**UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION**
  **Washington,
        D.C. 20549**
  **_____________________**
  **Form
        10-QSB/A**
 **(Mark
        One)**
  x
              **QUARTERLY
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934**
  **For
        the quarterly period ended September 30, 2006**
  o
              **TRANSITION
                  REPORT UNDER 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 small business issuer 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**
                *(Issuer's
                  telephone number, including area
                  code)*
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 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. x Yes oNo
  Indicate
        by check mark whether the registrant is a shell company (as defined in rule
        12b-2 of the Exchange Act. Yes o No x
  As
        of the
        close of business on November 13, 2006, 31,030,115 shares of common stock,
        par
        value $.01 per share, were outstanding.
  Transitional
        Small Business Disclosure Format (check one) Yes o No x
  Explanatory
        Note
  We
    are filing this Amendment No.1 on Form-10QSB/A for the quarter ended September
    30, 2006 (the “First Amendment”) in response to comments received
    from the Securities and Exchange Commission (“SEC”). This First
    Amendment revises and restates our financial statements to adjust the opening
    balance of stockholders equity as a result of the amendment of our Form 10KSB/A
    for the year ended March 31, 2006. In addition, the First amendment includes
    updated certificates from our Chief Executive Officer (CEO) and Interim Chief
    Financial Officer (CFO) as exhibits 31.1 and 31.2
  
  **INDEX**
  **PART
                    I. FINANCIAL INFORMATION**Item
                    1.
                Financial
                    StatementsConsolidated
                    balance sheets September 30, 2006 (Unaudited) andMarch
                    31, 2006
                3-4Consolidated
                    statements of operations for the three months and six months
                    ended
                    September 30, 2006 (Unaudited) and 2005 (Unaudited)
                5Consolidated
                    statement of stockholders' equity for the six months ended September
                    30,
                    2006 (Unaudited)
                6Consolidated
                    statements of cash flows for the six months ended September 30,
                    2006
                    (Unaudited) and 2005 (Unaudited)
                7-8Notes
                    to consolidated financial statements
                9-15Item
                    2.
                Management's
                    Discussion and Analysis or Plan of Operation
                16-20Item
                    3
                Controls
                    and Procedures
                21**PART
                    II. OTHER INFORMATION**Item
                    6.
                Exhibits
                22Signatures
                
                23
  2
  **Item
          1.** ***Financial
          Statements***
  **UNITED
          ENERGY CORP. AND SUBSIDIARIES**
 **CONSOLIDATED
          BALANCE SHEETS**
 **SEPTEMBER
          30, 2006 AND MARCH 31, 2006**
  **September 30,**
                  
                  **March 31,****2006**
                  
                  **2006****(Unaudited)****ASSETS**CURRENT
                      ASSETS:Cash
                      and cash equivalents
                  
                  $
                  3,814,794
                  
                  $
                  5,194,748Accounts
                      receivable, net of allowance for doubtful accounts of $9,512
                      and $5,018,
                      respectively
                  
                  
                  234,670
                  
                  
                  91,557Inventory,
                      net of allowance of $16,290 and $16,290, respectively
                  
                  
                  136,392
                  
                  
                  106,957Note
                      receivable, net of allowance for doubtful accounts of $10,525
                      and$10,525,
                      respectively
                  
                  
                  9,476
                  
                  
                  19,476Prepaid
                      expenses and other current assets
                  
                  
                  49,368
                  
                  
                  84,657Total
                      current assets
                  
                  
                  4,244,700
                  
                  
                  5,497,395PROPERTY
                      AND EQUIPMENT, net of accumulated depreciation and amortization
                      of
                      $404,204 and $373,080 respectively
                  
                  
                  117,895
                  
                  
                  146,994OTHER
                      ASSETS:Goodwill,
                      net
                  
                  
                  15,499
                  
                  
                  15,499Patents,
                      net of accumulated amortization of $134,705 and $119,794,
                      respectively
                  
                  
                  312,661
                  
                  
                  327,572Loans
                      receivable
                  
                  
                  2,750
                  
                  
                  364Deposits
                  
                  
                  1,385
                  
                  
                  1,385Total
                      assets
                  
                  $
                  4,694,890
                  
                  $
                  5,989,209
 
 The
          accompanying notes are an integral part of these consolidated financial
          statements.
  3
 **UNITED
          ENERGY CORP. AND SUBSIDIARIES**
 **CONSOLIDATED
          BALANCE SHEETS**
 **SEPTEMBER
          30, 2006 AND MARCH 31, 2006**
  **September 30,**
                
                **March 31,****2006**
                
                **2006****(Unaudited)****LIABILITIES
                    AND STOCKHOLDERS' EQUITY**CURRENT
                    LIABILITIES:Accounts
                    payable
                
                $
                174,241
                
                $
                279,303Accrued
                    expenses
                
                
                75,441
                
                
                134,286Due
                    to related parties
                
                
                244,141
                
                
                444,141Total
                    current liabilities
                
                
                493,823
                
                
                857,730STOCKHOLDERS'
                    EQUITY:Series
                    A Convertible Preferred Stock: $8,000 stated value, 420 shares
                    authorized;
                    3 shares issued and outstanding as of September 30 2006 and March
                    31,
                    2006
                
                
                24,000
                
                
                24,000Common
                    stock: $0.01 par value 100,000,000 shares authorized; 31,030,115
                    and
                    31,017,615 shares issued and outstanding as of September 30,
                    2006 and
                    March 31, 2006
                
                
                310,301
                
                
                310,176Additional
                    paid-in capital
                
                
                21,411,397
                
                
                21,221,471Accumulated
                    deficit
                
                
                (17,544,631
                )
                
                (16,424,168
                )Total
                    stockholders' equity
                
                
                4,201,067
                
                
                5,131,479Total
                    liabilities and stockholders' equity
                
                $
                4,694,890
                
                $
                5,989,209
  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 Six Months****Ended
                    September 30,**
                
