UNITED STATES
SECURITIES
AND EXCHANGE COMMISSIONWashington,
D.C. 20549



---

Form 10-QSB(Mark One)

|  |                                                                                           
|- | ------------------------------------------------------------------------------------------
|x | QUARTERLY REPORT PURSUANT TO
  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|  |                                                                                           
|  | For the quarterly period ended December 31, 2005                                          
|  |                                                                                           
|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



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UNITED ENERGY CORP.(Exact name of registrant as specified in its charter)

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

|                                            |  |           
|------------------------------------------- |  | ----------
|600 Meadowlands Parkway #20, Secaucus, N.J. |  | 07094     
|(Address of
  principal executive offices)  |  | (Zip Code)
|                                            |  |           

(800) 327-3456(Registrants telephone number, including
area code)

Indicate
by check mark whether the Issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Issuer was required to
file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x   No o

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

Indicate
the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date.

|                             |  |                                    
|---------------------------- |  | -----------------------------------
|Class                        |  | Outstanding as of February 13, 2006
|                             |  |                                    
|                             |  |                                    
|Common Stock, $.01 par value |  | 26,755,882 shares                  

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INDEX

|                              |                                                                                                                                       |  |      
|----------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- |  | -----
|PART I. FINANCIAL INFORMATION |                                                                                                                                       | 
|                              |                                                                                                                                       |  |      
|Item 1.                       | Financial
  Statements                                                                                                                |  |      
|                              |                                                                                                                                       |  |      
|                              | Consolidated balance sheets December 31, 2005 (Unaudited) and March
  31, 2005                                                        |  | 3-4  
|                              |                                                                                                                                       |  |      
|                              | Consolidated statements of operations for the three months and nine
  months ended December 31, 2005 (Unaudited) and 2004 (Unaudited) |  | 5    
|                              |                                                                                                                                       |  |      
|                              | Consolidated statement of stockholders equity for the nine months
  ended December 31, 2005 (Unaudited)                              |  | 6    
|                              |                                                                                                                                       |  |      
|                              | Consolidated statements of cash flows for the nine months ended
  December 31, 2005(Unaudited) and 2004 (Unaudited)                   |  | 7-8  
|                              |                                                                                                                                       |  |      
|                              | Notes to consolidated financial statements                                                                                            |  | 9-14 
|                              |                                                                                                                                       |  |      
|Item 2.                       | Managements Discussion and Analysis or Plan of Operations                                                                            |  | 15-21
|                              |                                                                                                                                       |  |      
|Item 3                        | Controls and Procedures                                                                                                               |  | 22-23
|                              |                                                                                                                                       |  |      
|PART II. OTHER INFORMATION    |                                                                                                                                       | 
|                              |                                                                                                                                       |  |      
|Item 1.                       | Legal Proceedings                                                                                                                     |  | 24   
|                              |                                                                                                                                       |  |      
|Item 2.                       | Changes in Securities and Small Business Issuer Purchases of Equity
  Securities.                                                     |  | 24   
|                              |                                                                                                                                       |  |      
|Item 3.                       | Defaults upon Senior Securities                                                                                                       |  | 24   
|                              |                                                                                                                                       |  |      
|Item 4.                       | Submission of Matters to a Vote of Security Holders                                                                                   |  | 24   
|                              |                                                                                                                                       |  |      
|Item 5.                       | Other Information                                                                                                                     |  | 24   
|                              |                                                                                                                                       |  |      
|Item 6.                       | Exhibits                                                                                                                              |  | 24   
|                              |                                                                                                                                       |  |      
|Signatures                    |                                                                                                                                       |  | 25   
|                              |                                                                                                                                       |  |      
|Certifications                |                                                                                                                                       |  | 26-29

2

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UNITED ENERGY CORP. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2005 AND MARCH 31, 2005

|                                                                                                                 |  |                     |         |                  |   |           | 
|---------------------------------------------------------------------------------------------------------------- |  | ------------------- | ------- | ---------------- | - | --------- | 
|                                                                                                                 |  | December 31,
  2005 |         | March 31,
  2005 |  
|                                                                                                                 |  |                     |         |                  |  
|                                                                                                                 |  | (Unaudited)         |         |                  |  
|                                                                                                                
|ASSETS                                                                                                           |  |                     |         |                  |   |           | 
|CURRENT ASSETS:                                                                                                  |  |                     |         |                  |   |           | 
|Cash and cash equivalents                                                                                        |  | $                   | 83,658  |                  | $ | 365,610   | 
|Accounts receivable, net of allowance for
  doubtful accounts of $3,258 and $22,192, respectively                |  |                     | 119,246 |                  |   | 783,004   | 
|Inventory, net of allowance of $16,290 and
  $16,290, respectively                                               |  |                     | 135,759 |                  |   | 135,960   | 
|Note receivable, net of reserve of $17,500
  and $31,350, respectively                                           |  |                     | 17,500  |                  |   | 28,650    | 
|Prepaid expenses and other current assets                                                                        |  |                     | 50,285  |                  |   | 120,574   | 
|                                                                                                                 |  |                     |         |                  |   |           | 
|Total current assets                                                                                             |  |                     | 406,448 |                  |   | 1,433,798 | 
|                                                                                                                 |  |                     |         |                  |   |           | 
|PROPERTY AND EQUIPMENT, net of accumulated
  depreciation and amortization of $354,970 and $305,734 respectively |  |                     | 147,060 |                  |   | 165,587   | 
|                                                                                                                 |  |                     |         |                  |   |           | 
|OTHER ASSETS:                                                                                                    |  |                     |         |                  |   |           | 
|Goodwill, net                                                                                                    |  |                     | 15,499  |                  |   | 15,499    | 
|Patents, net of accumulated amortization of
  $112,767 and $92,486, respectively                                 |  |                     | 301,168 |                  |   | 295,603   | 
|Employee loans                                                                                                   |  |                     | 159     |                  |   | 137       | 
|Deposits                                                                                                         |  |                     | 1,385   |                  |   | 1,385     | 
|Deferred financing costs, net of
  accumulated amortization of $106,303 at March 31, 2005                        |  |                     |        |                  |   | 206,590   | 
|                                                                                                                 |  |                     |         |                  |   |           | 
|Total assets                                                                                                     |  | $                   | 871,719 |                  | $ | 2,118,599 | 
|                                                                                                                 |  |                     |         |                  |   |           | 

The accompanying notes are an integral part
of these consolidated balance sheets

3

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UNITED ENERGY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2005 AND MARCH 31, 2005

|                                                                                                                                                                    |  |                     |             |                  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | ----------- | ---------------- | - | ----------- | -
|                                                                                                                                                                    |  | December 31,
  2005 |             | March 31,
  2005 |  
|                                                                                                                                                                    |  |                     |             |                  |  
|                                                                                                                                                                    |  | (Unaudited)         |             |                  |   |            
|                                                                                                                                                                   
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                |  |                     |             |                  |   |             |  
|                                                                                                                                                                    |  |                     |             |                  |   |             |  
|CURRENT
  LIABILITIES:                                                                                                                                              |  |                     |             |                  |   |             |  
|Accounts payable                                                                                                                                                    |  | $                   | 266,047     |                  | $ | 258,940     |  
|Accrued expenses                                                                                                                                                    |  |                     | 74,191      |                  |   | 96,106      |  
|Convertible term note payable, net of
  discount                                                                                                                    |  |                     |            |                  |   | 583,330     |  
|Due to related parties                                                                                                                                              |  |                     | 444,141     |                  |   | 377,741     |  
|                                                                                                                                                                    |  |                     |             |                  |   |             |  
|Total current liabilities                                                                                                                                           |  |                     | 784,379     |                  |   | 1,316,117   |  
|                                                                                                                                                                    |  |                     |             |                  |   |             |  
|LONG TERM
  LIABILITIES:                                                                                                                                            |  |                     |             |                  |   |             |  
|Convertible term note payable, net of
  discount                                                                                                                    |  |                     |            |                  |   | 672,268     |  
|                                                                                                                                                                    |  |                     |             |                  |   |             |  
|Total liabilities                                                                                                                                                   |  |                     | 784,379     |                  |   | 1,988,385   |  
|                                                                                                                                                                    |  |                     |             |                  |   |             |  
|                                                                                                                                                                    |  |                     |             |                  |   |             |  
|STOCKHOLDERS
  (DEFICIT) EQUITY:                                                                                                                                   |  |                     |             |                  |   |             |  
|Common stock: $0.01 par value 100,000,000
  shares authorized; 26,030,882 and 23,255,267 shares issued and outstanding as
  of December 31, 2005 and March 31, 2005 |  |                     | 260,309     |                  |   | 232,552     |  
|Additional paid-in capital                                                                                                                                          |  |                     | 15,123,418  |                  |   | 12,308,963  |  
|Stock subscription receivable                                                                                                                                       |  |                     |            |                  |   | (13,333     | )
|Accumulated deficit                                                                                                                                                 |  |                     | (15,296,387 | )                |   | (12,397,968 | )
|                                                                                                                                                                    |  |                     |             |                  |   |             |  
|Total stockholders equity                                                                                                                                          |  |                     | 87,340      |                  |   | 130,214     |  
|                                                                                                                                                                    |  |                     |             |                  |   |             |  
|Total liabilities and stockholders
equity                                                                                                                          |  | $                   | 871,719     |                  | $ | 2,118,599   |  
|                                                                                                                                                                    |  |                     |             |                  |   |             |  

