**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-KSB**




(Mark
      one)




x ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




**For
      the fiscal year ended March 31, 2008**




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




For
      the
      transition period from___________ to ___________




**Commission
      file number: 000-30841**




**UNITED
      ENERGY CORP.**


(Name
      of
      small business issuer 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,
                New Jersey**
            
            **07094**(Address
                of principal executive offices)
            
            (Zip
                Code)




**(201)-842-0288**


**(** Issuer’s
      telephone number, including area code)




Securities
      registered Under Section 12(b) of the Act





Title
                of each class
            
            Name
                of each exchange on which registered**None**
            
            **None**




Securities
      registered Under Section 12(g) of the Act:




Title
                of each class
            
            Name
                of each exchange on which registeredCommon
                Stock, par value
              $.01
                per share
            
            Over-the-Counter
                (OTC) Bulletin Board









Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. Yes oNo x




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




Check
      if
      there is no disclosure of delinquent filers in response to item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o




Indicate
      by check mark whether the registrant is a shell company (as defined in rule
      12b-2 of the Exchange Act. Yes oNo x





The
      issuer’s total consolidated revenues for the fiscal year ended March 31, 2008
      were $1,042,320.




The
      aggregate market value of the common equity held by non-affiliates of the
      registrant was $8,250,042 as of June 18, 2008.




The
      number of shares outstanding of the registrant's common equity as of July 14,
      2008 was 31,030,115 shares.









**UNITED
      ENERGY CORP.**




**2007
      FORM 10-KSB ANNUAL REPORT**




**TABLE
      OF CONTENTS**




**Page****PART
                I**ITEM
                1.
            DESCRIPTION
                OF BUSINESS
            1ITEM
                2.
            DESCRIPTION
                OF PROPERTY
            5ITEM
                3.
            LEGAL
                PROCEEDINGS
            5ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            5**PART
                II**ITEM
                5.
            MARKET
                FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
                ISSUER
                PURCHASES OF EQUITY SECURITIES
            6ITEM
                6.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            7ITEM
                7.
            FINANCIAL
                STATEMENTS AND SUPPLEMENTARY DATA
            17ITEM
                8.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            17ITEM
                8A.
            CONTROLS
                AND PROCEDURES
            17ITEM
                8B.
            OTHER
                INFORMATION
            18**PART
                III**ITEM
                9.
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                SECTION
                16(a) OF THE EXCHANGE ACT
            19ITEM
                10.
            EXECUTIVE
                COMPENSATION
            21ITEM
                11.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS
            23ITEM
                12.
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS
            25ITEM
                13.
            EXHIBITS
            27ITEM
                14.
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            28







**PART
      I**




**ITEM
      1.**  **DESCRIPTION
      OF BUSINESS**




**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.




We
      have
      developed a system referred to as our “S2 system,” to work with our
      environmentally friendly paraffin dispersants products. This 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. Our patent on the S2 system expired in January 2007; however,
      we
      have filed a patent application with respect to certain improvements,
      modifications and enhancements to the S2 system.




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
      entered into an amended and restated non-exclusive distribution agreement with
      Champion Technologies Inc. for the sale and distribution of our K-Line of
      Chemical Products. The agreement is for a term of three (3) years and grants
      Champion Technologies Inc. certain rights to blend, dilute and utilize our
      products to manufacture and sell different products. We also entered into a
      non-exclusive Master Purchase Agreement with Petrobras America Inc. for the
      sale
      and distribution of our K-Line of Chemical Products. The
      agreements do not provide for any minimum amounts to be purchased. We are also
      currently negotiating potential working arrangements with several other
      companies, however, there can be no assurance that any of these arrangements
      will be entered into or, if entered into will be successful. There also can
      be
      no assurance that the agreements with Champion Technologies and Petrobras
      America will be successful.




We
      provide our K-Line of Chemical Products and our Green Globe Chemical Products
      to
      our customers and generated revenues of $1,042,320 for the fiscal year ended
      March 31, 2008 and $811,893 for the fiscal year ended March 31, 2007.




**Organizational
      History**




We
      were
      originally incorporated in Nevada in 1971 as Aztec Silver Mining Co. We engaged
      in the manufacturing and distribution of printing equipment from 1995 through
      1998. During that period, we began to develop specialty chemical products for
      use in the printing industry. In March 1998, we discontinued our printing
      equipment operations and changed our business focus to the development of
      specialty chemical products. In March 2007, we discontinued the sale of our
      Uniproof proofing paper.




Business
      Operations and Principal Products




Our
      principal products include our K-Line of Chemical Products for the oil industry
      and our Green Globe Chemical Products which consist of a variety of solvents,
      paint strippers and cleaners.









**K-Line
      of Chemical Products**




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 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 and other major oil producing countries.





KX-100
      is
      a proprietary formula where contact time is limited for removal of a plug of
      paraffin or asphaltene. It is fast acting and an effective dispersant that
      can
      be used in temperatures as low as -25F. It can be used in nearly any
      application.




SR-3
      Scale and Rust Remover is a fast acting corrosion inhibited product developed
      to
      remove both calcium carbonate and calcium sulfate salt deposits. SR-3 is a
      broad
      spectrum, water soluble scale remover designed to rapidly alleviate hard and
      soft deposits and to restore full flow capacity. The product is also designed
      to
      remove rust while adding protection against further rusting by providing a
      phosphatized surface on ferrous metals.





HPD-1
      PLUS is specifically formulated to offer prompt and effective remediation of
      tough clogging problems with upper medium to high molecular weight paraffin.
      It
      performs multi-functional characteristics to impart wettability, penetration
      and
      dispersion, and is an exceptional solvency for paraffin rich heavy sludge with
      the proper treatment dosage and application.







GSA
      Gun
& Bore Cleaner is a proprietary formula which is a safer and more effective
      bore and chamber cleaner. It can be used on everything from small handguns
      to
      16” guns. Currently, GSA Gun & Bore Cleaner is being marketed and
      distributed by TopDuck Products LLC under their trademark “Gunzilla
      BC-10”.




**Green
      Globe Chemical Products**




Leak
      Detection Compound Type I and II is a gas leak detection compound that is
      compatible with oxygen. Is intended for use in detecting leaks in both high
      and
      low-pressure oxygen systems in aircraft and other related oxygen
      systems




Corrosion
      Inhibitor is an additive intended for use with anti-freeze in water at a
      concentration of 3% to retard corrosion.




Corrosion
      Removing Compound Type I, II and III are corrosion removing and metal
      conditioning compounds, which when diluted with water, will remove rust from
      ferrous metal surfaces.




Ethylene
      Glycol/Water Coolant is a mixture of Ethylene Glycol and distilled water to
      provide a coolant mixture for use in radar domes used by the
      Military.




Qualkleen
      1000 Wipes is a state-of-the-art
      active Matrix Liquid Crystal Display (AMLCD) and instrument glass cleaner.
      Qualkleen 1000 was developed for the Military to replace hazardous products
      such
      as IPA, Acetone, and Methanol in the cleaning of the high efficiency
      anti-reflective coating on the AMLCD glass being used in the new high tech
      multi-function displays for aircraft instrumentation.




NPX
      Powder Coating is an effective reusable paint stripper. NPX is a powerful blend
      of chemicals which we believe will out perform all other aluminum safe strippers
      in the powder coat industry and provide a safe method of stripping metals,
      including magnesium, zinc, high strength steel and titanium. NPX does not
      contain any methylene chloride, phenol, chromates or caustics.




Green
      Globe products are sold under the trade name Qualchem.TM 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.




2


**Aqueous
      Coating**




We
      have
      developed a patent pending aqueous coating with excellent oil, grease and water
      repellency for hot/cold food packaging such as cups, plates, cartons, wrappers
      and corrugated boxes which is biodegradable, decomposable, and
      recyclable.




**Additional
      Technologies**




We
      have
      developed certain modifications, improvements and enhancements to the S2 system
      including an apparatus for introducing a vapor-containing stream into
      underground geological formations, pumps, conduits or tanks which we believe
      represents an advance over previous techniques. The technique allows
      vapor-containing steam to bypass the well and be released to the atmosphere.
      We
      have filed a patent application with respect to the modifications, improvements
      and enhancements to the S2 system.





**Manufacturing
      and Sales**




All
      of
      the raw materials necessary for the manufacture of our products are generally
      available from multiple sources. Although we have negotiated favorable
      arrangements with some of our current suppliers, (which include Pride Solvents
      and Chemical Co. of NJ Inc., Hy-Test Packaging Corp, and Air Products and
      Chemicals), we would have to repeat the process if one or more of our current
      suppliers were no longer able to supply these raw materials to us. We do not
      own
      any special manufacturing facilities. Our chemical products are generally
      manufactured by contract blenders at a number of different locations. This
      method of manufacturing has reduced the need for us to invest in facilities
      and
      to hire the employees to staff them. Chemical blenders are relatively easy
      to
      replace and are bound by confidentiality agreements, where appropriate, which
      obligate them not to disclose or use our proprietary information.




We
      are
      not responsible for any environmental expenditure with respect to the
      manufacturing of our products. First, the chemical products that we use are
      generally “environmentally friendly” products in that they are low in toxicity
      and rank high in biodegradability. Further, any environmental issues involved
      in
      manufacturing are the responsibility of the blending facilities, provided they
      receive adequate and accurate information from us as to the components of the
      chemicals involved, however, there can be no assurance that we will not be
      liable as we are subject to various foreign, federal, state and local law and
      regulations relating to the protection of the environment.




In
      the
      fiscal year ending March 31, 2008, Petrobras America Inc. and Facility Solutions
      LTD. purchased our KX-100 oil cleaning products, which accounted for
      approximately 46.9% of our total customer sales and the U.S. Military purchased
      our Leak Detection Compound and Corrosion inhibitor, which accounted for 24.2%
      of our total customer sales. In the fiscal year ended March 31, 2008 Petrobras
      America Inc. purchased our KX-100 oil cleaning products, which accounted for
      approximately 45.7% of our total customer sales.




Except
      for these current customers, no other single entity has accounted for more
      than
      10% of our sales during any of the fiscal years ended March 31, 2008 and
      2007.




All
      of
      our products are sold in U.S. dollars and, therefore, we have had no foreign
      currency fluctuation risk.




Our
      current operations do not require a substantial investment in inventory other
      than minimum commitments to our distributors. However, we anticipate that any
      growth in our business will require us to maintain higher levels of
      inventory.




As
      of
      March 31, 2008, the Company did not have any 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.




**Marketing
      and Distribution**




We
      have
      engaged the services of independent contractors to market our K-Line of Chemical
      Products. These contractors work under various non-exclusive commission and
      distribution agreements and have substantial contacts among oil well owners
      and
      major oil companies in the United States, Mexico, South America, Africa, Europe
      and the Middle East. These contractors earn a commission based upon the sales
      value of the products that they sell. These independent contractors use our
      marketing materials, brochures and website to interest clients and to describe
      the attributes of our products.




3


Although
      we have not achieved the volume of sales we had anticipated for the oil
      dispersant products, there have been significant barriers to entry in this
      market. Most of these potential customers require substantial testing of our
      product to prove its efficacy at cleaning wells, tanks and flow lines. In many
      cases, additional laboratory testing is required to prove that our chemical
      products are compatible with refinery systems and will not interfere with
      certain chemical processes and safety requirements of the potential clients.
      This process of testing has taken a great deal longer than was originally
      anticipated. We believe that we have made significant inroads and currently
      expect a higher volume of sales in the next fiscal year ending March 31, 2009,
      although there can be no assurance that sales will increase in fiscal 2009.




**Research
      and Development**




Our
      K-Line of Chemical Products for the oil industry are developed and ready for
      market. All of these products are the result of research and development
      expenditures paid in the amounts of $298,618 and $232,517 for the fiscal years
      ended March 31, 2008 and 2007 respectively. We have had available the services
      of one research chemist and one analytical chemist, as well as one petroleum
      engineer, to lead in the development of our products. A significant amount
      of
      market adaptation has taken place in the field involving the development of
      application procedures for products. We do not anticipate having to make
      significant research and development expenditures on existing products in the
      future. However, we do expect to continue to develop new products to complement
      our existing product lines.




**Competition**




We
      compete directly or indirectly with other producers of specialty chemical
      products with similar uses, most of which are more established companies and
      have greater resources than we have. Generally, we attempt to compete by
      offering what we hope to be lower prices and better service. However, our KH-30,
      KX-100, KX-91 and KH-30S products for the oil industry are often more expensive,
      and with these products we attempt to compete by emphasizing product
      effectiveness and environmental safety.




**Proprietary
      Technologies**




With
      respect to our formulations, which are proprietary, we have patented our KH-30
      oil well cleaner in the United States and other major oil producing
      countries.





In
      addition to applying for patent protection on our KH-30 product, we have also
      registered “KH-30” as a trademark.




**Employees**




As
      of
      March 31, 2008 we employed twelve people on a full-time basis and had available
      the services of two other individuals under consulting or product/production
      cooperation arrangements. The latter arrangement is meant to include a situation
      where a chemist, engineer or significant marketing person is engaged by an
      organization under contract with us to manufacture or market one or more of
      our
      products.




None
      of
      our employees are represented by a union. We consider our relations with our
      employees to be good.




**Available
      Information**




We
      file
      annual, quarterly and current reports, information statements and other
      information with the Securities and Exchange Commission (the “SEC”). The public
      may read and copy any materials we file with the SEC at the SEC’s Public
      Reference Room at Station Place, 100 F Street, N.E., Washington, D.C.
      20549. The public may obtain information on the operation of the Public
      Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
      maintains an Internet site that contains reports, proxy and information
      statements, and other information regarding issuers that file electronically
      with the SEC. The address of that site is http://www.sec.gov .




4


**ITEM
      2.**  **DESCRIPTION
      OF PROPERTY**




We
      lease
      9,600 square feet of office space at 600 Meadowlands Parkway, #20, Secaucus,
      New
      Jersey 07094. Under the terms of the lease, which runs through June 2010, the
      monthly rent is $10,400. In addition, we lease office and warehouse space on
      a
      month to month basis in Odessa, TX, at a rate of $535 per month, and Traverse
      City, MI. at a rate of $500 per month.




We
      use
      independent non-affiliated contract chemical blending and manufacturing
      facilities in various locations around the United States for the manufacture
      of
      our products. We contract the production of our products to independent
      manufacturers and blenders and our products are therefore produced at the
      manufacturing facilities of those entities. We do not own any manufacturing
      facilities.