                **Ended
                    September 30,****2006**
                
                **2005**
                
                **2006**
                
                **2005****(Unaudited)**
                
                **(Unaudited)**
                
                **(Unaudited)**
                
                **(Unaudited)**REVENUES,
                    net
                
                $
                299,285
                
                $
                88,465
                
                $
                524,352
                
                $
                165,075COST
                    OF GOODS SOLD
                
                
                107,181
                
                
                75,082
                
                
                209,257
                
                
                136,799Gross
                    profit
                
                
                192,104
                
                
                13,383
                
                
                315,095
                
                
                28,276OPERATING
                    EXPENSES:Selling,
                    general and administrative
                
                
                773,913
                
                
                1,071,941
                
                
                1,489,613
                
                
                1,793,363Depreciation
                    and amortization
                
                
                18,770
                
                
                17,415
                
                
                37,408
                
                
                34,660Total
                    operating expenses
                
                
                792,683
                
                
                1,089,356
                
                
                1,527,021
                
                
                1,828,023Loss
                    from operations
                
                
                (600,579
                )
                
                (1,075,973
                )
                
                (1,211,926
                )
                
                (1,799,747
                )OTHER
                    INCOME (EXPENSE), net:Interest
                    income
                
                
                48,950
                
                
                13
                
                
                93,498
                
                
                23Interest
                    expense
                
                
                (374
                )
                
                (485,594
                )
                
                (1,229
                )
                
                (576,168
                )Total
                    other income (expense), net
                
                
                48,576
                
                
                (485,581
                )
                
                92,269
                
                
                (576,145
                )Net
                    loss
                
                
                (552,003
                )
                
                (1,561,554
                )
                
                (1,119,657
                )
                
                (2,375,892
                )Preferred
                    dividends
                
                
                (360
                )
                
                -
                
                
                (806
                )
                
                -Net
                    loss applicable to common shareholders
                
                $
                (552,363
                )
                $
                (1,561,554
                )
                $
                (1,120,463
                )
                $
                (2,375,892
                )BASIC
                    AND DILUTED LOSS PER SHARE:Total
                    basic and diluted loss per share
                
                $
                (0.02
                )
                $
                (0.06
                )
                $
                (0.04
                )
                $
                (0.10
                )WEIGHTED
                    AVERAGE NUMBER OF SHARES, OUTSTANDING, basic and diluted
                
                
                31,030,115
                
                
                25,047,652
                
                
                31,028,544
                
                
                24,292,710
  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 SIX MONTHS ENDED SEPTEMBER 30, 2006 (UNAUDITED)**
  **Additional****Common
                    Stock**
                
                **Preferred**
                
                **Paid-In**
                
                **Accumulated****Shares**
                
                **Amount**
                
                **Stock**
                
                **Capital**
                
                **Deficit**
                
                **Total**BALANCE,
                    April 1, 2006
                
                
                31,017,615
                
                
                310,176
                
                $
                24,000
                
                $
                21,221,471
                
                $
                (16,424,168
                )
                $
                5,131,479Exercise
                    of stock options
                
                
                12,500
                
                
                125
                
                
                —
                
                
                13,750
                
                
                —
                
                
                13,875Compensation
                    expense associated with options
                
                
                —
                
                
                —
                
                
                —
                
                
                176,176
                
                
                —
                
                
                176,176Dividends
                    paid and accrued on preferred shares
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (806
                )
                
                (806
                )Net
                    loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (1,119,657
                )
                
                (1,119,657
                )BALANCE,
                    September 30, 2006
                
                
                31,030,115
                
                
                310,301
                
                $
                24,000
                
                $
                21,411,397
                
                $
                (17,544,631
                )
                $
                4,201,067
  The
          accompanying notes are an integral part of these consolidated financial
          statements.
  6
 **UNITED
          ENERGY CORP. AND SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENTS OF CASH FLOWS**
 **FOR
          THE SIX MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**
  **2006**
                
                **2005****(Unaudited)**CASH
                    FLOWS FROM OPERATING ACTIVITIES:Net
                    loss
                
                $
                (1,120,463
                )
                $
                (2,375,892
                )Adjustments
                    to reconcile net loss to net cash used in operating activitiesDepreciation
                    and amortization
                
                
                46,035
                
                
                597,340Warrants
                    granted in consideration for services
                
                
                -
                
                
                129,720Stock
                    granted in consideration for interest expense
                
                
                -
                
                
                492Compensation
                    expense associated with options
                
                
                176,176
                
                
                387,000Changes
                    in operating assets and liabilities(Increase)
                    decrease in accounts receivable, net
                
                
                (143,113
                )
                
                715,464Increase
                    in inventory, net
                
                
                (29,435
                )
                
                (60,176
                )Decrease
                    in note receivable, net
                
                
                10,000
                
                
                15,000Decrease
                    in prepaid expenses and other current assets
                
                
                35,289
                
                
                67,068(Decrease)
                    increase in accounts payable and accrued Expenses
                
                
                (163,907
                )
                
                71,506Increase
                    in employee loans
                
                
                (2,386
                )
                
                (163
                )Net
                    cash used in operating activities
                
                
                (1,191,804
                )
                
                (452,641
                )CASH
                    FLOWS FROM INVESTING ACTIVITIES:Payments
                    for acquisition of property and equipment
                
                
                (2,025
                )
                
                (9,116
                )Payments
                    for patents
                
                
                -
                
                
                (23,676
                )Cash
                    used in investing activities
                
                
                (2,025
                )
                
                (32,792
                )CASH
                    FLOWS FROM FINANCING ACTIVITIES:Proceeds
                    from related party
                
                
                -
                
                
                200,000Payments
                    of related party payable
                
                
                (200,000
                )
                
                (133,600
                )Proceeds
                    from the exercise of stock options
                
