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 AUGUST 31, 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, address and 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 October 17, 1997
---------------------------------------     -----------------------------------
      Common stock, $.001 par value                  10,302,694 Shares



<PAGE>



                                  CRESTED CORP.

                                      INDEX

                                                                       PAGE NO.
PART I.      FINANCIAL INFORMATION

ITEM 1.      Financial Statements.

             Condensed Consolidated Balance Sheets
                August 31, 1997 and May 31, 1997.............................

             Condensed Consolidated Statements of Operations
                Three Months Ended August 31, 1997 and 1996..................

             Condensed Consolidated Statements of Cash Flows
                Three Months Ended August 31, 1997 and 1996..................

             Notes to Condensed Consolidated Financial Statements............

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

PART II.   OTHER INFORMATION

ITEM 1.      Legal Proceedings...............................................

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

             Signatures......................................................


                                        2

<PAGE>



                          PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS.

                           CRESTED CORP. AND AFFILIATE

                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS

                                                    August 31,             May 31,
                                                       1997                 1997
                                                  --------------       --------------
                                                    (Unaudited)         (Unaudited)

CURRENT ASSETS:
<S>                                               <C>                  <C>           
   Cash                                           $   1,451,900        $       37,100
   Accounts receivable
      Trade                                              90,500                63,900
      Affiliates                                        887,800               596,200
   Current portion of long-term receivable
      Related parties                                   308,700               304,000
      Other                                              79,000               --
   Inventory and other                                   32,700                48,300
                                                  -------------        --------------
         TOTAL CURRENT ASSETS                         2,850,600             1,049,500

LONG-TERM NOTES RECEIVABLE                              406,700               474,600

INVESTMENTS IN AFFILIATES                             1,845,300             1,796,800

INVESTMENT IN CONTINGENT WARRANT                        651,000                651,000

PROPERTIES AND EQUIPMENT                              5,213,300             5,181,300
   Less accumulated depreciation,
   depletion and amortization                        (3,061,800)           (3,017,700)
                                                  -------------        --------------
                                                      2,151,500             2,163,600

OTHER ASSETS                                            150,400               150,200
                                                  -------------        --------------
                                                  $   8,055,500        $    6,285,700
                                                  =============        ==============
</TABLE>




                   See notes to Condensed Consolidated Financial Statements.

                                                  3

<PAGE>



                                     CRESTED CORP. AND AFFILIATE

                                CONDENSED CONSOLIDATED BALANCE SHEETS

                                LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                         August 31,             May 31,
                                                            1997                 1997
                                                       -------------         -------------
                                                        (Unaudited)           (Unaudited)

CURRENT LIABILITIES:
<S>                                                    <C>                  <C>           
     Accounts payable and accrued expenses             $      76,000        $      556,600
     Deferred income                                       2,000,000               --
     Current portion of long-term debt (Note 4)
        Affiliates                                         6,039,600             6,023,400
        Others                                                 3,700                12,400
                                                       -------------        --------------
TOTAL CURRENT LIABILITIES                                  8,119,300             6,592,400

LONG-TERM DEBT                                                12,800                15,800

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

COMMITMENTS AND CONTINGENCIES

FORFEITABLE COMMON STOCK, $.001 par value
     65,000 shares                                            43,900                43,900

SHAREHOLDERS' EQUITY:
     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                                  (7,232,000)           (7,477,900)
                                                       -------------        --------------
                                                            (846,400)           (1,092,300)
                                                       -------------        --------------
                                                       $   8,055,500        $    6,285,700
                                                       =============        ==============



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

                                                  4

<PAGE>



                                 CRESTED CORP. AND AFFILIATE

                       CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                            August 31,
                                                  ----------------------------
                                                     1997                1996
                                                     ----                ----
REVENUES:
<S>                                               <C>               <C>  
   Mineral sales                                  $ 429,300         $  --
   Oil and gas sales                                 24,300             19,500
   Mineral property transactions                     28,800             20,900
   Interest                                          28,300              6,400
   Rental                                           220,700             27,400
   Gain on sale of assets                               400            --
   Other                                            155,000            111,100
                                                  ---------         ----------
                                                    886,800            185,300

