FORM 10-Q

                              SECURITIES AND EXCHANGE COMMISSION

                                   Washington, D. C. 20549


[X]    Quarterly report pursuant to section 13 or 15(d) of the
       Securities  Exchange  Act of 1934 
       For the fiscal quarter ended February 28, 1997 or
[  ]   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 Registrant as Specified in its Charter)

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

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

Registrant's telephone Number, including area code:         (307) 856-9272
                                                         -----------------------


                                      NONE
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)


        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
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
                           YES   X             NO

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

                Class                          Outstanding at April 17, 1997
---------------------------------------     ------------------------------------
   Common stock, $.001 par value                   10,221,094 Shares



<PAGE>



                                  CRESTED CORP.

                                      INDEX

                                                                        Page No.
                                                                        --------
PART I.   FINANCIAL INFORMATION

ITEM 1.   Financial Statements.

          Condensed Consolidated Balance Sheets
             February 28, 1997 and May 31, 1996............................3-4

          Condensed Consolidated Statements of Operations
             Three and Nine Months Ended February 28, 1997
              and February 29, 1996........................................5-6

          Condensed Consolidated Statements of Cash Flows
             Nine Months Ended February 28, 1997
             and February 29, 1996.........................................7-8

          Notes to Condensed Consolidated Financial Statements............9-10

ITEM 2.   Management's Discussion and Analysis of
             Financial Condition and Results of Operations...............10-12

PART II.  OTHER INFORMATION

ITEM 1.   Legal Proceedings..............................................12-13

ITEM 4.   Submission of Matters to a Vote of Security Holders............13-14

ITEM 5.   Other Information.................................................14

ITEM 6.   Exhibits and Reports on Form 8-K..................................14

          Signatures........................................................15


                                        2

<PAGE>



                          PART I. FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS.

                           CRESTED CORP. AND AFFILIATE

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>

                                                   February 28,         May 31,
                                                       1997               1996
                                                   -----------        -----------
                                                   (Unaudited)        (Unaudited)
<S>                                                <C>                <C>        
CURRENT ASSETS:
     Cash                                          $    62,300        $    52,600
     Accounts receivable
        Trade                                           57,400             58,200
        Affiliates                                     351,700            141,600
     Current portion of long-term receivable
        Related parties                                297,000            210,100
        Other                                          183,200            100,100
     Inventory and other                                82,300             33,600
                                                   -----------        -----------
TOTAL CURRENT ASSETS                                 1,033,900            596,200

LONG-TERM NOTES RECEIVABLE                             657,300            689,200

INVESTMENTS IN AFFILIATES                            4,579,100          4,344,700

PROPERTIES AND EQUIPMENT                             5,224,900          5,189,400
     Less accumulated depreciation,
     depletion and amortization                     (2,972,200)        (2,832,800)
                                                   -----------        -----------
                                                     2,252,700          2,356,600

OTHER ASSETS                                           148,000            145,800
                                                   -----------        -----------
                                                   $ 8,671,000        $ 8,132,500
                                                   ===========        ===========



            See notes to Condensed Consolidated Financial Statements.
</TABLE>

                                        3

<PAGE>



                           CRESTED CORP. AND AFFILIATE

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                          February 28,         May 31,
                                                              1997              1996
                                                         ------------       ------------
                                                          (Unaudited)        (Unaudited)
<S>                                                      <C>                <C>        
CURRENT LIABILITIES:
     Accounts payable and accrued expenses               $   250,600        $   300,000
     Line of credit (Note 4)                                   --                88,000
     Deferred income (Note 7)                              2,103,800           --
     Current portion of long-term debt (Note 4)
        Affiliates                                         5,785,600          6,460,300
        Others                                                30,500           --
                                                         -----------        -----------
TOTAL CURRENT LIABILITIES                                  8,170,500          6,848,300

LONG-TERM DEBT                                                26,200            --

ACCRUED RECLAMATION COSTS (Note 5)                           725,900            725,900

COMMITMENTS AND CONTINGENCIES

FORFEITABLE COMMON STOCK, $.001 par value;
     issued 65,000 and 57,000 shares, respectively            37,100             36,400

