================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(MARK ONE)

[X]        QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
           ACT OF 1934

           For the quarterly period ended June 30, 2002

[  ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT

           FOR THE TRANSACTION PERIOD FROM ______________ TO ______________

                             COMMISSION FILE NUMBER:
                                     0-10238

                            U.S. ENERGY SYSTEMS, INC.

        Delaware                                              52-1216347
 (State or Jurisdiction of                                 (I.R.S. Employer
Incorporation or Organization)                            Identification Number)

                           One North Lexington Avenue
                                  Fourth Floor
                             White Plains, NY 10601
                    (Address of Principal Executive Offices)

                                 (914) 993-6443
                (Issuer's Telephone Number, Including Area Code)


    Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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  [  ]

    Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after distribution of
securities under a plan confirmed by a court.
                                            Yes  [X]          No  [  ]

    State the number of shares outstanding of each of issuer's classes of common
equity, as of August 6, 2002:

          Title of Class                                Number of Shares
          --------------                                ----------------
           Common Stock                                    12,331,500

Transitional Small Business Disclosure Format (check one):  Yes  [  ]   No  [X]

                                       1
<PAGE>

================================================================================


                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                   U.S. ENERGY SYSTEMS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
<S>                                                                                                     <C>          <C>

                                                                                                         June 30,    December 31,
                                                                                                           2002          2001
                                                                                                       (unaudited)     (audited)
ASSETS
Current assets:
   Cash...........................................................................................     $  2,642,000  $ 10,658,000
   Restricted cash................................................................................       15,724,000    14,757,000
   Accounts receivable (less allowance for doubtful accounts of $267,000 and $580,000, respectively)      8,733,000    10,597,000
   Notes and interest receivable, current portion.................................................        3,180,000     3,064,000
   Other current assets...........................................................................        2,337,000     2,610,000
                                                                                                         ----------    ----------
 Total current assets.............................................................................       32,616,000    41,686,000

   Property, plant and equipment, net.............................................................       67,441,000    71,612,000
   Construction in progress.......................................................................        3,102,000     2,339,000
   Installment sale partnership interest, less current portion ...................................       16,366,000    17,168,000
   Notes receivable, less current portion.........................................................       57,250,000          -
   Investments....................................................................................        9,271,000    10,026,000
   Deferred costs including debt issuance costs, net of accumulated amortization..................        5,376,000     5,237,000
   Goodwill, net..................................................................................       28,148,000    30,639,000
   Deferred tax asset.............................................................................       16,631,000    11,034,000
     Other assets.................................................................................          320,000     1,768,000
                                                                                                        -----------   -----------
                                                                                                       $236,521,000  $191,509,000
                                                                                                        ===========   ===========
LIABILITIES
Current liabilities:
   Current portion of long-term debt..............................................................     $  5,513,000  $  6,167,000
   Notes payable - stockholder....................................................................        5,881,000     5,391,000
   Accounts payable and accrued expenses..........................................................       12,954,000    12,705,000
   Deferred revenue, installment sale partnership interest current portion........................        1,007,000     1,048,000
                                                                                                         ----------    ----------
Total current liabilities.........................................................................       25,355,000    25,311,000

   Long-term debt, less current portion...........................................................      114,546,000    70,686,000
   Notes payable - stockholder....................................................................        4,993,000     5,552,000
   Deferred revenue, installment sale partnership interest less current portion...................        6,732,000     7,229,000
   Rate incentive liability.......................................................................       12,142,000     9,581,000
   Advances from joint ventures...................................................................          102,000       102,000
                                                                                                        -----------    ----------
Total long-term liabilities.......................................................................      138,515,000    93,150,000
                                                                                                        -----------   -----------
Total liabilities.................................................................................      163,870,000   118,461,000
                                                                                                        -----------   -----------
Minority interests................................................................................       20,659,000    15,090,000
                                                                                                        -----------   -----------
Commitments and contingencies

STOCKHOLDERS' EQUITY
   Preferred stock, $.01 par value, authorized 10,000,000 shares:
     Series B, cumulative, convertible, issued and outstanding  368 shares........................             -              -
     Series C, cumulative, convertible, issued and outstanding 100,000 shares.....................           1,000         1,000
     Series D, cumulative, convertible, issued and outstanding 1,138,000..........................          11,000        11,000
   Common stock, $.01 par value, authorized 50,000,000 shares; issued 12,331,500 shares and
   12,065,000 shares, respectively................................................................         124,000       121,000
   Treasury stock, 114,700 shares of common stock at cost.........................................        (495,000)     (495,000)
   Additional paid-in capital.....................................................................      66,228,000    65,647,000
   Accumulated deficit............................................................................     (14,275,000)   (7,733,000)
   Accumulated comprehensive income...............................................................         398,000       406,000
                                                                                                       -----------    ----------
Total stockholders' equity........................................................................      51,992,000    57,958,000
                                                                                                       -----------   -----------
                                                                                                      $236,521,000  $191,509,000
                                                                                                       ===========   ===========
</TABLE>

                        See notes to consolidated financial statements

                                      2
<PAGE>

                   U.S. ENERGY SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
<S>                                                                            <C>                           <C>

                                                                                Three Months Ended             Six Months Ended
                                                                                ------------------             -----------------
                                                                               June 30,      June 30,       June 30,      June 30,
                                                                                2002           2001          2002           2001
                                                                               -------       --------       --------      --------
Revenues............................................................       $ 10,772,000   $ 12,400,000    $ 20,652,000 $ 17,664,000
Costs and expenses:
    Operating expenses..............................................          5,395,000      4,578,000      11,498,000    6,856,000
    Operating, general and administrative - non-recurring...........                  -              -      10,234,000            -
    General and administrative expenses.............................          1,991,000        935,000       3,713,000    1,973,000
    Depreciation and amortization...................................          1,307,000        981,000       2,625,000    1,184,000

    (Gain) Loss from joint ventures.................................            (60,000)        30,000         (75,000)      44,000
                                                                              ---------      ---------      ----------   ----------
         Total costs and expenses...................................          8,633,000      6,524,000      27,995,000   10,057,000
                                                                              ---------      ----------     ----------   ----------
Income (loss) from operations.......................................          2,139,000      5,876,000      (7,343,000)   7,607,000

Interest income.....................................................            455,000        142,000         850,000      403,000
Dividend income....................................................              41,000              -          41,000            -
Interest expense....................................................         (2,102,000)    (1,056,000)     (4,373,000)  (1,081,000)

