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, 1998
           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 13, 1998
Common stock, $.001 par value               10,302,694 Shares





<PAGE>



                    CRESTED CORP. AND AFFILIATE

                               INDEX

                                                           Page No.
PART I.   FINANCIAL INFORMATION

ITEM 1.   Financial Statements.

          Condensed Consolidated Balance Sheets
            February 28, 1998 and May 31, 1997..................3-4

          Condensed Consolidated Statements of Operations
            Three and Nine Months Ended February 28, 1998
             and February 28, 1997..............................5-6

          Condensed Consolidated Statements of Cash Flows
            Nine Months Ended February 28, 1998
            and February 28, 1997...............................7-8

          Notes to Condensed Consolidated Financial Statements....9

ITEM 2.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations.....10-13

PART II.  OTHER INFORMATION

ITEM 1.   Legal Proceedings...................................14-15

ITEM 4.   Submission of Matters to a Vote of Security Holders....15

ITEM 5.   Other Information...................................16-17

ITEM 6.   Exhibits and Reports on Form 8-K.......................17

          Signatures.............................................18


                                        2

<PAGE>



                     PART I.  FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS.

                       CRESTED CORP. AND AFFILIATE

                  CONDENSED CONSOLIDATED BALANCE SHEETS

                                 ASSETS

                                              February 28,     May 31,
                                                  1998          1997
                                              (Unaudited)    (Unaudited)

CURRENT ASSETS:
    Cash and cash equivalents                 $ 815,900      $  37,100
    Accounts receivable
      Trade                                      82,000         63,900
      Affiliates                                876,400        596,200
    Current portion of long-term receivable
      Related parties                           105,300        304,000
      Inventory and other                        64,900         48,300
                                              ---------      ---------
TOTAL CURRENT ASSETS                          1,944,500      1,049,500


LONG-TERM NOTES RECEIVABLE                      397,500        474,600

INVESTMENTS IN AFFILIATES                     1,955,400      1,796,800

INVESTMENT IN CONTINGENT
 STOCK PURCHASE WARRANT                         651,000        651,000

PROPERTIES AND EQUIPMENT                      5,716,600      5,181,300
    Less accumulated depreciation,
    depletion and amortization               (3,162,200)    (3,017,700)
                                              ----------     ----------
                                              2,554,400      2,163,600

OTHER ASSETS                                    150,300        150,200
                                              ---------      ---------
                                             $7,653,100     $6,285,700



            See Notes to Condensed Consolidated Financial Statements


                                        3

<PAGE>



                       CRESTED CORP. AND AFFILIATE

                  CONDENSED CONSOLIDATED BALANCE SHEETS

                  LIABILITIES AND SHAREHOLDERS' EQUITY

                                            February 28,       May 31,
                                                 1998           1997
                                             (Unaudited)    (Unaudited)

CURRENT LIABILITIES:
    Accounts payable and accrued expenses     $ 113,000      $ 556,600
    Deferred Income                           2,000,000       --
    Current portion of long-term debt
      Affiliates                              6,370,500      6,023,400
      Others                                     53,200         12,400
                                              ---------       --------
TOTAL CURRENT LIABILITIES                     8,536,700      6,592,400

LONG-TERM DEBT                                   48,700         15,800

ACCRUED RECLAMATION COSTS                       725,900        725,900

COMMITMENTS AND CONTINGENCIES

FORFEITABLE COMMON STOCK, $.001 par value;
    65,000 shares issued, forfeitable
    until earned                                 43,900         43,900

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 10,237,694 shares                   10,200         10,200
    Additional paid-in capital                6,375,400      6,375,400
    Accumulated deficit                      (8,087,700)    (7,477,900)
                                              -----------    -----------
    TOTAL SHAREHOLDERS' EQUITY               (1,702,100)    (1,092,300)
                                              -----------    -----------
                                            $ 7,653,100    $ 6,285,700
                                             ============   ===========



