UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_____________________
FORM
10-Q
|
þ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the quarterly period ended June 30, 2008
or
|
o
|
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
(State
or other jurisdiction of
incorporation
or organization)
|
22
-
3342379
(I.R.S.
Employer Identification No.)
|
|
|
|
600
Meadowlands Parkway #20, Secaucus, N.J. 07094
(Address
of principal executive offices)
|
|
|
|
(800)
327-3456
(Registrant's
telephone number, including area
code)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past
90 days.
þ
Yes
o
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer
o
|
|
Accelerated filer
o
|
|
Non-accelerated
filer
o
|
(Do
not check if a smaller reporting company)
|
Smaller reporting company
þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in rule
12b-2 of the Exchange Act. Yes
o
No
þ
As
of the
close of business on August 14, 2008, 31,030,115 shares of common stock, par
value $.01 per share, were outstanding.
INDEX
|
PART
I. FINANCIAL INFORMATION
|
|
|
|
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|
|
|
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Item
1.
|
Financial
Statements
|
|
|
|
|
|
|
|
|
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Consolidated
balance sheets June 30, 2008 (Unaudited) and March 31,
2008
|
|
3-4
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|
|
|
|
|
|
|
Consolidated
statements of operations for the three months ended June 30, 2008
(Unaudited) and 2007 (Unaudited)
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5
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|
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Consolidated
statement of stockholders' equity for the three months ended June
30, 2008
(Unaudited)
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6
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|
|
|
|
|
|
|
Consolidated
statements of cash flows for the three months ended June 30, 2008
(Unaudited) and 2007 (Unaudited)
|
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7-8
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|
|
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Notes
to consolidated financial statements
|
|
9-12
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|
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Item
2.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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13-15
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
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15
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Item
4T.
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Controls
and Procedures
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16
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PART
II. OTHER INFORMATION
|
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Item
1.
|
Legal
Proceedings
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17
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Item
1A.
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Risk
Factors
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17
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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17
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Item
3.
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Defaults
Upon Senior Securities
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17
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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17
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|
Item
5.
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Other
Information
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17
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Item
6.
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Exhibits
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17
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Signatures
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18
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Item
1.
Financial
Statements
UNITED
ENERGY CORP. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
|
June
30,
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March
31,
|
|
|
|
|
2008
|
|
2008
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
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|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
472,868
|
|
$
|
858,575
|
|
|
Accounts
receivable, net of allowance for doubtful accounts of $25,756 and
$25,329,
respectively
|
|
|
341,697
|
|
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247,747
|
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Inventory
|
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160,917
|
|
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141,667
|
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Prepaid
expenses and other current assets
|
|
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139,094
|
|
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162,255
|