The accompanying notes are an integral part
of these consolidated balance sheets

4

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UNITED
ENERGY CORP. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|------------------------------------------------------------------- |  | ---------------------- | ---------- | --------------------- | - | ----------- | - | ----------- | ---------- | - | - | ---------- | -
|                                                                    |  | For the
  Three Months |            | For the
  Nine Months |  
|                                                                    |  | Ended
  December 31,   |            | Ended
  December 31,  |  
|                                                                    |  | 2005                   |            | 2004                  |   | 2005        |   | 2004        |           
|                                                                    |  |                        |            |                       |   |             |   |             |           
|                                                                    |  | (Unaudited)            |            | (Unaudited)           |   | (Unaudited) |   | (Unaudited) |           
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|REVENUES, net                                                       |  | $                      | 225,220    |                       | $ | 537,450     |   | $           | 390,295    |   | $ | 1,192,499  |  
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|COST OF GOODS
  SOLD                                                |  |                        | 113,705    |                       |   | 247,916     |   |             | 250,504    |   |   | 589,893    |  
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|Gross profit                                                        |  |                        | 111,515    |                       |   | 289,534     |   |             | 139,791    |   |   | 602,606    |  
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|OPERATING
  EXPENSES:                                               |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|Selling, general
  and administrative                               |  |                        | 615,999    |                       |   | 555,861     |   |             | 2,409,362  |   |   | 1,938,043  |  
|Depreciation and
  amortization                                     |  |                        | 17,326     |                       |   | 21,252      |   |             | 51,986     |   |   | 62,038     |  
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|Total operating
  expenses                                          |  |                        | 633,325    |                       |   | 577,113     |   |             | 2,461,348  |   |   | 2,000,081  |  
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|Loss from
  operations                                              |  |                        | (521,810   | )                     |   | (287,579    | ) |             | (2,321,557 | ) |   | (1,397,475 | )
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|OTHER INCOME
  (EXPENSE), net:                                      |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|Interest income                                                     |  |                        | 9          |                       |   | 411         |   |             | 32         |   |   | 7,784      |  
|Interest expense                                                    |  |                        | (726       | )                     |   | (70,330     | ) |             | (576,894   | ) |   | (208,361   | )
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|Total other
  expense, net                                          |  |                        | (717       | )                     |   | (69,919     | ) |             | (576,862   | ) |   | (200,577   | )
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|Net loss                                                            |  | $                      | (522,527   | )                     | $ | (357,498    | ) | $           | (2,898,419 | ) | $ | (1,598,052 | )
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|BASIC AND
  DILUTED LOSS PER SHARE:                                 |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|Total basic and
  diluted loss per share                            |  | $                      | (0.02      | )                     | $ | (0.02       | ) | $           | (0.12      | ) | $ | (0.07      | )
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  
|WEIGHTED AVERAGE
  NUMBER OF SHARES, OUTSTANDING, basic and diluted |  |                        | 25,782,241 |                       |   | 22,411,245  |   |             | 24,791,025 |   |   | 22,309,328 |  
|                                                                    |  |                        |            |                       |   |             |   |             |            |   |   |            |  

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

5

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UNITED
ENERGY CORP. AND SUBSIDIARIESCONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY 
FOR THE NINE MONTHS ENDED DECEMBER 31, 2005 (UNAUDITED)

|                                                            |  |                |            |                          |             |         |         |                             |            |       |   |             |   |   |         |   |   |            |  
|----------------------------------------------------------- |  | -------------- | ---------- | ------------------------ | ----------- | ------- | ------- | --------------------------- | ---------- | ----- | - | ----------- | - | - | ------- | - | - | ---------- | -
|                                                            |  |                |            |                          |             |         |         |                             |            |       |   |             |   |   |         |   |  
|                                                            |  | Common
  Stock |            | AdditionalPaid-InCapital |             |         |         | StockSubscriptionReceivable |            |       |   |            
|                                                            |  |                |            |                          | Accumulated |         |         |                             |            |      
|                                                            |  | Shares         |            | Amount                   |             |         | Deficit |                             |            | Total |  
|                                                            |  |                |            |                          |             |         |         |                             |            |       |   |             |  
|                                                            |  |                |            |                          |             |         |         |                             |            |       |   |             |   |   |         |   |   |            |  
|BALANCE, April
  1, 2005                                    |  |                | 23,255,267 |                          | $           | 232,552 |         | $                           | 12,308,963 |       | $ | (12,397,968 | ) | $ | (13,333 | ) | $ | 130,214    |  
|Common stock
  issued in consideration of note payable      |  |                | 2,000,000  |                          |             | 20,000  |         |                             | 1,580,000  |       |   |            |   |   |        |   |   | 1,600,000  |  
|Common stock
  issued in consideration for interest         |  |                | 615        |                          |             | 7       |         |                             | 485        |       |   |            |   |   |        |   |   | 492        |  
|Proceeds from
  stock subscription receivable               |  |                |           |                          |             |        |         |                             |           |       |   |            |   |   | 13,333  |   |   | 13,333     |  
|Warrants granted
  in consideration for consulting services |  |                |           |                          |             |        |         |                             | 129,720    |       |   |            |   |   |        |   |   | 129,720    |  
|Compensation
  expense associated with options              |  |                |           |                          |             |        |         |                             | 387,000    |       |   |            |   |   |        |   |   | 387,000    |  
|Exercise of
  options                                       |  |                | 300,000    |                          |             | 3,000   |         |                             | 342,000    |       |   |            |   |   |        |   |   | 345,000    |  
|Common stock
  issued for private placement                 |  |                | 475,000    |                          |             | 4,750   |         |                             | 375,250    |       |   |            |   |   |        |   |   | 380,000    |  
|Net loss                                                    |  |                |           |                          |             |        |         |                             |           |       |   | (2,898,419  | ) |   |        |   |   | (2,898,419 | )
|                                                            |  |                |            |                          |             |         |         |                             |            |       |   |             |   |   |         |   |   |            |  
|BALANCE,
  December 31, 2005                                |  |                | 26,030,882 |                          | $           | 260,309 |         | $                           | 15,123,418 |       | $ | (15,296,387 | ) | $ |        |   | $ | 87,340     |  
|                                                            |  |                |            |                          |             |         |         |                             |            |       |   |             |   |   |         |   |   |            |  

The accompanying
notes are an integral part of this consolidated statement.