COSTS AND EXPENSES:
   Cost of sales                                     27,600             26,500
   Mineral operations                               187,400             81,400
   Interest expense                                   4,400              7,500
   General and administrative                       330,100            179,000
   Depreciation and amortization                     44,100             44,100
                                                  ---------         ----------
                                                    593,600            338,500
                                                  ---------         ----------

INCOME (LOSS) BEFORE EQUITY LOSS
   AND INCOME TAX PROVISION                          293,200          (153,200)

EQUITY IN (LOSS) GAIN
   INCOME OF AFFILIATE                              (47,300)           (58,800)
                                                  ---------         ----------

INCOME (LOSS) BEFORE PROVISION
   FOR INCOME TAXES                                 245,900           (212,000)

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

NET INCOME (LOSS)                                 $ 245,900         $ (212,000)
                                                  =========         ==========

NET INCOME (LOSS) PER SHARE                       $     .02         $     (.02)
                                                  =========         ==========

WEIGHTED AVERAGE NUMBER OF
   SHARES OUTSTANDING                             10,302,694        10,213,094
                                                  ==========        ==========



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

                                        5

<PAGE>



                           CRESTED CORP. AND AFFILIATE

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                      August 31,
                                                            ------------------------------
                                                                1997               1996
                                                                ----               ----
                                                             (Unaudited)        (Unaudited)
<S>                                                         <C>                <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                        $   245,900        $ (212,000)
   Adjustments to reconcile net loss to net cash
      used in operating activities:
         Depreciation, depletion and amortization                44,100            44,100
         Equity loss from investments                            47,300            58,800
         Deferred income                                      2,000,000           --
      Net changes in components
         of working capital                                    (783,400)          (83,700)
                                                            -----------        ----------
NET CASH PROVIDED BY (USED IN)
  OPERATING ACTIVITIES                                        1,553,900          (192,800)

CASH FLOWS FROM INVESTING ACTIVITIES:
   Increase in notes receivable                                 (27,500)          (77,900)
   Proceeds from collection
      of notes receivable                                        11,700            33,900
   Investments in affiliates                                    (95,800)         (105,200)
   Purchase of property and equipment                           (32,000)           (6,400)
                                                            -----------        ----------
NET CASH (USED IN)INVESTING ACTIVITIES                         (143,600)         (155,600)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase in debt                                              16,200           331,400
   Payment on long-term debt                                    (11,700)             (900)
                                                            -----------        ----------
NET CASH PROVIDED BY (USED IN)
   FINANCING ACTIVITIES                                           4,500           330,500
                                                            -----------        ----------

NET INCREASE (DECREASE) IN
   CASH AND CASH EQUIVALENTS                                  1,414,800           (17,900)

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

CASH AND CASH EQUIVALENTS AT
   END OF PERIOD                                              1,451,900            34,700
                                                            -----------        ----------

SUPPLEMENTAL DISCLOSURES:

   Interest paid                                            $     4,400        $    7,500
                                                            ===========        ==========



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

                                                    6

<PAGE>



                                  CRESTED CORP.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


        1) The Condensed  Consolidated  Balance Sheet as of August 31, 1997, the
Condensed  Consolidated  Statements  of  Operations  for the three  months ended
August 31, 1997 and 1996,  and the  Condensed  Consolidated  Statements  of Cash
Flows for the three months ended August 31, 1997 and 1996, have been prepared by
the Registrant  without audit. The Condensed  Consolidated  Balance Sheet of May
31, 1997, 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 August
31, 1997 and May 31, 1997,  the results of operations for the three months ended
August 31, 1997 and 1996, and the cash flows for the three 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, 1997 Form 10-K.
The results of operations for the periods ended August 31, 1997 and 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  consists  primarily  of the  balance  on a note  payable to the
Registrant's  parent USE of $6,039,600.  The remaining long-term debt of $12,800
is for various equipment loans through financial institutions.

        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,  1997
financial statements to conform to the classifications used in August 31, 1997.


