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 December
31, 2010




or




o
            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 ofincorporation
      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. þ
Yes o
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). o Yes þ No




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. o Yes þ No


As of
February 14, 2011, 31,504,449 shares of common stock, par value $.01 per share,
were outstanding.










INDEX




PART
      I.  FINANCIAL INFORMATIONItem
      1.
            Financial
      StatementsConsolidated
      balance sheets December 31, 2010 (Unaudited) andMarch
      31, 2010
            3-4Consolidated
      statements of operations for the three months and nine months ended
      December 31, 2010 (Unaudited) and 2009 (Unaudited)
            5Consolidated
      statement of stockholders' equity for the nine months ended December 31,
      2010 (Unaudited)
            6Consolidated
      statements of cash flows for the nine months ended December 31, 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
            13-17Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            17Item
      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




December
      31,
            
            
            March
      31,2010
            
            
            2010(Unaudited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
            
            
            $66,890
            
            
            
            $311,506Accounts
      receivable, net of allowance for doubtfulaccounts
      of $72,719 and $77,211, respectively
            
            
            86,271
            
            
            
            190,915Inventory
            
            
            93,840
            
            
            
            80,870Prepaid
      expenses and other current assets
            
            
            35,233
            
            
            
            62,827Loan
      receivable, net of reserve of $25,000
            
            
            25,000
            
            
            
            25,000Total
      current assets
            
            
            307,234
            
            
            
            671,118PROPERTY
      AND EQUIPMENT, net of accumulateddepreciation
      and amortization of $472,303 and$492,121
      respectively
            
            
            63,320
            
            
            
            79,050OTHER
      ASSETS:Goodwill,
      net
            
            
            15,499
            
            
            
            15,499Patents,
      net of accumulated amortization of $309,367and
      $280,306, respectively
            
            
            292,263
            
            
            
            317,318Loans
      receivable
            
            
            38,519
            
            
            
            35,793Deposits
            
            
            14,185
            
            
            
            1,385Total
      assets
            
            
            $731,020
            
            
            
            $1,120,163




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


3




UNITED
ENERGY CORP.  AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS




December
      31,
            
            
            March
      31,2010
            
            
            2010(Unaudited)LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      payable
            
            
            $248,158
            
            
            
            $234,948Accrued
      expenses
            
            
            283,817
            
            
            
            362,925Convertible
      term note
            
            
            30,000
            
            
            
            30,000Due
      to related parties
            
            
            463,883
            
            
            
            453,781Total
      current liabilities
            
            
            1,025,858
            
            
            
            1,081,654STOCKHOLDERS'
      EQUITY (DEFICIT):Preferred
      Stock: 100,000 shares authorized;Series
      A Convertible Preferred Stock: $8,000stated
      value, 3 shares issued and outstandingas
      of December 31, 2010 and March 31, 2010
            
            
            24,000
            
            
            
            24,000Common
      stock: $0.01 par value 100,000,000 sharesauthorized;
      31,504,449shares
      issued and outstanding as ofDecember
      31, 2010 and March 31, 2010
            
            
            315,045
            
            
            
            315,045Additional
      paid-in capital
            
            
            23,307,774
            
            
            
            23,245,536Accumulated
      deficit
            
            
            (23,941,657
            )
            
            
            (23,546,072
            )Total
      stockholders' equity (deficit)
            
            
            (294,838
            )
            
            
            38,509Total
      liabilities and stockholders' equity (deficit)
            
            
            $731,020
            
            
            
            $1,120,163




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


4


UNITED
ENERGY CORP. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS




For
      the Three Months
              
              
              For
      the Nine MonthsEnded
      December 31,
              
              
              Ended
      December 31,2010
              
              
              2009
              
              
              2010
              
              
              2009(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)REVENUES,
      net
              
              
              $109,953
              
              
              
              $437,075
              
              
              
              $992,779
              
              
              
              $1,444,281COST
      OF GOODS SOLD
              
              
              60,624
              
              
              
              153,228
              
              
              
              398,003
              
              
              
              538,787Gross
      profit
              
              
              49,329
              
              
              
              283,847
              
              
              
              594,776
              
              
              
              905,494OPERATING
      EXPENSES:Selling,
      general and administrative
              
              
              235,487
              
              
              
              762,183
              
              
              
              813,562
              
              
              
              1,903,821Research
      and development
              
              
              35,541
              
              
              
              58,665
              
              
              
              106,510
              
              
              
              174,304Gain
      on sale of asset
              
              
              -
              
              
              
              -
              
              
              
              (8,000
              )
              
