Edgar Filing: UNITED ENERGY CORP /NV/

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
---------------------

FORM 10-Q/A
(AMENDMENT NO. 2)

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

|| 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
incorporation or organization) Identification No.)

600 MEADOWLANDS PARKWAY #20, SECAUCUS, N.J. 07094
------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

(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 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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). | | Yes |X| No

Indicate the number of shares outstanding of each of the ISSUER's classes
of common stock, as of the latest practicable date.

Class Outstanding as of August 14, 2003
----- ---------------------------------

Common Stock, $.01 par value 22,180,270 shares

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Consolidated BALANCE SHEETS June 30, 2003 (Unaudited) and 3
March 31, 2003

Consolidated STATEMENTS OF OPERATIONS for the three months 4
ended June 30, 2003 (Unaudited) and 2002 (Unaudited)

Consolidated STATEMENT OF STOCKHOLDERS' EQUITY for the three 5
months ended June 30, 2003 (Unaudited)

Consolidated STATEMENTS of CASH FLOWS for the three months 6
ended June 30, 2003 (Unaudited) and 2002 (Unaudited)

Notes to CONSOLIDATED FINANCIAL STATEMENTS 7

Item 2. Management's Discussion and Analysis of Financial Condition 12
and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk 15

Item 4. Controls and Procedures 15

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 16

Item 2. Changes in Securities and Use of Proceeds 17

Item 3. Defaults upon Senior Securities 17

Item 4. Submission of Matters to a Vote of Security Holders 17

Item 5. Other Information 17

Item 6. Exhibits and Reports on Form 8-K 17

Signatures 18

UNITED ENERGY CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003
AND MARCH 31, 2003

JUNE 30, MARCH 31,
2003 2003
------- --------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,404,763 $2,120,942
Accounts receivable, net of allowance for
doubtful accounts of $33,055 and $48,113,
respectively

Inventory, net of allowance of $16,290 and 789,814 496,715
$16,290, respectively 198,688 211,344

Note receivable, net of reserve of $45,147
and $30,000, respectively 91,661 149,034

Prepaid expenses and other current assets 107,650 104,527
---------- ----------
Total current assets 2,592,576 3,082,562

PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization of $125,210 and
$92,032, respectively 387,925 268,597

OTHER ASSETS:
Goodwill, net of accumulated amortization of
$17,704 and $17,704, respectively 68,819 68,819

Patents, net of accumulated amortization of
$49,358 and $44,253, respectively 262,319 229,508

Loan receivable, net of reserve of $107,705
and $107,705, respectively 1,376 2,076

Deposits 76,385 31,385
---------- ----------

Total assets $3,389,400 $3,682,947
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable $330,505 $158,048
Accrued expenses 290,819 334,198
Due to related party 244,141 244,141
---------- ----------
Total current liabilities 865,465 736,387

Asset retirement obligation 30,000 --
---------- ----------
Total liabilities 895,465 736,387
========== ==========

STOCKHOLDERS' EQUITY:
Common stock; 100,000,000 shares authorized
of $0.01 par value, 22,180,270 and
22,180,270 shares issued and outstanding
as of June 30, and March 31, 2003,
respectively 221,802 221,802
Additional paid-in capital 10,708,452 10,698,752
Accumulated deficit (8,436,319) (7,973,994)
---------- ----------
Total stockholders' equity 2,493,935 2,964,560
---------- ----------
Total liabilities and stockholders' equity $3,389,400 $3,682,947
========== ==========

The accompanying notes are an integral part of these consolidated balance
sheets.

UNITED ENERGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
JUNE 30, 2003 AND 2002

FOR THE THREE MONTHS
ENDED JUNE 30,
2003 2002
--------- ----------
(UNAUDITED)

REVENUES, net........................................ $ 628,741 $ 738,997

COST OF GOODS SOLD................................... 325,922 532,622
--------- ----------

Gross profit....................................... 302,819 206,375
--------- ----------

OPERATING EXPENSES:
General and administrative......................... 673,604 428,196
Oil well operating and maintenance cost-net........ 57,995 -
Depreciation and amortization...................... 37,283 9,792
--------- ----------
Total operating expenses......................... 768,882 437,988
--------- ----------

Loss from operations............................. (466,063) (231,613)
--------- ----------
OTHER INCOME (EXPENSE), net:
Interest income.................................... 4,631 17,068
Interest expense................................... (893) (1,168)
--------- ----------
Total other income (expense), net................ 3,738 15,900
--------- ----------

Net loss......................................... $(462,325) $(215,713)
========= ==========

BASIC AND DILUTED LOSS PER SHARE..................... $ (0.02) $ (0.01)
========= ==========

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, basic
and diluted........................................ 22,180,270 19,279,171

The accompanying notes are an integral part of these consolidated statements.

