UNITED
STATES





SECURITIES
AND EXCHANGE COMMISSION





Washington,
D.C. 20549










FORM
10-Q




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




For the quarterly period ended December
31, 2009




or




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




For
the transition period from ________ to __________




Commission
File No. 000-30841









UNITED
ENERGY CORP.


(Exact
name of registrant as specified in its charter)




Nevada
              (State or other jurisdiction of
              incorporation or organization)
            22-3342379
              (I.R.S. Employer Identification No.)600
      Meadowlands Parkway #20, Secaucus, N.J.  07094
              (Address
      of principal executive offices)(800)
      327-3456
              (Registrant's
      telephone number, including area code)


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




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes £ No þ




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




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





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




As of
February 16, 2010, 31,504,449 shares of common stock, par value $.01 per share,
were outstanding.





INDEX




PART
      I.  FINANCIAL INFORMATIONItem
      1.
                                                  Financial
      StatementsConsolidated
      balance sheets December 31, 2009 (Unaudited) andMarch
      31, 2009
                                                  
                                                  3-4Consolidated
      statements of operations for the three months and nine months ended
      December 31, 2009 (Unaudited) and 2008 (Unaudited)
                                                  
                                                  5Consolidated
      statement of stockholders' equity for the nine months ended December 31,
      2009 (Unaudited)
                                                  
                                                  6Consolidated
      statements of cash flows for the nine months ended December 31, 2009
      (Unaudited) and 2008 (Unaudited)
                                                  
                                                  7-8Notes
      to consolidated financial statements
                                                  
                                                  9-15Item
      2.
                                                  Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                                  
                                                  15-18Item
      3.
                                                  Quantitative
      and Qualitative Disclosures About Market Risk
                                                  
                                                  19Item
      4.
                                                  Controls
      and Procedures
                                                  
                                                  19PART
      II.  OTHER INFORMATIONItem
      1.
                                                  Legal
      Proceedings
                                                  
                                                  20Item
      1A.
                                                  Risk
      Factors
                                                  
                                                  20Item
      2.
                                                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                                                  
                                                  20Item
      3.
                                                  Defaults
      Upon Senior Securities
                                                  
                                                  20Item
      4.
                                                  Submission
      of Matters to a Vote of Security Holders
                                                  
                                                  20Item
      5.
                                                  Other
      Information
                                                  
                                                  20Item
      6.
                                                  Exhibits
                                                  
                                                  20Signatures
                                                  
                                                  21


2







Item
      1. Financial
      StatementsUNITED
      ENERGY CORP.  AND SUBSIDIARIESCONSOLIDATED
      BALANCE
SHEETS





December 31,
                    
                    
                    March 31,2009
                    
                    
                    2009(Unaudited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                    
                    $
                    380,309
                    
                    
                    $
                    56,372Accounts
      receivable, net of allowance for doubtful accounts of $25,711 and $7,032,
      respectively
                    
                    
                    108,965
                    
                    
                    
                    140,531Inventory
                    
                    
                    95,010
                    
                    
                    
                    155,427Prepaid
      expenses and other current assets
                    
                    
                    31,617
                    
                    
                    
                    79,237Loan
      receivable, net of reserve of $25,000
                    
                    
                    25,000
                    
                    
                    
                    25,000Total
      current assets
                    
                    
                    640,901
                    
                    
                    
                    456,567PROPERTY
      AND EQUIPMENT, net of accumulateddepreciation
      and amortization of $484,902 and$462,091
      respectively
                    
                    
                    86,269
                    
                    
                    
                    108,094OTHER
      ASSETS:Goodwill,
      net
                    
                    
                    15,499
                    
                    
                    
                    15,499Patents,
      net of accumulated amortization of $270,681 and $242,000,
      respectively
                    
                    
                    322,679
                    
                    
                    
                    347,661Loans
      receivable
                    
                    
                    19,942
                    
                    
                    
                    3,843Deposits
                    
                    
                    1,385
                    
                    
                    
                    1,385Total
      assets
                    
                    $
                    1,086,675
                    
                    
                    $
                    933,049





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


3


UNITED
ENERGY CORP.  AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS





December 31,
                
                
                March 31,2009
                
                
                2009(Unaudited)LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                
                $
                184,109
                
                
                $
                189,609Accrued
      expenses
                
                
                200,613
                
                
                
                107,622Convertible
      term note
                
                
                30,000
                
                
                
                35,000Due
      to related parties
                
                
                453,781
                
                
                
                150,000Total
      current liabilities
                
                
                868,503
                
                
                
                482,231STOCKHOLDERS'
      EQUITY:Preferred
      Stock: 100,000 shares authorized;Series
      A Convertible Preferred Stock: $8,000 stated value, 3 shares issued and
      outstanding as of December 31, 2009 and March 31, 2009
                
                
                24,000
                
                
                
                24,000Common
      stock: $0.01 par value 100,000,000 shares authorized; 31,328,587 and
      31,030,115 shares issued and outstanding as of December 31, 2009 and March
      31, 2009
                
                
                313,286
                
                
                
                310,301Additional
      paid-in capital
                
                
                23,204,751
                
                
                
                22,196,257Accumulated
      deficit
                
                
                (23,323,865
                )
                
                
                (22,079,740
                )Total
      stockholders' equity
                
                
                218,172
                
                
                
                450,818Total
      liabilities and stockholders' equity
                
                $
                1,086,675
                
                
                $
                933,049





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


4




UNITED
ENERGY CORP. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS





For the Three Months
                    
                    
                    For the Nine MonthsEnded December 31,
                    
                    
                    Ended December 31,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008(Unaudited)
                    