SHAREHOLDERS' EQUITY (DEFICIT):
     Preferred stock, $.001 par value;
        authorized, 100,000 shares;
        none issued or outstanding                           --                 --
     Common stock, $.001 par value;
        authorized 20,000,000 shares;
        issued 10,156,094 shares                              10,100             10,100
     Additional paid-in capital                            6,319,400          6,319,400
     Accumulated deficit                                  (6,618,200)        (5,807,600)
                                                         -----------        -----------
                                                            (288,700)           521,900
                                                         -----------        -----------
                                                         $ 8,671,000        $ 8,132,500
                                                         ===========        ===========


            See notes to Condensed Consolidated Financial Statements.
</TABLE>

                                        4

<PAGE>



                           CRESTED CORP. AND AFFILIATE

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                           Three Months Ended                       Nine Months Ended
                                                February                                February
                                    -------------------------------        --------------------------------
                                      28, 1997           29, 1996            28, 1997              29, 1996
                                    ------------       -------------       ------------         -----------
<S>                                 <C>                <C>                 <C>                  <C>        
REVENUES:
  Mineral property transactions
   and mineral sales                $    26,900        $   296,200         $    75,300          $ 1,383,400
  Oil and gas sales                      31,400             27,600              62,500               68,600
  Interest                               12,800             21,900              27,700               30,000
  Commercial operations                  98,900             73,900             228,000              315,600
  Gain on sale of assets                --                  12,400             --                    37,400
  Management fees                        85,300             20,300             217,000               77,300
  Other                                  38,700            176,100              70,500              209,800
                                    -----------        -----------         -----------          -----------
                                        294,000            628,400             681,000            2,122,100

COSTS AND EXPENSES:
  Cost of mineral sales                 --                 471,100             --                 1,383,300
  Cost of sales                          25,100             21,600              74,300               69,800
  Mineral operations                    114,300            200,500             272,800              301,200
  Interest                                8,800             20,600              22,500               44,700
General and
  administrative                        375,400            396,000             812,600              952,700
  Depreciation and
   amortization                          46,400             59,000             139,500              183,200
                                    -----------        -----------         -----------          -----------
                                        570,000          1,168,800           1,321,700            2,934,900
LOSS BEFORE EQUITY
  LOSS OF AFFILIATES,
  PROVISION FOR
  INCOME TAXES AND
  EXTRAORDINARY ITEM                   (276,000)          (540,400)           (640,700)            (812,800)

EQUITY LOSS OF
  AFFILIATES                            (43,000)           (67,700)           (169,900)            (345,400)
                                    -----------        -----------         -----------          -----------

LOSS BEFORE
  PROVISION FOR
  INCOME TAXES                         (319,000)          (608,100)           (810,600)          (1,158,200)

PROVISION FOR
  INCOME TAXES                            --                 --                 --                   --
                                    -----------        -----------         -----------          -----------

(continued)

            See notes to Condensed Consolidated Financial Statements.
</TABLE>

                                        5

<PAGE>



                           CRESTED CORP. AND AFFILIATE

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (CONTINUED)
<TABLE>
<CAPTION>

                                           Three Months Ended                      Nine Months Ended
                                                February                               February
                                    -------------------------------       --------------------------------
                                      28, 1997           29, 1996           28, 1997              29, 1996
                                    ------------       -------------      ------------         -----------


<S>                                 <C>                <C>                <C>                   <C>         
NET LOSS                            $  (319,000)       $  (608,100)       $   (810,600)         $(1,158,200)
                                    ===========        ===========        ============          ===========

NET LOSS  PER SHARE                 $      (.03)       $     (0.06)       $       (.08)         $      (.11)
                                    ===========        ===========        ============          ===========

WEIGHTED AVERAGE
  NUMBER OF SHARES
  OUTSTANDING                        10,217,805         10,208,112          10,214,647           10,208,112
                                     ==========         ==========        ============           ==========



            See notes to Condensed Consolidated Financial Statements.