UNITED ENERGY CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 2003 (UNAUDITED)

Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit Total
--------- ------- ----------- ------------ -----------
BALANCE, March

31, 2003 22,180,270 $221,802 $10,698,752 $(7,973,994) $2,946,560
Options granted in
consideration
for services -- -- 9,700 -- 9,700

Net loss -- -- -- (462,325) (462,325)
---------- -------- ---------- ----------- ---------
BALANCE, June 30
2003 22,180,270 $221,802 $10,708,452 $(8,436,319) $2,493,935
========== ======== =========== =========== ==========

The accompanying notes are an integral part of this consolidated statement.

UNITED ENERGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
JUNE 30, 2003 AND 2002

FOR THE THREE MONTHS
ENDED JUNE 30,
2003 2002
--------- ---------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $(462,325) $(215,713)

Adjustments to reconcile net loss to net cash
used in operating activities-....................
Depreciation and amortization.................... 37,283 9,792
Options granted in consideration for services.... 9,700 --
Write-down of inventory.......................... -- 65,180
Changes in operating assets and liabilities-
Increase in accounts receivable, net............. (293,099) (51,325)
Decrease in inventory, net....................... 12,656 119,332
Decrease in note receivable...................... 57,373 --
(Increase) decrease in prepaid expenses.......... (3,123) 110,927
(Increase) decrease in other assets.............. (45,000) 477
Increase in related party payable................ -- 88,790
Increase (decrease) in accounts payable
and accrued expenses........................... 129,078 (214,638)
----------- -----------

Net cash used in operating activities.......... (557,457) (87,178)
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments on loan receivable........................ 700 --
Payments for patents............................... (37,916) (17,212)
Payments for acquisition of property
and equipment.................................. (121,506) (119,712)
----------- -----------

Net cash used in investing activities............ (158,722) (136,924)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of line of credit......................... -- (150,000)
Payments of private placement costs................ -- (484,200)
Proceeds from issuance of common stock............. -- 6,000,000
----------- -----------

Net cash provided by financing activities........ -- 5,365,800
----------- -----------
Net (decrease) increase in cash and cash
equivalents.................................... (716,179) 5,141,698

CASH AND CASH EQUIVALENTS, beginning of period....... 2,120,942 198,412
----------- -----------

CASH AND CASH EQUIVALENTS, end of period............. $1,404,763 $5,340,110
----------- -----------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period-

Interest......................................... $ 893 $ 1,781
----------- -----------
Income taxes..................................... $ 1,780 $ 800
=========== ===========

The accompanying notes are an integral part of these consolidated statements.

UNITED ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 (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 June 30, 2003
(unaudited) and the results of its operations for the three months ended June
30, 2003 and 2002 (unaudited) and cash flows for the three months ended June 30,
2003 and 2002(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, 2003 are not necessarily indicative of the operating
results that may be expected for the year ending March 31, 2004.

The consolidated balance sheet as of March 31, 2003 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-K, as amended.

2. 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
ended June 30, 2003 and 2002:

Specialty
Graphic Arts Chemicals Corporate Total
------------ --------- --------- --------

Revenues $483,547 $144,194 $ -- $628,741
======== ======== ========== ==========

Gross profit $243,554 $ 59,265 $ -- $302,819
General and administrative 45,233 286,693 341,678 673,604
Oil well operating and maintenance cost-net 57,995 57,995
Depreciation and amortization -- 32,895 4,388 37,283
Interest income -- -- 4,631 4,631
Interest expense -- -- (893) (893)
-------- --------- ---------- ----------

Net income (loss) $198,321 $(318,318) $(342,328) $(462,325)
======== ======== ========== ==========

Cash $ -- -- $1,404,763 $1,404,763
Accounts receivable, net 674,717 115,097 -- 789,814
Inventory 26,162 172,526 -- 198,688
Loans receivable 91,661 -- -- 91,661
Prepaid Expenses -- -- 107,650 107,650
Fixed assets, net -- 341,941 45,984 387,925
Goodwill, net -- 68,819 -- 68,819
Patent, net -- 262,319 -- 262,319
Loan receivable 1,376 1,376
Other assets -- -- 76,385 76,385
-------- --------- ---------- ----------

Total assets $792,540 $960,702 $1,636,158 $3,389,400
======== ======== ========== ==========

UNITED ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

Specialty
Graphic Arts Chemicals Corporate Total
------------ --------- --------- --------

Revenues..................................... $ 447,403 $ 291,594 $ -- $ 738,997
========== ========== ========== ==========

Gross profit................................. $ 110,351 $ 96,024 $ -- $ 206,375
General and administrative................... 49,463 187,780 190,953 428,196
Depreciation and amortization................ -- 4,458 5,334 9,792
Interest income.............................. 17,068 17,068
Interest expense............................. 1,168 -- 1,168
---------- ---------- ---------- ----------
Net income (loss)...................... $ 59,720 $ (96,214) $ (179,219) $ (215,713)
========== ========== =========== ==========

