UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549








FORM
10-Q





x
            Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of 1934




For
the Quarter Ended September 30, 2009





 ̈
            Transition
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of 1934




Commission
File Number: 814-00717








UNITED
ECOENERGY CORP.


(Exact
name of registrant as specified in its charter)







Nevada
            84-1517723(State or other jurisdiction
      of
              incorporation or organization)
            (I.R.S. Employer
              Identification No.)120
      Wall Street
              Suite
      2401
              New
      York, N.Y.
            10005(Address of principal executive office)
            (Zip
      Code)




(646)
808-3095


(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 and (2) has been subject to such filing
requirements for the past 90 days.    Yes  x
    No   ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).    Yes   ̈
    No   ̈




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):





Large accelerated filer   ̈
            
            Accelerated filer   ̈
            
            Non-accelerated filer  x
            
            Smaller Reporting Company   ̈




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).    Yes   ̈    No  x




The
number of shares of the registrant’s Common Stock, $.001 par value, outstanding
as of November 20, 2009 was 64,124,415.





1
  UNITED
ECOENERGY CORP.




FORM
10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2009




TABLE
OF CONTENTS





PAGEPART
      I.  FINANCIAL INFORMATIONItem 1.
            
            FINANCIAL
      STATEMENTS
            
            3Statements
      of Assets and Liabilities as of September 30, 2009 (unaudited) and
      December 31, 2008
            
            3Statements
      of Operations for the three and nine months ended September 30, 2009 and,
      2008(unaudited)
            
            4Statements
      of Changes in Net Assets for the nine months ended September 30, 2009
      (unaudited) and the year ended December 31, 2008
            
            5Statements
      of Cash Flows for the nine months ended September 30, 2009 and 2008
      (unaudited)
            
            6Schedule
      of Investments as of September 30, 2009 (unaudited)
            
            7Schedule
      of Investments as of December 31, 2008
            
            8Notes
      to Financial Statements
            
            9Item 2.
            
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            
            14Item 3.
            
            Quantitative
      and Qualitative Disclosures About Market Risk
            
            18Item 4.
            
            Controls
      and Procedures
            
            18PART II.  OTHER
      INFORMATIONItem 1.
            
            Legal
      Proceedings
            
            20Item
      1A.
            
            Risk
      Factors
            
            20Item 2.
            
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            
            20Item 3.
            
            Defaults
      upon Senior Securities
            
            20Item 4.
            
            Submission
      of Matters to a Vote of Security Holders
            
            20Item 5.
            
            Other
      Information
            
            20Item 6.
            
            Exhibits
            
            21Signatures
            
            22




2




PART
I. FINANCIAL INFORMATION




.


Item 1.
            Financial
      Statements


UNITED
ECOENERGY CORP.


STATEMENTS
OF ASSETS AND LIABILITIES




September
      30,
                  2009
                
                
                
                December
      31, 2008(unaudited)AssetsInvestments
      in portfolio companiesNon-controlled
      investments, at fair value (cost $450,000 and $250,000,
      respectively)
                
                $
                180,000
                
                
                $
                250,000Controlled
      investments, at fair value (cost—$514,500 - 2009)
                
                
                514,500
                
                
                
                -Cash
                
                
                367
                
                
                
                383Interest
      receivable
                
                
                3,658
                
                
                
                8,190Due
      from affiliate
                
                
                3,550
                
                
                
                3,550Total
      assets
                
                
                702,075
                
                
                
                262,123LiabilitiesAccounts
      payable
                
                
                50,456
                
                
                
                25,698Due
      to affiliates
                
                
                175,781
                
                
                
                175,781Notes
      payable – including interest of $13,438 and $11,298
      respectively
                
                
                57,304
                
                
                
                30,163Note
      payable to related party – including interest of $5,178 and
      $2,135
                
                
                56,519
                
                
                
                27,135Liability
      for unissued shares
                
                
                22,951
                
                
                
                -Total
      liabilities
                
                
                363,011
                
                
                
                258,777Net
      Assets
                
                $
                339,064
                
                
                $
                3,346Analysis
      of Net AssetsCommon
      stock, par value $.001 per share, 150,000,000 shares authorized, and
      66,124,415 (2009) and 34,710,537 (2008) issued and
    outstanding
                
                $
                66,124
                
                
                $
                34,710
 Additional
      paid-in capital
                
                
                1,529,496
                
                
                
                690,839Accumulated
      deficit
                
                
                (1,256,556
                )
                
                
                (722,203
                )Total
      Net Assets
                
                $
                339,064
                
                
                $
                3,346Net
      Asset Value Per Share
                
                $
                .01
                
                
                $
                -





See notes
to financial statements.








3














UNITED
ECOENERGY CORP.


STATEMENTS
OF OPERATIONS


(unaudited)




Three
      months ended September 30,
              
              
              
              Nine
      months ended September 30,2009
              
              
              
              2008
              
              
              
              2009
              
              
              
              2008Investment
      IncomeInterest
              
              $
              367
              
              
              $
              691
              
              
              $
              22,377
              
              
              $
              691ExpensesAdministrative
              
              
              54,976
              
              
              
              106,103
              
              
              
              304,022
              
              
              
              155,098Interest
              
              
              41,496
              
              
              
              2,247
              
              
              
              43,645
              
              
              
              6,732Transfer
      agent
              
              
              2,295
              
              
              
              1,645
              
              
              
              9,015
              
              
              
              1,835Professional
      fees
              
              
              10,555
              
              
              
              17,583
              
              
              
              34,388
              
              
              
              23,166Reversal
      of unpaid administrative fees
              
              
              (131,250
              )
              
              
              -
              
              
              
              (131,250
              )Total
      expenses
              
              
              (21,928
              )
              
              
              127,578
              
              
              
              259,820
              
              
              
              186,831Net
      investment gain/(loss)
              
              
              22,295
              
              
              
              (126,887
              )
              
              
              (237,443
              )
              
              
              (186,140
              )Unrealized
      gain (loss) on investmentsNet
      change in unrealized (loss)
              
              
              (20,000
              )
              
              
              
              
              
              
              (296,910
              )Net
      increase (decrease) in net assets resulting from
operations
              
              $
              2,295
              
              
              $
              (126,887
              )
              
              $
              (534,353
              )
              
              $
              (186,140
              )Net
      increase (decrease) in net assets resulting from operations per
      shareBasic
              
              
              -
              
              
              
              -
              
              
              
              (.01
              )
              
              
              (.01
              )Dilutive
              
              
              -
              
              
              
              -
              
              
              
              (.01
              )
              
              
              (.01
              )Weighted
      number of common shares outstanding – basic and dilutiveBasic
              
              
              46,124,415
              
              
              
              32,915,597
              
              
              
              39,000,369
              
              
              
              32,915,597Dilutive
              
              
              46,400,189
              
              
              
              32,915,597
              
              
              
              39,000,369
              
              
              
              32,915,597




See notes
to financial statements.







4





UNITED
ECOENERGY CORP.


STATEMENTS
OF CHANGES IN NET ASSETS




Nine months ended
                September 30,
      2009
              
              
              Year
      ended
                December
      31, 2008(unaudited)Increase
      (decrease) in net assets from operations:Net
      investment (loss)
              
              $
              (237,443
              )
              
              $
              (276,689
              )Net
      change in unrealized (loss)
              
              
              (296,910
              )
              
              
              -Net
      (decrease) in net assets resulting from operations
              
              
              (534,353
              )
              
              
              (276,689
              )Capital
      share transactions:Proceeds
      from shares sold
              
              
              346,400
              
              
              
              569,025Investment
      in portfolio company
              
              
              500,000
              
              
              
              -Warrants
      issued in connection with notes payables
              
              
              23,671
              
              
              
              -Net
      increase in net assets from capital share transactions
              
              
              870,071
              
              
              
              569,025Total
      increase (decrease) in net assets:
              
              
              335,718
              
              
              
              292,336Net
      assets at beginning of period
              
              
              3,346
              
              
              
              (288,990
              )Net
      assets at end of period
              
              $
              339,064
              
              
              $
              3,346Capital
      share activityShares
      sold
              
              
              1,413,878
              
              
              
              1,928,898Shares
      issued from conversion of preferred stock
              
              
              -
              
              
              
              4,000,000Shares
      issued in connection with investment in portfolio company (including
      20,000,000 shares held in escrow)
              
              
              30,000,000
              
              
              
              -Net
      increase in capital share activity
              
              
              31,413,878
              
              
              
              5,928,898




See notes
to financial statements.





5




UNITED
ECOENERGY CORP.