                
                13,875
                
                
                172,500Proceeds
                    from the issuance of common stock
                
                
                -
                
                
                80,000Proceeds
                    from stock subscription receivable
                
                
                -
                
                
                13,333Net
                    cash (used in) provided by financing activities
                
                
                (186,125
                )
                
                332,233Net
                    decrease in cash and cash equivalents
                
                
                (1,379,954
                )
                
                (153,200
                )CASH
                    AND CASH EQUIVALENTS, beginning of period
                
                
                5,194,748
                
                
                365,610CASH
                    AND CASH EQUIVALENTS, end of period
                
                $
                3,814,794
                
                $
                212,410
  7
  **UNITED
          ENERGY CORP. AND SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENTS OF CASH FLOWS**
 **FOR
          THE SIX MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**
  **2006**
                
                **2005****(Unaudited)**SUPPLEMENTAL
                    DISCLOSURES OF CASH FLOW INFORMATION:Cash
                    paid during the periodInterest
                
                $
                1,229
                
                $
                1,070Income
                    taxes
                
                $
                1,000
                
                $
                1,434SUPPLEMENTAL
                    DISCLOSURES OF NON-CASH INVESTING AND FINANCING
                    ACTIVITIES:Conversion
                    of note payable into common stock
                
                $
                -
                
                $
                1,600,000
  The
          accompanying notes are an integral part of these consolidated financial
          statements.
  8
  **UNITED
        ENERGY CORP.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 (Unaudited)**
  **1.**
              **BASIS
                  OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
                  POLICIES**
  *Basis
        of presentation*
  The
        accompanying unaudited consolidated financial statements of United Energy
        Corp.
        (the “Company”) have been prepared in accordance with generally accepted
        accounting principles for interim financial information and with the
        instructions to Form 10-QSB of Regulation S-B. Accordingly, they do not include
        all of the information and notes required by generally accepted accounting
        principles for complete financial statements. In the opinion of management,
        the
        unaudited interim financial statements furnished herein include all adjustments
        necessary for a fair presentation of the Company's financial position at
        September 30, 2006 (unaudited) and the results of its operations for the
        three
        months and six months ended September 30, 2006 and 2005 (unaudited) and cash
        flows for the six months ended September 30, 2006 and 2005 (unaudited). All
        such
        adjustments are of a normal and recurring nature. Interim financial statements
        are prepared on a basis consistent with the Company's annual financial
        statements. Results of operations for the three months and six months ended
        September 30, 2006 are not necessarily indicative of the operating results
        that
        may be expected for the year ending March 31, 2007.
  The
        consolidated balance sheet as of March 31, 2006 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-KSB/A for the
        fiscal
        year ended March 31, 2006.
  The
        Company currently anticipates that its available cash on hand and cash resources
        from expected revenues will be sufficient to meet its anticipated working
        capital and capital expenditure requirements for at least the next twelve
        months.
  Our
        continued existence is dependent upon several factors, including increased
        sales
        volumes, collection of existing receivables and the ability to achieve
        profitability from the sale 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.
 
 *Stock-Based
        Compensation*
  Effective
        January 1, 2006, the Company adopted the fair value recognition provision
        of
        Statement of Financial Standards (“SFAS”) No. 123 (revised 2004), *Shared-based
        Payments,* (“SFAS
        123(R)”) using the modified prospective transition method and therefore has not
        restated results for prior periods. Under this transition method, stock based
        compensation expense for the second quarter of fiscal year 2007 includes
        compensation expense for all stock-based compensation awards granted prior
        to,
        but not yet vested as of January 1, 2006, based on the grant date fair value
        estimated in accordance with the original provision of SFAS No. 123, *Accounting
        for Stock-Based Compensation* (“SFAS
        123”). Stock-based compensation expense for all stock-based compensation awards
        granted after January 1, 2006 is based on the grant-date fair value estimated
        in
        accordance with the provisions of SFAS 123(R).
  9
  **UNITED
        ENERGY CORP.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(Continued)**
  At
        September 30, 2006, the Company has stock based compensation plans. As permitted
        by SFAS No.123, Accounting for Stock Based Compensation, the Company accounted
        for stock-based compensation arrangements with employees in accordance with
        provisions of Account Principles Board (APB) Opinion No. 25, Accounting for
        Stock Issued to Employees through December 31, 2005. On
        January 1, 2006, the Company adopted SFAS No. 123(R), which requires
        public entities to record noncash compensation expense related to payment
        for
        employee services by an equity award, such as stock options. Compensation
        expense for stock options issued to employees is based on the difference
        on the
        date of grant, between the fair value of the Company’s stock and the exercise
        price of the option. As a result of adopting SFAS 123(R), net loss for the
        six
        months ended September 30, 2006 was higher by $100,287 than if the Company
        had
        not adopted SFAS 123(R). There was minimal impact on both the basic and diluted
        loss per share for the six months ended September 30, 2006. The Company
        accounted for equity instruments issued to non-employees in accordance with
        the
        provisions of SFAS No. 123 and Emerging Issues Task Force (EITF) Issue No.
        96-18, “Accounting for Equity Instruments That Are Issued to Other Than
        Employees for Acquiring, or in Conjunction with Selling, Goods or Services”
until the adoption of SFAS 123(R) which does not cover non-employees. All
        transactions in which goods or services are the consideration received for
        the
        issuance of equity instruments are accounted for based on the fair value
        of the
        consideration received or the fair value of the equity instrument issued,
        whichever is more reliably measurable. Stock based compensation for
        non-employees was $67,264 and $129,720 for the six months ended September
        30,
        2006 and 2005, respectively.
  **2.**
              **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.
  10
  **UNITED
        ENERGY CORP.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(Continued)**
  **3.**
              **SEGMENT
                  INFORMATION**
  Under
        the
        provision of SFAS No. 131, the Company's activities fall within two operating
        segments: Graphic Arts and Specialty Chemicals. The following tables set
        forth
        the Company's industry segment information for the three months and six months
        ended September 30, 2006 and 2005.
  The
        Company’s total revenues and net income (loss) by segment for the three month
        period ended September 30, 2006 and identifiable assets as of September 30,
        2006
        are as follows:
  Graphic
                    Arts
                