Minority interest...................................................           (405,000)    (1,879,000)       (388,000)  (1,879,000)
                                                                              ---------      ---------      ----------    ----------
Income (loss) before taxes..........................................            128,000      3,083,000     (11,213,000)   5,050,000

Income tax benefit (provision)....................................              190,000      (756,000)       5,255,000     (756,000)
Income (loss) before cumulative effect of accounting change and               ---------      ---------       ---------    ----------
disposal of a segment.................................                          318,000      2,327,000      (5,958,000)   4,294,000

Gain on disposal of a segment  (net of income tax of $113,000) .....            170,000              -         170,000            -
Cumulative effect of accounting change on years prior to 2002 (net of
   income tax of $546,000) .........................................                  -              -        (754,000)           -
                                                                              ---------      ---------       ----------   ---------

NET INCOME (LOSS)...................................................       $    488,000   $  2,327,000    $ (6,542,000) $ 4,294,000
                                                                              =========      ==========      ==========   =========
Dividends on preferred stock........................................           (211,000)      (284,000)       (416,000)    (520,000)
                                                                              ---------      ----------      ----------   ----------
INCOME (LOSS) APPLICABLE TO COMMON STOCK............................       $    277,000    $ 2,043,000    $ (6,958,000) $ 3,774,000
                                                                              =========      =========       ==========   =========
                               INCOME (LOSS) PER SHARE OF COMMON STOCK:
    Income (loss) per share of common stock - basic.................             $  .02   $       0.24    $      (0.57)  $     0.46
                                                                              =========      =========       ===========  =========
    Income (loss) per share of common stock - diluted...............             $  .03   $       0.14    $      (0.57)  $     0.27
                                                                              =========      =========       ===========  =========

Weighted average number of common shares outstanding - basic........         12,202,000      8,580,132      12,203,000    8,171,139
                                                                             ==========      =========      ==========    =========
Weighted average number of common shares outstanding - diluted......         17,617,000     16,089,738      12,203,000   15,680,744
                                                                             ==========     ==========      ==========   ==========
                                OTHER COMPREHENSIVE INCOME, NET OF TAX:

    Net income (loss)...............................................       $    488,000   $  2,327,000      (6,542,000)   4,294,000
    Gain (loss) on foreign currency translation.....................            (37,000)        14,000          (8,000)      14,000
                                                                              ---------      ---------        --------    ---------
     Total comprehensive income.....................................       $    451,000   $  2,341,000      (6,550,000)   4,308,000
                                                                              =========      =========       =========    =========
</TABLE>

                 See notes to consolidated financial statements

                                      3

<TABLE>
<CAPTION>
<S>                                  <C>                    <C>                   <C>
                                                               U.S. ENERGY SYSTEMS AND SUBSIDIARIES
                                                     CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                                              For the Six Months Ended June 30, 2002

                                     ---------------------- ---------------------- -------------------------
                                        Preferred Stock        Preferred Stock         Preferred Stock
                                           Series A               Series B                 Series C
                                     ---------------------- ---------------------- -------------------------
                                     Number                  Number                  Number
                                       of                     of                       of
                                      Shares       Amount    Shares      Amount       Shares      Amount
                                     ----------    -------- ---------    --------- -----------    ----------

        BALANCE - December 31, 2001         -      $    -      368        $   -     100,000      $  1,000

        Shares issued for exercised
               options and warrants
                 Comprehensive loss
  Net loss for the six months ended
                      June 30, 2002
      Dividends on Preferred Stock:
                           Series D
                           Series B
                           Series C

                                     ----------    -------- ---------    --------- -----------    ----------

            BALANCE - June 30, 2002         -       $   -      368            -     100,000       $ 1,000
                                     ==========    ======== =========    ========= ===========    ==========



                                                                      Common Stock
                                                              -----------------------------
                                                                                              Additional
                                                Subscription      Number                        Paid-in
                                                 Receivable     of Shares        Amount         Capital
                                                ------------- --------------- ------------- ----------------

BALANCE - December 31, 2001                       $     -       12,065,000     $ 121,000     $ 65,647,000

Shares issued for exercised options and
warrants                                                            98,500         1,000          230,000
Issuance of common stock                                           168,000         2,000          767,000

Comprehensive loss                                                                                      -
Net loss for the six months ended June 30,
2002
Dividends on Preferred Stock:
     Series B                                                                                     (18,000)
     Series C                                                                                     (88,000)
     Series D                                                                                    (310,000)

                                                ------------- --------------- ------------- ----------------
BALANCE - June 30, 2002                              $     -    12,331,500     $ 124,000     $ 66,228,000
                                                ============= =============== ============= ================
</TABLE>

                                       4
<PAGE>

<TABLE>
<CAPTION>
<S>                                  <C>                    <C>                   <C>
                                                               U.S. ENERGY SYSTEMS AND SUBSIDIARIES
                                                     CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                                              For the Six Months Ended June 30, 2002

                                     ------------------------- -----------------------------
                                        Preferred Stock           Preferred Stock
                                           Series D                Treasury Stock
                                     ------------------------- -----------------------------
                                     Number                       Number
                                       Of                           Of
                                     Shares        Amount        Shares        Amount
                                     --------    --------- -------------   -------------

        BALANCE - December 31, 2001  1,138,888      $11,000     (114,700)     $(495,000)

        Shares issued for exercised
               options and warrants
                 Comprehensive loss
  Net loss for the six months ended
                      June 30, 2002
      Dividends on Preferred Stock:
                           Series D
                           Series B
                           Series C

                                     ----------    --------     ---------    ---------

            BALANCE - June 30, 2002  1,138,888       11,000     (114,700)     $ (495,000)
                                     ==========    ========      ========    ============





                                                Accumulated
                                                Comprehensive        Accumulated
                                                   Income              Deficit            Total
                                                --------------- ------------------ ----------------

BALANCE - December 31, 2001                      $  406,000         $ (7,733,000)     $ 57,958,000

Shares issued for exercised options and
warrants                                                                                   231,000
Issuance of common stock                                                                   769,000

Comprehensive loss                                   (8,000)                               ( 8,000)
Net loss for the six months ended June 30,
2002                                                                  (6,542,000)       (6,542,000)
Dividends on Preferred Stock:
     Series B                                                                              (18,000)
     Series C                                                                              (88,000)
     Series D                                                                             (310,000)

                                                 ----------------- ------------------  --------------
BALANCE - June 30, 2002                           $  398,000       $ (14,275,000)      $ 51,992,000
                                                 =================== ================== ==============
</TABLE>

                                       4 (con't)

