Edgar Filing: UNITED ENERGY CORP /NV/

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
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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 DECEMBER 31, 2003

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

FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NO. 000-30841
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UNITED ENERGY CORP.
(Exact name of registrant as specified in its charter)

NEVADA 22-3342379
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

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 |X| 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 December 31, 2003
----- -----------------------------------

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

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INDEX

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Consolidated Balance Sheets December 31, 2003 (Unaudited) and 3
March 31, 2003

Consolidated Statements of Operations for the three months and nine months ended 4
December 31, 2003 (Unaudited) and 2002 (Unaudited)

Consolidated Statement of Stockholders' Equity for the nine months ended December 5
31, 2003 (Unaudited)

Consolidated Statements of Cash Flows for the nine months ended December 31, 2003 6
(Unaudited) and 2002 (Unaudited)

Notes to Consolidated Financial Statements 7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14

Item 3. Quantitative and Qualitative Disclosures About Market Risk 19

Item 4. Controls and Procedures 19

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 20

Item 2. Changes in Securities and Use of Proceeds 20

Item 3. Defaults upon Senior Securities 20

Item 4. Submission of Matters to a Vote of Security Holders 20

Item 5. Other Information 20

Item 6. Exhibits and Reports on Form 8-K 20

Signatures 21

Certifications 22

UNITED ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 (UNAUDITED)

1. BASIS OF PRESENTATION AND GOING CONCERN

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the unaudited interim
financial statements furnished herein include all adjustments necessary for a
fair presentation of the Company's financial position at December 31, 2003
(unaudited) and the results of its operations for the three months and nine
months ended December 31, 2003 and 2002 (unaudited) and cash flows for the nine
months ended December 31, 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 and nine months ended December 31, 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.

Going Concern - During the past two fiscal years ended March 31, 2003
and 2002, the Company has recorded aggregate losses from operations of
$4,193,576 and has incurred total negative cash flow from operations of
$3,033,650 for the same two-year period. During the nine months ended December
31, 2003 the Company experienced a net loss from operations of $1,846,228 and
negative cash flow from operating activities of $1,567,270. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
The Company's consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

Liquidity - The Company's continued existence is dependent upon
several factors, including increased sales volume, collection of existing
receivables and the ability to achieve profitability from the sale of the
Company's product lines. The Company is seeking additional sources of equity or
debt financing and expects to complete and fund a transaction in the next month.
In order to increase its cash flow, the Company is continuing its efforts to
stimulate sales and cut back expenses not directly supporting its sales and
marketing efforts.

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 and nine months ended December 31, 2003 and 2002.

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

The Company's total revenues and net loss by segment for the three
month period ended December 31, 2003 and identifiable assets as of December 31,
2003 are as follows:

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

Revenues $ 310 $ 90,810 $ -- $ 91,120
============ ========= ========= ==========

Gross profit $ 133 $ 52,933 $ -- $ 53,066
General and administrative 42,963 208,459 307,031 558,453
Oil well operating and maintenance cost-net -- 11,795 -- 11,795
Depreciation, amortization and depletion -- 35,058 4,389 39,447
Interest income -- -- (1,254) (1,254)
Interest expense -- 36 552 588
------------ --------- --------- ----------
Net loss $ (42,830) $(202,415) $(310,718) $ (555,963)
============ ========= ========= ==========

Cash and cash equivalents $ -- $ -- $ 277,607 $ 277,607
Accounts receivable, net 363,020 57,923 -- 420,943
Inventory, net 26,162 196,090 -- 222,252
Note receivable, net 64,808 -- -- 64,808
Prepaid expenses -- -- 67,115 67,115
Property and equipment, net -- 341,520 36,209 377,729
Goodwill, net -- 68,819 -- 68,819
Patents, net -- 310,877 -- 310,877
Loans receivable, net -- -- 3,238 3,238
Deposits -- -- 76,385 76,385
------------ --------- --------- ----------
Total assets $ 453,990 $ 975,229 $ 460,554 $1,889,773
============ ========= ========= ==========

The Company's total revenues and net income (loss) by segment for the
nine month period ended December 31, 2003, are as follows:

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

Revenues $ 485,667 $300,595 $ -- $ 786,262
============ ========= ========= ==========

Gross profit $ 244,363 $145,519 $ -- $ 389,882
General and administrative 153,038 848,825 1,023,415 2,025,278
Oil well operating and maintenance cost-net 102,662 -- 102,662
Depreciation, amortization and depletion -- 101,239 13,164 114,403
Interest income -- -- (8,523) (8,523)
Interest expense -- 149 2,141 2,290
------------ --------- --------- ----------
Net income (loss) $ 91,325 $(907,356) $(1,030,197) $(1,846,228)
============ ========= ========= ==========