              
              -Depreciation
      and amortization
              
              
              11,620
              
              
              
              11,971
              
              
              
              34,784
              
              
              
              36,483Total
      operating expenses
              
              
              282,648
              
              
              
              832,819
              
              
              
              946,856
              
              
              
              2,114,608Loss
      from operations
              
              
              (233,319
              )
              
              
              (548,972
              )
              
              
              (352,080
              )
              
              
              (1,209,114
              )OTHER
      INCOME (EXPENSE), net:Interest
      income
              
              
              -
              
              
              
              6
              
              
              
              7
              
              
              
              20Interest
      expense
              
              
              (13,377
              )
              
              
              (14,528
              )
              
              
              (42,432
              )
              
              
              (33,951
              )Total
      other income (expense), net
              
              
              (13,377
              )
              
              
              (14,522
              )
              
              
              (42,425
              )
              
              
              (33,931
              )Net
      loss
              
              
              (246,696
              )
              
              
              (563,494
              )
              
              
              (394,505
              )
              
              
              (1,243,045
              )PREFERRED
      DIVIDENDS
              
              
              (360
              )
              
              
              (360
              )
              
              
              (1,080
              )
              
              
              (1,080
              )Net
      loss applicable to common shareholders
              
              
              $(247,056
              )
              
              
              $(563,854
              )
              
              
              $(395,585
              )
              
              
              $(1,244,125
              )BASIC
      AND DILUTED LOSS PER SHARE:
              
              
              $(0.01
              )
              
              
              $(0.02
              )
              
              
              $(0.01
              )
              
              
              $(0.04
              )BASIC
      AND DILUTED WEIGHTED AVERAGENUMBER
      OF SHARES OUTSTANDING:
              
              
              31,504,449
              
              
              
              31,328,587
              
              
              
              31,504,449
              
              
              
              31,279,746




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


5


UNITED
ENERGY CORP. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY


FOR THE NINE MONTHS ENDED DECEMBER 31, 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
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,068
                            
                            
                            
                            -
                            
                            
                            
                            1,068Compensation
      expense associatedwith
      warrants
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            61,170
                            
                            
                            
                            -
                            
                            
                            
                            61,170Dividends
      accrued onpreferred
      shares
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (1,080
                            )
                            
                            
                            (1,080
                            )Net
      loss
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (394,505
                            )
                            
                            
                            (394,505
                            )BALANCE,
      Dectember 31, 2010
                            
                            
                            31,504,449
                            
                            
                            
                            $315,045
                            
                            
                            
                            $24,000
                            
                            
                            
                            $23,307,774
                            
                            
                            
                            $(23,941,657
                            )
                            
                            
                            $(294,838
                            )









6


UNITED
ENERGY CORP. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE NINE MONTHS ENDED DECEMBER 31, 2010 AND 2009




2010
            
            
            2009(Unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss from continuing operations
            
            
            $(394,505
            )
            
            
            $(1,243,045
            )Adjustments
      to reconcile net loss to net cash used in operating
      activitiesDepreciation
      and amortization
            
            
            44,791
            
            
            
            51,492Allowance
      for doubtful accounts
            
            
            (4,492
            )
            
            
            18,680Gain
      on sale of asset
            
            
            (8,000
            )
            
            
            -Compensation
      expense associated with warrants
            
            
            61,170
            
            
            
            975,411Compensation
      expense associated with options
            
            
            1,068
            
            
            
            1,068Changes
      in operating assets and liabilitiesAccounts
      receivable
            
            
            109,136
            
            
            
            12,887Inventory
            
            
            (12,970
            )
            
            
            60,417Prepaid
      expenses and other current assets
            
            
            26,730
            
            
            
            47,620Deposits
            
            
            (12,800
            )
            
            
            -Accounts
      payable and accrued expenses
            
            
            (65,898
            )
            
            
            117,490Net
      cash (used in) provided by operating activities
            
            
            (255,770
            )
            
            
            42,020CASH
      FLOWS FROM INVESTING ACTIVITIES:Employee
      loans
            
            
            (1,863
            )
            
            
            (16,100
            )Proceeds
      from sale of asset
            
            
            8,000
            
            
            
            -Payments
      for acquisition of property and equipment
            
            
            -
            
            
            
            (985
            )Payments
      for patents
            
            
            (4,006
            )
            
            
            (3,699
            )Cash
      provided by (used in) investing activities
            
            
            2,131
            
            
            
            (20,784
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from related party payable
            
            
            10,103
            
            
            
            303,781Preferred
      stock dividend
            
            
            (1,080
            )
            
            
            (1,080
            )Net
      cash provided by financing activities
            
            
            9,023
            
            
            
