1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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
UNITED ENERGY CORP.
-------------------
(Exact name of registrant as specified in its charter)
NEVADA 22-3342379
- ------------------------------ ------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No. )
incorporation or organization)
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 September 29, 2000
- ------------------------------ -----------------------------------
Common Stock, $.01 par value 15,830,270 shares
2
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
(Unaudited)......................................................... 3
Consolidated balance sheets
September 30, 2000 and March 31, 2000
.................................................................... 4
Consolidated statements of operations for the three months and six
months ended September 30, 2000 and 1999;
.................................................................... 5
Consolidated statement of Stockholders' Equity for the six months
ended September 30, 2000............................................ 6
Consolidated statements of cash flows for the
six months ended September 30, 2000 and 1999
.................................................................... 7
Notes to consolidated financial statements
September 30, 2000.................................................. 8-11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................... 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......... 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................... 18
Item 2. Changes in Securities and Use of Proceeds........................... 18
Item 3. Defaults upon Senior Securities..................................... 18
Item 4. Submission of Matters to a Vote of Security Holders................. 18
Item 5. Other Information-- Distribution Agreement with the
Alameda Company..................................................... 18
Item 6. Exhibits and Reports on Form 8-K.................................... 19
Signatures...................................................................... 20
3
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 September 30, 2000 (Unaudited) and 4
March 31, 2000
Consolidated Statements of Operations for the Three and Six Months
Ended September 30, 2000 and 1999 5
Consolidated Statements of Stockholders' Equity for the six months
ended September 30, 2000 6
Consolidated Statements of Cash Flows for the Six Months Ended
September 30, 2000
and 1999 (Unaudited) 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8-11
4
UNITED ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 (Unaudited)
AND MARCH 31, 2000
September 30, March 31,
2000 2000
----------- -----------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents ................................................ $ 50,798 $ 46,008
Accounts receivable, net of allowance for doubtful accounts
of $84,753 and $18,260, respectively ................................... 367,097 445,949
Inventory ................................................................ 732,601 592,285
Prepaid expenses ......................................................... 200 --
----------- -----------
Total current assets ............................................ 1,150,696 1,084,242
PROPERTY AND EQUIPMENT, net of accumulated depreciation and
amortization of $19,092 and $17,320, respectively ........................ 7,889 9,661
OTHER ASSETS:
Goodwill, net of accumulated amortization of $9,947 and
$7,957, respectively ................................................... 76,576 78,566
Patent, net of accumulated amortization of $14,487 and
$9,479, respectively ................................................... 135,781 140,789
Other assets ............................................................. 1,384 1,585
----------- -----------
Total assets .................................................... $ 1,372,326 $ 1,314,843
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses .................................... $ 259,361 $ 385,176
Accounts payable to shareholders ......................................... 350,000 350,000
Related party loans payable .............................................. 24,718 24,718
Short-term bank loan and revolving line of credit ........................ 162,222 5,697
----------- -----------
Total current liabilities ....................................... 796,301 765,591
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock; 100,000,000 shares authorized of $0.01 par value, 15,830,270
shares issued and outstanding as of September 30 and March 31, 2000,
respectively ........................................................... 158,302 158,302
Additional paid-in capital ............................................... 2,640,092 2,640,092
Stock subscription receivable ............................................ (25,000) (25,000)
Accumulated deficit ...................................................... (2,197,369) (2,224,142)
----------- -----------
Total stockholders' equity ...................................... 576,025 549,252
----------- -----------
Total liabilities and stockholders' equity ...................... $ 1,372,326 $ 1,314,843
=========== ===========
The accompanying notes are an integral part of these consolidated balance
sheets.