|
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Loan
receivable, net of reserve of $25,000
|
|
|
25,000
|
|
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25,000
|
|
|
Total
current assets
|
|
|
1,139,576
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1,435,244
|
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|
|
|
|
|
|
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PROPERTY
AND EQUIPMENT, net of accumulated depreciation and amortization of
$439,630 and $435,377 respectively
|
|
|
48,157
|
|
|
51,356
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS:
|
|
|
|
|
|
|
|
|
Goodwill,
net
|
|
|
15,499
|
|
|
15,499
|
|
|
Patents,
net of accumulated amortization of $202,957 and $193,330,
respectively
|
|
|
382,846
|
|
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386,687
|
|
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Loans
receivable
|
|
|
5,735
|
|
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5,023
|
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Deposits
|
|
|
1,385
|
|
|
1,385
|
|
|
Total
assets
|
|
$
|
1,593,198
|
|
$
|
1,895,194
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
UNITED
ENERGY CORP. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
|
June
30,
|
|
March
31,
|
|
|
|
|
2008
|
|
2008
|
|
|
|
|
(Unaudited)
|
|
|
|
|
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|
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LIABILITIES
AND STOCKHOLDERS' EQUITY
|
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|
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CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
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Accounts
payable
|
|
$
|
214,531
|
|
$
|
167,913
|
|
|
Accrued
expenses
|
|
|
82,677
|
|
|
113,698
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|
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Due
to related parties
|
|
|
244,141
|
|
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244,141
|
|
|
Total
current liabilities
|
|
|
541,349
|
|
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525,752
|
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|
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|
|
|
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STOCKHOLDERS'
EQUITY:
|
|
|
|
|
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Preferred
Stock: 100,000 shares authorized; Series A Convertible Preferred
Stock:
$8,000 stated value, 3 shares issued and outstanding as of June 30,
2008
and March 31, 2008
|
|
|
24,000
|
|
|
24,000
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Common
stock: $0.01 par value 100,000,000 shares authorized; 31,030,115
shares
issued and outstanding as of June 30, 2008 and March 31,
2008
|
|
|
310,301
|
|
|
310,301
|
|
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Additional
paid-in capital
|
|
|
21,781,646
|
|
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21,775,204
|
|
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Accumulated
deficit
|
|
|
(21,064,098
|
)
|
|
(20,740,063
|
)
|
|
Total
stockholders' equity
|
|
|
1,051,849
|
|
|
1,369,442
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
1,593,198
|
|
$
|
1,895,194
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
UNITED
ENERGY CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
For
the Three Months
|
|
|
|
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Ended
June 30,
|
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|
2008
|
|
2007
|
|
|
|
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(Unaudited)
|
|
|
|
|
|
|
|
|
|
REVENUES,
net
|
|
$
|
213,638
|
|
$
|
276,240
|
|
|
|
|
|
|
|
|
|
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|
COST
OF GOODS SOLD
|
|
|
108,534
|
|
|
117,490
|
|
|
|
|
|
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|
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|
Gross
profit
|
|
|
105,104
|
|
|
158,750
|
|
|
|
|
|
|
|
|
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|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
416,709
|
|
|
656,035
|
|
|
Depreciation
and amortization
|
|
|
12,271
|
|
|
18,600
|
|
|
Total
operating expenses
|
|
|
428,980
|
|
|
674,635
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(323,876
|
)
|
|
(515,885
|
)
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE), net:
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
802
|
|
|
28,876
|
|
|
Interest
expense
|
|
|
(601
|
)
|
|
(884
|
)
|
|
Total
other income (expense), net
|
|
|
201
|
|
|
27,992
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(323,675
|
)
|
|
(487,893
|
)
|
|
|
|
|
|
|
|
|
|
|
Preferred
dividends
|
|
|
(360
|
)
|
|
(446
|
)
|
|
|
|
|
|
|
|
|
|
|
Net
loss applicable to common shareholders
|
|
$
|
(324,035
|
)
|
$
|
(488,339
|
)
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED LOSS PER SHARE:
|
|
|
|
|
|
|
|
|
Total
basic and diluted loss per share
|
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES, OUTSTANDING, basic and diluted
|
|
|
31,030,115
|
|
|
31,030,115
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
UNITED
ENERGY CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR
THE THREE MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Preferred
|
|
Paid-In
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Stock
|
|
Capital
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
April 1, 2008
|
|
|
31,030,115
|
|
$
|
310,301
|
|
$
|
24,000
|
|
$
|
21,775,204
|
|
$
|
(20,740,063
|
)
|
$
|
1,369,442
|
|
|
Compensation
expense associated with options
|
|
|
—
|
|
|
—
|
|
|
-
|
|
|
6,442
|
|
|
—
|
|
|
6,442
|
|
|
Dividends
accrued on preferred shares
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(360
|
)
|
|
(360
|
)
|
|
Net
loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(323,675
|
)
|
|
(323,675
|
)
|
|
BALANCE,
June 30, 2008
|
|
|
31,030,115
|
|
$
|
310,301
|
|
$
|
24,000
|
|
$
|
21,781,646
|
|
$
|
(21,064,098
|
)
|
$
|
1,051,849
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
|
UNITED
ENERGY CORP. AND SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
FOR
THE THREE MONTHS ENDED JUNE 30, 2008 AND
2007
|
|
|
|
2008
|
|
2007
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
loss from continuing operations
|
|
$
|
(323,675
|
)
|
$
|
(487,893
|
)
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
13,880
|
|
|
22,686
|
|
|
Compensation
expense associated with options
|
|
|
6,442
|
|
|
58,109
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Increase
in accounts receivable, net
|
|
|
(93,949
|
)
|
|
(198,120
|
)
|
|
Increase
in inventory, net
|
|
|
(19,249
|
)
|
|
(5,353
|
)
|
Decrease
in prepaid expenses and
other current assets
|
|
|
23,160
|
|
|
8,565
|
|
Increase
in accounts payable and
accrued expenses
|
|
|
15,597
|
|
|
66,173
|
|
|
Net
cash used in continuing operations
|
|
|
(377,794
|
)
|
|
(535,833
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM DISCONTINUED OPERATIONS:
|
|
|
|
|
|
|
|
|
Decrease
in accounts receivable, net
|
|
|
-
|
|
|
31
|
|
|
Net
cash provided by discontinuing operations
|
|
|
-
|
|
|
31
|
|
|
Net
cash used in operating activities
|
|
|
(377,794
|
)
|
|
(535,802
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Employee
loans
|
|
|
(713
|
)
|
|
(4,721
|
)
|
|
Payments
for acquisition of property and equipment
|
|
|
(1,054
|
)
|
|
(4,896
|
)
|
|
Payments
for patents
|
|
|
(5,786
|
)
|
|
(16,624
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash
used in investing activities
|
|
|
(7,553
|
)
|
|
(26,241
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Preferred
stock dividend
|
|
|
(360
|
)
|
|
(360
|
)
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in financing activities
|
|
|
(360
|
)
|
|
(360
|
)
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(385,707
|
)
|
|
(562,403
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, beginning of period
|
|
|
858,575
|
|
|
2,863,906
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, end of period
|
|
$
|
472,868
|
|
$
|
2,301,503
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
UNITED
ENERGY CORP. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE THREE MONTHS ENDED JUNE 30, 2008 AND 2007
|
|
|
2008
|
|
2007
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
paid during the period
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
601
|
|
$
|
884
|
|
|
Income
taxes
|
|
$
|
1,560
|
|
$
|
2,150
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
UNITED
ENERGY CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2008 (Unaudited)
1
.
BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis
of presentation
The
accompanying unaudited consolidated financial statements of United Energy Corp.
(“we”, “United Energy” or the “Company”) have been prepared in accordance with
generally accepted accounting principles for interim financial information
and
with the instructions to Form 10-Q. 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 June 30, 2008
(unaudited) and the results of its operations for the three months ended June
30, 2008 and 2007 (unaudited) and cash flows for the three months ended June
30,
2008 and 2007 (unaudited). All such adjustments are of a normal and recurring
nature. Interim financial statements are prepared on a basis consistent with
the
Company's annual financial statements. Results of operations for the three
months ended June 30, 2008 are not necessarily indicative of the operating
results that may be expected for the year ending March 31, 2009.
The
consolidated balance sheet as of March 31, 2008 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 Annual Report on Form 10-KSB for the fiscal
year ended March 31, 2008.
Going
Concern
–
During the
past
two
fiscal years ended March 31, 2008 and 2007, we have recorded aggregate losses
from continuing operations of $4,313,181 and have incurred total negative cash
flows from operations of $4,027,022 for the same two-year period. During the
three months ended June 30, 2008 the Company experienced a net loss from
operations of $323,675 and a negative cash flow from operations $377,794. These
matters raise substantial doubt about the Company’s ability to continue as a
going concern. Our consolidated financial statements do not include any
adjustment that might result from the outcome of this uncertainty
.