**ITEM
      3.**  **LEGAL
      PROCEEDINGS**




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, punitive damages in an amount treble 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 yet been scheduled. We believe 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.




In
      March
      2007, the Company commenced an action against Applied Force and Samuel Miller
      III in the Superior Court of New Jersey, Law Division - Bergen County for the
      recovery of two of the Company’s vehicles and certain additional claims. The
      defendants, Applied Force and Samuel Miller III, have filed a counterclaim
      for
      recovery of alleged storage fees in the amount of $126,784 and certain alleged
      service fees in the amount of $1,275. A settlement agreement and mutual release
      was entered into during August 2007 and the action was dismissed on September
      18, 2007. As part of the settlement the Company transferred title of a truck
      to
      the defendant.




No
      other
      legal proceedings are currently pending or threatened against us.




**ITEM
      4.**  **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**




No
      matters were submitted to a vote of security holders during the fourth quarter
      of our fiscal year ended March 31, 2008. ****


5




**PART
      II**




**ITEM
      5.**  **MARKET
      FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
      OF EQUITY SECURITIES**




As
      of
      June 30, 2008, there were approximately 455 record holders of our common stock
      and there were 31,030,115 shares of our common stock outstanding. We have not
      previously declared or paid any dividends on our common stock and do not
      anticipate declaring any dividends in the foreseeable future.




The
      following table shows the high and low bid prices of our common stock as quoted
      on the OTC Bulletin Board by quarter during each of our last two fiscal years
      ended March 31, 2008 and 2007 and for each quarter after March 31, 2008. These
      quotes reflect inter-dealer prices, without retail markup, markdown or
      commissions and may not represent actual transactions. The information below
      was
      obtained from those organizations, for the respective periods.




Fiscal
                  Year
                ended March 31
              
              Quarter
              
              High
              
              Low2007
              
              
              First
                  Quarter (April-June 2006)
              
              $
              2.08
              
              $
              1.27Second
                  Quarter (July-September 2006)
              
              
              1.40
              
              
              .64Third
                  Quarter (October-December 2006)
              
              
              1.02
              
              
              .53Fourth
                  Quarter (January-March 2007)
              
              
              .77
              
              
              .392008
              
              
              First
                  Quarter (April-June 2007)
              
              $
              .77
              
              $
              .42Second
                  Quarter (July-September 2007)
              
              
              .68
              
              
              .45Third
                  Quarter (October-December 2007)
              
              
              .59
              
              
              .40Fourth
                  Quarter (January-March 2008)
              
              
              .54
              
              
              .352009
              
              
              First
                  Quarter (through July 11)
              
              $
              .31
              
              $
              .29




The
      high
      and low bid prices for shares of our common stock on July 11, 2008 were $.36
      and
      $.32 per share, respectively, based upon bids that represent prices quoted
      by
      broker-dealers on the OTC Bulletin Board. These
      quotations reflect inter-dealer prices, without retail mark-up, mark-down or
      commissions, and may not represent actual transactions.




**Dividend
      Policy**




While
      there are no restrictions on the payment of dividends, we have not declared
      or
      paid any cash or other dividends on shares of our common stock in the last
      two
      years, and we presently have no intention of paying any cash dividends in the
      foreseeable future. Our
      current policy is to retain earnings, if any, to finance the expansion of our
      business. The future payment of dividends will depend on the results of
      operations, financial condition, capital expenditure plans and other factors
      that we deem relevant and will be at the sole discretion of our board of
      directors.


6


**Equity
      Compensation Plan Information**




The
      following table provides information regarding the status of our existing equity
      compensation plans at March 31, 2008.




**Plan Category**
            
            **Number of securities**
              **to be issued upon**
              **exercise of**
              **outstanding options,**
              **warrants and rights**
            
            **Weighted-average**
              **exercise price of**
              **outstanding option,**
              **warrants and rights**
            
            **Number of securities**
              **remaining available**
              **for future issuance**
              **under equity**
              **compensation plans**
              **(excluding securities**
              **reflected in the**
              **second**
              **column)**Equity
                compensation plans approved by security holders
            
            
            (a)
              3,687,500
            
            
            (b)
              $1.16
            
            
            (c)
              —Equity
                compensation plans not approved by security holders
            
            
            1,475,000
            
            
            $1.55
            
            
            —Total
            
            
            5,162,500
            
            
            
            
            
            —





During
      the year ended March 31, 2008, pursuant to the terms of an employment agreement
      dated April 17, 2007, with Ronald Wilen, Chief Executive Officer, President
      and
      Secretary, 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. The initial grant of 50,000 stock options will
      be
      granted out of the 2001 Equity Incentive Plan at the one year anniversary.
      In
      addition, the stock option to purchase 135,000 shares has been reserved for
      Mr.
      Wilen out of the 2001 Equity Incentive Plan. After the reservation described
      in
      the immediately preceding sentence, no shares remain available for grant out
      of
      the 2001 Equity Incentive Plan. Thus, the remaining stock options to purchase
      65,000 shares granted to Mr. Wilen will be non-qualified stock options, unless
      the Company amends the 2001 Equity Incentive Plan in order to increase the
      number of shares that may be granted pursuant to such plan or adopts a new
      stock
      option plan.




**ITEM
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**




You
      should read the following description of our financial condition and results
      of
      operations in conjunction with the consolidated financial statements and
      accompanying notes included in this Annual Report beginning on page F-1.




**Overview**




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




7




We
      have developed a system referred to as our “S2 system,” to work with our
      environmentally friendly paraffin dispersants products. This 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. Our patent on the S2 system expired in January 2007; however,
      we
      have filed a patent application with respect to certain improvements,
      modifications and enhancements to the S2 System.




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 entered into
      an amended and restated non-exclusive distribution agreement with Champion
      Technologies Inc. for the sale and distribution of our K-Line of Chemical
      Products. The agreement is for a term of three (3) years and grants Champion
      Technologies Inc. certain rights to blend, dilute and utilize our products
      to
      manufacture and sell different products. We also entered into a non-exclusive
      Master Purchase Agreement with Petrobras America Inc. for the sale and
      distribution of our K-Line of Chemical Products. The agreements do not provide
      for any minimum amounts to be purchased. We are also currently negotiating
      potential working arrangements with several other companies however, there
      can
      be no assurance that any of these arrangements will be entered into or, if
      entered into will be successful. There also can be no assurance that the
      agreements with Champion Technologies and Petrobras America will be successful.




We
      provide our K-Line of Chemical Products and our Green Globe Chemical Products
      to
      our customers and generated revenues of $1,042,320 for the fiscal year ended
      March 31, 2008 and $811,893 for the fiscal year ended March 31, 2007.




**Critical
      Accounting Policies and Estimates**




The
      preparation of consolidated financial statements in accordance with accounting
      principles generally accepted in the United States of America requires us 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
      ongoing basis, we evaluate our estimates, including those related to product
      returns, bad debts, inventories, valuation of options and warrants, intangible
      assets, long-lived assets and contingencies and litigation. We base our
      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.




**Revenue
      Recognition**




Our
      primary source of revenue is from sales of our products. We recognize revenue
      upon shipment and transfer of title.




**Allowance
      for Doubtful Accounts**




We
      monitor our accounts and note receivable balances on a monthly basis to ensure
      they are collectible. On a quarterly basis, we use our historical experience
      to
      determine our accounts receivable reserve. Our allowance for doubtful accounts
      is an estimate based on specifically identified accounts, as well as general
      reserves. We evaluate specific accounts where we have information that the
      customer may have an inability to meet its financial obligations. In these
      cases, management uses its judgment, based upon the best available facts and
      circumstances, and records a specific reserve for that customer against amounts
      due to reduce the receivable to the amount that is expected to be collected.
      These specific reserves are re-evaluated and adjusted as additional information
      is received that impacts the amount reserved. We also establish a general
      reserve for all customers based upon a range of percentages applied to aging
      categories. These percentages are based on historical collection and write-off
      experience. If circumstances change, our estimate of the recoverability of
      amounts due to us could be reduced or increased by a significant amount. A
      change in estimated recoverability would be accounted for in the period in
      which
      the facts that give rise to the change become known.


8


**Discontinued
      Operations**





During
      the fiscal year ended March 31, 2007, the Company discontinued the sale of
      its
      Uniproof proofing paper.





**Results
      of Operations**





**Comparison
      of Fiscal Year Ended March 31, 2008 to Fiscal Year Ended March 31,
      2007**




*Revenues.* Revenues ** for
      the
      year ended March 31, 2008 were $1,042,320, a $230,427 or 28% increase from
      revenues of $811,893 for the year ended March 31, 2007. The increase was
      primarily related to a 133% increase in the level of our Green Globe/Qualchem
      military sales reflecting a higher level of orders and a 10% increase in the
      sales of our K-Line of Chemical Products during the year. Our three largest
      customers accounted for 71% of revenues for the year ended March 31, 2008
      compared with 64% for the comparable period in 2007.





*Cost
      of Goods Sold.* Cost
      of
      goods sold increased to $469,237 or 45% of sales, for the year ended March
      31,
      2008 from $363,208, or 45% of sales, for the year ended March 31, 2007. The
      increase in cost of goods sold was due to the increased level of sales compared
      to the prior year.





*Gross
      Profit.* Gross
      profit increased to $573,083 or 55% of sales, for the year ended March 31,
      2008
      from $448,685, or 55% of sales, for the year ended March 31, 2007. The increase
      in gross profit was due to an increase in the level of sales.





*Selling,
      General and Administrative Expenses.* Selling,
      general and administrative expenses decreased to $2,609,343 or 250% of sales,
      for the year ended March 31, 2008 from $2,811,970, or 346% of sales, for the
      year ended March 31, 2007. The
      decrease in selling, general and administrative expenses were primarily
      related to a decrease in professional fees and bad debts partially offset by
      an
      increase in travel and entertainment expenses and higher salaries due to the
      addition of employees offset by a reduction in option costs charged for
      employees.




*Depreciation
      and Amortization* .
      Depreciation and amortization decreased to $69,171 for
      the
      year ended March 31, 2008 from
      $76,434 for
      the
      year ended March 31, 2007, reflecting the Company’s use of an accelerated method
      of depreciation, offset by a slight increase in fixed assets.




** *Interest
      Income* .
      Interest income decreased to $67,504 for the year ended March 31, 2008 from
      $169,653 for the year ended March 31, 2007. The decrease was due to the use
      of
      cash received in connection with the private placement completed in March
      2006.




*Interest
      Expense.*  Interest
      expense remained relatively constant for
      the
      year ended March 31, 2008 as compared
      to the
      year
      ended March 31, 2007 .





*Net
      Loss.* For the
      year ended March 31, 2008, we incurred a net loss of $2,040,390 or $0.07 per
      share, as compared to a net loss of $2,272,539 for the year ended March 31,
      2007, or $0.07 per share. The average number of shares of common stock used
      in
      calculating earnings per share increased 788 shares to 31,030,115 from
      31,029,327 shares as a result of 12,500 shares issued in connection with the
      exercise of stock options.





**Liquidity
      and Capital Resources**





Since
      1995, operations have been financed primarily through loans and equity
      contributions from directors, executive officers and third parties supplemented,
      by funds generated by our business. As of March 31, 2008, we had $858,575 in
      cash and cash equivalents.





*Net
      Cash Used in Continuing Operations.* During
      the fiscal year ended March 31, 2008, net cash used in continuing operations
      was
      $1,915,584 compared with $2,111,438 for the fiscal year ended March 31, 2007.




*Net
      Cash Used in Investing Activities* .
      During
      the fiscal year ended March 31, 2008, net cash used in investing activities
      increased to $92,814 compared with $54,594 for
      the
      year ended March 31, 2007. The increase was primarily a result of additional
      loans, and an increase in payment for patents, offset
      by
      a slight decrease in the level
      of
      expenditures for the purchase
      of fixed assets.


9





*Net
      Cash Used in Financing Activities.*  During
      the fiscal year ended March 31, 2008, net cash
      used in financing activities consisted of $1,440 of preferred stock dividends.
      This compares to cash used in financing activities of $187,651 resulting from
      the payment of related party loans of $200,000 and preferred stock dividends
      of
      $1,526, which was partially offset by the proceeds from the exercise of stock
      options of $13,875 during the fiscal year ended March 31, 2007.





During
      the past two fiscal years ended March 31, 2008 and 2007, we have recorded
      aggregate losses from continuing operations of $4,313,181 and have incurred
      total negative cash flows from operations of $4,027,022 for the same two-year
      period. The
      report of the independent registered public accounting firm with respect to
      our
      consolidated financial statements included in this Report includes a “going
      concern” qualification, indicating that our recurring losses and negative cash
      flows from operations raise substantial doubt about our 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 capital through equity or debt financing, increased sales volumes,
      collection of existing receivables and the ability to achieve profitability
      from
      the sale of our product lines. In order to increase our cash flow, we are
      continuing our efforts to stimulate sales and cut back expenses not directly
      supporting our sales and marketing efforts.





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 Credit Risk**





Sales
      to
      three of our customers, Petrobras America Inc., the US Military and Facilty
      Solutions accounted for approximately 71% of our sales for the fiscal years
      ending March 31, 2008 and sales to one of our customers, Petrobras America
      Inc.
      accounted for approximately 46% of our sales for the fiscal year ending March
      31, 2007.




**Contractual
      Obligations**





Below
      is
      a table which presents our contractual obligation commitments at March 31,
      2008:





Less than
            
            
            
            
            
            AfterContractual Obligation
            
            Total
            
            1 Year
            
            1-3 Years
            
            3-5 Years
            
            5 YearsShort-term
                debt Obligations(1)
            
            $
            244,141
            
            $
            244,141
            
            $
            —
            
            $
            —
            
            $
            —Operating
                leases
            
            
            289,644
            
            
            132,610
            
            
            157,034
            
            
            —
            
            
            —Total
                contractual cash obligations
            
            $
            533,785
            
            $
            376,751
            
            $
            157,034
            
            $
            —
            
            $
            —




(1)
      Short-term debt obligations include an
      amount
      due to Robert Seaman, a shareholder and former director of the Company. The
      amount due as of March 31, 2008 and 2007 is $244,141. This amount is unsecured,
      non-interest bearing and due upon demand.




