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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-Q/A
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 000-30841
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UNITED ENERGY CORP.
(Exact name of registrant as specified in its charter)
Nevada 22-3342379
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Meadowlands Parkway, Secaucus, N.J. 07094
(Address of principal executive offices) (Zip Code)
(201) 842-0288
(Registrant's telephone number, including area code)
Indicate by check mark whether the Issuer (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 Issuer
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. |X| Yes |_| No
The number of shares outstanding of each of the Issuer's classes of common
stock, as of the latest practicable date.
UNITED ENERGY CORP.
Class Outstanding as of December 31, 2000
----- -----------------------------------
15,830,270 shares
Common Stock, $.01 par value Outstanding as of January 31, 2002
----------------------------------
16,080,270 shares
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INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
(Unaudited)...........................................................3
Consolidated balance sheets
December 31, 2000 (Unaudited) (Revised) and March 31, 2000 (Revised)..4
Consolidated statements of operations for the three months and nine
months ended December 31, 2000 (Unaudited) (Revised) and 1999
(Unaudited) (Revised).................................................5
Consolidated statements of cash flows for the nine months
ended December 31, 2000 (Unaudited) (Revised) and 1999
(Unaudited) (Revised).................................................6
Notes to consolidated financial statements
December 31, 2000 (Revised)...........................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................11
Item 3. Quantitative and Qualitative Disclosures About Market Risk...........14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................14
Item 2. Changes in Securities and Use of Proceeds............................14
Item 3. Defaults upon Senior Securities......................................14
Item 4. Submission of Matters to a Vote of Security Holders..................14
Item 6. Exhibits and Reports on Form 8-K.....................................14
Signatures....................................................................15
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
UNITED ENERGY CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
----
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 2000 (Unaudited)
(Revised) and March 31, 2000 (Revised)..................................4
Consolidated Statements of Operations for the Three and Nine Months
Ended December 31, 2000 (Unaudited) (Revised) and 1999
(Unaudited) (Revised)...................................................5
Consolidated Statements of Cash Flows for the Nine Months Ended
December 31, 2000 (Unaudited) (Revised) and 1999
(Unaudited) (Revised)...................................................6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (REVISED)...........................7
3
UNITED ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 (Unaudited) (Revised)
AND MARCH 31, 2000 (Revised)
December 31, March 31,
2000 2000
---- ----
(Unaudited)
(Revised) (Revised)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................ $ 275,218 $ 46,008
Accounts receivable, net of allowance for doubtful accounts of $71,656
and $18,260, respectively ......................................... 857,600 445,949
Inventory ............................................................ 129,156 592,285
Prepaid expenses ..................................................... 401 --
----------- -----------
Total current assets ............................................ 1,262,375 1,084,242
PROPERTY AND EQUIPMENT, net of accumulated depreciation and
amortization of $20,128 and $17,320, respectively .................... 7,004 9,661
OTHER ASSETS:
Goodwill, net of accumulated amortization of $10,942 and $7,957,
respectively ...................................................... 75,581 78,566
Patent, net of accumulated amortization of $16,991 and $9,479,
respectively ...................................................... 133,276 140,789
Other assets ......................................................... 1,385 1,585
----------- -----------
Total assets .................................................... $ 1,479,621 $ 1,314,843
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses ................................ $ 250,842 $ 385,176
Accounts payable to shareholders ..................................... 350,000 350,000
Related party loans payable .......................................... 26,148 24,718
Short-term bank loan and revolving line of credit .................... 160,000 5,697
----------- -----------
Total current liabilities ....................................... 786,990 765,591
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock; 100,000,000 shares authorized of $0.01 par value,
15,830,270 shares issued and outstanding as of December 31 and
March 31, 2000, respectively ...................................... 158,302 158,302
Additional paid-in capital ........................................... 3,979,552 3,792,052
Stock subscription receivable ........................................ (25,000) (25,000)
Accumulated deficit .................................................. (3,420,223) (3,376,102)
----------- -----------
Total stockholders' equity ...................................... 692,631 549,252
----------- -----------
Total liabilities and stockholders' equity ...................... $ 1,479,621 $ 1,314,843
=========== ===========
The accompanying notes are an integral part of these consolidated
balance sheets.
