UNITED
STATES




SECURITIES
AND EXCHANGE COMMISSION




Washington,
D.C. 20549









FORM
10-Q




þ
            QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the quarterly period ended
September 30, 2010




or




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




For
the transition period from ________ to __________




Commission
File No. 000-30841









UNITED
ENERGY CORP.


(Exact
name of registrant as specified in its charter)




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




600
Meadowlands Parkway #20, Secaucus, N.J. 07094


(Address
of principal executive offices)





(800)
327-3456


(Registrant's
telephone number, including area code)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. þYes
 ̈ 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 (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  ̈ No þ




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer  ̈
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈ (Do
      not check if a smaller reporting company)
            Smaller
      reporting company þ




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




As of
November 17, 2010, 31,504,449 shares of common stock, par value $.01 per share,
were outstanding.









INDEX




PART
      I. FINANCIAL INFORMATIONItem
      1.
                            Financial
      Statements
                            3Consolidated
      balance sheets September 30, 2010 (Unaudited) and March 31,
      2010
                            3-4Consolidated
      statements of operations for the three months and six months ended
      September 30, 2010 (Unaudited) and 2009 (Unaudited)
                            5Consolidated
      statement of stockholders' equity for the six months ended September 30,
      2010 (Unaudited)
                            6Consolidated
      statements of cash flows for the six months ended September 30, 2010
      (Unaudited) and 2009 (Unaudited)
                            7-8Notes
      to consolidated financial statements
                            9-13Item
      2.
                            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                            13-16Item
      3.
                            Quantitative
      and Qualitative Disclosures About Market Risk
                            16Item
      4.
                            Controls
      and Procedures
                            17PART
      II. OTHER INFORMATIONItem
      1.
                            Legal
      Proceedings
                            18Item
      1A.
                            Risk
      Factors
                            18Item
      2.
                            Unregistered
      Sales of Equity Securities and Use of Proceeds
                            18Item
      3.
                            Defaults
      Upon Senior Securities
                            18Item
      4.
                            (Removed
      and Reserved)
                            18Item
      5.
                            Other
      Information
                            18Item
      6.
                            Exhibits
                            18Signatures
                            
                            19


2




Item
1. Financial
Statements





UNITED
ENERGY CORP. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS




September 30,
                
                
                March 31,2010
                
                
                2010(Unaudited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                
                $
                150,447
                
                
                $
                311,506Accounts
      receivable, net of allowance for doubtful accounts of $72,719 and $77,211,
      respectively
                
                
                303,816
                
                
                
                190,915Inventory
                
                
                77,772
                
                
                
                80,870Prepaid
      expenses and other current assets
                
                
                21,429
                
                
                
                62,827Loan
      receivable, net of reserve of $25,000
                
                
                25,000
                
                
                
                25,000Total
      current assets
                
                
                578,464
                
                
                
                671,118PROPERTY
      AND EQUIPMENT, net of accumulated depreciation and amortization of
      $467,103 and $492,121 respectively
                
                
                68,520
                
                
                
                79,050OTHER
      ASSETS:Goodwill
                
                
                15,499
                
                
                
                15,499Patents,
      net of accumulated amortization of $299,653 and $280,306,
      respectively
                
                
                300,064
                
                
                
                317,318Loans
      receivable
                
                
                38,864
                
                
                
                35,793Deposits
                
                
                14,185
                
                
                
                1,385Total
      assets
                
                $
                1,015,596
                
                
                $
                1,120,163





The
accompanying notes are an integral part of these unaudited consolidated
financial statements


3




UNITED
ENERGY CORP. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS




September 30,
                
                
                March 31,2010
                
                
                2010(Unaudited)LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
      LIABILITIES:Accounts
      payable
                
                $
                323,578
                
                
                $
                234,948Accrued
      expenses
                
                
                266,545
                
                
                
                362,925Convertible
      term note
                
                
                30,000
                
                
                
                30,000Due
      to related parties
                
                
                464,781
                
                
                
                453,781Total
      current liabilities
                
                
                1,084,904
                
                
                
                1,081,654STOCKHOLDERS'
      EQUITY (DEFICIT):Preferred
      Stock: 100,000 shares authorized; Series A Convertible Preferred Stock:
      $8,000 stated value, 3 shares issued and outstanding as of September 30,
      2010 and March 31, 2010
                
                
                24,000
                
                
                
                24,000Common
      stock: $0.01 par value 100,000,000 shares authorized; 31,504,449 shares
      issued and outstanding as of September 30, 2010 and March 31,
      2010
                
                
                315,045
                
                
                
                315,045Additional
      paid-in capital
                
                
                23,286,248
                
                
                