            302,701Net
      (decrease) increase in cash and cash equivalents
            
            
            (244,616
            )
            
            
            323,937CASH
      AND CASH EQUIVALENTS, beginning of period
            
            
            311,506
            
            
            
            56,372CASH
      AND CASH EQUIVALENTS, end of period
            
            
            $66,890
            
            
            
            $380,309


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





7




UNITED
ENERGY CORP. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE NINE MONTHS ENDED DECEMBER 31, 2010 AND 2009




2010
            
            
            2009(Unaudited)SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the periodInterest
            
            
            $1,300
            
            
            
            $1,160Income
      taxes
            
            
            $2,412
            
            
            
            $2,080SUPPLEMENTAL
      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 consolidated financial
statements.


8


UNITED
ENERGY CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 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 December 31, 2010 (unaudited) and the results of its
operations for the three and nine months ended December 31, 2010 and 2009
(unaudited) and cash flows for the nine months ended December 31, 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 nine months
ended December 31, 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
$23,941,657 as of December 31, 2010.During the nine months ended December
31, 2010 the Company experienced a net loss from operations of $352,080 and a
negative cash flow from operations of $255,770.  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
December 31, 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 the maturity date of April 30, 2010. 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 $0.09
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:





December
      31,
            
            
            March
      31,2010
            
            
            2010Blended
      chemicals
            
            
            $22,301
            
            
            
            $29,734Raw
      materials
            
            
            71,539
            
            
            
            51,136Total
      inventory
            
            
            $93,840-
            
            
            
            $80,870


10




7.           FAIR
VALUE MEASUREMENTS




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
December 31, 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.




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.


11




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 of Directors.




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
            
            
            199.9
            
            
            
            175.3Dividend
      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
$1.06 for the nine months ended December 31, 2010.




Summary
Stock Option Activity




The following table summarizes stock
option information with respect to all stock options for the quarter ended
December 31, 2010:




Number
      of
                Shares
            
            
            Weighted
                Average
                Exercise
              Price
            
            
            Weighted
                Average
                Remaining
                Contractual
                Life
      (Years)
            
            
            Aggregate
                Intrinsic
                ValueOptions
      outstanding April 1, 2010
            
            
            3,287,500
            
            
            
            $1.05
            
            
            
            4.67Granted
            
            
            --Expired
            
            
            (60,000
            )Options
      outstanding December 31, 2010
            
            
            3,227,500
            
            
            
            $1.06
            
            
            
            3.91Vested
      and expected to vest–end of quarter
            
            
            3,227,500
            
            
            
            $1.06
            
            
            
            3.91
            
            
            $
            --Exercisable–end
      of quarter
            
            
            3,165,000
            
            
            
            $1.08
            
            
            
            3.86
            
            
            $
            --


12




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.




Options
outstanding at December 31, 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 the Company’s closing stock price on December 31, 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 December 31, 2010. This amount changes based upon changes in the fair market
value of the Company’s stock. As of December 31, 2010, $1,777 of the total
unrecognized compensation costs related to stock options is expected to be
recognized over a period of one year and three months.




9.           SUBSEQUENT
EVENTS




On January 21, 2011, the Company
entered into an agreement with Ronald Wilen, a director, the President and Chief
Executive Officer, and Hilltop Holding Company, L.P. (“Hilltop”), a limited
partnership of which Jack Silver, a director, is the managing partner. Pursuant
to the agreement, Mr. Wilen and Hilltop agreed to extend the maturity date of
$151,016.67 and $301,866.67 of secured convertible notes held by Mr. Wilen and
Hilltop, respectively.  The maturity date was extended from January
31, 2011 to December 20, 2011.  In consideration for the agreement to
extend the maturity dates, Mr. Wilen and Hilltop were issued warrants to
purchase up to 1,984,939 and 3,959,894 shares of common stock, respectively, at
an exercise price of $.11 per share.




On or about January 3, 2011, Hilltop loaned the Company an
additional $100,000.  Pursuant to the agreement, the Company issued
Hilltop a secured convertible note for the $100,000 loan and warrants to
purchase up to 1,111,111 shares of common stock at an exercise price of $.11 per
share.  The agreement also provides that Hilltop may purchase, at its
option, up to $100,000 of additional secured convertible notes and pro rata
portion of 1,111,111 warrants at any time prior to June 30, 2011.  The
secured convertible note is convertible into Common Stock at a conversion price
of $.09 per share, bears interest at 12% per annum, is due December 20, 2011 and
is secured by substantially all the assets of the Company on a pari passu basis
with the previously issued secured convertible notes.