4
UNITED ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
DECEMBER 31, 2000 (Unaudited) (Revised) AND 1999 (Unaudited) (Revised)
For the Three Months For the Nine Months
Ended December 31, Ended December 31,
------------------ ------------------
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited) (Unaudited)
(Revised) (Revised)
REVENUES, net ........................................................ $ 1,281,608 $ 868,747 $ 2,854,703 $ 1,765,996
COST OF GOODS SOLD ................................................... 894,717 496,857 1,965,943 980,793
------------ ------------ ------------ ------------
Gross profit ................................................. 386,891 371,890 888,760 785,203
------------ ------------ ------------ ------------
OPERATING EXPENSES:
General and administrative ........................................ 261,955 255,280 723,352 645,014
Executive service contributed by management ....................... 62,500 62,500 187,500 187,500
Depreciation and amortization ..................................... 4,385 4,555 13,155 13,023
------------ ------------ ------------ ------------
Total operating expenses ..................................... 328,840 322,335 924,007 845,537
------------ ------------ ------------ ------------
Income loss from operations .................................. 58,051 49,555 (35,247) (60,334)
------------ ------------ ------------ ------------
OTHER (EXPENSE) INCOME, net:
Interest income ................................................... -- 3,133 -- 7,884
Interest expense .................................................. (3,945) (4,126) (8,875) (8,536)
------------ ------------ ------------ ------------
Total other expense, net ..................................... (3,945) (993) (8,875) (652)
------------ ------------ ------------ ------------
Net income (loss) ............................................ $ 54,106 $ 48,562 $ (44,122) $ (60,986)
============ ============ ============ ============
BASIC AND DILUTED INCOME (LOSS)
PER SHARE ......................................................... $ 0.00 $ 0.00 $ (0.00) $ (0.00)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING, basic
and diluted ....................................................... 15,830,270 15,811,053 15,830,270 15,776,656
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated statements.
5
UNITED ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
DECEMBER 31, 2000 (Unaudited) (Revised) AND 1999 (Unaudited) (Revised)
For the Nine Months
Ended December 31,
2000 1999
---- ----
(Unaudited)
(Revised)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .............................................................................................. $ (44,122) $ (60,986)
Adjustments to reconcile net income to net cash used in operating activities-
Depreciation and amortization ...................................................................... 13,155 13,023
Executive services contributed by management ....................................................... 187,500 187,500
Changes in operating assets and liabilities-
Increase in accounts receivable, net ............................................................... (411,652) (260,445)
Increase in inventory .............................................................................. 463,128 (406,889)
Increase in prepaid expenses ....................................................................... (201) --
Decrease in other assets ........................................................................... -- 3,161
Increase (decrease) in accounts payable and accrued expenses ....................................... (134,331) 168,599
--------- ---------
Net cash used in operating activities ............................................................ 73,477 (356,037)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for patent ................................................................................... -- (14,359)
--------- ---------
Net cash used in investing activities ............................................................ -- (14,359)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on line of credit ............................................................................ 160,000 165,000
Payments on bank loan ................................................................................. (5,697) (5,455)
Proceeds from loans payable to related party .......................................................... 1,430 362,478
--------- ---------
Net cash provided by financing activities ........................................................ 155,733 522,023
--------- ---------
Net increase in cash and cash equivalents ........................................................ 229,210 151,647
CASH AND CASH EQUIVALENTS, beginning of period ........................................................... 46,008 172,448
--------- ---------
CASH AND CASH EQUIVALENTS, end of period ................................................................. $ 275,218 $ 324,095
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period-
Interest ........................................................................................... $ 7,585 $ 7,281
========= =========
Income taxes ....................................................................................... $ 5,066 $ 460
========= =========
The accompanying notes are an integral part of these consolidated statements.