STATEMENTS
OF CASH FLOWS


(unaudited)




Nine months ended September
      30,2009
              
              
              
              2008Cash
      Flows from Operating ActivitiesNet
      decrease in net assets from operations
              
              $
              (534,353
              )
              
              $
              (186,140
              )Adjustments
      to reconcile net decrease in net assets from operations to net cash used
      in operating activities:Net
      unrealized loss on investments
              
              
              270,000
              
              
              
              -Amortization
      of debt discount
              
              
              21,368
              
              
              
              -Beneficial
      conversion feature
              
              
              17,094
              
              
              
              -Decrease
      / (increase) in operating assets:Portfolio
      investments
              
              
              (214,500
              )
              
              
              (100,000
              )Interest
      receivable
              
              
              4,532
              
              
              
              (691
              )Due
      from affiliate
              
              
              -
              
              
              
              17,250Rent
      deposit
              
              
              -
              
              
              
              972Increase
      / (decrease) in operating liabilities:Accounts
      payable
              
              
              29,943
              
              
              
              (11,660
              )Accrued
      interest
              
              
              -
              
              
              
              6,732Due
      to affiliate
              
              
              -
              
              
              
              (11,719
              )Net
      cash used  in operating activities
              
              
              (405,916
              )
              
              
              (285,256
              )Cash
      Flows from Financing Activities:Proceeds
      from the issuance of common stock
              
              
              346,400
              
              
              
              473,026Short-term
      borrowings – related party
              
              
              84,500
              
              
              
              (21,735
              )Short-term
      borrowings repayment – related party
              
              
              (50,000
              )Short-term
      borrowings - convertible debenture
              
              
              25,000Net
      cash provided by financing activities
              
              
              405,900
              
              
              
              451,291Net
      increase in cash
              
              
              (16
              )
              
              
              166,035Cash
      - beginning of the the year
              
              
              383
              
              
              
              31Cash
      - at end of the year
              
              $
              367
              
              
              $
              166,066




Non-cash
operating activities consisted of the portfolio of investment of $500,000 for
30,000,000 shares of common stock in the 2009 period.




See notes
to financial statements.





6




UNITED
ECOENERGY CORP


SCHEDULE
OF INVESTMENTS


September
30, 2009


(unaudited)





Industry
              
              
              Principal
      Amount or Shares
              
              
              
              Cost
              
              
              
              Fair
      Value (1)Investments
      in Non-Controlled/Non-Affiliated Portfolio Companies - 25.9%Equity InterestsCity
      24/7, LLC
              Media
              
              
              10
              %
              
              $
              250,000
              
              
              $
              -Corporate
      Indebtedness-25.9%SSC,
      Inc.
              Automotive
              
              $
              200,000
              
              
              
              200,000
              
              
              
              180,000Total investments in
      non-controlled/non-affiliated portfolio companies
              
              
              
              
              
              
              
              450,000
              
              
              
              180,000Investments
      in Controlled  Portfolio Companies – 74.1%EquityInterests – 72
      %Epic
      Wound Care, Inc.
              Healthcare
              
              
              100
              %
              
              
              500,000
              
              
              
              500,000Corporate
      Indebtedness - 2.1 %Epic
      Wound Care, Inc.
              Healthcare
              
              $
              14,500
              
              
              
              14,500
              
              
              
              14,500Total
      investments in controlled portfolio companies
              
              
              
              
              
              
              
              514,500
              
              
              
              514,500Total
      – 100%
              
              
              
              
              
              
              $
              964,500
              
              
              $
              694,500


(1)
            Fair
      value is determined in good faith by or under the direction of the Board
      of Directors of the Company (see Note
3).





See notes
to financial statements.








7




UNITED
ECOENERGY CORP


SCHEDULE
OF INVESTMENTS


December
31, 2008








Investments
      in Non-Controlled

              Portfolio
      Companies
            Industry
            
            Principal
      Amount or Shares
            
            
            Cost
            
            
            Fair Value (1)Corporate
      IndebtednessCity 24/7, LLC – 12% - due
      12/08
            Media
            
            $
            250,000
            
            
            $
            250,000
            
            
            $
            250,000Total
      Investments in Non-Controlled Portfolio Companies – 100%
            
            
            
            
            
            
            $
            250,000
            
            
            
            250,000Total
      Investments—100%
            
            
            
            
            
            
            
            250,000
            
            
            $
            250,000





(1)
            Fair
      value is determined in good faith by or under the direction of the Board
      of Directors of the Company (see Note
3).








See notes
to financial statements.





8





UNITED
ECOENERGY CORP


NOTES
TO FINANCIAL STATEMENTS


(unaudited)




Note
1.  Organization




United
EcoEnergy Corp. (United EcoEnergy or the Company) is a closed-end investment
company which has elected to be treated as a business development company
(BDC) under the Investment Company Act of 1940, (the 1940 Act).





The
Company intends to invest principally in equity securities, including
convertible preferred securities and debt securities convertible into equity of
non-public American based micro-cap companies.  The Company will
provide its portfolio companies with management expertise as well as
capital.  Our investment objective is to maximize our portfolio’s
capital appreciation while generating current income from our portfolio
investments.




Note
2. Basis of Preparation





The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate the continuation of
the Company as a going concern.  This basis of accounting contemplates the
recovery of the Company’s assets and the satisfaction of liabilities in the
normal course of business. The Company has not as yet attained a level of
operations which allows it to meet its current overhead and may not attain
profitable operations within the next few business cycles, nor is there any
assurance that such an operating level can ever be achieved. The Company is
dependent upon obtaining additional financing adequate to fund its commitments
to its portfolio companies. While the Company has funded its initial operations
with private placements, became a publicly owned entity and secured loans from a
related party, there can be no assurance that adequate financing will continue
to be available to the Company and, if available, on terms that are favorable to
the Company.   Our ability to continue as a going concern is also
dependent on many events outside of our direct control, including, among other
things, our portfolio companies’ ability to achieve their business goals and
objectives, as well as improvement in the economic climate.  The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.





Interim
financial statements are prepared in accordance with GAAP for interim financial
information and pursuant to the requirements for BDC reporting on Form 10-Q and
Article 6 or 10 of Regulation S-X, as appropriate. In the opinion of management,
all adjustments, which are of a normal recurring nature, considered necessary
for the fair presentation of financial statements for the interim period, have
been included.





Operating
results for the interim periods presented are not necessarily indicative of the
results to be expected for a full year.





The
condensed consolidated balance sheet at December 31, 2008 has been derived from
the audited consolidated financial statements at that date but does not include
all the information and footnotes required by generally accepted accounting
principles for complete financial statements.





These
interim condensed financial statements should be read in conjunction with the
Company’s audited financial statements and notes for the period ended December
31, 2008 filed with the Securities and Exchange Commission on Form 10-K on April
15, 2009.




Note 3.  Significant
Accounting Policies




Consolidation


Under the
1940 Act rules and the regulations pursuant to Article 6 of Regulation S-X, the
Company is precluded from consolidating any entity other than another investment
company or an operating company that provides substantially all of its services
and benefits to the Company. As of September 30, 2009, the Company has no
consolidated subsidiaries.





Use
of Estimates


The
preparation of financial statements in conformity with GAAP requires the
Company’s management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reported period. Changes
in the economic environment, financial markets, creditworthiness of the
portfolio companies the Company chooses to invest in and any other parameters
used in determining these estimates could cause actual results to
differ.




Security
Valuation


The 1940
Act requires periodic valuation of each investment in the Company’s portfolio in
order to determine the Company’s net asset value. Under the 1940 Act,
unrestricted securities with readily available market quotations are to be
valued at the current market value; all other assets must be valued at fair
value as determined in good faith by or under the direction of the Board of
Directors.





Financial
Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”)
Topic 820, Fair Value
Measurements and Disclosures(“ASC 820”), defines fair value, establishes
a framework for measuring fair value and requires enhanced disclosures about
fair value measurements.  ASC 820 specifically defines fair value as
the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. ASC 820 also establishes a three-tier fair value hierarchy,
which prioritizes the inputs used in measuring fair value. These tiers include:
Level 1, defined as observable inputs such as quoted prices in active markets;
Level 2, which includes inputs such as quoted prices for similar securities in
active markets and quoted prices for identical securities where there is little
or no activity in the market; and Level 3, defined as unobservable inputs for
which little or no market data exists, therefore requiring an entity to develop
its own assumptions.




Debt
Investments


The
Company will determine the fair value of debt investments by reference to the
market in which it sources and executes such debt investments. Market
participants generally have a strategic premise for these investments, and
anticipate the sale of the company, recapitalization or initial public offering
as the realization/liquidity event. The fair value, or exit price, for a debt
instrument would be the hypothetical price that a market participant would pay
for the instrument, using a set of assumptions that are aligned with the
criteria that the Company would use in originating a debt investment in such a
market, including credit quality, interest rate, maturity date, conversion ratio
and overall yield, and considering the prevailing returns available in such a
market.