6

---



UNITED ENERGY
CORP. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004

|                                                                             |  |             |            |      |   |            |  
|---------------------------------------------------------------------------- |  | ----------- | ---------- | ---- | - | ---------- | -
|                                                                             |  | 2005        |            | 2004 |  
|                                                                             |  |             |            |      |  
|                                                                             |  | (Unaudited) |           
|CASH FLOWS FROM OPERATING
  ACTIVITIES:                                      |  |             |            |      |   |            |  
|Net loss                                                                     |  | $           | (2,898,419 | )    | $ | (1,598,052 | )
|                                                                            
|Adjustments to reconcile net loss to net
  cash used in operating activities |  |             |            |      |   |            |  
|Depreciation and amortization                                                |  |             | 620,508    |      |   | 235,690    |  
|Stock granted in consideration for
services                                  |  |             |           |      |   | 55,500     |  
|Warrants granted in consideration for
  services                             |  |             | 129,720    |      |   | 48,240     |  
|Stock granted in consideration for interest
  expense                        |  |             | 492        |      |   | 12,497     |  
|Compensation expense associated with
  options                               |  |             | 387,000    |      |   |           |  
|                                                                             |  |             |            |      |   |            |  
|Changes in operating assets and liabilities                                  |  |             |            |      |   |            |  
|Decrease (increase) in accounts receivable,
  net                            |  |             | 663,758    |      |   | (106,920   | )
|Decrease in inventory, net                                                   |  |             | 201        |      |   | 15,174     |  
|Decrease in note receivable, net                                             |  |             | 11,150     |      |   | 30,000     |  
|Decrease (increase) in prepaid expenses                                      |  |             | 70,289     |      |   | (8,994     | )
|Decrease in deposits                                                         |  |             |           |      |   | 75,000     |  
|                                                                             |  |             |            |      |   |            |  
|Decrease in accounts payable and accrued
  expenses                          |  |             | (14,807    | )    |   | (184,420   | )
|                                                                             |  |             |            |      |   |            |  
|                                                                             |  |             |            |      |   |            |  
|Net cash used in operating activities                                        |  |             | (1,030,108 | )    |   | (1,426,285 | )
|                                                                             |  |             |            |      |   |            |  
|                                                                             |  |             |            |      |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                        |  |             |            |      |   |            |  
|Employee loans                                                               |  |             | (22        | )    |   | 901        |  
|Proceeds from sale of fixed asset                                            |  |             |           |      |   | 15,000     |  
|Payments for acquisition of property and
  equipment                         |  |             | (30,709    | )    |   | (26,053    | )
|Payments for patents                                                         |  |             | (25,846    | )    |   | (8,375     | )
|                                                                             |  |             |            |      |   |            |  
|                                                                             |  |             |            |      |   |            |  
|Net cash used in investing activities                                        |  |             | (56,577    | )    |   | (18,527    | )
|                                                                             |  |             |            |      |   |            |  
|                                                                             |  |             |            |      |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                        |  |             |            |      |   |            |  
|Proceeds from related party                                                  |  |             | 200,000    |      |   |           |  
|Payment of related party payable                                             |  |             | (133,600   | )    |   |           |  
|Proceeds from the exercise of stock
options                                  |  |             | 345,000    |      |   |           |  
|Proceeds from the issuance of common
stock                                   |  |             | 380,000    |      |   |           |  
|Proceeds from stock subscription
receivable                                  |  |             | 13,333     |      |   |           |  
|                                                                             |  |             |            |      |   |            |  
|                                                                             |  |             |            |      |   |            |  
|Net cash provided by financing activities                                    |  |             | 804,733    |      |   |           |  
|                                                                             |  |             |            |      |   |            |  
|                                                                             |  |             |            |      |   |            |  
|Net decrease in cash and cash equivalents                                    |  |             | (281,952   | )    |   | (1,444,812 | )
|                                                                             |  |             |            |      |   |            |  
|CASH AND CASH EQUIVALENTS, beginning of
  period                             |  |             | 365,610    |      |   | 1,518,025  |  
|                                                                             |  |             |            |      |   |            |  
|CASH AND CASH EQUIVALENTS, end of period                                     |  | $           | 83,658     |      | $ | 73,213     |  
|                                                                             |  |             |            |      |   |            |  

7

---



UNITED ENERGY CORP. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004

|                                                                           |  |             |           |      |   |         | 
|-------------------------------------------------------------------------- |  | ----------- | --------- | ---- | - | ------- | 
|                                                                           |  | 2005        |           | 2004 |  
|                                                                           |  |             |           |      |  
|                                                                           |  | (Unaudited) |          
|                                                                           |  |             |           |      |   |         | 
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                         |  |             |           |      |   |         | 
|                                                                           |  |             |           |      |   |         | 
|Cash paid during the period                                                |  |             |           |      |   |         | 
|Interest                                                                   |  | $           | 1,756     |      | $ | 40,131  | 
|Income taxes                                                               |  | $           | 1,434     |      | $ | 1,520   | 
|                                                                           |  |             |           |      |   |         | 
|SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING
  ACTIVITIES: |  |             |           |      |   |         | 
|Conversion of accrued expenses due to former
employee into warrants        |  | $           |          |      | $ | 75,000  | 
|Conversion of note payable into common
stock                               |  | $           | 1,600,000 |      | $ | 150,000 | 

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

8

---



UNITED ENERGY CORP. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
DECEMBER 31, 2005 (Unaudited)

|   |                                        
|-- | ---------------------------------------
|1. | BASIS OF
PRESENTATION AND GOING CONCERN

The
accompanying unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-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 December 31, 2005 (unaudited) and the results of its
operations for the three months and nine months ended December 31, 2005 and
2004 (unaudited) and cash flows for the nine months ended December 31, 2005 and
2004(unaudited). All such adjustments are of a normal and recurring nature.
Interim financial statements are prepared on a basis consistent with the
Companys annual financial statements. Results of operations for the three
months and nine months ended December 31, 2005 are not necessarily indicative
of the operating results that may be expected for the year ending March 31,
2006.

The
consolidated balance sheet as of March 31, 2005 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.

Going
Concern - During the past two fiscal years ended March
31, 2005 and 2004, the Company has recorded aggregate losses from operations of
$4,423,974 and has incurred total negative cash flow from operations of
$3,801,148 for the same two-year period.
During the nine months ended December 31, 2005 the Company experienced a
net loss from operations of $2,898,419 and negative cash flow from operating
activities of $1,030,108.    These
matters raise substantial doubt about the Companys ability to continue as a
going concern. The Companys consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

Liquidity The Companys continued existence is dependent upon
several factors, including increased sales volume, collection of existing
receivables and the ability to achieve profitability from the sale of the
Companys product lines.  In order to
increase its cash flow, the Company is continuing its efforts to stimulate
sales and cut back expenses not directly supporting its sales and marketing
efforts.

|   |                   
|-- | ------------------
|2. | CONVERTIBLE
  DEBT

On
March 24, 2004, the Company issued a secured convertible term note in the
amount of $1,750,000, which had a term of three years and accrued interest at
the greater of the prime rate of interest, currently 7.50% per year (as
published in the Wall Street Journal), or 4% per year. Interest was payable
monthly in arrears commencing on May 1, 2004, and on the first day of each
consecutive calendar month after that date. Monthly amortization payments
commenced on October 1, 2004, at the rate of $58,333.

The
holder of the Term Note had the option to convert all or a portion of the note
(including principal, interest and penalties) into shares of common stock at
any time, subject to specified limitations, at a fixed conversion price of
$1.00 per share. The conversion price was subject to adjustment for stock
splits, stock dividends and similar events. On March 18, 2005, in connection
with the financing, the fixed conversion price was adjusted to $0.80. The
Companys obligations under the Term Note were secured by a first priority
security interest in the Companys assets. During the nine months ended
December 31, 2005, the holder of the Term Note converted the remaining
$1,600,000 in principal and $492 of interest into 2,000,615 shares of common
stock.

9

---



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
nine months ended December 31, 2005 and 2004.