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

The Company's total revenues and net income (loss) by segment for the
three month period ended December 31, 2002 and identifiable assets as of
December 31, 2002, are as follows:

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

Revenues $709,237 $82,855 $-- $792,092
============ ========== =========== ===========
Gross profit $316,048 $44,661 $-- $360,709
General and administrative 42,196 430,973 428,512 901,681
Depreciation and amortization -- 21,385 3,395 24,780
Interest income (15,250) (15,250)
Interest expense 144 -- -- 144
------------ --------- ---------- -----------
Net income (loss) $273,708 $(407,697) $(416,657) $(550,646)
============ ========== =========== ===========
Cash and cash equivalents $-- $-- $2,896,964 $2,896,964
Accounts receivable, net 833,113 66,538 -- 899,651
Inventory, net 41,333 155,509 -- 196,842
Loans receivable, net -- 108,447 10,808 119,255
Prepaid expenses -- 80,884 32,291 113,175
Property and equipment, net -- 236,223 50,484 286,707
Goodwill, net -- 68,819 -- 68,819
Patents, net -- 203,796 -- 203,796
Other assets -- -- 2,903 2,903
------------ --------- ---------- -----------
Total assets $874,446 $920,216 $2,993,450 $4,788,112
============ ========== =========== ===========

The Company's total revenues and net income (loss) by segment for the
nine month period ended December 31, 2002, are as follows:

Specialty
Graphic Arts Chemicals Corporate Total
------------ --------- ---------- -----------
Revenues $457,542 $-- $2,156,701
Gross profit $647,469 $224,729 $-- $872,198
General and administrative 138,279 1,238,563 1,012,011 2,388,853
Depreciation and amortization -- 49,619 8,198 57,817
Interest income -- -- (51,374) (51,374)
Interest expense 1,312 -- -- 1,312
------------ --------- ---------- -----------
Net income (loss) $507,878 $(1,063,453) $(968,835) $(1,524,410)
============ ========== =========== ===========

3. ACQUISITION OF OIL WELL LEASES

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. In addition to operating the wells, the Company used the wells to test
its products. During the nine months ended December 31, 2003, the Wyoming Wells
produced oil which generated $34,636 in revenues and incurred operating costs
and start-up maintenance and repair costs of $137,298, much of which is expected
to be non-recurring. The Company has capitalized $17,419 for the oil leases and
$71,429 for equipment, net of depreciation, amortization and depletion at
December 31, 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 Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("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 accounted 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. This Interpretation had no effect
on the Company's 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 the Company 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. We believe that
the lease is at fair market value with comparable leases for similar facilities.

6. STOCK-BASED COMPENSATION

At December 31, 2003, the Company has stock-based compensation plan. 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 nine months ended
December 31, 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 nine months ended
December 31, 2003 and 2002, respectively.

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

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 Trhee Months For the Nine Months
Ended December 31, Ended December 31,
----------------------------------------------------------
2003 3002 2003 2003
---------- ---------- ------------ ------------

Net Loss as reported $(555,963) $(550,646) $(1,846,228) $(1,524,410)
Deduct:
Total stock based employee compensation Expense (144,823) ( 23,892) (1,312,836) (1,182,658)
---------- ---------- ------------ ------------
determined under fair value based method for all
awards
Pro forma loss $(700,786) $(574,538) $(3,159,064) $(2,707,068)
---------- ---------- ------------ ------------
Basic and diluted loss per common share
As reported $(0.03) (0.02) $(0.09) $(0.07)
Pro forma $(0.03) $(0.03) $(0.14) $(0.13)

7. COMMITMENTS AND CONTINGENCIES

The Company and its subsidiaries, in the normal course of their
respective businesses, are parties 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. Three lawsuits were commenced against the Company in
Texas state court in Crane County, arising from this incident and one additional
claim, though not formally commenced, was asserted. The insurance companies
involved have settled all of the claims and the Company has paid only $15,000 in
legal out of pocket fees relating to these claims.

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 (the "Herbert Action"), seeking preliminary and permanent

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

injunctive and other relief for violations by Mr. Hebert of employment and
non-disclosure 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 ("Fluid Sciences Action
#1). 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. In June, 2003, the Company
removed this action to the United States District Court for the Western District
of Louisiana. In October 2003, the action was administratively stayed pending
the outcome of the action described in the preceding paragraph which was brought
in the United States District Court for the District of New Jersey by the
Company against Mr. Hebert.