9





UNITED
ECOENERGY CORP


NOTES
TO FINANCIAL STATEMENTS - continued


(unaudited)





In
general, the Company considers enterprise value an important element in the
determination of fair value, because it represents a metric that may support the
recorded value, or which, conversely, would indicate if a credit-related
markdown is appropriate. The Company also considers the specific covenants and
provisions of each investment that may enable the Company to preserve or improve
the value of the investment. In addition, the trends of the portfolio company’s
basic financial metrics from the time of the original investment until the
measurement date are analyzed; material deterioration of these metrics may
indicate that a discount should be applied to the debt investment, or a premium
may be warranted in the event that metrics improve substantially and the return
is higher than anticipated for such a profile under current market
conditions.





Equity
Investments


Equity
investments for which market quotations are readily available will generally be
valued at the most recently available closing market prices.





The fair
value of the Company’s equity investments for which market quotations are not
readily available will be determined based on various factors, including the
enterprise value remaining for equity holders after the repayment of the
portfolio company’s debt and other preference capital, and other pertinent
factors such as recent offers to purchase a portfolio company, recent
transactions involving the purchase or sale of the portfolio company’s equity
securities, or other liquidity events. The determined equity values are
generally discounted when the Company has a minority position, when there are
restrictions on resale, when there are specific concerns about the receptiveness
of the capital markets to a specific company at a certain time, or other
factors.





Enterprise
value means the entire value of the company to a potential buyer, including the
sum of the values of debt and equity securities used to capitalize the
enterprise at a point in time. There is no one methodology to determine
enterprise value and, in fact, for any one portfolio company, enterprise value
is best expressed as a range of fair values, from which the Company derives a
single estimate of enterprise value. To determine the enterprise value of a
portfolio company, the Company will analyze the portfolio company’s historical
and projected financial results, as well as the nature and value of collateral,
if any. The Company will also use industry valuation benchmarks and public
market comparables.  The Company will also consider other events,
including private mergers and acquisitions, a purchase transaction, public
offering or subsequent debt or equity sale or restructuring, and include these
events in the enterprise valuation process.  The Company may require
portfolio companies to provide annual audited and quarterly unaudited financial
statements, as well as annual projections for the upcoming fiscal
year.





The
following is a description of the steps the Company will take each quarter to
determine the value of the Company’s portfolio investments. Investments for
which market quotations are readily available will be recorded in the Company’s
financial statements at such market quotations. With respect to investments for
which market quotations are not readily available, the Company’s Board of
Directors will undertake a multi-step valuation process each quarter, as
described below:





(1) The
quarterly valuation process begins with each portfolio company or investment
being initially valued by the Company’s key person responsible for the portfolio
investment;


(2)
Preliminary valuation conclusions are then documented and discussed with the
investment committee of the board of directors;


(3)
Independent valuation firms may be engaged by our investment committee of the
board of directors to conduct independent appraisals and review our key person’s
preliminary valuations and make their own independent assessment;


(4) The
audit committee of the board of directors reviews the preliminary valuation of
our investment committee  and that of the independent valuation firm,
if applicable, and responds to the valuation recommendation of the independent
valuation firm to reflect any comments; and


(5) The
board of directors discusses valuations and ratifies the fair value of each
investment in our portfolio in good faith based on the input of our investment
adviser, the respective independent valuation firm, if applicable, and the audit
committee.





Portfolio
Investment Classification


The
Company classifies its portfolio investments in accordance with the requirements
of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as
investments in which the Company owns more than 25% of the voting securities or
has rights to maintain greater than 50% of the board representation. Under the
1940 Act, “Affiliate Investments” are defined as investments in which the
Company owns between 5% and 25% of the voting securities. Under the 1940 Act,
“Non-Control/Non-Affiliate Investments” are defined as investments that are
neither Control Investments nor Affiliate Investments.





Cash
and Cash Equivalents


Cash and
cash equivalents include all highly-liquid instruments with an original maturity
of 90 days or less at the date of purchase. Investments in money market mutual
funds and certificates of deposit, which may have original maturities of 90 days
or less, are separately classified as short-term investments.





Concentration
of Credit Risk


The
Company may place its cash and cash equivalents with various financial
institutions and, at times, cash held in depository accounts at such
institutions may exceed the Federal Deposit Insurance Corporation insured
limit.





Securities
Transactions


Securities
transactions are accounted for on the date the transaction for the purchase or
sale of the securities is entered into by the Company (i.e., trade
date).





Interest,
Dividend and Other Income


Interest
income from debt investments in portfolio companies, adjusted for amortization
of premium and accretion of discount, is recorded on an accrual basis to the
extent such amounts are expected to be collected.





Origination,
closing and/or commitment fees associated with debt investments in portfolio
companies are accreted into interest income over the respective terms of the
applicable loans.  Upon the prepayment of a loan or debt security, the
Company will records any prepayment penalties and unamortized loan origination,
closing and commitment fees as part of interest income.





Debt
investments will be placed on non-accrual status when principal or interest
payments are past due 60 days or more or when there is reasonable doubt that
principal or interest will be collected. Accrued interest will be reversed when
a loan is placed on non-accrual status.  Non-accrual debt investments
will be restored to accrual status when past due principal and interest is paid
and, in management’s judgment, is likely to remain current.





Dividend
income from equity investments in portfolio companies is recorded on the
ex-dividend date.




10





UNITED
ECOENERGY CORP


NOTES
TO FINANCIAL STATEMENTS - continued


(unaudited)





Fee
income includes fees, if any, for due diligence, structuring, transaction
services, consulting services and management services rendered to portfolio
companies and other third parties. Due diligence, structuring, transaction
service, consulting and management service fees generally are recognized as
other income when services are rendered.





Federal
and State Income Taxes


The
Company is currently taxable as a C corporation and uses the liability method of
accounting for income taxes. Deferred tax assets and liabilities are recorded
for temporary differences between the tax basis of assets and liabilities and
their reported amounts in the financial statements, using statutory tax rates in
effect for the year in which the temporary differences are expected to reverse.
A valuation allowance is provided against deferred tax assets when it is more
likely than not that some portion or all of the deferred tax assets will not be
realized.





The
Company intends to elect to be treated for U.S. federal income tax purposes, and
intends to qualify, as a RIC under Subchapter M of the Internal Revenue
Code.  If the Company does not meet the criteria to qualify as a RIC
after the election is initially made, it will continue to be taxed as a regular
corporation under Subchapter C of the Internal Revenue Code (a “C
corporation”).  As a RIC, the Company generally will not have to pay
corporate-level federal income taxes on any ordinary income or capital gains
that the Company distributes to its stockholders from its tax earnings and
profits. To obtain and maintain its RIC tax treatment, the Company must meet
specified source-of-income and asset diversification requirements and distribute
annually at least 90% of its ordinary income and realized net capital gains in
excess of realized net capital losses, if any. In order to avoid certain excise
taxes imposed on RICs, the Company currently intends to distribute during each
calendar year an amount at least equal to the sum of: (i) 98% of its
ordinary income for the calendar year, (ii) 98% of its capital gains in
excess of capital losses for


the
one-year period ending on October 31 of the calendar year, and
(iii) any ordinary income and net capital gains for preceding years that
were not distributed during such years. As of
December 31, 2008, the Company has approximately $443,000 of net operating loss
carry-forwards available to affect future taxable income and has established a
valuation allowance equal to the tax benefits of the net operating loss carry
forwards and temporary differences as realization of the asset is not
assured.





Uncertain
tax positions


The
Company evaluates its tax positions taken or expected to be taken in the course
of preparing the Company’s tax returns to determine whether the tax positions
are ‘‘more-likely-than-not’’ of being sustained by the applicable tax authority.
Tax positions not deemed to meet the “more-likely-than-not” threshold are
recorded as an expense in the applicable year. As of September 30, 2009 and for
the period then ended, the Company did not have a liability for any unrecognized
tax benefits. Management’s evaluation of uncertain tax positions may be subject
to review and adjustment at a later date based upon factors including, but not
limited to, an on-going analysis of tax laws, regulations and interpretations
thereof.





Dividends
and Distributions


Dividends
and distributions to common stockholders will be recorded on the ex-dividend
date. Net realized capital gains, if any, will be distributed at least
annually.  No dividends or distributions were declared or paid to
common stockholders since inception.





Per Sharethe Information


Net changes in net assets resulting
from operations per common share, or basic earnings per share, are calculated
using the weighted average number of common shares outstanding for period
presented. The
weighted average number of shares outstanding for all periods presented exclude
the 20 million shares held in escrow since the conditions for release have not
been met as of the end of each period presented. The weighted average number of
shares outstanding for the dilutive computation for the three months ended
September 30, 2009 includes 636,989 shares for warrants outstanding based upon
the treasury method.Diluted loss per common share for all other periods
is the same as basic loss per share, as the effect of potentially dilutive
securities (warrants -1,423,378in 2009) are
anti-dilutive.