                 See notes to consolidated financial statements


<PAGE>



                  U.S. ENERGY SYSTEMS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
<S>                                                                                           <C>             <C>


                                                                                                   Six Months Ended
                                                                                             June 30, 2002    June 30, 2001
                                                                                             -------------    -------------
 CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)............................................................            $(6,542,000)      $  4,294,000
    Adjustments to reconcile net income (loss) to net cash provided by (used in)
    operating activities:
       Depreciation and amortization............................................              2,625,000          1,184,000
       Gain on sale of segment..................................................               (170,000)
       Minority interest income.................................................                388,000          1,879,000
       Recognition of development costs.........................................              1,900,000                  -
       Unrealized gain on sales.................................................                      -         (1,715,000)
       Deferred taxes...........................................................             (5,597,000)        (1,979,000)
       Write down of fixed assets...............................................              3,893,000                  -
       Write down of investments................................................                830,000                  -
       Equity in (gain) loss of joint ventures..................................                (75,000)            30,000
       Cumulative effects of accounting change on years prior to 2002 (net of income
       tax of $546,000)                                                                         754,000                  -
    Changes in:
       Accounts and notes receivable, trade.....................................              2,026,000          2,422,000
       Project development costs................................................                      -            (23,000)
       Other current assets.....................................................                273,000             54,000
       Other assets.............................................................              1,448,000           (746,000)
       Accounts payable and accrued expenses....................................                249,000           (691,000)
       Minority interest liability..............................................              5,181,000
       Deferred revenue.........................................................               (538,000)          (199,000)

       Rate incentive liability.................................................              2,561,000            494,000
                                                                                              ---------          ---------
 Net cash provided by operating activities......................................              9,206,000          5,004,000
                                                                                              ---------          ---------
 CASH FLOWS FROM INVESTING ACTIVITIES:
       Change in investments....................................................               (136,000)                 -
       Acquisition of equipment and leasehold improvements......................               (494,000)          (576,000)
       Construction in progress.................................................               (763,000)        (1,566,000)
       Energy projects..........................................................            (57,250,000)                 -
       Acquisition of Zapco.....................................................                      -         (1,010,000)
       Acquisition of Trigen Canada.............................................                      -         (2,277,000)

       Deferred acquisition costs...............................................             (1,233,000)         1,386,000
                                                                                              ---------          ---------
 Net cash used in investing activities..........................................            (59,876,000)        (4,043,000)
                                                                                             ----------          ---------
 CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from notes receivable...........................................                686,000            369,000
       Payments of convertible subordinated secured debentures..................                      -            (16,000)
       Payments of long-term debt...............................................             (2,474,000)          (118,000)
       Proceeds from long-term debt.............................................             45,613,000          1,063,000
       Redemption of subscription receivable....................................                      -          7,741,000

       Debt issuance costs......................................................                (19,000)          (120,000)
       Proceeds from exercise of options and warrants...........................                231,000          2,959,000

       Dividends on preferred stock.............................................               (416,000)          (520,000)
                                                                                             ----------         ----------
 Net cash provided by  financing activities.....................................             43,621,000         11,358,000
                                                                                             ----------         ----------
 NET INCREASE  (DECREASE) IN CASH...............................................             (7,049,000)        12,319,000

 Cash, restricted cash and equivalents - beginning of period....................             25,415,000         15,751,000
                                                                                             ----------         ----------
 CASH, RESTRICTED CASH AND EQUIVALENTS - END OF PERIOD                                     $ 18,366,000        $28,070,000
                                                                                             ----------         ----------
    Supplemental disclosure of cash flow information:
    Cash paid for interest......................................................            $ 3,045,000         $   51,000
    Supplemental schedule of non-cash financing activities:                                   ---------          ---------
 Issuance of common stock.......................................................                               $ 9,630,000
                                                                                                                 =========
 Issuance of Series C Preferred Stock...........................................                               $ 3,000,000
                                                                                                                 =========
 Deferred offering costs........................................................                                $ (479,000)
                                                                                                                 =========
 Liabilities assumed in acquisition of Zapco and Trigen Canada..................                              $119,975,000
                                                                                                               ===========
 Issuance of Common Stock for investment interest in SEFL.......................              $ 769,000
                                                                                                =======
</TABLE>
                 See notes to consolidated financial statements

                                        5


                   U.S. ENERGY SYSTEMS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                SIX MONTHS ENDED JUNE 30, 2002 AND JUNE 30, 2001
                                   (UNAUDITED)


NOTE A - BASIS  OF  PRESENTATION

    The accompanying unaudited consolidated financial statements have been
prepared in accordance with instructions to Form 10-QSB and, accordingly, do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. In our opinion, all adjustments (consisting of normal accruals)
considered necessary for a fair presentation have been included. The results for
the three months and six months are not necessarily indicative of results for
the full year.

    For further information see "Management's Discussion and Analysis or Plan of
Operations", and refer to the consolidated financial statements (including the
notes thereto) in the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2001.

NOTE B - NET INCOME (LOSS)  PER  SHARE

    Net income (loss) per share has been computed on the basis of the weighted
average number of shares outstanding during the periods. In case of loss, common
stock equivalents have not been included in the computation since their
inclusion would be anti-dilutive.

NOTE C - INCOME TAXES

     The six-month financial statements ended June 30, 2002 reflect an increase
in the deferred tax asset due to net operating losses generated and an increase
in the net operating loss carry forward for the six months.

     The financial statements for the period ended June 30, 2001 included a
provision for taxes due to the utilization of operating loss carry forwards.

NOTE D - ADDITIONAL CAPITAL

    For the six months ended June 30, 2002, 98,500 stock options were exercised,
resulting in the receipt of a total of $231,000 in cash.

NOTE E - INVESTMENTS

     Scandinavian Energy Finance, Limited / EnergiSystem Sverige. In March,
2002, together with EIC Electricity SA ("EIC"), a Swiss investment company
specializing in energy investments, we formed a joint venture, Scandinavian
Energy Finance, Limited ("SEFL") and financed a new Swedish energy group,
EnergiSystem Sverige AB ("EnergiSystem"). SEFL has a 25 year option to acquire
90% of the fully diluted equity of EnergiSystem for a nominal sum. As part of
the transaction, EnergiSystem acquired seven operating district energy systems
and several late-stage development projects. Currently, the operations provide
biomass-fueled energy to 800 customers serving the equivalent of approximately
30,000 households in ten communities in the vicinity of Stockholm, Sweden. A
significant portion of the energy is provided under long-term contracts. The
energy market in Sweden is deregulated, and district energy markets are not
subject to government rate regulation.