                    
                    (Unaudited)
                    
                    
                    (Unaudited)
                    
                    
                    (Unaudited)REVENUES,
      net
                    
                    $
                    437,075
                    
                    
                    $
                    343,530
                    
                    
                    $
                    1,444,281
                    
                    
                    $
                    941,524COST
      OF GOODS SOLD
                    
                    
                    153,228
                    
                    
                    
                    126,948
                    
                    
                    
                    538,787
                    
                    
                    
                    401,582Gross
      profit
                    
                    
                    283,847
                    
                    
                    
                    216,582
                    
                    
                    
                    905,494
                    
                    
                    
                    539,942OPERATING
      EXPENSES:Selling,
      general and administrative
                    
                    
                    762,183
                    
                    
                    
                    353,063
                    
                    
                    
                    1,903,821
                    
                    
                    
                    1,114,921Research
      and development
                    
                    
                    58,665
                    
                    
                    
                    77,050
                    
                    
                    
                    174,304
                    
                    
                    
                    231,157Depreciation
      and amortization
                    
                    
                    11,971
                    
                    
                    
                    12,470
                    
                    
                    
                    36,483
                    
                    
                    
                    37,372Total
      operating expenses
                    
                    
                    832,819
                    
                    
                    
                    442,583
                    
                    
                    
                    2,114,608
                    
                    
                    
                    1,383,450Loss
      from operations
                    
                    
                    (548,972
                    )
                    
                    
                    (226,001
                    )
                    
                    
                    (1,209,114
                    )
                    
                    
                    (843,508
                    )OTHER
      INCOME (EXPENSE), net:Interest
      income
                    
                    
                    6
                    
                    
                    
                    19
                    
                    
                    
                    20
                    
                    
                    
                    942Interest
      expense
                    
                    
                    (14,528
                    )
                    
                    
                    (472
                    )
                    
                    
                    (33,951
                    )
                    
                    
                    (1,346
                    )Total
      other income (expense), net
                    
                    
                    (14,522
                    )
                    
                    
                    (453
                    )
                    
                    
                    (33,931
                    )
                    
                    
                    (404
                    )Net
      loss
                    
                    
                    (563,494
                    )
                    
                    
                    (226,454
                    )
                    
                    
                    (1,243,045
                    )
                    
                    
                    (843,912
                    )PREFERRED
      DIVIDENDS
                    
                    
                    (360
                    )
                    
                    
                    (360
                    )
                    
                    
                    (1,080
                    )
                    
                    
                    (1,080
                    )Net
      loss applicable to common shareholders
                    
                    $
                    (563,854
                    )
                    
                    $
                    (226,814
                    )
                    
                    $
                    (1,244,125
                    )
                    
                    $
                    (844,992
                    )BASIC
      AND DILUTED LOSS PER SHARE:
                    
                    $
                    (0.02
                    )
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.04
                    )
                    
                    $
                    (0.03
                    )BASIC
      AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
                    
                    
                    31,328,587
                    
                    
                    
                    31,030,115
                    
                    
                    
                    31,279,746
                    
                    
                    
                    31,030,115





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


5




UNITED
ENERGY CORP. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY


FOR
THE NINE MONTHS ENDED DECEMBER 31, 2009 (UNAUDITED)





AdditionalCommon Stock
                                    
                                    
                                    Preferred
                                    
                                    
                                    Paid-In
                                    
                                    
                                    AccumulatedShares
                                    
                                    
                                    Amount
                                    
                                    
                                    Stock
                                    
                                    
                                    Capital
                                    
                                    
                                    Deficit
                                    
                                    
                                    TotalBALANCE,
      April 1, 2009
                                    
                                    
                                    31,030,115
                                    
                                    
                                    $
                                    310,301
                                    
                                    
                                    $
                                    24,000
                                    
                                    
                                    $
                                    22,196,257
                                    
                                    
                                    $
                                    (22,079,740
                                    )
                                    
                                    $
                                    450,818Compensation
      expense associated
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    .with
      options
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,068
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,068Compensation
      expense associatedwith
      warrants
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    975,411
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    975,411Conversion
      of convertible noteinto
      common stock
                                    
                                    
                                    298,472
                                    
                                    
                                    
                                    2,985
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    32,015
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    35,000Dividends
      accrued onpreferred
      shares
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1,080
                                    )
                                    
                                    
                                    (1,080
                                    )Net
      loss
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1,243,045
                                    )
                                    
                                    
                                    (1,243,045
                                    )BALANCE,
      December 31, 2009
                                    
                                    
                                    31,328,587
                                    
                                    
                                    $
                                    313,286
                                    
                                    
                                    $
                                    24,000
                                    
                                    
                                    $
                                    23,204,751
                                    
                                    
                                    $
                                    (23,323,865
                                    )
                                    
                                    $
                                    218,172





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


6




UNITED
ENERGY CORP. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE NINE MONTHS ENDED DECEMBER 31, 2009 AND 2008





2009
                
                
                2008(Unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss from continuing operations
                
                $
                (1,243,045
                )
                
                $
                (843,912
                )Adjustments
      to reconcile net loss to net cash used in operating
      activitiesDepreciation
      and amortization
                
                
                51,492
                
                
                
                48,589Allowance
      for doubtful accounts
                
                
                18,680
                
                
                
                (16,686
                )Compensation
      expense associated with warrants
                
                
                975,411
                
                
                
                -Compensation
      expense associated with options
                
                
                1,068
                
                
                