.


Recently
Issued Accounting Pronouncements


From time
to time, new accounting pronouncements are issued by the FASB or other standards
setting bodies that are adopted by the Company as of the specified effective
date. Unless otherwise discussed, the Company believes that the impact of
recently issued standards that are not yet effective will not have a material
impact on its financial statements upon adoption.





In
June 2009, the FASB issued the FASB Accounting Standards CodificationTM and
the Hierarchy of Generally Accepted Accounting Principles (the “Codification”).
The Codification became the single official source of authoritative,
nongovernmental U.S. generally accepted accounting principles (“GAAP”). The
Codification did not change GAAP but reorganizes the literature. The
Codification is effective for interim and annual periods ending after
September 15, 2009.





In
August 2009, the FASB issued authoritative guidance regarding accounting
and disclosures related to the fair value measurement of liabilities.  The
new guidance establishes valuation techniques in circumstances in which a quoted
price in an active market for the identical liability is not available. 
Additionally, it clarifies appropriate valuation techniques when restrictions
exist that prevent the transfer of liabilities measured at fair value. 
Finally, it provides further guidance on the classification of liabilities
measured at fair value within the fair value hierarchy.  The new guidance
is effective for interim periods ending after August 26, 2009.  The
adoption of the guidance did not have a material impact on the Company’s results
of operations or financial position.





In
May 2009, the FASB issued authoritative guidance on subsequent events. This
guidance establishes general standards of accounting for and disclosures of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. This guidance is effective for interim
or annual financial periods ending after June 15, 2009. The adoption of the
guidance did not have an impact on the Company’s results of operations or
financial position.





In
April 2009, the FASB issued guidance regarding the determination of fair
value when the volume and level of activity for an asset or liability have
significantly decreased and identifying transactions that are not orderly. 
The new guidance provides for estimating fair value when the volume and level of
activity for an asset or liability have significantly decreased in relation to
normal market activity.  Additionally, the new guidance identifies
circumstances that indicate a transaction is not orderly. The new guidance
requires interim disclosures of the inputs and valuation techniques used to
measure fair value reflecting changes in the valuation techniques and related
inputs.   The guidance is effective for interim and annual reporting
periods ending after June 15, 2009, and is to be applied
prospectively.  The adoption of the guidance did not have a material impact
on the Company’s results of operations or financial position.





In
April 2009, the FASB issued guidance requiring companies to disclose
information about fair value of financial instruments not measured on the
balance sheet at fair value in interim financial statements as well as in annual
financial statements.  Prior to this guidance, fair value for these assets
and liabilities was only disclosed annually.  The guidance requires
all entities to disclose the methods and significant assumptions used to
estimate the fair value of financial instruments.  The new guidance is
effective for interim periods ending after June 15, 2009.  In periods
after initial adoption, the guidance requires comparative disclosures only for
periods ending after initial adoption.  The adoption of the new
guidance did not have a material impact on the Company’s results of operations
or financial position.








11





UNITED
ECOENERGY CORP


NOTES
TO FINANCIAL STATEMENTS - continued


(unaudited)





In
September 2009, the FASB issued Accounting Standards Update No. 2009-12,
Investments in Certain Entities That Calculate Net Asset Value
per  Share (or Its Equivalent) (“ASU 2009-12”), which provides
amendments to ASC Subtopic 820-10, for the fair value measurement of investments
in certain entities that calculate net asset value per share (or its
equivalent).  ASU 2009-12 permits a reporting entity to measure the
fair value of an investment that is within its scope on the basis of the net
asset value per share of the investment (or its equivalent) if the net asset
value of the investment (or its equivalent) is calculated in a manner consistent
with the measurement principles of ASC 820.  ASU 2009-12 is effective
for interim and annual periods ending after December 15, 2009, and its adoption
is not expected to impact Company’s financial condition, results of operations
or cash flows.





Note
3.  Portfolio Investments




On
October 7, 2009, the Board of Directors approved an agreement with City 24/7,
LLC, dated August 11, 2009, to convert two senior secured notes issued to the
Company by City 24/7 to an equity position in City 24/7.  The notes
were originally issued September 8, 2008 and October 8, 2008 in the amounts of
$100,000 and $150,000, respectively, in consideration of loans the Company made
on those dates in those amounts.  Pursuant to the Agreement, City 24/7
paid the notes by admitting The Company as a member of City 24/7, LLC, a New
York limited liability company, with a ten percent (10%) interest in the
profits, losses and distributions of the LLC.  Pursuant to the
agreement, we released our security interest in the assets of City
24/7.  As City 24/7 had not been able to make payment on the notes in
accordance with the notes terms, the Company, as of June 30, 2009 concluded that
the investment was impaired and wrote-off the full investment and uncollected
interest accrued.




In
August 2008, the Company entered into an investment term sheet with SSC, Inc.
the developer of the Ultimate Aero super car for an investment in the company
and the right to obtain up to 35 percent of the ownership of SSC. During May and
June 2009, the Company advanced a total of $200,000 to SSC, which amount was
secured by a security agreement on an Ultimate Aero, which has a retail price of
approximately $1 million. The Company has not provided additional
financing to SSC due to a lack of access to additional due diligence
information requested of SSC.  In July 2009, SSC indicated it may
attempt to renege on its investment agreement, and was unable to repay the
$200,000 advance. The Company is exploring its legal options, and accordingly
has recorded an impairment reserve of $20,000 during the quarter ended September
30, 2009.




In
June 2009, the Company acquired the intellectual property rights of Epic Wound
Care, LLC, through a wholly-owned subsidiary, Epic Wound Care, Inc. The
intellectual property includes the right to manufacture and distribute
innovative gauze to serve the wound care market. The acquisition cost for the
rights was 30 million shares of Company’s common stock, of which 20 million
shares were escrowed with the voting rights controlled by the Company pending
attainment of certain performance targets over 18 months from the closing date
of the transaction. The Company valued the rights acquired at $500,000. While
the common shares escrowed are legally issued and outstanding, for purposes
calculating net assets value per share and earnings per share the Company
considers these shares as contingent and has not include them in the
calculation.




At
September 30, 2009, the fair value measurement of all the Company’s investments
were determined using Level 3 inputs and the components of the change
in


our
investments categorized as Level 3, for the nine months ended September 30,
2009 were as follows


Fair
      Value Measurements Using Significant Unobservable Inputs
                  (Level
      3)Corporate
                  Debt
                
                
                
                Equity
                
                
                
                TotalBeginning
      Balance, December 31, 2008
                
                $
                250,000
                
                
                $
                
                
                
                $
                250,000Additions
                
                
                214,500
                
                
                
                500,000
                
                
                
                714,500Total
      unrealized gains or losses included in earnings
                
                
                (270,000
                )
                
                
                
                
                
                
                (270,000
                )Ending
      Balance, September 30, 2009
                
                $
                194,500
                
                
                $
                500,000
                
                
                $
                694,500


Investment
Advisory Agreement


The
Company entered into an investment advisory agreement with United EcoEnergy
Advisors, LLC (the Investment Advisor) in March 2006 under which the investment
advisor, subject to the overall supervision of the board of directors of the
Company, agreed to provide investment advisory services to the Company. The
investment advisor is owned by two individuals who owned a majority interest in
the Company (prior to June 2009) and one of whom serves on the Company’s Board
of Directors. No advisor fees have been paid or accrued.  In October
2009, the Investment Advisor and the Company agreed to terminate this
agreement.




Administration
Agreement


On
September 1, 2008, the Company entered into an Administration Agreement with
Enterprise Administration, LLC (“Enterprise”), under which Enterprise provides
administrative services to the Company, either directly or through
sub-administration agreements. Enterprise is owned by two individuals who owned
the Investment Advisor.  Under the terms of the agreement, all
management and administration, and related operating needs are provided by
Enterprise and the Company is to reimburse Enterprise for the actual costs of
the services on a monthly basis.  Pursuant to the agreement,
Enterprise charged the Company $157,500 during the nine months ended September
30, 2009.  Enterprise and the Company agreed to terminate the
agreement, effective September2, 2009 and Enterprise agreed to forgo and unpaid
amounts.  Accordingly, the Company recorded a gain of $131,250 as a
result of the forgiveness of the unpaid amounts during the quarter ended
September 30, 2009.