5
UNITED ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999 (Unaudited)
For the Three Months For the Six Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
REVENUES, net $ 736,763 $ 394,633 $ 1,573,095 $ 897,249
COST OF GOODS SOLD 524,896 203,676 1,071,226 483,937
------------ ------------ ------------ ------------
Gross profit 211,867 190,957 501,869 413,312
------------ ------------ ------------ ------------
OPERATING EXPENSES:
General and administrative 158,053 200,013 461,397 389,734
Depreciation and amortization 4,385 3,915 8,770 8,468
------------ ------------ ------------ ------------
Total operating expenses 162,438 203,928 470,167 398,202
------------ ------------ ------------ ------------
(Loss) income from operations 49,429 (12,971) 31,702 15,110
------------ ------------ ------------ ------------
OTHER (EXPENSE) INCOME, net:
Interest income -- 3,078 -- 4,751
Interest expense (3,995) (4,080) (4,929) (4,410)
------------ ------------ ------------ ------------
Total other income (expense), net (3,995) (1,002) (4,929) 341
------------ ------------ ------------ ------------
Net (loss) income $ 45,434 $ (13,973) $ 26,773 $ 15,451
============ ============ ============ ============
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 15,726,270 15,830,270 15,715,020
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated statements.
6
UNITED ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (Unaudited)
AND FOR THE YEAR ENDED MARCH 31, 2000
Common Stock Additional Stock
------------------------- Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit Total
----------- ----------- ----------- ------------ ----------- -----------
BALANCE, March 31, 1999 15,681,270 $ 156,812 $ 2,514,292 $ (25,000) $(2,369,587) $ 276,517
Common stock issued for services received 149,000 1,490 125,800 -- -- 127,290
Net income -- -- -- -- 145,445 145,445
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, March 31, 2000 15,830,270 158,302 2,640,092 (25,000) (2,224,142) 549,252
Net income (unaudited) -- -- -- -- 26,773 26,773
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, September 30, 2000 (unaudited) 15,830,270 $ 158,302 $ 2,640,092 $ (25,000) $(2,197,369) $ 576,025
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated statements.
7
UNITED ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2000 AND 1999 (Unaudited)
For the Six Months
Ended September 30,
-------------------
2000 1999
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................................. $ 26,773 $ 15,451
Adjustments to reconcile net income to net cash used in
operating activities-
Depreciation and amortization ............................................. 8,770 8,468
Changes in operating assets and liabilities-
Decrease (increase) in accounts receivable ................................ 78,852 (93,591)
Increase in inventory (140,316) (359,923)
Increase in prepaid expenses .............................................. (200) -
Decrease (increase) in other assets ....................................... 201 (5,330)
Increase (decrease) in accounts payable and accrued
expenses ................................................................ (125,815) 97,570
--------- ---------
Net cash used in operating activities .............................. (151,735) (337,355)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for patent ......................................................... -- (10,729)
--------- ---------
Net cash used in investing activities .............................. -- (10,729)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (payments) on line of credit, net .................................. (3,475) 141,754
Proceeds from bank loan ..................................................... 160,000 --
Proceeds from loans payable to related party ................................ -- 361,862
--------- ---------
Net cash provided by financing activities .......................... 156,525 503,616
--------- ---------
Net increase in cash and cash equivalents .......................... 4,790 155,532
CASH AND CASH EQUIVALENTS, beginning of period ................................. 46,008 172,448
--------- ---------
CASH AND CASH EQUIVALENTS, end of period ....................................... $ 50,798 $ 327,980
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period-
Interest .................................................................. $ 3,682 $ 3,017
========= =========
Income taxes .............................................................. $ 720 $ 400
========= =========
The accompanying notes are an integral part of these consolidated statements.
8
UNITED ENERGY CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
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 September 30, 2000 and
March 31, 2000 and the results of its operations for the three months and the
six months ended September 30, 2000 and 1999 and cash flows for the six months
ended September 30, 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 six-month periods ended September 30, 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 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 filed
with the Securities and Exchange Commission on June 20, 2000.
8
9
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.
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.