Our
continued existence is dependent upon several factors, including raising
additional capital through equity or debt financing, increased sales volumes,
collection of existing receivables and the ability to achieve profitability
from
the sale of our product lines. In order to increase our cash flow, we are
continuing our efforts to stimulate sales and cut back expenses not directly
supporting our sales and marketing efforts.
There
can
be no assurance that we will be successful in stimulating sales or reducing
expenses to levels sufficient to generate cash flow sufficient to fund our
anticipated liquidity requirements. There also can be no assurance that
available financing will be available, or if available, that such financing
will
be on terms acceptable to us.
UNITED
ENERGY CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2.
USE
OF ESTIMATES
The
preparation of consolidated financial statements in accordance with accounting
principals generally accepted in the United States of America requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities.
On
an
on-going basis, the Company evaluates its estimates, including those related
to
option and warrant values, bad debts, inventories, intangible assets,
contingencies and litigation. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
3.
INVENTORY
Inventory
consists of the following:
|
|
|
June
30,
|
|
March
31,
|
|
|
|
|
2008
|
|
2008
|
|
|
Blended
chemicals
|
|
$
|
104,841
|
|
$
|
85,615
|
|
|
Raw
materials
|
|
|
56,076
|
|
|
56,052
|
|
|
Total
inventory
|
|
$
|
160,917
|
|
$
|
141,667
|
|
4.
RELATED-PARTY TRANSACTIONS
The
Company has an amount due to Robert Seaman, a shareholder and former director
of
the Company. Amount due to the related party as of June 30, 2008 and 2007 is
$244,141. This amount is unsecured, non-interest bearing and due upon demand.
Martin
Rappaport, a major shareholder and director of the Company, owned the property
through September 2007 from which United Energy leases the 9,600 square foot
facility it occupies in Secaucus, New Jersey. The Company pays approximately
$115,200 per year under the lease, excluding real estate taxes. The Company
believes that the lease is at fair market value with leases for similar
facilities.
During
April 2007, the Company entered into an employment agreement with the Chairman
of the Board, Ron Wilen. See note 5 for additional information.
5.
EMPLOYEE
BENEFITS PLAN
Stock
Option Plans
In
August
2001, the Company’s stockholders approved the 2001 Equity Incentive Plan (the
“2001 Plan”), which provides for the grant of stock options to purchase up to
2,000,000 shares of common stock to any employee, non-employee director, or
consultant at the Board’s discretion. Under the 2001 Plan, these options may be
exercised for a period up to ten years from the date of grant. Options issued
to
employees are exercisable upon vesting, which can range between the dates of
the
grant to up to 5 years
.
An
amendment and restatement of the 2001 Equity Incentive Plan increasing the
number of shares for a total of 4,000,000 was approved by the Board of Directors
on May 29, 2002 and was
approved
by the
shareholders at the annual meeting.
UNITED
ENERGY
CORP.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Under
the
2001 Plan, options are granted to non-employee directors upon election at the
annual meeting of stockholders at a purchase price equal to the fair market
value on the date of grant. In addition, the non-employee director stock options
shall be exercisable in full twelve months after the date of grant unless
determined otherwise by the compensation committee.
Fair
Value of Stock Options
For
disclosure purposes under SFAS No. 123 and SFAS No. 123(R), the fair value
of
each option grant is estimated on the date of grant using the Black-Scholes
option valuation model with the following weighted-average
assumptions:
|
|
|
2008
|
|
2007
|
|
|
Expected
life (in years)
|
|
|
10
|
|
|
10
|
|
|
Risk-free
interest rate
|
|
|
4.54
|
%
|
|
4.54
|
%
|
|
Volatility
|
|
|
78.0
|
|
|
88.5
|
|
|
Dividend
yield
|
|
|
0
|
%
|
|
0
|
%
|
Utilizing
these assumptions, the weighted average fair value of options granted with
an
exercise price equal to their fair market value at the date of the grant is
$1.15 for the three months ended June 30, 2008.