                23,245,536Accumulated
      deficit
                
                
                (23,694,601
                )
                
                
                (23,546,072
                )Total
      stockholders' equity (deficit)
                
                
                (69,308
                )
                
                
                38,509Total
      liabilities and stockholders' equity (deficit)
                
                $
                1,015,596
                
                
                $
                1,120,163





The
accompanying notes are an integral part of these unaudited consolidated
financial statements




4




UNITED
ENERGY CORP. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS




For the Three Months
                
                
                For the Six MonthsEnded September 30,
                
                
                Ended September 30,2010
                
                
                2009
                
                
                2010
                
                
                2009(Unaudited)
                
                
                (Unaudited)
                
                
                (Unaudited)
                
                
                (Unaudited)REVENUES,
      net
                
                $
                439,321
                
                
                $
                613,202
                
                
                $
                882,826
                
                
                $
                1,007,206COST
      OF GOODS SOLD
                
                
                164,914
                
                
                
                231,845
                
                
                
                337,379
                
                
                
                385,559Gross
      profit
                
                
                274,407
                
                
                
                381,357
                
                
                
                545,447
                
                
                
                621,647OPERATING
      EXPENSES:Selling,
      general and administrative
                
                
                309,363
                
                
                
                790,606
                
                
                
                578,075
                
                
                
                1,141,638Research
      and development
                
                
                35,813
                
                
                
                64,143
                
                
                
                70,969
                
                
                
                115,639Gain
      on sale of asset
                
                
                (8,000
                )
                
                
                -
                
                
                
                (8,000
                )
                
                
                -Depreciation
      and amortization
                
                
                11,596
                
                
                
                12,435
                
                
                
                23,164
                
                
                
                24,512Total
      operating expenses
                
                
                348,772
                
                
                
                867,184
                
                
                
                664,208
                
                
                
                1,281,789Loss
      from operations
                
                
                (74,365
                )
                
                
                (485,827
                )
                
                
                (118,761
                )
                
                
                (660,142
                )OTHER
      INCOME (EXPENSE), net:Interest
      income
                
                
                1
                
                
                
                7
                
                
                
                7
                
                
                
                14Interest
      expense
                
                
                (14,062
                )
                
                
                (11,878
                )
                
                
                (29,055
                )
                
                
                (19,423
                )Total
      other income (expense), net
                
                
                (14,061
                )
                
                
                (11,871
                )
                
                
                (29,048
                )
                
                
                (19,409
                )Net
      loss
                
                
                (88,426
                )
                
                
                (497,698
                )
                
                
                (147,809
                )
                
                
                (679,551
                )PREFERRED
      DIVIDENDS
                
                
                (360
                )
                
                
                (360
                )
                
                
                (720
                )
                
                
                (720
                )Net
      loss applicable to common shareholders
                
                $
                (88,786
                )
                
                $
                (498,058
                )
                
                $
                (148,529
                )
                
                $
                (680,271
                )BASIC
      AND DILUTED LOSS PER SHARE:
                
                $
                (0.00
                )
                
                $
                (0.02
                )
                
                $
                (0.00
                )
                
                $
                (0.02
                )BASIC
      AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
                
                
                31,504,449
                
                
                
                31,328,587
                
                
                
                31,504,449
                
                
                
                31,255,192





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




5




UNITED
ENERGY CORP. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY


FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2010 (UNAUDITED)




AdditionalCommon Stock
                    
                    
                    Preferred
                    
                    
                    Paid-In
                    
                    
                    AccumulatedShares
                    
                    
                    Amount
                    
                    
                    Stock
                    
                    
                    Capital
                    
                    
                    Deficit
                    
                    
                    TotalBALANCE,
      April 1, 2010
                    
                    
                    31,504,449
                    
                    
                    $
                    315,045
                    
                    
                    $
                    24,000
                    
                    
                    $
                    23,245,536
                    
                    
                    $
                    (23,546,072
                    )
                    
                    $
                    38,509Compensation
      expense associated with options
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    712
                    
                    
                    
                    -
                    
                    
                    
                    712Compensation
      expense associated with warrants
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    40,000
                    
                    
                    
                    -
                    
                    
                    
                    40,000Dividends
      accrued on preferred shares
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (720
                    )
                    
                    
                    (720
                    )Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (147,809
                    )
                    
                    
                    (147,809
                    )BALANCE,
      September 30, 2010
                    
                    
                    31,504,449
                    
                    
                    $
                    315,045
                    
                    
                    $
                    24,000
                    
                    
                    $
                    23,286,248
                    
                    
                    $
                    (23,694,601
                    )
                    
                    $
                    (69,308
                    )





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




6




UNITED
ENERGY CORP. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2010 AND 2009