                                        6

<PAGE>



                           CRESTED CORP. AND AFFILIATE

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

</TABLE>
<TABLE>
<CAPTION>
                                                                   Nine Months Ended
                                                                       February
                                                          --------------------------------
                                                             28, 1997           29, 1996
                                                          -------------       ------------
                                                            (Unaudited)       (Unaudited)
<S>                                                       <C>                <C>          
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                               $  (810,600)       $ (1,158,200)
   Adjustments to reconcile net loss to net cash
      used in operating activities:
         Depreciation, depletion and amortization             139,500             183,200
         Equity loss from investments                         169,900             345,400
         Gain on sale of assets                               --                  (21,800)
         Other                                                (2,200)             --
         Deferred income (Note 7)                           2,103,800             --
         Non-cash compensation                                    700               1,600
      Net changes in components
         of working capital                                  (395,400)          1,653,600
                                                          -----------        ------------
NET CASH PROVIDED BY
  OPERATING ACTIVITIES                                      1,205,700           1,003,800
                                                          -----------        ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Increase in notes receivable                              (174,400)             (6,700)
   Proceeds from collection
      of notes receivable                                      36,300              27,600
   Investments in affiliates                                 (404,300)           (398,200)
   Purchase of property and equipment                         (35,600)           (191,700)
   Proceeds from sale of assets                               --                   33,700
                                                          -----------        ------------
NET CASH (USED IN)INVESTING ACTIVITIES                       (578,000)           (535,300)
                                                          -----------        ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase in debt                                           112,600              49,000
   Payment on long-term debt                                 (730,600)           (536,000)
                                                          -----------        ------------
NET CASH (USED IN)  FINANCING ACTIVITIES                     (618,000)           (487,000)
                                                          -----------        ------------

(Continued)


            See notes to Condensed Consolidated Financial Statements.
</TABLE>

                                        7

<PAGE>



                           CRESTED CORP. AND AFFILIATE

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (CONTINUED)
<TABLE>
<CAPTION>
                                                   Nine Months Ended
                                                       February
                                          ----------------------------------
                                             28, 1997             29, 1996
                                          --------------        ------------
                                            (Unaudited)          (Unaudited)

<S>                                       <C>                   <C>         
NET DECREASE IN CASH
  AND CASH EQUIVALENTS                             9,700             (18,500)

CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                            52,600              24,400
                                          --------------        ------------

CASH AND CASH EQUIVALENTS AT
   END OF PERIOD                          $       62,300        $      5,900
                                          ==============        ============

SUPPLEMENTAL DISCLOSURES:
   Income tax paid                        $     --              $   --
                                          ==============        ============

   Interest paid                          $       22,500        $     44,700
                                          ==============        ============



            See notes to Condensed Consolidated Financial Statements.
</TABLE>
                                        8

<PAGE>



                                  CRESTED CORP.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

        1) The Condensed Consolidated Balance Sheet as of February 28, 1997, the
Condensed  Consolidated  Statements  of  Operations  for the nine months and the
three months ended  February  28, 1997 and  February  29,  1996,  and  Condensed
Consolidated  Statements  of Cash Flows for the nine months  ended  February 28,
1997 and February  29,  1996,  have been  prepared by the  Registrant  "Crested"
without  audit.  The Condensed  Consolidated  Balance Sheet of May 31, 1996, has
been taken from the audited  financial  statements  included in the Registrant's
Annual Report on Form 10-K filed for the year then ended.  In the opinion of the
Registrant,  the  accompanying  financial  statements  contain  all  adjustments
(consisting of only normal recurring  accruals)  necessary to fairly present the
financial  position of the  Registrant and its affiliate as of February 28, 1997
and May 31, 1996, the results of operations for the three months and nine months
ended  February 28, 1997 and February 29, 1996,  and the cash flows for the nine
months then ended.

        2) Certain  information and footnote  disclosures  normally  included in
financial  statements  prepared in accordance with generally accepted accounting
principles have been condensed or omitted.  It is suggested that these financial
statements be read in conjunction  with the Registrant's May 31, 1996 Form 10-K.
The results of operations  for the periods ended  February 28, 1997 and February
29, 1996 are not  necessarily  indicative of the operating  results for the full
year.

        3) The condensed  consolidated  financial  statements of the  Registrant
include its proportionate  share of the accounts of USECB Joint Venture ("USECB"
or "USECC")  which is owned 50% by Registrant  and 50% by  Registrant's  parent,
U.S. Energy Corp. ("USE").  All material  intercompany profits and balances have
been eliminated.

