. On May 10, 2006, Pinnacle filed a registration statement with the Securities and Exchange Commission relating to sales of its common stock by the selling stockholders named therein. Information about Pinnacle can be obtained from its registration statement, on file with the SEC at www.sec.gov. This registration statement has not yet become effective. USECC owns 9.8% of the outstanding common stock of Pinnacle and is participating in the public offering. Once this registration statement becomes effective, management of the Company and USE may sell some or all of their equity in Pinnacle.

Uranium Power Corp.

On December 8, 2004 Uranium Power Corp. (“UPC”) signed a Purchase and Sales Agreement with USECC to purchase an undivided 50% interest in the Sheep Mountain properties. The agreement was amended on January 13, 2006.

UPC paid USECC $850,000 in calendar 2005, and issued 1,000,000 UPC shares to USECC (1/2 each to USE and Crested) in 2004 and 2005. As a result of the amendment, UPC has paid an additional $1,975,000 and issued 1.5 million more shares for a total of 2.5 million shares, against the purchase price. USECC sold 203,500 of these shares as of June 30, 2006 which generated $78,000 in net cash. These funds are used to pay operating costs of USECC.

An additional $4.1 million and 1.5 million shares are required to pay the full purchase price: $1.5 million on April 29, 2007 and $1.25 million on October 29, 2007 (provided UPC is required to pay 50% of all money it raises after January 13, 2006 until the two $1.5 million payments are made); and two additional payments each of $800,000 cash and 750,000 UPC shares (total $1,600,000 cash and 1,500,000 UPC shares) on June 29, 2007 and December 29, 2007.

USECC and UPC will each be responsible for paying 50% of (i) current and future Sheep Mountain reclamation costs in excess of $1,600,000, and (ii) all costs to maintain and hold the properties. UPC will contribute up to $10,000,000 to the joint venture (at $500,000 for each of 20 exploration projects). USECC and UPC each will be responsible for 50% of costs on each jointly approved project in excess of $500,000. As of June 30, 2006, UPC had funded $613,600 of the costs related to the properties in the venture. Of that amount the venture had expended $568,500.

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Closing of the agreement is required on or before December 29, 2007. UPC may terminate the agreement before closing, in which event UPC (i) would forfeit all payments made up to the termination date; (ii) lose all of its interest in the properties to be contributed by USECC under the agreement; (iii) lose all rights to additional properties acquired in the joint venture as well as forfeit all cash contributions to the joint venture, and (iv) be relieved of its share of reclamation liabilities existing at December 8, 2004.

Sutter Gold

On April 11, 2006, SGMI announced that it closed a non-brokered $759,100 private placement of 4,250,000 shares of its common stock at $0.18 per share. Each share also had an attached transferable warrant exercisable for two years at $0.27. Proceeds from this private placement will be used to fund additional exploratory/development core drilling on its Lincoln Gold Project.

On May 31, 2006, SGMI announced successfully closing a $2,818,900. The private placement consisted of 12,062,000 units at $0.225 per unit. Each unit comprises one common share and one 24-month warrant. Each warrant can be exercised to purchase one common share at a price of $0.315 per share. Proceeds from this private placement will fund a combined underground and surface diamond drill program and, if warranted, a feasibility study on its Sutter Gold Mine which is an advanced stage gold project in the historic Mother Lode located about 50 miles southeast of Sacramento, California.

Line of Credit

The Company, jointly with USE, has a $500,000 line of credit with a commercial bank. The line of credit is secured by certain real estate holdings and equipment jointly owned with USE. At June 30, 2006, the full line of credit was available to the Company and USE. This line credit is used for short term working capital needs associated with operations.

Other

On May 15, 2006, the Arbitration Panel (“Panel”) in the Nukem and Sheep Mountain Partners (“SMP”) case issued a Clarification of the Arbitration Award as a result of the remand to the Panel by the United States District Court for the District of Colorado pursuant to the Order of the 10^th Circuit Court of Appeals. In its Clarification of the Arbitration Award, the Panel held that the Constructive Trust was intended to secure the payment of the original damage award of $15 million and it was extinguished upon Nukem’s payment of that damage award to USECC. The Company therefore will not receive its portion of the previously disclosed $20 million judgment from Nukem.

The Company’s capital resources at June 30, 2006, are not sufficient to satisfy all the capital requirements of the Company. To provide the capital resources needed for the next calendar year, the Company will need to (1) continue to successfully negotiate the terms of its debt with USE and (2) sell its Enterra units and/or equity.

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Capital Requirements

The direct capital requirements of the Company during 2006 remain its general and administrative costs; expenses and funding of exploration drilling; the holding costs of the Sheep Mountain uranium properties in Wyoming and a uranium mill and uranium properties in southern Utah, Colorado and Arizona and the maintenance of jointly owned real estate. During the six months ended June 30, 2006, the Company and USE reacquired the Mt. Emmons molybdenum property, now known as the Lucky Jack Project (“Lucky Jack”), from PD. In addition to receiving the Lucky Jack property the Company and USE became the owners of a water treatment plant which is attached to the property and thereby responsible for the operation of the plant.

Maintaining Mineral Properties

Uranium Properties

The agreement with UPC calls for UPC to fund 50% of the expenses associated with maintaining the Sheep Mountain uranium properties in central Wyoming and five other uranium projects and performing exploration drilling on them. A budget of $2.3 million for the year ending December 31, 2006 has been approved, relating to reclamation work at the uranium properties, exploration drilling, geological and engineering work and other costs. UPC has also agreed to fund the first $500,000 of all approved projects up to a total of $10,000,000 and has advanced $613,600 against the 2006 approved budget. In the first half of 2006, a total of $568,500 was expended under these approved projects. The average care and maintenance costs associated with the Sheep Mountain uranium mineral properties in Wyoming is approximately $200,000 per year of which UPC is required to pay 50% annually.

Plateau Resources Limited, Inc., Uranium Properties

The Company is contractually obligated to fund 50% of the cash requirements of Plateau Resources Limited, Inc. (“Plateau”) and will share in 50% of any cash receipts of Plateau. USE is responsible for the other 50%. Although the Company participates in 50% of the cash flow from Plateau; 100% of the common stock of Plateau is owned by USE. Plateau owns and maintains the Shootaring Canyon Uranium Mill (the “Shootaring Mill”). In March 2005, Plateau filed an application with the State of Utah to restart the Shootaring Mill. If management’s projections of placing the Shootaring Mill into production hold, reclamation on the property is not anticipated to commence until some time in 2033.