                17,346Changes
      in operating assets and liabilitiesAccounts
      receivable
                
                
                12,887
                
                
                
                117,207Inventory
                
                
                60,417
                
                
                
                (8,675
                )Prepaid
      expenses and other current assets
                
                
                47,620
                
                
                
                103,988Accounts
      payable and accrued expenses
                
                
                117,490
                
                
                
                (24,679
                )Net
      cash provided by (used in) operating activities
                
                
                42,020
                
                
                
                (606,822
                )CASH
      FLOWS FROM INVESTING ACTIVITIES:Employee
      loans
                
                
                (16,100
                )
                
                
                3,580Payments
      for acquisition of property and equipment
                
                
                (985
                )
                
                
                (83,453
                )Payments
      for patents
                
                
                (3,699
                )
                
                
                (9,644
                )Cash
      used in investing activities
                
                
                (20,784
                )
                
                
                (89,517
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from related party payable
                
                
                303,781
                
                
                
                -Preferred
      stock dividend
                
                
                (1,080
                )
                
                
                (1,080
                )Net
      cash provided by (used in) financing activities
                
                
                302,701
                
                
                
                (1,080
                )Net
      increase (decrease)  in cash and cash
equivalents
                
                
                323,937
                
                
                
                (697,419
                )CASH
      AND CASH EQUIVALENTS, beginning of period
                
                
                56,372
                
                
                
                858,575CASH
      AND CASH EQUIVALENTS, end of period
                
                $
                380,309
                
                
                $
                161,156





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


7


UNITED
ENERGY CORP. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE NINE MONTHS ENDED DECEMBER 31, 2009 AND 2008





2009
                    
                    
                    2008(Unaudited)SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid during the periodInterest
                    
                    $
                    1,160
                    
                    
                    $
                    1,345Income
      taxes
                    
                    $
                    2,080
                    
                    
                    $
                    2,220SUPPLEMENTAL
      DISCLOSURES OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:Note
      payable issued in conversion of accounts payable
                    
                    $
                    30,000
                    
                    
                    $
                    -Conversion
      of note payable into common stock
                    
                    $
                    35,000
                    
                    
                    $
                    -





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


8


UNITED
ENERGY CORP.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 (Unaudited)




1.           BASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Basis
of presentation




Interim
Financial Statements




The
accompanying unaudited consolidated financial statements of United Energy Corp.
(“we”, “United Energy” or the “Company”) have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, the unaudited interim financial statements furnished herein
include all adjustments necessary for a fair presentation of the Company's
financial position at December 31, 2009 (unaudited) and the results of its
operations for the three and nine months ended December 31, 2009 and 2008
(unaudited) and cash flows for the nine months ended December 31, 2009 and 2008
(unaudited). All such adjustments are of a normal and recurring nature. Interim
financial statements are prepared on a basis consistent with the Company's
annual financial statements. Results of operations for the three and nine months
ended December 31, 2009 and 2008 are not necessarily indicative of the operating
results that may be expected for the year ending March 31, 2010.




The
consolidated balance sheet as of March 31, 2009 has been derived from the
audited financial statements at that date but does not include all of the
information and notes required by accounting principles generally accepted in
the United States for complete financial statements.




For
further information, refer to the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2009.




Going
Concern– The accompanying
consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America which
contemplate continuation of the Company as a going concern. However, the Company
has year-end losses from operations and has an accumulated deficit of
$23,323,865 as of December 31, 2009.During the nine months ended December
31, 2009 the Company experienced a net loss from operations of $1,209,114 and
cash flow from operations of $42,020.  These matters raise substantial
doubt about the Company’s ability to continue as a going concern. Our
consolidated financial statements do not include any adjustment that might
result from the outcome of this uncertainty.




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





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





2           NET
LOSS PER SHARE




Basic net
loss per share is computed based upon the weighted average number of common
shares outstanding during the periods and is computed by dividing net loss by
the adjusted weighted average number of shares during the
periods.


9


3
            ACCOUNTING
      STANDARDS UPDATES




In August 2009, the FASB issued ASU
2009-05 which includes amendments to Subtopic 820-10, “Fair Value Measurements
and Disclosures—Overall”. The update provides clarification that in
circumstances, in which a quoted price in an active market for the identical
liability is not available, a reporting entity is required to measure fair value
using one or more of the techniques provided for in this update. The amendments
in this ASU clarify that a reporting entity is not required to include a
separate input or adjustment to other inputs relating to the existence of a
restriction that prevents the transfer of the liability and also
clarifies  that both a quoted price in an active market for the
identical liability at the measurement date and the quoted price for the
identical liability when traded as an asset in an active market when no
adjustments to the quoted price of the asset are required are Level 1 fair value
measurements. The guidance provided in this ASU is effective for the first
reporting period, including interim periods, beginning after
issuance.  The adoption of this standard did not have a material
impact on the Company’s consolidated financial position and results of
operations.




In
September 2009, the FASB issued ASU 2009-06, Income Taxes (Topic 740),
”Implementation Guidance on Accounting for Uncertainty in Income Taxes and
Disclosure Amendments for Nonpublic Entities”, which provides implementation
guidance on accounting for uncertainty in income taxes, as well as eliminates
certain disclosure requirements for nonpublic entities.  For entities
that are currently applying the standards for accounting for uncertainty in
income taxes, this update shall be effective for interim and annual periods
ending after September 15, 2009. For those entities that have deferred the
application of accounting for uncertainty in income taxes in accordance with
paragraph 740-10-65-1(e), this update shall be effective upon adoption of those
standards. The adoption of this standard is not expected to have an impact on
the Company’s consolidated financial position and results of operations since
this accounting standard update provides only implementation and disclosure
amendments.