                Specialty
                  Chemicals
                
                Corporate
                
                TotalRevenues
                
                $
                271
                
                $
                299,014
                
                $
                —
                
                $
                299,285Gross
                    profit
                
                $
                9
                
                $
                192,095
                
                $
                —
                
                $
                192,104Selling,
                    general and administrative
                
                
                —
                
                
                408,234
                
                
                365,679
                
                
                773,913Depreciation
                    and amortization
                
                
                —
                
                
                17,117
                
                
                1,653
                
                
                18,770Interest
                    income
                
                
                —
                
                
                —
                
                
                48,950
                
                
                48,950Interest
                    expense
                
                
                —
                
                
                —
                
                
                374
                
                
                374Net
                    income (loss)
                
                $
                9
                
                $
                (233,256
                )
                $
                (318,756
                )
                $
                (552,003
                )Cash
                    and cash equivalents
                
                $
                —
                
                $
                —
                
                $
                3,814,794
                
                $
                3,814,794Accounts
                    receivable, net
                
                
                —
                
                
                234,670
                
                
                —
                
                
                234,670Inventory,
                    net
                
                
                7,545
                
                
                128,847
                
                
                —
                
                
                136,392Note
                    receivable, net
                
                
                9,476
                
                
                —
                
                
                —
                
                
                9,476Prepaid
                    expenses
                
                
                —
                
                
                16,356
                
                
                33,012
                
                
                49,368Property
                    and equipment, net
                
                
                —
                
                
                83,749
                
                
                34,146
                
                
                117,895Goodwill,
                    net
                
                
                —
                
                
                15,499
                
                
                —
                
                
                15,499Patents,
                    net
                
                
                —
                
                
                312,661
                
                
                —
                
                
                312,661Loan
                    receivable, net
                
                
                —
                
                
                —
                
                
                2,750
                
                
                2,750Deposits
                
                
                —
                
                
                —
                
                
                1,385
                
                
                1,385Total
                    assets
                
                $
                17,021
                
                $
                791,782
                
                $
                3,886,087
                
                $
                4,694,890Capital
                    Expenditures
                
                $
                —
                
                $
                2,025
                
                $
                —
                
                $
                2,025
  The
        Company's total revenues and net loss by segment for the six month period
        ended
        September 30, 2006, are as follows:
  Graphic
                    Arts
                
                Specialty
                  Chemicals
                
                Corporate
                
                TotalRevenues
                
                $
                511
                
                $
                523,841
                
                $
                —
                
                $
                524,352Gross
                    profit
                
                $
                33
                
                $
                315,062
                
                $
                —
                
                $
                315,095Selling,
                    general and administrative
                
                
                15,968
                
                
                736,509
                
                
                737,136
                
                
                1,489,613Depreciation
                    and amortization
                
                
                —
                
                
                34,106
                
                
                3,302
                
                
                37,408Interest
                    income
                
                
                —
                
                
                —
                
                
                93,498
                
                
                93,498Interest
                    expense
                
                
                —
                
                
                —
                
                
                1,229
                
                
                1,229Net
                    loss
                
                $
                (15,935
                )
                $
                (455,553
                )
                $
                (648,169
                )
                $
                (1,119,657
                )
  11
  **UNITED
        ENERGY CORP.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(Continued)**
 
 The
        Company’s total revenues and net loss by segment for the three month period
        ended September 30, 2005 and identifiable assets as of September 30, 2005
        are as
        follows:
  Graphic
                    Arts
                
                Specialty
                  Chemicals
                
                Corporate
                
                TotalRevenues
                
                $
                211
                
                $
                88,254
                
                $
                —
                
                $
                88,465Gross
                    profit
                
                $
                (59
                )
                $
                13,442
                
                $
                —
                
                $
                13,383Selling,
                    general and administrative
                
                
                44,194
                
                
                725,539
                
                
                302,208
                
                
                1,071,941Depreciation
                    and amortization
                
                
                —
                
                
                15,083
                
                
                2,332
                
                
                17,415Interest
                    income
                
                
                —
                
                
                —
                
                
                13
                
                
                13Interest
                    expense
                
                
                —
                
                
                —
                
                
                485,594
                
                
                485,594Net
                    loss
                
                $
                (44,253
                )
                $
                (727,180
                )
                $
                (790,121
                )
                $
                (1,561,554
                )Cash
                    and cash equivalents
                
                $
                —
                
                $
                —
                
                $
                212,410
                
                $
                212,410Accounts
                    receivable, net
                
                
                35,002
                
                
                32,538
                
                
                —
                
                
                67,540Inventory,
                    net
                
                
                68,898
                
                
                127,238
                
                
                —
                
                
                196,136Note
                    receivable, net
                
                
                13,650
                
                
                —
                
                
                —
                
                
                13,650Prepaid
                    expenses
                
                
                —
                
                
                —
                
                
                53,507
                
                
                53,507Property
                    and equipment, net
                
                
                —
                
                
                118,056
                
                
                23,745
                
                
                141,801Goodwill,
                    net
                
                
                —
                
                
                15,499
                
                
                —
                
                
                15,499Patents,
                    net
                
                
                —
                
                
                305,831
                
                
                —
                
                
                305,831Loan
                    receivable, net
                
                
                —
                
                
                —
                
                
                300
                
                
                300Deposits
                
                
                —
                
                
                —
                
                
                1,385
                
                
                1,385Total
                    assets
                
                $
                117,550
                
                $
                599,162
                
                $
                291,347
                
                $
                1,008,059Capital
                    Expenditures
                
                $
                —
                
                $
                9,116
                
                $
                —
                
                $
                9,116
  The
        Company's total revenues and net loss by segment for the six month period
        ended
        September 30, 2005, are as follows:
  Graphic
                    Arts
                