        4) Debt at February 28, 1997 and February 29, 1996 consists primarily of
an account payable to the Registrant's  parent USE of $5,785,600 and $6,460,300,
respectively. The remaining debt is for various equipment.

        5) Accrued  reclamation  obligations  of $725,900  are the  Registrant's
share of the  reclamation  liability  at the Crooks Gap  Mining  District.  This
reclamation work may be performed over several years.

        6)  Certain  reclassifications  have  been  made  in the  May  31,  1996
financial  statements  to conform to the  classifications  used in February  28,
1997.

        7) On November 4, 1996, the U.S.  District  Court of Colorado  confirmed
the Order and Award in the Arbitration proceedings with Nukem and its subsidiary
CRIC.  The  Arbitration  Panel  issued the Order and Award on April 18, 1996 and
clarified  the Award on July 3,  1996.  As a result,  USECC  received  a partial
distribution  of the funds  held in escrow and in the SMP  account in  Riverton,
Wyoming,  of $4,367,500 on November 5, 1996. A portion of these funds,  $159,800
was  paid  directly  to USE for U3O8 it had  purchased  for a SMP  delivery  and
interest

                                        9

<PAGE>



thereon.  The Registrant's  independent  accountant has advised that one-half of
the  balance,  to-wit  $2,103,800,  recieved as a  distribution  of SMP profits,
should be carried  as a deferred  income  item on the  liability  section of the
balance sheet,  which means that as of February  28,1997,  it is not included in
the  Registrant's  net  income or  earnings  per share.  When a more  definitive
resolution  is  reached in the  arbitration/litigation  the  $2,103,800  will be
included as income,  assuming the  conclusion is favorable to the Registrant and
USE.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
        RESULTS OF OPERATIONS.

        The following is  Management's  Discussion  and Analysis of  significant
factors which have affected the Registrant's  liquidity,  capital  resources and
results of operations during the periods included in the accompanying  financial
statements.

LIQUIDITY AND CAPITAL RESOURCES

        Working capital  declined during the nine months ended February 28, 1997
by  $884,500 to a working  capital  deficit of  $7,136,600.  This  decrease  was
primarily caused by deferred income of $2,103,800 being recorded during the nine
months ended  February 28, 1997.  On November 4 and 5, 1996,  the U. S. District
Court in Denver, CO confirmed the April 18, 1996 Order and Award as clarified on
July 3,  1996.  Based on the  Court's  judgment,  the First  Interstate  Bank of
Riverton  and the  Norwest  Bank of Denver  released  $367,475  and  $4,000,000,
respectively,  to the Registrant and USE. A similar amount was made available to
Nukem.  To date of this filing,  Nukem/CRIC  has only withdrawn its share of the
funds  from  the  First  Interstate  Bank  of  Riverton.  All  remaining  funds,
approximately $15 million,  remain in the SMP Norwest Bank escrow account. These
funds are in dispute  and a decision  on the  distribution  is  pending.  Of the
$4,367,475  received by USECC,  USE was paid $159,800 for its cost with interest
for a delivery  of uranium  concentrates  to an SMP  customer.  One-half  of the
balance of $4,207,700 or  $2,103,800,  is carried as a current  deferred  income
item pending final resolution of the SMP arbitration.

        The reduction of working capital was partially offset by a net reduction
in accounts payable to USE of $618,000.  As of February 28, 1997, the Registrant
and USE had repaid all advances under their line of credit of $1,000,000  with a
financial  institution.  There  were also  changes in  current  asset  balances.
Accounts  receivable-affiliates,  prepaid  insurance and the current  portion of
long-term   receivable-other   increased  by  $210,100,   $48,700  and  $83,100,
respectively.  The increase in accounts receivable affiliates consists primarily
of amounts due from SMP for holding costs.  The receivable from SMP increased by
$362,300,  which is 50% of the total due from SMP for holding  costs for the SMP
mineral  properties for the period from June 1, 1996 through  February 28, 1997.
One-half of this amount, or $181,200,  is represented  through the consolidation
of USECB  financials.  Cash and cash equivalents  increased by $9,700 during the
nine months ended February 28, 1997.  This increase was primarily as a result of
operating activities.