The
Companys total revenues and net loss by segment for the three month period
ended December 31, 2005 and identifiable assets as of December 31, 2005 are as
follows:

|                                      |  |              |         |                       |   |           |   |       |          |   |   |          |  
|------------------------------------- |  | ------------ | ------- | --------------------- | - | --------- | - | ----- | -------- | - | - | -------- | -
|                                      |  | Graphic Arts |         | Specialty
  Chemicals |   | Corporate |   | Total |         
|                                      |  |              |         |                       |   |           |   |       |         
|Revenues                              |  | $            | 106,259 |                       | $ | 118,961   |   | $     |         |   | $ | 225,220  |  
|                                      |  |              |         |                       |   |           |   |       |          |   |   |          |  
|Gross profit                          |  | $            | 44,747  |                       | $ | 66,768    |   | $     |         |   | $ | 111,515  |  
|Selling, general and
  administrative |  |              | 60,251  |                       |   | 254,696   |   |       | 301,052  |   |   | 615,999  |  
|Depreciation and
  amortization       |  |              |        |                       |   | 15,756    |   |       | 1,570    |   |   | 17,326   |  
|Interest income                       |  |              |        |                       |   |          |   |       | 9        |   |   | 9        |  
|Interest expense                      |  |              |        |                       |   |          |   |       | 726      |   |   | 726      |  
|                                      |  |              |         |                       |   |           |   |       |          |   |   |          |  
|Net loss                              |  | $            | (15,504 | )                     | $ | (203,684  | ) | $     | (303,339 | ) | $ | (522,527 | )
|                                      |  |              |         |                       |   |           |   |       |          |   |   |          |  
|Cash and cash equivalents             |  | $            |        |                       | $ |          |   | $     | 83,658   |   | $ | 83,658   |  
|Accounts receivable, net              |  |              | 46,019  |                       |   | 73,227    |   |       |         |   |   | 119,246  |  
|Inventory, net                        |  |              | 7,737   |                       |   | 128,022   |   |       |         |   |   | 135,759  |  
|Note receivable, net                  |  |              | 17,500  |                       |   |          |   |       |         |   |   | 17,500   |  
|Prepaid expenses                      |  |              |        |                       |   |          |   |       | 50,285   |   |   | 50,285   |  
|Property and equipment, net           |  |              |        |                       |   | 111,705   |   |       | 35,355   |   |   | 147,060  |  
|Goodwill, net                         |  |              |        |                       |   | 15,499    |   |       |         |   |   | 15,499   |  
|Patents, net                          |  |              |        |                       |   | 301,168   |   |       |         |   |   | 301,168  |  
|Loan receivable, net                  |  |              |        |                       |   |          |   |       | 159      |   |   | 159      |  
|Deposits                              |  |              |        |                       |   |          |   |       | 1,385    |   |   | 1,385    |  
|                                      |  |              |         |                       |   |           |   |       |          |   |   |          |  
|Total assets                          |  | $            | 71,256  |                       | $ | 629,621   |   | $     | 170,842  |   | $ | 871,719  |  
|                                      |  |              |         |                       |   |           |   |       |          |   |   |          |  
|Capital Expenditures                  |  | $            |        |                       | $ | 17,529    |   | $     | 13,180   |   | $ | 30,709   |  
|                                      |  |              |         |                       |   |           |   |       |          |   |   |          |  

The
Companys total revenues and net loss by segment for the nine month period
ended December 31, 2005, are as follows:

|                                      |  |              |         |                       |   |            |   |       |            |   |   |            |  
|------------------------------------- |  | ------------ | ------- | --------------------- | - | ---------- | - | ----- | ---------- | - | - | ---------- | -
|                                      |  | Graphic Arts |         | Specialty
  Chemicals |   | Corporate  |   | Total |           
|                                      |  |              |         |                       |   |            |   |       |           
|Revenues                              |  | $            | 106,741 |                       | $ | 283,554    |   | $     |           |   | $ | 390,295    |  
|                                      |  |              |         |                       |   |            |   |       |            |   |   |            |  
|Gross profit                          |  | $            | 44,959  |                       | $ | 94,832     |   | $     |           |   | $ | 139,791    |  
|Selling, general and
  administrative |  |              | 138,777 |                       |   | 1,446,679  |   |       | 823,906    |   |   | 2,409,362  |  
|Depreciation and
  amortization       |  |              |        |                       |   | 45,756     |   |       | 6,230      |   |   | 51,986     |  
|Interest income                       |  |              |        |                       |   |           |   |       | 32         |   |   | 32         |  
|Interest expense                      |  |              |        |                       |   |           |   |       | 576,894    |   |   | 576,894    |  
|                                      |  |              |         |                       |   |            |   |       |            |   |   |            |  
|Net loss                              |  | $            | (93,818 | )                     | $ | (1,397,603 | ) | $     | (1,406,998 | ) | $ | (2,898,419 | )
|                                      |  |              |         |                       |   |            |   |       |            |   |   |            |  

10

---



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

The
Companys total revenues and net income (loss) by segment for the three month
period ended December 31, 2004 and identifiable assets as of December 31, 2004
are as follows:

|                                      |  |              |         |                       |   |           |   |       |          |   |   |           |  
|------------------------------------- |  | ------------ | ------- | --------------------- | - | --------- | - | ----- | -------- | - | - | --------- | -
|                                      |  | Graphic Arts |         | Specialty
  Chemicals |   | Corporate |   | Total |         
|                                      |  |              |         |                       |   |           |   |       |         
|Revenues                              |  | $            | 212,095 |                       | $ | 325,355   |   | $     |         |   | $ | 537,450   |  
|                                      |  |              |         |                       |   |           |   |       |          |   |   |           |  
|Gross profit                          |  | $            | 95,548  |                       | $ | 193,986   |   | $     |         |   | $ | 289,534   |  
|Selling, general and
  administrative |  |              | 35,452  |                       |   | 302,070   |   |       | 218,339  |   |   | 555,861   |  
|Depreciation and
  amortization       |  |              |        |                       |   | 18,549    |   |       | 2,703    |   |   | 21,252    |  
|Interest income                       |  |              |        |                       |   |          |   |       | 411      |   |   | 411       |  
|Interest expense                      |  |              |        |                       |   |          |   |       | 70,330   |   |   | 70,330    |  
|                                      |  |              |         |                       |   |           |   |       |          |   |   |           |  
|Net income (loss)                     |  | $            | 60,096  |                       | $ | (126,633  | ) | $     | (290,961 | ) | $ | (357,498  | )
|                                      |  |              |         |                       |   |           |   |       |          |   |   |           |  
|Cash and cash equivalents             |  | $            |        |                       | $ |          |   | $     | 73,213   |   | $ | 73,213    |  
|Accounts receivable, net              |  |              | 268,540 |                       |   | 232,321   |   |       |         |   |   | 500,861   |  
|Inventory, net                        |  |              | 20,080  |                       |   | 141,233   |   |       |         |   |   | 161,313   |  
|Note receivable, net                  |  |              | 33,650  |                       |   |          |   |       |         |   |   | 33,650    |  
|Prepaid expenses                      |  |              |        |                       |   | 33,137    |   |       | 56,153   |   |   | 89,290    |  
|Property and equipment, net           |  |              |        |                       |   | 156,823   |   |       | 29,527   |   |   | 186,350   |  
|Goodwill, net                         |  |              |        |                       |   | 17,509    |   |       |         |   |   | 17,509    |  
|Patents, net                          |  |              |        |                       |   | 298,769   |   |       |         |   |   | 298,769   |  
|Loan receivable, net                  |  |              |        |                       |   |          |   |       | 637      |   |   | 637       |  
|Deferred note costs                   |  |              |        |                       |   |          |   |       | 232,666  |   |   | 232,666   |  
|Deposits                              |  |              |        |                       |   |          |   |       | 1,385    |   |   | 1,385     |  
|                                      |  |              |         |                       |   |           |   |       |          |   |   |           |  
|Total assets                          |  | $            | 322,270 |                       | $ | 879,792   |   | $     | 393,581  |   | $ | 1,595,643 |  
|                                      |  |              |         |                       |   |           |   |       |          |   |   |           |  
|Capital Expenditures                  |  | $            |        |                       | $ | 21,210    |   | $     | 4,843    |   | $ | 26,053    |  
|                                      |  |              |         |                       |   |           |   |       |          |   |   |           |  