It is anticipated that $31 million will be required to modify the Shootaring Mill’s tailings facility to the State of Utah standards and complete other mill upgrades before production can begin. Additionally, a circuit to process vanadium, which is contained in almost all of the mineralized material found in nearby properties, may be added to the Shootaring Mill. In order to fund the refurbishment of the Shootaring Mill and acquire additional uranium properties from which to produce uranium bearing ores, USECC is seeking joint venture partners or equity participants. Once the State of Utah grants Plateau an operating license for the Shootaring Mill the bonding requirement will be increased.

On February 27, 2006, Plateau re-acquired, by Foreclosure Sale, the Ticaboo townsite operations (“Ticaboo”) located in southern Utah near Lake Powell. The Ticaboo property includes a motel, restaurant and lounge, convenience store, recreational boat storage and service facility, and improved residential and mobile home lots. On April 12, 2006 Plateau signed a contract with ARAMARK Sports and Entertainment Services, Inc. for the management and operation of Ticaboo. Initially, the Company will be responsible for capital up-grades to the Ticaboo properties which are currently estimated to be approximately $250,000.

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Agreement with Uranium Power Corp.

USECC and Uranium Power Corp. (“UPC”) signed an option agreement on May 11, 2006 to add two new projects; the Green River North and the Green River South projects, located in Emery County, Utah. USECC and UPC will hold equal interests in UPC’s rights to earn 70% under the Initial Option, and another 10% under the Additional Option, in the Green River South project. For the Initial Option, UPC will provide the first $500,000, and USECC will provide the second $500,000. The cash payment and the exploration and development commitment for the Additional Option will be equally funded by UPC and USECC. For the UPC stock component on both the Initial Option and the Additional Option, USECC will pay UPC (in cash, UPC stock, or the Company and USE stock) 50% of the lesser of (i) UPC’s stock price at the time the stock is issued by UPC , and (ii) Cdn$1.00 per share.

The Green River South project, previously known as the Sahara Property, was optioned by UPC from the Uranium Group (“UG”) pursuant to an Amended and Restated Option and Joint Venture Agreement. Under this agreement, UPC has an option to earn a 70% interest (the “Initial Option”) by making payments to UG of $585,000 and 200,000 shares of UPC stock and paying $1,365,000 for exploration and development activities, all over the four years ending December 31, 2009. Until the Initial Option is exercised, UPC will be solely responsible for paying property maintenance costs. At any time after UPC has paid the full price for the Initial Option (whether with the last installment on December 31, 2009, or earlier), UPC can earn a further 15% interest (the “Additional Option”) by paying UG an additional $300,000, issuing to UG 400,000 more UPC shares, and spending an additional $700,000 (over the year following exercise of the Additional Option) on exploration and development work.

If the long term price of uranium oxide is below $20.00 per pound for four consecutive weeks in any calendar year, the payments for that year will be reduced by 50% and the balance deferred to the next year. If the uranium oxide price continues below $20.00, (or recovers but then falls below $20.00 in one or more subsequent years) the balance will be deferred to the next year or years after 2010.

After exercise of the Initial Option (and the Additional Option, if exercised), UG and UPC will fund programs and budgets in proportion to their interests in the property. A party’s interest will be reduced in proportion to its non-funding of costs. If a party’s interest is reduced to 10% or less, its interest will be converted to either a 10% net profits interest or a 2% gross income royalty.

At such time as the Initial Option is exercised, UPC is required to make available to UG a three year $1 million revolving loan (8% simple interest on outstanding balance) for purposes of UG funding its obligations on the project.

UPC (or its designee) is the manager of the project, and will be entitled to compensation (for reasonable management costs, not for profit) of not more than 10% of direct costs associated with exploration activities, plus not more than 2% of direct costs associated with contract work related to development and mining and the purchase of capital equipment. These percentages are subject to adjustment by the parties.

UPC will own a 50% interest in the Green River North project through its participation in the Mining Venture Agreement with USECC, consistent with UPC’s 50% participation in the other uranium properties held by that joint venture.

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Sutter Gold Mining Inc. (SGMI) Properties

Sutter Gold has initiated an 18,000 foot underground drilling program to delineate the currently drilled out property to further define the number of ounces available for mining. The 2006 drill program will be divided between underground and surface holes. The 24 hole underground step-out and infill drill program will further define areas with significant mineralized material in six vein structures at the southern end of the Comet zone. The underground drill stations will be located at the end of the existing 2,850 foot decline. The 9 to 12 hole surface drill program is to grid test an area containing what may be another significant mineralized zone in the K5 Vein, historically mined on Sutter's property at the South Spring Hill Mine. Historical records from this area of the K5 Vein reported that portions of the vein were mined with widths ranging from 8 to 70 feet from the mine's drifts and crosscuts.

The estimated cost of these projects is $1.2 million during the balance of calendar 2006. Capital to fund these projects was obtained from private placements of SGMI’s common stock. See Capital Resources above.

Lucky Jack Molybdenum Project

USECC re-acquired the Lucky Jack molybdenum project, formerly known as the Mt. Emmons molybdenum property, located near Crested Butte, Colorado on February 28, 2006. The property was returned to USECC by Phelps Dodge Corporation (“PD”) in accordance with a 1987 Amended Royalty Deed and Agreement between USECC and Amax Inc. (“Amax”).

USECC has decided to pursue permitting and development of the property and are now engaged in the active pursuit of a sizable mining industry partner to co-develop and mine the property. In order to do so, USECC may have to obtain a mine feasibility study which is estimated will cost approximately $2.5 million. Of this total amount, it is anticipated by management that approximately $1.0 million will be spent during the year ended December 31, 2006.

Conveyance of the property by PD to USECC also included the transfer of ownership and operational responsibility of the mine water treatment plant located on the properties. Operating costs for the water treatment plant are expected to approximate $1 million annually. In an effort to assure continued compliance, USECC has retained the technical expert and contractor hired by PD on January 2, 2006 to operate the water treatment plant.

On July 25, 2006 the U.S. District Court of Colorado awarded PD attorney fees and costs in the amount of $3,223,047 and operational expenses for the water treatment plant on the Lucky Jack molybdenum property in the amount of $4,315,293. The total amount of the award is $7,538,340. The Company and USE have determined that they will appeal the decision of the U.S. District Court to the 10^th Circuit Court of Appeals. The Company has reviewed FAS 5, “Accounting for Contingencies”, and has determined that the likelihood of prevailing in the appeal is reasonably possible. Although a completely accurate prediction can not be made of the ultimate outcome or timing of an appeal, the Company’s legal expert in the matter believes that the Company will ultimately prevail in overturning the U.S. District Court’s award of attorney fees and costs.