        The Registrant utilized $578,000 in its investing  activities during the
nine months  ended  February  28,  1997.  This was  primarily as a result of the
Registrant and its parent USE funding

                                       10

<PAGE>



the standby costs of the Sheep  Mountain  Partners  mining  properties,  and the
operational expenses of Energx Limited ("Energx") and Sutter Gold Mining Company
("SGMC").  As the Registrant and USE provide various  services for GMMV and SMP,
these non-affiliated  participants are invoiced for their proportionate share of
the operating and care and maintenance  costs of the mineral  properties of GMMV
and SMP. Through February 28, 1997, GMMV is current on its reimbursements to the
Registrant and USE for all the operating costs. Due to disputes existing between
the SMP partners,  the Registrant and USE have not been  reimbursed for care and
maintenance  costs  expended on the SMP mineral  properties in Wyoming since the
spring of 1991. As a result of the uncertainty of the receivable from SMP, it is
being  reported on the Financial  Statements  as an  investment  in  affiliates.
Financing  activities  consumed  a net of  $618,000  as a  result  of  increased
long-term debt of $112,600 and payment of long-term debt of $730,600.

        During the nine months  ended  February 28, 1997,  the  Registrant  also
invested  $30,000 in Yellowstone  Fuels,  Inc. ("YFI") to acquire 15% of YFI and
$26,300  in USE.  The  investment  in YFI was  approved  by the  joint  board of
directors  of the  Registrant  and  USE.  The  president  of YFI is a son of the
chairman of the Registrant.  YFI is a start-up uranium exploration company which
is  acquiring  properties  that are  suitable  for  underground  mining by fluid
circulation  techniques  ("in situ"),  as compared  with  conventional  open pit
excavation  or shaft  mining.  The  investment  in USE  came as a result  of the
purchase of 2,000 shares of USE common stock in the open market.

        The primary  requirements for the Registrant's  working capital continue
to be funding of the on-going administrative expenses of USECC, uranium delivery
costs,  and property  holding costs of SMP. As a result of the disputes  between
the SMP partners,  the Registrant and USE had been  delivering  certain of their
respective  portions of the uranium  concentrates  required to fill  various SMP
delivery  requirements on long-term U3O8 contracts with domestic utilities.  The
Registrant and USE made one U3O8 delivery  during the nine months ended February
28,  1996,  but no  deliveries  were made by USECC  during the nine months ended
February  28,  1997.  There  will  be  no  capital   requirements  to  fill  the
Registrant's  and USE's  portion of the  remaining  U3O8  commitments  of SMP in
fiscal 1997.

        The  primary  source  of the  Registrant's  capital  resources  for  the
remainder of fiscal 1997 will be cash on hand;  continued borrowing from USE and
from financial  institutions  (primarily the line of credit);  possible proceeds
from the sale of  uranium  under  the SMP  contracts;  and the sale of equity or
interests in investment properties. Fees from oil production, rentals of various
real estate  holdings  and  equipment,  and the sale of aviation  fuel will also
provide  cash.  Additional  sources  of  capital  will be  required  to hold and
maintain mineral properties,  permitting,  the construction of a gold processing
mill and mine development of SGMC, and administrative  costs. The Registrant and
USE are currently  seeking  other  financing  for the  construction  of the gold
processing  mill  and mine  development  at SGMC.  The  funding  of SMP care and
maintenance costs may require  additional  funding,  depending on the outcome of
the SMP arbitration.


                                       11

<PAGE>



RESULTS OF OPERATIONS

NINE MONTHS ENDED FEBRUARY 28, 1997 COMPARED TO NINE MONTHS ENDED
FEBRUARY 29, 1996

        Total  revenues for the nine months ended February 28, 1997 decreased by
$1,441,100 compared to the same period of the previous year. Revenues during the
nine month period ended February 28, 1997 decreased primarily as a result of the
Registrant  reporting  revenues of $1,383,400 in the nine months ended  February
29, 1996 from the sale of U3O8 to fill  delivery  contracts on behalf of SMP. No
such revenues were recorded during the nine months ended February 28, 1997.