The
Companys total revenues and net income (loss) by segment for the nine month
period ended December 31, 2004, are as follows:

|                                      |  |              |         |                       |   |           |   |       |          |   |   |            |  
|------------------------------------- |  | ------------ | ------- | --------------------- | - | --------- | - | ----- | -------- | - | - | ---------- | -
|                                      |  | Graphic Arts |         | Specialty
  Chemicals |   | Corporate |   | Total |         
|                                      |  |              |         |                       |   |           |   |       |         
|Revenues                              |  | $            | 549,242 |                       | $ | 643,257   |   | $     |         |   | $ | 1,192,499  |  
|                                      |  |              |         |                       |   |           |   |       |          |   |   |            |  
|Gross profit                          |  | $            | 238,329 |                       | $ | 364,277   |   | $     |         |   | $ | 602,606    |  
|Selling, general and
  administrative |  |              | 98,647  |                       |   | 1,054,432 |   |       | 784,964  |   |   | 1,938,043  |  
|Depreciation and
  amortization       |  |              |        |                       |   | 54,902    |   |       | 7,136    |   |   | 62,038     |  
|Interest income                       |  |              |        |                       |   |          |   |       | 7,784    |   |   | 7,784      |  
|Interest expense                      |  |              |        |                       |   |          |   |       | 208,361  |   |   | 208,361    |  
|                                      |  |              |         |                       |   |           |   |       |          |   |   |            |  
|Net income (loss)                     |  | $            | 139,682 |                       | $ | (745,057  | ) | $     | (992,677 | ) | $ | (1,598,052 | )
|                                      |  |              |         |                       |   |           |   |       |          |   |   |            |  

|                           |  |         |         |      |   |           | 
|-------------------------- |  | ------- | ------- | ---- | - | --------- | 
|                           |  | REVENUE |        
|GEOGRAPHICAL
  INFORMATION |  | 2005    |         | 2004 |  
|                           |  |         |         |      |  
|                          
|U.S.                       |  | $       | 321,863 |      | $ | 860,574   | 
|Non U.S.                   |  |         | 68,432  |      |   | 331,925   | 
|                           |  |         |         |      |   |           | 
|Total revenue              |  | $       | 390,295 |      | $ | 1,192,499 | 
|                           |  |         |         |      |   |           | 

11

---



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

|   |                        
|-- | -----------------------
|4. | SALE OF OIL WELL LEASES

In April 2004,
the Company sold their oil well leases located in Laramie County, Wyoming for
$15,000 and a 4.5% royalty on all future oil sales from these wells. The
Company recognized no gain or loss on the sale of the oil well leases. In May
2004, the state of Wyoming returned the $75,000 deposit made by the company at
the time the oil leases were purchased.

|   |                             
|-- | ----------------------------
|5. | RELATED-PARTY
  TRANSACTIONS

The
Company has an amount due to Robert Seaman, a major shareholder and former
director of the Company.  Amount due to
the related party as of December 31, 2005 and 2004 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 $108,000 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 Chairman of the Board, Ron Wilen, loaned the
Company $133,600. The loan was unsecured, non interest bearing and due upon
demand. The 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 are both
unsecured, non interest bearing and due upon demand.

|   |                           
|-- | --------------------------
|6. | STOCK-BASED
  COMPENSATION

At December
31, 2005, the Company has stock-based compensation plans.  As permitted by SFAS No.123, Accounting for
Stock Based Compensation, as amended by SFAS No. 148, the Company accounts for
stock-based compensation arrangements with employees in accordance with
provisions of Account Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees.   The Company
accounts for equity instruments issued to non-employees in accordance with the
provisions of SFAS No.123 and Emerging Issues Task Force (EITF) Issue No.
96-18, Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction With Selling, Goods or Services.  All transactions in which goods or services
are the consideration received for the issuance of equity instruments are
accounted for based on the fair value of the consideration received or the fair
value of the equity instrument issued, whichever is more reliably measurable.
December 2004, the Financial Accounting Standards Board issued SFAS 123R Share
Based Payments. SFAS 123R requires public companies to record non-cash
compensation expense related to payment for employee services by an equity
award, such as stock options, in their financial statements over the requisite
service period. The Company will adopt SFAS 123R during the fourth quarter.
Stock-based compensation for non-employees was $129,720 and $103,740 for the
nine months ended December 31, 2005 and 2004, respectively.

The following
table illustrates the effect on net loss and loss per share if the Company had
applied the fair value recognition provisions of SFAS No. 123 to all
stock-based compensation:

12

---



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

|                                                                                                            |  | For the Three Months
  Ended December 31, |          | For the Nine Months
  Ended December 31, |  
|----------------------------------------------------------------------------------------------------------- |  | ----------------------------------------- | -------- | ---------------------------------------- | -
|                                                                                                            |  |                                           |          |                                          |  
|                                                                                                            |  | 2005                                      |          | 2004                                     |  
|                                                                                                            |  |                                           |          |                                          |  
|Net loss as
  reported                                                                                      |  | $                                         | (522,527 | )                                        | $
|                                                                                                            |  |                                           |          |                                          |  
|Add:                                                                                                        |  |                                           |          |                                          |  
|Stock based employee
compensation expense
  included in reported net income                                 |  |                                           |         |                                          |  
|Deduct:                                                                                                     |  |                                           |          |                                          |  
|Total stock based employee
compensation
  expense determined under fair value based
  method for all awards |  |                                           | (45,954  | )                                        |  
|                                                                                                            |  |                                           |          |                                          |  
|                                                                                                            |  |                                           |          |                                          |  
|Pro forma
  loss                                                                                            |  | $                                         | (568,481 | )                                        | $
|                                                                                                            |  |                                           |          |                                          |  
|Basic and
  diluted loss per common share                                                                   |  |                                           |          |                                          |  
|                                                                                                            |  |                                           |          |                                          |  
|As reported                                                                                                 |  | $                                         | (0.02    | )                                        | $
|                                                                                                            |  |                                           |          |                                          |  
|Pro forma                                                                                                   |  | $                                         | (0.02    | )                                        | $

|   |                              
|-- | -----------------------------
|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.

|   |                 
|-- | ----------------
|8. | RECLASSIFICATION

Certain
amounts from the prior period consolidated financial statements have been
reclassified to conform to current period presentation with no effect on the
net income.

13

---



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

|   |                  
|-- | -----------------
|9. | SUBSEQUENT EVENTS

During
January 2006, the Company issued the remaining 7.25 units or 725,000 shares of
its common stock for a purchase price of $580,000 as per the securities
purchase agreement dated March 18, 2005.

On
January 26, 2006, the Company entered into the First Amendment to the
securities agreement dated March 18, 2005. The agreement was scheduled to
expire on its first anniversary, March 18, 2006. The amendment changes that
date 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. For the period beginning on the date of the amendment through June
30, 2007, the consent of the majority holder is required for the Company to do
any of the following:

| |                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) contract
  for equity financing or debt financing with an equity component or issue any
  equity securities or securities convertible to equity;                                   
| |                                                                                                                                                                                        
| | (ii) incur
  indebtedness in excess of $250,000 other than trade debt in the ordinary
  course of business;                                                                            
| |                                                                                                                                                                                        
| | (iii) merge
  or consolidate or sell, transfer or license our assets outside of the
  ordinary course of business;                                                                     
| |                                                                                                                                                                                        
| | (iv) enter
  into an operating or capital lease in a transaction or series of transactions
  with annual payments in excess of $250,000;                                               
| |                                                                                                                                                                                        
| | (v) make
  capital expenditures in excess of $125,000 per fiscal year;                                                                                                                 
| |                                                                                                                                                                                        
| | (vi) grant
  exclusive distribution rights with respect to any of our products; or                                                                                                     
| |                                                                                                                                                                                        
| | (vii) permit
  any of our officers to sign or endorse any check, note, draft or other form
  of indebtedness in excess of $5,000 without the prior written authority of
  our Chairman.

We
also agreed that from the date of the amendment through March 18, 2009 we will
not negotiate or contract for a future offering without first providing to the
investors a ten-day right of first refusal to participate in the future
offering. To the extent the investors choose not to participate, we will then
have 60 days to complete the future offering without re-offering the investors
the right to participate.

During
the period from the date of the amendment through March 18, 2008, the majority
holder has the right to designate someone to receive notices of our Board of
Directors meetings and attend as an observer.