6
UNITED ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(REVISED)
DECEMBER 31, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the unaudited interim
financial statements furnished herein include all adjustments necessary for a
fair presentation of the Company's financial position at December 31, 2000 and
March 31, 2000 and the results of its operations for the three months and the
nine months ended December 31, 2000 and 1999 and cash flows for the nine months
ended December 31, 2000 and 1999. All such adjustments are of normal recurring
nature. Interim financial statements are prepared on a basis consistent with the
Company's annual financial statements. Results of operations for the three-month
and for the nine-month periods ended December 31, 2000 are not necessarily
indicative of the operating results that may be expected for the year ending
March 31, 2001.
The consolidated balance sheet as of March 31, 2000 (Revised) has been
derived from the audited financial statements at that date but does not include
all of the information and notes required by accounting principles generally
accepted in the United States for complete financial statements.
For further information, refer to the consolidated financial statements and
notes thereto included in the Company's Registration statement on Form 10, as
amended.
2. STOCK OPTION PLAN
On May 3, 1999, the Board of Directors approved the 1999 Comprehensive
Stock Option Plan (the "1999 Plan"). Under the 1999 Plan, the Company is
authorized to grant stock options, the exercise of which would allow up to an
aggregate of 2,000,000 shares of the Company's common stock to be acquired by
the holders of said awards. The awards can take the form of Incentive Stock
Options ("ISOs") or Nonstatutory Stock Options ("NSOs"). ISOs and NSOs are to be
granted in terms not to exceed ten years. The exercise price of the ISOs and
NSOs will be no less than the market price of the Company's common stock on the
date of grant. Adoption of the 1999 Plan is pending shareholder approval.
The Company has no options outstanding.
3. EXCLUSIVE DISTRIBUTION AGREEMENT
On September 22, 2000 the Company and Alameda Company entered into an
exclusive Distribution agreement (the "Agreement"), whereby Alameda will
purchase from the Company various products from the graphic arts division
(meeting certain minimum purchase requirements) at guaranteed fixed prices
through December 31,2002 and distribute these products exclusively throughout
the USA, Canada, Puerto Rico, Mexico, Central America, South America and the
Caribbean.
No products were shipped and no revenue was recognized under the Alameda
Agreement prior to October 2000.
7
UNITED ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(REVISED)--(Continued)
4. CREDIT LINE AGREEMENT
In June 2000, the Company obtained a $1,000,000 line of credit from Fleet
Bank. Borrowings under the credit line bear interest at prime. Interest is
payable monthly. Amounts outstanding under the line of credit are subject to
repayment on demand and are secured by accounts receivable, inventory, furniture
and fixtures, machinery and equipment and a pledge of 750,000 shares of the
Company's common stock held in escrow. The line is also secured by the personal
guarantee of a shareholder of the Company.
The line of credit is subject to certain covenants, including financial
covenants to which the Company must adhere on a quarterly or annual basis.
Borrowings under the line of credit must be reduced to zero for a period of 30
consecutive days in any twelve-month period.