2010
                
                
                2009(Unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss from continuing operations
                
                $
                (147,809
                )
                
                $
                (679,551
                )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesDepreciation
      and amortization
                
                
                29,877
                
                
                
                34,694Allowance
      for doubtful accounts
                
                
                (4,492
                )
                
                
                18,680Gain
      on sale of asset
                
                
                (8,000
                )
                
                
                -Compensation
      expense associated with warants
                
                
                40,000
                
                
                
                524,385Compensation
      expense associated with options
                
                
                712
                
                
                
                712Changes
      in operating assets and liabilitiesAccounts
      receivable
                
                
                (108,409
                )
                
                
                (221,185
                )Inventory
                
                
                3,098
                
                
                
                30,092Prepaid
      expenses and other current assets
                
                
                41,399
                
                
                
                47,648Deposits
                
                
                (12,800
                )
                
                
                -Accounts
      payable and accrued expenses
                
                
                (7,751
                )
                
                
                1,679Net
      cash used in operating activities
                
                
                (174,175
                )
                
                
                (242,846
                )CASH
      FLOWS FROM INVESTING ACTIVITIES:Employee
      loans
                
                
                (3,071
                )
                
                
                (1,023
                )Proceeds
      from sale of asset
                
                
                8,000
                
                
                
                -Payments
      for acquisition of property and equipment
                
                
                -
                
                
                
                (985
                )Payments
      for patents
                
                
                (2,093
                )
                
                
                (3,699
                )Cash
      provided by (used in) investing activities
                
                
                2,836
                
                
                
                (5,707
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from related party payable
                
                
                11,000
                
                
                
                303,781Preferred
      stock dividend
                
                
                (720
                )
                
                
                (720
                )Net
      cash provided by financing activities
                
                
                10,280
                
                
                
                303,061Net
      (decrease) increase in cash and cash equivalents
                
                
                (161,059
                )
                
                
                54,508CASH
      AND CASH EQUIVALENTS, beginning of period
                
                
                311,506
                
                
                
                56,372CASH
      AND CASH EQUIVALENTS, end of period
                
                $
                150,447
                
                
                $
                110,880




7




UNITED
ENERGY CORP. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE SIX MONTHS ENDED SEPTEMBER 30, 2010 AND 2009





2010
                    
                    
                    2009(Unaudited)SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the periodInterest
                    
                    $
                    899
                    
                    
                    $
                    886Income
      taxes
                    
                    $
                    1,700
                    
                    
                    $
                    1,040SUPPLEMENTAL
      DISCLOSURES OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:Conversion
      of note payable into common stock
                    
                    $
                    -
                    
                    
                    $
                    35,000





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




8


UNITED
ENERGY CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010 (Unaudited)




1.
            BASIS
      OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES




Basis
of presentation




Interim
Financial Statements




The
accompanying unaudited consolidated financial statements of United Energy Corp.
(“we”, “United Energy” or the “Company”) have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, the unaudited interim financial statements furnished herein
include all adjustments necessary for a fair presentation of the Company's
financial position at September 30, 2010 (unaudited) and the results of its
operations for the three and six months ended September 30, 2010 and 2009
(unaudited) and cash flows for the three and six months ended September 30, 2010
and 2009 (unaudited). All such adjustments are of a normal and recurring nature.
Interim financial statements are prepared on a basis consistent with the
Company's annual financial statements. Results of operations for the three and
six months ended September 30, 2010 and 2009 are not necessarily indicative of
the operating results that may be expected for the year ending March 31,
2011.




The
consolidated balance sheet as of March 31, 2010 has been derived from the
audited financial statements at that date but does not include all of the
information and notes required by accounting principles generally accepted in
the United States for complete financial statements.




For further information, refer to the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31,
2010.




Going
Concern– The accompanying
consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America which
contemplate continuation of the Company as a going concern. However, the Company
has year-end losses from operations and has an accumulated deficit of
$23,694,601 as of September 30, 2010.During the six months ended September
30, 2010 the Company experienced a net loss from operations of $147,809 and a
negative cash flow from operations of $158,175. These matters raise substantial
doubt about the Company’s ability to continue as a going concern. Our
consolidated financial statements do not include any adjustment that might
result from the outcome of this uncertainty.




Our
continued existence is dependent upon several factors, including raising
additional funds through loans, additional sales of its equity securities,
increased sales volumes and the ability to achieve profitability from the sales
of our product lines. In order to increase our cash flow, we are continuing our
efforts to stimulate sales and cut back expenses not directly supporting our
sales and marketing efforts.




There can
be no assurance that we will be successful in stimulating sales or reducing
expenses to levels sufficient to generate cash flow sufficient to fund our
anticipated liquidity requirements. There also can be no assurance that
available financing will be available, or if available, that such financing will
be on terms acceptable to us.