                Specialty
                  Chemicals
                
                Corporate
                
                TotalRevenues
                
                $
                482
                
                $
                164,593
                
                $
                —
                
                $
                165,075Gross
                    profit
                
                $
                212
                
                $
                28,064
                
                $
                —
                
                $
                28,276Selling,
                    general and administrative
                
                
                78,526
                
                
                1,191,983
                
                
                522,854
                
                
                1,793,363Depreciation
                    and amortization
                
                
                —
                
                
                30,000
                
                
                4,660
                
                
                34,660Interest
                    income
                
                
                —
                
                
                —
                
                
                23
                
                
                23Interest
                    expense
                
                
                —
                
                
                —
                
                
                576,168
                
                
                576,168Net
                    loss
                
                $
                (78,314
                )
                $
                (1,193,919
                )
                $
                (1,103,659
                )
                $
                (2,375,892
                )
  GEOGRAPHICAL
                    INFORMATION
                
                REVENUE2006
                
                2005U.S.
                
                $
                450,447
                
                $
                165,075Non
                    U.S.
                
                
                73,905
                
                
                —Total
                    revenue
                
                $
                524,352
                
                $
                165,075
  12


**UNITED
      ENERGY CORP.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Continued)**




**4.** **INVENTORY**





Inventory
      consists of the following:




**Sept.
                30,**
              **2006**
            
            **March
                31,**
              **2006**Blended
                chemicals
            
            $
            90,527
            
            $
            68,255Raw
                materials
            
            
            45,865
            
            
            38,702Total
                inventory
            
            $
            136,392
            
            $
            106,957





**5. RELATED-PARTY
      TRANSACTIONS**




The
      Company has an amount due to Robert Seaman, a shareholder and former director
      of
      the Company. The amount due to the related party as of September 30, 2006 and
      2005 is $244,141. This amount is unsecured, non-interest bearing and due upon
      demand.




Martin
      Rappaport, a major shareholder and director of the Company, owns the property
      from which United Energy leases the 9,600 square foot facility it occupies
      in
      Secaucus, New Jersey. The Company pays approximately $115,200 per year under
      the
      lease, excluding real estate taxes. The Company believes that the lease is
      at
      fair market value with leases for similar facilities.




During
      January and February 2005, the Company’s Chairman of the Board, Ron Wilen,
      loaned the Company $133,600. The loan was unsecured, non interest bearing and
      due upon demand. This loan was repaid in April 2005.




During
      August 2005, the Chairman of the Board, Ron Wilen, and the Chief Executive
      Officer, Brian King, each loaned the Company $100,000. The loans were both
      unsecured, non-interest bearing and due upon demand. These loans were repaid
      in
      April 2006.




**6.** **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 compensation committee.




There
      were 215,000 shares of common stock available for future grant as of September
      30, 2006 under the 2001 equity incentive plan.




13




**UNITED
      ENERGY CORP.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Continued)**




***Fair
      Value of Stock Options***


For
      disclosure purposes under SFAS No. 123 and SFAS No. 123(R), 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:




**2006**
            
            **2005**Expected
                life (in years)
            
            
            10
            
            
            10Risk-free
                interest rate
            
            
            4.54
            %
            
            4.54
            %Volatility
            
            
            102.5
            
            
            135.0Dividend
                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
      $1.17 for the six months ended September 30, 2006.




*Summary
      Stock Option Activity* **




The
      following table summarizes stock option information with respect to all stock
      options for the quarter ended September 30, 2006:




**Number
                of**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Life
                (Years)**
            
            **Aggregate**
              **Intrinsic**
              **Value**Options
                outstanding April 1, 2006
            
            
            3,185,000
            
            $
            1.11
            
            
            8.48Granted
            
            
            300,000
            
            $
            1.84Exercised
            
            
            (12,500
            )Options
                outstanding September 30, 2006
            
            
            3,472,500
            
            $
            1.17
            
            
            7.61Vested
                and expected to vest–end
                of
                quarter
            
            
            3,472,500
            
            $
            1.17
            
            
            7.61
            
            $
            —Exercisable-end
                of quarter
            
            
            3,064,077
            
            $
            1.19
            
            
            7.47
            
            $
            —




Options
      outstanding at September 30, 2006 have an exercise price ranging from $0.70
      to
      $2.05.




14




**UNITED
      ENERGY CORP.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Continued)**




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, 2006 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, 2006. This amount changes
      based
      upon changes in the fair market value of United Energy’s stock. As of September
      30, 2006, $184,941 of the total unrecognized compensation costs related to
      stock
      options is expected to be recognized over a period of one year and nine
      months.




The
      following table illustrates the effect on net loss and earnings per share for
      the three months and six months ended September 30, 2005 as if the Company
      had
      applied the fair value recognition provisions of SFAS No. 123 to stock-based
      employee compensation:


**For
                  the Three**
                **monthsEnded**
                **September
                  30,**
                **2005**
              
              **For
                  the Six**
                **months
                  Ended**
                **September
                  30,**
                **2005**Net
                  loss as reported
              
              $
              (1,561,554
              )
              $
              (2,375,892
              )Add:Stock
                  based employee compensation expenseIncluded
                  in reported net income
              
              
              387,000
              
              
              387,000Deduct:Total
                          stock based employee compensation expense determined under
                          fair value
                          based method for allawards
              
              
              (133,981
              )
              
              (297,737
              )Pro
                  forma loss
              
              $
              (1,308,535
              )
              $
              (2,286,629
              )Basic
                  and diluted loss per common shareAs
                  reported
              
              $
              (0.06
              )
              $
              (0.10
              )Pro
                  forma
              
              $
              (0.05
              )
              $
              (0.09
              )