5. SEGMENT INFORMATION
Under the provision of SFAS No. 131 the Company's activities fall within
two operating segments: Graphic Arts and Specialty Chemicals. The following
tables set forth the Company's industry segment information for the three and
nine months ended December 31, 2000 (Revised) and 1999 (Revised):
The Company's total revenues, net income (loss) and identifiable assets by
segment for the three months ended December 31, 2000 (Revised), are as follows:
Graphic Specialty
Arts Chemicals Corporate Total
---- --------- --------- -----
Revenues .............................................. $1,224,826 $ 56,782 $ -- $1,281,608
========== ========= ========= ==========
Gross profit .......................................... $ 362,723 $ 24,168 $ -- $ 386,891
General and administrative ............................ 49,619 97,368 114,968 261,955
Executive services contributed by management .......... -- -- 62,500 62,500
Depreciation and amortization ......................... -- 4,020 365 4,385
Interest expense ...................................... 3,945 -- -- 3,945
---------- --------- --------- ----------
Net income (loss) ............................ $ 309,159 $ (77,220) $(177,833) $ 54,106
========== ========= ========= ==========
Cash .................................................. $ -- -- $ 275,218 $ 275,218
Accounts receivable, net .............................. 826,130 31,471 -- 857,600
Inventory ............................................. 94,335 34,821 -- 129,156
Prepaid Expenses ...................................... -- -- 401 401
Fixed assets, net ..................................... -- -- 7,004 7,004
Goodwill, net ......................................... -- 75,581 -- 75,581
Patent, net ........................................... -- 133,276 -- 133,276
Other assets .......................................... -- -- 1,385 1,385
---------- --------- --------- ----------
Total assets .................................. $ 920,465 $ 275,149 $ 284,008 $1,479,621
========== ========= ========= ==========
8
UNITED ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(REVISED)--(Continued)
The Company's total revenue and net income (loss) by segment for the nine
months ended December 31, 2000 (Revised), are as follows:
Graphic Specialty
Arts Chemicals Corporate Total
---- --------- --------- -----
Revenues ....................................... $2,671,401 $ 183,302 $ -- $ 2,854,703
========== ========= ========= ===========
Gross profit ................................... $ 816,018 $ 72,742 $ -- $ 888,760
General and administrative ..................... 178,897 158,931 385,524 723,352
Executive services contributed by management ... -- -- 187,500 187,500
Depreciation and amortization .................. -- 11,908 1,247 13,155
Interest expense ............................... 8,875 -- -- 8,875
---------- --------- --------- -----------
Net income (loss) ...................... $ 628,246 $ (98,097) $(574,271) $ (44,122)
========== ========= ========= ===========
The Company's total revenues and net income (loss) by segment for the three
months ended December 31, 1999 (Revised), are as follows:
Graphic Specialty
Arts Chemicals Corporate Total
---- --------- --------- -----
Revenues ........................................$ 657,506 $ 211,241 $ -- $ 868,747
========== ========= ========= ===========
Gross profit ....................................$ 282,205 89,685 $ -- $ 371,890
General and administrative ...................... 78,000 64,603 112,677 255,280
Executive services contributed by management .... -- -- 62,500 62,500
Depreciation and amortization ................... -- 4,115 440 4,555
Interest expense (income) ....................... 4,126 -- (3,133) 993
---------- --------- --------- -----------
Net income (loss) ......................$ 200,079 $ 20,967 $(172,484) $ 48,562
========== ========= ========= ===========
The Company's total revenues and net income (loss) by segment for the nine
months ended December 31, 1999 (Revised), are as follows:
Graphic Specialty
Arts Chemicals Corporate Total
---- --------- --------- -----
Revenues ....................................... $1,373,481 $ 392,515 $ -- $ 1,765,996
========== ========= ========= ===========
Gross profit ................................... $ 639,814 $ 145,389 $ -- $ 785,203
General and administrative ..................... 171,005 156,314 317,695 645,014
Executive services contributed by management ... -- -- 187,500 187,500
Depreciation and amortization .................. -- 11,703 1,320 13,023
Interest expense (income) ...................... 8,536 -- (7,884) 652
---------- --------- --------- -----------
Net income (loss) ...................... $ 460,273 $ (22,628) $(498,631) $ (60,986)
========== ========= ========= ===========
9
UNITED ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(REVISED)--(Continued)
6. REVISION OF CONSOLIDATED FINANCIAL STATEMENTS
Subsequent to the issuance of its March 31, 2001 financial statements, the
Company recorded compensation for the executives' services that were contributed
by management in the amount of $250,000 for each fiscal year (or $62,500 for
each fiscal quarter) commencing in 1996. Previously, no compensation expense was
reflected, as none was paid. Generally Accepted Accounting Principles require
that the fair value of these services be reflected as an expense with the offset
reflected in additional paid-in-capital. Such expense has now been reflected
retroactively to 1996.