        Commercial  revenues  decreased by $87,600  primarily as a result of the
Registrant  and USE  selling  Wind  River  Estates  during  fiscal  1996.  These
decreases  in  revenues  were  offset by an  increase  of $75,300  in  royalties
received from Cyprus/AMAX on the Mt. Emmons  molybdenum  property.  No royalties
were received  during the nine months ended February 29, 1996 as a result of the
Registrant and USE exchanging six quarters of the molybdenum royalty for certain
real estate property in Gunnison County, CO.

        Costs and expenses  decreased by $1,613,200 during the nine months ended
February 28, 1997,  compared to the same period of the previous  year,  when the
Registrant  recorded  costs of U3O8 sold under the SMP  contracts of  $1,383,300
during the nine months  ended  February  29,  1996.  There were no sales of U3O8
recorded by the  Registrant  during the nine months  ended  February  28,  1997.
Mining operations costs,  interest expense and general and administrative  costs
decreased by $28,400, $22,200 and $140,100, respectively.

        Operations  for the nine months ended  February  28, 1997  resulted in a
pre-tax  loss of $640,700  before  equity in loss of  affiliates  of $169,900 as
compared to a loss of $812,800 before equity in income of affiliates of $345,400
during the same period of the previous year.  After  recognizing  equity losses,
the  Registrant  recognized  a net  loss  of  $810,500  compared  to a  loss  of
$1,158,200  for  the  comparative  period  of the  previous  year.  Registrant's
independent   accountant  has  recommended  that  the  $2,103,800   received  as
distribution  of SMP  profits,  be  recorded  as a deferred  income  item on the
balance  sheet,  which means that as of February 28, 1997, it is not included in
the  Registrant's  net  income or  earnings  per share.  When a more  definitive
resolution is reached in the arbitration/litigation  proceedings, the $2,103,800
will become  income,  assuming the conclusion is favorable to the Registrant and
USE.

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

        The information  called for in this Item 1 has been previously  reported
in: the Registrant's  Form 10-K (Item 3) for the fiscal year ended May 31, 1996;
Registrant's Forms 10-Q (Item 1 of Part II) for the fiscal quarters ended August
31, 1996 and  November  30,  1996,  and the Form 8-K dated March 6, 1997.  These
reports disclose the status of the consensual arbitration/litigation in the U.S.
District  Court of Colorado  involving  the  Registrant  and USE d/b/a USECC and
Nukem, Inc. and its wholly-owned subsidiary Cycle Resource Investment

                                       12

<PAGE>



Corp.  (CRIC)  over  disputes   involving  the  Sheep  Mountain  Partners  (SMP)
partnership  concerning the marketing and sale of uranium and mining  operations
in Wyoming. As was reported earlier, an Amended Judgment was entered on March 6,
1997 by Judge Lewis T. Babcock of the U.S.  District Court of Colorado,  wherein
the Court confirmed the  Arbitration  Award ordering Nukem to pay USECC a net of
approximately  $8,465,000 as monetary damages.  In November 1996, USECC received
$4,367,000  out of the SMP  escrowed  funds and its bank account per the Court's
earlier November 5, 1996 Judgment.

        Despite the rulings of the Panel imposing a constructive  trust in favor
of SMP on the rights to purchase CIS uranium,  the uranium acquired  pursuant to
those rights and the profits  therefrom,  the  defendants-appellants  Nukem/CRIC
continue  to assert in both Court  filings  and public  news  releases  that the
Arbitration  Panel did just the opposite and in fact,  "denied"  SMP's rights to
the CIS contracts in constructive trust.

        In the March 6, 1997 Amended Judgment, Judge Babcock again confirmed the
Arbitration  Panel's  Awards and denied  Nukem's  motion to modify and/or vacate
portions of the Award;  denied  Nukem's  objections to the  confirmation  of the
Order and Award,  and granted  USECC's  motion to modify the Award by  deducting
$265,213  from the amounts  Nukem and CRIC claimed to have  advanced to purchase
uranium for the SMP Partnership.