**7.** **COMMITMENTS
      AND CONTINGENCIES**




Sales
      Commission Claim




In
      July
      2002, an action was commenced against us in the Court of Common Pleas of South
      Carolina, Pickens County, brought by Quantum International Technology, LLC
      and
      Richard J. Barrett. Plaintiffs allege that they were retained as a sales
      representative of ours and in that capacity made sales of our products to the
      United States government and to commercial entities. Plaintiffs further allege
      that we failed to pay to plaintiffs agreed commissions at the rate of 20% of
      gross sales of our products made by plaintiffs. The complaint seeks an
      accounting, compensatory damages in the amount of all unpaid commissions plus
      interest thereon, and punitive damages in an amount triple the compensatory
      damages, plus legal fees and costs. Plaintiffs maintain that they are entitled
      to receive an aggregate of approximately $350,000 in compensatory and punitive
      damages, interest and costs. In June 2003, the action was transferred from
      the
      court in Pickens County to a Master in Equity sitting in Greenville, South
      Carolina and was removed from the trial docket. The action, if tried, will
      be
      tried without a jury. No trial date has been scheduled. We believe, based on
      the
      advice of counsel, we have meritorious defenses to the claims asserted in the
      action and intend to vigorously defend the case. The outcome of this matter
      cannot be determined at this time.




15




**Item
      2**   ***Management's
      Discussion and Analysis or Plan of Operation***




**CAUTIONARY
      STATEMENT RELATING TO FORWARD-LOOKING STATEMENTS**





The
      matters discussed in this Form 10-QSB/A 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-QSB/A 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-KSB/A
      for the fiscal year ended March 31, 2006. 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.





**Recent
      Developments**




On
      March
      18, 2005, we entered into a securities purchase agreement with two private
      investors with the respect to the sale of shares of our common stock and
      warrants. The agreement provides for two types of units, designated as Series
      A
      and Series B. The Series A Units each consist of 100,000 shares of our common
      stock and a Series A Warrant to purchase 50,000 shares of our common stock
      at
      $1.00 per share, subject to adjustment. The Series A Warrants expire five (5)
      years from the date they are issued. The purchase price for each Series A Unit
      is $80,000. The securities purchase agreement provides for the sale of up to
      twenty (20) Series A Units. The Series B Units each consist of ten (10) shares
      of a new class of preferred stock that will be converted into 80,000 shares
      of
      our common stock in the aggregate, subject to adjustment, and Series B Warrant
      to purchase 40,000 shares of our stock at $1.50 per share. The Series B Warrants
      expire five (5) years from the date they are issued. The purchase price for
      each
      Series B Unit is $80,000. The securities purchase agreement provides for the
      sale of up to forty-two (42) Series B Units.




On
      January 26, 2006, the Company entered into the first amendment to the securities
      purchase agreement dated March 18, 2005 (the “First Amendment”). The First
      Amendment changed, among other provision, the expiration date of the securities
      purchase agreement to the earlier of March 18, 2008 or thirty (30) days after
      notice of termination from the holder of a majority of the shares issued under
      the agreement and that for so long as the Purchasers (as defined in the First
      Amendment) hold 1,500,000 shares of common stock equivalents (shares of common
      stock and other securities convertible to or exercisable for common stock),
      the
      Majority Holder, defined in the First Amendment as prior to the issuance of
      any
      Series B Units, the Purchaser who is the holder of the majority of shares of
      common stock issued as part of the Series A Units, and following the issuance
      of
      the first Series B Unit, the Purchaser who is the holder of the majority of
      shares of the preferred stock, shall have the right to designate a majority
      of
      the members of our Board of Directors in the event of any of the following,
      referred to as triggering events:




(i)
                if we fail to have gross revenue of at least $5,000,000 for the six
                months
                ended September 30, 2006;(ii)
                if we breach any of our representations, warranties, agreements,
                covenants, terms or obligations under the securities purchase agreement
                or
                ancillary agreements; or(iii)
                if the investors purchase an aggregate of twenty one or more Series
                B
                Units




We
      failed
      to have gross revenues of at least $5,000,000 for the six months ended September
      30, 2006 and therefore, the Majority Holder has the right to designate a
      majority of the members of our Board of Directors. To date, the Majority Holder
      has not elected to designate a majority of the members of our Board of Directors
      and there is no assurance that the Majority Holder will not elect to designate
      a
      majority of the members of our Board of Directors. If the Majority Holder
      decides to designate a majority of the members of our Board of Directors, such
      directors will have the authority to exercise control over matters relating
      to
      us, including without limitation, (i) discretion over our day to day affairs
      and
      our management and (ii) decisions relating or affecting our capital structure,
      including the issuance of additional capital stock, debt and the declaration
      of
      dividends.




16




**Overview**




**** We
      develop and distribute environmentally friendly specialty chemical products
      with
      applications in several industries and markets. Our current line of products
      includes:


o
              KH-30
                  paraffin dispersant for the oil industry and related products;o
              Uniproof
                  specialty-coated proofing paper for the printing industry; ando
              following
                  additional testing, “Slick Barrier” underwater protective coatings for use
                  in marine applications.




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 that are renewable at the option of the U.S. military.




We have developed and patented a system referred to as our “S2 system,” to work
      with our environmentally friendly paraffin dispersants products. This patented
      technology produces high volumes of steam and heat at variable pressures and
      temperatures to completely dissolve most deposits of paraffin and asphaltene
      within oil wells, pipelines or storage tanks. The S2 system apparatus is
      portable, compact and easy to use. We are further developing the process to
      enhance and support sales of KH-30 and its related products for the oil industry
      and for other potential applications.




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 KH-30 product line to the worldwide marketplace
      for
      refinery, tank and pipeline cleaning services. We have recently entered into
      a
      non-exclusive distribution agreement with Champion Technologies Inc. and a
      non-exclusive Master Purchase Agreement with Petrobras America Inc. for the
      sale
      and distribution of our K-Line of patented specialty chemical solutions. In
      June
      2006 and September 2006, Petrobras America Inc. placed Specialty Chemical orders
      of $123,772 and $167,092, respectively. The agreements do not provide for any
      minimum amounts to be purchased. We are also currently negotiating potential
      working arrangements with several other companies however, there can be no
      assurance that any of these arrangements will be entered into or, if entered
      into, (as well as the agreements with Champion Technologies and Petrobras
      America Inc.) will be successful.