Note
4.  Related party transactions





Notes
payable related party


During
the nine months ended September 30, 2009, the Company borrowed an aggregate of
$109,500 from LeadDog Capital LP through issuances of notes payable
for approxamitely 6 month periods with interest payable at 16%
per year.  In connection with the issuance of these notes the Company
is
required to issue an 150,000 shares of common stock (included in liability for
unissued shares at September 30, 2009) and granted to the lender warrants
to purchase 9,500 shares of common stock at $.001 per share. LeadDog
Capital LP and its affiliates are shareholders and warrant holders however the
group is restricted from becoming a beneficially owner (as such term is defined
under Section 13(d) and Rule 13d-3 of the Securities Exchange Act of 1934, as
amended, (the 1934 Act)), of the Company’s common stock which would exceed 9.5%
of the number of shares of common stock outstanding.







12




UNITED
ECOENERGY CORP


NOTES
TO FINANCIAL STATEMENTS - continued


(unaudited)





The
proceeds from issuance of the promissory notes were allocated to the notes,
common stock and the warrants based upon their relative fair values. This
allocation resulted in expense
related to the amortization of debt discount.  The fair value of the
warrants was determined using the Black-Scholes option pricing model using the following assumptions:
volatility of 141%; risk-free interest rate of 1.34% to 1.65%; expected life of
3 years and estimated dividend yield of 0%.





Amounts
Due To and From Affiliates


Amounts
due from affiliate totaling $3,550 at September 30, 2009 and December 31, 2008,
represent short-term, non-interest bearing advances to an affiliated company.
The amounts due to affiliate of $175,781 at September 30, 2009 and December 31,
2008,represent funds advanced to and expenses paid by Enterprise Partners, LLC
for the Company in prior years.




Note  5.  Notes
Payable
  Notes
payable includes obligations of the Company which originated in 2007 amounting
to approximately $30,215 including interest of $11,300.  While the
indebtedness was incurred on a short-term basis, the Company has not made any
payments since 2008.
  The
Company also borrowed $25,000 in June 2009 under terms which provides that the
borrower may convert the indebtedness including unpaid interest at $.25 per
share through the due date in October 2009.  The debt was not paid on
the due date and the conversion feature expired.  The debt holder has
a pro-rata interest in the security interest the Company has in connection with
the Company’s loan to SSC, Inc.  (see Note 3).  In
connection with this borrowing the Company also granted the debt holder a
warrant to purchase 12,500 shares of common stock for $.25.  The
proceeds of the loan were allocated to the beneficial conversion feature
($17,000) and the balance to the loan and the warrants based upon their relative
fair values.  During the quarter ended September 30, 2009, the Company
expensed approximately $20,000 as a result of the amortization of the debt
discount attributable to the beneficial conversion feature and the
warrants.  The fair value of the warrants was determined using the
Black-Sholes option pricing model using the following assumptions: volatility of
141 %; risk-free interest rate of 1.17, expected life of 2 years and estimated
dividend yield of 0%.





Note
6. Subsequent Events




Subsequent
to September 30, 2009, the Company borrowed  $13,443 from LeadDog
Capital LP  with interest payable at 16% per year for two
years .  In connection with the borrowings the Company issued to
the lender and to the lender an 13,443 warrants to purchase shares of the
Company’s common stock at $.001 per share.





The
Company has no other material events to report subsequent to the measurement
date of these financial statements through the date that such were issued on
November  , 2009.





13








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





FORWARD-LOOKING
STATEMENTS





Some of the statements in this quarterly report on Form 10-Q constitute
forward-looking statements because they relate to future events or our future
performance or financial condition. These forward-looking statements are not
historical facts, but rather are based on current expectations, estimates and
projections about us, our prospective portfolio investments, our industry, our
beliefs, and our assumptions.  The forward-looking statements
contained in this quarterly report on Form 10-Q may include statements as
to:





•
            Our
      future operating results;





•
            Our
      business prospects and the prospects of our portfolio
      companies;





•
            The
      impact of the investments that we expect to
  make;





•
            The
      ability of our portfolio companies to achieve their
      objectives;





•
            Our
      expected financings and
investments;





•
            The
      adequacy of our cash resources and working
    capital; and





•
            The
      timing of cash flows, if any, from the operations of our portfolio
      companies.





In addition, words such as “anticipate,” “believe,” “expect” and
“intend” indicate a forward-looking statement, although not all forward-looking
statements include these words. The forward-looking statements contained in this
quarterly report on Form 10-Q involve risks and uncertainties. Our actual
results could differ materially from those implied or expressed in the
forward-looking statements for any reason, including the factors set forth in
“Risk Factors” and elsewhere in this quarterly report on Form 10-Q or
incorporated by reference herein. Other factors that could cause actual results
to differ materially include:





•
            An
      economic downturn, such as the one we are currently experiencing, could
      likely impair the ability of
      any portfolio company
              that
      we may acquire an interest in to continue to operate, which could
      lead to the loss of some or all of our investments in such
              portfolio
      companies;





•
            An
      economic downturn, such as the one we are currently experiencing, could
      disproportionately impact the public ready growth
              companies
      which we target for investment, potentially causing us to suffer losses in
      our portfolio and experience diminished
              demand
      for capital from these companies;•
            An
      inability to access the capital  markets could impair our
      investment activities.





We have based the forward-looking statements included in this
quarterly report on Form 10-Q on information available to us at the time we
filed this quarterly report on Form 10-Q with the SEC, and we assume no
obligation to update any such forward-looking statements. Except as required by
the federal securities laws, we undertake no obligation to revise or update any
forward-looking statements, whether as a result of new information, future
events or otherwise. You are advised to consult any additional disclosures that
we may make directly to you or through reports that we in the future may file
with the SEC, including annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K. The forward-looking
statements and projections contained in this quarterly report on Form 10-Q are
excluded from the safe harbor protection provided by Section 27E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).




MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS





The following Management’s Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with our financial
statements and the related notes and schedules thereto.





Overview





The Company was incorporated under the Nevada General Corporation
Law, in February 1997, and was a development stage company
through the end of 2005, and until it filed an election with the SEC to be
treated as a business development company in February 2006. At the same time the
Company changed its name to United EcoEnergy Corp., to reflect its new business
model and plan.





We intend to invest principally in equity securities, including convertible
preferred securities and debt securities convertible into equity securities, of
primarily non-public U.S.-based companies.  Our investment objective is to
maximize our portfolio’s capital appreciation while generating current income
from our portfolio investments.   In accordance with our investment
objective, we intend to provide capital principally to U.S.-based, private
companies with an equity value of less than $250 million, which we refer to as
“micro-cap companies.”  Our primary emphasis will be to attempt to
generate capital gains through our equity investments in micro-cap companies,
including through the conversion of the convertible debt or convertible
preferred securities we will seek to acquire in such
companies.





We may also make investments on an opportunistic basis in U.S.-based
publicly-traded companies with market capitalizations of less than $250 million,
as well as foreign companies that otherwise meet our investment criteria,
subject to certain limitations imposed under the 1940 Act. At the present time,
we do not expect our investments in foreign companies to exceed more than 10% of
our total investment portfolio on a cost basis, however.





Any subsequent follow-on investment will be contingent upon the portfolio
company satisfying pre-established milestones towards the filing of a
registration statement under the Securities Act of 1933, as amended (“Securities
Act”) or the Exchange Act.  Where appropriate, we may also negotiate
to receive warrants, either as part of our initial or follow-on investments in
our portfolio companies.





14




As an integral part of our
initial investment, we intend to partner with and help prepare our portfolio
companies to become public and meet the governance and eligibility requirements
for a Nasdaq Capital Market listing.   We intend to invest in
micro-cap companies that we believe will be able to file a registration
statement with the U.S. Securities and Exchange Commission (“SEC”) within
approximately three to twelve months after our initial
investment.




We intend to maximize our potential for capital
appreciation by taking advantage of the premium we believe is generally
associated with having a more liquid asset, such as a publicly traded
security.  Specifically, we believe that a “going-public”, will
generally provide our portfolio companies with greater visibility,
marketability, and liquidity than they would otherwise be able to
achieve.  Since we intend to be more patient investors, we believe
that our portfolio companies may have an even greater potential for capital
appreciation if they are able to demonstrate sustained earnings growth and are
correspondingly rewarded by the public markets with a price-to-earnings (P/E)
multiple appropriately linked to earnings performance.  We can provide
no assurance, however, that the micro-cap companies in which we may invest will
be able to achieve such sustained earnings growth necessary, or that the public
markets will recognize such growth, if any, with an appropriate market
premium.





The convertible debt instruments we expect to receive in connection with our
initial investments will likely be unsecured or subordinated debt
securities.  These convertible debt instruments will in nearly all cases
not be rated by a national rating agency.  If such debt securities
were rated, however, we would expect them to fall below investment grade, which
are sometimes referred to as “junk bonds,” meaning that they are more
speculative in nature with respect to the issuer’s capacity to pay interest and
repay principal, and are therefore subject to greater risk of default than other
debt securities that qualify as investment grade. The equity investments we
expect to receive in connection with our follow-on investments will typically be
non-controlling investments, meaning we will not be in a position to control the
management, operation and strategic decision-making of the companies in which we
invest.   In the near term, we expect that our total initial and
follow-on investments in each portfolio company will typically range from
$250,000 to $600,000, although we may invest more than this threshold in certain
opportunistic situations.  We expect the size of our individual
investments to increase if and to the extent our capital base increases in the
future.