Summary
Stock Option Activity
The
following table summarizes stock option information with respect to all stock
options for the quarter ended June 30, 2008:
|
|
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic
Value
|
|
|
Options
outstanding April 1, 2008
|
|
|
3,787,500
|
|
$
|
1.15
|
|
|
6.36
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding June 30, 2008
|
|
|
3,787,500
|
|
$
|
1.15
|
|
|
6.11
|
|
|
|
|
|
Vested
and expected to vest-end of quarter
|
|
|
3,787,500
|
|
$
|
1.15
|
|
|
6.11
|
|
$
|
—
|
|
|
Exercisable
–
end
of
quarter
|
|
|
3,595,014
|
|
$
|
1.16
|
|
|
5.95
|
|
$
|
—
|
|
UNITED
ENERGY
CORP.NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
During
the quarter ended June 30, 2007, pursuant to the terms of an employment
agreement with Ronald Wilen, Chairman of the Board, Secretary, and Executive
Vice President of Research and Development dated April 17, 2007, for each of
the
next five (5) years of the term of the agreement (commencing with April 17,
2008), Mr. Wilen will receive an option to purchase fifty thousand (50,000)
shares of common stock of the Company. The exercise price with respect to any
option granted pursuant to the employment agreement shall be the fair market
value of the common stock underlying such option on the date such option was
granted. The initial grant of 50,000 stock options will be granted out of the
2001 Equity Incentive Plan at the one year anniversary. In addition, the
stock
option
to
purchase 135,000 shares has been reserved for Mr. Wilen out of the 2001 Equity
Incentive Plan. After the reservation described in the immediately preceding
sentence, no shares remain available for grant out of the 2001 Equity Incentive
Plan. Thus, the remaining stock options to purchase 65,000 shares granted to
Mr.
Wilen will be non-qualified stock options, unless the Company amends the 2001
Equity Incentive Plan in order to increase the number of shares that may be
granted pursuant to such plan or adopts a new stock option plan.
Options
outstanding at June 30, 2008 have an exercise price ranging between $0.70 to
$2.05.
The
aggregate intrinsic value in the table above represents the total intrinsic
value (the difference between United Energy’s closing stock price on June 30,
2008 and the exercise price, multiplied by the number of in-the-money options)
that would have been received by the option holders had vested option holders
exercised their options on June 30, 2008. This amount changes based upon changes
in the fair market value of United Energy’s stock. As of June 30, 2008, $72,980
of the total unrecognized compensation costs related to stock options is
expected to be recognized over a period of one year and nine
months.
6.
COMMITMENTS
AND CONTINGENCIES
Litigation
Sales
Commission Claim
In
July
2002, an action was commenced against us in the Court of Common Pleas of South
Carolina, Pickens County, brought by Quantum International Technology, LLC
and
Richard J. Barrett. Plaintiffs allege that they were retained as a sales
representative of ours and in that capacity made sales of our products to the
United States government and to commercial entities. Plaintiffs further allege
that we failed to pay to plaintiffs agreed commissions at the rate of 20% of
gross sales of our products made by plaintiffs. The complaint seeks an
accounting, compensatory damages in the amount of all unpaid commissions plus
interest thereon, and punitive damages in an amount triple the compensatory
damages, plus legal fees and costs. Plaintiffs maintain that they are entitled
to receive an aggregate of approximately $350,000 in compensatory and punitive
damages, interest and costs. In June 2003, the action was transferred from
the
court in Pickens County to a Master in Equity sitting in Greenville, South
Carolina and was removed from the trial docket. The action, if tried, will
be
tried without a jury. No trial date has been scheduled. We believe, based on
the
advice of counsel, we have meritorious defenses to the claims asserted in the
action and intend to vigorously defend the case. The outcome of this matter
cannot be determined at this time.
In
March
2007, the Company commenced an action against Applied Force and Samuel Miller
III in the Superior Court of New Jersey, Law Division - Bergen County for the
recovery of two of the Company’s vehicles and certain additional claims. The
defendants, Applied Force and Samuel Miller III, have filed a counterclaim
for
recovery of alleged storage fees in the amount of $126,784 and certain alleged
service fees in the amount of $1,275. A settlement agreement and mutual release
was entered into during August 2007 and the action was dismissed on September
18, 2007. As part of the settlement the Company transferred title of a truck
to
the defendant.