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Results of Operations

~~Quarter and~~ Six Months Ended June 30, ~~2005~~2006 compared with the ~~Quarter and~~ Six Months Ended June 3020, ~~2004~~ 2005

During the three and six months ended June 30, 2006 and June 30, 2005 the Company had no operating revenues. Operating costs and expenses consisted of non cash accretion of asset retirement obligations of $99,800 for the six months ended June 30, 2006 and $29,200 for the three months ended then. The increase in accretion expenses during the six months ended June 30, 2006 as compared to those recorded at June 30, 2005 of $54,400 is as a result of a re-estimation of the actual reclamation cost associated with the Sheep Mountain uranium properties.

During the three and six months ended June 30, 2006 the Company recorded a loss from the exchange of the Enterra Acquisition shares of $1,354,200 and a loss of $53,500 from the sale of Enterra units. The Company received exchangeable shares of Enterra Acquisitions when it sold RMG to Enterra in June of 2005. These shares were convertible to units of Enterra Energy Trust after a one year holding period. Prior to the actual conversion the conversion feature of the Enterra Acquisition shares was accounted for as an imbedded derivative. At the time the actual conversion took place the market price of Enterra Energy Trust units had significantly decreased. The Company plans on selling the units so the Enterra Energy Trust units are recorded at market as trading securities. This therefore resulted in a loss of $1.3 million. During the six months ended June 30, 2006 the Company received $1,295,500 from the sale 100,000 units of Enterra Energy Trust but recognized a loss on the sale of these units of $53,500 due to further declines in the market price of Enterra units.

During the six months ended June 30, 2006 the Company recorded a net loss of $223,600 from the value of the derivative discussed above on the Enterra Acquisition shares. During the six months ended June 30, 2005 the Company recognized revenue of $1,228,800 from the valuation of the derivative. Additionally the Company recorded a net gain on the sale of RMG of $5,882,500 during the six months ended June 30, 2005.

Operations resulted in a net loss per share of $0.13 for during the three and six months ended June 30, 2006 as compared to a net gain per share of $0.34 per share during the six months ended June 30, 2005 and a net gain during the three months ended June 30, 2005 of $0.36 per share. The primary difference in the two periods is the sale of RMG and the gain recognized on the valuation of the imbedded derivative in the Enterra Acquisitions shares.

Six Months Ended June 30, 2005 compared with the Six Months Ended June 30, 2004

During the quarter and six months ended June 30, 2005 the Company had no revenues or income from operations. The expenses incurred relate to General and Administrative costs and the accretion of the reclamation liability of the Company on the SMP uranium properties. General and Administrative costs and expenses decreased by $22,100 during the six months ended June 30, 2005 and $11,000 during the quarter ended June 30, 2005 when compared with the same periods ended June 30, 2004. This reduction in General and Administrative expenses was primarily related to reduced professional services. During the quarter and six months ended June 30, 2004, the Company recorded a $25,800 change in the estimate of asset retirement obligation on the SMP properties. No adjustment in the asset retirement obligation occurred during the quarter or six months ended June 30, 2005.

During the quarter and six months ended June 30, 2005, a gain was recognized on the sale of RMG, for the receipt of 91,029 Enterra Initial Units and 245,759 Class D shares of Acquisitions valued at $19.00 each or a total of $6,399,000. The gain was offset by the Company’s investment in RMG; the purchase of an overriding royalty from an entity that had financed the purchase of RMG’s producing properties, and the Company’s portion of the buy-out of the RMG minority shareholders’ interest in Pinnacle. Additionally, the Company recognized a 10% discount as deferred income of $424,500 on the Class D shares of Acquisitions as they are not marketable for one year from June 1, 2005. The net gain recognized on the sale of RMG was therefore $5,458,000 for both the three and six months ended June 30, 2005.21-

During the quarter and six months ended June 30, 2005, a gain was recognized on the sale of RMG, for the receipt of 91,029 Enterra Initial Units and 245,759 Class D shares of Acquisitions valued at $19.00 each or a total of $6,399,000. The gain was offset by the Company’s investment in RMG; the purchase of an overriding royalty from an entity that had financed the purchase of RMG’s producing properties, and the Company’s portion of the buy-out of the RMG minority shareholders’ interest in Pinnacle. The net gain recognized on the sale of RMG was therefore $5,882,500 for both the three and six months ended June 30, 2005. The Company also recognized a gain of $1,228,800 from the valuation of the embedded derivative pursuant to SFAS 133. The valuation of the derivative was made using the Black Scholes model with a risk free interest rate of 4.38% and a stock price volatility of 33.1%.

Equity losses from affiliates increased $301,600 during the six months ended June 30, 2005 and $398,600 during the quarter then ended. The increase in equity losses for both periods related to expenses in the sale of RMG, a bonus paid to employees and directors following the sale of RMG to Enterra and increased professional costs associated with complying with Sarbanes Oxley. One outside director of RMG was paid a bonus of $10,000 for his work on the development of RMG, and the five outside directors of USE were paid $5,000 each for a total bonus to the directors of $35,000.

The employees were paid a total bonus of $435,750 at the close of the sale of RMG. All employees of the Company and USE participated in this bonus as they all helped develop RMG and many have not received increases in compensation for a number of years. Officers of the Company, USE and RMG received the following bonuses: Mark Larsen, President of RMG $140,000, officers of the Company and USE -~~15-~~ Keith Larsen and Scott Lorimer $40,000 each, and John L. Larsen, Daniel P. Svilar and Harold F. Herron $20,000 each. In addition to these Officers, Mr. Steve Youngbauer who serves as Assistant General Counsel to Mr. Svilar received a bonus of $40,000. There were two additional members of John L. Larsen’s family who received bonuses for a total compensation amount of bonuses to Mr. Larsen’s family of $226,000. The total amount paid in bonuses to the directors, officers and employees for extraordinary work in closing the Enterra purchase of RMG was $470,750 which represents 2.5% of the total consideration received by the Company and USE from the sale of RMG to Enterra. The Company was obligated to pay one half of these expenses.