     SEFL provided approximately $56 million to EnergiSystem in the form of
financing. Approximately $45 million of this amount was made in the form of a
senior secured convertible debenture to EnergiSystem and approximately $11
million was in the form of a subordinated loan to EnergiSystem. The senior
secured convertible debenture carries an interest rate of approximately 6%
during the first 2 years and 9% thereafter. The subordinated loan carries an
interest rate of approximately 13%.

                                       6

<PAGE>
                   U.S. ENERGY SYSTEMS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                SIX MONTHS ENDED JUNE 30, 2002 AND JUNE 30, 2001
                                   (UNAUDITED)

NOTE E - INVESTMENTS CONTINUED

     USE Canada has a service agreement with an approximate annual value of
$400,000 with EnergiSystem under which it will provide consulting services
relating to EnergiSystem operations, technology, development and growth. In the
second quarter, the company earned and recognized $152,000 of these management
fees.

     We hold 51% of the voting interests of SEFL and EIC holds 49% of the voting
interests. We invested approximately $5 million in cash and 167,976 of our
common shares, valued at approximately $769,000 in SEFL, and EIC invested its
proportionate share in cash. Each partner is required to fund an additional $1
million within two years.

     A Swedish bank provided SEFL with approximately $45 million of long term
financing on a non-recourse basis to SEFL's stockholders. The financing carries
a variable interest rate of the Stockholm Inter-Bank Offered Rate (STIBOR) plus
30 basis points per annum, capped at 4.7% for the first 5 years and a rate of
STIBOR plus 110 basis points per annum thereafter. The loan has a 25 year term
with no amortization during the first ten years.

NOTE F - CHANGE IN ACCOUNTING PRINCIPLE

     The Company recorded a change in accounting principle due to the write-off
of the remaining balance of Goodwill for USE Enviro Systems Inc as required in
Financial Accounting Standard Board Statement No. 142 Goodwill and Other
Intangible Assets. This write-off is shown net of taxes in the statement of
operations for the six month period ended June 30, 2002.

NOTE G - Sale of Subsidiary

     Effective June 30, 2002, the Company sold its 100% ownership  interest in
U.S. Energy  Environmental  Corp. to KGS  Environmental  LLC,  an  employee-led
partnership  for  approximately  $1.7  million,  which  included  cash
consideration and the assumption of debt. The sale of U.S. Energy Environmental
Corp., a domestic  provider of environmental  services,  including oil recycling
and  environmental  remediation,  is  part  of  the  Company's previously
announced strategy to divest or discontinue non-core assets.

     The  following  pro  forma  combined  revenue  and net  income is provided
as if the  sale  of U.S.  Energy Environmental Corp. had taken place effective
January 1, 2002:

<TABLE>
<CAPTION>
<S>                                                                  <C>                 <C>                       <C>
                                                                                         As of June 30, 2002

                                                                     U.S. Energy             U.S. Energy              Adjusted
                                                                                         Environmental Corp.        U.S. Energy

Revenues                                                            $20,652,000             $  2,519,000           $ 18,133,000

Net Loss                                                            $(6,542,000)            $   (231,000)          $ (6,311,000)

Earnings Per Share
   Loss  per share common - Basic                                   $     (0.57)            $      (0.02)          $      (0.55)
   Loss per share common - Diluted                                  $     (0.57)            $      (0.02)          $      (0.55)
Weighted average number of shares outstanding - Basic                12,203,000               12,203,000             12,203,000
Weighted average number of shares outstanding - Diluted              17,617,000               17,617,000             17,617,000

</TABLE>

                                     7

<PAGE>

Item 2 - Management's Discussion and Analysis or Plan of Operation

Results of Operations

Three Months and Six Months Ended June 30, 2002 Compared to Three Months and Six
Months Ended June 30, 2001

    Total revenues decreased by $1,628,000 or 14% in the three months ended June
30, 2002 ("Second Quarter 2002") as compared to the three months ended June 30,
2001 ("Second Quarter 2001"), and increased by $2,988,000 or 17% for the six
months ended June 30, 2002 ("Six Months 2002") as compared to the six months
ended June 30, 2001 ("Six Months 2001"). The lower results of Second Quarter
2002 compared to Second Quarter 2001 primarily stemmed from much lower revenue
and earnings contributions from the company's non-core geothermal energy
operations, which benefited from robust western U.S. electricity pricing in
2001. The lower contributions to total revenues by the company's non-core
geothermal operations for the entire Six Month 2002 period were offset by the
inclusion of the USE Biogas and USE Canada for the Six Months 2002.

    Total revenues from Core Operations, which are comprised of the Company's
energy outsourcing businesses (USE Biogas, USE Canada, SEFL, collectively the
"Core Operations"), were $9,170,000 in the Second Quarter 2002. Comparison of
the financial performance of Core Opersations to the Second Quarter 2001 and
Six Months 2001 is not possible since  all components of the Core Operations
were not in existence in fiscal year 2001.

    Total operating expenses, which consist of costs related to the production
of revenues, increased by $817,000 or 18% during the Second Quarter 2002 and
$4,642,000 or 67% during Six Months 2002 as compared to Second Quarter 2001 and
Six Months 2001, respectively. This increase is primarily due to the inclusion
of the USE Biogas and USE Canada for the full Six Months 2002 period compared tO
only part of the Six Month 2001 period.

    Total operating expenses for the Core Operations were $4,176,000 in the
Second Quarter 2002.

    General and administrative expenses, increased in Second Quarter 2002 over
Second Quarter 2001 and in Six Months 2002 over Six Months 2001 by $1,056,000 or
113% and $1,740,000 or 88%, respectively, compensation from the addition of USE
Biogas and USE Canada for the Six Months 2002.

General and administrative expenses for the Core Operations in the Second
Quarter 2002 totaled $1,065,000

    The components of general and administrative expenses for the three and six
month periods are as follows:

<TABLE>
<CAPTION>
<S>                                          <C>                       <C>                    <C>                    <C>

                                                        Three Months Ended                             Six Months Ended
                                             -------------------------------------            ----------------------------------
                                                    June 30,            June 30,                  June 30,            June 30,
                                                      2002                2001                      2002                2001
                                             ------------------   ----------------            ---------------   ----------------
    Salaries and consulting...........              $968,000           $455,000                $ 1,585,000          $ 842,000
    Legal and professional............               298,000            140,000                    615,000            327,000
    Insurance.........................               245,000            115,000                    388,000            206,000
    Corporate expenses................               289,000            136,000                    434,000            231,000
    Other.............................               191,000             89,000                    691,000            367,000
                                                   ---------            -------                  ---------          ---------
         Total........................           $ 1,991,000          $ 935,000                $ 3,713,000        $ 1,973,000
                                                   =========            =======                  =========          =========
</TABLE>

    Depreciation expense increased to $1,307,000 or 33% and $2,625,000 or 122%
for the three and six month periods ending June 30, 2002, respectively, compared
to $981,000 and $1,184,000 respectively, for the three and six month periods
ending June 30, 2001. This is primarily due to increased investment in
depreciable assets from the inclusion of USE Biogas and USE Canada for the full
quarter as compared to their partial inclusion in the same period last year.