Item
2
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
CAUTIONARY
STATEMENT RELATING TO FORWARD-LOOKING STATEMENTS
The
matters discussed in this Form 10-Q contain certain forward-looking statements
and involve risks and uncertainties (including changing market conditions,
competitive and regulatory matters, etc.) detailed in the disclosure contained
in this Form 10-Q and the other filings with the Securities and Exchange
Commission made by us from time to time. The discussion of our liquidity,
capital resources and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects
of
any changes to our operations. Accordingly, actual results could differ
materially from those projected in the forward-looking statements as a result
of
a number of factors, including those identified herein and those discussed
under
the heading “Risk Factors” in the Company’s 10-KSB for the fiscal year ended
March 31, 2008. This item should be read in conjunction with the financial
statements and other items contained elsewhere in the report. Unless the context
otherwise requires, “we”, “our”, “us”, the “Company” and similar phrases refer
to United Energy Corp.
Overview
We
develop and distribute environmentally friendly specialty chemical products
with
applications in several industries and markets. Our current line of products
includes our K-Line of Chemical Products for the oil industry and related
products.
Through
our wholly owned subsidiary, Green Globe Industries, Inc., we provide the U.S.
military with a variety of solvents, paint strippers and cleaners under our
trade name “Qualchem.” Green Globe is a qualified supplier for the U.S. military
and has sales contracts currently in place with no minimum purchase
requirements, which are renewable at the option of the U.S. Military.
We
have
developed a system referred to as our “S2 system,” to work with our
environmentally friendly paraffin dispersants products. This technology produces
high volumes of steam and heat at variable pressures and temperatures to
completely dissolve most deposits of paraffin and asphaltene within oil wells,
pipelines or storage tanks. The S2 system apparatus is portable, compact and
easy to use. We are further developing the process to enhance and support sales
of KH-30 and its related products for the oil industry and for other potential
applications. Our patent on the S2 system expired in January 2007; however,
we
have filed a patent application with respect to certain improvements,
modifications and enhancements to the S2 system.
A
key
component of our business strategy is to pursue collaborative joint working
and
marketing arrangements with established international oil and oil service
companies. We intend to enter into these relationships to more rapidly and
economically introduce our K-Line of Chemical Products to the worldwide
marketplace for refinery, tank and pipeline cleaning services.
We
entered into an amended and restated non-exclusive distribution agreement with
Champion Technologies Inc. for the sale and distribution of our K-Line of
Chemical Products. The agreement is for a term of three (3) years and grants
Champion Technologies Inc. certain rights to blend, dilute and utilize our
products to manufacture and sell different products. We also entered into a
non-exclusive Master Purchase Agreement with Petrobras America Inc. for the
sale
and distribution of our K-Line of Chemical Products.
The
agreements do not provide for any minimum amounts to be purchased. We are also
currently negotiating potential working arrangements with several other
companies, however, there can be no assurance that any of these arrangements
will be entered into or, if entered into will be successful. There also can
be
no assurance that the agreements with Champion Technologies and Petrobras
America will be successful.
We
provide our K-Line of Chemical Products and our Green Globe Products to our
customers and generated revenues of $213,638 for the quarterly period ended
June
30, 2008 and $276,240 for the quarterly period ended June 30, 2007.
RESULTS
OF OPERATIONS
Three
Months Ended June 30, 2008 Compared to the Three Months Ended June 30,
2007
Revenues
.
Revenues for the three months ended June 30, 2008 were $213,638, a $62,602,
or
23% decrease from revenues of $276,240 in the comparable three months of 2007.
Revenues from our Green Globe/Qualchem military sales decreased by $128,246
to
$7,664 or 94% compared to $135,910 in the comparable three months ended June
30,
2007, offset by a increase of $65,644 to $205,974 or 47% compared to $140,330
in
the comparable three months ended June 30, 2007 in sales of our K-Line of
Chemical Products.