We expect that our capital will primarily be used by our portfolio
companies to finance organic growth.  To a lesser extent, our capital
may be used to finance acquisitions and recapitalizations. Our investment
decisions will be based on an analysis of potential portfolio companies’
management teams and business operations supported by industry and competitive
research, an understanding of the quality of their revenues and cash flow,
variability of costs and the inherent value of their assets, including
proprietary intangible assets and intellectual property.  We will also
assess each potential portfolio company as to its appeal in the public markets
and its suitability for achieving and maintaining public company
status.





As a business development company, we are required to comply with certain
regulatory requirements. For example, to the extent provided by the 1940 Act, we
are required to invest at least 70% of our total assets in eligible portfolio
companies.





Research shows that publically traded companies are potentially
valued higher than comparable private company peers because market participants
may pay a premium for liquidity.  Investors willing to accept
illiquidity in the form of a private, pre-IPO investment can attempt to capture
this potential valuation differential once a company becomes publicly
traded.




We intend to provide an opportunity to participate in the potential
increase in value that can occur as portfolio companies transition from private
to public status and potential accelerated earnings growth following an infusion
of capital. We believe that this process could result in risk-adjusted excess
returns that have the potential to generate capital gains on each investment
over an average 3-year anticipated holding period.  We intend to
distribute current income from our portfolio to investors in the form of
quarterly dividends, to the extent available.





Current
Economic Environment





The
U.S. economy is currently in a recession, which could be long-term. Consumer
confidence continued to deteriorate and unemployment figures continued to
increase during the first half of 2009.  However, in recent months,
certain economic indicators have shown modest improvements. The generally deteriorating economic
situation, together with the limited availability of debt and equity capital,
including through bank financing, will likely have a disproportionate impact on
the micro-cap companies we intend to target for investment.  As a
result, we may experience a reduction in attractive investment opportunities in
prospective portfolio companies that fit our investment criteria.  In
addition, micro-cap companies in which we ultimately invest may be unable to pay
us the interest or dividends on their convertible securities or repay their debt
obligations to us, and the common stock which we may receive upon conversion of
the convertible securities may have little or no value, resulting in the loss of
all or substantially all of our investment in such micro-cap
companies.





Going
Concern





Our financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate the
continuation of the Company as a going concern.  This basis of accounting
contemplates the recovery of the Company’s assets and the satisfaction of
liabilities in the normal course of business. The Company elected to be a BDC in
2006 but has not as yet attained a level of operations which allows it to meet
its current overhead and may not attain profitable operations within next few
business operating cycles, nor is there any assurance that such an operating
level can ever be achieved. The Company is dependent upon obtaining additional
financing adequate to fund its commitments to its portfolio companies. The
report of our auditors on our financial statements included a reference to going
concern risks.  While the Company has funded its initial operations
with private placements, became a publicly owned entity and secured loans from a
related party, there can be no assurance that adequate financing will continue
to be available to the Company and, if available, on terms that are favorable to
the Company.   Our ability to continue as a going concern is also
dependent on many events outside of our direct control, including, among other
things, our portfolio companies’ ability to achieve their business goals and
objectives, as well as improvement in the economic climate.  The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.





Investment
Portfolio and Activities





During the three and nine months ended September 30, 2009,
we made additional investments in our non- controlled portfolio companies when
we made a secured loan to SSC, Inc of $200,000 and also organized an entity
whole-owned by the Company in the healthcare industry which acquired the
intellectual property rights to manufacture and distribute an innovative gauze
to serve the wound care market.  We funded the rights acquisition by
the issuance of 30 million shares of our common shares, of which 20 million have
been escrowed and will be released upon attainment of certain benchmarks over 18
months from the closing of the transaction.  Healthcare has become a
targeted industry group for the Company.





During the three months ended September 30, 2009, the Company also
recognized the total impairment of its investment accrued interest in City 24/7
LLC since City was not able to make its required repayments on the loans
totaling $250,000 the Company made to them in 2008. However, the Company
continued to negotiate with City and in August 2009, the parties agreed to
convert two senior secured notes to an equity position in City
24/7.   As a result of the matters discussed above concerning
SSC, the Company also reserved $20,000 against that investment.




During 2009, the Company’s management has been replaced and in December 2009, a
majority of the Board will be new members. It is the intention of the new
management to review more investment opportunities that meet the Company’s
investment criteria while at the same time develop funding sources, principally
equity, if available on terms that are favorable to the Company,  in
addition to the Company’s present lender.  The consummation of each
investment will depend upon satisfactory completion of our due diligence
investigation of the prospective portfolio company, our confirmation and
acceptance of the investment terms, structure and financial covenants, the
execution and delivery of final binding agreements in form mutually satisfactory
to the parties, the absence of any material adverse change and the receipt of
any necessary consents.  We can provide no assurance that we will be
able to both find appropriate candidates for investment and if found, conclude a
transaction as well as to find adequate financing for our operations including
amounts necessary to fund the operations of our portfolio
companies.




15





Results
of Operations





We
commenced operations as a BDC in February 2006; however, much of the time since
that date was devoted to fund raising and  extensive efforts devoted
to identifying investment candidates; negotiation of transactions and due
diligence efforts, etc. Set forth below are the results of operations for
the three and six months ended September 30, 2009 and 2008.





Investment
incomeWe
currently have limited investment income and amounts accrued in accordance
with the terms of the related loans have not been received.  The
Company has stopped accruing income on loans for which the Company established
the loans were impaired.  Our equity investments are not expected to
pay dividends. We may also generate revenue in the form of commitment,
origination, structuring or diligence fees, fees for providing significant
managerial assistance and possibly consulting fees. Any such fees will be
generated in connection with our investments and recognized as
earned.  In all
likelihood we will be required to make future expenditures in connection with
our due diligence efforts along with general and administrative expenses before
we will earn any material investment income.





Expenses.
Our primary operating expenses include the payment of: (i) consulting fees
under current and former arrangements to fund the costs related to
personnel  and advisors and other administrative obligations for
identifying, evaluating, negotiating, closing; monitoring and servicing our
investments; (ii) interest on borrowings; and (ii) professional services
including legal, accounting and transfer agent.   In the quarter
ended September 30, 2009, the Company and its former administrative service
provider agreed to the termination of the service agreement and any unpaid
amounts were cancelled.  Accordingly, the Company recognized income of
$131,250 from the reversal of these unpaid amounts.





Net
change in unrealized (loss) – non-controlled
investments:During the three month and nine month
periods ended September 30, 2009, the Company recognized unrealized loss on its
investments of $20,000 and $296,910 as a result of the matters discussed above
concerning its investments in SSC and City 24/7 LLC.




Financial
Condition, Liquidity and Capital Resources




As of
September 30, 2009 and December 31, 2008, the Company had negative working
capital of approximately $333,00 and $88,000,
respectively.   Since implementing the BDC business plan, we
generated net cash proceeds of $1.1 million from equity placements and borrowed
$205,000, principally from a related party. During this period we invested
$464,000 in cash and issued common stock in one additional transaction. The
Company elected to be a BDC in 2006 but has not as yet attained a level of
operations which allows it to meet its current overhead and may not attain
profitable operations within next few business operating cycles, nor is there
any assurance that such an operating level can ever be achieved. The Company is
dependent upon obtaining additional financing adequate to fund its commitments
to its portfolio companies. The report of our auditors on our financial
statements included a reference to going concern risks.  While the
Company has funded its initial operations with private placements, became a
publicly owned entity and secured loans from a related party, there can be no
assurance that adequate financing will continue to be available to the Company
and, if available, on terms that are favorable to the Company.   Our
ability to continue as a going concern is also dependent on many events outside
of our direct control, including, among other things, our portfolio companies’
ability to achieve their business goals and objectives, as well as improvement
in the economic climate.  The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.





Our primary use of funds will be
investments in portfolio companies, cash distributions to holders of our common
stock, and the payment of operating expenses.





As of
September 30, 2009, we had net assets of $339,000 and, based on 46,124,231
shares of common stock outstanding (exclusive of 20 million shares held in
escrow), a net asset value per common share of approximately $. 01 As
of December 31, 2008, we had net assets of $3,346 and, based on 34,710,577
shares of common stock outstanding, a net asset value per common share of
approximately $nil.