            See Notes to Condensed Consolidated Financial Statements


                                        4

<PAGE>



                          CRESTED CORP. AND AFFILIATE

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                            Three Months Ended            Nine Months Ended
                                 FEBRUARY                     FEBRUARY
<TABLE>
<CAPTION>
                          28, 1998      28, 1997        28, 1998      28, 1997
                        (Unaudited)    (Unaudited)     (Unaudited)   (Unaudited)
REVENUE
  <S>                        <C>          <C>           <C>              <C>        
  Mineral Sales           $       --    $       --   $429,300        $   --
  Oil and gas sales        24,200        31,400        62,500          62,500
  Mineral property
  transactions             23,100        26,900        78,300          75,300
  Interest                 53,800        12,800       105,700          27,700
  Rental                  137,200        98,900       529,400         228,000
  Other                   296,600       124,000       637,100         287,500
                          -------       -------       -----------   ------------
                          534,900       294,000     1,842,300         681,000

COSTS AND EXPENSE
   Cost of sales           36,000        25,100       107,700          74,300
   Mineral operations     187,700       114,300       549,300         272,800
   Interest                 5,200         8,800        15,800          22,500
   General and
   administrative         838,400       375,400     1,525,200         812,600
   Depreciation, depletion
   and amortization           -          46,400        96,700         139,500
                          ---------      ------      --------       ---------
                        1,067,300       570,000     2,294,700       1,321,700
                          ---------     -------     ---------       ---------

LOSS BEFORE EQUITY
    INCOME (LOSS)
   AND TAX PROVISION     (532,400)     (276,000)     (452,400)       (640,700)

EQUITY IN  LOSS
   OF AFFILIATES          (66,000)      (43,000)     (157,400)       (169,900)
                          -------       -------       --------       ---------

LOSS BEFORE PROVISION
   FOR INCOME TAXES      (598,400)     (319,000)     (609,800)       (810,600)

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

</TABLE>


            See Notes to Condensed Consolidated Financial Statements


                                        5

<PAGE>



                           CRESTED CORP. AND AFFILIATE

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (CONTINUED)


                            Three Months Ended           Nine Months Ended
                                 FEBRUARY                    FEBRUARY
                            28, 1998       28, 1997      28, 1998     28, 1997


NET LOSS                  $ (598,400)   $ (319,000)  $ (609,800)    $ (810,600)
                          ===========   ===========  ===========    ===========

NET LOSS
  PER SHARE               $     (.06)   $    (0.03)  $     (.06)    $     (.08)
                           =======       =======      ========       =========

WEIGHTED AVERAGE
  NUMBER OF SHARES
  OUTSTANDING             10,302,694    10,217,805   10,302,694     10,214,647
                          ==========    ==========   ==========     ==========





            See Notes to Condensed Consolidated Financial Statements


                                        6

<PAGE>



                         CRESTED CORP. AND AFFILIATE

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                    Nine Months Ended
                                                        FEBRUARY
                                                   28, 1998          28, 1997
                                                  (Unaudited)      (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                      $ (609,800)       $(810,600)
   Adjustments to reconcile net loss to net cash
     Provided by operating activities:
       Depreciation, depletion and amortization     155,100          139,500
       Abandonment of mining claims                    --                --
       Equity loss of affiliates                    157,400          169,900
       Loss (gain) of sale of asset                    (800)            --
       Other                                           --             (2,200)
       Deferred income                            2,000,000        2,103,800
         Non-cash compensation                         -                 700
       Net changes in components and working ca    (758,600)        (395,400)

NET CASH  PROVIDED BY (USED IN)
  OPERATING ACTIVITIES                              943,300        1,205,700

CASH FLOWS FROM INVESTING ACTIVITIES:
       Increase in notes receivable                 (40,300)        (174,400)
       Proceeds from collection of notes receiv     316,100           36,300
       Development of mining claims                    (600)             --
     Investment in affiliates                      (316,000)        (404,300)
     Purchase of property and equipment            (546,500)        ( 35,600)
     Proceeds from sale of assets                     2,000                -
                                                      ------          -------

NET CASH  USED IN INVESTING ACTIVITIES             (585,300)        (578,000)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase in debt                                 503,900          112,600
   Principle payment on long-term debt              (83,100)        (730,600)
                                                   --------         ---------

NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES  420,800         (618,000)

            See Notes to Condensed Consolidated Financial Statements


                                        7

<PAGE>



                         CRESTED CORP. AND AFFILIATE

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (CONTINUED)
                                                    Nine Months Ended
                                                        FEBRUARY
                                                28, 1998       28, 1997
                                               (Unaudited)    (Unaudited)