For
so long as the investors hold 1,500,000 shares of common stock equivalents
(meaning shares of common stock and other securities convertible to or
exercisable for common stock), the majority holder 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 ending
  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.                                                                                           

14

---



|       |                                                             
|------ | ------------------------------------------------------------
|Item 2 | Managements Discussion and Analysis or
  Plan of Operations

CAUTIONARY STATEMENT RELATING TO
FORWARD-LOOKING STATEMENTS

The
matters discussed in this Form 10-QSB 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 and the other filings with the
Securities and Exchange Commission made by the Company from time to time. The
discussion of the Companys 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 the Companys
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. This item should be read in conjunction with
the financial statements and other items contained elsewhere in the report.

Overview

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

| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | KH-30
  paraffin dispersant for the oil industry and related products;                                          
| |   |                                                                                                                 
| |  | Uniproof
  specialty-coated proofing paper for the printing industry; and                                       
| |   |                                                                                                                 
| |  | 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 environmentally friendly, non-hazardous,
biodegradable solvents 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.

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 are currently
negotiating potential working arrangements with several companies.

Business Operations and Principal Products

K-Product Line of Chemicals

KH-30
is a mixture of modified oils, dispersants and oil-based surfactants designed
to control paraffin and asphaltene deposits in oil wells.  When applied in accordance with our
recommended procedures, KH-30 has resulted in substantial production increases
of between two and five times in paraffin-affected oil and gas wells by
allowing for a faster penetration of paraffin and asphaltene deposits. KH-30
disperses and suspends paraffin and asphaltene in a free-flowing state and
prevents solids from sticking to each other or to oil well equipment.  KH-30 is patented in the United States,
Australia, Russia, Nigeria, Venezuela, Vietnam and the OAPI (the Africa
Intellectual Property Organization, which includes the countries of
Burkina-Faso, Benin, Central African Republic, Congo, Ivory Coast, Cameroon,
Gabon, Guinea, Guinea-Bissau, Mali, Mauritania, Niger, Senegal, Chad and
Togo).  We

15

---



have 12
additional country patent applications pending in most of the major
oil-producing countries around the world (including the European Union and
Canada).

Although
we believe that the application of our K-Line of products on a continuous basis
will result in higher production and lower lease operating costs in oil wells,
the introduction of our K-Line of products into the oil and gas producing
industry has been difficult.  Many
entrenched players such as the hot oilers and the major oil service companies
who benefit from high mark-ups on their proprietary products have no incentive
to promote the use of our K-Line of products.
Moreover, oil production engineers are reluctant to risk damage to a
well from a product that does not have the endorsement and backing of a major
enterprise. Consequently, the pace of introduction of our K-line of products
has been much slower than we initially anticipated.  We believe that this situation has begun to change as a result of
our marketing efforts with several oil service companies and well owners
beginning to use our products after successful trials.

KX-91
is used for cleanup and stimulation of well bores. It works on all gravities of
crudes. Penetrates and disperses faster than KH-30 and has a freeze point of
40F. KX-91 is good for tanks with buildup on the bottom and can be used on
pipelines with paraffin and asphaltene blockages.

KH-30S
is an outstanding flow enhancer. Used mainly on heavy crudes to reduce the
viscosity and reduce drag and friction. It has been very successful in tanks
with high bottoms and should be injected into the oil stream to help enhance
flow.

KDR-75
is effective in reducing friction pressure of petroleum crude and related oil
products due to turbulent flow through pipelines and helps restore laminar
flow. As a result, an increase in flow rate and productivity with reduced
energy consumption can be achieved.

KX-100
is a product where contact time is limited for removal of a plug. It is fast
acting and an outstanding dispersant that can be used in temperatures as low as
25F.  It can be used in nearly any
application with great results.

KX-105DS-A
Degreaser is a strong multi-functional, non-hazardous chemical cleaning
compound designed to dissolve and remove tough heavy organic and sludge
deposits.  It possesses strong wetting,
penetrating, dispersing and solvating properties. Hence, safe for use in oil
field cleaning applications.

KX-104PDC
is designed to reduce pour point, gel point, or cloud point of crude oil and
improve its cold flow property and pumpability in oil field processing applications.

KX-200-A
Pentrant is a proprietary chemical composition, specifically developed to
handle problems with paraffin and asphaltene blockages and high viscosity crude
with flow impairment.

KX-404
EB is specifically formulated to destabilize both, oil-in-water and
water-in-oil type emulsions when used in low treatment dosages of 50-100 PPM
with minimal contact time.  It triggers
kinetically and thermodynamically unstable, weaker, transient emulsion phase
into a sharp clean break down of oil & water phase. The application of
steam heat up to 150-200F will activate and speed up demulsification.

16

---



Additional
Product Line of Chemicals

AS-12
is an acidic cleaner in liquid form, which has been formulated to aid in the
removal of Iron Sulfide and mild depositions of Calcium Carbonate from
down-hole equipment surfaces and any other locations where a low pH may be
advisable.  Due to its very low pH, it
is recommended that general safety precautions be observed while handling the
concentrated material, wearing suitable facial and skin precautions.

CI-95
is formulated around an oil-soluble, water-dispersible filming amine designed
for use in sour gas and producing oil wells.
It is a liquid compound, which has been formulated to give a very
tenacious film with an extended persistency without undesirable gunking on
the down-hole tubulars.

SCI-97
Quatemary Surfacant is designed for use in down-hole cleanups in producing oil
wells. It is a quatemary ammonium chloride compound which has been successfully
used to clean the down-hole surfaces in producing wells, as well as in salt
water disposal and injections systems, while at the same time water-wetting the
solids to assist in removing these from the produced crude oil.

SI-15
Scale Inhibitor is a broad based spectrum, high-calcium tolerant, water soluble
scale inhibitor which has been formulated to inhibit the formation and
deposition of Calcium Carbonate scale in oil field brines.  SI-15 will complex well with the calcium
cations, impeding crystal growth and subsequent scale formation and deposition.

HI-17
is an aqueous solution of an alkyl amine along with other proprietary
ingredients, which is used to prevent precipitation of sodium chloride crystals
from high chloride brines.  It may be
applied over the wide range of temperatures and pressures, which are typically
found in producing oil and gas wells with little to no impact on performance.

Uniproof Proofing Paper

We
have developed a photo-sensitive coating that is applied to paper to produce
what is known in the printing industry as proofing paper or blue line
paper.  We developed this formulation
over several years of testing.  The
formulation is technically in the public domain as being within the scope of an
expired patent of duPont.  However,
other companies have not duplicated the exact formulation utilized by us, to
the best of our knowledge, and we protect it as a trade secret.

Slick Barrier

Slick
Barrier is an underwater protective coating, which prevents the adherence of
barnacles to boat hulls.  The product is
environmentally friendly and biodegradable, which we believe to be particularly
appealing in fresh water marine applications.
The product is currently being tested on pleasure boats throughout the
United States and Europe.  A patent
application for Slick Barrier was filed in 2003, and we are applying for
trademark protection both nationally and internationally.

GreenGlobe
Industries

In
November 1998, we acquired all of the outstanding shares of Green Globe in
exchange for 30,000 shares of our common stock.  Green Globe is operated as a separate subsidiary and sells its
products under the trade name Qualchem.
The acquisition of Green Globe has given us access to the chemistry and
product lines of Green Globe which include environmentally friendly paint
strippers and cleaners, many of which have been qualified for use by the U.S.
military.  Of particular note in the
Green Globe line was the development of dual package cleaning and drying
wipes which produce a clear, non-reflective coating on glasses, computer
screens and instrument panels.  The
wipes were developed, and have received U.S. military approval, for the
cleaning of the instrument panels of combat aircraft.

17

---



Proprietary Technologies

With
respect to our formulations, which are proprietary, we have patented our KH-30
oil well cleaner in the United States, Australia, Russia, Nigeria, Venezuela,
Vietnam and OAPI. We also have 12 additional country patent applications
pending in most of the major oil-producing countries around the world
(including the European Union and Canada). We believe our patent is strong and
will help our competitive position. However, we are aware that others may try
to imitate our product or invalidate our patents. We have in the past
vigorously enforced our trade secrets such as the one relating to our Uniproof
proofing paper, and intend to continue to do so in the future. However, we
recognize that intellectual property rights provide less than complete
protection. We believe that no other company is currently producing a product
similar to KH-30.