Cost
of Goods Sold
.
Cost of
goods sold decreased $8,956, or 8% to $108,534 or 51% of sales, for the three
months ended June 30, 2008 from $117,490, or 43% of sales for the three months
ended June 30, 2007. The decrease in cost of goods sold (which accounted for
a
higher percentage of revenues) was due to the lower sales level in the period
compared to the comparable period in 2007. Cost of goods sold from our Green
Globe/Qualchem military sales decreased by $60,367 to $2,219 or 96% compared
to
$62,586 in the comparable three months ended June 30, 2007, offset by an
increase of $51,411 to $106,315 or 94% compared to $54,904 in the comparable
three months ended June 30, 2007 in cost of goods sold of our K-Line of Chemical
Products.
Gross
Profit
.
Gross
profit for the three months ended June 30, 2008, decreased by $53,646, or 34%
to
$105,104 or 49% of sales compared with $158,750 or 57% of sales in the prior
period. The decrease in gross profit and gross profit percentage reflects the
lower levels of sales.
Operating
Costs and Expenses
General
and Administrative Expenses
.
General
and administrative expenses decreased $239,326 to $416,709 or 195% of sales
for
the three months ended June 30, 2008 compared with $656,035 or 237% of sales
for
the three months ended June 30, 2007. The decrease in general and administrative
expenses is primarily related to a decrease in professional fees, salaries
due
to the reduction of employees and a reduction in option costs charged for
employees.
Depreciation
and Amortization
.
Depreciation
and amortization decreased to $12,271
for
the
three months ended June 30, 2008
from
$18,600
for
the
three months ended June 30, 2007, reflecting the Company’s use of an accelerated
method of depreciation, offset by a slight increase in fixed assets.
Interest
Income
.
The
Company had interest income of $802 for the three months ended June 30, 2008
compared with $28,876 in the corresponding period in 2007. The decrease was
due
to the use of cash received in connection with the private placement in March
2006.
Interest
Expense
.
Interest expense remained relatively constant for the three months ended June
30, 2008 as compared to June 30, 2007.
Net
Loss
.
The
three months ended June 30, 2008 resulted in a net loss of $323,675 or $0.01
per
share as compared to a net loss of $487,893 or $0.02 per share for the three
months ended June 30, 2007. The average number of shares of common stock used
in
calculating earnings per share remained the same at 31,030,115.
Liquidity
and Capital Resources
As
of
June 30, 2008, the Company had $472,868 in cash and cash equivalents, as
compared to $858,575 at March 31, 2008.
The
$385,707 decrease in cash and cash equivalents was due to net cash used in
operations of $377,794, net cash used in investing activities of $7,553 and
net
cash used in financing activities of $360. Cash used in investing activities
consisted of employee loans of $713, fixed asset purchases of $1,054 and patent
purchases of $5,786. Cash used in financing activities consisted of preferred
stock dividends of $360.
As
of
June 30, 2008 the Company’s backlog included $155,953 of chemical sales. Backlog
represents products that the Company’s customers have committed to purchase. The
Company’s backlog is subject to fluctuations and is not necessarily indicative
of future sales.
During
the past
two
fiscal years ended March 31, 2008 and 2007, we have recorded aggregate losses
from continuing operations of $4,313,181 and have incurred total negative cash
flows from operations of $4,027,022 for the same two-year period. During the
three months ended June 30, 2008 the Company experienced a net loss from
operations of $323,675 and a negative cash flow from operations $377,794. These
matters raise substantial doubt about the Company’s ability to continue as a
going concern. Our consolidated financial statements do not include any
adjustment that might result from the outcome of this uncertainty
.
Our
continued existence is dependent upon several factors, including raising
additional capital through equity or debt financing, increased sales volumes,
collection of existing receivables and the ability to achieve profitability
from
the sale of our product lines. In order to increase our cash flow, we are
continuing our efforts to stimulate sales and cut back expenses not directly
supporting our sales and marketing efforts.