The ~~employees~~ Company ~~were~~recorded ~~paid~~ a ~~total~~net ~~bonus~~gain of $~~435~~5,~~750~~764,800 ator ~~the~~$0.34 ~~close~~per ofshare during the ~~sale of RMG.~~six ~~All~~ months ~~employees~~ended ofJune ~~the~~30, ~~Company~~2005 ~~and USE participated in this bonus~~ as ~~they~~compared ~~all helped~~to ~~develop~~a ~~RMG~~net ~~and~~loss ~~many~~of ~~have~~$992,800 ~~not~~or ~~received increases in compensation for~~ a ~~number~~ loss of ~~years~~ $0.06 ~~Officers~~per ofshare ~~the~~during ~~Company, USE and RMG received~~ the ~~following bonuses:~~six ~~Mark~~months ~~Larsen,~~ended ~~President~~June ~~of RMG $140~~30,~~000,~~ ~~officers~~2004. ofThe ~~the~~net ~~Company~~gain ~~and~~for ~~USE~~ the - quarter ~~Keith~~ended ~~Larsen~~June ~~and~~30, ~~Scott~~2005 ~~Lorimer~~was $406,~~000 each~~198,300 ~~and~~or ~~John L. Larsen, Daniel P. Svilar and Harold F. Herron~~ $~~20,000 each~~0.36 Inper ~~addition~~share ~~to these Officers, Mr. Steve Youngbauer who serves~~ as ~~Assistant General Counsel~~ compared to ~~Mr. Svilar, received~~ a net ~~bonus~~loss of $40465,~~000.~~400 ~~There~~or ~~were two additional members of John L. Larsen’s family who received bonuses for a total compensation amount of bonuses to Mr. Larsen’s family of~~ $~~226,000~~0.03 ~~The~~per ~~total~~share ~~amount paid in bonuses to the directors, officers and employees~~ for ~~extraordinary work in closing~~ the ~~Enterra~~quarter ~~purchase~~ended ofJune ~~RMG was $470~~30,~~750 which represents 2.5% of the total consideration received by the~~ ~~Company and USE from the sale of RMG to Enterra~~ 2004. ~~The Company was obligated to pay one half of these expenses.~~

The Company recorded a net gain of $4,111,500 or $0.24 per share during the six months ended June 30, 2005 as compared to a net loss of $992,800 or a loss of $0.06 per share during the six months ended June 30, 2004. The net gain for the quarter ended June 30, 2005 was $4,536,000 or $0.26 per share as compared to a net loss of $465,400 or $0.03 per share for the quarter ended June 30, 2004.

Six Months Ended June 30, 2004 compared with the Six Months Ended June 30, 2003

The Company had no revenues during the three and six months ended June 30, 2004 and 2003.

Costs and expenses for the six months ended June 30, 2004 increased to $204,100 compared to costs of $134,400 recognized during the six months ended June 30, 2003. This increase came as a result of increased fees associated with professional services primarily related to Sarbanes Oxley compliance and a charge to earnings due to excess monies expended on reclamation from those planned in the amount of $25,800.

The Company recorded an equity loss from USECC of $788,700 during the six months ended June 30, 2004 as compared to equity losses of $756,000 from USECC and $644,300 from RMG or a total of $1,400,300 during the six months ended June 30, 2003. The primary reason for the decrease in the equity losses was as a result of the discontinuation of the recognition of RMG’s equity losses due to no value remaining on the books of the Company for its investment in RMGof RMG Pinnacle Gas Resources, Inc., a minority owned affiliate.

The Company recorded $293,800 as the cumulative effect of accounting changes as a result of the adoption of SFAS 143 during the six months ended June 30, 2003. No similar transaction was recognized during the six months ended June 30, 2004.

The Company recorded a net loss of $992,800 or $0.06 per share during the six months ended June 30, 2004, as compared to a net loss of $1,828,500 or $0.11 per share for the six months ended June 30, 2003.

Forward Looking Statements

This Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("the Exchange Act"). All statements other than statements of historical fact included in this Report, are forward-looking statements. In addition, whenever words like "expect", "anticipate" or "believe" are used, we are making forward looking statements. For all the above reasons, actual results may vary materially from the forward-looking statements and there is no assurance that the assumptions used are necessarily the most likely to occur.

-16-

Critical Accounting Policies

Employee Stock-Based Compensation - On December 16, 2004, the Financial Accounting Standards Board ("FASB") issued FASB No. 123(R), Accounting for Stock-Based Compensation, which replaces FASB 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. Under the terms of FASB 123(R), the Company will be required to expense the fair value of stock options should it issue such options to employees. The fair value is determined using an option-pricing model that takes into account the stock price at the grant date, the exercise price, the expected life of the option, the volatility of the underlying stock, the expected dividends on it and the risk-free interest rate over the expected life of the option. The fair value of an option estimated at the grant date is not subsequently adjusted for changes in the price of the underlying stock or its volatility, life of the option, dividends on the stock, or the risk-free interest rate. The Company will be required to begin reporting under FASB 123(R) on the first interim report after December 31, 2005.

Asset Retirement Obligation - The Company's policy is to accrue the liability for future reclamation costs of its mineral properties under SFAS 143 based on the estimated future reclamation costs as determined by internal and external experts. The present value of the obligation is accreted each period as the date of obligation settlement approaches. The Company deducts actual funds expended from the accrued liability during the quarter in which it is expended. As a result of the Company having no remaining net book value for the properties and no economic benefits to be received in future periods, all changes in estimates are charged to operations in the quarter in which they are recorded.

Contractual Obligations

There have been no material changes outside the ordinary course of business in the Company's contractual obligation from those discussed in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2004~~2005.

~~Recent~~Subsequent ~~Accounting Pronouncements~~ Events

~~The~~Exclusivity ~~Company~~ Agreement ~~has~~for ~~reviewed~~potential ~~all~~sale ~~current outstanding statements from the Financial Accounting Standards Board and does not believe that any~~ of ~~those~~uranium ~~statements will have a material adverse effect on the financial statements of the Company when adopted.~~ properties

On July 10, 2006, USECC signed an Exclusivity Agreement with sxr Uranium One Inc. (“Uranium One” or “SXR”), which is headquartered in Toronto, Canada with offices in South Africa and Australia (TSE and JSE “SXR”). Upon signing the Exclusivity Agreement, the Term Sheet (signed by Uranium One, and by USEG and Crested on June 22, 2006) became effective. The Term Sheet sets forth the indicative terms of a proposed sale of the majority of the USEG and Crested’s uranium assets to Uranium One.

-22-

Under the terms of the Exclusivity Agreement, Uranium One paid USECC $750,000 (nonrefundable, except for material breach of the Exclusivity Agreement) for the exclusive right to purchase the USECC uranium assets, including the Shootaring Canyon uranium mill in southeast Utah (and all geological libraries and other intellectual property related to the acquired assets and the mill), for a period of up to 270 days (an initial six month period, plus an optional three month extension). During this time, the parties will prepare definitive acquisition agreements. Subject to satisfactory results on Uranium One’s due diligence review and obtaining all required approvals associated with the sale and purchase of the assets, the definitive agreements will be signed and the sale closed as soon as possible.

The Exclusivity Agreement provides that when the assets acquisition is closed, Uranium One will reimburse USECC for those expenses which have been pre-approved by Uranium One.