2
            NET
      LOSS PER SHARE




Basic
earnings per share is computed by dividing net income available to common
shareholders by the weighted average number of common shares outstanding during
the period. Diluted earnings per share reflects the potential dilution that
could occur if stock options and other commitments to issue common stock were
exercised or equity awards vest resulting in the issuance of common stock that
could increase the number of shares outstanding and lower the earnings per share
of the Company’s common stock. This calculation is not done for periods in a
loss position as this would be antidilutive. As of September 30, 2010, there
were stock options and warrants that would have been included in the computation
of diluted earnings per share that could potentially dilute basic earnings per
share in the future, however, the Company is in a loss position and the result
of the computation would be antidilutive.




9




3
            RECENTLY
      ISSUED ACCOUNTING STANDARDS




Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles




In August 2010, the FASB issued
Accounting Standard Updates No. 2010-21 (ASU No. 2010-21) “Accounting for
Technical Amendments to Various SEC Rules and Schedules” and No. 2010-22 (ASU
No. 2010-22) “Accounting for Various Topics – Technical Corrections to SEC
Paragraphs”. ASU No 2010-21 amends various SEC paragraphs pursuant to the
issuance of Release no. 33-9026: Technical Amendments to Rules, Forms, Schedules
and Codification of Financial Reporting Policies. ASU No. 2010-22 amends various
SEC paragraphs based on external comments received and the issuance of SAB 112,
which amends or rescinds portions of certain SAB topics. Both ASU No. 2010-21
and ASU No. 2010-22 are effective upon issuance. The amendments in ASU No.
2010-21 and No. 2010-22 will not have a material impact on the Company’s
financial statements.





A variety
of proposed or otherwise potential accounting standards are currently under
study by standard-setting organizations and various regulatory agencies. Because
of the tentative and preliminary nature of these proposed standards, management
has not determined whether implementation of such proposed standards would be
material to the Company’s consolidated financial statements.




4.
            CONVERTIBLE
      DEBT




On
November 6, 2009, the Company issued a convertible term note in the amount of
$30,000, which accrues interest at 7% per year. Principal and interest is
payable on demand. The holder of this term note has the option to convert all or
a portion of the note (including principal and interest) into shares of common
stock at any time at a conversion price of $0.21 per share. The conversion price
is subject to adjustment for stock splits, stock dividends and similar
events.




5.
            USE
      OF ESTIMATES




The preparation of consolidated
financial statements in accordance with accounting principals generally accepted
in the United States of America requires the Company to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and
liabilities.




On an on-going basis, the Company
evaluates its estimates, including those related to option and warrant values,
bad debts, inventories, intangible assets, contingencies and litigation. The
Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.




6.
            INVENTORY





Inventory consists of the
following:





September 30,
                  
                  
                  March 31,2010
                  
                  
                  2010Blended
      chemicals
                  
                  $
                  20,677
                  
                  
                  $
                  29,734Raw
      materials
                  
                  
                  57,095
                  
                  
                  
                  51,136Total
      inventory
                  
                  $
                  77,772
                  
                  
                  $
                  80,870




10




7.
            FAIR
      VALUE MEASUREMENT




Fair value of certain of the Company’s
financial instruments including cash and cash equivalents, inventory, account
payable, accrued expenses, notes payables, and other accrued liabilities
approximate cost because of their short maturities. The Company measures and
reports fair value in accordance with ASC 820, “Fair Value Measurements and
Disclosure” defines fair value, establishes a framework for measuring fair value
in accordance with generally accepted accounting principles and expands
disclosures about fair value investments.




Fair
value, as defined in ASC 820, is 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. The fair value of an asset should reflect
its highest and best use by market participants, principal (or most
advantageous) markets, and an in-use or an in-exchange valuation premise. The
fair value of a liability should reflect the risk of nonperformance, which
includes, among other things, the Company’s credit risk.




Valuation
techniques are generally classified into three categories: the market approach;
the income approach; and the cost approach. The selection and application of one
or more of the techniques may require significant judgment and are primarily
dependent upon the characteristics of the asset or liability, and the quality
and availability of inputs. Valuation techniques used to measure fair value
under ASC 820 must maximize the use of observable inputs and minimize the use of
unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and
resulting measurement as follows:




Level
1




Quoted
prices (unadjusted) in active markets that are accessible at the measurement
date for identical assets or liabilities;




Level
2




Quoted
prices for similar assets or liabilities in active markets; quoted prices for
identical or similar assets or liabilities in markets that are not active;
inputs other than quoted prices that are observable for the asset or liability;
and inputs that are derived principally from or corroborated by observable
market data for substantially the full term of the assets or liabilities;
and




Level
3




Unobservable
inputs for the asset or liability that are supported by little or no market
activity and that are significant to the fair values.