In
addition to applying for patent protection on our KH-30 product, we have also
registered KH-30 as a trademark. Trademark protection has also been obtained
for the Uniproof name for our proofing paper. We anticipate applying for both
patent and trademark protection for our other products in those jurisdictions
where we deem such protection to be beneficial.

RESULTS OF OPERATIONS

Three Months Ended December 31, 2005 Compared
to the Three Months Ended December 31, 2004

Revenues.
Revenues for the three months ended December 31, 2005 were $225,220, a
$312,230, or 58% decrease from revenues of $537,450 in the comparable three
months of 2004. The decrease in revenues was due to lower levels of Specialty
Chemicals and Uniproof proofing paper sales during the quarter. Specialty
Chemicals, which includes sales of our KH-30 products and Green Globe/Qualchem
military sales, decreased by $206,394 to $118,961, or 63% compared to $325,355
in the comparable three months in the previous year. This decrease was due
primarily to lower sales of our KH-30 family of oil field dispersant products.
Uniproof proofing paper sales decreased $105,836 to $106,259, or 50% compared
to $212,095 in the comparable three months in the previous year. The decrease
was due to fewer orders from our primary customer.

Cost
of Goods Sold. Cost of goods sold decreased $134,211,
or 54% to $113,705 or 50% of sales, for the three months ended December 31,
2005 from $247,916, or 46% of sales for the three months ended December 31,
2004. The decrease in cost of goods sold and higher percentage of sales was due
to the lower sales levels.

Gross
Profit. Gross profit for the three months ended
December 31, 2005, decreased by $178,019, or 61% to $111,515 or 50% of sales
compared with $289,534 or 54% of sales in the prior period. The decrease in
gross profit and gross profit percentage reflects the lower levels of sales of
specialty chemicals and Uniproof proofing paper sales.

Operating
Costs and Expenses

Selling,
General and Administrative Expenses. Selling, general
and administrative expenses increased $60,138 to $615,999 or 274% of sales for
the three months ended December 31, 2005 compared with $555,861 for the three
months ended December 31, 2004. The increase in selling, general and
administrative expenses was primarily related to an increase in salaries,
benefits, insurance and bad debts, partially offset by a decrease in
professional fees and travel and entertainment.

Depreciation
and Amortization. Depreciation and amortization
decreased by $3,926 to $17,326 or 18% for the three months ended December 31,
2005 as compared to $21,252 for the three months ended December 31, 2004. The
decrease was due to the Companys use of an accelerated method of depreciation,
offset by a slight increase in fixed assets.

Interest
Expense. The Company had interest expense of $726 for
the three months ended December 31, 2005 compared with interest expense of
$70,330 in the corresponding period in 2004. The decrease was due to the
convertible term note being satisfied in August 2005.

18

---



Net
Loss. The three months ended December 31, 2005
resulted in a net loss of $522,527 or $0.02 per share as compared to a net loss
of $357,498 or $0.02 per share for the three months ended December 31, 2004. The
average number of shares of common stock used in calculating earnings per share
increased 3,370,996 shares to 25,782,241 as a result of 2,000,615 shares issued
for the conversion of the note payable and interest payable, 1,275,000 shares
issued in connection with the private placement and 300,000 shares issued in
connection with the exercise of options.

Nine Months Ended December 31, 2005 Compared
to the Nine Months Ended December 31, 2004

Revenues.
Revenues for the nine-month period ended December 31, 2005 were $390,295, a
$802,204 or 67% decrease from revenues of $1,192,499 in the comparable
nine-month period ended December 31, 2004. The decrease in revenues was due to
lower levels of specialty chemicals and Uniproof proofing paper sales during
the nine months ended December 31, 2005. Specialty Chemicals, which includes
sales of our KH-30 products and Green Globe/Qualchem products, decreased by
$359,703 to $283,554, or 56% compared to $643,257 in the comparable nine month
period ended December 31, 2004. The decrease was primarily related to a 63%
decrease in sales of our KH-30 family of oil field dispersant products
reflecting a lower level of orders partially offset by a 20% increase in Green
Globe/Qualchem military sales. Uniproof proofing paper sales decreased $442,501
to $106,741, or 81% compared to $549,242 in the comparable nine month period
ended December 31, 2005. The decrease was primarily related to fewer orders
from our primary customer.

Cost
of Goods Sold. Cost of goods sold decreased 58% to
$250,504 or 64% of sales, for the nine-month period ended December 31, 2005
from $589,893 or 49% of sales, for the nine-month period ended December 31,
2004. The decrease in cost of goods sold and higher percentage of sales was due
to the lower sales level.

Gross
Profit. Gross profit for the nine-month period ended
December 31, 2005 was 36% or $139,791, a $462,815 or 77% decrease from a 51%
gross profit or $602,606 in the corresponding period of fiscal 2004. The
decrease in gross profit and gross profit percentage reflect the lower levels
of sales of specialty chemicals and Uniproofing paper.

Operating
Costs and Expenses

Selling,
general and Administrative Expenses. Selling, general
and administrative expenses increased $471,319, or 24% to $2,409,362, or 6,173%
of revenues for the nine-month period ended December 31, 2005 from $1,938,043,
or 163% of revenues for the nine-month period ended December 31, 2004. The
increase in selling, general and administrative expenses was primarily related
to an increase in salaries due to the exercise of options, benefits and bad
debts partially offset by a decrease in professional fees and travel and
entertainment.

Depreciation
and Amortization. Depreciation and amortization
decreased by $10,052 or 16% to $51,986 for the nine months ended December 31,
2005 as compared to $62,038 for the nine months ended December 31, 2004. The
decrease was due to the Companys use of an accelerated method of depreciation,
offset by a slight increase in fixed assets.

Interest
Expense. The Company had interest expense of $576,894
for the nine-month period ended December 31, 2005 compared with interest
expense of $208,361 in the corresponding period in 2004. The increase was due
to the additional warrants issued to the holder of the convertible term note
issued in February 2005 and satisfied in August 2005.

Net
Loss. The nine-month period ended December 31, 2005
resulted in a net loss of $2,898,419 or $0.12 per share compared to a net loss
of $1,598,052 or $0.07 per share for the comparable period ended December 31,
2004. The average number of shares of common stock used in calculating earnings
per share increased by 2,481,697 to 24,791,025 shares at December 31, 2005
compared with 22,309,328 at December 31, 2004 as a result of 2,000,615 shares
issued for the conversion of the note payable and interest payable, 1,275,000
shares issued in connection with the private placement and 300,000 shares
issued in connection with the exercise of options.

19

---



Liquidity and
Capital Resources

As
of December 31, 2005, the Company had $83,658 in cash and cash equivalents, as
compared to $365,610 at March 31, 2005.

The
$281,952 decrease in cash and cash equivalents was due to net cash used in
operating activities of $1,030,108, net cash used in investing activities of
$56,577, partially offset by net cash provided by financing activities of
$804,733. Cash used in investing activities consisted of employee loans of $22,
$25,846 related to patent applications for KH-30 and the S-2 technology and the
purchase of production equipment and other fixed assets of $30,709. Cash
provided by financing activities consisted of proceeds from related parties of
$200,000, proceeds from the exercise of stock options of $345,000, proceeds
from the issuance of common stock of $380,000, the receipt of stock subscription
receivable of $13,333, partially offset by the payment of related party payable
of $133,600.

During
the nine months ended December 31, 2005, the Company issued 4.75 additional
Series A Unit or 475,000 shares of its common stock for a purchase price of $380,000
as per the securities purchase agreement dated March 18, 2005.

During
January 2006, the Company issued the remaining 7.25 units or 725,000 shares of
its common stock for a purchase price of $580,000 as per the securities
purchase agreement dated March 18, 2005.