**Reporting
      by Segments**





We
      are a
      specialty chemicals company because of our determination in fiscal 1998 to
      close
      our printing equipment division and focus on our K-Line of chemical and Green
      Globe products. However, in the past a portion of our revenues has been related
      to the printing and the graphic arts industry and we had reported each as two
      segments. During the fiscal year ended March 31, 2007, the Company classified
      the graphic arts segment as discontinued operations.





We
      devote
      almost all of our time and effort into selling, promoting and developing our
      K-Line of chemical products and we are continuing to increase our marketing
      efforts to develop new products as extensions of our original KH-30 product.
      We
      believe that in the future our sales will increase.




10


**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.




**Inflation**




We
      do not
      believe that inflation in the cost of our raw materials has had in the past
      or
      will have in the future any significant negative impact on our operations.
      However, no assurance can be given that we will be able to offset such
      inflationary cost increases in the future.




**Recently
      Issued Accounting Standards**




In
      September 2006, the FASB issued Statement No. 157, *Fair
      Value Measurements* (“SFAS
      157”). SFAS No. 157 defines fair value, establishes a framework for measuring
      fair value in accordance with generally accepted accounting principles and
      expands disclosures about fair value investments. SFAS 157 is effective for
      financial assets and liabilities on January 1, 2008. The FASB has deferred
      the
      implementation of the provisions of SFAS 157 relating to certain non-financial
      assets and liabilities until January 1, 2009. The adoption of SFAS 157 on
      January 1, 2008 for financial assets and liabilities did not have a material
      effect on the Company’s consolidated financial statements. The Company has not
      determined whether the adoption of SFAS 157 will have a material impact on
      its
      consolidated financial position and results of operations on January 1, 2009
      for
      non-financial assets and liabilities.




**Quantitative
      and Qualitative Disclosures About Market Risk**




The
      market risk inherent in our market risk sensitive instruments and positions
      are
      the potential losses arising from adverse changes in foreign currency exchange
      rates.





**Foreign
      Currency Exchange Rates**





Although
      our business is international in scope, to date our product sales have been
      all
      U.S. dollar-denominated. As we expand, we may be affected by exchange rate
      fluctuations in foreign currencies relative to the U.S. dollar. We do not
      currently use derivative financial instruments to hedge our exposure to changes
      in foreign currency exchange rates.




**SPECIAL
      NOTE ON FORWARD-LOOKING STATEMENTS**




Certain
      statements in this Annual Report on Form 10-KSB (the “Form 10-KSB”), including
      statements under “Item 1. Business,” “Item 3. Legal Proceedings” and “Item 6.
      Management’s Discussion and Analysis or Plan of Operation”, constitute
“forward-looking statements” within the meaning of Section 27A of the Securities
      Act of 1933, as amended (the “Securities Act”), and Section 21E of the
      Securities Exchange Act of 1934, as amended, and the Private Securities
      Litigation Reform 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 Form 10-KSB 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 which may cause the 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 Form 10-KSB. 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.


11




**RISK
      FACTORS**




An
      investment in our common stock involves a high degree of risk. You should
      carefully consider the following material risks, before you decide to buy our
      common stock. If any of the following risks actually occur, our business,
      results of operations and financial condition would likely suffer. In these
      circumstances, the market price of our common stock could decline and you may
      lose all or part of your investment.




*WE
      HAD A CURRENT ACCUMULATED DEFICIT OF $20,740,063 AS OF MARCH 31, 2008 AND IF
      WE
      CONTINUE TO INCUR OPERATING LOSSES, WE MAY BE UNABLE TO SUPPORT OUR BUSINESS
      PLAN, WHICH WILL HAVE A DETRIMENTAL EFFECT ON OUR STOCK.*




We
      have incurred losses in each of our last three fiscal years. As of March 31,
      2008, we had an accumulated deficit of $20,740,063. If we continue to incur
      operating losses and fail to become a profitable company, we may be unable
      to
      support our business plan, namely to market our K-Line of Chemical Products
      for
      the oil and gas industry, and the Green Globe Chemical Products. We incurred
      net
      losses from continuing operations of $2,040,390 and $2,272,791 in the fiscal
      years ended March 31, 2008 and 2007, respectively. Our future profitability
      depends in large part on our ability to market and support our Specialty
      Chemical Products which we derive the majority of our revenues. We cannot assure
      you that we will achieve or sustain significant sales or profitability in the
      future.




*WE
      ARE DEPENDENT ON OUR ABILITY TO RAISE CAPITAL FROM EXTERNAL FUNDING SOURCES.
      IF
      WE ARE UNABLE TO CONTINUE TO OBTAIN NECESSARY CAPITAL FROM OUTSIDE SOURCES,
      WE
      WILL BE FORCED TO REDUCE OR CURTAIL OPERATIONS.*




We
      have
      limited financial resources. As a result we need to obtain additional capital
      from outside sources to continue operations and commercialize our business
      plan.
      We cannot assure that adequate additional funding will be available. If we
      are
      unable to continue to obtain needed capital from outside sources, we will be
      forced to reduce or curtain our operations.




Our
      ability to execute our business plan depends upon our ability to obtain
      financing through




·
            bank
                or other debt financing,


·
            equity
                financing,


·
            strategic
                relationships and/or


·
            other
                means.





*OUR
      INDEPENDENT AUDITORS HAVE EXPRESSED THAT THERE IS SUBSTANTIAL DOUBT ABOUT OUR
      ABILITY TO CONTINUE AS A GOING CONCERN.*





Our
      independent auditors issued an explanatory paragraph expressing substantial
      doubt about our ability to continue as a going concern on our financial
      statements for fiscal 2008, based on the significant operating losses and a
      lack
      of external financing. Neither our March 31, 2008 nor March 31, 2007 financial
      statements include any adjustments that resulted from the outcome of this
      uncertainty. Our inability to continue as a going concern would require a
      restatement of assets and liabilities on a liquidation basis, which would differ
      materially and adversely from the going concern basis on which our consolidated
      financial statements have been prepared.




*THERE
      ARE SIGNIFICANT OBSTACLES TO ENTERING THE OIL AND GAS PRODUCING INDUSTRY THAT
      HAVE CONTRIBUTED TO THE SLOW PACE AT WHICH OUR K-LINE OF CHEMICAL PRODUCTS
      ARE
      BEING INTRODUCED TO THE MARKET.*




Our
      business plan is focused largely on marketing efforts for our K-Line of Chemical
      Products for the oil and gas industry. Although we believe that the application
      of our K-Line of Chemical Products for the oil and gas industry on a continuous
      basis will result in higher production and lower power lease operating costs,
      the introduction of our K-Line of Chemical Products into the oil and gas
      producing industry has been extremely difficult. Many entrenched players such
      as
      the “hot oilers” and the major oil service companies that benefit from high
      markups on their proprietary products have no incentive to promote the use
      of
      our chemical products. Moreover, oil production engineers are extremely
      reluctant to risk damage to a well from a product that does not have the
      endorsement of a major enterprise. Consequently, the pace of introduction of
      our
      K-Line of Chemical Products has been much slower than we initially anticipated.
      If we and our K-Line of Chemical Products marketing partners are unable to
      successfully achieve market acceptance our products, our future results of
      operations and financial condition will be adversely affected.


12




*THE
      SUCCESS OF OUR K-LINE OF CHEMICAL PRODUCTS WILL BE HIGHLY DEPENDENT UPON THE
      LEVEL OF ACTIVITY AND EXPENDITURES IN THE OIL AND NATURAL GAS INDUSTRIES AND
      A
      DECREASE IN THE LEVELS THEREOF WOULD, IN ALL LIKELIHOOD, ADVERSELY IMPACT SALES
      OF OUR K-LINE OF CHEMICAL PRODUCTS.*




We
      anticipate that demand for our oil and gas-cleaning product will depend on
      the
      levels of activity and expenditures in the industry, which are directly affected
      by trends in oil and natural gas prices. We anticipate that demand for our
      K-Line of Chemical Product sales will be particularly sensitive to the level
      of
      development, production and exploration activity of, and corresponding capital
      spending by, oil and natural gas companies. Prices for oil and gas are subject
      to large fluctuations in response to relatively minor changes in the supply
      of
      and demand for oil and gas, market uncertainty, political stability and a
      variety of other factors that are beyond our control. Any prolonged reduction
      in
      oil and natural gas prices will depress the level of exploration, and
      development and production activity. Lower levels of activity are expected
      to
      result in a corresponding decline in the demand for our oil and gas well
      products, which could have an adverse impact on our prospects, results of
      operations and financial condition. Factors affecting the prices of oil and
      natural gas include:




**•**
            worldwide
                political, military and economic conditions, including the ability
                of OPEC
                (the Organization of Petroleum Exporting Countries) to set and maintain
                production levels and prices for oil and
                gas;




**•**
            overall
                levels of global economic growth and
                activity;




**•**
            global
                weather conditions;




**•**
            the
                level of production by non-OPEC
                countries;




**•**
            the
                policies of governments regarding the exploration for and production
                and
                development of their oil and natural gas reserves;
                and




**•**
            actual
                and perceived changes in the supply of and demand for oil and natural
                gas.




*WE
      MAY NOT BE ABLE TO GENERATE SUBSTANTIAL REVENUES FROM OUR GREEN GLOBE CHEMICAL
      PRODUCTS.*




Our
      sales to date have been substantially dependent on sales of our K-Line of
      Chemical Products. Sales of Green Globe Chemical Products accounted for
      approximately 27% of revenues for the fiscal year ended March 31, 2008. The
      U.S.
      military represented approximately 90% of such revenues from the sales of our
      Green Globe Chemical Products for the fiscal year ended March 31, 2008. If
      we
      fail to develop significant revenue from Green Globe Chemical Products or the
      U.S. military ceases or decreases its use of our Green Globe Chemical Products,
      our business plan and financial condition will be adversely
      affected.




*IF
      OUR STRATEGIC PARTNERS DO NOT EFFECTIVELY MARKET OUR PRODUCTS, WE WILL NOT
      GENERATE SIGNIFICANT SALES OR PROFITS AND WE DO NOT CURRENTLY HAVE THE INTERNAL
      RESOURCES TO MARKET OUR PRODUCTS DIRECTLY.*




We
      utilize third parties to assist in marketing, selling and distributing our
      products. We believe that the establishment of a network of third party
      strategic partners, particularly abroad, with extensive and specific knowledge
      of the various applications in the oil and gas industry is important for our
      success. We cannot assure you that our current or future strategic partners
      will
      purchase our products at sufficient levels or provide us with adequate support.
      If one or more of our partners underperforms or if any of our strategic
      relationships are terminated or otherwise disrupted, our operating performance,
      results of operations and financial condition will be adversely
      affected.




13




*WE
      DEPEND ON A SMALL NUMBER OF CUSTOMERS FOR A SUBSTANTIAL PORTION OF OUR REVENUES,
      BUT WE HAVE NO LONG TERM CONTRACTS OR BINDING PURCHASE COMMITMENTS FROM THESE
      CUSTOMERS.*




We
      currently have a limited number of recurring customers for our products, none
      of
      whom have entered into long-term contracts or binding purchase commitments
      with
      us. Our three largest customers accounted for 71% and 64% of our revenues for
      the fiscal years ended March 31, 2008 and 2007, respectively.




*WE
      RELY ON THIRD PARTIES FOR THE RAW MATERIALS NECESSARY TO MAKE OUR PRODUCTS,
      LEAVING US POTENTIALLY VULNERABLE TO SUBSTANTIAL COST INCREASES AND
      DELAYS.*




All
      of the raw materials necessary for the manufacture of our products are generally
      available from multiple sources. We have negotiated favorable arrangements
      with
      our current suppliers. If one or more of our current suppliers were no longer
      able to supply the raw materials that we need, we would be required to negotiate
      arrangements with alternate suppliers, which would likely include some cost
      or
      delay and could be substantial. In addition, no assurance can be given that
      any
      alternative arrangements that we secure would be on terms as favorable as our
      current arrangements.




*WE
      DEPEND ON INDEPENDENT MANUFACTURERS OF OUR PRODUCTS; ANY PROLONGED INTERRUPTION
      IN THEIR BUSINESS COULD CAUSE US TO LOSE OUR CUSTOMERS.*




We
      do not own any manufacturing facilities. Our chemical products are generally
      manufactured by contract blenders at a number of different facilities. Chemical
      blenders are relatively easy to replace. While we believe these facilities
      have
      the capacity to meet our current production needs and also meet applicable
      environmental regulations, we cannot be certain that these facilities will
      continue to meet our needs or continue to comply with environmental laws. In
      addition, these facilities are subject to certain risks of damage, including
      fire, which would disrupt production of our products. To the extent we are
      forced to find alternate facilities, it would likely involve delays in
      manufacturing and potentially significant costs.




The
      chemical blender and independent coater that manufactures our products are
      bound
      by confidentiality agreements that obligate them not to disclose or use our
      proprietary information. A breach of one or more of these agreements could
      have
      a detrimental effect on our business and prospects.




*ENVIRONMENTAL
      PROBLEMS AND LIABILITIES COULD ARISE AND BE COSTLY FOR US TO CLEAN
      UP.*




We
      are subject to various foreign, federal, state and local laws and regulations
      relating to the protection of the environment, including the Industrial Site
      Recovery Act, a New Jersey statute requiring clearance by the state prior to
      the
      sale of any industrial facility. These laws provide for retroactive strict
      liability for damages to natural resources or threats to public health and
      safety, rendering a party liable without regard to its negligence or fault.
      Sanctions for noncompliance may include revocation of permits, corrective action
      orders, and administrative or civil penalties or even criminal prosecution.
      We
      have not, to date, incurred any serious liabilities under environmental
      regulations and believe that we are in substantial compliance therewith.
      Nevertheless, we cannot be certain that we will not encounter environmental
      problems or incur environmental liabilities in the future that could adversely
      affect our business.




*BECAUSE
      WE ARE SMALLER AND HAVE FEWER FINANCIAL AND MARKETING RESOURCES THAN MANY OF
      OUR
      COMPETITORS, WE MAY NOT BE ABLE TO SUCCESSFULLY COMPETE IN THE EXTREMELY
      COMPETITIVE CHEMICAL INDUSTRIES.*




14




We
      compete directly or indirectly with other producers of specialty chemical
      products, most of which are or have aligned themselves with more established
      companies, have greater brand recognition and greater financial and marketing
      resources. Generally, we attempt to compete by offering what we hope to be
      lower
      prices and better service. However, the prices for our K-Line of Chemical
      Products and Green Globe Chemical Products are higher than competing products;
      therefore, we attempt to compete by emphasizing product effectiveness and
      environmental safety.