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.




13




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 have
currently established dealerships in Mexico, Columbia, Brazil, Malta, Malaysia,
Russia, China, Trinidad and Venezuela. The testing of our products has begun in
these counties and we hope to have positive results soon.




We
provide our K-Line of Chemical Products and our Green Globe Products to our
customers and generated revenues of $992,779 for the nine-month period ended
December 31, 2010 and $1,444,281 for the nine-month period ended December 31,
2009.




RESULTS
OF OPERATIONS




Three
Months Ended December 31, 2010 Compared to the Three Months Ended December 30,
2009




Revenues. Revenues for
the three months ended December 31, 2010 were $109,953, a $327,122, or 75%
decrease from revenues of $437,075 in the comparable three months of 2009. The
decrease in revenues was due to lower levels our K-Line of Chemical Products and
military sales during the three months ended December 31,
2010.  Revenues from our K-Line of Chemical Products decreased by
$304,349 to $83,237 or 79% compared to $387,586 in the comparable three months
ended December 31, 2010, and revenues from our Green Globe/Qualchem military
sales decreased by $22,773 to $26,716 or 46% compared to $49,489 in the
comparable three months ended December 31, 2009.




Cost of Goods Sold. Cost of
goods sold decreased $92,604, or 61% to $60,624 or 56% of revenues, for the
three months ended December 31, 2010 from $153,228 or 35% of revenues, for the
three months ended December 31, 2009.  The decrease in cost of goods
sold and the increase in cost of goods sold as a percentage of revenue 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
$87,940 to $43,172 or 67% compared to $131,112 in the comparable three months
ended December 31, 2009, and cost of goods sold by our Green Globe/Qualchem
military sales decreased by $4,664 to $17,452 or 21% compared to $22,116 in the
comparable three months ended December 31, 2009.




Gross
Profit.  Gross profit for the three months ended December 31,
2010, decreased by $234,518, or 83% to $49,329 or 44% of sales compared with
$283,847 or 65% of sales in the prior period. The decrease in gross profit and
gross profit percentage reflects the lower levels of high volume sales that
normally result in a higher profit margin.




Operating
Costs and Expenses




Selling, General and Administrative
Expenses. Selling, general and administrative expenses decreased $526,696
to $235,487 or 214% of sales for the three months ended December 31, 2010
compared with $762,183 or 174% of sales for the three months ended December 31,
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 marketing expenses, insurance expenses, professional
fees, salaries, employee benefits and travel and entertainment.




Research and Development.
Research and development expenses decreased $23,124 to $35,541 or 32% of sales
for the three months ended December 31, 2010 compared with $58,665 or 13% of
sales for the three months ended December 31, 2009. The decrease in research and
development expenses was related to a decrease in lab supplies and
salaries.




14




Depreciation and
Amortization.  Depreciation and amortization remained
relatively constant for the three months ended December 31, 2010 as compared
with December 31, 2009.




Interest
Income.  Interest income remained relatively constant for the
three months ended December 31, 2010 as compared with December 31,
2009.




Interest
Expense.  Interest expense remained relatively constant for the
three months ended December 31, 2010 as compared with December 31,
2009.




Net Loss.  The
three months ended December 31, 2010 resulted in a net loss of $246,696 or $0.01
per share as compared to a net loss of $563,494 or $0.02 per share for the three
months ended December 31, 2009. The average number of shares of common stock
used in calculating earnings per share increased 175,862 shares to 31,504,449 as
a result of 298,472 shares issued in connection with the conversion of the
convertible note.




Nine
Months Ended December 31, 2010 Compared to the Nine Months Ended December 31,
2009




Revenues.  Revenues
for the nine-month period ended December 31, 2010 were $992,779, a $451,502 or
31% decrease from revenues of $1,444,281 in the comparable nine-month period
ended December 31, 2009.  The decrease in revenues was due to lower
levels our K-Line of Chemical Products and military sales during the nine months
ended December 31, 2010.  Revenues from our K-Line of Chemical
Products decreased by $349,506 to $905,638 or 28% compared to $1,255,144 in the
comparable nine months ended December 31, 2009, and revenues from our Green
Globe/Qualchem military sales decreased by $101,996 to $87,141 or 54% compared
to $189,137 in the comparable nine months ended December 31, 2009.