Cash ...................................... $ -- -- $5,340,110 $5,340,110
Accounts receivable, net..................... 126,785 142,644 -- 269,429
Inventory.................................... 8,005 95,340 -- 103,345
Prepaid Expenses............................. -- -- 6,200 6,200
Fixed assets, net............................ -- 84,719 44,973 129,692
Goodwill, net................................ -- 68,819 -- 68,819
Patent, net.................................. -- 143,231 -- 143,231
Other assets................................. -- -- 1,385 1,385
---------- ---------- ---------- ----------

Total assets.......................... $ 134,790 $ 534,753 $5,392,668 $6,062,211
========== ========== ========== ==========

3. ACQUISITION OF OIL WELLS

On April 4, 2003 the Company purchased oil leases for six oil wells in
Laramie County, Wyoming (the "Wyoming Wells") for an aggregate purchase price of
$97,616. The Company intends to operate the Wyoming Wells and use the wells for
testing of its products. During the quarter ended June 30, 2003, the Wyoming
Wells produced oil which generated $21,204 in revenues and incurred operating
costs and start up maintenance and repair costs of $79,199, much of which is
expected to be non-recurring. The Company has capitalized $17,616 for the oil
leases and $75,185 for equipment, net of depreciation, amortization and
depletion at June 30, 2003. The Company recorded an asset retirement obligation
of $30,000 to cover the cost of capping the wells in accordance with SFAS No.
143, "Accounting for Asset Retirement Obligations." The Company maintains a
refundable, interest bearing deposit of $75,000 with the State of Wyoming to
cover the costs of eventual capping the wells in the event they are no longer
operated or abandoned.

UNITED ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

4. NEW ACCOUNTING PRONOUNCEMENTS

In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or
Disposal Activities". SFAS No. 146 requires that the liability for costs
associated with an exit or disposal activity be recognized at their fair values
when the liabilities are incurred. Under previous guidance, liabilities for
certain exit costs were recognized at the date that management committed to an
exit plan, which is generally before the actual liabilities are incurred. SFAS
No. 146 is effective prospectively for exit or disposal activities initiated
after December 31, 2002. This statement had no effect on the Company's
consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure". This statement amends the disclosure
and certain transition provisions of Statement 123, "Accounting for Stock-Based
Compensation". Its disclosure provisions, which apply to all entities with
employee stock-based compensation, are effective for fiscal years ending after
December 15, 2002. SFAS 148:

o requires all entities with stock-based employee compensation
arrangements to provide additional disclosures in their summary of
significant accounting policies note for entities that use the
intrinsic value method of APB No. 25, "Accounting for Stock Issued to
Employees," to account for employee stock compensation for any period
presented, their accounting policies note should include a tabular
presentation of pro forma net income and earnings per share using the
fair value method.

o permits entities changing to the fair value method of accounting for
employee stock compensation to choose from one of three transition
methods - the prospective method, the modified prospective method, or
the retroactive restatement method. The prospective transition method,
however, will not be available for entities that initially apply the
fair value method in fiscal years beginning after December 15, 2003.

o requires interim-period pro forma disclosures if stock-based
compensation is accounting for under the intrinsic value method in any
period presented. The Company does not currently expect the adoption
of this statement to have a material impact on its financial
statements.

In November 2002, the FASB issued Interpretation No. 45, "Guarantors'
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guaranties of Indebtedness of Others." The Interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. This Interpretation does not prescribe a specific approach for
subsequently measuring the guarantor's recognized liability over the term of the
related guarantee. The disclosure provisions of this interpretation were
effective for the Company's March 31, 2003 consolidated financial statements.
The initial recognition and initial measurement provisions of this
Interpretation are applicable on a prospective basis to guarantees issued or
modified after March 31, 2003. This interpretation had no effect on the
Company's consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." This Interpretation clarifies the application of
existing accounting pronouncements to certain entities in which equity investors
do not have the characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its activities without
additional; subordinated financial support from other parties. The provisions of
the Interpretation are immediately effective for all variable interests in
variable interest entities created after January 31, 2003, and the Company will
need to apply its provisions to any existing variable interests in variable
interest entities no later than July 1, 2003. The Company does not anticipate
that this Interpretation will have any impact on its consolidated financial
statements.

UNITED ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

5. RELATED PARTY TRANSACTIONS

Martin Rappaport, a significant shareholder and director of the Company,
owns the property from which United Energy leases the 9,600 square foot facility
it occupies in Secaucus, New Jersey. The Company pays approximately $100,000 per
year under the lease, excluding real estate taxes.