Fair
value measurements are required to be disclosed by the Level within the fair
value hierarchy in which the fair value measurements in their entirety fall.
Fair value measurements using significant unobservable inputs (in Level 3
measurements) are subject to expanded disclosure requirements including a
reconciliation of the beginning and ending balances, separately presenting
changes during the period attributable to the following: (i) total gains or
losses for the period (realized and unrealized), segregating those gains or
losses included in earnings, and a description of where those gains or losses
included in earning are reported in the statement of income.




As of
September 30, 2010, the Company does not possess any long-term monetary or
nonmonetary financial instruments whose fair value is measured on a recurring
basis. The Company possesses financial instruments of a short-term nature, such
as cash, prepaid expenses, accounts receivable, loans receivable, accounts
payable, accrued expenses and convertible notes, whose fair value can be
approximated due to their short term maturity.


11


8.
            EMPLOYEE
      BENEFITS PLAN




Stock
Option Plans




In August
2001, the Company’s stockholders approved the 2001 Equity Incentive Plan (the
“2001 Plan”), which provides for the grant of stock options to purchase up to
2,000,000 shares of common stock to any employee, non-employee director, or
consultant at the Board’s discretion. Under the 2001 Plan, these options may be
exercised for a period up to ten years from the date of grant. Options issued to
employees are exercisable upon vesting, which can range between the dates of the
grant to up to 5 years.




An
amendment and restatement of the 2001 Equity Incentive Plan increasing the
number of shares for a total of 4,000,000 was approved by the Board of Directors
on May 29, 2002 and was approved by the shareholders at the annual
meeting.




Under the 2001 Plan, options are
granted to non-employee directors upon election at the annual meeting of
stockholders at a purchase price equal to the fair market value on the date of
grant. In addition, the non-employee director stock options shall be exercisable
in full twelve months after the date of grant unless determined otherwise by the
board.




Fair
Value of Stock Options


For disclosure purposes under FASB
guidance now codified as ASC Topic 505, the fair value of each option grant is
estimated on the date of grant using the Black-Scholes option valuation model
with the following weighted-average assumptions:




2010
                  
                  
                  2009Expectedlife (in
      years)
                  
                  
                  10
                  
                  
                  
                  10Risk-free
      interest rate
                  
                  
                  4.54
                  %
                  
                  
                  4.54
                  %Volatility
                  
                  
                  191.2
                  
                  
                  
                  169.4Dividend
      yield
                  
                  
                  0
                  %
                  
                  
                  0
                  %




Utilizing
these assumptions, the weighted average fair value of options granted with an
exercise price equal to their fair market value at the date of the grant is
$1.05 for the six months ended September 30, 2010.




Summary
Stock Option Activity




The following table summarizes stock
option information with respect to all stock options for the quarter ended
September 30, 2010:




Number of
                    Shares
                
                
                Weighted
                    Average
                    Exercise
                    Price
                
                
                Weighted
                    Average
                    Remaining
                    Contractual
                    Life (Years)
                
                
                AggregateIntrinsic
                    ValueOptions
      outstanding April 1, 2010
                
                
                3,287,500
                
                
                $
                1.05
                
                
                
                4.67Granted
                
                
                —Expired
                
                
                (40,000
                )Options
      outstanding September 30, 2010
                
                
                3,247,500
                
                
                $
                1.06
                
                
                
                4.22Vested
      and expected to vest–end of quarter
                
                
                3,247,500
                
                
                $
                1.06
                
                
                
                4.22
                
                
                $
                —Exercisable–end
      of quarter
                
                
                3,172,500
                
                
                $
                1.06
                
                
                
                4.16
                
                
                $
                —




Pursuant
to the terms of an employment agreement with Ronald Wilen, Chief Executive
Officer, President, Secretary and Director of the Company dated April 17, 2007,
for each of the next five (5) years of the term of the agreement (commencing
with April 17, 2008), Mr. Wilen will receive an option to purchase fifty
thousand (50,000) shares of common stock of the Company. The exercise price with
respect to any option granted pursuant to the employment agreement shall be the
fair market value of the common stock underlying such option on the date such
option was granted.


12




Options
outstanding at September 30, 2010 have an exercise price ranging between $0.09
to $2.05.




The aggregate intrinsic
value in the table above represents the total intrinsic value (the difference
between United Energy’s closing stock price on September 30, 2010 and the
exercise price, multiplied by the number of in–the–money options) that would
have been received by the option holders had vested option holders exercised
their options on September 30, 2010. This amount changes based upon changes in
the fair market value of United Energy’s stock. As of September 30, 2010, 2,133
of the total unrecognized compensation costs related to stock options are
expected to be recognized over a period of one year and six months.




