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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 June 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. [ ] Yes [X ] 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
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INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Consolidated Financial Statements
(Unaudited) ................................................... 3
Consolidated balance sheets
June 30, 2000 and March 31, 2000 .............................. 4
Consolidated statement of operations for the three months ended
June 30, 2000 and 1999; ....................................... 5
Consolidated statement of stockholders' equity
for the three months ended June 30, 2000; ..................... 6
Consolidated statements of cash flows for the
three months ended June 30, 2000 and 1999 ..................... 7
Notes to consolidated financial statements
June 30, 2000 ................................................. 8-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ..................................... 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk .... 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................. 13
Item 2. Changes in Securities and Use of Proceeds ..................... 13
Item 3. Defaults upon Senior Securities ............................... 14
Item 4. Submission of Matters to a Vote of Security Holders ........... 14
Item 5. Other Information- Credit Line with Fleet Bank, N.A ........... 14
Item 6. Exhibits and Reports on Form 8-K .............................. 15
Signatures ...................................................................... 16
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITED ENERGY CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of June 30, 2000 (Unaudited) and March 31, 2000 4
Consolidated Statements of Operations for the Three Months Ended June 30, 2000
and 1999 (Unaudited) 5
Consolidated Statements of Stockholders' Equity for the Three months ended June
30, 2000 6
Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2000
and 1999 (Unaudited) 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8-9
</TABLE>
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UNITED ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 (Unaudited)
AND MARCH 31, 2000
<TABLE>
<CAPTION>
June 30, 2000 March 31, 2000
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 68,204 $ 46,008
Accounts receivable, net of allowance for doubtful accounts of
$73,100 and $18,260, respectively 273,774 445,949
Inventory 802,172 592,285
Prepaid expenses 251 -
-------------- --------------
Total current assets 1,144,401 1,084,242
PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization
of $18,205 and $17,320, respectively 8,776 9,661
OTHER ASSETS:
Goodwill, net of accumulated amortization of $8,952 and $7,957, respectively 77,571 78,566
Patent, net of accumulated amortization of $11,984 and $9,479, respectively 138,284 140,789
Other assets 1,385 1,585
-------------- --------------
Total assets $ 1,370,417 $ 1,314,843
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 301,149 $ 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 163,959 5,697
-------------- --------------
Total current liabilities 839,826 765,591
-------------- --------------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock; 100,000,000 shares authorized of $0.01 par value, 15,830,270
shares issued and outstanding as of June 30 and March 31, 2000
158,302 158,302
Additional paid-in capital 2,640,092 2,640,092
Stock subscription receivable (25,000) (25,000)
Accumulated deficit (2,242,803) (2,224,142)
-------------- --------------
Total stockholders' equity 530,591 549,252
-------------- --------------
Total liabilities and stockholders' equity $ 1,370,417 $ 1,314,843
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
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UNITED ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999 (Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended June 30,
---------------------------------
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
REVENUES, net $ 836,332 $ 502,616
COST OF GOODS SOLD 546,330 280,261
----------- -----------
Gross profit 290,002 222,355
----------- -----------
OPERATING EXPENSES:
General and administrative 303,344 189,721
Depreciation and amortization 4,385 4,553
----------- -----------
Total operating expenses 307,729 194,274
----------- -----------
(Loss) income from operations (17,727) 28,081
----------- -----------
OTHER (EXPENSE) INCOME, net:
Interest income - 1,673
Interest expense (934) (330)
----------- -----------
Total other (expense) income, net (934) 1,343
----------- -----------
Net (loss) income (18,661) 29,424
=========== ===========
BASIC AND DILUTED INCOME PER SHARE: $ 0.00 $ 0.00
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING,
basic and diluted 15,830,270 15,703,770
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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UNITED ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 2000 (Unaudited)
AND FOR THE YEAR ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Common Stock Additional Stock
------------------------- Paid-in Subscription Accumulated
Shares Amount Capital Receivable Deficit Total
---------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