We
      provide Specialty Chemicals and graphic arts products to our customers and
      generated revenues of $524,352 for the six months ended September 30, 2006
      and
      $165,075 for the six months ended September 30, 2005.




17


**RESULTS
      OF OPERATIONS**




**Three
      Months Ended September 30, 2006 Compared to the Three Months Ended September
      30,
      2005**




*Revenues* .
      Revenues for the three months ended September 30, 2006 were $299,285, a
      $210,820, or 238% increase from revenues of $88,465 in the comparable three
      months of 2005. The increase in revenues was due to higher sales of Specialty
      Chemicals, primarily to two customers, Petrobras America Inc and Castor
      Petroleum LTD. Specialty Chemicals revenues, which includes sales of our KH-30
      products and Green Globe/Qualchem military sales, increased by $210,760 to
      $299,014, or 239% from the comparable three months of 2005 compared to $88,254
      in the comparable three months in 2005. This increase was due primarily to
      higher sales of our KH-30 family of oil field dispersant products. There were
      no
      sales of our Uniproof proofing paper during the three months ended September
      30,
      2006 and 2005.




*Cost
      of Goods Sold* .
      Cost of
      goods sold increased $32,099, or 43% to $107,181 or 36% of revenues, for the
      three months ended September 30, 2006 from $75,082, or 85% of revenues for
      the
      three months ended September 30, 2005. The increase in cost of goods sold (which
      accounted for lower percentage of revenues) was due to the higher sales levels
      in the period compared to the comparable period in 2005.




*Gross
      Profit* .
      Gross
      profit for the three months ended September 30, 2006, increased by $178,721,
      or
      1,335% to $192,104 or 64% of revenues compared with $13,383 or 15% of sales
      in
      the prior period. The increase in gross profit and gross profit percentage
      reflects the higher levels of sales of Specialty Chemicals.




***Operating
      Costs and Expenses***




*Selling,
      General and Administrative Expenses* .
      Selling, general and administrative expenses decreased $298,028 to $773,913
      or
      259% of sales for the three months ended September 30, 2006 compared with
      $1,071,941 for the three months ended September 30, 2005. The decrease in
      selling, general and administrative expenses was primarily related to lower
      salaries due to the exercise of options in the prior comparable period and
      a
      decrease in travel and entertainment expenses, partially offset by an increase
      in bad debts and a slight increase in professional fees.




*Depreciation
      and Amortization* .
      Depreciation and amortization remained relatively constant for the three months
      ended September 30, 2006 as compared to September 30, 2005.




*Interest
      Income* .
      The
      Company had interest income of $48,950 for the three months ended September
      30,
      2006 compared with $13 in the corresponding period in 2005. The increase was
      due
      to the increased cash level in connection with the private placement completed
      in March 2006.




*Interest
      Expense* .
      The
      Company had interest expense of $374 for the three months ended September 30,
      2006 compared with interest expense of $485,594 in the corresponding period
      in
      2005. The decrease was due to the lower principal amount of indebtedness
      outstanding as a result of the convertible term note being satisfied in August
      2005.




*Net
      Loss* .
      The
      three months ended September 30, 2006 resulted in a net loss of $552,003 or
      $0.02 per share as compared to a net loss of $1,561,554 or $0.06 per share
      for
      the three months ended September 30, 2005. The  average
      number of shares of common stock used in calculating net loss per share
      increased 5,982,463 shares to 31,030,115 as a result of 2,000,000 shares issued
      for the conversion of the note payable, 312,500 shares issued in connection
      with
      the exercise of stock options and 5,400,000 shares issued in connection with
      the
      private placement completed in March 2006.




**Six
      Months Ended September 30, 2006 Compared to the Six Months Ended September
      30,
      2005**




*Revenues* .
      Revenues for the six-month period ended September 30, 2006 were $524,352, a
      $359,277 or 217% increase from revenues of $165,075 in the comparable six-month
      period ended September 30, 2005. The increase in revenues was due to higher
      sales of Specialty Chemicals, primarily to two customers, Petrobras America
      Inc.
      and Castor Petroleum LTD. Specialty Chemicals revenues, which includes sales
      of
      our KH-30 products and Green Globe/Qualchem products, increased by $359,248
      to
      $523,841, or 218% compared to $164,593 in the comparable six month period ended
      September 30, 2005. This increase was primarily related to higher sales of
      our
      KH-30 family of oil field dispersant products. There were no sales of our
      Uniproof proofing paper during the six months ended September 30, 2006 and
      2005.




18




*Cost
      of Goods Sold* .
      Cost of
      goods sold increased $72,458, or 53% to $209,257 or 40% of revenues, for the
      six-month period ended September 30, 2006 from $136,799 or 83% of revenues,
      for
      the six-month period ended September 30, 2005. The increase in cost of goods
      sold (which accounted for a lower percentage of revenues) was due to the higher
      sales level in the period compared to the comparable period in
      2005.




*Gross
      Profit* .
      Gross
      profit for the six months ended September 30, 2006, increased by $286,819,
      or
      1,014% to $315,095 or 60% of revenues compared with $28,276 or 17% of revenues
      in the prior period. The increase in gross profit and gross profit percentage
      reflects the higher levels of sales of Specialty Chemicals.




***Operating
      Costs and Expenses***




*Selling,
      General and Administrative Expenses* .
      Selling, general and administrative expenses decreased $303,750 to $1,489,613
      or
      284% of revenues for the six months ended September 30, 2006 compared with
      $1,793,363 for the six months ended September 30, 2005. The decrease in selling,
      general and administrative expenses was primarily related to lower salaries
      due
      to the exercise of options in the prior comparable period, a decrease in
      professional fees, lower marketing expenses, and lower travel and entertainment
      expenses, partially offset by an increase in bad debts.