NET INCREASE IN CASH
  AND CASH EQUIVALENTS                           778,800         9,700

CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                            37,100        52,600
                                               ---------      --------

CASH AND CASH EQUIVALENTS AT
   END OF PERIOD                               $ 815,900      $ 62,300
                                               =========      ========

SUPPLEMENTAL DISCLOSURES:
   Interest Paid                               $  15,800      $ 22,500
                                               =========      ========

   Income tax paid                             $   9,500      $    -
                                               =========      =========




            See Notes to Condensed Consolidated Financial Statements


                                        8

<PAGE>



                                  CRESTED CORP.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      1) The Condensed  Consolidated  Balance Sheet as of February 28, 1998, the
Condensed  Consolidated  Statements  of  Operations  for the nine months and the
three months ended  February  28, 1998 and  February  28,  1997,  and  Condensed
Consolidated  Statements  of Cash Flows for the nine months  ended  February 28,
1998 and  February  28,  1997,  have been  prepared by the Company (  "Crested")
without  audit.  The Condensed  Consolidated  Balance Sheet of May 31, 1997, has
been taken from the  audited  financial  statements  included  in the  Company's
Annual Report on Form 10-K filed for the year 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 and its affiliate as of February 28, 1998 and
May 31,  1997,  the results of  operations  for the three months and nine months
ended  February 28, 1998 and February 28, 1997,  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 Company's May 31, 1997 Form 10-K. The
results of operations  for the periods ended  February 28, 1998 and February 28,
1997 are not necessarily indicative of the operating results for the full year.

     3) The condensed  consolidated  financial statements of the Company include
its  proportionate  share of the  accounts  of USECB Joint  Venture  ("USECB" or
"USECC") which is owned 50% by Company and 50% by Company's parent,  U.S. Energy
Corp.  ("USE").  All  material  intercompany  profits  and  balances  have  been
eliminated.
     4) Debt at  February  28, 1998 and May 31, 1997  consists  primarily  of an
account  payable to the  Company's  parent  USE of  $6,370,500  and  $6,023,400,
respectively. The remaining debt is for various equipment.

      5) Accrued  reclamation  obligations  of $725,900  represent the Company'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, 1997 financial
statements to conform to the classifications used in February 28, 1998.






                                        9

<PAGE>



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

During the nine months ended  February 28, 1998,  the Company's  current  assets
increased by $895,000 to a balance of $1,944,500. This increase is primarily due
to a net  increase  of cash  $778,800  and an  increase  of $280,200 in Accounts
Receivable related parties. The increase in cash was a result of the Acquisition
Agreement entered into during the three months ended August 31, 1997 between the
Company,  its parent U.S.  Energy Corp.  ("USE") and Kennecott  Uranium  Company
(Kennecott).  As a result of the  Acquisition  Agreement,  the  Company  and USE
received a $4,000,000  signing  bonus and a loan of  $16,000,000  to continue to
develop  the  Green  Mountain  Mining  Venture  (GMMV)  mining   properties  and
Sweetwater Mill. The $4,000,000  signing bonus was forfeitable  through December
1, 1997, unless certain conditions were met by the Company and USE. Although the
conditions  were met and the  signing  bonus  was no longer  forfeitable,  under
generally  accepted  accounting  principals  the Company's  portion,  $2,000,000
continues  to be  carried  as a  deferred  revenue  item  until such time as the
Acquisition  Agreement is closed or terminated.  If the Acquisition Agreement is
terminated,  the GMMV will continue to hold the  properties  and only  Kennecott
will be  responsible  for paying back the amount  loaned  under the  $16,000,000
development  loan to a Kennecott  affiliate  and the 50% interest of Crested and
USE will not be impacted.

The Company also received  cash in the amount of $429,300,  which is one half of
the proceeds the Company and USE received for the sale of uranium  under a Sheep
Mountain  Partners  (SMP)  contract,  and  $78,300  as an advance  royalty  from
Cyprus/AMAX.  As a result of the GMMV  operations,  the Company and USE invoiced
the GMMV a total of $5,438,500 for direct costs,  management  fees and equipment
rental  during the nine months  ended  February  28,  1998.  Of the total amount
invoiced to the GMMV,  $622,950 (an  increase of $212,450)  had not been paid to
the Company as of Februrary 28, 1998. However,  the quarter-end balance was paid
in full in March of 1998.  The  Company  and USE  continued  to fund SMP and the
Plateau Resources ("Plateau") operations. SMP has not reimbursed the Company and
USE for their direct costs for  maintaining the SMP properties on standby and is
subject to the Arbitration Panel's Award and pending litigation.