9
10
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 ant six
months period ended September 30,2000 and 1999:
The Company's total revenues, net loss and identifiable assets by segment
for the three months ended September 30, 2000, are as follows:
Graphic Specialty
Arts Chemicals Corporate Total
--------------- --------------- --------------- ---------------
Revenues $ 644,058 $ 92,705 $ - $ 736,763
=============== =============== =============== ===============
Gross profit $ 171,791 $ 40,076 $ - $ 211,867
General and administrative 31,172 28,852 98,029 158,053
Depreciation and amortization - 4,020 365 4,385
Interest expense 3,995 - - 3,995
--------------- --------------- --------------- ---------------
Net loss $ 136,624 $ 7,204 $ (98,394) $ 45,434
=============== =============== ================ ===============
Accounts receivable $ 337,281 $ 29,816 $ - $ 367,097
Inventory 702,580 30,021 - 732,601
Fixed assets - - 7,889 7,889
Goodwill - 76,576 - 76,576
Patent - 135,781 - 135,781
Other assets - - 52,382 52,382
--------------- --------------- --------------- ---------------
Total assets $ 1,039,861 $ 272,194 $ 60,271 $ 1,372,326
=============== =============== =============== ===============
10
11
UNITED ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999 (Unaudited)
AND MARCH 31, 2000
The Company's total revenues and net income by segment for the six months ended
September 30, 2000, are as follows:
Graphic Specialty
Arts Chemicals Corporate Total
---------- --------- --------- ----------
Revenues $1,446,575 $126,520 $ - $1,573,095
========== ======== ========= ==========
Gross profit $ 453,295 $ 48,574 $ - $ 501,869
General and administrative 129,278 61,563 270,556 461,397
Depreciation and amortization - 7,888 882 8,770
Interest expense 4,929 - - 4,929
---------- -------- --------- ----------
Net income $ 319,088 $(20,877) $(271,438) $ 26,773
========== ======== ========= ==========
The Company's total revenues and net loss by segment for the three months ended
September 30, 1999, are as follows:
Graphic Specialty
Arts Chemicals Corporate Total
-------- --------- ---------- --------
Revenues $311,601 $ 83,032 $ - $394,633
======== ======== ========== ========
Gross profit $163,137 27,820 $ - $190,957
General and administrative 48,580 47,840 103,593 200,013
Depreciation and amortization - 3,475 440 3,915
Interest expense (income) 4,080 - (3,078) 1,002
-------- -------- ---------- --------
Loss from continuing operations $110,477 $(23,495) $(100,955) $(13,973)
======== ======== ========= ========
The Company's total revenues and net income by segment for the six months ended
September 30, 1999, are as follows:
Graphic Specialty
Arts Chemicals Corporate Total
-------- --------- --------- --------
Revenues $715,975 $181,274 $ - $897,249
======== ======== ========= ========
Gross profit $357,608 $ 55,704 $ - $413,312
General and administrative 93,004 91,712 205,018 389,734
Depreciation and amortization - 7,588 880 8,468
Interest expense (income) 4,410 - (4,751) (341)
-------- -------- --------- --------
Loss from continuing operations $260,194 $(43,596) $(201,147) $ 15,451
======== ======== ========= ========
11
12
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. KH-30(R) has a period of operational
effectiveness in an oil or gas well that exceeds the effectiveness period of
other products currently in use, usually lasting between 60-90 days before
retreatment is required. 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.
12
13
UNIPROOF(R) sales totaled $576,927 for the quarter ended September 30, 2000
and $1,243,022 for the six months ended September 30, 2000.
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 filed with the
Securities and Exchange Commission on June 20, 2000.
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.
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 this
report on Form 10-Q.
13
14
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
REVENUES Revenues for the second quarter of fiscal 2001 were $736,763, a
$342,130 or 87% increase over revenues of $394,633 in the second quarter of
fiscal 2000. The increase in revenues was primarily due to an increase in
UNIPROOF(R) sales.
COST OF GOODS SOLD Cost of goods sold increased to $524,896 or 71% of
revenues, for the quarter ended September 30, 2000 from $203,676 or 52% of
sales, for the quarter ended September 30, 1999. The numerical increase was
primarily due to increased production of UNIPROOF(R) proofing paper.
GROSS PROFIT Gross profit for the September 30 quarter of fiscal year 2001
was $211,867, a $20,910 or 11% increase from $190,957 in the corresponding
period of fiscal 2000. This 11% increase was primarily attributable to increased
sales of UNIPROOF(R) proofing paper.
OPERATING COSTS AND EXPENSES
General and Administrative Expenses. General and administrative expenses
decreased to $158,053, or 21% of revenues for the quarter ended September 30,
2000 from $200,013, or 51% of revenues for the quarter ended September 30, 1999.
The percentage decrease in the 2000 period was largely the result of
significantly higher revenues in that period.