6. STOCK-BASED COMPENSATION

At June 30, 2003 the Company has stock based compensation plans. As
permitted by SFAS No.123, Accounting for Stock Based Compensation, the Company
accounts for stock-based compensation arrangements with employees in accordance
with provisions of Account Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees. Compensation expense for stock options issued to
employees is based on the difference on the date of grant, between the fair
value of the Company's stock and the exercise price of the option. There was no
stock based employee compensation charged to expense for the quarters ended June
30, 2003, and 2002. The Company accounts for equity instruments issued to
non-employees in accordance with the provisions of SFAS No.123 and Emerging
Issues Task Force (EITF) Issue No. 96-18, "Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction With
Selling, Goods or Services". All transactions in which goods or services are the
consideration received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair value of the
equity instrument issued, whichever is more reliably measurable. Stock based
compensation for non-employees was $9,700, and $0 for the quarters ended June
30, 2003 and 2002.

The following table illustrated the effect on net loss and loss per share
if the Company had applied the fair value recognition provisions of SFAS No. 123
to all stock based compensation:

For the Quarter Ended June 30,
2003 2002
---------------------------------

Net Loss as reported $(462,325) $(215,713)

Deduct:
Total stock based employee compensation
expense determined under fair value
based method for all awards (23,250) (956,875)

Pro forma loss $(439,075) $(1,172,588)
---------

Basic and diluted loss per common share

As reported $(0.02) $(0.01)

Pro forma $(0.02) $(0.06)

UNITED ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

7. COMMITMENTS AND CONTINGENCIES

LITIGATION

The Company, in its normal course of business, is subject to certain
litigation. In the opinion of the Company's management, settlements of
litigation will not have a material adverse effect on the Company's results of
operations, financial position or cash flows.

Texas Oil Field Accident
------------------------

On October 29, 2002, an accident occurred at an oil well site near Odessa,
Texas, where the Company's equipment and products were being used in the
treatment of an oil well. There are two lawsuits pending against the Company in
Texas state court in Crane County, arising from this incident. Hurst, et ano. v.
United Energy Corp., et al. Stephen Hurst, who lost an arm and sustained serious
other injuries in the accident and his wife have commenced a suit against the
Company and other defendants including the owner of the oil well and an oil well
servicing company. Simmons, et ano. v. United Energy Corp., et al. Larry
Simmons, whose injuries were not as serious as those of Mr. Hurst, and his wife,
have also commenced a suit against the Company. Both actions are in the
discovery stage. The Company anticipates that additional actions may be
commenced by other individuals who suffered less serious injuries in the
accident. The Company cannot at this time quantify or estimate the impact of
this litigation on the Company's operations as of June 30, 2003.

In addition to the above described litigation, OSHA commenced an investigation
into the accident. On April 8, 2003, OSHA issued its Citation and Notification
of Penalty which found that the Company had committed violations of certain
applicable rules, including having failed to provide at or in proximity to the
site a person or persons adequately trained to render first aid with adequate
first aid supplies available and having failed to develop, implement or maintain
at the site a written hazard communication program describing how safety
criteria will be met. OSHA proposed a fine of $3,000 for these violations, which
the Company has paid.

Litigation Concerning A Former Employee
---------------------------------------

On or about May 16, 2003, the Company commenced an action against Jon Hebert, a
former employee of the Company in the United States District Court for the
District of New Jersey, seeking preliminary and permanent injunctive and other
relief for violations by Mr. Hebert of employment and non-disclosures agreements
between him and the Company, resulting in alleged disclosures by Hebert of the
Company's confidential and proprietary information and wrongful solicitation of
the Company's customers. The Company alleges that sales of products manufactured
or distributed by Hebert's new employer may, in addition, infringe the Company's
patents. After a hearing on the Company's motion for a preliminary injunction,
the Court denied the motion, but ordered expedited proceedings in the matter.

On or about May 27, 2003, Mr. Hebert's current employer, Fluid Sciences, L.L.C.,
commenced two actions against the Company and one of its wholly owned
subsidiaries, Nor Industries, Inc. One of the actions was commenced in the 15th
Judicial District Court, Lafayette Parish, Louisiana. This action seeks a
declaratory judgment that the agreements between the Company and Mr. Hebert are
not enforceable against Fluid Sciences, L.L.C as a matter of Louisiana's public
policy and laws. In addition the action seeks judgment that the Company's
efforts to enforce its agreements with Mr. Hebert are in restraint of trade and
constitute unfair competition entitling Fluid Sciences, L.L.C. to injunctive
relief and damages.

On or about May 27, 2003, a second action was commenced in the United States
District Court for the Western District of Louisiana, entitled Fluid Sciences,
L.L.C. v. United Energy Corp. and Nor Industries, Inc. The complaint in this
action alleges that Fluid Sciences is entitled to a declaratory judgment that
its products do not infringe the patents of the Company.

The Company and its subsidiary intend vigorously to defend the two actions
brought by Fluid Sciences, L.L.C.

UNITED ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

Sales Commission Claim
----------------------

On or about July 26, 2002, an action was commenced against the Company 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 the sales representative to the Company and in that
capacity made sales of the Company's products to the United States government
and to commercial entities. Plaintiffs further allege that the Company failed to
pay to plaintiffs agreed commissions at the rate of 20% of gross sales of the
Company's products made by plaintiffs. The complaint seeks an accounting,
compensatory damages in the amount of all unpaid commissions plus interest
thereon, punitive damages in an amount treble 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. The Company believes it has meritorious
defenses to the claims asserted in the action and intends vigorously to defend
the case.