9.
            SUBSEQUENT
      EVENT




The Company did not have any material
subsequent events to disclose from the balance sheet date to the filing date.
The Company evaluated subsequent events through November 17,
2010.




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




CAUTIONARY
STATEMENT RELATING TO FORWARD-LOOKING STATEMENTS





The
matters discussed in this Form 10-Q contain certain forward-looking statements
and involve risks and uncertainties (including changing market conditions,
competitive and regulatory matters, etc.) detailed in the disclosure contained
in this Form 10-Q and the other filings with the Securities and Exchange
Commission made by us from time to time. The discussion of our liquidity,
capital resources and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to our operations. Accordingly, actual results could differ
materially from those projected in the forward-looking statements as a result of
a number of factors, including those identified herein and those discussed under
the heading “Risk Factors” in the Company’s 10-K for the fiscal year ended March
31, 2010. This item should be read in conjunction with the financial statements
and other items contained elsewhere in the report. Unless the context otherwise
requires, “we”, “our”, “us”, the “Company” and similar phrases refer to United
Energy Corp.




Overview




We
develop and distribute environmentally friendly specialty chemical products with
applications in several industries and markets. Our current line of products
includes our K-Line of Chemical Products for the oil industry and related
products.




Through
our wholly owned subsidiary, Green Globe Industries, Inc., we provide the U.S.
military with a variety of solvents, paint strippers and cleaners under our
trade name “Qualchem.” Green Globe is a qualified supplier for the U.S. military
and has sales contracts currently in place with no minimum purchase
requirements, which are renewable at the option of the U.S.
Military.




A key
component of our business strategy is to pursue collaborative joint working and
marketing arrangements with established international oil and oil service
companies. We intend to enter into these relationships to more rapidly and
economically introduce our K-Line of Chemical Products to the worldwide
marketplace for refinery, tank and pipeline cleaning services.




We
provide our K-Line of Chemical Products and our Green Globe Products to our
customers and generated revenues of $882,826 for the six-month period ended
September 30, 2010 and $1,007,206 for the six-month period ended September 30,
2009.




13




RESULTS
OF OPERATIONS




Three
Months Ended September 30, 2010 Compared to the Three Months Ended September 30,
2009




Revenues. Revenues for the
three months ended September 30, 2010 were $439,321, a $173,881, or 28% decrease
from revenues of $613,202 in the comparable three months of 2009. Revenues from
our K-Line of Chemical Products decreased by $140,832 to $411,048 or 26%
compared to $551,880 in the comparable three months ended September 30, 2009,
and revenues from our Green Globe/Qualchem military sales decreased by $33,049
to $28,273 or 54% compared to $61,322 in the comparable three months ended
September 30, 2009.




Cost of Goods Sold. Cost of
goods sold decreased $66,931, or 29% to $164,914 or 38% of revenues, for the
three months of September 30, 2010 from $231,845 or 38% of revenues, for the
three months of September 30, 2009. The decrease in cost of goods sold was due
to the lower sales level in the period compared to the comparable period in
2009. Cost of goods sold from our K-Line of Chemical Products decreased by
$54,305 to $151,790 or 26% compared to $206,095 in the comparable three months
ended September 30, 2009, and cost of goods sold by our Green Globe/Qualchem
military sales decreased by $12,626 to $13,124 or 49% compared to $25,750 in the
comparable three months ended September 30, 2009.




Gross Profit. Gross profit
for the three months ended September 30, 2010, decreased by $106,950, or 28% to
$274,407 or 62% of sales compared with $381,357 or 62% of sales in the prior
period. The decrease in gross profit reflects the lower levels of
sales.




Operating
Costs and Expenses




Selling, General and Administrative
Expenses. Selling, general and administrative expenses decreased $481,243
to $309,363 or 70% of sales for the three months ended September 30, 2010
compared with $790,606 or 129% of sales for the three months ended September 30,
2009. The decrease in general and administrative expenses is primarily related
to a decrease in financing costs associated with the issuance of warrants and in
insurance expenses, professional fees, salaries, employee benefits and travel
and entertainment.




Research and Development.
Research and development expenses decreased $28,330 to $35,813 or 8% of sales
for the three months ended September 30, 2010 compared with $64,143 or 10% of
sales for the three months ended September 30, 2009. The decrease in research
and development expenses was primarily related to a decrease in lab supplies and
salaries.




Depreciation and
Amortization. Depreciation and amortization remained relatively constant
for the three months ended September 30, 2010 as compared with September 30,
2009.