The primary uses of cash by the Company were the  reduction of Accounts  Payable
of $443,600; purchases of Property Plant and Equipment of $546,500; increases in
the Investment in Affiliates of $316,000, and the repayment of Long Term Debt of
$83,100. The Company and USE's Chairman and CEO retired $432,000 in amounts owed
to the Company and USE.  This was done as a result of the  decision of the board
of director and  compensation  committee of USE granting the Company's and USE's
Chairman  and CEO John L. Larsen a bonus of $615,000 for his  excellent  work in
acquiring Kennecott as a joint venture partner in 1990 for $15,000,000 in cash

                                       10

<PAGE>



plus a $50,000,000 commitment to USECC to develop the Green Mountain properties;
the  negotiations  by Mr. Larsen in acquiring  Plateau  Resources  Ltd. with the
Shootaring  Mill and the most  recent  negotiations  for USECC to enter into the
Acquisition  Agreement to acquire Kennecott's  interest in GMMV resulting in the
signing  bonus of $4,000,000 to the Company and US. The Companies and Mr. Larsen
agreed that the bonus is further in full  settlement of the $1,000,000  bonus to
the CEO  authorized by the USE board of directors in 1993 which was  conditioned
on the spot price of uranium  concentrates and cash  distributions from the GMMV
to the Company and USE.

The  primary  requirements  for the  Company's  working  capital  continue to be
funding of the on-going administrative expenses; mine and mill holding and start
up costs of Plateau;  the holding  costs of the SMP mines;  on-going  litigation
expenses  associated with the SMP dispute,  and certain  uranium  delivery costs
associated with SMP utility contracts.  Nukem and CRIC are currently making most
of the SMP uranium  deliveries.  No  assurance  can be given that this method of
delivery will continue. The capital requirements to fill the Company's and USE's
portion of the  remaining  commitments  in fiscal  1998 will  depend on the spot
market  price  of  uranium  and may  also be  dependent  on the  outcome  of the
Arbitration/  Litigation  Award involving  Nukem and CRIC,  which Nukem and CRIC
have appealed to the 10th Circuit Court of Appeals.

The primary  source of the  Company's  capital  resources  for the  remainder of
fiscal 1998 will be  reimbursement  available  through the GMMV (see  discussion
below);   cash  on   hand;   the   potential   settlement   of  the   Nukem/CRIC
Arbitration/Litigation;  uranium  deliveries  pursuant  to  the  SMP  contracts;
borrowing from financial  institutions  (primarily the line of credit),  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.

The Company,  USE and Sutter Gold Mining Company ("SGMC") are currently  seeking
additional  financing for the  construction of the gold processing mill and mine
development of SGMC. See discussion  under SGMC below.  An additional $8 million
in financing is being sought. However, there is no assurance that the funds will
be raised.

The expenditures for the SMP care and maintenance costs at the SMP uranium mines
may require additional funding, depending on the outcome of the SMP arbitration.
See Part II, Item 1 "Legal Proceedings" below.

GMMV

On June 23,  1997,  the  Company  and USE  d/b/a  USECC  signed  an  Acquisition
Agreement  with Kennecott for the right to acquire  Kennecott's  interest in the
GMMV for $15,000,000 and other  considerations.  This information was previously
reported in the Company's Form 10-Q (Item 2) for the fiscal quarter ended August
31, 1997. As a result of this agreement, it is believed that no internal funding
will be  required  by the  Company  and  Crested  for the  GMMV  at  either  the
Sweetwater Mill or the Jackpot Mine.