Accordingly, the December 31, 2000 and March 31, 2000 Consolidated Balance
Sheets have been revised for the above. The Company also recorded additional
non-cash compensation expense for stock given to outside consultants during
fiscal 1999 and 2000 amounting to $103,750 and $48,210, respectively. The
Company recorded a $325,000 gain for the fair value of the cancellation of
400,000 shares of the Company's stock returned to the Company in connection with
the settlement of claims arising from the discontinuance of the equipment
division in fiscal year 1998 and recorded $75,000 in expense relating to fiscal
year 1996 for the issuance of 50,000 shares in connection with the SciTech
acquisition. The amounts have been included in the accumulated deficit balance
on the Consolidated Balance Sheets. None of the above impacted working capital
or total stockholders' equity.
Accordingly, the Consolidated Statement of Operations for the three and
nine months ended December 31, 2000 and 1999 have been revised to reflect the
$62,500 of executive services contributed by management in each quarter. The
above resulted in income and loss per share of $.00 for the three and nine
months ended December 31, 2000 and 1999.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
United Energy considers its primary focus to be the development,
manufacture and sale of environmentally safe specialty chemical products. The
Company considers its leading product in terms of future earnings potential to
be its KH-30(R) oil and gas well cleaning product.
KH-30(R) is an environmentally-safe, non-petroleum based product that is
non-toxic and will biodegrade. Moreover, the use of KH-30(R) in the well has
additional beneficial effects "downstream" resulting in cleaner flow lines and
holding tanks. KH-30(R) has also been tested to be refinery compatible in that
it contains no materials that are harmful to the refining process. This product
has yet to achieve any significant market penetration.
One of United Energy's specialty chemical products is a photo-sensitive
coating that is applied to paper to produce what is known in the printing
industry as proofing paper or "blue line" paper. The Company developed this
formulation over several years of testing. The Company's patent attorneys have
informed the Company that the formulation is technically within the public
domain as being within the scope of an expired duPont patent. However, the exact
formulation utilized by the Company has not been able to be duplicated by others
and is protected by the Company as a trade secret. The product is marketed under
the trade name UNIPROOF(R).
The Company introduced its UNIPROOF(R) proofing paper in June of 1999. By
March of 2000, sales of the product had increased to more than $200,000 per
month and amounted to a total of $1,724,695 during the fiscal year ended March
31, 2000. UNIPROOF(R) sales totaled $1,209,547 for the quarter ended December
31, 2000 and $2,452,569 for the nine months ended December 31, 2000. Sales of
UNIPROOF(R) for the third quarter included a one-time inventory sale to the
Alameda company in the amount of $798,100 and are, therefore, not indicative of
results to be expected in future fiscal quarters.
The Company's business plan is to use UNIPROOF(R) proofing paper sales to
provide the cash flow to support world-wide marketing efforts for its KH-30(R)
oil well cleaner and, to a lesser extent, the other specialty chemical products
developed by the Company which are described in its Form 10, as amended.
In order to provide working capital to build UNIPROOF(R) sales, in June
2000 the Company entered into a $1,000,000 Line of Credit Agreement with Fleet
Bank, N.A., the material terms of which are described below under "Liquidity and
Capital Resources."
On September 22, 2000 the Company entered into an agreement with the
Alameda Company of Anaheim California which grants them exclusive distribution
rights in the Western Hemisphere (North, South and Central America and the
Caribbean) for UNIPROOF(R) proofing paper. As part of the arrangement Alameda
agreed to buy all existing UNIPROOF(R) inventory for $798,100. The Company is
turning over to Alameda all existing customers within the above territory. Sales
of UNIPROOF(R) for the third quarter included the one-time inventory sale to the
Alameda company in the amount of $798,100 and are, therefore, not indicative of
results to be expected in future fiscal quarters.
The contract with Alameda covers the years 2001 and 2002 and is renewable
annually thereafter provided they meet certain minimum product purchase levels.
To maintain exclusivity for 2001 and 2002 they must purchase a total of
13,394,641 sq. ft ($3,348,660) in 2001 and 16,073,568 sq. ft. ($4,018,392) in
2002. Future minimums and prices are to be agreed upon. For more information,
please see our agreement with Alameda which is included as an exhibit to our
report on Form 10-Q for the period ended September 30, 2000 filed on December
20, 2000.