Interest Income. Interest
income remained relatively constant for the six months ended September 30, 2010
as compared with September 30, 2009.




Gain on sale of asset.During
the period ended September 30, 2010, the company sold a fully depreciated
vehicle for $8,000.




Interest Expense. The Company
had interest expense of $14,062 for the three months ended September 30, 2010
compared with $11,878 in the corresponding period in 2009. The increase was due
to the indebtedness outstanding on the loans by directors and their
affiliates.




Net Loss. The three months
ended September 30, 2010 resulted in a net loss of $88,426 or $0.00 per share as
compared to a net loss of $497,698 or $0.02 per share for the three months ended
September 30, 2009. The average number of shares of common stock used in
calculating earnings per share increased 175,862 shares to 31,504,444 as a
result of 175,862 shares issued in the connection with the exercise of
warrants.




14




Six
Months Ended September 30, 2010 Compared to the Six Months Ended September 30,
2009




Revenues. Revenues for the
six-month period ended September 30, 2010 were $882,826, a $124,380 or 12%
decrease from revenues of $1,007,206 in the comparable six-month period ended
September 30, 2009. Revenues from our K-Line of Chemical Products decreased by
$45,157 to $822,401 or 5% compared to $867,558 in the comparable six months
ended September 30, 2009, and revenues from our Green Globe/Qualchem military
sales decreased by $79,223 to $60,425 or 57% compared to $139,648 in the
comparable six months ended September 30, 2009.




Cost of Goods Sold. Cost of
goods sold decreased $48,180, or 13% to $337,379 or 38% of revenues, for the
six-month period ended September 30, 2010 from $385,559 or 38% of revenues, for
the six-month period ended September 30, 2009. The decrease in cost of goods
sold was due to the lower sales level in the period compared to the comparable
period in 2009. Cost of goods sold from our K-Line of Chemical Products
decreased by $15,813 to $309,390 or 5% compared to $325,203 in the comparable
six months ended September 30, 2009, and cost of goods sold from our Green
Globe/Qualchem military sales decreased by $32,367 to $27,989 or 54% compared to
$60,356 in the comparable six months ended September 30, 2009.




Gross Profit. Gross profit
for the six months ended September 30, 2010, decreased by $76,200, or 12% to
$545,447 or 62% of revenues compared with $621,647 or 62% of revenues in the
prior period. The decrease in gross profit reflects the lower levels of sales of
our Specialty Chemicals and Green Globe/Qualchem military sales




Operating
Costs and Expenses




Selling, General and Administrative
Expenses. Selling, general and administrative expenses decreased $563,563
to $578,075 or 65% of revenues for the six months ended September 30, 2010
compared with $1,141,638 or 113% of revenues for the six months ended September
30, 2009. The decrease in selling, general and administrative expenses was
primarily related to a decrease in financing costs associated with the issuance
of warrants and in insurance expenses, professional fees, salaries, employee
benefits and travel and entertainment.




Research and Development.
Research and development expenses decreased $44,670 to $70,969 or 8% of sales
for the six months ended September 30, 2010 compared with $115,639 or 11% of
sales for the six months ended September 30, 2009. The decrease in research and
development expenses was related to a decrease in lab supplies and
salaries.




Depreciation and
Amortization. Depreciation and amortization remained relatively constant
for the six months ended September 30, 2010 as compared with September 30,
2009.




Interest Income. Interest
income remained relatively constant for the six months ended September 30, 2010
as compared with September 30, 2009.




Gain on sale of asset.During
the period ended September 30, 2010, the company sold a fully depreciated
vehicle for $8,000.




Interest Expense. The Company
had interest expense of $29,055 for the six months ended September 30, 2010
compared with $19,423 in the corresponding period in 2009. The increase was due
to the indebtedness outstanding on the loans by directors and their
affiliates.




Net Loss. The six months
ended September 30, 2010 resulted in a net loss of $147,809 or $0.00 per share
as compared to a net loss of $679,551 or $0.02 per share for the six months
ended September 30, 2009. The average number of shares of common stock used in
calculating earnings per share increased 249,257 shares to 31,504,449 as a
result of 298,472 shares issued in connection with the conversion of the
convertible note and 175,862 shares issued in the connection with the exercise
of warrants.




15




Liquidity
and Capital Resources




As of
September 30, 2010, the Company had $150,447 in cash and cash equivalents, as
compared to $311,506 at March 31, 2010.




The
$161,059 decrease in cash and cash equivalents was due to net cash used in
operations of $174,175, net cash provided by investing activities of $2,836 and
net cash provided by financing activities of $10,280. Cash
provided by investing activities consisted of proceeds from sale of
asset of $8,000, offset by patent purchases of $2,093 and employee loans of
$3,071. Cash provided by financing activities consisted of related party loans
of $11,000, offset by preferred stock dividends of $720.