                                       11

<PAGE>



Pursuant to the  Acquisition  Agreement which includes the Mineral Lease and the
Mill Contract,  USECC is developing  the proposed  Jackpot Mine and working with
Kennecott in preparing the Sweetwater Mill for renewed operations.  Such work is
being funded from the $16,000,000 loan provided to the GMMV by Kennecott.  Under
the Fourth  Amendment  of the GMMV  Agreement,  (which  amendment  was  affected
pursuant to the Acquisition  Agreement),  Kennecott will be entitled to a credit
against its original  $50,000,000  commitment to fund the GMMV, in the amount of
two  dollars of credit for each one dollar of such funds out of the  $16,000,000
loan provided by Kennecott to the GMMV,  plus the  $4,000,000  bonus paid to the
Company and USE on signing of the Acquisition Agreement.

Closing  of the  Acquisition  Agreement  is  subject  to  the  Company  and  USE
satisfying  several conditions on or before the extended closing date of October
30, 1998. If the  Acquisition  Agreement is never  closed,  Kennecott and USECC,
shall own their  respective 50% interest in the GMMV and the obligation to repay
the $16,000,000 loan shall remain  Kennecott's  obligation,  without any adverse
effect on the 50% interest in the GMMV held by the Company and USE.

SUTTER GOLD MINING COMPANY

The  preliminary  prospectus  to qualify a  previous  special  warrant  offering
prospectus  of Sutter Gold Mining  common  stock has been filed with the Ontario
Securities  Commission with a copy to the Toronto Stock Exchange.  An additional
$8  million  must be  raised  to fund the  development  costs to place  the SGMC
properties in production.  It is not anticipated that any of the Company's funds
will be  required to fund these  operations.  Subsequent  to the  quarter  ended
February 28, 1998 USE purchased  certain Special Warrants of Sutter Gold. Please
refer to Item 5 below.  It is unlikely  SGMC will be listed on the Toronto Stock
Exchange until such time as gold prices recover  further from the drop in prices
in 1997.

SHEEP MOUNTAIN PARTNERS

Nukem and CRIC filed their  opening  brief in their  appeal to the 10th  Circuit
Court of Appeals on December  12,  1997.  The Company and USE filed their answer
brief on January 12, 1998.  Thereafter,  Nukem and CRIC filed a reply brief.  On
April 13, 1998, the Deputy Clerk of Court advised all counsel that a three-judge
panel had  reviewed the briefs and record on appeal and oral  arguments  are not
needed.  See Item 1, Part II below. No assurance can be given as to the ultimate
outcome.

Until  such  time as these  issues  are  resolved,  the  Company  and USE may be
required to fund the standby costs of the Sheep Mountain  Partners'  mines.  The
Company and USE have filed a lien on the SMP  properties as a protection for the
payment of past and future standby costs for which they have not been reimbursed
by Nukem/CRIC and filed suit in Wyoming to foreclose the lien. The case has been
stayed and the issues will be heard in the Denver  District  Court.  See Item 1,
Part II below.


                                       12

<PAGE>



RESULTS OF OPERATIONS

THREE AND NINE MONTHS ENDED  FEBRUARY 28, 1998 COMPARED TO THREE AND NINE MONTHS
ENDED FEBRUARY 28, 1997

Revenues for the nine months ended  February 28, 1998,  increased by  $1,161,300
over the same period of the prior year. The increase in revenues primarily is as
a result of a delivery  pursuant to one of the SMP delivery  contracts wherein a
net profit of $429,300 was recognized by the Company and an increase of $301,400
in rental  revenues which consist  primarily of the rental of equipment and real
estate.  There were no uranium  sales during the nine months  ended  February 28
1998.  The increase of equipment  rentals is as a result of increased  equipment
rentals  to the GMMV under the June 23,  1997  Acquisition  Agreement  discussed
above.  Management fees and other Revenues increased by $349,600 during the nine
month period ended  February 28, 1998,  over the same period ended  February 28,
1997, due primarily to management fees charged on increased  activities provided
to various subsidiary companies and partnerships by the Company and USE.

Other than the  increases  in Mineral  Operations  of  $276,500  and General and
Administrative  expenses of  $712,600,  costs and expenses  remained  relatively
constant with those experienced  during the nine month period of the prior year.
Mineral  Operations  and  General  and  Administrative  expenses  increased  due
primarily to additional  staff to administer the development of the GMMV and the
bonus given to the Company and USE's Chairman and CEO.

Equity in loss of in affiliates  decreased by $12,500 over the prior year during
the nine months ended February 28, 1997; to a total of $157,500.