In
September 2009, the FASB has published ASU No. 2009-12, “Fair Value Measurements
and Disclosures (Topic 820) - Investments in Certain Entities That Calculate Net
Asset Value per Share (or Its Equivalent)”. This ASU amends Subtopic 820-10,
“Fair Value Measurements and Disclosures – Overall”, to permit a reporting
entity to measure the fair value of certain investments on the basis of the net
asset value per share of the investment (or its equivalent). This ASU also
requires new disclosures, by major category of investments including the
attributes of investments within the scope of this amendment to the
Codification. The guidance in this Update is effective for interim and annual
periods ending after December 15, 2009. Early application is permitted.The adoption of this
standard is not expected to have a material impact on the Company’s consolidated
financial position and results of operations.




In
January 2010, the FASB has published ASU 2010-01 “Equity (Topic 505)- Accounting
for Distributions to Shareholders with Components of Stock and Cash—a consensus
of the FASB Emerging Issues Task Force,” as codified in ASC 505,. ASU
No. 2010-01 clarifies the treatment of certain distributions to
shareholders that have both stock and cash components. The stock portion of such
distributions is considered a share issuance that is reflected in earnings per
share prospectively and is not a stock dividend. The amendments in this Update
are effective for interim and annual periods ending on or after December 15,
2009, and should be applied on a retrospective basis.  Early adoption
is permitted.  The adoption of this standard did not have an impact on
the Company’s consolidated financial position and results of
operations.




Not yet
adopted




In
December 2009, the FASB has published ASU 2010-16 ““Transfers and Servicing
(Topic 860): Accounting for Transfers of Financial Assets.” ASU No. 2009-16
is a revision to ASC 860, “Transfers and Servicing,” and amends the guidance on
accounting for transfers of financial assets, including securitization
transactions, where entities have continued exposure to risks related to
transferred financial assets. ASU No. 2009-16 also expands the disclosure
requirements for such transactions. This ASU will become effective for us on
April 1, 2010.  The adoption of this standard is not expected to
have a material impact on the Company’s consolidated financial position and
results of operations.




10


In
January 2010, the FASB has published ASU 2010-06 “Fair Value Measurements and
Disclosures (Topic 820): - Improving Disclosures about Fair Value Measurements.
ASU No. 2010-06 clarifies improve disclosure requirement related to fair
value measurements and disclosures – Overall Subtopic (Subtopic 820-10) of the
FASB Accounting Standards Codification. The new disclosures and clarifications
of existing disclosures are effective for interim and annual reporting periods
beginning after December 15, 2009, except for the disclosure about purchase,
sales, issuances, and settlement in the roll forward of activity in Level 3 fair
value measurements.  Those disclosures are effective for fiscal years
beginning after December 15, 2010, and for interim periods within those fiscal
years. The amendments in this Update are effective for interim and annual
periods ending on or after December 15, 2009, and should be applied on a
retrospective basis.  The adoption of this standard is not expected to
have a material impact on the Company’s consolidated financial position and
results of operations.




Other
ASUs not effective until after January, 2010, are not expected to have a
significant effect on the Company’s consolidated financial position or results
of operations.




4.
            CONVERTIBLE
      DEBT




On
November 6, 2009, the Company issued a convertible term note in the amount of
$30,000, which accrues interest at 7% per year. Principal and interest is
payable on the maturity date of April 30, 2010. The holder of this term note has
the option to convert all or a portion of the note (including principal and
interest) into shares of common stock at any time at a conversion price of $0.21
per share. The conversion price is subject to adjustment for stock splits, stock
dividends and similar events.




On
January 28, 2009, the Company issued a convertible term note in the amount of
$35,000, which accrues interest at 7% per year. Principal and interest is
payable on the maturity date of June 30, 2009. The holder of this term note has
the option to convert all or a portion of the note (including principal and
interest) into shares of common stock at any time at a conversion price of $0.12
per share. The conversion price is subject to adjustment for stock splits, stock
dividends and similar events. The holder of this term note agreed to convert the
note and on June 2, 2009, the term note was converted. In consideration for the
conversion, the Company issued to the holder of the note, warrants to acquire
140,000 shares of Common Stock at an exercise price of $0.12, which warrants are
exercisable for a period of five years.




5.
            USE
      OF ESTIMATES




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




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




6.
            FAIR
      VALUE MEASUREMENTS




FASB ASC
820-10 “Fair Value Measurements and Disclosures”, is effective for financial
assets and liabilities in fiscal years beginning after November 15, 2007, and
for non-financial assets and liabilities in fiscal years beginning after
November 15, 2008. The Company adopted FASB ASC 820-10 for financial assets and
liabilities with no material impact to the consolidated financial statements.
The Company is currently evaluating the potential impact of the application of
FASB ASC 820-10 on the non-financial assets and liabilities found on its
consolidated financial statements.  FASB ASC 820-10 applies to all
assets and liabilities that are being measured and reported on a fair value
basis. FASB ASC 820-10 requires new disclosure that establishes a framework for
measuring fair value in GAAP, and expands disclosure about fair value
measurements. This statement enables the reader of the financial statements to
assess the inputs used to develop those measurements by establishing a hierarchy
for ranking the quality and reliability of the information used to determine
fair values. The statement requires that assets and liabilities carried at fair
value be classified and disclosed in one of the following three
categories:




11




Level 1:
Quoted market prices in active markets for identical assets or
liabilities.