On
January 26, 2006, the Company entered into the First Amendment to the
securities agreement dated March 18, 2005. The agreement was scheduled to
expire on its first anniversary, March 18, 2006. The amendment changes that
date 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. For the period beginning on the date of the amendment through June
30, 2007, the consent of the majority holder is required for the Company to do
any of the following:

| |                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) contract
  for equity financing or debt financing with an equity component or issue any
  equity securities or securities convertible to equity;                                   
| |                                                                                                                                                                                        
| | (ii) incur
  indebtedness in excess of $250,000 other than trade debt in the ordinary
  course of business;                                                                            
| |                                                                                                                                                                                        
| | (iii) merge
  or consolidate or sell, transfer or license our assets outside of the
  ordinary course of business;                                                                     
| |                                                                                                                                                                                        
| | (iv) enter
  into an operating or capital lease in a transaction or series of transactions
  with annual payments in excess of $250,000;                                               
| |                                                                                                                                                                                        
| | (v) make
  capital expenditures in excess of $125,000 per fiscal year;                                                                                                                 
| |                                                                                                                                                                                        
| | (vi) grant
  exclusive distribution rights with respect to any of our products; or                                                                                                     
| |                                                                                                                                                                                        
| | (vii) permit
  any of our officers to sign or endorse any check, note, draft or other form
  of indebtedness in excess of $5,000 without the prior written authority of
  our Chairman.

We also agreed
that from the date of the amendment through March 18, 2009 we will not
negotiate or contract for a future offering without first providing to the
investors a ten-day right of first refusal to participate in the future
offering. To the extent the investors choose not to participate, we will then
have 60 days to complete the future offering without re-offering the investors
the right to participate.

During
the period from the date of the amendment through March 18, 2008, the majority
holder has the right to designate someone to receive notices of our Board of
Directors meetings and attend as an observer.

20

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For
so long as the investors hold 1,500,000 shares of common stock equivalents
(meaning shares of common stock and other securities convertible to or
exercisable for common stock), the majority holder 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 ending
  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                                                                                            

As
of December 31, 2005 the Company had no backlog. Backlog represents products
that the Companys customers have committed to purchase. The Companys backlog
is subject to fluctuations and is not necessarily indicative of future sales.

During
the past two fiscal years ended March 31, 2005 and 2004, the Company has
recorded aggregate losses from operations of $4,423,974 and has incurred total
negative cash flow from operations of $3,801,148 for the same two-year period. During
the nine months ended December 31, 2005, the Company experienced a net loss
from operations of $2,898,419 and negative cash flow from operating activities
of $1,030,108. The Company does not currently have an operating line of credit.
These matters raise substantial doubt about the Companys ability to continue
as a going concern. The Companys consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

The
Companys continued existence is dependent upon several factors, including
increased sales volume, collection of existing receivables and the ability to
achieve profitability from the sale of the Companys product lines. In order to
increase its cash flow, the Company is continuing its efforts to stimulate
sales and cut back expenses not directly supporting its sales and marketing
efforts.

Concentration of
Risk

The
Company sells its Uniproof proofing paper to three customers. One of these
customers constitutes 99% of Graphic Arts sales and 27% of total customer sales
for the nine months period ended December 31, 2005. The loss of this customer
would have adverse financial consequences to the Company. We have provided
liberal credit terms to this customer and there is a risk that a certain amount
of this receivable balance may prove to be uncollectible. The Company believes
that this customer will purchase additional product and the Company would use
that as leverage to collect any outstanding balances.

Quantitative and
Qualitative Disclosures about Market Risk

The
Company is not subject to market risk as there are no outstanding loans as of
December 31, 2005.

21

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|        |                         
|------- | ------------------------
|Item 3. | Controls and Procedures.

Evaluation
of the Companys Disclosure Controls

As
of the end of the period covered by this report, the Company has evaluated the
effectiveness of the design and operation of its disclosure controls and
procedures (disclosure controls). This evaluation (the controls evaluation)
was done under the supervision and participation of the Companys management,
including its chief executive officer (the CEO) and interim chief financial
officer (the CFO). Rules adopted by the Securities and Exchange Commission
require that in this section of the report the Company present the conclusions
of its CEO and CFO about the effectiveness of the Companys disclosure controls
based on and as of the dated of the controls evaluation.

CEO and CFO Certifications

Appearing
as exhibits 31.1 and 31.2 to this report are Certifications of the CEO and
CFO. The certifications are required pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This section of
this report contains information concerning the controls evaluation referred to
in the Section 302 Certifications and this information should be read in
conjunction with the Section 302 Certifications for a more complete
understanding of the topics presented.

Disclosure
Controls

Disclosure
controls are procedures that are designed with the objective of ensuring that
information required to be disclosed in the Companys reports filed under the
Securities Exchange Act, such as this report, is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commissions rules and forms. Disclosure controls are also designed
with the objective of ensuring that such information is accumulated and
communicated to the Companys management, including, without limitation, the
CEO and CFO, as appropriate to allow timely decisions regarding required
disclosure.

Limitations
on the Effectiveness of Controls

The
Companys management, including, without limitation, the CEO and CFO, does not
expect that the Companys disclosure controls will prevent all error and fraud.
A control system no matter how well conceived and operated can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations of all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been
detected.

Scope
of Controls Evaluation

The
CEO/CFO evaluation of the Companys disclosure controls included a review of
the controls objective and design, the controls implementation by the Company
and the effect of the controls on the information generated for use in this
report. In the course of the controls evaluation, management sought to identify
data errors, controls problems or acts of fraud and to confirm that appropriate
corrective action, including process movements, was being undertaken. This type
of evaluation will be done on a quarterly basis so that the conclusions
concerning controls effectiveness can be reported in the Companys quarterly
reports on Form 10-QSB and annual report on Form 10-KSB. The overall goals of
these various review and evaluation activities are to monitor the Companys
disclosure controls and to make modifications, as necessary. In this regard,
the Companys intent is that the disclosure controls will be maintained as
dynamic controls systems that change (including improvements and corrections)
as conditions warrant.

22

---



Conclusions

Based
upon the controls evaluation, the Companys CEO and CFO have concluded that, as
of the end of the period covered by this report, the Companys disclosure
controls are effective to provide reasonable assurance that information
required to be disclosed in the Companys reports filed under the Securities
Exchange Act such as this report, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commissions rules and forms.

There
has been no change in the Companys internal controls over financial reporting
during the fiscal quarter ended December 31, 2005, that has materially
affected, or is reasonably likely to materially affect, the Companys internal
controls over financial reporting.

23

---



PART II

OTHER INFORMATION

|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

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

|        |                                          
|------- | -----------------------------------------
|Item 2. | Changes in Securities and Use of Proceeds

Not
Applicable

|        |                                
|------- | -------------------------------
|Item 3. | Defaults upon Senior Securities

Not
Applicable

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

Not
Applicable

|        |                  
|------- | -----------------
|Item 5. | Other Information

Not
Applicable

|        |         
|------- | --------
|Item 6. | Exhibits

| |     |          
| | --- | ---------
| | (a) | Exhibits.

| |  |      |                                                                                        
| |  | ---- | ---------------------------------------------------------------------------------------
| |  | 31.1 | Written
  Statement of the Chief Executive Officer Pursuant to 18 U.S.C. §1350 Sec. 302
| |  |      |                                                                                        
| |  | 31.2 | Written
  Statement of the Chief Financial Officer Pursuant to 18 U.S.C. §1350 Sec. 302
| |  |      |                                                                                        
| |  | 32.1 | Written
  Statement of the Chief Executive Officer Pursuant to 18 U.S.C. §1350 Sec. 906
| |  |      |                                                                                        
| |  | 32.2 | Written
  Statement of the Chief Financial Officer Pursuant to 18 U.S.C. §1350 Sec. 906

24

---



United Energy Corp. 
FORM 10-QSB 
December 31, 2005

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:
  February 13, 2006 |     | UNITED
  ENERGY CORP.                              
|                           |     |                                                    
|                           | By: | /s/ Brian
  King                                   
|                           |     |                                                    
|                           |     | Brian King,Chief
  Executive Officer               
|                           |     | (as
  principal executive officer)                 
|                           |     |                                                    
|                           | By: | /s/ James
  McKeever                               
|                           |     |                                                    
|                           |     | James
  McKeever,                                  
|                           |     | Interim
  Chief Financial Officer                  
|                           |     | (as
  principal financial and accounting
  officer)

25

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