Under the Term Sheet, Uranium One has the right to purchase the assets under the following terms:

$49,250,000 in Uranium One common stock at a set price at closing (the set price is the volume weighted average price of Uranium One stock for the 10 days prior to signing the Exclusivity Agreement, which is US $7.45 per share or Cdn $8.32). This represents the $50 million portion, less the cash paid for the Exclusivity Agreement.

·	$20 million in cash upon the start of commercial operation of the Shootaring Canyon uranium mill.

·	$7.5 million in cash upon the first delivery of mineralized material to a commercial uranium mill from any of the purchased properties that are subject to the Agreement.

·	A cash royalty equivalent to 5% of the revenues derived from the sales value of any commodity produced from the Shootaring Canyon uranium mill, to a maximum royalty payment of $12.5 million.

USECC holds a 4% net profits interest on Rio Tinto’s Jackpot uranium property located on Green Mountain in Wyoming. This interest will not be included in the agreement to sell uranium assets to SXR. SXR has announced that it may acquire the Sweetwater mill and the Green Mountain properties from Rio Tinto, separate from the proposed transaction with USECC.

Litigation with Phelps Dodge

On July 25, 2006, the United States District Court for the District of Colorado entered an order granting a motion for attorney fees and costs in favor of Phelps Dodge Corporation and Mt. Emmons Mining Company. A hearing on the motion was held on July 20, 2006. The motion was made in the case of Phelps Dodge Corporation and Mt. Emmons Mining Company v. U.S. Energy Corp. and Crested Corp (Civil Cases No. 02-cv-00796-LTB-PAC), subsequent to the plaintiffs (Phelps Dodge Corporation and Mt. Emmons Mining Company) prevailing in a declaratory judgment action against U.S. Energy Corp. and Crested Corp. regarding the parties’ rights related to molybdenum properties located near Crested Butte, Colorado (the “Mt. Emmons properties”). The court had entered an order in the declaratory judgment action on February 4, 2005. As a result of that earlier order, U.S. Energy Corp. and Crested Corp. have taken title to the subject mineral properties with an existing water treatment plant located thereon.

-23-

The court ordered that U.S. Energy Corp and Crested Corp. pay Phelps Dodge $7,538,340 for (i) attorney fees and costs of $3,223,047; plus (ii) operations expenses of $4,315,293 for the Mt. Emmons properties (including costs for Phelps Dodge to operate the water treatment plant for the period from July 2002 through August 2005) and 5 ½% interest on the outstanding judgment amount.

The Company and USE have determined that they will appeal the decision of the U.S. District Court to the United States Tenth Circuit Court of Appeals.

Patent Mining Claims at Lucky Jack Molybdenum Project

United States Tenth Circuit Court of Appeals Affirmation of Lower Court Dismissal of Challenges to Mt. Emmons Patents. On July 21, 2006, the United States Tenth Circuit Court of Appeals (the “10^th CCA”) affirmed the January 12, 2005 United States District Court for the District of Colorado dismissal of challenges to the issuance of mining patents (by the United States Bureau of Land Management) on certain of the properties comprising the Mt. Emmons properties, to Phelps Dodge Corporation and Mt. Emmons Mining Company. The case is High Country Citizen’s Alliance, Town of Crested Butte, Colorado, and The Board of County Commissioners of the County of Gunnison, Colorado v. Kathleen Clarke, Director of the Bureau of Land Management et. al., Gale Norton, Secretary of Interior, U.S. Department of the Interior; Phelps Dodge Corporation; Mt. Emmons Mining Company (the 10^th CCA case number is D.C. No. 04-MK-749PAC).

The subject patents (and adjacent properties) are held by U.S. Energy Corp. and Crested Corp. For further information on the Mt. Emmons property, and the background of this litigation (to which neither U.S. Energy Corp. nor Crested Corp. have been parties), please see the Form 10-Ks for the year ended December 31, 2005 filed by U.S. Energy Corp. and Crested Corp.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Risk Factors

The following risk factors should be considered in evaluating the information in this Form 10-Q.

WeAs ~~have~~ noted above, aPinnacle ~~history~~filed ofa ~~operating~~registration ~~losses,~~statement ~~and~~with ~~current~~the ~~working~~Securities ~~capital,~~ and ~~future~~Exchange ~~receipt~~ Commission ofrelating ~~funds~~to ~~from~~sales ~~liquidating~~of ~~investments,~~its ~~may~~common bestock. ~~insufficient~~This toregistration ~~develop~~statement ~~our~~ has ~~mineral~~not ~~properties,~~yet ~~none~~become ofeffective. ~~which~~The ~~have~~USECC ~~proved~~owns ~~reserves~~9. ~~At June 30,~~8% ~~2005,~~of wethe ~~had~~outstanding acommon stock ~~working~~of ~~capital~~Pinnacle; ~~deficit~~and ofis ~~$10,427,600,~~participating ~~and~~in anthe ~~accumulated~~public offering. The cash ~~deficit~~ the Company ofcan ~~$15,778,200.~~realize from this investment presently is not determinable.

-The Company has a history of operating losses, current working capital deficits and future receipt of funds from liquidating investments may be insufficient to develop our mineral properties, none of which have proved reserves. At June 30, 2006, we had a working capital deficit of $9,050,600, and an accumulated deficit of $17-,572,200.

~~Working~~Cash ~~capital~~ on hand and future receipt of proceeds from liquidating the Enterra ~~securities are~~units are expected to be ~~sufficient~~adequate to fund ~~general~~the ~~and~~Company’s ~~administrative expenses, service a~~ portion of the ~~debt~~cost ~~owed~~of ~~to USE, and conduct exploration and~~ a ~~limited~~bond ~~amount~~ needed ofto ~~development~~appeal ~~work on~~ the ~~mineral~~judgment ~~properties,~~relating ~~through~~to ~~2006.~~PD ~~However, putting mineral properties into production (constructing and operating mines and processing facilities) requires very substantial amounts of capital~~judgement. WeUSECC ~~are seeking~~is 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~~USECC has successfully negotiated an Exclusivity Agreement with SXR to sell a majority of their uranium assets. The development of some or all of the properties likely will be delayed to the extent and for so long as weUSECC ~~are~~is unsuccessful in obtaining financing, either in direct capital or through arrangements with industry partners.

If the Company and USE agree to reduce a substantial amount of the debt owed by the Company to USE by issuing common stock to USE, the other shareholders of the Company could incur significant dilution in ownership.-24-

~~Uncertainties~~If in the Company ~~value~~and USE agree to reduce a substantial amount of the ~~mineral~~debt ~~properties.~~owed by ~~While~~ the we Company ~~believe~~to ~~that~~USE ~~our~~by ~~mineral~~issuing ~~properties~~Crested ~~are~~common ~~valuable~~stock to USE, ~~substantial~~the ~~work~~other ~~and~~shareholders ~~capital~~ of the ~~will~~Company becould ~~needed~~incur tosignificant ~~establish~~dilution ~~whether they are valuable~~ in ~~fact~~ownership.