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 loss - - - - (18,661) (18,661)
---------- ----------- ----------- ----------- ------------ ------------
BALANCE, June 30, 2000 15,830,270 $ 158,302 $2,640,092 $ (25,000) $(2,242,803) $ 530,591
========== =========== =========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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UNITED ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
--------------------------
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (18,661) $ 29,424
Adjustments to reconcile net income to net cash used in operating activities-
Depreciation and amortization 4,385 4,553
Changes in operating assets and liabilities-
Decrease (increase) in accounts receivable 172,175 (198,684)
Increase in inventory (209,887) (122,450)
Increase in prepaid expenses (251) --
Decrease (increase) in other assets, net 200 (4,885)
Increase (decrease) in accounts payable and accrued expenses (84,027) 120,900
--------- ---------
Net cash used in operating activities (136,066) (171,142)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for patent -- (6,129)
--------- ---------
Net cash used in investing activities -- (6,129)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (payments) on line of credit, net (1,738) 43,362
Proceeds from bank loan 160,000 --
Proceeds from loans payable to related party -- 215,000
--------- ---------
Net cash provided by financing activities 158,262 258,362
--------- ---------
Net increase in cash and cash equivalents 22,196 81,091
CASH AND CASH EQUIVALENTS, beginning of period 46,008 172,448
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 68,204 $ 253,539
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period-
Interest $ 174 $ 330
Income taxes 720 400
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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UNITED ENERGY CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 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 June 30, 2000 and March
31, 2000 and the results of its operations and cash flows for the three months
ended June 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
period ended June 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 generally accepted accounting principles
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.
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.
3. 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.
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4. 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 months
periods ended June 30,2000 and 1999:
The Company's total revenues, income from operations and identifiable
assets by segment for the three months ended June 30, 2000, are as follows:
<TABLE>
<CAPTION>
Graphic Specialty
Arts Chemicals Corporate Total
---- --------- --------- -----
<S> <C> <C> <C> <C>
Revenues $ 802,517 $ 33,815 $ -- $ 836,332
========== ========== ========== ==========
Gross profit 281,504 8,498 -- $ 290,002
General and administrative 98,106 32,711 172,527 $ 303,344
Depreciation and amortization -- 3,868 517 $ 4,385
Interest expense (income) 934 -- -- $ 934
---------- ---------- ---------- ----------
Income from continuing operations $ 182,464 $ (28,081) $ (173,044) $ (18,601)
========== ========== ========== ==========
Accounts receivable $ 264,374 $ 9,400 $ -- $ 273,774
Inventory 751,294 50,878 -- $ 802,172
Fixed Assets -- -- 8,776 $ 8,776
Goodwill -- 77,571 -- $ 77,571
Patent -- 138,284 -- $ 138,284
Other Assets -- -- 69,840 $ 69,840
---------- ---------- ---------- ----------
Total assets $1,015,663 $ 276,133 $ 78,616 $1,370,417
========== ========== ========== ==========
</TABLE>
The Company's total revenues and income from operations by segment for the three
months ended June 30, 1999, are as follows:
<TABLE>
<CAPTION>
Graphic Specialty
Arts Chemicals Corporate Total
---- --------- --------- -----
<S> <C> <C> <C> <C>
Revenues $ 404,374 $ 98,242 $ -- $ 502,616
========= ========= ======== =========
Gross profit 194,471 27,884 -- $ 222,355
General and administrative 44,424 43,872 101,425 $ 189,721
Depreciation and amortization -- 4,113 440 $ 4,553
Interest expense (income) 330 -- (1,673) $ (1,343)
--------- --------- --------- ---------
Loss from continuing operations $ 149,717 $ (20,101) $(100,192) $ 29,424
========= ========= ========= =========
</TABLE>
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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. UNIPROOF(R) sales totaled $666,095 for the quarter ended June 30,
2000.
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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."
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
REVENUES Revenues for the first three months of fiscal 2001 were
$836,332, a $333,716, or 66% increase over revenues of $502,616 in the first
three 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 $546,330 or 65% of
sales, for the quarter ended June 30, 2000 from $280,261 or 56% of sales, for
the quarter ended June 30, 1999. The numerical increase was primarily due to
higher production of UNIPROOF(R) proofing paper.
GROSS PROFIT Gross profit for June 30 quarter of fiscal year 2001 was
$290,002, a $67,647 or 30% increase from $222,355 in the corresponding period
of fiscal 2000. This increase was primarily attributable to increased
UNIPROOF(R) sales.