                                        7

<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

        On June 23, 1997, the Company and its parent company,  U.S. Energy Corp.
("USE"),  entered into an Acquisition  Agreement with Kennecott  Uranium Company
("Kennecott")  whereby  the  Company  and USE  received  a  signing  bonus  from
Kennecott of $4,000,000 and a loan to develop the Green Mountain  Mining Venture
("GMMV")  properties of  $16,000,000.  The $4,000,000 is forfeitable  until such
time as a closing  takes place on December 1, 1997 or certain  other actions are
taken by the Company and USE at that date. The $4,000,000,  one half of which is
attributable to the Company,  is therefore  carried on the liability  portion of
the balance sheet as a current deferred income item.  Additionally,  the Company
received cash from the sale of uranium under the Sheep Mountain Partners ("SMP")
contracts of $429,300; its advance royalty from Cyprus Amax of $28,000; $220,000
from the  rental  of  equipment  to the GMMV and  real  estate  properties,  and
$109,800 in the form of management  fees.  The receipt of these funds  increased
the Company's liquidity position significantly.

        The Company  utilized  $143,600 in its investing  activities  during the
three  months  ended  August 31,  1997.  This was  primarily  as a result of the
Company and USE funding SMP and Plateau  Resources Limited  ("Plateau").  As the
Company  and  USE  provide   various   services   for  the  GMMV  and  SMP,  the
non-affiliated  participants are invoiced for their  proportionate  share of the
approved  operating  costs.  The GMMV is  current on its  reimbursements  to the
Company and USE for all the operating  costs.  Due to disputes  existing between
the SMP  partners,  the  Company and USE have not been  reimbursed  for care and
maintenance  costs  expended on the SMP mineral  properties in Wyoming since the
spring of 1996. As a result of the uncertainty of the receivable from SMP, it is
being reported on the Financial  Statements as an investment in  affiliates.  In
addition to increasing  investments,  the Company  utilized  $32,000 of the cash
received to purchase additional equipment.

        The Company netted $4,500 from its financing  activities as it increased
its long term  debt to USE as a result of USE  paying  certain  expenses  on the
Company's  behalf.  Cash  provided  by  operations,   $1,553,900  and  financing
activities, $4,500 less the cash used in investing activities, $143,600 resulted
in a net increase in cash and cash  equivalents  of  $1,414,800.  This  increase
places the Company in a strong cash position of $1,451,900 at August 31, 1997 as
compared to $34,700 at the same date of the prior year.  Transactions that could
potentially impact the Company's liquidity position are the indebtedness to USE,
$6,039,600  and the Company's  potential  refundable  portion of the  $4,000,000
signing bonus from  Kennecott.  It is believed by management of the Company that
it and USE will be able to satisfy the terms of the Kennecott  agreement and the
signing bonus will not have to be refunded.

        The primary  requirements for the Registrant's  working capital continue
to be funding of the on-going  administrative  expenses,  including the mine and
mill  development and holding costs of Plateau;  and the uranium  delivery costs
and property  holding costs of SMP. As a result of the disputes  between the SMP
partners,  the  Registrant  and  USE  have  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.
Nukem/CRIC are currently making most of the SMP deliveries. No assurances 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

                                        8

<PAGE>



uranium  concentrates  and is also  dependent on the outcome of the  arbitration
proceedings involving Nukem/CRIC.

        The primary source of the Company's  capital resources for the remainder
of fiscal 1998 will be  financing  available  through the GMMV,  see  discussion
below;    cash   on    hand;    eventual    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  and  USE are  currently  seeking
additional  financing for the  construction of the gold processing mill and mine
development of Sutter Gold Mining Company ("SGMC").  See discussion under Sutter
below. An additional $12 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 may  require
additional  funding,  depending on the outcome of the SMP arbitration.  See Part
II, Item 1 "Legal Proceedings" below.

GMMV

        As a result of  agreements  being  reached  with  Kennecott  during  the
quarter  ended August 31, 1997,  it is believed that no funding will be required
by the Company for the GMMV at either the  Sweetwater  Mill or the Jackpot Mine.
On June 23, 1997 USE,  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  consideration.  Kennecott paid USE and USECC a
bonus  of  $4,000,000  on  signing,  and  committed  to  provide  the GMMV up to
$16,000,000  for payment of  reimbursable  costs incurred by USECC in developing
the proposed underground Jackpot Uranium Mine for production and in changing the
status of the Sweetwater Mill from standby to operational.