Cost of Goods Sold. Cost of
goods sold decreased $140,784, or 27% to $398,003 or 40% of revenues, for the
nine-month period ended December 31, 2010 from $538,787 or 34% of revenues, for
the nine-month period ended December 31, 2009.  The decrease in cost
of goods sold and the increase in cost of goods sold as a percentage of revenue
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
$103,753 to $352,562 or 23% compared to $456,315 in the comparable nine months
ended December 31, 2009, and cost of goods sold from our Green Globe/Qualchem
military sales decreased by $37,031 to $45,441 or 45% compared to $82,472 in the
comparable nine months ended December 31, 2009.




Gross
Profit.  Gross profit for the nine months ended December 31,
2010, decreased by $310,718, or 35% to $594,776 or 60% of revenues compared with
$905,494 or 63% of revenues in the prior period. The decrease in gross profit
and gross profit percentage reflects the lower levels of sales.




Operating
Costs and Expenses




Selling, General and Administrative
Expenses. Selling, general and administrative expenses decreased
$1,090,259 to $813,562 or 82% of revenues for the nine months ended December 31,
2010 compared with $1,903,821 or 132% of revenues for the nine months ended
December 31, 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 marketing expenses, insurance expenses, professional
fees, salaries, employee benefits and travel and entertainment.




Research and Development.
Research and development expenses decreased $67,794 to $106,510 or 11% of sales
for the nine months ended December 31, 2010 compared with $174,304 or 12% of
sales for the nine months ended December 31, 2010. The decrease in research and
development expenses was related to a decrease in lab supplies and
salaries.




Gain on sale of asset.During
the period ended December 31, 2010, the company sold a fully depreciated vehicle
for $8,000.




Depreciation and
Amortization. Depreciation and amortization remained relatively constant
for the nine months ended December 31, 2010 as compared with December 31,
2009.


15




Interest
Income.  Interest income remained relatively constant for the
nine months ended December 31, 2010 as compared with December 31,
2009.




Interest Expense. The Company
had interest expense of $43,432 for the nine months ended December 31, 2010
compared with $33,951 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 nine
months ended December 31, 2010 resulted in a net loss of $394,505 or $0.01 per
share as compared to a net loss of $1,243,045 or $0.04 per share for the nine
months ended December 31, 2009. The average number of shares of common stock
used in calculating earnings per share increased 224,703 shares to 31,504,449 as
a result of 298,472 shares issued in connection with the conversion of the
convertible note.




Liquidity
and Capital Resources




As of
December 31, 2010, the Company had $66,890 in cash and cash equivalents, as
compared to $311,506 at March 31, 2010.




The
$244,616 decrease in cash and cash equivalents was due to net cash used in
operations of $255,770, net cash provided by investing activities of $2,131 and
net cash provided by financing activities of $9,023. Cash provided by investing
activities consisted of proceeds from sale of asset of $8,000, offset by patent
purchases of $4,006 and employee loans of $1,863.  Cash provided by
financing activities consisted of related party loans of $10,103, offset by
preferred stock dividends of $1,080.




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 $23,941,657 as of December 31,
2010.During
the nine months ended December 31, 2010, the Company experienced a net loss from
operations of $352,080 and a negative cash flow from operations of
$255,770.  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.




On or
about January 3, 2011, Hilltop loaned the Company an additional
$100,000.  Pursuant to the agreement, the Company issued Hilltop a
secured convertible note for the $100,000 loan and warrants to purchase up to
1,111,111 shares of common stock at an exercise price of $.11 per
share.  The agreement also provides that Hilltop may purchase, at its
option, up to $100,000 of additional secured convertible notes and pro rata
portion of 1,111,111 warrants at any time prior to June 30, 2011.




Concentration
of Risk




Sales to our top three customers,
accounted for approximately 73% of revenue, or $725,112, for the nine-month
period ending December 31, 2010 and sales to our top four customers, accounted
for approximately 78% of our revenue, or $943,951, for the nine-month period
ending December 31, 2009.




Sales to our top customer, for the
nine-month period ending December 31, 2010 were $461,112.


16
  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




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
December 31, 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 third quarter ended December 31, 2009 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
October 2010, the Company issued warrants to acquire 400,000 shares of Common
Stock in the aggregate to two employees of The Company 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




10.1
            Agreement,
      dated as of January 21, 2011, among the Company, Ronald Wilen and Hilltop
      Holding Company, L.P. incorporated herein by reference to Exhibit 10.1 of
      the Registrant’s Current Report on Form 8-K filed on January 28,
      2011.




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:
      February 14, 2011
            UNITED
      ENERGY CORP.By:
            /s/ Ronald WilenRonald
      Wilen,Chief
      Executive Officer(as
      principal executive officer)By:
            /s/ James McKeeverJames
      McKeever,Interim
      Chief Financial Officer(as
      principal financial and accounting
officer)


19