    Depreciation and amortization expense for the Core Operations in the Second
Quarter 2002 totaled $1,122,000.

    Net income from Core Operations rose to $662,000 in the three months ended
June 30, 2002, up 157% from $257,000 in the three months ended March 31, 2002.
Underpinning the first half year earnings from Core Operations totaling $919,000
was discretionary cash flow of $1,544,000.

                                       8
<PAGE>
    First Quarter 2002 Non-recurring Operating, General and Administrative
Expenses

    The Company has recorded $10,234,000 of operating, general and
administrative non-recurring expenses in the first quarter ended March 31, 2002.
These non-recurring expenses result from the adjustment of tangible assets held
at subsidiaries such as fixed assets and investments as well as the recognition
of deferred projects and acquisition costs by USE Corporate. Accruals for
potential costs related to the potential sale, divestiture or discontinuation of
certain business units were made in the first quarter of 2002 as part of both
operating and general and administrative expense. Additionally, the Company
recognized a change in accounting principle of $754,000 (net of $546,000 tax) to
reflect the application of FASB No. 142 against the recorded goodwill of U.S.
Energy Environmental Corp.


Liquidity and Capital Resources

    At June 30, 2002, cash totaled approximately $18,366,000 of which
approximately $2,642,000 was unrestricted, as compared to $10,658,000 of
unrestricted cash at December 31, 2001. In connection with notes payable by
certain USE Biogas subsidiaries, the lender required these subsidiaries to
maintain various restricted cash accounts, which, at June 30, 2002, amounted to
$14,124,000. This amount also includes approximately $1.6 million of funds the
Company set aside to ensure the payment of dividends on certain series of our
preferred stock. These funds were set apart in conjunction with the approval of
our plan of recapitalization

     During the Six Months 2002, cash flow of $43,621,000 from financing
activities and $9,206,000 from operating activities was used to partially fund
the $59,876,000 of investing activities. The financing of EnergiSystem
operations resulted in notes receivable of approximately $57,250,000 which was
partially funded by proceeds of $45,613,000 from long term debt.

    Cash flow from operating activities in the Six Months 2002 was $9,206,000 as
compared to $5,004,000 in the Second Quarter 2001.

    Our consolidated working capital, including restricted cash, was $7,261,000
at June 30, 2002 compared to $16,375,000 at December 31, 2001.

    We believe that our cash position and projected cash flow from operations
are sufficient to satisfy our commitments for the next twelve months.


Cautionary Statement Relating to Forward Looking Statements

    This Form 10-QSB contains certain "forward looking statements" which
represent the Company's expectations or beliefs, including, but not limited to,
statements concerning industry performance and the Company's operations,
performance, financial condition, growth and strategies. For this purpose, any
statements contained in this Form 10-QSB that are not statements of historical
fact may be deemed to be forward looking statements. Without limiting the
generality of the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "intend," "could," "estimate" or "continue" or the negative or
other variations thereof or comparable terminology are intended to identify
certain forward-looking statements. These statements by their nature involve
substantial risks and uncertainties, certain of which are beyond the Company's
control, and actual results may differ materially depending on a variety of
important factors which are noted herein, including but not limited to the
potential impact of competition, changes in local or regional economic
conditions, the ability of the Company to continue its growth strategy,
dependence on management and key personnel, supervision and regulation issues
and the ability to find financing on terms suitable to the company. For
information regarding the risks facing the Company, please see the information
included under the caption "Risk Factors" in U. S. Energy's 10KSB/A filed with
the SEC on June 6, 2002.

                                       9
<PAGE>


                           PART II - OTHER INFORMATION

Item 4:  Submission of Matters to a Vote of Security Holders

On May 29, 2002 U S Energy Systems Inc held its annual shareholders meeting.
This meeting had two issues on its agenda for voting by the shareholders.
Proposal one was the election of directors and proposal two was ratification of
Kostin, Ruffkess and Company, LLC as auditors of the company. The results of the
voting on these proposals were:

Proposal 1 Election of Directors
--------------------------------
                                                            Withhold Authority
                                For the Election             for the Election
                                 of such Person               of such Person
                                  as a Director                as a Director
                                ----------------            ------------------
M. Stephen Harkness                14,975,512                      247,757
Howard Nevins                      15,059,549                      163,720
Lawrence I. Schneider              15,059,549                      163,720

Proposal 2 Ratification of Auditors:
------------------------------------

For the Proposal           15,170,480
Against the Proposal           19,465
Abstain                        33,324

Mr M. Stephen Harkness, Mr. Howard Nevins and Mr. Lawrence I. Schneider joined
the following directors of the Company:

Mr. Goran Mornhed
Mr. Allen Rothman
Mr. Irving Levine
Mr. Evan Evans
Mr. Mark Strauch
Mr. Stanley Fox
Mr. Henry Schneider
Mr. Bernard Zahren

Mr. Zahren resigned as Chief Executive Officer and Director on July 8, 2002 and
the Board of Directors elected Mr. Kenneth Leung to the Board on July 8, 2002.