The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America which contemplate continuation of the
Company as a going concern. However, the Company has year-end losses from
operations and has an accumulated deficit of $23,694,601 as of September 30,
2010.During the six
months ended September 30, 2010 the Company experienced a net loss from
operations of $147,809 and a negative cash flow from operations of $158,175.
These matters raise substantial doubt about the Company’s ability to continue as
a going concern. Our consolidated financial statements do not include any
adjustment that might result from the outcome of this
uncertainty.




Our
continued existence is dependent upon several factors, including raising
additional funds through loans, additional sales of its equity securities,
increased sales volumes and the ability to achieve profitability from the sales
of our product lines. In order to increase our cash flow, we are continuing our
efforts to stimulate sales and cut back expenses not directly supporting our
sales and marketing efforts.




There can
be no assurance that we will be successful in stimulating sales or reducing
expenses to levels sufficient to generate cash flow sufficient to fund our
anticipated liquidity requirements. There also can be no assurance that
available financing will be available, or if available, that such financing will
be on terms acceptable to us.




Concentration
of Risk




Sales to our top three customers,
accounted for approximately 82% of revenue, or $725,112, for the six-month
period ending September 30, 2009 and sales to our top four customers, accounted
for approximately 85% of our revenue, or $854,786, for the three-month period
ending September 30, 2009.




Sales to our top customer, for the
six-month period ending September 30, 2010 were $461,112.




Off-Balance
Sheet Arrangements




We do not
currently have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to our
stockholders.






Item 3.
            Quantitative and Qualitative
      Disclosures About Market
Risks.




Not
applicable




16




Item 4.
            Controls and
      Procedures.




Evaluation
of the Company's Disclosure Controls and Procedures




We
carried out an evaluation, under the supervision and with the participation of
the Company's management, including our Chief Executive Officer and our
Principal Accounting Officer (Interim Chief Financial Officer), of the
effectiveness of our “disclosure controls and procedures” (as defined in Rules
13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of
September 30, 2010. Based upon that evaluation, the Chief Executive Officer and
the Principal Accounting Officer (Interim Chief Financial Officer) concluded
that our disclosure controls and procedures are effective, in all material
respects, with respect to the recording, processing, summarizing, and reporting,
within the time periods specified in the Securities and Exchange Commission's
rules and forms, of information required to be disclosed by us in the reports
that we file or submit under the Exchange Act. In designing and evaluating our
“disclosure controls and procedures” (as defined in Rules 13a-15(e) or 15d-15(e)
of the Securities Exchange Act of 1934, as amended), management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurances of achieving the desired control objectives,
as ours are designed to do, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.




Changes
in Control Over Financial Reporting




Management
has not identified any change in our internal control over financial reporting
that occurred during the second quarter ended September 30, 2010 that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.




17


PART
II




OTHER
INFORMATION




Item
      1.
            Legal
      Proceedings




None.




Item 1A.
            Risk
      Factors




Not applicable.




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




In August
2010, the Company issued warrants to acquire 1,000,000 shares of Common Stock in
the aggregate to members of its Board of Directors as compensation for their
services. The Company did not receive any proceeds from the issuance of the
warrants. The warrants were issued pursuant to the exemption from registration
provided by Section 4 (2) of the Securities Act of 1933, as
amended.




Item
      3.
            Defaults Upon Senior
      Securities




None




Item
      4.
            (Removed and
      Reserved)




Item
      5.
            Other
      Information




None




Item 6.
            Exhibits




31.1
            Chief
      Executive Officer’s Certificate, pursuant to Rule 13a-14(a)/ 15d-14(a) of
      the Exchange Act.




31.2
            Chief
      Financial Officer’s Certificate, pursuant to Rule 13a-14(a)/ 15d-14(a) of
      the Exchange Act




32.1
            Chief
      Executive Officer’s Certificate, pursuant to Section 1350 of Chapter 63 of
      Title 18 of the United States Code (18 U.S.C.
  1350).




32.2
            Chief
      Financial Officer’s Certificate, pursuant to Section 1350 of Chapter 63 of
      Title 18 of the United States Code (18 U.S.C.
  1350).




18


SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this Report to be signed on its behalf by the undersigned thereunto
duly authorized.




Dated:      November
      17, 2010
                    
                    UNITED
      ENERGY CORP.By:
                    /s/ Ronald WilenRonal
      Wilen,Chief
      Executive Officer(as
      principal executive officer)By:
                    /s/ James McKeeverJames
      McKeever,Interim
      Chief Financial Officer(as
      principal financial and accountingofficer)




19