        The Amended Judgment of March 6, 1997 did not  specifically  address the
Panel's  Award to SMP of a supply  contract  Nukem had entered into with another
utility,  or Nukem's uranium purchase contracts with three CIS Republics.  USECC
filed a motion for an order of limited remand to the  Arbitration  Panel for its
reaffirmation  of its  findings  on the issue of placing  the CIS  contracts  in
constructive  trust for SMP.  The Court found that the  Panel's  Awards were not
ambiguous and denied the motion.  The Court may still  reconsider  the denial of
this motion.  In order to preserve  USECC's  rights,  Registrant and USE filed a
Notice of Appeal  with the Tenth  Circuit  Court of Appeals on the  omission  of
these  equitable  awards  and  filed a motion  with the U.S.  District  Court to
correct a clerical omission in the Amended Judgment.

        On or about March 21, 1997,  defendants Nukem and CRIC filed a motion to
stay enforcement of USECC's  monetary  judgment pending the appeal of Nukem/CRIC
and posted a supersedeas  bond in the amount of  $8,613,600.  On March 25, 1997,
USECC  filed a motion  objecting  to  defendants'  motion on the posting of that
amount for its supersedeas  bond and requested the Court to order the defendants
to  increase  the bond to cover the value of the CIS  contracts.  This motion is
pending.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        On December 13, 1996,  an annual  meeting of  shareholders  was held and
five  directors,  John L. Larsen,  Max T. Evans,  Daniel P.  Svilar,  Michael D.
Zwickl and  Kathleen R. Martin were  reelected  for a term  expiring at the next
succeeding  annual  meeting  and until  their  successors  are duly  elected  or
appointed and qualified. With respect to the election of the five directors, the
votes cast were as follows.


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<PAGE>



Name of Director           For           Against        Abstain      Withheld
----------------           ---           -------        -------      --------
John L. Larsen           8,575,616        11,000         9,720          3,075
Max T. Evans             8,578,216        10,500         9,620          1,075
Daniel P. Svilar         8,578,216        10,500         9,720            975
Michael D. Zwickl        8,578,216        10,500         9,620          1,075
Kathleen R. Martin       8,576,091        11,000         9,720          2,600

ITEM 5. OTHER INFORMATION

        On November 22, 1996, the Registrant  and  Registrant's  parent USE (the
"USE Parties")  signed a letter of intent with Kennecott Energy and Coal Company
("Kennecott") for Registrant and USE to acquire  Kennecott's 50% interest in the
Green Mountain  Mining Venture (GMMV) through the  acquisition of the stock of a
Kennecott  subsidiary  within 18  months.  Although  the  letter  of intent  was
extended and has since expired, the parties are continuing  negotiations for the
USE Parties to acquire Kennecott's  interest in the GMMV. The GMMV was formed in
1990 to  explore  for and if  warranted,  to develop  the  uranium  deposits  in
south-central  Wyoming.  The proposed  change in the GMMV would make U.S. Energy
Corp. and Crested Corp.,  dba USECC,  100% owners of the GMMV if the USE Parties
can arrange the  necessary  financing  to exercise  the option.  USECC has moved
forward to prepare the portal and other workings at the proposed Jackpot Mine to
accommodate  the  installation  of a  conveyor  system  for  driving  the double
declines  (tunnels) at a -17% decline,  to a length of up to 8,000 feet to reach
the first of several horizons of the uranium deposits.

        Such change in  ownership  is subject to  Kennecott  and the USE Parties
renewing the letter of intent and  finalizing  terms of a definitive  agreement,
and  the  USE  Parties  arranging  the  necessary  financing  to  close  such an
agreement. There is no assurance such steps will be successfully achieved.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

        (a)    Exhibits.  None.

        (b) Reports on Form 8-K.  There were no Reports filed by the  Registrant
on Form 8-K during the quarter ended February 28, 1997.



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<PAGE>


                                   SIGNATURES

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

                                            CRESTED CORP.
                                            (Registrant)



Date:  April 17, 1997               By:        s/ Max T. Evans
                                            -----------------------------------
                                            MAX T. EVANS, President



Date:  April 17, 1997               By:        s/ Robert Scott Lorimer
                                            -----------------------------------
                                            ROBERT SCOTT LORIMER,
                                            Principal Financial Officer
                                            and Chief Accounting Officer


                                       15

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