*WE
      MAY NOT BE ABLE TO RETAIN OUR EXECUTIVE OFFICERS WHO WE NEED TO SUCCEED, AND
      ADDITIONAL QUALIFIED PERSONNEL ARE EXTREMELY DIFFICULT TO
      ATTRACT.*




Our
      performance depends, to a significant extent, upon the efforts and abilities
      of
      our executive officers. We do not have employment agreements with certain of
      our
      executive officers and do not maintain any key man insurance on their lives
      for
      our benefit. The loss of the services of our executive officers could have
      a
      serious and adverse effect on our business, financial condition and results
      of
      operations. Our success will also depend upon our ability to recruit and retain
      additional qualified senior management personnel. Competition is intense for
      highly skilled personnel in our industry and, accordingly, no assurance can
      be
      given that we will be able to hire or retain sufficient personnel.




*OUR
      MANAGEMENT OWNS A SUBSTANTIAL AMOUNT OF OUR STOCK AND IS CAPABLE OF INFLUENCING
      OUR BUSINESS AND AFFAIRS.*




Our
      directors and executive officers beneficially own approximately 30.1% of our
      outstanding common stock. As such, they will be able to significantly influence
      the election of the members of our board of directors and the outcome of
      corporate actions that require shareholder approval, such as mergers and
      acquisitions. In addition, Pursuant to the terms of the Company’s Series A
      Convertible Preferred Stock (the “Preferred Stock”) and an agreement with
      Sherleigh Associates Profit Sharing Plan (“Sherleigh”), as holder of all of the
      outstanding shares of Preferred Stock, Sherleigh has the right to designate
      a
      majority of the members of our board of directors. Jack Silver, one of our
      directors, as the trustee of Sherleigh, has voting control over the shares
      of
      Preferred Stock held by Sherleigh. The level of ownership by our directors
      and
      executive officers, together with particular provisions of our articles of
      incorporation, bylaws and Nevada law, may have a significant effect in delaying,
      deferring or preventing any change in control and may adversely affect the
      voting and other rights of our other shareholders.




*IF
      WE
      CANNOT PROTECT OUR PROPRIETARY RIGHTS AND TRADE SECRETS OR IF WE WERE FOUND
      TO
      BE INFRINGING ON THE PROPRIETARY RIGHTS OF OTHERS, OUR BUSINESS WOULD BE
      SUBSTANTIALLY HARMED.*




Our
      success depends in large part on our ability to protect the proprietary nature
      of our products, preserve our trade secrets and operate without infringing
      the
      proprietary rights of third parties. If other companies obtain and copy our
      technology or claim that we are making unauthorized use of their proprietary
      technology, we may become involved in lengthy and costly disputes. If we are
      found to be infringing on the proprietary rights of others, we could be required
      to seek licenses to use the necessary technology. We cannot assure you that
      we
      could obtain these licenses on acceptable terms, if at all. In addition, the
      laws of some foreign countries may not provide adequate protection for our
      proprietary technology.




To
      protect our intellectual property, we seek patents and enter into
      confidentiality agreements with our employees, manufacturers and marketing
      and
      distribution partners. We cannot assure you that our patent applications will
      result in the successful issuance of patents or that any issued patents will
      provide significant protection for our technology and products. In addition,
      we
      cannot assure you that other companies will not independently develop competing
      technologies that are not covered by our patents. There is also no assurance
      that confidentiality agreements will provide adequate protection of our trade
      secrets, know-how or other proprietary information. Any unauthorized disclosure
      and use of our proprietary technology, whether in breach of an agreement or
      not,
      could have an adverse effect on our business, prospects, results of operations
      and financial condition.




15




*THE
      PUBLIC MARKET FOR OUR COMMON STOCK HAS BEEN CHARACTERIZED BY A LOW VOLUME OF
      TRADING AND OUR STOCKHOLDERS MAY NOT BE ABLE TO RESELL THEIR SHARES AT OR ABOVE
      THE PRICE AT WHICH THEY PURCHASED THEIR SHARES, IF AT ALL.*




Historically,
      the volume of trading in our common stock has been low. A more active public
      market for our common stock may not develop or, even if it does in fact develop,
      may not be sustainable. The market price of our common stock may fluctuate
      significantly in response to factors, some of which are beyond our control.
      These factors include:




**•**
            product
                liability claims and other
                litigation;




**•**
            the
                announcement of new products or product enhancements by us or our
                competitors;




**•**
            developments
                concerning intellectual property rights and regulatory
                approvals;




**•**
            quarterly
                variations in our competitors’ results of
                operations;




**•**
            developments
                in our industry; and




**•**
            general
                market conditions and other factors, including factors unrelated
                to our
                own operating performance.




Recently,
      the stock market in general has experienced extreme price and volume
      fluctuations. In particular, market prices of securities of specialty chemical
      products companies have experienced fluctuations that are often unrelated to
      or
      disproportionate from the operating results of these companies. Continued market
      fluctuations could result in extreme volatility in the price of shares of our
      common stock, which could cause a decline in the value of our shares. Price
      volatility may be worse if the trading volume of our common stock is
      low.




*WE
      HAVE OUTSTANDING WARRANTS AND OPTIONS, AND WE ARE ABLE TO ISSUE “BLANK CHECK”
PREFERRED STOCK, THAT COULD BE ISSUED RESULTING IN THE DILUTION OF COMMON STOCK
      OWNERSHIP.*




As
      of
      June 30, 2008, we had outstanding Preferred Stock, warrants and options that,
      when exercised and converted, could result in the issuance of up to 11,802,500
      additional shares of common stock. In addition, our Articles of Incorporation
      allow the board of directors to issue up to 100,000 shares of preferred stock
      and to fix the rights, privileges and preferences of those shares without any
      further vote or action by the shareholders. We currently have 3 shares of
      Preferred Stock outstanding. To the extent that outstanding warrants, options
      and preferred stock or similar instruments or convertible preferred stock issued
      in the future are exercised or converted, these shares will represent a dilution
      to the existing shareholders.  The preferred stock could hold dividend
      priority and a liquidation preference over shares of our common
      stock.   Thus, the rights of the holders of common stock are and will
      be subject to, and may be adversely affected by, the rights of the holders
      of
      any preferred stock. Any such issuance could be used to discourage an
      unsolicited acquisition proposal by a third party.




*OUR
      COMMON STOCK IS CONSIDERED A “PENNY STOCK” AND MAY BE DIFFICULT TO SELL WHEN
      DESIRED.*




The
      SEC has adopted regulations that define a “penny stock”, generally, to be an
      equity security that has a market price of less than $5.00 per share or an
      exercise price of less than $5.00 per share, subject to specific exemptions.
      The
      market price of our common stock has been less than $5.00 per share. This
      designation requires any broker or dealer selling our securities to disclose
      certain information concerning the transaction, obtain a written agreement
      from
      the purchaser and determine that the purchaser is reasonably suitable to
      purchase the securities. These rules may restrict the ability of brokers or
      dealers to sell our common stock and may affect the ability of stockholders
      to
      sell their shares. In addition, since our common stock is currently quoted
      on
      the OTC Bulletin Board, stockholders may find it difficult to obtain accurate
      quotations of our common stock, may experience a lack of buyers to purchase
      our
      shares or a lack of market makers to support the stock price.




16




*A
      SIGNIFICANT NUMBER OF OUR SHARES ARE ELIGIBLE FOR SALE AND THEIR SALE OR
      POTENTIAL SALE WILL PROBABLY DEPRESS THE MARKET PRICE OF OUR
      STOCK.*




Sales
      of a significant number of shares of our common stock in the public market
      could
      harm the market price of our common stock. Some or all of the shares of our
      common stock may be offered from time to time in the open market without
      registration pursuant to Rule 144, and these sales could have a depressive
      effect on the market for our common stock.




*WE
      DO
      NOT ANTICIPATE PAYING DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE FUTURE;
      THEREFORE, YOU SHOULD NOT BUY THIS STOCK IF YOU WISH TO RECEIVE CASH
      DIVIDENDS.*




We
      currently intend to retain our future earnings in order to support operations
      and finance expansion; therefore, we do not anticipate paying any cash dividends
      on our common stock in the foreseeable future.




**ITEM
      7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**




The
      response to this item is submitted as a separate section of this Report
      beginning on page F-1.




**ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**




None




**ITEM
      8A. 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
      March 31, 2008. 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.





**Management’s
      Annual Report on Internal Control Over Financial Reporting**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f)
      of
      the Securities Exchange Act of 1934, as amended. Internal control over financial
      reporting is designed to provide reasonable assurance regarding the reliability
      of financial reporting and the preparation and fair presentation of financial
      statements for external purposes, in accordance with generally accepted
      accounting principles. The effectiveness of any system of internal control
      over
      financial reporting is subject to inherent limitations and therefore, may not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness of future periods are subject to the risk that the controls may
      become inadequate due to change in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





Our
      management conducted an evaluation of the effectiveness of internal control
      over
      financial reporting using the criteria set forth by the Committee of Sponsoring
      Organizations of the Treadway Commission. Based on this evaluation, our
      management concluded that as of March 31, 2008, our internal control over
      financial reporting was not effective. Specifically, the Company’s management
      and its auditors determined that a material weakness existed in our internal
      control over financial reporting. The material weakness relates to the lack
      of
      segregation of duties in financial reporting, as our financial reporting and
      all
      accounting functions are performed by our Interim Chief Financial Officer.
      Due
      to our lack of funds, the Company has an insufficient number of personnel having
      adequate knowledge, experience and training, and the Company does not anticipate
      having the ability to retain such qualified personnel until it is able to obtain
      adequate funding.




17


This
      annual report does not include an attestation report of the Company’s registered
      public accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by the Company’s registered
      public accounting firm pursuant to temporary rules of the Securities and
      Exchange Commission that permit the Company to provide only management’s report
      in this annual report.





**Changes
      in Control Over Financial Reporting**





Management
      has not identified any change in our internal control over financial reporting
      that occurred during the fourth quarter of the fiscal year ended March 31,
      2008
      that has materially affected, or is reasonably likely to materially affect,
      the
      Company’s internal control over financial
      reporting.





**ITEM
      8B. OTHER INFORMATION**


None


18


**PART
      III**




**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
      GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
      ACT.**




The
      following table shows the positions held by our board of directors and executive
      officers and their ages as of June 30, 2008.




**Name**
            
            **Age**
            
            **Position**Ronald
                Wilen
            
            69
            
            Director,
                Chief Executive Officer, President and SecretaryJack
                Silver
            
            64
            
            Director
                and Chairman of the BoardJames
                McKeever, CPA
            
            42
            
            Interim
                Chief Financial OfficerAdam
                Hershey
            
            35
            
            DirectorPeter
                Garson-Rappaport
            
            25
            
            DirectorMartin
                Rappaport
            
            71
            
            DirectorJohn
                A. Lack
            
            63
            
            Director




The
      principal occupations for the past five years (and, in some instances, for
      prior
      years) of each of our executive officers and directors are as
      follows:




**Ronald
      Wilen.** Mr.
      Wilen has served as a member of our board since October 1995, our Chief
      Executive Officer since November 2007, and Secretary since May 2006.
      Mr. Wilen also served as our Chief Executive Officer from October 1995 to
      September 2004, our President from October 1995 to August 2001, our Executive
      Vice President of Research and Development from October 1995 to November 2007
      and as our Chairman of the Board from August 2001 to January 2008.




**Jack
      Silver.** Mr.
      Silver has served as a member of the Board as its Chairman since January 2008.
      Mr. Silver is the principal investor and manager of SIAR Capital, LLC, an
      independent investment fund that invests primarily in undervalued, emerging
      growth companies, and is the trustee of Sherleigh.




**James
      McKeever,**  **CPA.** Mr.
      McKeever has been our Interim Chief Financial Officer since January 2004. He
      also continues to be a partner in the accounting firm of Abrams & McKeever
      CPA’s, which he joined in January 2000. Mr. McKeever has more than 18 years’
experience in public accounting and financial reporting, and is a member of
      the
      New Jersey Society of Certified Public Accountants.




**Adam
      Hershey.** Mr.
      Hershey has served as a member of the Board since January 2008. Mr. Hershey
      has
      been a partner at SIAR Capital, LLC since September 2007. From March 2005 until
      joining SIAR, Mr. Hershey was a Vice President and Portfolio Manager of
      Neuberger Berman, LLC, a subsidiary of Lehman Brothers, managing capital for
      institutions and high net worth individuals. From 2003 to March 2005, Mr.
      Hershey was a Partner and Portfolio Manager at Sloate, Weisman, Murray &
Company, a registered investment advisor that was acquired by Neuberger Berman,
      LLC in March 2005.




**Peter
      Garson-Rappaport.** Mr.
      Rappaport is an analyst at SIAR Capital, LLC. He has been at SIAR since December
      2006. He previously was a co-owner and manager of Wash U Wash, a third party
      provider of laundry and dry-cleaning services. He also served as deputy finance
      director of Jeff Smith for Congress Campaign in the spring of 2004.




**Martin
      Rappaport.** Mr.
      Rappaport has served as a member of our board since June 2001. Mr. Rappaport
      is
      self-employed. For more than 30 years, he has developed and managed commercial
      and residential real estate. Mr. Rappaport is an active supporter and
      contributor to Blythedale Children’s Hospital in Valhalla, New
      York.




**John
      A. Lack.** Mr.
      Lack
      has served as a member of our board since June 2008. Since 1998, Mr. Lack has
      been the managing general partner of Digitar, a media investment and consulting
      company. In his 35-year career in the media and entertainment industries, Mr.
      Lack is best known for creating MTV. Most recently Mr. Lack was a founding
      partner & CEO of Firebrand, the first multi-platform network dedicated to
      commercial culture. Mr. Lack is also the Chairman of the Guardian’s Council at
      the Pollock-Krasner House and Study Center in East Hampton, NY and Chairman
      of
      the ASGOG Foundation.




19


Directors
      are elected annually and serve until the next annual meeting of the Company’s
      stockholders, and until their successors have been elected and have qualified.
      Officers are appointed to their positions, and continue in such positions,
      at
      the discretion of the directors.