Level 2:
Observable market based inputs or unobservable inputs that are corroborated by
market data.




Level 3:
Unobservable inputs that are not corroborated by market data.




7.
            RECLASSIFICATIONS




Certain amounts in the December 31,
2008 consolidated financial statements have been reclassified to conform to the
December 31, 2009 presentation.




8.
            PROPERTY
      AND EQUIPMENT




Property and equipment are stated at
cost.  Depreciation has been calculated over the estimated useful
lives of the assets ranging from 3 to 15 years.  Leasehold
improvements are amortized over the lives of the respective leases, which are
shorter than the useful life.  The cost of maintenance and repairs is
expensed as incurred.  Depreciation and amortization expense for the
period ended December 31, 2009 and the year ended March 31, 2009 were $22,811
and $26,714, respectively.




Property
and equipment consists of the following:




December 31,
                    
                    
                    March 31,2009
                    
                    
                    2009Furniture
      and fixtures
                    
                    $
                    83,355
                    
                    
                    $
                    83,355Machinery
      and equipment
                    
                    
                    419,612
                    
                    
                    
                    418,626Vehicles
                    
                    
                    42,001
                    
                    
                    
                    42,001Leasehold
      improvements
                    
                    
                    26,203
                    
                    
                    
                    26,203571,171
                    
                    
                    
                    570,185Less:
      Accumulated depreciation and amortization
                    
                    
                    (484,902
                    )
                    
                    
                    (462,091
                    )Property
      and equipment, net
                    
                    $
                    86,269
                    
                    
                    $
                    108,094





9.
            INVENTORY





Inventory consists of the
following:





December 31,
                  
                  
                  March 31,2009
                  
                  
                  2009Blended
      chemicals
                  
                  $
                  35,953
                  
                  
                  $
                  92,944Raw
      materials
                  
                  
                  59,057
                  
                  
                  
                  62,483Total
      inventory
                  
                  $
                  95,010
                  
                  
                  $
                  155,427





10.
            RELATED-PARTY
      TRANSACTIONS




In March
2009, Ronald Wilen, a director, the President and the Chief Executive Officer,
Martin Rappaport, a director, and Sherleigh Associates Profit Sharing Plan
(“Sherleigh”), a trust of which Jack Silver, a director, is the trustee,
provided the Company with short term loans in the amount of $50,000 each, and
each received warrants to purchase up to 200,000 shares of common stock at an
exercise price of $.125 per share which warrants are exercisable for a period of
five (5) years.




12




Subsequently,
in May 2009, the loan by Sherleigh was repaid, and Messrs Wilen and Rappaport
loaned the Company an additional $50,000 each, and Hilltop Holding Company, L.P.
(“Hilltop”), a limited partnership of which Mr. Silver is the managing partner,
loaned the Company $101,017.  In addition, the Company amended Messrs
Wilen’s and Rappaport’s March 2009 notes into secured convertible notes (the
“Amended March Loan Notes”) and issued to Messrs Wilen and Rappaport and Hilltop
secured convertible notes (the “May Loan Notes”) for their May 2009 loans to the
Company.  The amended notes extended the maturity date of the Amended
March Loan Notes to July 13, 2009.  In consideration for agreeing to
extend the maturity date and for making the May 2009 loans, Messrs Wilen,
Rappaport and Hilltop each received warrants to purchase up to 400,000 shares of
common stock at an exercise price of $.12 per share, which warrants are
exercisable for a period of five (5) years.




Thereafter,
in July 2009, Messrs Wilen and Rappaport and Hilltop agreed to extend the
maturity date of the Amended March Loan Notes and the May Loan Notes from July
13, 2009 to August 13, 2009 and as consideration for such extension received
warrants to purchase an aggregate of 611,825 shares of common stock at an
exercise price of $.12 per share, which warrants are exercisable for a period of
five (5) years.




Thereafter,
in July/August 2009, Messrs Wilen and Rappaport and Hilltop each loaned the
Company an additional $50,000.  In October 2009, the Company issued to
Messrs Wilen and Rappaport and Hilltop secured convertible notes (the “August
Loan Notes”) for their July/August 2009 loans to the Company.  In
connection with the July/August 2009 loans, Messrs Wilen and Rappaport and
Hilltop agreed to extend the maturity date of the Amended March Loan Notes and
the May Loan Notes to January 29, 2010.  In consideration for agreeing
to extend the maturity date and for making the July/August 2009 loans, Messrs
Wilen, Rappaport and Hilltop each received warrants to purchase up to 400,000
shares of common stock at an exercise price of $.09 per share, which warrants
are exercisable for a period of five (5) years.  In addition, the
conversion price of the Amended March Loan Notes and the May Loan Notes was
lowered from $.12 per share to $.09 per share.




Pursuant
to an agreement dated January 29, 2010, Messrs Wilen and Rappaport and Hilltop
agreed to extend the maturity date of the Amended March Loan Notes, the May Loan
Notes and the August Loan Notes to January 31, 2011.  In consideration
for agreeing to extend the maturity date, Messrs Wilen, Rappaport and Hilltop
received warrants to purchase an aggregate of 5,414,705 shares of common stock
at an exercise price of $.222 per share, which warrants are exercisable for a
period of five (5) years.   As a result of the foregoing, each of
the Amended March Loan Notes, the May Loan Notes and the August Loan Notes are
convertible into common stock of the Company at a conversion price of $.09 per
share, bear interest at 12% per annum, are due January 31, 2011 and are secured
by substantially all the assets of the Company.