There
can
be no assurance that we will be successful in stimulating sales or reducing
expenses to levels sufficient to generate cash flow sufficient to fund our
anticipated liquidity requirements. There also can be no assurance that
available financing will be available, or if available, that such financing
will
be on terms acceptable to us.
Concentration
of Risk
Sales
to
two of our customers, accounted for approximately 57% and 75% of our sales
for
the three months ending June 30, 2008 and 2007.
Off-Balance
Sheet Arrangements
We
do not
currently have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes
in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to our
stockholders.
Item
3.
Quantitative
and Qualitative Disclosures About Market Risks.
Not
applicable
Item
4T.
Controls
and Procedures.
Evaluation
of the Company's Disclosure Controls and Procedures
We
carried out an evaluation, under the supervision and with the participation
of
the Company's management, including our Chief Executive Officer and our
Principal Accounting Officer (Interim Chief Financial Officer), of the
effectiveness of our “disclosure controls and procedures” (as defined in Rules
13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended)
as of
June 30, 2008. Based upon that evaluation, the Chief Executive Officer and
the
Principal Accounting Officer (Interim Chief Financial Officer) concluded that
our disclosure controls and procedures are effective, in all material respects,
with respect to the recording, processing, summarizing, and reporting, within
the time periods specified in the Securities and Exchange Commission's rules
and
forms, of information required to be disclosed by us in the reports that we
file
or submit under the Exchange Act. In designing and evaluating our “disclosure
controls and procedures” (as defined in Rules 13a-15(e) or 15d-15(e) of the
Securities Exchange Act of 1934, as amended), management recognized that any
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurances of achieving the desired control objectives, as
ours
are designed to do, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.
Changes
in Control Over Financial Reporting
Management
has not identified any change in our internal control over financial reporting
that occurred during the first quarter of the fiscal year ended March 31, 2009
that has materially affected, or is reasonably likely to materially affect,
the
Company’s internal control over financial
reporting.
PART
II
OTHER
INFORMATION
Item
1.
Legal
Proceedings
None.
Item
1A.
Risk
Factors
Not
applicable.
Item
2.
Unregistered
Sales of Equity Securities and Use of Proceeds
None
Item
3.
Defaults
Upon Senior Securities
None
Item
4.
Submission
of Matters to a Vote of Security Holders
None
Item
5.
Other
Information
None
Item
6.
Exhibits
|
31.1
|
Chief
Executive Officer’s Certificate, pursuant to Rule 13a-14(a)/ 15d-14(a) of
the Exchange Act.
|
|
31.2
|
Chief
Financial Officer’s Certificate, pursuant to Rule 13a-14(a)/ 15d-14(a) of
the Exchange Act
|
|
32.1
|
Chief
Executive Officer’s Certificate, pursuant to Section 1350 of Chapter 63 of
Title 18 of the United States Code (18 U.S.C.
1350).
|
|
32.2
|
Chief
Financial Officer’s Certificate, pursuant to Section 1350 of Chapter 63 of
Title 18 of the United States Code (18 U.S.C.
1350).
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this Report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
Dated:
August 14, 2008
|
UNITED
ENERGY CORP.
|
|
|
|
|
|
|
By:
|
/s/
Ronald Wilen
|
|
|
|
Ronal
Wilen,
|
|
|
|
Chief
Executive Officer
|
|
|
|
(as
principal executive officer)
|
|
|
|
|
|
|
By:
|
/s/
James McKeever
|
|
|
|
James
McKeever,
|
|
|
|
Interim
Chief Financial Officer
|
|
|
|
(as
principal financial and accounting
officer)
|
Grafico Azioni United Energy (PK) (USOTC:UNRG)
Storico
Da Gen 2025 a Feb 2025
Grafico Azioni United Energy (PK) (USOTC:UNRG)
Storico
Da Feb 2024 a Feb 2025