~~· The profitable mining and processing of uranium and vanadium at and~~ Uncertainties in the ~~vicinity~~value of ~~Plateau’s~~the mineral properties. While USECC inbelieves ~~Utah~~that ~~will~~their ~~depend~~mineral ~~on many factors: Obtaining~~ properties inare ~~proximity to the Shootaring mill to keep transportation costs economic; delineation through extensive drilling and sampling of sufficient volumes of mineralized material~~valuable, ~~with~~substantial ~~sufficient grades, to make mining~~ work and capital ~~processing~~will ~~economic~~be ~~over~~needed ~~time; continued sustained high prices for uranium oxide and vanadium; obtaining the capital required~~ to ~~upgrade~~establish ~~the~~whether ~~Shootaring~~they ~~mill~~are ~~and~~in ~~add a vanadium circuit; and obtaining and continued compliance with operating permits~~fact valuable.

· ~~The~~In ~~profitable~~the ~~mining~~event atthat SXR does not purchase the ~~Sheep~~uranium ~~Mountain~~assets ~~properties~~owned inby ~~Wyoming~~USECC, we will ~~depend~~have ~~on:~~to ~~Evaluation~~continue ofto ~~existing~~pursue ~~data~~an equity or industry partner to ~~delineate~~assist ~~sufficient~~in ~~volumes~~the development of ~~mineralized~~the ~~material,~~properties. ~~with~~Profitability ~~sufficient~~of ~~grades,~~the touranium ~~make~~properties ~~mining~~will ~~and~~depend ~~processing~~on ~~economic~~several ~~over~~factors ~~time;~~which include continued sustained ~~high~~higher prices for uranium oxide;, ~~and~~we ~~UPC~~need ~~and~~to maintain cost controls at the ~~Company~~Shootaring ~~having~~Uranium ~~sufficient~~property ~~capital~~in toSouthern ~~complete~~Utah on the ~~drilling~~mining, transportation and ~~sampling~~milling ~~work.~~of Inores ~~addition,~~and ~~there~~successfully isfinance noand ~~operating~~commence ~~mill~~refurbishment ~~near~~of ~~Sheep~~the ~~Mountain;~~mill. ~~the~~Additionally ~~ultimate~~we ~~economics~~may ofneed ~~mining~~to ~~the~~either ~~Sheep~~acquire ~~Mountain~~additional mineral properties ~~will~~in ~~depend~~the onvicinity ~~access~~of tothe aShootaring mill or ~~sufficiently~~acquire ~~high~~ore ~~uranium~~from ~~oxide~~contract ~~prices~~miners toin ~~warrant~~the ~~shipments to faraway mills~~area.

· The profitable mining and processing of gold by Sutter Gold Mining Inc. ~~(in which the Company owns a substantial stake)~~ 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.

~~-18-~~· The Lucky Jack molybdenum property 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 mine/mill operation will be substantial. There is a history of opposition by local government entities and environmental organizations to the prior owners seeking permits to mine this property. This opposition has been expressed in litigation from time to time. Continued legal challenges may delay putting the Lucky Jack Project into production.

· WeUSECC ~~have~~has not yet obtained 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 gold and uranium/vanadium 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 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. WeUSECC ~~have~~has not established any reserves (economic deposits of mineralized materials) on any of our molybdenum, 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 USE and the Company) 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.25-

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, weUSECC might have to abandon the project.

~~The~~USECC ~~Company~~ must comply with numerous environmental regulations on a continuous basis, to comply with the United States Clean Air Act, the Clean Water Act, the ~~Resource~~ Resource Conservation and Recovery Act ("RCRA"), and the Comprehensive ~~Environmental~~ Environmental Response Compensation Liability Act ("CERCLA"). For example, water and dust discharged from mines and tailings from prior mining or milling ~~operations~~ 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~~ currently operating (like the Shootaring Canyon uranium mill atnear Ticaboo, Utah). ~~The~~ 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. Environmental regulatory programs create potential liability for our operations and may result in requirements to perform environmental investigations or corrective actions under federal and state laws and federal and state superfund requirements.

Failure to comply with these regulations could result in substantial fines ~~and~~, environmental remediation orders and/or potential shut down of the projects until compliance is achieved. Failure to timely obtain required permits to start operations at a project could cause delay and/or the failure of the project resulting ~~and~~in ~~cause~~ a potential write off of the investments therein.

~~-19-~~Possible Dilution to Shareholders. Because the Company does not have enough capital to put our properties into production, shareholders may be diluted in their ownership if the Company raises capital. Direct dilution would occur if the Company sells preferred stock, common stock, or debt, convertible into common stock, with conversion and other terms which large institutions can negotiate for substantial capital financings which result in more favorable terms than buying stock in the market. Indirect dilution would occur if institutional financing is raised for a subsidiary company. In this scenario, the percentage of the subsidiary held by us would be diluted.

ITEM 4. Controls and Procedures

Our management, under the supervision and with the participation of our ~~President~~Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), ~~have~~has evaluated the effectiveness of our disclosure controls and procedures as defined in Securities and Exchange Commission (“SEC”) Rule 13a-15(e) and 15d-15(e) as of the end of the period covered by this report. Based upon that evaluation, management has ~~concluded~~ concluded that our disclosure controls and procedures are effective to ensure ~~that~~ that information we are required to disclose in reports that we file or submit ~~under~~ under the Securities Exchange Act is communicated to management, including the ~~President~~ CEO and CFO, as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

During the six months covered by this report, there have been no significant changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

-2026-

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

~~Sheep~~Material ~~Mountain~~ proceedings ~~Partners~~pending at June 30, 2006, and developments in those proceedings from that date to the date this Report was filed, are summarized below. The legal status of the legal proceedings, which were pending during the year has either not changed, been settled or is otherwise immaterial.

OnSheep ~~February~~ Mountain ~~24,~~Partners 2005, a three judge panel of the 10th Circuit Court of Appeals (10th 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 Order and Award. In remanding this case, the 10th Circuit stated: "The arbitration award in this case is silent as to the definition of 'purchase rights' and the 'profits there from,' 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. 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./Litigation

~~The~~On ~~three~~ May ~~member~~ 15, ~~arbitration~~2006, ~~panel~~the ~~has~~Arbitration ~~scheduled~~Panel (“Panel”) in the Nukem and Sheep Mountain Partners (“SMP”) case issued a ~~hearing~~Clarification ~~for~~of ~~August~~the ~~26,~~Arbitration ~~2005,~~Award as to ~~consider~~ the Constructive ~~procedures,~~Trust ~~schedule~~as ~~and~~a ~~scope~~result of the remand to the Panel by the United States District Court for the District of Colorado pursuant to the Order of the 10th Circuit Court of Appeals.