        The  $16,000,000  being  loaned by Kennecott to the GMMV was advanced to
Kennecott by an  affiliate,  Kennecott  Energy  Company  ("KEC") under a secured
recourse  Promissory  Note  (the  "Note")  bearing  interest  at 10.5% per annum
starting in April 1999 until paid in full. The Note is payable  quarterly out of
20% of cash flow from the GMMV properties, but not more than 50% of the earnings
for  such  quarter  from the  GMMV  operations,  before  interest,  income  tax,
depreciation and amortization,  however, the Note is payable (i) in full on June
23, 2010  regardless  of cash flow and earnings of the GMMV,  or (ii) sooner (on
December 31, 2005) if an  economically  viable  uranium mine has not been placed
into  production  by such date.  The Note is secured  by a first  mortgage  lien
against  Kennecott's  interest  in the GMMV  pursuant  to a  Mortgage,  Security
Agreement,  Financing  Statement and  Assignment  of Proceeds,  Rents and Leases
granted by  Kennecott  to KEC (the  "Mortgage").  USE and USECC will  assume the
Note, and the assets of the GMMV will be subject to the Mortgage,  at closing of
the acquisition.

        Pursuant to the Acquisition  Agreement,  the Mineral Lease, and the Mill
Contract,  USECC is to develop the proposed Jackpot Mine and work with Kennecott
in  preparing  the  Sweetwater  Mill for renewed  operations.  Such work will be
funded from the $16,000,000  being provided to the GMMV by Kennecott.  Under the
Fourth  Amendment of the GMMV Agreement,  Kennecott will be entitled to a credit
against  Kennecott's  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  provided by Kennecott to the GMMV,  plus the $4,000,000 paid to USE
and USECC on signing of the Acquisition  Agreement.  It is anticipated that such
credits will satisfy the balance of Kennecott's  initial  funding  commitment to
acquire a 50% interest in the GMMV.


                                        9

<PAGE>



        Kennecott  has  agreed to  provide  funds to the GMMV  each  month in an
amount  adequate to  reimburse  USECC for  invoiced  costs and restore the USECC
working account balance to $1,000,000.  Payment by GMMV of the monthly  invoiced
costs is  subject to  Kennecott's  confirmation  that such costs  conform to the
Mineral  Lease and Mill Contract  budgets.  Subject to and at the closing of the
Acquisition  Agreement,  Kennecott  will  advance  to the GMMV cash equal to any
difference  between (i) the $16,000,000  commitment and (ii) amounts advanced to
pay reimbursable costs and maintain the working capital account.

        Closing  of the  Acquisition  Agreement  is  subject  to USE  and  USECC
satisfying several conditions, including: (i) the acquiring entity (which may be
USE, USECC, or an entity formed by USE and USECC to acquire Kennecott's interest
in the GMMV) must have a market  capitalization of at least  $200,000,000;  (ii)
the parties to the Acquisition  Agreement must have received all authorizations,
consents,  permits and  approvals of  government  agencies  required to transfer
Kennecott's  interest in the GMMV to the acquiring  entity;  (iii) USE and USECC
shall have replaced, or caused the replacement of, approximately  $25,000,000 of
reclamation  bonds,  in  addition  to  other  guarantees,   indemnification  and
suretyship  agreements  posted by Kennecott on behalf of the GMMV;  and (iv) USE
and USECC, or the acquiring entity, must pay $15,000,000 in cash to Kennecott at
closing and assume all  obligations and liabilities of Kennecott with respect to
the GMMV (including repayment of the $16,000,000 Note and the Mortgage) from and
after the closing. Under very limited circumstances,  the scheduled closing date
may be postponed to another date not later than October 30, 1998. The parties to
the Acquisition Agreement also executed a mutual General Release with respect to
any and all  claims  that  they may have  with  respect  to any  prior  disputes
concerning  the GMMV,  which  General  Release  would be  delivered  to all such
parties at closing of the Acquisition Agreement. Upon closing of the Acquisition
Agreement,  the Mineral Lease and the Mill Contract will be terminated  and USE,
USECC or the acquiring entity will own 50% of the GMMV,  although its properties
will remain  subject to the Mortgage until the Note is paid in full. The current
50% interest in GMMV held by USE and USECC will not change when the  Acquisition
Agreement is closed.