Operations for the nine month period ended February 28, 1998, resulted in a loss
of  $609,800  or $0.06 per share as  compared to a loss of $810,600 or $0.08 per
share for the same period from the  previous  year.  The decrease in the loss is
primarily  as a result of  increased  revenues  for the sale of Uranium  and the
rental of equipment  which were offset by increases  in mineral  costs,  and the
increased  administrative costs associated with expanded operations.  Operations
for the three months ended February 28, 1998,  resulted in a loss of $598,401 or
$0.06 per share as compared to a loss of $319,000 or $0.03 per share  during the
quarter  ended  February 28, 1997.  This increase in the loss for the quarter is
primarily  associated  with the bonus given the  Company's  Chairman and CEO and
increased costs associated with mining and administrative costs.



                                       13

<PAGE>



                    PART II.  OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS.

      (a) SHEEP MOUNTAIN PARTNERS ARBITRATION/LITIGATION. The information called
for in this Item 1 has been previously reported in the Company's Form 10-K (Item
3) for the fiscal year ended May 31,  1997 and Item 1, Part II of the  Company's
Form 10-Q for the quarters  ended  August 31, 1997 and  November 30, 1997.  This
report discloses the status of the consensual arbitration/litigation in the U.S.
District  Court of Colorado  and 10th  Circuit  Court of Appeals  involving  the
Company and U.S. Energy Corp.  d/b/a USECC and Nukem,  Inc. and its wholly-owned
subsidiary Cycle Resource  Investment 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,  a Second
Amended  Judgment was entered on June 30, 1997, by Judge Lewis T. Babcock of the
U.S.   District  Court  of  Colorado  wherein  the  Court  again  confirmed  the
Arbitration Award ordering Nukem to pay USECC a net of approximately  $8,600,000
as monetary damages and imposing a constructive trust in favor of SMP on Nukem's
rights to purchase CIS uranium,  the uranium  acquired  pursuant to those rights
and the profits therefrom (the "CIS  contracts").  Nukem/CRIC filed a motion for
clarification  and/or limited remand of the Second Amended  Judgment.  On August
13, 1997, the U.S.  District Court denied the motion.  Nukem and CRIC then filed
an amended notice of appeal of the District Court's  Judgment,  Amended Judgment
and Second Amended Judgment with the 10th Circuit Court of Appeals.  USECC filed
a motion to increase the  supersedeas  bond Nukem posted for $8,613,600 to cover
the value of the CIS  contracts,  but the 10th Circuit  Court denied the motion.
Nukem/CRIC filed their Appellants'  opening brief with the 10th Circuit Court of
Appeals on December 12, 1997.  USECC filed its  Appellees'  brief on January 12,
1998.  Nukem/CRIC  filed a reply brief on January 26,  1998.  On April 13, 1998,
Company  received a notice to all counsel in the appeal from the Deputy Clerk of
the 10th Circuit  Court  advising  that the case was  referred to a  three-judge
panel and after examination of the briefs and record on appeal, the panel was of
the unanimous  opinion that oral arguments were not needed.  Nukem and CRIC have
the  opportunity  to file within ten days with the Court a statement  of reasons
for oral  argument.  The  Court  also  required  Nukem  and CRIC to  initiate  a
mandatory settlement conference and a report of the proposed conference shall be
filed with the Clerk.

      (b). BGBI LITIGATION.  The information  called for in this Item 1 has been
previously  reported  in the  Company's  Form 10-K (Item 3) for the fiscal  year
ended May 31, 1997 and Item I part II of the Company's Form 10-Q for the quarter
ended November 30, 1997.  This report  discloses the status of the lawsuit filed
by Plaintiff  Bond Gold Bullfrog Inc. in Nye County,  NV against the  Defendants
Company, USE and Parador Mining Company,  Inc. regarding Parador's lease to Bond
Gold of two patented  mining  claims.  On December 18, 1997, at a hearing before
the District  court on motions for summary  judgment by all  parties,  the Court
granted  various  motions of the  parties  but denied  plaintiff's  motions  for
summary  judgment  on the breach of  Parador's  lease and the issue of  specific
performance  by  plaintiff.  The Court  denied  defendants'  motion for  summary
judgment on plaintiff's claim for breach of contract. Thus, the issues of breach
of contract by both BGBI for specific performance by plaintiff. The Court denied
defendants'  motion for  summary  judgment  on  plaintiff's  claim for breach of
contract.  Thus,  the issues of breach of  contract by both  plaintiff  BGBI and
these  defendants  and BGBI for  specific  performance  remained  and were tried
before the Court  commencing  on January 26,  1998.  After the trial,  the Court
found against the parties on their respective claims and the plaintiff

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and  these  defendants  filed a Notice of  Cross-Appeal  and  Notice of  Appeal,
respectively  to the Nevada Supreme  Court.  The record on appeal has been filed
with the Nevada Supreme Court and the appeals process is now being followed.