Item 6 - Exhibits and Reports on Form 8-K


(a)      Exhibits

                                       10
<PAGE>

<TABLE>
<CAPTION>
<S>               <C>
                  2.1     Merger   Agreement   by  and   between   the   Company,   AES  Merger   Corp.,   American
                          Enviro-Services,  Inc., and the  Shareholders  of American  Enviro-Services,  Dated as of
                          August 4, 1997(4)

                  2.2     Subscription  Agreement  dated as of August 23,  2000,  by and among U.S.  Energy  System
                          Castlebridge,  LLC ("USE Sub"),  Kemper-Castlebridge,  Inc.,  ("KC"),  GKM II Corporation
                          ("GKM") and Castlebridge Partners, LLC ("Castlebridge") (9)

                  2.3     Agreement  and Plan of  Reorganization  and Merger dated as of November 28, 2000,  by and
                          among U.S. Energy Systems,  Inc. ("US Energy"),  USE Acquisition  Corp. ("USE Acquisition
                          Corp."),  and Zahren  Alternative Power Corp.  ("Zapco")  (without schedules or exhibits)
                          (the "Merger Agreement"). (11)

                  2.4     Amendment No 1 dated December 11, 2000 to the Merger Agreement(11)

                  2.5     Amendment No. 2 dated December 19, 2000 to the Merger Agreement(15)

                  2.6     Amendment No. 3 dated January 19, 2001 to the Merger Agreement(15)

                  2.7     Amendment No. 4 dated February 23, 2001 to the Merger Agreement(15)

                  2.8      Amendment No. 5 dated April 30, 2001 to the Merger Agreement(16)

                  2.9      Stock  Purchase  Agreement  dated as of June 11,  2001 by and  between USE Canada  Acquisition  Corp. and
                           Trigen-Canada Company LLC(17)

                  3.1     Restated  Certificate of  Incorporation  of the Company filed with the Secretary of State
                          of Delaware(1)

                  3.2     Amended and Restated By-Laws of the Company

                  3.3     Articles of Organization of Steamboat Envirosystems, L.C.(1)

                  3.4     Certificate  of Amendment of Amended and Restated  Certificate  of  Incorporation  of the
                          Company (10)

                  3.5     Certificate of Increase of Series A Convertible Preferred Stock of the Company (10)

                  3.6     Amended and Restated By-Laws of US Energy (11)

                  3.7     Form of Certificate of Designation for US Energy's Series C Preferred Stock(15)

                  3.8     Form of Certificate of Designation for US Energy's Series D Preferred Stock(15)

                  3.9     Certificate of Correction to Certificate of Designation of Series A Preferred Stock(15)

                  3.10    Certificate of Correction to Certificate of Designation of Series B Preferred Stock(15)

                  4.1     Specimen Stock Certificate(1)

                  4.2     Form of Warrant(1)

                  4.3     Form of Warrant Agreement(1)

                  4.4     Form of Representative's Purchase Option(1)

                  4.5     Certificate of Designation of Series A Convertible
                          Preferred Stock of the Company as filed with the
                          Secretary of State of Delaware on March 23, 1998(7)

                  4.6     Certificate  of  Designation  of Series B Convertible  Preferred  Stock of the Company as
                          filed with the Secretary of the State of Delaware(14)

                  4.7     Amended and Restated  Plan of  Recapitalization  dated as of July 31, 2000 by and between
                          the Company and the parties identified therein. (15)

                  4.8     Form of Series B Warrant to Purchase Shares of Common Stock(10)

                  4.9     Form of Series C Redeemable Common Stock Purchase Warrant of US Energy (11)

                  10.1    Plan of Reorganization of Cogenic Energy Systems, Inc.(2)

                  10.2    8% Convertible Subordinated Debenture due 2004(2)

                  10.5    Purchase  Agreement,  dated as of January 24, 1994, between Lehi Co-Gen Associates,  L.C.
                          and Lehi Envirosystems, Inc.(2)

                  10.6     Operating  Agreement among Far West Capital,  Inc., Suma  Corporation and Lehi  Envirosystems, Inc. dated
                           January 24, 1994(2)

                  10.7    Form of Purchase and Sale  Agreement  between Far West Capital,  Inc.,  Far West Electric
                          Energy Fund, L.P., 1-A Enterprises, the Company and Steamboat LLC(1)
                  10.8    Form of Operation and Maintenance Agreement between Steamboat LLC and S.B. Geo, Inc.(1)

                  10.9    Letter  Agreement,  dated as of November 8, 1994,  between the Company,  PSC Cogeneration
                          Limited  Partnership,  Central Hudson  Cogeneration,  Inc. and Independent Energy Finance
                          Corporation(1)

                  10.10   Agreement  among the  Company,  Plymouth  Envirosystems,  Inc.,  IEC  Plymouth,  Inc. and
                          Independent Energy Finance Corporation dated November 16, 1994(1)

                  10.11   Amended and Restated Agreement of Limited  Partnership of Plymouth  Cogeneration  Limited
                          Partnership  among PSC Cogeneration  Limited  Partnership,  Central Hudson  Cogeneration,
                          Inc. and Plymouth Envirosystems, Inc. dated November 1, 1994(1)

                  10.12   Amended  and  Restated  Agreement  of Limited  Partnership  of PSC  Cogeneration  Limited
                          Partnership  among  IEC  Plymouth,  Inc.,  Independent  Energy  Finance  Corporation  and
                          Plymouth Envirosystems, Inc. dated December 28, 1994(1)

                  10.13   Purchase and Sale  Agreement,  dated as of December 31,  1995,  between the Company,  Far
                          West Capital,  Inc., Far West Electric  Energy Fund,  L.P., 1-A Enterprises and Steamboat
                          Enviro systems, LLC(1)

                  10.13(a)Letter  Agreement,  dated September 25, 1996,  between the Company and Far West
                          Capital, Inc.(1)

</TABLE>
                                       11
<PAGE>
<TABLE>
<CAPTION>
<S>               <C>

                  10.16   Security Agreement and Financing Statement among the Company,  Lehi Envirosystems,  Inc.,
                          Plymouth  Envirosystems,  Inc. and Anchor  Capital  Company,  LLC dated June 14, 1995, as
                          amended(1)

                  10.20   Lease dated September 1, 1995 between the Company and Gaedeke Holdings, Ltd.(1)

                  10.21   Documents related to Private Placement(1)

                  10.21(a)Certificate of Designations(1)

                  10.22   Purchase Agreement between the Company and
                          Westinghouse Electric Corporation dated as of November
                          6, 1995 and amendments thereof(1)

                  10.25(a)Long-Term  Agreement for the Purchase and Sale of  Electricity  Between  Sierra
                          Pacific Power Company and Far West Capital, Inc. dated October 29, 1988(1)

                  10.25(b)Assignment  of  Interest,  dated  December  10,  1988 by and  between  Far West
                          Capital, Inc. and 1-A Enterprises(1)

                  10.25(c)Letter dated August 18, 1989 by Gerald W. Canning,  Vice  President of Electric
                          Resources,  consenting to the  Assignment  of Interest on behalf of Sierra  Pacific Power
                          Company(1)

                  10.26(a)Agreement for the Purchase and Sale of Electricity,
                          dated as of November 18, 1983 between Geothermal
                          Development Associates and Sierra Pacific Power
                          Company(1)

                  10.26(b)Amendment to Agreement  for  Purchase and Sale of  Electricity,  dated March 6,
                          1987,  by and  between  Far West  Hydroelectric  Fund,  Ltd.  and  Sierra  Pacific  Power
                          Company(1)