        If the Acquisition Agreement is not closed by December 1, 1997, then USE
and USECC (or an entity  formed by them to acquire  the GMMV  interest  owned by
Kennecott)  are to provide to  Kennecott a  commitment  letter from a recognized
national  investment banking firm to complete an underwritten public offering of
the securities of USE (or an entity formed or introduced to acquire  Kennecott's
GMMV  interest  (the  "Acquiring  Entity")),  in amount  sufficient to close the
Acquisition  Agreement  transactions.  Such  amount  is  estimated  by USE to be
approximately  $40,000,000,  (for the $15,000,000 closing cash purchase price to
Kennecott,  plus  $25,000,000 to assume or cause the  replacement of reclamation
bonds, guarantees,  indemnification agreements and suretyship agreements related
to the GMMV properties and the Sweetwater Mill. Alternatively, USE, USECC or the
Acquiring Entity must provide evidence to Kennecott of a commitment  letter from
a bank,  other  financial  institution or industry  entity to provide private or
joint venture financing in such approximate amount.  Failure to provide evidence
of such financial  commitment by December 1, 1997 will terminate the Acquisition
Agreement, the Mineral Lease and the Mill Contract.

        If  the  Acquisition  Agreement  is  not  closed,  USE  and  USECC,  and
Kennecott,  shall own their respective 50% interest in the GMMV, and Kennecott's
obligation  to repay the  $16,000,000  loaned by KEC  shall  remain  Kennecott's
obligation,  without any adverse  effect on the 50% interest in the GMMV held by
USE and USECC.  However,  the Jackpot Mine  development work and Sweetwater Mill
upgrade work funded by the $16,000,000 advance,  will have benefited all parties
to the GMMV.


                                       10

<PAGE>



SUTTER GOLD MINING COMPANY

        Sutter  Gold  Mining  Company  is  in  discussions  with  two  separate,
substantial  Canadian investment banking firms in Toronto,  Canada,  regarding a
proposed  public  offering  of SGMC  common  stock  through  the  Toronto  Stock
Exchange. If such discussions result in a successful securities offering,  which
would  be made  only  to  Canadian  residents,  SGMC  will  be able to fund  the
anticipated  $12  million  development  costs with these  funds and the funds it
currently has on hand from the 1997 private  placements.  It is not  anticipated
that any of the Company's  funds will be required to fund these  operations,  if
such financing efforts are successful.

SHEEP MOUNTAIN PARTNERS

        On June 27, 1997, the District Court entered its Second Amended Judgment
ordering  Nukem to assign the PSE&G contract to SMP and impressed 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 District Court
also stayed  USECC's right to execute on the Judgment  against  Nukem/CRIC  when
Nukem/CRIC  posted a supersedeas  bond in the amount of $8,613,600.  Thereafter,
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/CRIC  then  filed an  Amended  Notice of  Appeal  of the  District
Court's  Judgment and Second  Amended  Judgment  with the Tenth Circuit Court of
Appeals.  The Company and USE filed a motion to increase the supersedeas bond to
cover the value of the CIS purchase  contracts.  Nukem/CRIC filed their response
on October 17, 1997. No assurance can be given on the outcome of these  motions.
The  Tenth  Circuit  Court of  Appeals  set  November  6,  1997 as the date that
Nukem/CRIC must file its pleadings in their appeal before the Court. The Company
and USE have until December 6, 1997 to file a response to these pleadings.  Some
time after that the issue will be resolved by the Appellate  Court. No assurance
can be given as to the ultimate outcome,  however  management of the Company and
USE are optimistic the ruling will be in their favor.

        Until such time as these issues are resolved, the Company and USE may be
required to fund the standby costs of the Sheep Mountain 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.