SMK Industries, Inc. v. Nor Graphics, Inc.
------------------------------------------

In its Form 10-K for the fiscal year ended March 31, 2002, the Company reported
with respect to an action commenced against it in 1997 by SMK Industries seeking
damages for breach of contract of approximately $120,000. On June 18, 2003, the
Company and plaintiff have reached an agreement to settle and discontinue the
lawsuit. In the settlement, the Company will pay an aggregate of $75,000 in
three installments, which was accrued for in the accompanying financial
statements.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Report on Form 10-Q discuss our
plans and strategies for our business or state other forward-looking statements,
as this term is defined in the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company, or industry results to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions; industry capacity; direct marketing
and other industry trends; demographic changes; competition; the loss of any
significant customers; changes in business strategy or development plans;
availability and successful integration of acquisition candidates; availability,
terms and deployment of capital; advances in technology; retention of clients
not under long-term contract; quality of management; business abilities and
judgment of personnel; availability of qualified personnel; changes in, or the
failure to comply with, government regulations; and technology,
telecommunication and postal costs.

OVERVIEW

United Energy considers its primary focus to be the development,
manufacture and sale of environmentally friendly specialty chemical products.
The Company considers its leading product in terms of future earnings potential
to be its KH-30(R) multifunctional dispersant and its family of related products
KX-91(R) and KH-30S(R) used as oil and gas well, pipeline, and storage tank
cleaners.

KH-30(R) is an environmentally friendly, non-petroleum based product that
is biodegradable. When applied in accordance with United Energy's recommended
procedures KH-30(R) has resulted in substantial production increases of between
two and five times in paraffin and asphaltene-affected oil and gas wells. In
addition, KH-30(R) has proven effective as a "downstream application" which
results 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, however, the Company has recently received

significant sample orders from operations in several countries throughout
the world and many states throughout the USA.

On October 9, 2002, the Company announced the filing of a comprehensive
patent for its new S2 System. The S2 System employs new technology to maintain
the flow of oil and gas throughout all phases of the production, transportation,
refinery and storage process in the oil and gas industry. The S2 System is a
light-weight, compact, mobile device, which can economically generate high
volumes of steam at controllable pressures and temperatures using non-petroleum
based fuel. In conjunction with the injection of KH-30(R) and its related family
of products, the S2 System will be used to melt paraffin and asphaltene
deposits, and to inhibit the formation of new blockages, maintaining peak
performance of equipment for an extended time period. The company also believes
that this system has application in other non-petroleum based uses where large
volumes of high temperature steam are required.

One of United Energy's graphic arts 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). Most recently UNIPROOF(R) has been made in a thinner
configuration so it can now be used by book publishers as well as other
printers.

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)
and, to a lesser extent, the other specialty chemical products developed by the
Company. The company has an arrangement with the Alameda Company of Anaheim,
California to distribute UNIPROOF(R) proofing paper on a non-exclusive basis.
The Company seeks additional vendors to which we will sell the UNIPROOF(R)
product.

United Energy's chemists have also developed an environmentally friendly
fire-retardant agent named FR-15. FR-15 begins as a concentrate which can be
mixed with varying amounts of water, depending on the anticipated use. FR-15
mixture also resists re-ignition once a fire has been extinguished. This product
can also be used to reduce odors, such as those from decomposing garbage, and
for soil remediation following petroleum-based contamination. Our FR-15 product
has been developed and successfully tested by several municipal fire
departments. Underwriters Laboratories ("UL") did not have an approved test for
FR-15 as a dispersant. A reformulation of FR-15 was developed to pass the UL
fire extinguisher test. The reformulated product is being resubmitted for
testing and certification by UL. The Company anticipates that testing will be
completed by the December 2003. We expect that sales of FR-15 will commence when
the product receives UL certification.

Slick Barrier is an underwater protective coating which prevents the
adherence of barnacles to boat hulls. The product is another in the Company's
line of environmental products in that it is environmentally friendly and
biodegradable, which the Company believes to be particularly appealing in fresh
water marine applications. The product is being tested on pleasure boats
throughout the United States and Europe. We expect to begin sales of the product
by the fourth quarter of the fiscal year ending on March 31, 2004. A patent
application on this product is in process. We are applying for trademark
protection both nationally and internationally for our "Slick Barrier" product.

In November 1998, United Energy acquired all of the outstanding shares of
Green Globe in exchange for 30,000 shares of United Energy common stock. Green
Globe is operated as a separate subsidiary of United Energy and sells its
products under the trade name Qualchem(TM). The acquisition of Green Globe gives
United Energy access to the chemistry and product lines of Green Globe which
include environmentally friendly paint strippers and cleaners, many of which
have been qualified for use by the U.S. Military. Of particular note in the
Green Globe line was the development of dual package cleaning and drying "wipes"
which produce a clear, non-reflective coating on glasses, computer screens and
instrument panels. The wipes were developed for, and have received U.S. Military
approval for, the cleaning of the instrument panels of combat aircraft.

RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2003 AND 2002

Revenues. Revenues for the quarter ended June 30, 2003 were $628,741, a
$110,256, or 15% decrease from revenues of $738,997 in the comparable quarter of
2002. The decrease in revenues was primarily due to a $170,618 decrease in sales
of our military products through the company's Green Globes subsidiary. We
believe that in 2002, the US Government stocked up on orders and then cut its
orders in 2003 due to other military priorities. In the first quarter of 2003
sales of UNIPROOF(R) proofing paper increased by approximately $68,500 as
deliveries to our primary client increased by $152,200 which was offset by lower
sales to other clients. UNIPROOF(R) sales tend to be seasonal with larger
request for the product in the first and third quarters of our fiscal year.
Specialty Chemicals, which includes sales of our KH-30(R) products and Green
Globe/Qualchem military sales, decreased to $166,399 or 43% compared to $291,594
in the comparable quarter in the previous year. The decrease was substantially
due to lower sales of Green Globe/Qualchem military sales. This was offset in
part by a substantial increase in our KH-30(R) family of oil field dispersant
products which increased 56% to $126,331 from $80,908 in the prior year.

Cost of Goods Sold. Cost of goods sold decreased $206,700 or 39% to
$325,922 or 52% of sales, for the three months ended June 30, 2003 from $532,622
or 72% of sales, for the three months ended June 30, 2002. The decrease in cost
of goods sold and lower percentage of sales was primarily due to the higher
sales levels and margins on UNIPROOF(R) paper sales and our KH-30(R) family of
oil field dispersant products. This was partially offset by the larger decline
in military sales which tend to be lower margin, higher cost products.

Gross Profit. Gross profit for the three months ended June 30, 2003
increased by $96,444 or 47% to $302,819 or 48% of sales compared with $206,375
or 28% of sales in the prior year. The increase in gross margin reflects the
higher level sales and improved margins on UNIPROOF(R) paper and our KH-30(R)
family of oil field dispersant products and the reduced volume of sales of our
lower margin Green Globe/Qualchem military sales.

OPERATING COSTS AND EXPENSES

General and Administrative Expenses. General and administrative expenses
increased $245,408 to $673,604 or 57% or 107% of revenues for the three months
ended June 30, 2003 from $428,196, or 58% of revenues for the three months ended
June 30, 2002. The increase in general and administrative expenses is primarily
related to legal costs including certain litigation expenses, salaries and
benefits of the new staff added beginning in May 2002, travel and entertainment
costs related to marketing and client development.

Depreciation and Amortization. Depreciation and Amortization increased to
$37,283 from $9,792 reflecting additions to fixed assets for laboratory
analytical equipment, manufacture of additional S2 System equipment, capitalized
legal costs related to patent filings for our S2 System and KH-30(R) family of
products, and acquisition of fixed assets related to the oil wells. Depletion
expense was not significant.

Oil Well Operating and Maintenance Cost - net. During the three months
ended June 30, 2003, the wells produced oil which generated $21,204 in revenues
and incurred operating costs and startup maintenance and repair costs of
$79,199, much of which is expected to be non-recurring.

Interest Expense, Net of Interest Income. The Company had net interest
income of $3,738 for the three months ended June 30, 2003 compared with net
interest income of $15,900 in the corresponding period in 2002. The decrease was
due primarily to the lower investment earnings on the reduced remaining funds
raised from the private placement on May 14, 2002.

Net Loss. The three months ended June 30, 2003 resulted in a net loss of
$(462,325) or $(0.02) per share as compared to a net loss of $(215,713) or
$(0.01) per share for the three months ended June 30, 2002. The increase in the
loss in the quarter ended June 30, 2003 is the result of a higher level of
general and administrative expenses offset in part by higher gross margin on
sales. The average number of shares used in calculating earnings per share
increased to 22,180,270 shares from 16,279,171 as a result of the 6,000,000
shares issued in the private placement on May 14, 2002.

LIQUIDITY AND CAPITAL RESOURCES.

As of June 30, 2003 the Company had $1,404,763 in cash and cash
equivalents, accounts receivable of $789,814 inventory of $198,688, notes
receivable of $91,661 and prepaid expenses and other assets of $107,650 for a
total of $2,592,576 of current assets. As of March 31, 2003, the Company had
$2,120,942 in cash, accounts receivable of $496,715, inventories of $211,344,
note receivable of 149,034 and prepaid expenses and other assets of $104,527 for
a total of $3,082,562 of current assets.