                  10.27   Loan and Option Agreement dated August, 1996 by and
                          among NRG Company, LLC and Reno Energy, LLC and ART,
                          LLC and FWC Energy, LLC, and amendments thereto(1)

                  10.28   Promissory  Note dated August 9, 1996 for $300,000 from Reno Energy,  LLC to NRG Company,
                          LLC(1)

                  10.29   Letter of Intent dated July 15, 1996 on behalf of Reno Energy, LLC(1)

                  10.30   Limited Liability Company Operating Agreement of NRG
                          Company, LLC dated as of September 8, 1996, and
                          amendments thereto(1)

                  10.31   Form of Limited Liability Company Operating Agreement of Steamboat,  Envirosystems,  L.C.
                          dated as of October, 1996(1)

                  10.32   Form of Debenture Conversion Agreement(1)

                  10.33(a)First Amended and Restated Loan and Option Agreement,
                          dated April 9, 1997, by and between USE Geothermal
                          LLC, and Reno Energy LLC, ART, LLC and FWC Energy,
                          LLC(3)

                  10.33(b)Note in the  amount  of  $1,200,000,  dated as of April 9,  1997,  made by Reno
                          Energy LLC in favor of USE Geothermal LLC(3)

                  10.33(c)Security  Agreement,  dated as of April 9,  1997,  made by Reno  Energy  LLC in
                          favor of USE Geothermal LLC(3)

                  10.33(d)Form of Security Agreement and Collateral Assignment,
                          entered into by and between USE Geothermal LLC and
                          both FWC Energy LLC and ART LLC(3)

                  10.33(e)Guaranty Agreement, dated as of April 9, 1997, made
                          by FWC Energy LLC and ART LLC in favor of USE
                          Geothermal LLC(3)

                  10.34   1996 Stock Option Plan(5)

                  10.35   Form of 9% Convertible Subordinated Secured Debenture due 2004(6)

                  10.36   Form of Employment Agreement by and between the Company and Howard Nevins(4)

                  10.37   Subscription  Agreement,  dated March 20,  1998,  between the Company and Energy  Systems
                          Investors, LLC(7)

                  10.38   Registration Rights Agreement, dated March 20, 1998,
                          between the Company and Energy Systems Investors,
                          LLC(7)

                  10.39   Amended  and  Restated  Stock  Option  Agreement  between  the  Company  and  Lawrence I.
                          Schneider  dated May 10, 2000 with respect to 750,000  shares of the Company Common Stock
                          (10)

                  10.40   Amended and Restated Stock Option Agreement between
                          the Company and Goran Mornhed dated May 10, 2000 with
                          respect to 1,000,000 shares of the Company Common
                          Stock (10)

                  10.41   Pledge  Agreement  dated  as of July 31,  2000 by and  between  the  Company  and  Energy
                          Systems Investors, L.L.C. (10)

                  10.42   Limited  Recourse   Promissory  Note  dated  July  31,  2000  issued  by  Energy  Systems
                          Investors, L.L.C. in favor of the Company (10)

                  10.43   Stockholders'  and  Voting  Agreement  dated as of  November  28,  2000 by and  among AJG
                          Financial   Services,   Inc.,   Bernard   Zahren,   Environmental   Opportunities   Fund,
                          Environmental  Opportunities Fund/Cayman,  Finova Mezzanine Capital Corp., Frederic Rose,
                          M & R  Associates,  Martin F.  Laughlin,  Michael J.  Carolan  and  Richard J.  Augustine
                          (collectively,  the "Zapco Stockholders"),  US Energy, Cinergy Solutions,  Inc. ("Cinergy
                          Solutions") and certain stockholders of US Energy. (11)

                  10.44   Termination  Fee  Agreement  dated as of November 28, 2000 by and among US Energy,  Zapco
                          and Cinergy Energy Solutions, Inc. ("Cinergy Energy"). (11)

                  10.45   Indemnification  Agreement  dated  as of  November  28,  2000  by  and  among  the  Zapco
                          Stockholders, Zapco, US Energy, USE Acquisition Corp. and Cinergy Energy. (11)

                  10.46   Escrow Agreement dated November 28, 2000 by and among the Zapco  Stockholders,  Zapco, US
                          Energy,  USE  Acquisition  Corp.,  Cinergy  Energy  and  Tannenbaum  Helpern  Syracuse  &
                          Hirschtritt LLP as Escrow Agent. (11)

                  10.47   Registration  Rights  Agreement  dated  November  28, 2000 by and among US Energy and the
                          Zapco Stockholders. (11)

                  10.48   Employment  Agreement  dated  November  28,  2000 by and  between US Energy  and  Bernard
                          Zahren. (11)

                  10.49   Form of Stock  Option  Agreement  to be entered into by and between US Energy and Bernard
                          Zahren. (11)
</TABLE>

                                       13
<PAGE>

<TABLE>
<CAPTION>
<S>               <C>
                  10.50   Performance Guaranty dated as November 28, 2000 of US Energy.(11)

                  10.51   Performance  Guaranty of Cinergy  Solutions  Holding  Company,  Inc. dated as of November
                          28, 2000. (11)

                  10.52   Subscription  Agreement  dated  as of  November  28,  2000 by and  among US  Energy,  USE
                          Acquisition Corp. and Cinergy Energy. (11)

                  10.53   Stockholders  Agreement  dated  as of  November  28,  2000 by and  among US  Energy,  USE
                          Acquisition Corp. and Cinergy Energy. (11)

                  10.54   Indemnification  Agreement  dated as of  November  28,  2000 by and among US Energy,  USE
                          Acquisition Corp. and Cinergy Energy. (11)

                  10.55   Employment  Agreement  dated as of May 10, 2000 by and  between the Company and  Lawrence
                          Schneider(13)

                  10.56   Employment  Agreement  dated as of May 10,  2000 by and  between  the  Company  and Goran
                          Mornhed(13)

                  10.57   2000 Executive Incentive Compensation Plan(13)

                  10.58   2000 Executive Bonus Plan(13)

                  10.59   Stock Option Agreement between the Company and
                          Lawrence Schneider with respect to 1,000,000 shares of
                          Common Stock(13)

                  10.60   Stock  Option  Agreement  between the Company and Goran  Mornhed  with respect to 187,500
                          shares of Common Stock.(13)

                  10.61   Stock Option  Agreement  between the Company and Goran  Mornhed  with respect to 562,500  shares of Common
                          Stock(13)