Distribution
Policy





We have not paid any dividends or
distributions since our inception.  Our Board of Directors will
determine the payment of any distributions in the future. We will pay these
distributions to our stockholders out of assets legally available for
distribution. We cannot assure you that we will achieve investment results that
will allow us to make a targeted level of cash distributions or year-to-year
increases in cash distributions.  Any dividends to our stockholders
will be declared out of assets legally available for distribution.




Although
our primary emphasis will be to generate capital gains through the common stock
we expect to receive upon conversion of the convertible debt and convertible
preferred securities issued to us in the initial and follow-on investments in
our portfolio companies, we also expect to generate current income from the
interest and preferred dividends on the debt and convertible preferred
securities, respectively, prior to their conversion.





The
timing of any capital gains generated from the appreciation and sale of common
stock we expect to receive in our portfolio companies upon conversion of the
convertible debt and convertible preferred equity securities cannot be
predicted.  Although we expect to be able to pay dividends from the
interest and preferred dividends we receive from our initial and follow-on
investments prior to our conversion thereof, we do not expect to generate
capital gains from the sale of our portfolio investments on a level or uniform
basis from quarter to quarter.  This may result in substantial
fluctuations in our quarterly dividend payments to stockholders.  In
addition, since we expect to have an average holding period for our portfolio
company investments of two to three years, it is unlikely we will generate any
capital gains during our initial years of operations and thus we are likely to
pay dividends in our initial years of operation principally from interest and
preferred dividends we receive from our initial and follow-on investments prior
to our conversion thereof.  However, our ability to pay dividends in
our initial years of operation will be based on our ability to invest our
capital in suitable portfolio companies in a timely manner.





In
addition, although we currently intend to distribute realized net capital gains,
if any, at least annually, we may in the future decide to retain such capital
gains for investment and elect to treat such gains as deemed distributions to
our stockholders. If this happens, our stockholders will be treated as if they
had received an actual distribution of the capital gains we retain and
reinvested the net after-tax proceeds in us. In this situation, our stockholders
would be eligible to claim a tax credit (or, in certain circumstances, a tax
refund) equal to their allocable share of the tax we paid on the capital gains
deemed distributed to them.  We can offer no assurance that we will
achieve results that will permit the payment of any cash distributions and, to
the extent that we issue senior securities, we will be prohibited from making
distributions if doing so causes us to fail to maintain the asset coverage
ratios stipulated by the 1940 Act or if distributions are limited by the terms
of any of our borrowings.





We intend to elect to be treated, and
intend to qualify annually thereafter, as a RIC under Subchapter M of the Code.
To obtain and maintain RIC tax treatment, we must, among other things,
distribute at least 90% of our ordinary income and realized net capital gains in
excess of realized net capital losses, if any. In order to avoid certain excise
taxes imposed on RICs, we currently intend to distribute during each calendar
year an amount at least equal to the sum of: (i) 98% of our ordinary income
for the calendar year, (ii) 98% of our capital gains in excess of capital
losses for the one-year period ending on October 31 of the calendar year,
and (iii) any ordinary income and net capital gains for preceding years
that were not distributed during such years.





16


We can
offer no assurance that we will achieve results that will permit the payment of
any cash distributions and, if we issue senior securities, we will be prohibited
from making distributions if doing so causes us to fail to maintain the asset
coverage ratios stipulated by the 1940 Act or if distributions are limited by
the terms of any of our borrowings.





All
distributions will be paid at the discretion of our Board of Directors and will
depend on our earnings, our financial condition, maintenance of our RIC status,
compliance with applicable business development company regulations and such
other factors as our Board of Directors may deem relevant from time to time. We
cannot assure that we will pay distributions to our stockholders in the future.
In the event that we encounter delays in locating suitable investment
opportunities, we may pay all or a substantial portion of our distributions from
the proceeds of the sales of our common stock in anticipation of future cash
flow, which may constitute a return of our stockholders’ capital. Distributions
from the proceeds of the sales of our common stock also could reduce the amount
of capital we ultimately invest in interests of portfolio
companies.  Our distributions may exceed our earnings, especially
during the period before we have substantially invested the proceeds from the
sale of our common stock.





Contractual
Obligations





As of
September 30, 2009, our investment agreements with our portfolio companies
provide that we will provide if the portfolio companies attain certain
benchmarks we are to provide financing of up to $150,000.





Off-Balance
Sheet Arrangements





As of
September 30, 2009, we have no off-balance sheet arrangements.





Related
Parties





Information
concerning related party transactions is included in the financial statements
and related notes, appearing elsewhere in this quarterly report on Form
10-Q. In addition, we have adopted a formal
Code of Ethics that governs the conduct of our officers and directors. Our
officers and directors also remain subject to the fiduciary obligations imposed
by both the 1940 Act and applicable state corporate law.





Critical
Accounting Policies





The
preparation of financial statements and related disclosures in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and revenues and expenses during the periods
reported. Actual results could materially differ from those estimates. We have
identified the following items as critical accounting policies.





Valuation of
Portfolio Investments.  We will determine the
net asset value per share of our common stock quarterly, or more frequently to
the extent circumstances together with our obligations under the 1940 Act
require us to do so. The net asset value per share is equal to the value of our
total assets minus liabilities and any preferred stock outstanding divided by
the total number of shares of common stock outstanding. At present, we do not
have any preferred stock authorized or outstanding.





Value, as
defined in Section 2(a)(41) of the 1940 Act, is (i) the market price
for those securities for which a market quotation is readily available, and
(ii) for all other securities and assets, fair value is as determined in
good faith by our Board of Directors.





Determining
fair value requires that judgment be applied to the specific facts and
circumstances of each portfolio investment while employing a consistently
applied valuation process for the types of investments we make. We are required
to specifically value each individual investment on a quarterly basis We will determine the fair value of our debt investments by
reference to the market in which we source and execute these debt investments.
Market participants generally have a strategic premise for these investments,
and anticipate the sale of the company, recapitalization or initial public
offering as the realization/liquidity event. The fair value, or exit price, for
a debt instrument would be the hypothetical price that a market participant
would pay for the instrument, using a set of assumptions that are aligned with
the criteria that we would use in originating a debt investment in this market,
including credit quality, interest rate, maturity date, conversion ratio and
overall yield, and considering the prevailing returns available in this market.
In general, we consider enterprise value an important element in the
determination of fair value, because it represents a metric that may support the
recorded value, or which, conversely, would indicate if a credit-related
markdown is appropriate. We also consider the specific covenants and provisions
of each investment which may enable us to preserve or improve the value of the
investment. In addition, the trends of the portfolio company’s basic financial
metrics from the time of the original investment until the measurement date are
also analyzed; material deterioration of these metrics may indicate that a
discount should be applied to the debt investment, or a premium may be warranted
in the event that metrics improve substantially and the return is higher than
required for such a profile under current market conditions.





The fair
value of our equity investments for which market quotations are not readily
available will be determined based on various factors, including the enterprise
value remaining for equity holders after the repayment of the portfolio
company’s debt and other preference capital, and other pertinent factors such as
recent offers to purchase a portfolio company, recent transactions involving the
purchase or sale of the portfolio company’s equity securities, or other
liquidity events. The determined equity values will generally be discounted when
we have a minority position, restrictions on resale, specific concerns about the
receptivity of the capital markets to a specific company at a certain time, or
other factors.  Equity investments for which market quotations are
readily available will generally be valued at the most recently available
closing market price.





Enterprise
value means the entire value of the company to a potential buyer, including the
sum of the values of debt and equity securities used to capitalize the
enterprise at a point in time. There is no one methodology to determine
enterprise value and, in fact, for any one portfolio company, enterprise value
is best expressed as a range of fair values, from which we derive a single
estimate of enterprise value. To determine the enterprise value of a portfolio
company, we will analyze its historical and projected financial results, as well
as the nature and value of collateral, if any. We will also use industry
valuation benchmarks and public market comparables.  We will also
consider other events, including private mergers and acquisitions, a purchase
transaction, public offering or subsequent debt or equity sale or restructuring,
and include these events in the enterprise valuation process. We will generally
require portfolio companies to provide annual audited and quarterly unaudited
financial statements, as well as annual projections for the upcoming fiscal
year.





The
following is a description of the steps the Company will take each quarter to
determine the value of the Company’s portfolio investments. Investments for
which market quotations are readily available will be recorded in the Company’s
financial statements at such market quotations. With respect to investments for
which market quotations are not readily available, the Company’s Board of
Directors will undertake a multi-step valuation process each quarter, as
described below:




17





(1) The
quarterly valuation process begins with each portfolio company or investment
being initially valued by the Company’s key person responsible for the portfolio
investment;





(2)
Preliminary valuation conclusions are then documented and discussed with the
investment committee of the board of directors;





(3)
Independent valuation firms may be engaged by our investment committee of the
board of directors to conduct independent appraisals and review our key person’s
preliminary valuations and make their own independent assessment;





(4) The
audit committee of the board of directors reviews the preliminary valuation of
our investment committee  and that of the independent valuation firm,
if applicable, and responds to the valuation recommendation of the independent
valuation firm to reflect any comments; and





(5) The
board of directors discusses valuations and ratifies the fair value of each
investment in our portfolio in good faith based on the input of our investment
adviser, the respective independent valuation firm, if applicable, and the audit
committee.