The ~~timing~~ Constructive ~~and~~Trust ~~ultimate~~has ~~outcome~~been the subject of ~~this~~numerous ~~litigation~~proceedings isin ~~not~~the ~~predicted~~U.S. District WeCourt ~~believe~~of Colorado and three appeals to the 10th ~~that~~ Circuit ~~the~~ Court ~~ultimate~~of ~~outcome~~Appeals. ~~will~~As ~~not~~a ~~have~~result of these proceedings, the U.S. District Court entered an ~~adverse~~Order ~~affect~~and Judgment in favor of USECC and against Nukem on ~~our~~July 30, 2003 ~~financial~~for ~~condition~~an additional $20,044,200. In Nukem’s third appeal, the 10th or Circuit reversed ~~results~~this Order and Judgment and remanded the case to the Panel for clarification of ~~operations~~the Constructive Trust.

~~Phelps~~In ~~Dodge~~ the Remand Hearing before the Panel, Nukem was also seeking a judgment against USECC for over four million dollars claiming an overpayment of the damage award, plus attorney’s fees, costs and expenses. USECC asked the Panel to impress the Constructive Trust on four CIS Contracts in favor of SMP concurrent with the expiration dates of the contracts. In its Clarification of the Arbitration Award, the Panel denied both Nukem’s and USECC’s claims. The Panel held that the Constructive Trust was intended to secure the payment of the original damage award and it was extinguished upon Nukem’s payment of that damage award to USECC.

~~Crested and USE 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.Litigation

~~The~~On ~~case was~~ October ~~tried~~31, ~~starting on November 29~~2005, ~~2004.~~PD Onfiled ~~February~~a 4,motion ~~2005,~~with the District Court ~~entered~~to recover ~~Findings~~ attorney’s ~~and~~fees ~~Fact~~ and ~~Conclusions~~expenses ofin ~~Law~~the ~~and~~declaratory ~~ordered~~judgment ~~that~~action ~~the~~against ~~conveyance of the Mt~~USECC. PD ~~Emmons~~claimed ~~properties~~$4,050,200 ~~under~~in ~~Paragraph~~attorney’s 8fees ofand ~~the~~expenses ~~1987~~and ~~AMAX~~$3,692,100 ~~Agreement~~in ~~includes~~costs incurred for the ~~transfer~~ operation of ~~ownership~~the ~~and~~water ~~operational~~treatment ~~responsibility~~plant for the ~~Water~~last ~~Treatment~~three ~~Plant,~~ years. ~~and~~These ~~that~~claims PDwere ~~does~~ not ~~owe~~part ~~USECC~~of ~~any~~the ~~advanced~~initial ~~royalty~~litigation ~~payments~~with PD. ~~However,~~USECC ~~the~~ filed a ~~Order~~response ~~did~~with ~~not address~~ the ~~NPDES~~Court ~~permit.~~denying ~~NPDES~~that ~~permits~~USECC ~~are~~owes ~~administered and regulated~~PD bysuch ~~the~~monies. ~~Colorado~~On ~~Department~~February 28, of2006, ~~Public~~PD ~~Health~~conveyed ~~and~~ the ~~Environment (“CDPHE”).~~Mount ~~The~~Emmons ~~timing~~properties ~~and~~(Lucky ~~scope~~Jack ofProject) ~~responsibilities for maintaining~~ and ~~operating~~ the water treatment plant, ~~will~~to ~~be addressed by the CDPHE later in 2005~~USECC.

~~USECC~~A ~~has~~ hearing ~~filed~~ on aPD’s motion ~~with~~for ~~the~~attorney’s ~~Court~~fees toand ~~amend~~cost ~~the~~was ~~Order~~held ~~to determine that the decreed water rights to PD~~ on ~~the~~July Mt20, 2006. ~~Emmons~~On ~~properties~~July 25, ~~from~~2006, the ~~Colorado~~United ~~Supreme~~States District Court ~~opinion~~ ~~(decided~~for ~~in 2002, finding that~~ the ~~predecessor~~District ~~owners~~ of ~~the~~Colorado ~~Mt. Emmons~~entered ~~property~~ an ~~had~~order ~~rights~~granting toa ~~water~~motion tofor ~~develop~~attorney afees ~~mine),~~ and ~~any~~costs ~~other~~in ~~appurtenant~~favor of Phelps ~~water~~ Dodge ~~rights,~~ Corporation beand ~~conveyed to USECC~~Mt. ~~The~~Emmons ~~motion~~Mining ~~is pending~~Company.

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PDThe ~~and~~ court ~~USECC~~ ordered ~~have~~that ~~been~~the ~~engaged~~Company inand ~~settlement~~USE ~~discussions~~pay inPhelps anDodge ~~attempt~~$7,538,340 tofor ~~resolve~~(i) attorney ~~the remaining~~ fees ~~issues~~ and ~~avoid~~costs ~~an appeal~~ of ~~the~~$3,223,047; ~~District~~plus ~~Court’s~~(ii) ~~Judgment.~~operations Inexpenses ~~view~~ of $4,315,293for the Mt. ~~ongoing~~Emmons ~~discussions~~properties ~~and~~(including incosts ~~the~~for ~~interest~~Phelps ofDodge ~~conserving~~to ~~judicial~~operate ~~and~~the ~~party~~water ~~resources,~~ treatment onplant ~~April~~for ~~5, 2005,~~ the ~~parties~~period ~~filed~~from aJuly ~~Joint~~2002 ~~Motion~~through toAugust ~~Stay~~2005). ~~Ruling~~The Company ~~on Motion~~ and toUSE ~~Amend~~have ~~Judgment~~determined ~~and~~that tothey ~~Extend~~will ~~Stay~~appeal ofthe ~~Execution~~decision ~~Pending~~of ~~Appeal~~the U.S. OnDistrict ~~April~~ Court 7,to ~~2005,~~ the 10th Circuit Court ~~granted~~of ~~the~~Appeals. ~~motion~~The ~~and~~Company ~~entered~~has anreviewed ~~order~~FAS as5, ~~follows:~~“Accounting for ~~(1) the~~ Contingencies”, ~~ruling~~and onhas ~~USECC’s~~determined ~~Motion~~that tothe ~~Amend~~likelihood ~~Judgment~~of isprevailing ~~stayed~~in ~~until ten days after~~the ~~filing~~ appeal ofis ~~written~~reasonably ~~notice~~possible. byAlthough PDa ~~that~~completely ~~settlement~~accurate ~~has~~prediction can not be ~~been~~made ~~achieved;~~of ~~and (2)~~ the ~~March~~ultimate 8,outcome ~~2005~~or ~~Order~~timing onof ~~stay~~an ofappeal, ~~execution~~the ~~and~~Company’s ~~enforcement~~legal expert ofin the ~~Judgment is extended~~matter ~~for~~believes 30that ~~days~~the ~~after~~Company ~~the~~will ~~Court~~ultimately ~~issues~~prevail ain overturning ~~ruling~~the onU.S. ~~USECC~~District Court’s ~~Motion~~award toof ~~Amend.~~attorney fees and costs.