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 (Fluid Sciences Action
#2). The complaint in this action alleges that Fluid Sciences is entitled to a
declaratory judgment that its products do not infringe on the patents of the
Company. The Company and its subsidiary intend vigorously to defend the
litigation brought by Fluid Sciences, L.L.C.

The parties to the Herbert Action and to Fluid Sciences Actions #1 and 2 have
orally agreed, in principle, to settle and discontinue all of the actions
without any further cost to any of the parties. While the specific terms of the
settlements have not yet been finally established, the Company does not
anticipate that any such litigation will have an adverse affect upon the
Company. Included in these settlement negotiations are clear promises from Fluid
Sciences, L.L.C. and Jon Herbert that there will be no further violations of any
company patents.

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. The Company also believes that the actual amount of damages will be
under $10,000.

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

CAUTIONARY STATEMENT RELATING TO 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;
marketing and other industry trends; demographic changes; competition; the loss
of any significant customers; availability of working capital, inability to
raise additional capital, failure to achieve sales objectives, ability to
control expenses, inability to manufacture products, reliance on third parties
for raw materials, risks related to compliance to environmental laws, changes in
business strategy or development plans; retention of clients not under long-term
contract; quality and retention of management; business abilities and judgment
of personnel; availability of qualified personnel; protection of proprietary
rights, patents and trade secrets and changes in, or the failure to comply with,
government regulations.

OVERVIEW

The Company 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 the Company'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 a number of requests for
promotional samples from prospective customers in several countries throughout
the world and many states in the U.S.

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 applications in other non-petroleum based uses where large
volumes of high temperature steam are required.

One of the Company'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 has an arrangement with Alameda Company of Anaheim,
California to distribute UNIPROOF(R) proofing paper on a non-exclusive basis.
The Company seeks additional distributors to sell the UNIPROOF(R) product.

The Company'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. The FR-15 has been developed and successfully
tested by several municipal fire departments. The Company does not have any
current plans to market this product in the United States.

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 environmentally friendly products that are 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. A patent application on this product has been filed.

In November 1998, the Company acquired all of the outstanding shares of
Green Globe in exchange for 30,000 shares of the Company's common stock. Green
Globe is operated as a separate subsidiary of the Company and sells its products
under the trade name Qualchem(TM). The acquisition of Green Globe gives the
Company 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. The Green Globe product line includes
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 DECEMBER 31, 2003 COMPARED TO THE THREE MONTHS ENDED DECEMBER
31, 2002

Revenues. Revenues for the three months ended December 31, 2003 were
$91,120, a $700,970, or 88% decrease from revenues of $792,092 in the comparable
three months of 2002. The decrease in revenues was primarily a result of no
UNIPROOF(R) sales during the quarter. UNIPROOF(R) sales tend to be seasonal with
more requests for the product in the first through third quarters of the fiscal
year. However, our largest customer did not place any orders for additional
UNIPROOF(R) paper in the second or third quarters. Specialty Chemicals, which
includes sales of our KH-30(R) products and Green Globe/Qualchem military sales,
increased by $7,955 to $90,810, or 10% compared to $82,855 in the comparable
three months in the previous year. This increase was due primarily to an
increase in Green Globe/Qualchem military sales partially offset by a decrease
in sales of our KH-30(R) products.

Cost of Goods Sold. Cost of goods sold decreased $393,329, or 91% to
$38,054 or 42% of sales, for the three months ended December 31, 2003 from
$431,383, or 54% of sales for the three months ended December 31, 2002. The
decrease in cost of goods sold and lower percentage of sales was primarily due
to the lower sales levels and margins on UNIPROOF(R) paper sales.

Gross Profit. Gross profit for the three months ended December 31,
2003, decreased by $307,643, or 85% to $53,066 or 58% of sales compared with
$360,709 or 46% of sales in the prior year. The decrease in gross profit
reflects the lower level of sales of UNIPROOF(R) paper.

OPERATING COSTS AND EXPENSES

General and Administrative Expenses. General and administrative
expenses decreased $343,228 to $558,453 or 38% for the three months ended
December 31, 2003 compared with $901,681 for the three months ended December 31,
2002. The decrease in general and administrative expenses is primarily related
to lower salaries and benefits due to the departure of certain executives, lower
legal fees and the reduction in certain marketing expenses that were incurred to
develop product branding, logos, brochures and a website in 2002.