**Committees
      of the Board**




The
      Board
      of Directors is the acting Audit Committee. Our Board of Directors has
      determined that there is no person on our Board of Directors who qualifies
      as an
      audit committee financial expert as that term is defined by applicable
      Securities and Exchange Commission rules. The Board of Directors believes that
      obtaining the services of an audit committee financial expert is not
      economically rational at this time in light of the costs associated with
      identifying and retaining an individual who would qualify as an audit committee
      financial expert.




**Indebtedness
      of Executive Officers** **and Directors**




No
      executive officer, director or any member of these individuals’ immediate
      families or any corporation or organization with whom any of these individuals
      is an affiliate is or has been indebted to us since the beginning of our last
      fiscal year.




**Family
      Relationships**




There
      are
      no family relationships among our executive officers and directors.




**Legal
      Proceedings**




During
      the past five years, none of our executive officers, directors, promoters or
      control persons has been involved in a legal proceeding material to an
      evaluation of the ability or integrity of such person.




**Compliance
      with Section 16(a) of the Securities Exchange Act of 1934**




Section
      16(a) of the Securities Act of 1934, as amended, requires our directors and
      executive officers, and persons who own more than 10% our outstanding common
      stock, to file with the SEC, initial reports of ownership and reports of changes
      in ownership of our equity securities. These persons are required by SEC
      regulations to furnish us with copies of all the reports they file.




To
      our
      knowledge, based solely on a review of the copies of the reports furnished
      to us
      and written or oral representations that no other reports were required for
      those persons during the fiscal year ended March 31, 2008, we believe that
      all
      of our officers, directors and greater than 10% beneficial owners complied
      with
      the reporting requirements of Section 16(a) of the Securities Exchange Act
      of
      1934, as amended, other than as follows:




•
            Ronald
                Wilen, a director and our chief executive officer and president,
                Martin
                Rappaport, a director, Louis Bernstein, a former director, and Andrea
                Pampanini, a former director, each failed to report the granting
                of
                options for 10,000 shares of our common stock in lieu of an annual
                director retainer and meeting fees.


•
            Adam
                Hershey and Peter Garson-Rappaport, both directors, failed to file
                a Form
                3 indicating that they did not beneficially own any securities of
                the
                Company as of the date they each became a
                director.




20


**Code
      of Ethics**




We
      have
      adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all
      of our employees (including executive officers) and directors. The Code is
      available on our website at www.unitedenergycorp.net under the heading
“Investor Information”. We intend to satisfy the disclosure requirement
      regarding any waiver of a provision of the Code applicable to any executive
      officer or director, by posting such information on such website.




**ITEM
      10. EXECUTIVE COMPENSATION**




The
      following Summary Compensation Table sets forth, for the years indicated, all
      cash compensation paid, distributed or accrued for services, including salary
      and bonus amounts, rendered in all capacities by our Chief Executive Officer
      and
      all other executive officers who received or are entitled to receive
      remuneration in excess of $100,000 during the stated periods.




**Summary Compensation Table****Name
                and**
              **Principal
                Position**
            
            **Fiscal
                Year**
            
            **Salary**
            
            **Option Awards**
            
            **All other
                Compensation**
            
            **Total******
            
            **($)**
            
            **($)**
            
            **($)**
            **(**1)
            **($)**Ronald
                Wilen
            
            
            2008
            
            
            200,769
            
            
            98,700
            
            
            7,935
            (2)
            
            307,404Chief
                Executive Officer and President
            
            
            2007
            
            
            200,000
            
            
            3,875
            
            
            8,901
            (2)
            
            212,776Brian
                King (3)
            
            
            2008
            
            
            130,769
            (4)
            
            -
            
            
            11,088
            (3)
            
            141,857Former
                President and Chief Executive Officer
            
            
            2007
            
            
            200,000
            
            
            495,000
            
            
            17,067
            (3)
            
            712,067




(1)
            We
                pay for medical insurance for all employees. Included in the table
                is the
                amount of the premiums paid by us dependent on the coverage
                provided.




(2)
            During
                the fiscal years ended March 31, 2008 and 2007, we paid for the lease
                on
                one automobile used by Mr. Wilen under monthly lease payments. We
                also
                paid for medical insurance for Mr. Wilen at a rate of $325.80 per
                month.




(3)
            We
                paid for Mr. King’s medical insurance at a rate of $1,400.30 per
                month.




(4)
            Mr.
                King resigned as our Chief Executive Officer in November
                2007.




**Director
      Compensation**





Each
      non-employee director and Ron Wilen receives options for 10,000 shares of our
      common stock in lieu of an annual retainer and meeting fees. Other than the
      10,000 options granted there are no special fees, contracts entered into, or
      payments made in consideration of any director’s service as a director.


21


The
      following table shows compensation paid to all directors who are not also
      employees during fiscal year ended March 31, 2008.





**Name**
            
            **Option**
              **Awards
                ($)**
            
            **Total
                ($)**Jack
                Silver (1)
            
            
            -
            
            
            -Adam
                Hershey (1)
            
            
            -
            
            
            -John
                A. Lack (2)
            
            
            -
            
            
            -Peter
                Garson-Rappaport(3)
            
            
            -
            
            
            -Martin
                Rappaport(4)
            
            
            3,200
            
            
            3,200Louis
                Bernstein (4)
            
            
            2,471
            
            
            2,471Andrea
                Pampanini (4)
            
            
            2,471
            
            
            2,471





(1)
            Mr.
                Silver and Mr. Hershey were appointed directors on January 25,
                2008.


(2)
            Mr.
                Lack was appointed director on June 4,
                2008.


(3)
            Mr.
                Rappaport was appointed director on March 24, 2008.


(4)
            Mr.
                Bernstein and Ms. Pampanini resigned as directors on January 1,
                2008.




**Outstanding
      Equity Awards at Fiscal Year End**





**Option
                Awards****Name**
            
            **Number
                of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options
                (#)**
              **Exercisable**
            
            **Option**
              **Exercise**
              **Price
                ($)**
            
            **Option**
              **Expiration
                Date**Ronald
                Wilen,
            
            
            40,000
            
            
            1.00
            
            
            3/31/2015Chief
                Executive Officer,
            
            
            10,000
            
            
            1.60
            
            
            1/1/2016and
                President
            
            
            10,000
            
            
            1.00
            
            
            3/30/201710,000
            
            
            1.00
            
            
            3/31/2018400,000
            
            
            1.11
            
            
            3/4/2012100,000
            
            
            1.80
            
            
            11/16/2012250,000
            
            
            1.00
            
            
            3/31/2008Brian
                King,
            
            
            500,000
            
            
            1.00
            
            
            9/15/2014Former
                President and
            
            
            500,000
            
            
            1.06
            
            
            4/1/2015Chief
                Executive Officer
            
            
            250,000
            
            
            2.05
            
            
            4/1/2016




**Stock
      Option Plan**




In
      August
      2001, our stockholders approved the 2001 Equity Incentive 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 our board’s
      discretion. Under the 2001 Equity Incentive Plan, 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 date of the grant to
      up to
      five years.




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


22


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, non-employee director stock options
      shall be exercisable in full twelve months after the date of grant unless
      determined otherwise by the compensation committee.




There
      were no stock options to purchase shares of our common stock available for
      future grant as of March 31, 2008 under the 2001 Equity Incentive
      Plan.




**11.**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS**




**Beneficial
      Ownership Information**




The
      following table sets forth information regarding the number of shares of our
      common stock beneficially owned on June 30, 2008, by each of our directors,
      each
      of our executive officers named in the Summary Compensation Table above, all
      of
      our executive officers and directors as a group, and by any person or “group,”
as that term is used in Section 13(d)(3) of the Securities Exchange Act of
      1934,
      known to us to own beneficially more than 5% of the outstanding shares of our
      common stock. Except as otherwise set forth below, the address of each of the
      persons listed below is c/o United Energy Corp., 600 Meadowlands Parkway, #20,
      Secaucus, New Jersey 07094.




****
            ****
            **Amount and**
            ****
            ****
            ********
            ****
            **Nature
                of**
            ****
            ****
            ******Name and Address**
            ****
            **Beneficial**
            ****
            **Percent of**
            ******of Beneficial Owner**
            ****
            **Ownership(1)**
            ****
            **Class
                (1)**Ronald
                Wilen
            
            
            4,407,000(2
            )
            
            13.8
            %James
                McKeever, CPA
            
            
            3,000
            
            
            *Jack
                Silver
            
            
            3,155,340(3
            )
            
            9.9
            %SIAR
                Capital LLC660
                Madison AvenueNew
                York, NY 10021Martin
                Rappaport
            
            
            2,290,000(4
            )
            
            7.4
            %Adam
                Hershey
            
            
            0
            
            
            *Peter
                Garson-Rappaport
            
            
            0
            
            
            *John
                A. Lack
            
            
            0
            
            
            *All
                current executive officers and directors as a group (6
                persons)
            
            
            9,855,340
            
            
            30.1
            %5%
                or Greater Stockholders:Joseph
                J. Grano, Jr.
            
            
            2,008,665(5
            )
            
            6.4
            %c/o
                Centurion Holdings LLC1185
                Avenue of the Americas, Suite 2250New
                York, NY 10036


________________


*
      Less
      than 1% of outstanding shares.


23


(1)
            As
                of June 30, 2008, the Company had 31,030,115 shares of common stock
                and
                three shares of Preferred Stock outstanding. Unless otherwise indicated
                in
                these footnotes, each stockholder has sole voting and investment
                power
                with respect to the shares beneficially owned. All share amounts
                reflect
                beneficial ownership determined pursuant to Rule 13d-3 under the
                Exchange
                Act. All information with respect to beneficial ownership has been
                furnished by the respective director, executive officer or stockholder,
                as
                the case may be.




(2)
            Includes
                (i) stock options to purchase 400,000 shares at an exercise price
                of $1.11
                per share, (ii) stock options to purchase 100,000 shares at an exercise
                price of $1.80 per share, (iii) stock options to purchase 60,000
                shares at
                an exercise price of $1.00 per share, (iv) stock options to purchase
                10,000 shares at an exercise price of $1.60 per share, which are
                currently
                exercisable and (v) stock options to purchase 250,000 shares at $1.00
                per
                share.




(3)
            Includes
                (i) 2,313,333 shares held by Sherleigh, a trust of which Mr. Silver
                is the
                trustee, (ii) 5,682,667 shares of common stock issuable upon exercise
                of
                warrants held by Sherleigh; and (iii) 24,000 shares of common stock
                issuable upon conversion of 3 shares of Preferred Stock held by Sherleigh,
                but excludes shares of Common Stock underlying such warrants and
                Preferred
                Stock to the extent following the exercise or conversion thereof,
                Sherleigh and its affiliates would be deemed to beneficially own
                more than
                9.9% of the total number of issued and outstanding common stock of
                the
                Company. Pursuant to the terms of the warrants and the Preferred
                Stock,
                the warrants the Preferred Stock cannot be exercised or converted
                to the
                extent following such exercise or conversion the holder or its affiliates
                would beneficially own more than 9.99% of the total number of issued
                and
                outstanding Common Stock of the Company. The three shares of Preferred
                Stock constitute 100% of the class of such voting equity
                securities.




(4)
            Includes
                (i) stock options to purchase 10,000 shares at an exercise price
                of $0.70
                per share, (ii) stock options to purchase 10,000 shares at an exercise
                price of $1.30 per share, (iii) stock options to purchase 10,000
                shares at
                an exercise price of $1.18 per share, (iv) stock options to purchase
                40,000 shares at an exercise price of $1.00 per share, (v) stock
                options
                to purchase 10,000 shares at an exercise price of $1.60 per share,
                which
                are currently exercisable.




(5)
            Includes
                1,875,332 shares of Common Stock and warrants to purchase 133,333
                shares
                of common stock.




**Equity
      Compensation Plan Information**




The
      following table provides information regarding the status of our existing equity
      compensation plans at March 31, 2008.




**Plan
                Category**
            
            **Number of securities**
              **to be issued upon**
              **exercise of**
              **outstanding options,**
              **warrants and rights**
            
            **Weighted-average**
              **exercise price of**
              **outstanding option,**
              **warrants and rights**
            
            **Number of securities**
              **remaining available**
              **for future issuance**
              **under equity**
              **compensation plans**
              **(excluding securities**
              **reflected in**
              **column
                (a))**(a)
            
            (b)
            
            (c)Equity
                compensation plans approved by security holders
            
            
            3,687,500
            
            $
            1.16
            
            
            —Equity
                compensation plans not approved by security holders
            
            
            1,475,000
            
            $
            1.55
            
            
            —Total
            
            
            5,162,500
            
            
            
            
            
            —




**Change
      of Control**




Pursuant
      to a Securities Purchase Agreement, dated March 18, 2005, among the Company
      and
      the Purchasers identified therein, including Sherleigh, as amended by the First
      Amendment to Securities Purchase Agreement, dated as of January 26, 2006, and
      by
      the Second Amendment to Securities Purchase Agreement, dated as of March 9,
      2006
      (as amended, the “Purchase Agreement”), during the period of March 2005 through
      March 2006, Sherleigh purchased from the Company (a) 1,333,333 shares of Common
      Stock, (b) warrants to acquire 5,682,667 shares of Common Stock, and (c) three
      shares of the Company’s Preferred Stock for an aggregate purchase price of
      $1,090,331.




24


The
      Purchase Agreement and the Preferred Stock provide that, upon the occurrence
      of
      a “Triggering Event” and during the “Period of Triggering Event”, the holders of
      the majority of the outstanding shares of Preferred Stock have the right to
      designate up to a majority of the members of our board of directors. “Triggering
      Event” is defined as (i) failure of the Company to have gross revenues of at
      least $5 million for the six month period ending September 30, 2006 or (ii)
      material breach by the Company of any of its representations, warranties,
      agreements or covenants contained in the Purchase Agreement and certain other
      agreements and instruments entered into in connection therewith. The Company
      failed to have gross revenues of at least $5 million during the six months
      ended
      September 30, 2006, and thus, a Triggering Event has occurred. “Period of the
      Triggering Event” is defined as date commencing upon the occurrence of a
      Triggering Event and ending on the date the purchasers under the Purchase
      Agreement no longer hold in the aggregate at least 1,500,000 shares of common
      stock issued pursuant to the Purchase Agreement and issuable upon the exercise
      of any warrants issued pursuant to the Purchase Agreement or upon conversion
      of
      the Preferred Stock. Accordingly, pursuant to the terms of the Purchase
      Agreement and the Preferred Stock, Sherleigh, as the holder of all outstanding
      shares of Preferred Stock, has the right to designate a majority of the members
      of our board of directors.