      (c). On  September  16, 1991,  Company and USE d/b/a USECC as  plaintiffs,
filed Civil Action No. 91CV7082 in the Denver District Court, wherein plaintiffs
were  seeking  reimbursement  of  $85,000  per month from the spring of 1991 for
maintaining the SMP uranium mines at Crooks Gap on a standby basis. On behalf of
SMP,  CRIC filed an answer,  affirmative  defenses  and a  counterclaim  against
plaintiffs denying that SMP owed plaintiffs any money. Plaintiffs filed a Motion
for Summary  Judgment and the Denver  District Court Judge denied the motion and
stayed all  proceedings  until the case involving  plaintiffs and CRIC and Nukem
were resolved in the U.S. District Court for Colorado. This matter was submitted
to arbitration in February  1994, and on April 18, 1996, the  Arbitration  Panel
awarded USECC  $2,512,823  plus per diem interest of $616 against Nukem and CRIC
jointly and severally  for standby costs through March 31, 1996.  When Nukem and
CRIC  appealed  the  confirmation  of  the  Arbitration  Award,  they  posted  a
supersedeas bond to cover this portion of the Award. USECC continued to maintain
the SMP underground and open pit mines in Fremont County, Wyoming so USECC filed
a lien for such  expenditures  on the SMP mining  properties from March 31, 1996
and in 1997,  filed a civil action to foreclose  the lien in a Wyoming  District
Court.  Nukem and CRIC  resisted the  foreclosure  case in Wyoming  claiming the
Denver District Court had  jurisdiction  because of the forum  selection  clause
referred  to  Colorado  as the  jurisdiction  for such  claim  in the  Operating
Agreement  between SMP and USECC.  The Court enjoined USECC from proceeding with
the  foreclosure  action in the Wyoming  Court and various  pleadings  have been
filed  by both  parties  in the  Denver  District  Court  where  the case is now
pending.

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

     On December 5, 1997, 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.

      The vote as follows:

NAME OF DIRECTOR          FOR       AGAINST   ABSTAIN   WITHHELD

John L. Larsen        8,601,807      8,400    31,500      8,330
Max T. Evans          8,604,807      8,400    31,500      5,330
Daniel P. Svilar      8,602,807      8,400    31,500      7,330
Michael D. Zwickl     8,602,807      8,400    31,500      7,330
Kathleen R. Martin    8,602,507      8,400    31,500      7,630





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ITEM 5.      OTHER INFORMATION

Subsequent to February 28, 1998,  USE entered into four separate  Stock Purchase
Agreements  with four  Canadian  investment  funds,  for the issuance of 658,895
shares of Common Stock of USE, in  consideration of the funds' payment to USE of
US$1,190,000  in cash and the  delivery  to USE of 888,900  Special  Warrants of
Sutter Gold Mining  Company  ("SGMC"),  a subsidiary  of USE. The funds had paid
SGMC a total of  Cdn$4,888,950  in May 1997,  pursuant to a private  offering in
Canada,  to purchase  the  Special  Warrants  from SGMC.  Each  Special  Warrant
entitled  the holder to  acquire  from SGMC,  at no further  cost,  one share of
Common Stock of SGMC, and one Purchase Warrant; each Purchase Warrant would have
entitled the holder to purchase one share of Common Stock of SGMC, at a price of
Cdn  $6.00 per whole  share  (the  "Purchase  Warrants"),  during  the 18 months
following  the May 1997  closing of the  offering of the SGMC  Special  Purchase
Warrants.