*Depreciation
      and Amortization* .
      Depreciation and amortization remained relatively constant for the six months
      ended September 30, 2006 as compared to September 30, 2005.




*Interest
      Income* .
      The
      Company had interest income of [$93,498] for the six months ended September
      30,
      2006 compared with $23 in the corresponding period in 2005. The increase was
      due
      to the increased cash level in connection with the private placement completed
      in March 2006.




*Interest
      Expense* .
      The
      Company had interest expense of $1,229 for the six months ended September 30,
      2006 compared with interest expense of $576,168 in the corresponding period
      in
      2005. The decrease was due to the lower principal amount of indebtedness
      outstanding as a result of the convertible term note being satisfied in August
      2005.




*Net
      Loss* .
      The six
      months ended September 30, 2006 resulted in a net loss of $1,119,657 or $0.04
      per share as compared to a net loss of $2,375,892 or $0.10 per share for the
      six
      months ended September 30, 2005. The  average
      number of shares of common stock used in calculating earnings per share
      increased 6,735,834 shares to 31,028,544 as a result of 2,000,000 shares issued
      for the conversion of the note payable, 312,500 shares issued in connection
      with
      the exercise of stock options and 5,400,000 shares issued in connection with
      the
      private placement completed in March 2006.




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***Liquidity
      and Capital Resources***




As
      of
      September 30, 2006, the Company had $3,814,794 in cash and cash equivalents,
      as
      compared to $5,194,748 at March 31, 2006.




The
      $1,379,954 decrease in cash and cash equivalents at September 30, 2006 compared
      to March 31, 2006 was due to net cash used in operating activities of
      $1,191,804, net cash used in investing activities of $2,025 and net cash used
      in
      financing activities of $186,125 during the six months ended September 30,
      2006.
      Cash used in investing activities consisted of fixed asset purchases of $2,025.
      Cash used in financing activities during the six months ended September 30,
      2006
      consisted of the payment of a related party payable of $200,000, partially
      offset by the receipt from the exercise of stock options of
      $13,875.




As
      of
      September 30, 2006 the Company had no backlog. Backlog represents products
      that
      the Company’s customers have committed to purchase. The Company’s backlog is
      subject to fluctuations and is not necessarily indicative of future
      sales.




We
      currently anticipate that our available cash in hand and cash resources from
      expected revenues will be sufficient to meet our anticipated working capital
      and
      capital expenditure requirements for at least the next twelve
      months.




***Concentration
      of Risk***




We
      currently sell our Uniproof proofing paper to one customer, the Alameda Company
      of Anaheim, California. There were no sales to this customer during the six
      months ended September 30, 2006 and 2005. Revenue from sales of our proofing
      paper is expected to continue to decline due to the paper technology switching
      to a digital technology. A decision by Alameda to discontinue its relationship
      with us could result in a significant loss of revenue to us.




We
      sold
      our Specialty Chemicals to four customers, which comprised 80.8% of our sales
      of
      Specialty Chemicals for the six months ended September 30, 2006. For the six
      months ended September 30, 2005, we sold our Specialty Chemicals to two
      customers, which comprised 40.1% of our sales of Specialty Chemicals.




***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.




***Quantitative
      and Qualitative Disclosures about Market Risk***




There
      were no material changes from the information presented in the Company’s Annual
      Report on Form 10-KSB for the fiscal year ended March 31, 2006, with
      respect to the Company’s quantitative and qualitative disclosures about market
      risks.


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**Item
      3.**   **Controls
      and Procedures.**




As
      of
      September 30, 2006 (the end of the period covered by this report), our
      management carried out an evaluation, with the participation of our Chief
      Executive Officer and Interim Chief Financial Officer, of the effectiveness
      of
      our disclosure controls and procedures. The evaluation process, including the
      inherent limitations on the effectiveness of such controls and procedures,
      is
      more fully discussed below. Based upon that evaluation, the Chief Executive
      Officer and Interim Chief Financial Officer concluded that as of the end of
      the
      period covered by this report, our disclosure controls were not effective due
      to
      the material weakness in our internal controls over the financial reporting
      process, as described below. 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.




In
      connection with the audit by our independent registered public accounting firm
      of our financial statements, as of March 31, 2006 and for the year then ended,
      our independent registered public accounting firm notified our management and
      the Board of Directors that they had identified a deficiency that they
      considered a material weakness in our internal controls over the financial
      reporting process relating to the communication between the Chairman of the
      Board of Directors, the CEO and the interim CFO. Adjustments were identified
      during the audit process relating to the recording of options that the Company
      issued during 2006 and 2005. These adjustments were made to the consolidated
      financial statements for the year ended March 31, 2006 and 2005.




The
      reportable conditions have been discussed in detail among management and our
      independent registered public accounting firm, and we are committed to resolving
      the issue. We have taken the appropriate steps in correcting the matter by
      enhancing the communications process among the members of management to ensure
      more timely notification of current issues, including through the institution
      of
      more regularly scheduled meetings among management.




There
      are no changes in our internal controls over financial reporting that occurred
      during the period covered by this report that have materially affected, or
      are
      reasonably likely to materially affect our internal control over financial
      reporting.


21




**PART
      II**




**OTHER
      INFORMATION**




**Item
      6.**   **Exhibits**




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




b)       Reports on Form 8-K




None.


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**SIGNATURES**




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




Dated:
                August 10, 2007
            UNITED
                ENERGY CORP.By:
            /s/
                Brian KingBrian
                King,Chief
                Executive Officer(as
                principal executive officer)By:
            /s/
                James McKeeverJames
                McKeever,Interim
                Chief Financial Officer(as
                principal financial and accounting
                officer)


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