                  10.62   Standby Payment  Agreement  dated as of June 11, 2001 by and among U. S. Energy Systems,  Inc., USE Canada
                          Acquisition Corp. and AJG Financial Services, Inc.(17)

                  10.63   Promissory  Note dated  June 11,  2001 made by USE Canada  Acquisition  Corp.  in favor of Trigen - Canada
                          Company LLC(17)

                  10.64   Guaranty  made as of June 11, 2001 by USE Energy  Systems,  Inc.  in favor of Trigen - Canada  Company LLC
                          and the other person identified therein.(17)
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S>             <C>

                 10.65           Development Incentive Plan

                 10.66           Corporate Incentive Plan

                 10.67           Finance Incentive Plan

                 10.68           Employment Agreement dated as of August 20, 2001 between the Company and Allen J. Rothman

                 10.69           Employment Agreement dated as of January 1, 2002 between the Company and Edward Campana

                 10.70           Employment Agreement dated as of September 8, 2000 between the Company and Henry Schneider

                 10.71           Shareholder Agreement dated March 2002 by and among Scandinavian Energy Finance Limited, Endoray
                                 Investments BV, US Energy Systems, Inc., EIC Investments (Jersey) Limited and A&A EIC Electricity
                                 Investment Company

                 10.72           Financing Agreement dated as of March 11, 2002 by and between Scandinavian Energy Finance Limited
                                 and Gigantissimo 2321 AB n/k/a Energisystems Sverige AB

                 10.73           Conditions on Gigantissimo 2321 AB  n/k/a Energisystems Sverige AB's Convertible Debenture Loan
                                 2002-2027
                 10.74           Subordinated Loan Agreement dated as of March 11, 2002 between Gigantissimo 2324 AB to be renamed
                                 Narvarme Acquisition I and AB Scandinavian Energy Finance Limited

                 10.75           Shareholders Agreement dated as of March 11, 2002 by and among Goran Ernstson, Scandinavian Energy
                                 Finance Limited, Lansforsakringar Liv Forsakringsaktiebolag for the shares of
                                 Gigantissimo 2321 AB n/k/a Energisystem Sverige AB

                 10.76           Security Holders Agreement dated as of March 11, 2002 between Scandinavian Energy Finance Limited
                                 and Goran Ernstson
                 10.77           Option Agreement dated as of March 7, 2002 by and between Goran Ernstson and Scandinavian Energy
                                 Finance Limited

                 10.78           Amendment No. 1 to Escrow Agreement dated as of May 22, 2001 by and among the Zapco Stockholders,
                                 Zapco, US Energy, USE Acquisition Corp., Cinergy Energy and Tannenbaum Helpern Syracuse &
                                 Hirschtritt LLP as Escrow Agent

                 10.79           Amendment No. 1 to Indemnification Agreement dated as of May 11, 2001 by and among Zapco
                                 Stockholders, Zapco, US Energy, USE Acquisition Corp. and Cinergy Energy

                 99.2            Second  Amended  and  Restated  Operating  Agreement  dated as of August 23,  2000 by and
                                 between USE Sub, KC, GKM and Castlebridge. (12)


                  __________________________

                  (1)     Incorporated  by reference  to the  Company's  Registration  Statement on Form SB-2 (File
                          No. 333-94612).
                  (2)     Incorporated by reference to the Company's Annual
                          Report on Form 10-KSB for the year ended January 31,
                          1994.
                  (3)     Incorporated  by reference  to the  Company's  Current  Report on Form 8-K filed on April
                          24, 1997.
                  (4)     Incorporated  by reference to the Company's  Current  Report on Form 8-K dated August 12,
                          1997.
                  (5)     Incorporated by reference to the Company's Annual
                          Report on Form 10-KSB for the year ended January 31,
                          1997.
                  (6)     Incorporated  by reference to the Company's  Current  Report on Form 8-K dated August 18,
                          1997.
                  (7)     Incorporated  by reference  to the  Company's  Current  Report on Form 8-K filed on March
                          26, 1998.
                  (8)     Incorporated by reference to the Company's Annual
                          Report on Form 10-KSB for the year ended January 31,
                          1998.
                  (9)     Incorporated  by  reference  to the  Company's  Current  Report  on Form  8-K/A  filed on
                          September 5, 2000.
                  (10)    Incorporated by reference to the Company's Quarterly
                          Report on Form 10-QSB for the quarter ended July 31,
                          2000.
                  (11)    Incorporated by reference to the Company's Quarterly
                          Report on Form 10-QSB for the quarter ended October
                          31, 2000.
                  (12)    Incorporated by reference to the Company's
                          Registration Statement on Form S-3 filed on February
                          20, 2001.
                  (13)    Incorporated by reference to the Company's Current Report on Form 8-K dated
                          May 4, 2000
                  (14)    Incorporated by reference to the Company's Annual Report on
                          Form 10-KSB for the year ended January 31, 1999.
                  (15)    Incorporated by reference to the Company's Report on Form 10-KSB for the period ended December 31, 2000.
                  (16)    Incorporated  by reference to the Company's  Post-Effective  Amendment to  Registration  Statement on Form
                          Series SB-2 filed on May 14, 2001
                  (17)    Incorporated by reference to the Company's Current Report on Form 8-K dated June 11, 2001.
</TABLE>

         (b) Reports on Form 8-K

                  None


                                       14
<PAGE>

                                   SIGNATURES


    Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has caused this quarterly report on Form 10-QSB to be signed on its
behalf by the undersigned duly authorized.


Dated: August 14, 2002

U. S. ENERGY SYSTEMS, INC.


By:      /s/ Goran Mornhed
         -----------------
             Goran Mornhed
             Chief Executive Officer
            (Principal Executive Officer)


By:      /s/ Francis D. Fitzgerald
         -------------------------
             Francis D. Fitzgerald
             Chief Accounting Officer
             (Principal Accounting and Financial Officer)




                                     15
<PAGE>


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of US Energy Systems Inc (the "Company")
on Form 10-QSB for the period ending June 30, 2002 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), Goran Mornhed the
Chief Executive Officer and Francis D. Fitzgerald the Chief Accounting Officer,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:

          (1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.

Dated: August 14, 2002

U. S. ENERGY SYSTEMS, INC.




By:      /s/ Goran Mornhed
         -----------------
             Goran Mornhed
             Chief Executive Officer
             (Principal Executive Officer)


By:      /s/ Francis D. Fitzgerald
         -------------------------
             Francis D. Fitzgerald
             Chief Accounting Officer
            (Principal Accounting and Financial Officer)