Accounts receivable increased to $789,814 at June 30, 2003 from $496,715 at
March 31, 2003 reflecting a large sale of UNIPROOF(R) paper just before the
end of the quarter and extended payment terms to customers as incentives. The
allowance for doubtful accounts was decreased to $33,055 at June 30, 2003 from
$48,113 at March 31, 2003 reflecting the risk of collection on certain accounts.

Inventories at June 30, 2003 were $198,688 compared with $211,344 at March
31, 2003, a decrease of $12,656. The slightly lower inventory levels are
indicative of lower levels of finished UNIPROOF(R) paper stock on hand and usage
of pre-stocked inventory to meet our KH-30(R) family of oil field dispersant
products sales during the current quarter to meet customer orders. In most cases
UNIPROOF(R) and Green Globe/Qualchem products are shipped as soon as produced.

Property and Equipment net of accumulated depreciation increased to
$357,925 at June 30, 2003 from $268,597 at March 31, 2003 reflecting
approximately $23,890 in expenditures for production equipment and approximately
$97,616 for 6 oil wells and related lease and equipment in Wyoming primarily for
testing of our oil dispersant products.

On April 4, 2003 the Company purchased oil leases for six oil wells in
Laramie County, Wyoming for an aggregate purchase price of $97,616. The Company
intends to operate the Wyoming Wells and use the wells for testing of its
products. During the quarter ended June 30, 2003, the Wyoming Wells produced oil
which generated $21,204 in revenues and incurred operating costs and start up
maintenance and repair costs of $79,199, much of which is expected to be
non-recurring. The Company has capitalized $17,616 for the oil leases and
$75,185 for equipment, net of depreciation, amortization and depletion at June
30, 2003. The Company maintains a refundable, interest bearing deposit of
$75,000 with the State of Wyoming to cover the costs of eventual capping the
wells in the event they are no longer operated or abandoned.

Patents increased to $262,319 at June 30, 2003 from $229,508 at March 31,
2003 reflecting expenditures of approximately $37,900 consisting of legal
expenses in support of patent applications for our KH-30(R) and S2 System
products net of accumulated depreciation.

Current Liabilities increased by $129,078 to $865,465 at June 30, 2003 from
$736,387 at March 31, 2003. The increase is primarily due to the increase in
accounts payable reflecting the timing of payment of bills. Additionally,
current liabilities includes certain accrued legal and other expenses primarily
associated with the private placement and owed to related parties in the amount
of $244,141 as of June 30, 2003 and March 31, 2003 which remain unpaid and in
dispute with a former related party.

Net Cash Used in Operating Activities. Net cash used in operating
activities increased to $557,457 in the three months ended June 30, 2003
compared to $87,178 for the three month period ended June 30, 2002. The increase
in net cash used in operations resulted primarily from an increase in the
operating loss to $462,325 for the three months ended June 30, 2003 compared
with $215,713 for the comparable period in 2002 and a use of cash resulting from
the increase in accounts receivables. This was in part offset by an increase in
accounts payable of $129,078 due to the timing of payments during the three
months ended June 30, 2003 compared with a use in cash of $214,638 the three
month period ended June 30, 2002 whereby the company used the proceeds of its
stock offering to pay down accounts payable.

Cash Flows from Investing Activities. The Company expended $158,722 during
the three months ended June 30, 2003 for non-recurring capital expenditures.
This consisted of $97,616 for the acquisition of six oil leases and related
production equipment in Wyoming. The remainder was primarily for legal fees for
patents related to its KH-30(R) family of oil field dispersant products and
manufacture of several S2 System production units. This compared to $136,924
during the three month period ended June 30, 2002 primarily for furniture
computer

equipment, leasehold improvements and patent application costs. The Company
has no material commitments for future capital expenditures.

Cash Provided by Financing Activities. There was no net cash provided by
financing activities during the three months ended June 30, 2003 compared with
$5,365,800 during the three month period ended June 30, 2002 reflecting the net
proceeds from the Private Placement offset by the repayment of the $150,000
balance of the line of credit in May 2002.

Although the Company had significant cash outflows during the quarter, much
of these expenditures are expected to be non-recurring and were required to
increase its sales and marketing efforts. United Energy believes that its
existing cash will be sufficient to enable it to meet its future working capital
needs for at least the next twelve months, at its current operating levels. The
Company is focusing its efforts on improving the existing products, completing
testing on products, protecting the intellectual property of the Company through
perfecting certain patents and trademarks, and extensively marketing the
existing products. During the three months ended June 30, 2003 the Company has
continued its efforts to reduce costs through cutback on certain services while
continuing to market its products.

CONCENTRATION OF RISK

The Company sells its UNIPROOF(R) proofing paper to three customers. One of
those customers constitutes 93% of Graphic Arts sales and 72% of total customer
sales for the three month period ended June 30, 2003. Although our relationship
with this customer continues to be excellent, loss of this customer would have
adverse financial consequences to the Company.