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RESULTS OF OPERATIONS

THREE MONTHS ENDED AUGUST 31, 1997 COMPARED TO 
THREE MONTHS ENDED AUGUST 31, 1996

        Revenues  for the quarter  ended  August 31, 1997  increased by $701,500
over the same quarter of the prior year. The increase in revenues  primarily are
as a result of a delivery of uranium  concentrates under one of the SMP delivery
contracts wherein a net profit of $429,300 was recognized by the Company.  There
were no such sales during the quarter ended August 31, 1996 as  Nukem/CRIC  were
making all deliveries for SMP during that period.  Nukem/CRIC  likewise made the
SMP delivery for the first  quarter of fiscal 1998 and delivered one half of the
reported  profits from the sale to the Company and USE.  Revenues also increased
for the rental of  equipment  by $186,400 to a total of $190,100 for the quarter
ended  August 31,  1997.  This  increase is as a result of  increased  equipment
rentals to the GMMV under the June 23, 1997 agreement  discussed above.  Finally
other  revenues  increased by $43,900  during the quarter  ended August 31, 1997
over the quarter ended August 31, 1996.  This increase was primarily as a result
of management fees increasing by $53,900 due to increased activities provided to
the various subsidiary companies by the Company,

        Costs and expenses  remained fairly constant with the prior year for the
same  quarter  of  the  prior  year.  The  costs  that  increased  were  mineral
operations,  $106,000 and general and administrative  expenses,  $151,100. These
increases were due primarily to additional  staff to administer the  development
of the GMMV as well as accrued  vacations  being paid to certain  employees  and
primarily applied to their indebtedness to the Company and USE.

        Operations  for the quarter  ended August 31, 1997 resulted in income of
$245,900  or $0.02  per share as  compared  to a loss of  $212,000  or $0.02 per
share.  The increase in earnings is primarily as a result of increased  revenues
for the sale of uranium concentrates and the rental of equipment.

                           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, 1997.
This report discloses 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 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  approximately
$12,594,000 as monetary damages.  In November 1996, USECC received $4,367,000 of
these damages out of the SMP escrowed funds and its bank account per the Court's
earlier November 5, 1996 Judgment.

        Despite the rulings of the  Arbitration  Panel  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
defendants-appellants  Nukem/CRIC  continued 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.


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        In the March 6, 1997 Amended Judgment, Judge Babcock again confirmed the
Arbitration  Panel's  Orders and Award;  denied  Nukem's motion to modify and/or
vacate portions of the Award;  denied Nukem's  objections to the confirmation of
the  Orders  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.

        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  but the District
Court denied the motion.  USECC then filed a motion with the U.S. District Court
to correct clerical omissions in its March 6, 1997 Amended Judgment.  Nukem/CRIC
opposed the motion but on June 30, 1997,  the District  Court entered its Second
Amended  Judgment  ordering  Nukem  to  assign  the  PSE&G  contract  to SMP and
impressing 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.

        Thereafter,  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 and Second  Amended  Judgment  with the Tenth
Circuit Court of Appeals.  USECC filed a motion to increase the supersedeas bond
and Nukem/CRIC filed their response to USECC's motion on October 17, 1997. Also,
Nukem and CRIC are to file their brief in the appeal to the Tenth  Circuit Court
of Appeals by November  6, 1997.  USECC will then have thirty days to respond to
Nukem/CRIC's appellant brief.

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

        (a)    Exhibits.  None.

        (b) Reports on Form 8-K.  The  Registrant  filed two Reports on Form 8-K
under Item 5 Other during the quarter ended August 31, 1997 reporting  events of
June 23, 1997 and June 27, 1997.


                                       13

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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:  October 17, 1997                     By:      /S/ MAX T. EVANS
                                                   ----------------------------
                                                   MAX T. EVANS,
                                                   President
 


Date:  October 17, 1997                     By:      /S/ ROBERT SCOTT LORIMER
                                                   ----------------------------
                                                   ROBERT SCOTT LORIMER,
                                                   Principal Financial Officer
                                                   and Chief Accounting Officer


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