The
issuance of the August Loan Notes and the warrants in October 2009 and the
reduction of the conversion price of the Amended March Loan Notes and the May
Loan Notes triggered the anti-dilution provisions of the Company’s outstanding
Series A Warrants, Series B Warrants, Series C Warrants and Series A Convertible
Preferred Stock.  As a result, in October 2009, the Company entered
into an Anti-Dilution Waiver Agreement with the holders of Series A Warrants,
Series B Warrants, Series C Warrants and Series A Convertible Preferred Stock,
including Sherleigh, whereby the exercise price of the Series A Warrants, the
Series B Warrants and the Series C Warrants were reduced from $0.12 to $0.09 per
share; however, such holders agreed to waive any increase in the number of
shares underlying the Series A Warrants, Series B Warrants and Series C Warrants
as a result of such reduction in the exercise price.  In addition,
Sherleigh, as the sole holder of the Series A Convertible Preferred Stock,
agreed to waive the anti-dilution provisions of the Series A Convertible
Preferred Stock.




11.
            EMPLOYEE
      BENEFITS PLAN




Stock
Option Plans




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




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




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




13




Fair
Value of Stock Options




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




2009
                      
                      
                      2008Expectedlife (in
      years)
                      
                      
                      10
                      
                      
                      
                      10Risk-free
      interest rate
                      
                      
                      4.54
                      %
                      
                      
                      4.54
                      %Volatility
                      
                      
                      175.3
                      
                      
                      
                      143.7Dividend
      yield
                      
                      
                      0
                      %
                      
                      
                      0
                      %




Utilizing
these assumptions, the weighted average fair value of options granted with an
exercise price equal to their fair market value at the date of the grant is
$1.05 for the nine months ended December 31, 2009.




Summary
Stock Option Activity




The following table summarizes stock
option information with respect to all stock options for the quarter ended
December 31, 2009:




Number of
                      Shares
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price
                    
                    
                    Weighted
                      Average
                      Remaining
                      Contractual
                      Life (Years)
                    
                    
                    Aggregate
                      Intrinsic
                      ValueOptions
      outstanding April 1, 2009
                    
                    
                    3,287,500
                    
                    
                    $
                    1.24
                    
                    
                    
                    6.16Granted
                    
                    
                    —Exercised
                    
                    
                    —Options
      outstanding December 31, 2009
                    
                    
                    3,287,500
                    
                    
                    $
                    1.05
                    
                    
                    
                    4.92Vested
      and expected to vest–end of quarter
                    
                    
                    3,287,500
                    
                    
                    $
                    1.05
                    
                    
                    
                    4.92
                    
                    
                    $
                    —Exercisable–end
      of quarter
                    
                    
                    3,175,000
                    
                    
                    $
                    1.08
                    
                    
                    
                    4.83
                    
                    
                    $
                    —




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




Options
outstanding at December 31, 2009 have an exercise price ranging between $0.09 to
$2.05.




14


The aggregate intrinsic
value in the table above represents the total intrinsic value (the difference
between the Company’s closing stock price on December 31, 2009 and the exercise
price, multiplied by the number of in–the–money options) that would have been
received by the option holders had vested option holders exercised their options
on December 31, 2009. This amount changes based upon changes in the fair market
value of the Company’s stock. As of December 31, 2009, $3,201 of the total
unrecognized compensation costs related to stock options is expected to be
recognized over a period of two years and three months.




12.
            COMMITMENTS
      AND CONTINGENCIES




Litigation




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.




13.
            SUBSEQUENT
      EVENTS




Pursuant
to an agreement dated January 29, 2010, Messrs Wilen and Rappaport and Hilltop
agreed to extend the maturity date of the Amended March Loan Notes, the May Loan
Notes and the August Loan Notes to January 31, 2011.  In consideration
for agreeing to extend the maturity date, Messrs Wilen, Rappaport and Hilltop
received warrants to purchase an aggregate of 5,414,705 shares of common stock
at an exercise price of $.222 per share, which warrants are exercisable for a
period of five (5) years.   As a result of the foregoing, each of
the Amended March Loan Notes, the May Loan Notes and the August Loan Notes are
convertible into common stock of the Company at a conversion price of $.09 per
share, bear interest at 12% per annum, are due January 31, 2011 and are secured
by substantially all the assets of the Company.




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




CAUTIONARY
STATEMENT RELATING TO FORWARD-LOOKING STATEMENTS





Certain
statements in this report constitute “forwarding-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities and Exchange Act of 1995 (collectively, the “Reform
Act”).  Certain, but not necessarily all, of such forward-looking
statements can be identified by the use of forward-looking terminology such as
“believes”, “expects”, “may”, “will”, “should”, or “anticipates” or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy that involve risks and uncertainties.  All statements
other than statements of historical fact, included in this report regarding our
financial position, business strategy and plans or objectives for future
operations are forward-looking statements.




Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors, including but not limited to, the risk factors discussed
identified herein and those discussed under the heading “Risk Factors” in the
Company’s 10-K for the fiscal year ended March 31, 2009, which may cause our
actual results, performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements and other factors referenced in this
report.  We do not undertake and specifically decline any obligation
to publicly release the results of any revisions which may be made to any
forward-looking statement to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events. This item should be read in conjunction with the financial statements
and other items contained elsewhere in the report. Unless the context otherwise
requires, “we”, “our”, “us”, the “Company” and similar phrases refer to United
Energy Corp.





15




Overview




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




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




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




We
provide our K-Line of Chemical Products and our Green Globe Products to our
customers and generated revenues of $1,444,281 for the nine-month period ended
December 31, 2009 and $941,524 for the nine-month period ended December 31,
2008.