Subsequent to the issuance of its March 31, 2001 financial statements, the
Company revised its financial statements to reflect the value of contributed
executive services and for other adjustments. See Note 6 above of Notes to
Consolidated Financial Statements for a more complete description of such
revisions.
11
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999
Revenues. Revenues for the third quarter of fiscal 2001 were $1,281,608, a
$412,861 or 48% increase over revenues of $868,747 in the third quarter of
fiscal 2000. The increase in revenues was primarily due to an increase in
UNIPROOF(R) sales, particularly impacted by the one-time sale of $798,100 of
UNIPROOF(R) inventory to the Alameda Company.
Cost of Goods. Sold Cost of goods sold increased to $894,717 or 70% of
revenues, for the quarter ended December 31, 2000 from $496,857 or 57% of sales,
for the quarter ended December 31, 1999. This was primarily due to increased
production of UNIPROOF(R) proofing paper.
Gross Profit. Gross profit for the December 31 quarter of fiscal year 2001
was $386,891, a $15,001 or 4% increase from $371,890 in the corresponding period
of fiscal 2000. This increase was primarily attributable to increased
UNIPROOF(R) sales. Gross profit as a percentage of sales was 30% in the fiscal
2001 quarter compared with 43% in the fiscal 2000 period, due to an increase in
cost of goods sold.
Operating Costs and Expenses
General and Administrative Expenses. General and administrative expenses
increased to $261,955, or 20% of revenues for the quarter ended December 31,
2000 from $255,280, or 29% of revenues for the quarter ended December 31, 1999.
The percentage decrease in the fiscal 2001 period was largely the result of
significantly higher revenues in that period, while the increase in dollar terms
was primarily due to higher professional fees associated with the preparation
and filing of materials with the Securities and Exchange Commission to become a
1934 Act reporting entity.
Executive Services Contributed by Management. Senior Executives of the
Company contributed $62,500 of services in the quarters ended December 31, 2000
and 1999 which was recorded as an expense.
Interest Expense, Net of Interest Income. The Company had interest expense
of $3,945 for the quarter ended December 31, 2000 compared with net interest
expense of $993 in the corresponding 1999 period. The increase was the result of
borrowings under the credit line obtained in June 2000 which were not offset by
funds on deposit.
Net Income. For the quarter ended December 31, 2000, net income totaled
$54,106, or 4% of revenues, as compared to income of $48,562 or 6% of revenues
for the quarter ended December 31, 1999.
NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999
Revenues. Revenues for the first nine months of fiscal 2001 were
$2,854,703, a $1,088,707 or 62% increase over revenues of $1,765,996 in the
first nine months of fiscal 2000. The increase in revenues was primarily due to
an increase in UNIPROOF(R) sales, particularly impacted by the one-time sale of
$798,100 of inventory to the Alameda Company.
Cost of Goods Sold. Cost of goods sold increased to $1,965,943 or 69% of
sales, for the nine months ended December 31, 2000 from $980,793 or 55% of
sales, for the nine months ended December 31, 1999. This was primarily due to
increased production of UNIPROOF(R) proofing paper.
Gross Profit. Gross profit for the first nine months of fiscal year 2001
was $888,760, a $103,557 or 13% increase from $ 785,203 in the corresponding
period of fiscal 2000. This increase was primarily attributable to increased
UNIPROOF(R) sales, offset by the increase in cost of goods sold.
12
Operating Costs and Expenses
General and Administrative Expenses. General and administrative expenses
increased to $723,352, or 25% of revenues for the nine months ended December 31,
2000 from $645,014, or 37% of revenues for the nine months ended December 31,
1999. The nine month 2000 figure also included a $53,396 net addition to the
allowance for doubtful accounts receivable and higher professional fees related
to filings with the U.S. Securities and Exchange Commission.
Executive Services Contributed by Management. Senior Executives of the
Company contributed $187,500 of services in the nine months ended December 31,
2000 and 1999 which were recorded as an expense.
Interest Expense, Net of Interest Income. The Company had interest expense
of $8,875 for the first nine months ended December 31, 2000 compared with net
interest expense of $652 in the corresponding 1999 period. The change was due to
borrowings under the Company's credit line.
