According to the Complaint, U.S. Energy Corp. (“U.S. Energy” or the “Company”) is an independent energy company focused on the acquisition and development of oil and gas producing properties in the continental United States. The Company’s business activities are currently focused in South Texas and the Williston Basin in North Dakota, although the Company does not intend to limit its focus to these geographic areas. U.S. Energy focuses on increasing production, reserves, revenues, and cash flow from operations while managing its level of debt.

The Company has historically explored for and produced oil and gas through a non-operator business model. As a non-operator, U.S. Energy relies on its operating partners to propose, permit, drill, complete, and produce oil and gas wells. Before a well is drilled, the operator provides all oil and gas interest owners in the designated well the opportunity to participate in the drilling and completion costs and revenues of the well on a pro-rata basis. The Company’s operating partners also produce, transport, market, and account for all oil and gas production, and the Company is currently developing its capability to operate properties.

On or around October 3, 2017, U.S. Energy’s Board of Directors caused the Company and its wholly owned subsidiary, Energy One LLC, to enter into an Exchange Agreement with APEG Energy II, L.P. (“APEG”), an entity controlled by Angelus Private Equity Group, LLC (“Angelus”), which currently holds $6,000,000 in principal amount of loans under a credit agreement between Energy One and APEG (the “Credit Facility”).

Pursuant to the terms of the Exchange Agreement, APEG will exchange $4,463,380 of outstanding borrowings under the Credit Facility for 5,819,270 new shares of U.S. Energy common stock at an exchange price of $0.767, representing only a 1.3% premium over the 30-day volume weighted average price of the Company’s common stock on September 20, 2017. In addition, the Company will pre-pay $600,000 of the outstanding principal under the Credit Facility, leaving approximately $937,000 outstanding, and the Company will pay at closing any accrued, unpaid interest on the Credit Facility held by APEG (collectively, the “Proposed Transaction”). Immediately following the close of the Proposed Transaction, APEG will hold approximately 49.3% of U.S. Energy’s outstanding common stock.

On October 31, 2017, Defendants filed a Definitive Proxy Statement with the United States Securities and Exchange Commission in connection with the Proposed Transaction. Specifically, the Proxy Statement solicits stockholder approval at a special stockholder meeting to be held on December 27, 2017 of two items: (i) the issuance of 5,819,270 new shares of U.S. Energy common stock in connection with the Proposed Transaction; and (ii) an amendment, at the discretion of the Board, to the Company’s articles of incorporation to implement a reverse stock split of the Company’s outstanding common stock at a reverse split ratio of 1-for-5.

The Complaint alleges that the Proxy Statement omits material information with respect to the Proposed Transaction, which renders the Proxy Statement false and misleading.

This case was voluntarily dismissed on January 16, 2018.