As
      of
      June 30, 2008, three of our six directors have been designated by Sherleigh.
      Such designees of Sherleigh are Jack Silver, Adam Hershey and Peter
      Garson-Rappaport.




**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**




We
      have
      an amount due to Robert Seaman, a shareholder and former director of the
      Company. The amount due as of March 31, 2008 was $244,141. This amount is
      unsecured, non-interest bearing and due upon demand.




Martin
      Rappaport, one of our directors, owned the building through September 2007
      in
      which we lease our principal executive offices in Secaucus, New Jersey. We
      paid
      $115,200 per year under the lease, excluding real estate taxes. We believe
      that
      this transaction was advantageous to us and was on terms no less favorable
      to us
      than could have been obtained from unaffiliated third parties.




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




**Securities
      Purchase Agreement**




Pursuant
      to the Purchase Agreement, in March 2005, Sherleigh purchased from the Company
      533,333 shares of common stock and Series A Warrants to acquire 266,667 shares
      of common stock for a purchase price of $426,664. Thereafter, during the period
      of August 2005 through January 2006, Sherleigh purchased, pursuant to the
      Purchase Agreement, 800,000 additional shares of common stock and additional
      Series A Warrants to acquire 400,000 shares of common stock for an aggregate
      purchase price of $639,667. Then in March 2006, pursuant to the Purchase
      Agreement, Sherleigh purchased 3 shares of Preferred Stock, Series B Warrants
      to
      acquire 12,000 shares of common stock and Series C Warrants to acquire 5,004,000
      shares of common stock for a purchase price of $24,000.




In
      addition, pursuant to the Purchase Agreement, and the Preferred Stock, upon
      the
      occurrence of a “Triggering Event” and during the “Period of Triggering Event”,
      the holders of the majority of the outstanding Preferred Stock have the right
      to
      designate up to a majority of the members of the Company’s board of directors.
“Triggering Event” is defined as (i) failure of the Company to have gross
      revenues of at least $5 million for the six month period ending September 30,
      2006 or (ii) material breach by the Company of any of its representations,
      warranties, agreements or covenants contained in the Purchase Agreement and
      certain other agreements and instruments entered into in connection therewith.
      The Company failed to have gross revenues of at least $5 million for the six
      months ended September 30, 2006, and thus a Triggering Event has occurred.
      “Period of the Triggering Event” is defined as date commencing upon the
      occurrence of a Triggering Event and ending on the date the purchasers under
      the
      Purchase Agreement no longer hold in the aggregate at least 1,500,000 shares
      of
      common stock issued pursuant to the Purchase Agreement or issuable upon the
      exercise of any warrants issued pursuant to the Purchase Agreement or upon
      conversion of the Preferred Stock.




25


The
      Purchase Agreement also provides that until March 18, 2009, the purchasers
      have
      the right to participate in any future equity financing, including securities
      convertible into or exchangeable into equity securities.




**Series
      A, Series B and Series C Warrants**




Each
      of
      the Series A, Series B and Series C Warrants provide that they may be exercised
      at any time prior to the five year anniversary date of the issuance of such
      warrants, for an exercise price of $1.00 per share. The warrants also provide
      for cashless exercise at the option of the holder and anti-dilution protection
      in the event the Company is deemed to have issued shares of common stock for
      a
      price less than the exercise price.




**Series
      A Convertible Preferred Stock**




Each
      share of Preferred Stock earns dividends at the rate of 6% per annum of the
      Stated Value of $8,000. Such dividends are payable from legally available funds
      on June 30th and December 30 of each year, or at the option of the holder,
      in
      shares of common stock of the Company at $1.00 per share.




Each
      share of Preferred Stock is convertible into 8,000 shares of common stock at
      the
      option of the holder. Such conversion rate is subject to anti-dilution
      protections in the event the Issuer is deemed to have issued shares of Common
      Stock at a price less than the conversion price.




The
      holders of the Preferred Stock have no voting rights except as required by
      law
      and except the right to designate and elect a majority of the Company’s board of
      directors upon the occurrence of a Triggering Event, as described
      above.




In
      the
      event of a liquidation, dissolution or winding up of the Company’s business, the
      holders of the Preferred Stock have a liquidation preference equal to $8,000
      per
      share of Preferred Stock plus all accrued but unpaid dividends
      thereon.




**Registration
      Rights Agreements**




In
      connection with the Purchase Agreement the Company entered into a Registration
      Rights Agreement, wherein it agreed to file a registration statement registering
      the common stock issued pursuant to the Purchase Agreement and the common stock
      underlying the Series A Warrants, the Series B Warrants and the Preferred
      Stock.




In
      connection with the Second Amendment to the Purchase Agreement, the Company
      entered into a Registration Rights Agreement, wherein it agreed to file a
      registration statement registering the common stock underlying the Series C
      Warrants.




**Director
      Independence**




The
      board
      of directors have determined that Messrs Silver, Hershey, Garson-Rappaport,
      Rappaport and Lack are independent directors as defined in NASDAQ Marketplace
      Rule 4200(a)(15).




26


**ITEM
      13. EXHIBITS**




**Exhibit**
                **Number**
              
              **Description
                  of Document**3.1
              
              Articles
                  of Incorporation of United Energy Corp. (1)3.2
              
              Amendment
                  to the Articles of Incorporation. (2)3.3
              
              Articles
                  of Incorporation: Articles Fourth, Fifth and Seventh. (1)3.6
              
              By-Laws
                  of United Energy Corp. (1)3.7
              
              By-Laws:
                  Article I: Sections: Six, Seven, Eight, Nine, Ten; Article II:
                  Section
                  Nine: Article IV: Section Two. (1)3.8
              
              New
                  Article V of the Bylaws. (13)3.9
              
              Amendment
                  to Articles of Incorporation of United Energy Corp. (10)3.10
              
              Certificate
                  of Designations, Preferences and Rights of Series A Convertible
                  Preferred
                  Stock. (13)4.1
              
              Form
                  of Stock Certificate of United Energy Corp.(1)4.2
              
              Common
                  Stock Purchase Warrant, dated March 24, 2004. (3)4.3
              
              Form
                  of March 2005 Series A Purchase Warrant. (7)4.4
              
              Form
                  of March 2005 Series B Purchase Warrant. (7)4.5
              
              Warrant
                  Certificate, dated April 27, 2005. (8)4.6
              
              2002
                  Common Stock Purchase Warrant. (9)4.7
              
              Common
                  Stock Purchase Warrant, dated February 28, 2005. (6)4.8
              
              Form
                  of Series C Warrant. (13)4.9
              
              Form
                  of Warrant between United Energy Corp. and Connie Kristan.
                  (15)4.10
              
              Form
                  of Warrant between United Energy Corp. and Joseph Grano.
                  (15)10.1
              
              2001
                  Equity Incentive Plan, as amended on May 29, 2002. (4)10.2
              
              Securities
                  Purchase Agreement, dated March 18, 2005, between United Energy
                  Corp. and
                  the Purchasers identified therein. (7)10.3
              
              Registration
                  Rights Agreement, dated March 18, 2005, between United Energy Corp.
                  and
                  the Purchasers identified therein. (7)10.4
              
              Consulting
                  Services Agreement, dated April 27, 2005, between United Energy
                  Corp. and
                  Ben Barnes. (8)10.5
              
              2002
                  Common Stock and Warrant Purchase Agreement. (9)10.6
              
              United
                  Energy Corp. 2001 Equity Incentive Plan, Amended and Restated Effective
                  May 29, 2002. (10)10.7
              
              Form
                  of Incentive Stock Option Agreement. (11)10.8
              
              Form
                  of Stock Option Agreement. (11)10.9
              
              First
                  Amendment to Securities Purchase Agreement, dated January 26, 2006,
                  by and
                  among United Energy Corp., Sherleigh Associates, Inc. Profit Sharing
                  Plan
                  and Joseph J. Grano, Jr. (12)10.10
              
              Second
                  Amendment to Securities Purchase Agreement, dated as of March 9,
                  2006, by
                  and among United Energy Corp., Sherleigh Associates, Inc. Profit
                  Sharing
                  Plan and Joseph J. Grano, Jr. (13)10.11
              
              Registration
                  Rights Agreement, dated as of March 9, 2006, by and between United
                  Energy
                  Corp. and Sherleigh Associates, Inc. Profit Sharing Plan.
                  (13)10.12
              
              Form
                  of Securities Purchase Agreement dated as of March 24, 2006.
                  (14)10.13
              
              Form
                  of Registration Rights Agreement dated as of March 24, 2006.
                  (14)10.14
              
              Form
                  of First Amendment to Securities Purchase Agreement and Registration
                  Rights Agreement dated as of March 24, 2006. (14)10.15
              
              Employment
                  Agreement with Ronald Wilen dated April 17, 2007. (16)10.16
              
              Master
                  Purchase Agreement, dated February 23, 2006, between Petrobras
                  America
                  Inc. and the Company*21.1
              
              Subsidiaries
                  of Small Business Issuer (15)31.1
              
              Chief
                  Executive Officer’s Certificate, pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002. *31.2
              
              Interim
                  Chief Financial Officer’s Certificate, pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002. *32.1
              
              Chief
                  Executive Officer’s and Interim Chief Financial Officer’s Certificate,
                  pursuant to 18 U.S.C., Section 1350, as adopted pursuant to section
                  906 of
                  the Sarbanes-Oxley Act of 2002.
                  *




*
              
              Filed
                  herewith(1)
              
              Incorporated
                  by reference from the exhibits filed with the Form 10 on June 20,
                  2000.(2)
              
              Incorporated
                  by reference from the exhibits filed with the Form 10-Q for the
                  period
                  ended September 30, 2001.(3)
              
              Incorporated
                  by reference from the exhibits filed with the Form 8-K filed on
                  March 30,
                  2004.(4)
              
              Incorporated
                  by reference from the exhibits filed with the Schedule 14A for
                  the year
                  ended March 31, 2003.(5)
              
              Incorporated
                  by reference from the exhibits filed with the Registration Statement
                  on
                  Form SB-2 (No. 333 115484).(6)
              
              Incorporated
                  by reference from the exhibits filed with the Form 8-K filed on
                  April 12,
                  2005.(7)
              
              Incorporated
                  by reference from the exhibits filed with the Form 8-K filed on
                  March 23,
                  2005.(8)
              
              Incorporated
                  by reference from the exhibits filed with the Form 8-K filed on
                  June 3,
                  2005.(9)
              
              Incorporated
                  by reference from the exhibits filed with the Form S-3 filed on
                  September
                  13, 2005.(10)
              
              Incorporated
                  by reference from the exhibits filed with the Definitive Schedule
                  14A
                  filed on July 18, 2005(11)
              
              Incorporated
                  by reference from the exhibits filed with the Form S-8 filed on
                  September
                  29, 2005.(12)
              
              Incorporated
                  by reference from the exhibits filed with the Form 8-K filed on
                  January
                  27, 2006.(13)
              
              Incorporated
                  by reference from the exhibits filed with the Form 8-K filed on
                  March 9,
                  2006.(14)
              
              Incorporated
                  by reference from the exhibits filed with the Form SB-2 filed on
                  April 24,
                  2006.(15)
              
              Incorporated
                  by reference from the exhibits filed with the Form 10-KSB filed
                  on May 29,
                  2006.(16)
              
              Incorporated
                  by reference from the exhibits filed with the Form 10-QSB filed
                  for the
                  period ended June 30, 2007.




27


**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**




**Audit
      Fees**




The
      aggregate fees billed or expected to billed by Imowitz, Koenig & Co., LLP
      (“Imowitz”) for professional services rendered for the audit of our annual
      financial statements for the fiscal year ended March 31, 2008 and 2007 and
      for
      the reviews of the interim financial statements included in our Quarterly
      Reports on Form 10-QSB for the fiscal years were approximately $75,000 and
      $70,000, respectively.




**Audit-Related
      Fees**




Fees
      of
      $7,088 and $3,473 to Imowitz for audit-related services for the fiscal year
      ended March 31, 2008 and March 31, 2007.




**Tax
      Fees**




No
      fees
      were billed by Imowitz for tax services rendered for the fiscal years ended
      March 31, 2008 and 2007.




**All
      Other Fees**




Imowitz
      did not render any other services, other than the services described above
      under
“Audit Fees,” “Audit-Related Fees” and “Tax Fees” for the fiscal year ended
      March 31, 2008 or for the fiscal year ended March 31, 2007.




**Audit
      Committee**




Our
      board
      of directors has established a policy requiring it’s pre-approval of all audit
      services and permissible non-audit services provided by the independent
      auditors, along with the associated fees for those services. The policy requires
      the specific pre-approval of all permitted services. When considering the
      pre-approval of non-audit services, our board considers whether the provision
      of
      such non-audit service is consistent with the auditor’s independence and the
      Securities and Exchange Commission rules regarding auditor independence.
      Additionally, our board considers whether the independent auditors are best
      positioned and qualified to provide the most effective and efficient service,
      based on factors such as the independent auditors’ familiarity with our
      business, personnel, systems or risk profile and whether provision of the
      service by the independent auditors would enhance our ability to manage or
      control risk or improve audit quality or would otherwise be beneficial to
      us.




28


**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) 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.




UNITED
              ENERGY CORP.Date:
                July 14, 2008
            By:
            /s/
                Ronald WilenRonald
                WilenChief
                Executive OfficerBy:
            /s/
                James McKeeverJames
                McKeeverInterim
                Chief Financial Officer








Pursuant
      to the requirements of the Securities Exchange Act of 1934, this Report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.