United States Tenth Circuit Court of Appeals Affirmation of Lower Court Dismissal of Challenges to Mt. Emmons Patents.

On July 21, 2006, the United States Tenth Circuit Court of Appeals (the “10^th CCA”) affirmed the January 12, 2005 United States District Court for the District of Colorado dismissal of challenges to the issuance of mining patents (by the United States Bureau of Land Management) on certain of the properties comprising the Mt. Emmons properties, to Phelps Dodge Corporation and Mt. Emmons Mining Company. The case is High Country Citizen’s Alliance, Town of Crested Butte, Colorado, and The Board of County Commissioners of the County of Gunnison, Colorado v. Kathleen Clarke, Director of the Bureau of Land Management et. al., Gale Norton, Secretary of Interior, U.S. Department of the Interior; Phelps Dodge Corporation; Mt. Emmons Mining Company (the 10^th CCA case number is D.C. No. 04-MK-749PAC).

Plateau Resources Ltd.

Christian Murer vs. Plateau Resources Limited, Inc.

On May 11, 2006, Christian F. Murer (“Murer”) filed a lawsuit against Plateau in the United States District Court, District of Utah, Central Division (Case Number 2:06cv00393 BSJ) claiming that: 1) Plateau was required to deliver certain geological and engineering data for some unpatented mining claims located in Utah pursuant to an April 8, 1977 agreement between Murer and Century 21 Mining, Inc. and 2) that Murer will be economically damaged by the differential in royalty payments he would otherwise receive under an agreement with IUC Exploration LLC on August 31, 2005. Murer is seeking specific performance and damages. Plateau has retained Parr Waddoups Brown Gee & Loveless of Salt Lake City, Utah to represent Plateau in the case. An answer to the complaint was filed on June 8, 2006. Management of Plateau does not believe that it is obligated to provide the geological and engineering data to Murer or that it owes Mr. Murer damages.

ITEM 2. Changes in Securities and Use of Proceeds

During the ~~three~~six months ended June 30, ~~2005~~2006, the Company did not issue any unregistered securities.

ITEM 3. Defaults upon Senior Securities

Not applicable.

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ITEM 4. Submission of Matters to a Vote of Security Holders

On ~~July~~ June 22 23, ~~2005~~2006, the annual meeting of shareholders was held for the election of ~~one~~ ~~director~~ two directors, ~~Daniel~~Keith PG. ~~Svilar~~Larsen and Harold F. Herron who ~~was~~were elected as a ~~director~~ directors for a specified term or until ~~his~~their ~~successor~~successors isare duly appointed and qualified. With respect to the election of the ~~director~~directors, the votes cast were as follows:

Name of Director	Term Expires	For	Abstain
Daniel P. Svilar	2008	15,877,442	6,275
Keith G. Larsen	2009	15,594,176	287,566
Harold F Herron	2009	15,597,276	284,466

The Company's Board of Directors consists of four members: Harold F. Herron, John L. Larsen, Keith G. Larsen, and Daniel P. Svilar.

During the annual meeting of shareholders, there was one other issue voted upon:

	Votes For	Votes Against	Abstain
Appointment of Epstein, Weber & Conover, PLC as independent auditors for calendar 2005	15,877,467	1,350	4,900
Appointment of Epstein, Weber & Conover, PLC as independent auditors for calendar 2006	15,760,107	113,052	8,582

ITEM 5. Other Information

Not applicable.

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ITEM 6. Exhibits and reports on Form 8-K

(a)	Exhibits.
	31.1	Certification of President Pursuant to Rule 13a-15(e) / Rule 15d-15(e)
	31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) / Rule 15(e)/15d-15(e)
	32.1	Certification of President Pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002
	32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002
(b)	Reports on Form 8-K. The Company filed four reports on Form 8-K for the quarter ended June 30, 2005. The events reported were as follows:
	1.	The report filed on April 13, 2005, under Item 1.01 referenced the Company and Rocky Mountain Gas, Inc. (“RMG”) entering into a binding agreement for the acquisition of RMG by Enterra Energy Trust.
	2.	The report filed on April 13, 2005, under Item 1.01 referenced the Company and U.S. Energy Corp. signing a Mining Venture Agreement with Uranium Power Corp.
	3.	The report filed on May 24, 2005, under Item 1.01 was an amendment to the report filed April 13, 2005 referencing the acquisition of RMG.
	4.	The report filed on June 7, 2005, under Item 2.01 and 9.01 referenced the Completion of Disposition of Assets of the Company, U.S. Energy Corp. and RMG with Exhibits.

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(b)	Reports on Form 8-K. The Company filed 5 reports on Form 8-K for the quarter ended June 30, 2006. The events reported were as follows:

	1.	The report filed on May 12, 2006, under Item 8.01 referenced the May 9, 2006 agreement with Uranium Power Corp. on two new uranium projects.

	2.	The report filed on May 19, 2006, under Item 8.01 referenced the receipt of the May 15, 2006 Clarification of the Arbitration Award in the Nukem litigation.

	3.	The report filed on May 31, 2006, under Item 8.01 referenced $3 million (Cdn) private placement for Sutter Gold Mining, Inc.

	4.	The report filed on June 8, 2006, under Item 8.01 referenced two amendments to the May 5, 2006 SEDA.

	5.	The report filed on June 26, 2006, under Item 8.01 referenced shareholder approval of four proposal at the Annual Meeting including; re-election of two directors, selection of the current audit firm, waiving Nasdaq’s MarketPlace Rule 435 (i)(1)(D) and amendment of the Articles of Incorporation for removal of direct ors only for cause.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

		CRESTED CORP.
		(Company)
Date: August 12, 2005	By:	/s/Harold F. Herron
Date: August 11, 2006	By:	/s/Harold F. Herron
		HAROLD F. HERRON,
		HEROLD F. HERRON,
		President
		CHAIRMAN and President
Date: August 12, 2005	By:	/s/Robert Scott Lorimer
Date: August 11, 2006	By:	/s/Robert Scott Lorimer
		ROBERT SCOTT LORIMER
		Principal Financial Officer and
		Chief Accounting Officer

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