Net Loss. For the nine months ended December 31, 2000, net loss totaled
$44,122 as compared to a net loss of $60,986 for the nine months ended December
31, 1999. The decrease in the loss is primarily the result of the higher volume
of UNIPROOF(R) sales.
Liquidity and Capital Resources
Historically, the Company has financed its operations through equity
contributions from principals and from third parties supplemented by funds
generated from its business. As of March 31, 2000, we had $46,008 in cash,
accounts receivable of $445,949 and inventories of $592,285. As of December 31,
2000 we had $275,218 in cash, accounts receivable of $857,600 and inventory of
$129,156. The high receivables and low inventory figures at December 31, 2000
reflect the execution of the contract with the Alameda Company on September 22,
2000 and their purchase of all UNIPROOF(R) inventory on extended terms. Accounts
receivable as of March 31, 2000 and December 31, 2000 are net of allowances for
doubtful accounts in the amounts of $18,260 and $71,656, respectively.
Cash Provided by Financing Activities. Net cash generated from financing
activities decreased to $155,733 for the nine month period ended December 31,
2000 from $522,023 for the period ended December 31, 1999, a net decrease of
$366,290. The higher amount in 1999 had been needed to cover increases in
inventory in that period over the preceding periods.
Inventories at March 31, 2000 were $592,285, and decreased to $129,156 at
December 31, 2000, a decrease of $463,129. The decrease is primarily the result
of the execution of the contract with the Alameda Company on September 22, 2000
and their purchase of all UNIPROOF(R) inventory.
Accounts receivable increased from $445,949 on March 31, 2000 to $857,600
on December 31, 2000. This $411,651 or 92% increase was primarily the result of
our one-time sale of UNIPROOF(R) finished goods inventory to the Alameda Company
which was done on extended payment terms. Accounts receivable as of March 31,
2000 and December 31, 2000 are net of allowances for doubtful accounts in the
amounts of $18,260 and $71,656, respectively.
Capital expenditures were negligible during the nine months ended December
31, 2000 and during the corresponding period of 1999. United Energy has no
material commitments for future capital expenditures. However, our need for
working capital will continue to grow if we continue to achieve higher levels of
sales.
As a result, in June 2000, the Company closed on an agreement for a $1.0
million revolving credit facility with Fleet Bank, N.A. The credit line, which
is collateralized by substantially all of the assets of the Company, accrues
interest at a rate equal to the prime rate. As of December 31, 2000, $160,000
was outstanding under the credit line, the same amount as at June 30, 2000.
The credit line is further secured by a pledge of 750,000 shares of the
Company's common stock held in treasury and by the guarantee of a shareholder of
the Company.
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United Energy believes that its existing cash and credit facility will be
sufficient to enable it to meet its foreseeable future capital needs.
Going Concern
From its inception in 1995 through March 31, 1999 the Company accumulated
losses of $3,223,337. The Company had a net loss of $152,765 for the fiscal year
ended March 31, 2000, which loss included a $250,000 non-cash charge for
contributed executive services. Currently, results for the first three quarters
of fiscal 2001 approximate results for the full year 2000. The Company also has
in place a $1,000,000 credit facility and a distribution arrangement with the
Alameda Company for its UNIPROOF(R) proofing paper. Because of these
developments, the Company is not concerned about its ability to continue in
business.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
United Energy does not expect its operating results, cash flows, or credit
available to be affected to any significant degree by a sudden change in market
interest rates. Furthermore, the Company does not engage in any transactions
involving financial instruments or in hedging transactions with respect to its
operations.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
In the opinion of management, there are no material legal proceedings in
process against the Company and none are threatened.
Item 2. Changes in Securities and Use of Proceeds
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
during the quarter ended December 31, 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None.
(b) Reports on Form 8-K. None.
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UNITED ENERGY CORP.
FORM 10-Q/A
DECEMBER 31, 2000
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED ENERGY CORPORATION
Dated: January 31, 2002
By: \s\ ROBERT SEAMAN
----------------------------
Robert L. Seaman,
Executive Vice President and
Principal Financial Officer
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