RESULTS
OF OPERATIONS




Three
Months Ended December 31, 2009 Compared to the Three Months Ended December 30,
2008




Revenues.  Revenues
for the three months ended December 31, 2009 were $437,075, a $93,545, or 27%
increase from revenues of $343,530 in the comparable three months of 2008. The
increase in revenues was due to higher levels our K-Line of Chemical Products
and military sales during the three months ended December 31,
2009.  Revenues from our K-Line of Chemical Products increased by
$61,117 to $387,586 or 19% compared to $326,469 in the comparable three months
ended December 31, 2008, and revenues from our Green Globe/Qualchem military
sales increased by $32,428 to $49,489 or 190% compared to $17,061 in the
comparable three months ended December 31, 2008.




Cost of Goods Sold. Cost of
goods sold increased $26,280, or 21% to $153,228 or 35% of revenues, for the
three months ended December 31, 2009 from $126,948 or 37% of revenues, for the
three months ended December 31, 2008.  The increase in cost of goods
sold and the decrease in cost of goods sold as a percentage of revenue was due
to the higher sales level in the period compared to the comparable period in
2008. Cost of goods sold from our K-Line of Chemical Products increased by
$15,956 to $131,112 or 14% compared to $115,156 in the comparable three months
ended December 31, 2008, and cost of goods sold by our Green Globe/Qualchem
military sales increased by $10,324 to $22,116 or 88% compared to $11,792 in the
comparable three months ended December 31, 2008.




Gross
Profit.  Gross profit for the three months ended December 31,
2009, increased by $67,265, or 31% to $283,847 or 65% of sales compared with
$216,582 or 63% of sales in the prior period. The increase in gross profit and
gross profit percentage reflects the higher levels of sales.




Operating
Costs and Expenses




Selling, General and Administrative
Expenses. Selling, general and administrative expenses increased $409,120
to $762,183 or 174% of sales for the three months ended December 31, 2009
compared with $353,063 or 103% of sales for the three months ended December 31,
2008.  The increase in general and administrative expenses is
primarily related to an increase in financing costs associated with the issuance
of warrants, offset by a decrease in professional fees, salaries, employee
benefits and travel and entertainment.




16




Research and Development.
Research and development expenses decreased $18,385 to $58,665 or 13% of sales
for the three months ended December 31, 2009 compared with $77,050 or 22% of
sales for the three months ended December 31, 2008. The decrease in research and
development expenses was primarily related to a decrease in salaries, partially
offset by a slight increase in lab supplies.




Depreciation and
Amortization.  Depreciation and amortization remained
relatively constant for the three months ended December 31, 2009 as compared
with December 31, 2008.




Interest
Income.  Interest income remained relatively constant for the
three months ended December 31, 2009 as compared with December 31,
2008.




Interest
Expense.  The Company had interest expense of $14,528 for the
three months ended December 31, 2009 compared with $472 in the corresponding
period in 2008. The increase was due to the indebtedness outstanding on the
loans by directors and other affiliates.




Net Loss.  The
three months ended December 31, 2009 resulted in a net loss of $563,494 or $0.02
per share as compared to a net loss of $226,454 or $0.01 per share for the three
months ended December 31, 2008. The average number of shares of common stock
used in calculating earnings per share increased 298,472 shares to 31,328,587 as
a result of 298,472 shares issued in connection with the conversion of the
convertible note.




Nine
Months Ended December 31, 2009 Compared to the Nine Months Ended December 31,
2008




Revenues.  Revenues
for the nine-month period ended December 31, 2009 were $1,444,281, a $502,757 or
53% increase from revenues of $941,524 in the comparable nine-month period ended
December 31, 2008.  The increase in revenues was due to higher levels
our K-Line of Chemical Products and military sales during the nine months ended
December 31, 2009.  Revenues from our K-Line of Chemical Products
increased by $359,828 to $1,255,144 or 40% compared to $895,316 in the
comparable nine months ended December 31, 2008, and revenues from our Green
Globe/Qualchem military sales increased by $142,929 to $189,137 or 309% compared
to $46,208 in the comparable nine months ended December 31, 2008.




Cost of Goods Sold. Cost of
goods sold increased $137,205, or 34% to $538,787 or 37% of revenues, for the
nine-month period ended December 31, 2009 from $401,582 or 43% of revenues, for
the nine-month period ended December 31, 2008.  The increase in cost
of goods sold and the decrease in cost of goods sold as a percentage of revenue
was due to the higher sales level in the period compared to the comparable
period in 2008. Cost of goods sold from our K-Line of Chemical Products
increased by $86,691 to $456,315 or 23% compared to $369,624 in the comparable
nine months ended December 31, 2008, and cost of goods sold from our Green
Globe/Qualchem military sales increased by $50,514 to $82,472 or 158% compared
to $31,958 in the comparable nine months ended December 31, 2008.




Gross
Profit.  Gross profit for the nine months ended December 31,
2009, increased by $365,552, or 68% to $905,494 or 63% of revenues compared with
$539,942 or 57% of revenues in the prior period. The increase in gross profit
and gross profit percentage reflects the higher levels of sales of Specialty
Chemicals.




Operating
Costs and Expenses




Selling, General and Administrative
Expenses. Selling, general and administrative expenses increased $788,900
to $1,903,821 or 132% of revenues for the nine months ended December 31, 2009
compared with $1,114,921 or 118% of revenues for the nine months ended December
31, 2008. The increase in selling, general and administrative expenses was
primarily related to an increase in financing costs associated with the issuance
of warrants and in marketing and insurance expenses, partially offset by a
decrease in professional fees, salaries, employee benefits and travel and
entertainment.