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.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of the Company's Disclosure Controls. As of the end of the
period covered by this Report, the Company has evaluated the effectiveness of
the design and operation of its disclosure controls and procedures ("Disclosure
Controls"). This evaluation (the "Controls Evaluation") was done under the
supervision and participation of the Company's management, including its Chief
Executive Officer (the "CEO") and then Chief Financial Officer (the "CFO").
Rules adopted by the Securities and Exchange Commission require that in this
section of the Report the Company present the conclusions of its CEO and CFO
about the effectiveness of the Company's Disclosure Controls based on and as of
the dated of the Controls Evaluation.

CEO and CFO Certifications. Appearing as Exhibits 31.1 and 31.2 to this
Report are "Certifications" of the CEO and the current CFO. The Certifications
are required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the
"Section 302 Certifications"). This section of this Report contains information
concerning the Controls Evaluation referred to in the Section 302 Certifications
and this information should be read in conjunction with the Section 302
Certifications for a more complete understanding of the topics presented.

Disclosure Controls. Disclosure Controls are procedures that are designed
with the objective of ensuring that information required to be disclosed in the
Company's reports filed under the Exchange Act, such as this Report, is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms. Disclosure Controls
are also designed with the objective of ensuring that such information is
accumulated and communicated to the Company's management, including, without
limitation, the CEO and CFO, as appropriate to allow timely decisions regarding
required disclosure.

Limitations on the Effectiveness of Controls. The Company's management,
including, without limitation, the CEO and CFO, does not expect that the
Company's Disclosure Controls will prevent all error and fraud. A control system
no matter how well conceived and operated can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations of all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected.

Scope of Controls Evaluation. The CEO/CFO evaluation of the Company's
Disclosure Controls included a review of the controls' objective and design, the
controls' implementation by the Company and the effect of the controls on the
information generated for use in this Report. In the course of the Controls
Evaluation, management sought to identify data errors, controls problems or acts
of fraud and to confirm that appropriate corrective action, including process
movements, were being undertaken. This type of evaluation will be done on a
quarterly basis so that the conclusions concerning controls effectiveness can be
reported in the Company's Quarterly Reports on Form 10-Q and Annual Reports on
Form 10-K. The overall goals of these various review and evaluation activities
are to monitor the Company's Disclosure Controls and to make modifications, as
necessary. In this regard, the Company's intent is that the Disclosure Controls
will be maintained as dynamic controls systems that change (including
improvements and corrections) as conditions warrant.

Conclusions. Based upon the Controls Evaluation, the Company's CEO and CFO
have concluded that as of the end of the period covered by this Report, our
Disclosure Controls are effective to provide reasonable assurance that
information required to be disclosed in the Company's reports filed under the
Securities Exchange Act of 1934, as amended, such as this Report, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms.

There has been no change in the Company's internal controls over financial
reporting during the fiscal quarter ended June 30, 2003 that has materially
affected, or is reasonably likely to materially affect, the Company's internal
controls over financial reporting.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Texas Oil Field Accident
------------------------

Simmons, et ano. v. United Energy Corp., et al. Larry Simmons, whose injuries
were not as serious as those of Mr. Hurst, and his wife, have also commenced a
suit against the Company. Both actions are in the discovery stage. The Company
anticipates that additional actions may be commenced by other individuals who
suffered less serious injuries in the accident. The Company cannot at this time
quantify or estimate the impact of this litigation on the Company's operations
as of June 30, 2003.

Litigation Concerning A Former Employee
---------------------------------------

The Company and its subsidiary intend vigorously to defend the two actions
brought by Fluid Sciences, L.L.C.

Sales Commission Claim
----------------------

SMK Industries, Inc. v. Nor Graphics, Inc.
------------------------------------------

lawsuit. In the settlement, the Company will pay an aggregate of $75,000 in
three installments, which was accrued for in the accompanying financial
statements.

ITEM 2. CHANGES IN 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 AND REPORTS ON FORM 8-K

(a) Exhibits.
31.1 Written Statement of the Chief Executive Officer Pursuant
to 18 U.S.C. ss.1350 Sec. 302

31.2 Written Statement of the Chief Financial Officer Pursuant
to 18 U.S.C. ss.1350 Sec. 302

32.1 Written Statement of the Chief Executive Officer Pursuant
to 18 U.S.C. ss.1350 Sec. 906

32.2 Written Statement of the Chief Financial Officer Pursuant
to 18 U.S.C. ss.1350 Sec. 906

(b) Reports on Form 8-K.

On or about May 29, 2003 the Company filed a current report on Form
8-K regarding the resignation of Rodney I. Woods as President and a
Director of the Company.

UNITED ENERGY CORP.

FORM 10-Q/A
(AMENDMENT NO. 2)

JUNE 30, 2003

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 CORP.

Dated: JULY 29, 2004

By: /s/ RONALD WILEN
-----------------
RONALD WILEN,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER

By: /s/ JAMES MCKEEVER
-----------------
JAMES MCKEEVER,
INTERIM Chief Financial Officer