Pursuant to the terms and  conditions of the Special  Warrants,  if SGMC were to
fail  to  obtain   prospectus   qualification   before  the   October  10,  1997
qualification deadline (as such terms were defined in the Special Warrants) from
the securities  commissions of the Canadian  Provinces wherein purchasers of the
Special Warrants  reside,  the holders of the Special Warrants would be entitled
to  receive a dilution  penalty  in the amount of 1.1 shares of Common  Stock of
SGMC and 1.1 Purchase  Warrants,  for each Special  Warrant  exercised after the
qualification  deadline if  prospectus  qualification  were not  obtained by the
qualification  deadline.  Such qualification required listing of the SGMC shares
and Purchase Warrants on a principal Canadian stock exchange.

The prospectus  qualification  has not been obtained by SGMC, due to the drop in
gold prices during the latter part of 1997 and the resulting lack of interest in
new listings of gold  companies in the Canadian  markets.  However,  none of the
four  Canadian  funds,  nor any other  investor in the  Canadian  offering,  has
received  additional shares of SGMC Common Stock or additional Purchase Warrants
in payment of the  dilution  penalty  with  respect to the Special  Warrants and
their constituent securities.


Each of the four  Canadian  funds,  in order to  diversify  and  increase  their
original  investment,  made offers to USE to purchase  shares of Common Stock of
USE. Each of the four funds, and USE,  negotiated the terms of acceptance of the
funds' offer by USE. As a result of the offer and subsequent  negotiations  with
each of the funds, USE entered into the four Stock Purchase  Agreements with the
funds.

As of the date  hereof,  pursuant  to the  Stock  Purchase  Agreements,  USE has
received  consideration  for  its  issued  shares  consisting  of (i)  net  cash
proceeds,  from all four funds, of US$1,102,464 (after deduction of US$87,536 in
legal fees and a fee paid to a Canadian  investment  banking firm); (ii) 684,300
Special  Warrants  of  SGMC  (from  three  of the  four  funds);  and  (iv)  the
relinquishment  by each of the  four  funds  of  their  rights  to the  dilution
penalty.  USE has issued 546,365 shares of Common Stock as of the date hereof in
consideration  of the  cash,  the  Special  Warrants  received  to date  and the
relinquishments. The USE shares are restricted securities. Pursuant to the terms
of the Stock Purchase Agreements,  USE will file a resale registration statement
with the Securities and Exchange Commission, to permit the resale of the subject
shares by the funds. When the registration statement is declared effective,  the
balance of 112,530 shares of USE Common Stock will be issued to the fourth

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fund, and that fund will deliver its 204,600 Special  Warrants to USE in payment
for such 112,530  shares of USE Common Stock.  Such 112,530 shares of USE Common
Stock  issued to the fourth  fund will be  included  in the resale  registration
statement.

The dilution penalty,  if paid, would have resulted in the issuance to the funds
of an additional  88,890 shares of Common Stock of SGMC and Purchase Warrants to
buy  another  88,890  shares of Common  Stock of SGMC.  USE will retain the SGMC
Special  Warrants  acquired to date from three of the funds (and will retain the
fourth fund's Special Warrants when acquired).  It is possible that the dilution
penalty may have to be paid with  respect to Canadian  investors  in the Special
Warrants other than the four Canadian funds.

The Stock  Purchase  Agreements  closed as of April 7,  1998,  at which date the
closing bid price of USE shares was US$6.876. A price of US$7.00 was utilized by
the funds and by USE for purposes of determining  the number of USE shares to be
issued under the Stock Purchase Agreements.  There will not be any adjustment in
the terms of the fourth fund's Stock  Purchase  Agreement for any changes in USE
share market prices when the final portion of that Agreement is closed.

The USE compensation  committee is to review the transaction with the above four
funds on a division of the SGMC Special  Warrants  acquired by USE,  between USE
and Crested and make its  recommendation  to the boards of  directors of USE and
the Company.

The accounting  treatment of the transaction with the funds will be set forth in
the full year  financial  statements for USE, which will be included in the Form
10-K Report for fiscal year ending May 31, 1998.

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, 1998.



                                       17

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                            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 13, 1998          By:     S/ MAX T. EVANS
                                    ------------------
                                    MAX T. EVANS,
                                    President



Date:  April 13, 1998          By:     S/ ROBERT SCOTT LORIMER
                                    --------------------------
                                    ROBERT SCOTT LORIMER,
                                    Principal Financial Officer
                                    and Chief Accounting Officer


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