INTEREST EXPENSE, NET OF INTEREST INCOME. The Company had interest expense
of $3,995 for the quarter ended September 30, 2000 compared with net interest
expense of $1002 in the corresponding 1999 period. The increase was the
14
15
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 September 30, 2000, net income totaled
$45,434 or 6% of revenues, compared to a loss of $13,973 for the quarter ended
September 30, 1999.
SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
REVENUES Revenues for the first six months of fiscal 2001 were $1,573,095,
a $675,846 or 75% increase over revenues of $879,249 in the first six months
of fiscal 2000. The increase in revenues was primarily due to an increase in
UNIPROOF(R) sales.
COST OF GOODS SOLD Cost of goods sold increased to $1,071,226 or 68% of
sales, for the six months ended September 30, 2000 from $483,937 or 54% of
sales, for the six months ended September 30, 1999. The numerical increase was
primarily due to increased production of UNIPROOF(R) proofing paper.
GROSS PROFIT Gross profit for the first six months of fiscal year 2001 was
$501,869 an $88,557 or 21% increase from $413,312 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.
OPERATING COSTS AND EXPENSES
General and Administrative Expenses. General and administrative expenses
increased to $461,397, or 29% of revenues for the six months ended September 30,
2000 from $389,734, or 43% of revenues for the six months ended September 30,
15
16
1999. The six month 2000 figure also included a $66,493 addition to the
allowance for doubtful accounts receivable.
INTEREST EXPENSE, NET OF INTEREST INCOME. The Company had interest expense
of $4,929 for the first six months ended September 30, 2000 compared with net
interest income of $341 in the corresponding 1999 period. The change was due to
borrowings under the Company's credit line.
NET INCOME. For the six months ended September 30, 2000, net income totaled
$26,773, or 2% of revenues, as compared to net income of $15,451 or 2% of
revenues for the six months ended September 30, 1999. The numerical increase 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 $445,945 and inventories of $592,285. As
of September 30, 2000 we had $50,798 in cash, accounts receivable of $367,097
and inventory of $732,601. The high inventory and low receivable figures at
September 30, 2000 reflect the execution of the contract with the Alameda
Company on September 22, 2000 and the fact that no revenue from that contract
will be recognized until the third quarter.
Cash Provided by Financing Activities. Net cash generated from financing
activities decreased to $156,525 for the six month period ended September 30,
2000 from $503,616 for the period ended September 30, 1999, a net decrease of
$347,091. The higher amount in 1999 had been needed to cover increases in
inventory in that period over the immediately preceding period.
Inventories at March 31, 2000 were $592,285, and increased to $732,601 at
September 30, 2000, an increase of $140,316. The increase reflects the execution
of
16
17
the contract with the Alameda Company on September 22, 2000 and the
non-recognition of revenue from that contract until the third fiscal quarter.
Accounts receivable decreased from $445,949 on March 31, 2000 to $367,097 on
September 30, 2000. The decrease was primarily the result of the non-recognition
of revenue on the contract with the Alameda Company.
Capital expenditures were negligible during the six months ended September
30, 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 collaterialized by substantially all of the assets of the Company, accrues
interest at a rate equal to the prime rate. As of September 30, 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.
United Energy believes that its existing cash and credit facility will be
sufficient to enable it to meet its foreseeable future capital needs.
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.
17
18
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
On June 5, 2000, the Board of Directors authorized the issuance of 750,000
shares of the Company's common stock in the name of the Company to be held as
treasury stock. Such shares remain in the name of the Company but they have been
pledged as further collateral for the credit line obtained from Fleet Bank in
June 2000.
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 September 30, 2000.
ITEM 5. OTHER INFORMATION- DISTRIBUTION AGREEMENT WITH THE ALAMEDA COMPANY
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.
The contract with Alameda covers the years 2001 and 2002 and is renewable
annually thereafter provided they meet certain minimum product purchase levels.
To
18
19
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 this report on Form
10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. Distribution Agreement with the Alameda Company.
(b) Reports on Form 8-K. None.
19
20
UNITED ENERGY CORP.
FORM 10-Q
SEPTEMBER 30, 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: December 15, 2000
By: \s\ Robert Seaman
----------------------------
Robert L. Seaman,
Executive Vice President and Principal Financial Officer
20