/s/
                Ronald Wilen
            
            Chief
                Executive Officer, President and
            
            July
                14, 2008Ronald
                Wilen
            
            Secretary
                (principal executive officer)/s/
                James McKeever
            
            Interim
                Chief Financial Officer
            
            July
                14, 2008James
                McKeever
            
            (principal
                financial and accounting officer)/s/
                Adam Hershey
            
            Director
            
            July
                14, 2008Adam
                Hershey/s/
                Peter Garson-Rappaport
            
            Director
            
            July
                14, 2008Peter
                Garson-Rappaport/s/
                John Lack
            
            Director
            
            July
                14, 2008John
                Lack/s/
                Martin Rappaport
            
            Director
            
            July
                14, 2008Martin
                Rappaport/s/
                Jack Silver
            
            Director,
                Chairman of the Board of
            
            July
                14, 2008Jack
                Silver
            
            Directors









**UNITED
      ENERGY CORP. AND SUBSIDIARIES**




**FORM
      10-KSB**




**ITEM
      7**




**INDEX
      OF FINANCIAL STATEMENTS AND SCHEDULES**




The
      following financial statements of United Energy Corp. and its subsidiaries
      required to be included in Item 7 are listed below:




PageReport
                of independent registered public accounting firm
            F-2Consolidated
                balance sheets as of March 31, 2008 and March 31, 2007
            F-3-F-4For
                the periods ended March 31, 2008 and 2007:Consolidated
                statements of operations
            F-5Consolidated
                statements of stockholders' equity
            F-6Consolidated
                statements of cash flows
            F-7-
                F-8Notes
                to consolidated financial statements
            F-9-F-17


F-1


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors of United Energy Corp.:





We
      have
      audited the accompanying consolidated balance sheets of United Energy Corp.
      (a
      Nevada corporation) and subsidiaries as of March 31, 2008 and March 31, 2007
      and
      the related consolidated statements of operations, cash flows and stockholders'
      equity for the years then ended. These consolidated financial statements are
      the
      responsibility of the Company's management. Our responsibility is to express
      an
      opinion on these consolidated financial statements based on our
      audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor have we been engaged to perform, an audit of its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for purposes
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the consolidated financial statements. An audit also includes
      assessing the accounting principles used and significant estimates made by
      management, as well as evaluating the overall consolidated financial statement
      presentation. We believe that our audits provide a reasonable basis for our
      opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of United Energy Corp. and subsidiaries as of March 31,
      2008
      and March 31, 2007 and the consolidated results of their operations and their consolidated cash
      flows for the years then ended, in conformity with accounting principles
      generally accepted in the United States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      the
      Company will continue as a going concern. As discussed in Note 1 to the
      consolidated financial statements, the Company has incurred recurring losses
      and
      negative cash flows from operations. These matters raise substantial doubt
      about
      the Company’s ability to continue as a going concern. The consolidated financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.





/s/
      IMOWITZ, KOENIG & CO., LLP


New
      York,
      New York


July
      14,
      2008


F-2




**UNITED
      ENERGY CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**MARCH
      31, 2008 AND 2007**




**March 31,**
            
            **March 31,****2008**
            
            **2007****ASSETS**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            858,575
            
            $
            2,863,906Accounts
                receivable, net of allowance for doubtful accounts of $25,329 and
                $5,879,
                respectively
            
            
            247,747
            
            
            64,466Inventory
            
            
            141,667
            
            
            138,798Prepaid
                expenses and other current assets
            
            
            162,255
            
            
            128,216Loan
                receivable, net of reserve of $25,000
            
            
            25,000
            
            
            -Assets
                of discontinued operations
            
            
            -
            
            
            4,507Total
                current assets
            
            
            1,435,244
            
            
            3,199,893PROPERTY
                AND EQUIPMENT, net of accumulated depreciation
            
            
            51,356
            
            
            88,081OTHER
                ASSETS:Goodwill,
                net
            
            
            15,499
            
            
            15,499Patents,
                net of accumulated amortization of $193,330 and $150,861,
                respectively
            
            
            386,687
            
            
            345,889Loans
                receivable
            
            
            5,023
            
            
            1,864Deposits
            
            
            1,385
            
            
            1,385Total
                assets
            
            $
            1,895,194
            
            $
            3,652,611





The
      accompanying notes are an integral part of these consolidated
      statements


F-3





**UNITED
      ENERGY CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**MARCH
      31, 2008 AND 2007**




**March 31,**
            
            **March 31,****2008**
            
            **2007****LIABILITIES
                AND STOCKHOLDERS' EQUITY**CURRENT
                LIABILITIES:Accounts
                payable
            
            $
            167,913
            
            $
            133,135Accrued
                expenses
            
            
            113,698
            
            
            99,226Due
                to related parties
            
            
            244,141
            
            
            244,141Total
                current liabilities
            
            
            525,752
            
            
            476,502STOCKHOLDERS'
                EQUITY:Preferred
                Stock: 100,000 shares authorized Series A Convertible Preferred Stock:$8,000
                stated value, 3 shares issued and outstanding as of March 31, 2008
                and
                2007
            
            
            24,000
            
            
            24,000Common
                stock: $0.01 par value 100,000,000 shares authorized; 31,030,115
                shares
                issued and outstanding as of March 31, 2008 and 2007
            
            
            310,301
            
            
            310,301Additional
                paid-in capital
            
            
            21,775,204
            
            
            21,540,041Accumulated
                deficit
            
            
            (20,740,063
            )
            
            (18,698,233
            )Total
                stockholders' equity
            
            
            1,369,442
            
            
            3,176,109Total
                liabilities and stockholders' equity
            
            $
            1,895,194
            
            $
            3,652,611





The
      accompanying notes are an integral part of these consolidated
      statements


F-4





**UNITED
      ENERGY CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**FOR
      THE YEARS ENDED MARCH 31, 2008 AND 2007**





**2008**
            
            **2007**REVENUES,
                net
            
            $
            1,042,320
            
            $
            811,893COST
                OF GOODS SOLD
            
            
            469,237
            
            
            363,208Gross
                profit
            
            
            573,083
            
            
            448,685OPERATING
                EXPENSES:Selling,
                general and administrative
            
            
            2,609,343
            
            
            2,811,970Depreciation
                and amortization
            
            
            69,171
            
            
            76,434Total
                operating expenses
            
            
            2,678,514
            
            
            2,888,404Loss
                from operations
            
            
            (2,105,431
            )
            
            (2,439,719
            )OTHER
                INCOME (EXPENSE), net:Interest
                income
            
            
            67,504
            
            
            169,653Interest
                expense
            
            
            (2,463
            )
            
            (2,725
            )Total
                other income (expense), net
            
            
            65,041
            
            
            166,928Net
                loss from continuing operations
            
            
            (2,040,390
            )
            
            (2,272,791
            )DISCONTINUED
                OPERATIONS:Income
                from discontinued operations
            
            
            -
            
            
            252Net
                loss
            
            
            (2,040,390
            )
            
            (2,272,539
            )Preferred
                dividends
            
            
            (1,440
            )
            
            (1,526
            )Net
                loss applicable to common shareholders
            
            $
            (2,041,830
            )
            $
            (2,274,065
            )BASIC
                AND DILUTED LOSS PER SHARE:Loss
                from continuing operations
            
            $
            (0.07
            )
            $
            (0.07
            )Income
                from discontinued operations
            
            
            0.00
            
            
            0.00Total
                basic and diluted loss per share
            
            $
            (0.07
            )
            $
            (0.07
            )WEIGHTED
                AVERAGE NUMBER OF SHARES, OUTSTANDING, basic and diluted
            
            
            31,030,115
            
            
            31,029,327





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


F-5





**UNITED
      ENERGY CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITY**


**FOR
      THE YEARS ENDED MARCH 31, 2008 AND 2007**





AdditionalCommon
                Stock
            
            Preferred
            
            Paid-In
            
            AccumulatedShares
            
            Amount
            
            Stock
            
            Capital
            
            Deficit
            
            TotalBALANCE,
                April 1, 2006
            
            
            31,017,615
            
            $
            310,176
            
            $
            24,000
            
            $
            21,221,471
            
            $
            (16,424,168
            )
            
            5,131,479Exercise
                of stock options
            
            
            12,500
            
            
            125
            
            
            
            
            
            13,750
            
            
            -
            
            
            13,875Compensation
                expense associated with options
            
            
            -
            
            
            -
            
            
            
            
            
            304,820
            
            
            -
            
            
            304,820Dividends
                paid and accrued onon
                preferred shares
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,526
            )
            
            (1,526
            )Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,272,539
            )
            
            (2,272,539
            )BALANCE,
                March 31, 2007
            
            
            31,030,115
            
            
            310,301
            
            
            24,000
            
            
            21,540,041
            
            
            (18,698,233
            )
            
            3,176,109Compensation
                expense associated with options
            
            
            -
            
            
            -
            
            
            
            
            
            235,163
            
            
            -
            
            
            235,163Dividends
                paid and accrued on On preferred shares
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,440
            )
            
            (1,440
            )Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,040,390
            )
            
            (2,040,390
            )BALANCE,
                March 31, 2008
            
            
            31,030,115
            
            $
            310,301
            
            $
            24,000
            
            $
            21,775,204
            
            $
            (20,740,063
            )
            $
            1,369,442





The
      accompanying notes are an integral part of this consolidated
      statements


F-6





**UNITED
      ENERGY CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE YEARS ENDED MARCH 31, 2008 AND 2007**




**2008**
            
            **2007**CASH
                FLOWS FROM OPERATING ACTIVITIES:CASH
                FLOWS FROM CONTINUING OPERATIONS:Net
                loss from continuing operations
            
            $
            (2,040,390
            )
            $
            (2,272,791
            )Adjustments
                to reconcile net loss to net cash used in operating activitiesDepreciation
                and amortization
            
            
            80,578
            
            
            93,690Compensation
                expense associated with options
            
            
            235,163
            
            
            304,820Asset
                transferred in legal settlement
            
            
            5,003
            
            
            -Changes
                in operating assets and liabilities(Increase
                ) decrease in accounts receivable, net
            
            
            (183,281
            )
            
            27,091Increase
                in inventory, net
            
            
            (2,870
            )
            
            (39,461
            )Increase
                in loan receivable, net
            
            
            (25,000
            )
            
            -Increase
                in prepaid expenses and other current assets
            
            
            (34,038
            )
            
            (43,559
            )Increase
                (decrease) in accounts payable and accrued expenses
            
            
            49,251
            
            
            (181,228
            )Net
                cash used in continuing operations
            
            
            (1,915,584
            )
            
            (2,111,438
            )CASH
                FLOWS FROM DISCONTINUED OPERATIONS:Net
                income from discontinuing operations
            
            
            -
            
            
            252Decrease
                (increase) in accounts receivable, net
            
            
            31
            
            
            (31
            )Decrease
                in inventory, net
            
            
            -
            
            
            7,620Decrease
                in note receivable, net
            
            
            4,476
            
            
            15,000Net
                cash provided by discontinuing operations
            
            
            4,507
            
            
            22,841Net
                cash used in operating activities
            
            
            (1,911,077
            )
            
            (2,088,597
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Loans
                receivable
            
            
            (3,160
            )
            
            (1,500
            )Payments
                for acquisition of property and equipment
            
            
            (6,387
            )
            
            (3,710
            )Payments
                for patent
            
            
            (83,267
            )
            
            (49,384
            )Cash
                used in investing activities
            
            
            (92,814
            )
            
            (54,594
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Payments
                of related party payable
            
            
            -
            
            
            (200,000
            )Proceeds
                from the exercise of stock options
            
            
            -
            
            
            13,875Preferred
                stock dividend
            
            
            (1,440
            )
            
            (1,526
            )Net
                cash used in financing activities
            
            
            (1,440
            )
            
            (187,651
            )Net
                decrease in cash and cash equivalents
            
            
            (2,005,331
            )
            
            (2,330,842
            )CASH
                AND CASH EQUIVALENTS, beginning of period
            
            
            2,863,906
            
            
            5,194,748CASH
                AND CASH EQUIVALENTS, end of period
            
            $
            858,575
            
            $
            2,863,906





The
      accompanying notes are an intergral part of these consolidated
      statements


F-7





**UNITED
      ENERGY CORP. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE YEARS ENDED MARCH 31, 2008 AND 2007**




**2008**
            
            **2007**SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:Cash
                paid during the periodInterest
            
            $
            2,463
            
            $
            2,725Income
                taxes
            
            $
            3,680
            
            $
            1,235





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


F-8


**UNITED
      ENERGY CORP. AND SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2007 AND 2006**





**1.**  **DESCRIPTION
      OF BUSINESS AND GOING CONCERN**





United
      Energy Corp. (“United Energy” or the Company”) considers its primary business
      focus to be the development, manufacture and sale of environmentally friendly
      specialty chemical products with applications in several industries and
      markets. Our
      current line of products include 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.




During
      the past two fiscal years ended March 31, 2008 and 2007, we have recorded
      aggregate losses from continuing operations of $4,313,181 and have incurred
      total negative cash flows from operations of $4,027,022 for the same two-year
      period. The
      report of the independent registered public accounting firm with respect to
      our
      consolidated financial statements included in this Report includes a “going
      concern” qualification, indicating that our recurring losses and negative cash
      flows from operations raise substantial doubt about our 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 capital through equity or debt financing, increased sales volumes,
      collection of existing receivables and the ability to achieve profitability
      from
      the sale of our product lines. In order to increase our cash flow, we are
      continuing our efforts to stimulate sales and cut back expenses not directly
      supporting our sales and marketing efforts.





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.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





**Principles
      of Consolidation**





The
      consolidated financial statements include the accounts of United Energy and
      its
      wholly-owned subsidiary Green Globe and currently inactive subsidiaries,
      Nor-Graphic Industries and United Energy Oil. All intercompany transactions
      and
      accounts have been eliminated in consolidation.





**Use
      of Estimates**





The
      preparation of consolidated financial statements in accordance with accounting
      principles generally accepted in the United States of America requires United
      Energy 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, United Energy evaluates its estimates, including those related
      to valuation of options and warrants, bad debts, inventories, intangible assets,
      contingencies and litigation. United Energy 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.





**Revenue
      Recognition**





The
      Company's primary source of revenue is from the sales of its products. The
      Company recognizes revenue upon shipment and transfer of title.


F-9


**Cash
      and Cash Equivalents**





Cash
      and
      cash equivalents consist of cash and highly liquid investments with original
      maturities of three months or less.





**Inventories**





Inventories
      consist predominately of finished goods. Inventories are valued at the lower
      of
      cost (first-in, first-out method) or market.


**Allowance
      for Doubtful Accounts**





The
      Company monitors its accounts and note receivable balances on a monthly basis
      to
      ensure they are collectible. On a quarterly basis, the Company uses its
      historical experience to determine its accounts receivable reserve. The
      Company’s allowance for doubtful accounts is an estimate based on specifically
      identified accounts as well as general reserves. The Company evaluates specific
      accounts where it has information that the customer may have an inability to
      meet its financial obligations. In these cases, management uses its judgment,
      based upon the best available facts and circumstances, and records a specific
      reserve for that customer against amounts due to reduce the receivable to the
      amount that is expected to be collected. These specific reserves are reevaluated
      and adjusted as additional information is received that impacts the amount
      reserved. The Company also establishes a general reserve based upon a range
      of
      percentages applied to aging categories. These percentages are based on
      historical collection and write-off experience. If circumstances change, the
      Company’s estimate of the recoverability of amounts due the Company could be
      reduced or increased by a material amount. Such a change in estimated
      recoverability would be accounted for in the period in which the facts that
      give
      rise to the change become known.