Research and Development.
Research and development expenses decreased $56,853 to $174,304 or 12% of sales
for the nine months ended December 31, 2009 compared with $231,157 or 25% of
sales for the nine months ended December 31, 2009. The decrease in research and
development expenses was related to a decrease in lab supplies and
salaries.




17




Depreciation and
Amortization. Depreciation and amortization remained relatively constant
for the nine months ended December 31, 2009 as compared with December 31,
2008.




Interest
Income.  The Company had interest income of $20 for the nine
months ended December 31, 2009 compared with $942 in the corresponding period in
2008. The decrease was due to the use of cash received in connection with the
private placement in March 2006.




Interest Expense. The Company
had interest expense of $33,951 for the nine months ended December 31, 2009
compared with $1,346 in the corresponding period in 2008. The increase was due
to the indebtedness outstanding on the loans by directors and their
affiliates.




Net Loss.  The nine
months ended December 31, 2009 resulted in a net loss of $1,243,045 or $0.04 per
share as compared to a net loss of $843,912 or $0.03 per share for the nine
months ended December 31, 2008. The average number of shares of common stock
used in calculating earnings per share increased 249,631 shares to 31,279,746 as
a result of 298,472 shares issued in connection with the conversion of the
convertible note.




Liquidity
and Capital Resources




As of
December 31, 2009, the Company had $380,309 in cash and cash equivalents, as
compared to $56,372 at March 31, 2009.




The
$323,937 increase in cash and cash equivalents was due to net cash provided by
operations of $42,020, net cash used in investing activities of $20,784 and net
cash provided by financing activities of $302,701. Cash used in investing
activities consisted of fixed asset purchases of $985, patent purchases of
$3,699 and employee loans of $16,100.  Cash provided by financing
activities consisted of related party loans of $303,781, offset by preferred
stock dividends of $1,080.




The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America which contemplate continuation of the
Company as a going concern. However, the Company has year-end losses from
operations and has an accumulated deficit of $23,323,865 as of December 31,
2009.During
the nine months ended December 31, 2009, the Company experienced a net loss from
operations of $1,209,114 and a cash flow from operations of
$42,020.  These matters raise substantial doubt about the Company’s
ability to continue as a going concern. Our consolidated financial statements do
not include any adjustment that might result from the outcome of this
uncertainty.




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





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




Concentration
of Risk




Sales to our top four customers,
accounted for approximately 78% of revenue, or $943,591, for the nine-month
period ending December 31, 2009 and sales to our top two customers, accounted
for approximately 48% of our revenue, or $456,150, for the nine-month period
ending December 31, 2008.




Sales to our top customer, for the
nine-month period ending December 31, 2009 were $372,421.




Off-Balance
Sheet Arrangements




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




18




Item
      3.
            Quantitative and Qualitative
      Disclosures About Market
Risks.




Not
applicable




Item
      4.
            Controls and
      Procedures.




Evaluation
of the Company's Disclosure Controls and Procedures




We carried out an evaluation, under
the supervision and with the participation of the Company's management,
including our Chief Executive Officer and our Principal Accounting Officer
(Interim Chief Financial Officer), of the effectiveness of our “disclosure
controls and procedures” (as defined in Rules 13a-15(e) or 15d-15(e) of the
Securities Exchange Act of 1934, as amended) as of December 31,
2009.  Based upon that evaluation, the Chief Executive Officer and the
Principal Accounting Officer (Interim Chief Financial Officer) concluded that
our disclosure controls and procedures are effective, in all material respects,
with respect to the recording, processing, summarizing, and reporting, within
the time periods specified in the Securities and Exchange Commission's rules and
forms, of information required to be disclosed by us in the reports that we file
or submit under the Exchange Act. In designing and evaluating our “disclosure
controls and procedures” (as defined in Rules 13a-15(e) or 15d-15(e) of the
Securities Exchange Act of 1934, as amended), management recognized that any
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurances of achieving the desired control objectives, as ours
are designed to do, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.





Changes
      in Control Over Financial Reporting




Management
has not identified any change in our internal control over financial reporting
that occurred during the third quarter ended December 31, 2009 that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial
reporting.




19


PART
II




OTHER
INFORMATION




Item
1.                
    Legal
Proceedings




None.




Item
1A.                 
Risk
Factors




Not applicable.




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




In
November 2009, the Company issued a convertible term note in the amount of
$30,000, which accrues interest at 7% per annum.  Principal and
interest is payable on the maturity date of April 30, 2010.  the
holder of the note has the option to convert all or portion of the note into
shares of common stock at a conversion price of $0.21 per share.  The
Company did not receive any proceeds from the note and instead was issued as
payment of monies owed by the Company to the holder.  The note was
issued pursuant to the exemption from registration provided by Section 4(2) of
the Securities Act of 1933.




Item
3.                     Defaults Upon Senior
Securities




None




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




None




Item
5.                     Other
Information




None





Item
6.                     Exhibits




10.1
              Agreement,
      dated January 29, 2010 by and between the Company and Messrs Wilen and
      Rappaport and Hilltop




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




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




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




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




20


SIGNATURES




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




Dated:    February
      16, 2010
            
            UNITED
      ENERGY CORP.By:
            /s/ Ronald WilenRonald
      Wilen,Chief
      Executive Officer(as
      principal executive officer)By:
            /s/ James McKeeverJames
      McKeever,Interim
      Chief Financial Officer(as
      principal financial and accounting
officer)




21