OPERATING COSTS AND EXPENSES
General and Administrative Expenses. General and administrative
expenses increased to $303,344, or 36% of revenues for the quarter ended June
30, 2000 from
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$189,721, or 38% of revenues for the quarter ended June 30, 1999. The numerical
increase included a $54,840 addition to the allowance for doubtful accounts
receivable.
INTEREST EXPENSE, NET OF INTEREST INCOME. The Company had interest
expense of $934 for the June 30 quarter of 2000 compared with net interest
income of $1,343 in the corresponding 1999 period.
NET LOSS. The quarter ended June 30, 2000, resulted in a net loss of
$18,661, as compared to net income of $29,424 or 6% of revenues for the quarter
ended June 30, 1999. The loss in the 2000 period is primarily the result of the
higher allowance for doubtful accounts and increased professional fees.
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 June 30, 2000 we had $68,204 in cash, accounts receivable of
$273,774 and inventory of $802,172.
Cash Provided by Financing Activities. Net cash generated from
financing activities decreased to $158,262 for the period ended June 30, 2000
from $258,362 for the period ended June 30, 1999, a net decrease of $100,100.
The higher amount in 1999 had been needed to cover increased accounts receivable
and increased inventory in that period over the immediately preceding period.
Inventories at March 31, 2000 were $592,285, and increased to $802,172
at June 30, 2000, an increase of $209,887. Most of the increase was due to raw
materials acquired during the quarter to support higher future production
levels.
Capital expenditures were negligible during the three months ended June
30, 2000 and during the corresponding period of 1999. United Energy has no
material
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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 June 30, 2000,
$160,000 was outstanding under the credit line. 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. See also, Part
II, Item 5. Other Information for more complete information.
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.
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
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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 June 30, 2000.
ITEM 5. OTHER INFORMATION-- CREDIT LINE WITH FLEET BANK, N.A.
In June 2000, the Company obtained a $1,000,000 line of credit from
Fleet Bank, N.A. Borrowings under the credit line bear interest at the prime
rate, payable monthly. Amounts owed under the credit line are subject to
repayment on demand at any time and for any reason. Borrowings under the line
must be reduced to zero for a period of 30 consecutive days in any twelve month
period.
Amounts borrowed under the credit line are secured by the following:
(i) A continuing security interest in all accounts and accounts
receivable, contracts, contract rights, general intangibles, instruments,
documents, chattel paper, all obligations, in whatever form, owing to the
Company and all rights in the merchandise or services which gave rise to any of
the foregoing, whether now existing or hereafter arising, now or hereafter
received by or belonging or owing to the Company and in the proceeds thereof,
and in all goods including (a) all inventory, including raw materials, work in
process, and other tangible personal property held for sale or lease or
furnished or to be furnished under contracts of service or used or consumed in
the Company's business, wherever located, whether now existing or hereafter
arising, now or hereafter received by or belonging to the Company, and in the
proceeds and products thereof, and (b) all machinery, equipment, furnishings,
fixtures and other tangible personal property (with all accessions thereto) used
or brought for use primarily in business,
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wherever located, whether now existing or hereafter arising, now or hereafter
received by or belonging to the Company, and in the proceeds and products
thereof, including without limitation tax refunds and insurance proceeds on any
of the foregoing.
(ii) a pledge of 750,000 shares of the Company's common stock held
in treasury and
(iii) the guarantee of a shareholder of the Company.
The credit line also carries certain income and balance sheet tests
that the Company must meet quarterly and annually. The several documents setting
forth the Company's rights and obligations with respect to the credit line are
filed as exhibits to this registration statement and readers are referred to
them for more complete information.
To date, the Company has borrowed $160,000 under the credit line for
working capital to fill orders for its UNIPROOF(R) proofing paper. The Company
does not expect to borrow more than an additional $40,000 under the credit line
during the next six months.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. Documents comprising Line of Credit Agreement with
Fleet Bank, N.A.
(b) Reports on Form 8-K. None.
15
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UNITED ENERGY CORP.
FORM 10-Q
JUNE 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
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