Determination
of fair values involves subjective judgments and estimates. Accordingly, this
critical accounting policy expresses the uncertainty with respect to the
possible effect of such valuations, and any change in such valuations, on our
financial statements.





Revenue
Recognition.We calculate gains or losses on the
sale of investments by using the specific identification method. We record
interest income, adjusted for amortization of premium and accretion of discount,
on an accrual basis to the extent such amounts are expected to be
collected.




Origination,
closing and/or commitment fees associated with debt investments in portfolio
companies are accreted into interest income over the respective terms of the
applicable loans.  Upon the prepayment of a loan or debt security, we
record any prepayment penalties and unamortized loan origination, closing and
commitment fees part of interest income.





We place
loans on non-accrual status when principal or interest payments are past due 60
days or more or when there is reasonable doubt that principal or interest will
be collected. Accrued interest is generally reversed when a loan is placed on
non-accrual status. We may recognize as income or apply to principal, interest
payments received on non-accrual loans, depending upon management’s judgment. We
restore non-accrual loans to accrual status when past due principal and interest
is paid and, in management’s judgment, are likely to remain
current.





Other
Income. 
Other income includes closing fees, or origination fees, associated with equity
investments in portfolio companies. Such fees are normally paid at closing of
our investments, are fully earned and non-refundable, and are generally
non-recurring.





The 1940
Act requires that a business development company offer managerial assistance to
its portfolio companies. We offer and provide managerial assistance to our
portfolio companies in connection with our investments and may receive fees for
our services. These fees are typically included in other income.





Federal Income
Taxes.  We
intend to elect to be treated, and intend to qualify annually thereafter, as a
RIC under Subchapter M of the Code.  If we do not meet the criteria to
qualify as a RIC for our 2009 taxable year, we will be taxed as a regular
corporation under Subchapter C of the Code. We intend to operate so as to
qualify to be taxed as a RIC under Subchapter M of the Code and, as such, to not
be subject to federal income tax on the portion of our taxable income and gains
distributed to stockholders. To qualify for RIC tax treatment, we are required
to distribute at least 90% of our investment company taxable income, as defined
by the Code.





Because
federal income tax regulations differ from accounting principles generally
accepted in the United States, distributions in accordance with tax regulations
may differ from net investment income and realized gains recognized for
financial reporting purposes. Differences may be permanent or temporary.
Permanent differences are reclassified among capital accounts in the financial
statements to reflect their tax character. Temporary differences arise when
certain items of income, expense, gain or loss are recognized at some time in
the future. Differences in classification may also result from the treatment of
short-term gains as ordinary income for tax purposes.


Item 3.
            Quantitative
      and Qualitative Disclosures about Market
Risk.





We are subject to financial market risks, including changes in
interest rates. During the three and six months ended September 30, 2009
our portfolio loans had fixed rates. As such, a change in interest rates may
have a material effect on our net investment income. However, we may hedge
against interest rate fluctuations from time-to-time by using standard hedging
instruments such as futures, options and forward contracts subject to the
requirements of the 1940 Act. While hedging activities may insulate us against
adverse changes in interest rates, they may also limit our ability to
participate in the benefits of lower interest rates with respect to our
portfolio of investments. During the three and six months ended
September 30, 2009, we did not engage in interest rate
hedging.





Item 4.    CONTROLS AND
PROCEDURES





Evaluation
of Disclosure Controls and Procedures





The
Company is in the process of implementing disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934 (the ‘‘Exchange Act’’), that are designed to ensure that information
required to be disclosed in the Company’s Exchange Act reports are recorded,
processed, summarized, and reported within the time periods specified in rules
and forms of the Securities and Exchange Commission, and that such information
is accumulated and communicated to our Chief Executive Officer to allow timely
decisions regarding required disclosure.





As of
September 30, 2009, the Chief Executive Officer and Chief Financial Officer
carried out an assessment, of the effectiveness of the design and operation
of our disclosure controls and procedures pursuant to Exchange Act
Rules 13a-15(b) and 15d-15(b). As of the date of this assessment, the Chief
Executive Officer and Chief Financial Officer concluded that the Company’s
disclosure controls and procedures were not effective as of September 30, 2009,
because of the material weakness described below.





The Chief
Executive Officer and Chief Financial Officer performed additional accounting
and financial analyses and other post-closing procedures including detailed
validation work with regard to balance sheet account balances, additional
analysis on income statement amounts and managerial review of all significant
account balances and disclosures in the Quarterly Report on Form 10-Q, to ensure
that the Company’s Quarterly Report and the financial statements forming part
thereof are in accordance with accounting principles generally accepted in the
United States of America. Accordingly, management believes that the financial
statements included in this Quarterly Report fairly present, in all material
respects, the Company’s financial condition, results of operations, and cash
flows for the periods presented.





18




Management’s
Report on Internal Control over Financial Reporting





Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external reporting purposes in
accordance with accounting principles generally accepted in the United States of
America. Internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Company’s assets that
could have a material effect on the interim or annual financial
statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with policies or procedures may deteriorate.





The Chief
Executive Officer  and Chief Financial Officer assessed the effectiveness
of the Company’s internal control over financial reporting as of September 30,
2009. In performing its assessment of the effectiveness of the Company’s
internal control over financial reporting, management applied the criteria
described in the Internal Control-Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (‘‘COSO’’).





A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis.





The
material weakness identified during management's assessment was the lack of
sufficient resources with SEC, generally accepted accounting principles (GAAP)
and tax accounting expertise. This control deficiency did not result in
adjustments to the Company’s interim financial statements. However, this control
deficiency could result in a material misstatement of significant accounts or
disclosures that would result in a material misstatement to the Company’s
interim or annual financial statements that would not be prevented or detected.
Accordingly, management has determined that this control deficiency constitutes
a material weakness.





Because
of the material weakness, management concluded that the Company did not maintain
effective internal control over financial reporting as of July 31, 2009, based
on the criteria in Internal Control-Integrated Framework issued by
COSO.





Changes
in Internal Control over Financial Reporting





The
Company is in the process of correcting the internal control deficiency which
began with the employment of a new Chief Financial Officer in August
2009.








19





PART
II. OTHER INFORMATION







Item 1.
            Legal
      Proceedings




We are
not currently subject to any material pending legal proceedings.





Item 1A.
            Risk
      Factors




In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I “Item 1A. Risk Factors” in our
Annual Report on Form 10-K for the fiscal year ended December 31,
2008, which could materially affect our business, financial condition and/or
operating results. The risks described in our Annual Report on Form 10-K
are not the only risks facing our Company. Additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial also may
materially and adversely affect our business, financial condition and/or
operating results.





Item 2.
            Unregistered
      Sales of Equity Securities and Use of
Proceeds




None.





Item 3.
            Defaults
      Upon Senior Securities




None.





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




On
October 30, 2009 the Company filed and Information Statement with the SEC
providing notice of shareholder action in lieu of an Annual Meeting of
Shareholders, taken pursuant to the written consent of certain shareholders,
referred to as the consenting shareholders. Specifically, the consenting
shareholders approved the following proposals: (i) the election of five members
to the Board of Directors of the Company, to serve until the next Annual Meeting
of Shareholders or until their successors are duly elected; (ii) the decision of
the Audit Committee of the Board of Directors of the Company to appoint Berman,
Hopkins, Wright & LaHam, CPAs & Associates, LLP, as the independent
auditors for the Company for the year commencing January 1,
2009.  The consenting shareholders held shares of common
stock and are entitled to cast a number of votes equal to 60.2 % of the total
voting capital stock on all matters submitted to the shareholders for
approval.





Item 5.
            Other
      Information




None.





20







Item 6.
            Exhibits




(a)
Exhibits


31.1
            
            Certification
      of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities
      Exchange Act of 1934.31.2
            
            Certification
      of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities
      Exchange Act of 1934.32.1
            
            Certification
      of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002 (18 U.S.C. 1350).32.2
            
            Certification
      of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002 (18 U.S.C. 1350).


21





SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) 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 on August 6,
2009.





United
      EcoEnergey CorporationBy:
            
            /s/ Kelly T.
      HickelKelly
      T. HickelChief
      Executive OfficerBy:
            
            /s/ Jan E.
      ChasonJan
      E. ChasonChief
      Financial Officer