Depreciation, Amortization and Depletion. Depreciation, amortization
and depletion increased to $39,447 from $24,780 reflecting additions to fixed
assets for the 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 Company's oil wells.
Depletion expense was not material.

Oil Well Operating and Maintenance Cost - net. During the three months
ended December 31, 2003, the Company's wells produced oil which generated $8,583
in revenues and incurred operating costs and maintenance and repair costs of
$20,378.

Interest Income, Net of Interest Expense. The Company had net interest
income of $666 for the three months ended December 31, 2003 compared with net
interest income of $15,106 in the corresponding period in 2002. The decrease was
due primarily to the lower investment earnings on the reduced remaining funds
raised from the Company's private placement in May 2002.

Net Loss. The three months ended December 31, 2003 resulted in a net
loss of $(555,963) or $(0.03) per share as compared to a net loss of $(550,646)
or $(0.02) per share for the three months ended December 31, 2002. The increase
in the loss in the quarter ended December 31, 2003 was the result of a lower
level of sales as a result of a decreased level of UNIPROOF(R) paper sales,
which was partially offset by higher gross profit margins and a lower level of
general and administrative expenses. The average number of shares of common
stock used in calculating earnings per share remained the same at 22,180,270
shares.

NINE MONTHS ENDED DECEMBER 31, 2003 COMPARED TO THE NINE MONTHS ENDED DECEMBER
31, 2002

Revenues. Revenues for the nine month period ended December 31, 2003
were $786,262, a $1,370,439 or 64% decrease from revenues of $2,156,701 in the
comparable nine month period ended December 31, 2002. The decrease in revenues
was primarily due to decreased sales of UNIPROOF(R) proofing paper compared with
the nine-month period ended December 31, 2002. During 2003, there was a
substantial decline in sales of UNIPROOF(R) especially during the second and
third fiscal quarters due to a lower level of orders from the Company's primary
customer. For the nine month period ended December 31, 2003, Specialty Chemical
sales, which includes sales of our KH-30(R) products and Green Globe/Qualchem
military sales decreased 34% to $300,595 from $457,542 in the prior nine month
period ended December 31, 2002. The decline was primarily related to a 66%
decrease in Green Globe/Qualchem military sales. We believe, in 2002, the U.S.
Government stocked up on orders and then cut its orders in 2003 due to other
military priorities. The decline in Green Globe/Qualchem military sales was
partially offset by a 5% increase in sales of our KH-30(R) family of oil field
dispersant products reflecting a higher level of orders.

Cost of Goods Sold. Cost of goods sold decreased 69% to $396,380 or 50%
of sales, for the nine month period ended December 31, 2003 from $1,284,503 or
60% of sales, for the nine month period ended December 31, 2002. The decrease in
cost of goods sold was primarily due to the reduced volume of UNIPROOF(R)
proofing paper sales and change in the mix of products sold reflecting margins
on UNIPROOF(R) paper sales compared to the prior year and increased costs
related to providing samples of KH-30(R) to prospective customers during 2002.

Gross Profit. Gross profit for the nine month period ended December 31,
2003 was 50% or $389,882, a $482,316 or 55% decrease from a 40% gross profit or
$872,198 in the corresponding period of fiscal 2002. The decrease in gross
profit and the increase in the gross profit percentage reflects the level of
UNIPROOF(R) paper sales, the higher volume but average lower gross profit level
of Green Globe/Qualchem military and KH-30(R) sales. The gross profit was also
adversely affected in 2002 by the cost of providing promotional samples of
KH-30(R) to prospective customers.

OPERATING COSTS AND EXPENSES

General and Administrative Expenses. General and administrative
expenses decreased $363,575, or 15% to $2,025,278, or 258% of revenues for the
nine month period ended December 31, 2003 from $2,388,853, or 111% of revenues
for the nine month period ended December 31, 2002. The decrease in general and
administrative expenses was primarily related to a reduction in salaries and
benefits of the new executive staff added beginning in May 2002 (four
individuals left the company from February through December 2003), a reduction
in non-recurring marketing expenses incurred in 2002 related to developing
promotional brochures, logos and product branding, design and implementation
costs of a new Company website, which was partially offset by increases in
certain legal services partially related to litigation, insurance expenses, an
increased level of travel related to meetings with potential customer, and
customer trials on oil wells and storage tanks.

Depreciation, Amortization and Depletion. Depreciation, amortization
and depletion increased to $114,403 from $57,817 reflecting additions to fixed
assets for additional S2 System equipment and capitalized legal costs related to
patent filings for our S2 System and KH-30(R) products.

Oil Well Operating and Maintenance Cost-net. During the nine months
ended December 31, 2003, the wells produced oil which generated $34,636 in
revenues and incurred operating costs and maintenance and repair costs of
$137,298.

Interest Income, Net of Interest Expense. The Company had net interest
income of $6,233 for the nine month period ended December 31, 2003 compared with
net interest income of $50,062 in the corresponding period in 2002. The decrease
was due primarily to the investment earnings on the lower level of remaining
funds raised from the Company's private placement in May 2002.

Net Loss. The nine month period ended December 31, 2003 resulted in a
net loss of $(1,846,228) or $(0.08) per share compared to a net loss of
$(1,524,410) or $(0.07) per share for the comparable period ended December 31,
2002. The increase in the loss in the nine month period ended December 30, 2003
was the result of a decrease in sales slightly offset by a decrease in operating
expenses. The average number of shares of common stock used in calculating
earnings per share increased by 960,000 to 22,180,270 shares at December 31,
2003 compared with 21,220,270 at December 31, 2002. The increase resulted from
6,000,000 shares issued in the Company's private placement in May 2002.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2003, the Company had $277,607 in cash and cash equivalents,
as compared to $2,120,942 at March 31, 2003.

The $1,843,335 decrease in cash was due to net cash used in operating
activities of $1,567,270 and net cash used in investing activities of $276,065.
Cash used in investing activities consisted of $97,060 of legal expenses related
to patent applications for KH-30(R) and S2 System products, the purchase of
production equipment and oil wells of $177,843 and loans to employees of $1,162.

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. In addition
to operating the wells, the Company used the wells to test its products. During
the nine months ended December 31, 2003, the Wyoming Wells produced oil and
generated $34,636 in revenues and incurred operating costs and start-up
maintenance and repair costs of $137,298 much of which is expected to be
non-recurring. The Company has capitalized $17,419 for the oil leases and
$71,429 for equipment, net of depreciation, amortization and depletion at
December 31, 2003. The Company maintains a refundable, interest-bearing deposit
of $75,000 with the State of Wyoming to cover the costs of eventually capping
the wells in the event they are no longer operated or are abandoned. The Company
has no present plans for any other significant capital expenditures.

As of December 31, 2003, the Company had no backlog. 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, 2003 and 2002, the
Company has recorded aggregate losses from operations of $4,193,576 and has
incurred total negative cash flow from operations of $3,033,650 for the same
two-year period. During the nine months ended December 31, 2003, the Company
experienced a net loss from operations of $1,892,448 and negative cash flow from
operating activities of $1,613,490. These matters raise substantial doubt about
the Company's ability to continue as a going concern. The Company's consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

The Company's continued existence is dependent upon several factors,
including increased sales volume, collection of existing receivables and the
ability to achieve profitability from the sale of the Company's product lines.
The Company is seeking additional sources of equity or debt financing and
expects to complete and fund a transaction in the next month. In order to
increase its cash flow, the Company is continuing its efforts to stimulate sales
and cut back expenses not directly supporting its sales and marketing efforts.

CONCENTRATION OF RISK

The Company sells its UNIPROOF(R) proofing paper to three customers.
One of these customers constitutes 93% of Graphic Arts sales and 57% of total
customer sales for the nine month period ended December 31, 2003. The customer
has not placed any orders during the second and third quarters. The loss of this
customer would have adverse financial consequences to the Company. We have
provided liberal credit terms to this customer and there is a risk that a
certain amount of this receivable balance may prove to be uncollectible. The
Company believes that this customer will purchase additional product and the
Company would use that as leverage to collect any outstanding balances.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company 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. Further, 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 ("CEO") and then Chief Financial Officer ("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 December 31, 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

See Note 7, Commitments and Contingencies to the Consolidated Financial
Statements

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not Applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable

ITEM 5. OTHER INFORMATION

Not Applicable

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 Interim 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 Interim Chief Financial Officer
Pursuant to 18 U.S.C.ss.1350 Sec. 906

(b) Reports on Form 8-K.

None

UNITED ENERGY CORP.

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

DECEMBER 31, 2003

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: July 29, 2004 UNITED ENERGY CORP.

By: /s/ Ronald Wilen
------------------------------------------
Ronald Wilen,
Chairman and Chief Executive Officer

By: /s/ James McKeever
------------------------------------------
James McKeever,
Interim Chief Financial Officer