**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 years ended March 31,
      2008 and 2007 was $38,108 and $62,622, respectively.





Property
      and equipment consists of the following at March 31, 2008 and 2007:





**2008**
            
            **2007**Furniture
                and fixtures
            
            $
            81,642
            
            $
            79,046Machinery
                and equipment
            
            
            336,887
            
            
            336,396Vehicles
            
            
            42,001
            
            
            82,139Leasehold
                improvements
            
            
            26,203
            
            
            26,203486,733
            
            
            523,784Less-
                Accumulated depreciation and amortization
            
            
            (435,377
            )
            
            (435,703
            )Property
                and equipment, net
            
            $
            51,356
            
            $
            88,081





**Goodwill**





The
      Company capitalized goodwill related to the acquisition of Green Globe in
      September of 1998. Goodwill represents cost in excess of fair value on the
      net
      assets acquired. Goodwill was amortized over a 15 year period using a straight
      line amortization method until the adoption of SFAS No. 142 “Goodwill and Other
      Intangible Assets,” on April 1, 2002. Under
      SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer
      amortized but are reviewed annually (or more frequently if impairment indicators
      arise) for impairment. Separable intangible assets that are not deemed to have
      indefinite lives will continue to be amortized over their useful lives (but
      with
      no maximum life).





As
      required by SFAS 142, the Company completed its transitional impairment testing
      of intangible assets. Under SFAS 142, a goodwill impairment exists if the net
      book value of a reporting unit exceeds its estimated fair value. The impairment
      testing is performed in two steps: (i) the Company determines impairment by
      comparing fair value of a reporting unit with its carrying value, and (ii)
      if
      there is an impairment the Company measures the amount of impairment loss by
      comparing the implied fair value of goodwill with the carrying amount of that
      goodwill.





As
      of
      March 31, 2008 the Company completed its annual impairment testing of goodwill.
      The Company estimated the fair value of its goodwill by using discounted cash
      flow analysis. As a result of the impairment tests, the Company did not record
      a
      goodwill impairment charge related to the Green Globe segment, during the years
      ended March 31, 2008 and 2007.





F-10


Goodwill
      consists of the following at March 31, 2008 and 2007:




**2008**
            
            **2007**Goodwill
            
            $
            86,523
            
            $
            86,523Less:
                Impairment loss
            
            
            53,320
            
            
            53,320Less:
                Accumulated amortization
            
            
            17,704
            
            
            17,704Goodwill,
                net
            
            $
            15,499
            
            $
            15,499





**Research
      & Development**





Our
      products are the result of research and development expenditures. The Company’s
      policy is to expense any research and development costs as they are incurred.
      The Company incurred research and development costs of $298,618 and $232,517
      for
      the fiscal years ended March 31, 2008 and 2007, respectively.





**Patents**





The
      Company capitalizes legal costs incurred to obtain patents. Amortization begins
      when the patent is approved using the straight-line basis over the estimated
      useful life of 15 years.





**Accounting
      for Long-Lived Assets**





The
      Company’s long-lived assets include property and equipment and
      patents.





In
      accordance with SFAS 144, long-lived assets other than goodwill are reviewed
      on
      a periodic basis for impairment whenever events or changes in circumstances
      indicate that the carrying amounts of the assets may not be recoverable.
      Recoverability of assets to be held and used is measured by a comparison of
      the
      carrying amount of an asset to future undiscounted net cash flows expected
      to be
      generated by the asset. If such assets are considered to be impaired, the
      impairment to be recognized is measured by the amount by which the carrying
      amount of the assets exceeds the fair value of the assets.





**Income
      Taxes**





The
      Company accounts for income taxes using the asset and liability method. Under
      this method, deferred tax assets and liabilities are determined based on the
      temporary differences between the financial statement and the income tax bases
      of assets and liabilities and for net operating loss carry forwards existing
      at
      the balance sheet date using enacted tax rates in effect for the years in which
      the taxes are expected to be paid or recovered. A valuation allowance is
      established when it is considered more likely than not that such assets will
      not
      be realizable. The effect on deferred tax assets or liabilities of a change
      in
      tax rates is recognized in the period in which the tax change
      occurs.





**Stock-Based
      Compensation**





In
      accordance with Statement of Financial Standards (“SFAS”) No. 123 (revised
      2004), “Share-based payments”, the Company records compensation expense for all
      stock-based payment awards made to employees based on estimated fair
      value.





**Recently
      Issued Accounting Standards**





In
      September 2006, the FASB issued Statement No. 157, *Fair
      Value Measurements* (“SFAS
      157”). SFAS No. 157 defines fair value, establishes a framework for measuring
      fair value in accordance with generally accepted accounting principles and
      expands disclosures about fair value investments. SFAS 157 is effective for
      financial assets and liabilities on January 1, 2008. The FASB has deferred
      the
      implementation of the provisions of SFAS 157 relating to certain non-financial
      assets and liabilities until January 1, 2009. The adoption of SFAS 157 on
      January 1, 2008 for financial assets and liabilities will not have a material
      effect on the Company’s consolidated financial statements. The Company has not
      determined whether the adoption of SFAS 157 will have a material impact on
      its
      consolidated financial position and results of operations on January 1, 2009
      for
      non-financial assets and liabilities.




**Per
      Share Data**





SFAS
      No.
      128 establishes standards for computing and presenting earnings per share
      ("EPS"). The standard requires the presentation of basic EPS and diluted EPS.
      Basic EPS is calculated by dividing income/loss available to common shareholders
      by the weighted average number of shares of common stock outstanding during
      the
      period. Diluted EPS is calculated by dividing income/loss available to common
      shareholders by the weighted average number of common shares outstanding
      adjusted to reflect potentially dilutive securities. Diluted loss per share
      for
      the years ended March 31, 2008 and 2007 does not include 11,802,500 and
      14,517,500 stock options, warrants and convertible preferred stock,
      respectively, since the inclusion would have been antidilutive.


F-11






**Concentrations
      of Risk**





*Cash
      and Cash Equivalents*





The
      Company maintains cash balances at financial institutions insured up to $100,000
      by the Federal Deposit Insurance Corporation. Balances exceeded these insured
      amounts during the year.





*Accounts
      and Notes Receivable*





The
      Company had two customers that accounted for 82% of the total accounts
      receivable at March 31, 2008 and three customers that accounted for 72% of
      the
      total accounts receivable at March 31, 2007. One company accounted for 61%
      and
      38%, the second accounted for 21% and 17%, and the last accounted for 0% and
      17%
      at March 31, 2008 and 2007 respectively. Credit losses, if any, have been
      provided for in the consolidated financial statements and are based on
      management's expectations.




*Significant
      Customers*





The
      Company's revenues from major customers, as a percentage of revenues, for the
      years ended March 31, 2008 and 2007, are as follows:





**2008**
            
            **2007**Customer
                A
            
            
            25
            %
            
            0
            %Customer
                B
            
            
            22
            %
            
            46
            %Customer
                C
            
            
            24
            %
            
            8
            %




*Vendors*




The
      Company purchased supplies from major venders for the years ended March 31,
      2008
      and 2007 as follows:





**2008**
            
            **2007**Vendor
                A
            
            
            27
            %
            
            40
            %Vendor
                B
            
            
            24
            %
            
            26
            %





**Fair
      Value of Financial Instruments**





The
      carrying amounts of cash and cash equivalents, accounts receivable, note and
      loan receivable, inventory, accounts payable and accrued expenses approximate
      their fair values due to the short-term maturity of these
      instruments.




**3.**  **INVENTORY**





Inventory
      consists of the following as of March 31, 2008 and 2007:





**2008**
            
            **2007**Blended
                chemicals
            
            $
            85,615
            
            $
            93,814Raw
                materials
            
            
            56,052
            
            
            44,984Total
                inventory
            
            $
            141,667
            
            $
            138,798




F-12





**4.**  **DISCONTINUED
      OPERATIONS**





During
      the fiscal year ended March 31, 2007, the Company discontinued the sale of
      its
      Uniproof proofing paper resulting in the graphic arts segment becoming a
      discontinued operation.




The
      financial position and results of operations described above are presented
      as
      assets and liabilities of discontinued operations in the consolidated balance
      sheets and discontinued operations in the consolidated statement of operations,
      respectively for all periods presented in accordance with SFAS No.
      144 *.*





A
      summary
      of the results of discontinued operations for the fiscal year ended March 31,
      2008 and 2007 is as follows:





**2008**
            
            **2007**Revenues
            
            $
            —
            
            $
            1,310Cost
                of goods sold
            
            
            —
            
            
            1,058Gross
                profit
            
            $
            —
            
            $
            252





A
      summary
      of assets and liabilities of discontinued operations as of March 31, 2008 and
      2007is as follows:





**2008**
            
            **2007**Accounts
                receivable
            
            $
            —
            
            $
            31Inventory
            
            
            —
            
            
            —Note
                receivable
            
            
            —
            
            
            4,476Assets
                of discontinued operations
            
            $
            —
            
            $
            4,507





**5.**  **RELATED
      PARTY TRANSACTIONS**





The
      Company had an amount due to Robert Seaman, a shareholder and former director
      of
      the Company. The amount due as of March 31, 2008 and 2007 is $244,141. This
      amount is unsecured, non-interest bearing and due upon demand.




Martin
      Rappaport, a major shareholder and director of the Company, owned the property
      through September 2007 from which United Energy leases the 9,600 square foot
      facility it occupies in Secaucus, New Jersey. The Company paid $115,200 per
      year
      under the lease, excluding real estate taxes.





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




**6.**  **COMMITMENTS
      AND CONTINGENCIES**





**Litigation**





Sales
      Commission Claim





In
      July
      2002, an action was commenced against the Company in the Court of Common Pleas
      of South Carolina, Pickens County, brought by Quantum International Technology,
      LLC and Richard J. Barrett. The plaintiffs allege that they were retained as
      the
      sales representatives of the Company and in that capacity made sales of the
      Company’s products to the United States government and to commercial entities.
      The plaintiffs further allege that the Company failed to pay to the plaintiffs
      agreed commissions at the rate of 20% of gross sales of the Company’s products
      made by the plaintiffs. The complaint seeks an accounting, compensatory damages
      in the amount of all unpaid commissions plus interest thereon, punitive damages
      in an amount treble the compensatory damages, plus legal fees and costs. The
      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 yet been scheduled. The Company believes that 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.




F-13




In
      March
      2007, the Company commenced an action against Applied Force and Samuel Miller
      III in the Superior Court of New Jersey, Law Division - Bergen County for the
      recovery of two of the Company’s vehicles and certain additional claims. The
      defendants, Applied Force and Samuel Miller III, have filed a counterclaim
      for
      recovery of alleged storage fees in the amount of $126,784 and certain alleged
      service fees in the amount of $1,275. A settlement agreement and mutual release
      was entered into during




August
      2007 and the action was dismissed on September 18, 2007. As part of the
      settlement the Company transferred title of a truck to the
      defendant.




**Lease
      Commitments**





The
      Company leases office facilities, equipment and autos under operating leases
      expiring on various dates through 2011. Certain leases contain renewal options.
      The following is a schedule of future minimum lease payments under operating
      leases having remaining terms in excess of one year as of March 31,
      2008.





Year2009
            
            $
            132,6102010
            
            
            125,8342011
            
            
            31,200Total
                minimum lease payments
            
            $
            289,644





Operating
      lease expense was $133,953 and $128,528 for the years ended March 31, 2008
      and
      2007, respectively.





**7.** **STOCKHOLDERS’
          EQUITY**





**Preferred
      Stock**





The
      Company is authorized to issue up to 100,000 shares of preferred stock in one
      or
      more series, with such voting powers, designations, preferences, limitations,
      restrictions and relative rights as may be established by resolution of the
      Board of Directors.





The
      Company has issued three shares of Series A Convertible Preferred Stock (the
      “Preferred Stock”), with a par value of $0.01 per share and a stated value of
      $8,000 per share. The Preferred Stock is non redeemable and is convertible
      at
      the election of the holder into shares of Common Stock, based on the stated
      value per share, at an initial conversion price of $1.00 per share. The
      Preferred Stock pays a dividend at a rate of 6% per annum. Upon any liquidation
      of the Company, the holder of the Preferred Stock will be entitled to be paid,
      prior to the Common Stock or any other security that by their terms are junior
      to the Preferred Stock. The Preferred Stock has no voting rights, however upon
      the occurrence of a Triggering Event (as defined in the agreement), the holder
      of the Preferred Stock has the right, at their option, to designate and elect
      a
      majority of the Company’s Board of Directors. The Triggering Event occurred
      during the fiscal year ended March 31, 2007 and the holder of the Preferred
      Stock exercised the option during the fiscal year ended March 31, 2008




**Warrants**





The
      Company has issued warrants in conjunction with various private placements
      of
      its stock and convertible term note in exchange for sevices. All warrants are
      currently exercisable.





The
      following table sumarizes warrant information for the years ended March 31,
      2008
      and 2007.




Number of
            
            Weighted AverageWarrants
            
            Exercise PriceOutstanding
                April 1, 2006
            
            
            11,741,000
            
            $
            1.32Expired
            
            
            (750,000
            )
            $
            0.60Outstanding
                March 31, 2007
            
            
            10,991,000
            
            $
            1.41Expired
            
            
            (3,000,000
            )
            $
            2.00Outstanding
                March 31, 2008
            
            
            7,991,000
            
            $
            1.14




F-14





As
      of
      March 31, 2008, outstanding common stock warrants are as follows:





**Number
                of**
            
            **Exercise****Warrants**
            
            **Price**
            
            **Expiration
                Date**100,000
            
            $
            1.00
            
            
            January
                18, 2009175,000
            
            $
            1.50
            
            
            March
                24, 2009100,000
            
            $
            1.25
            
            
            March
                24, 2011100,000
            
            $
            1.50
            
            
            March
                24, 2011100,000
            
            $
            1.75
            
            
            March
                24, 201150,000
            
            $
            1.00
            
            
            May
                17, 200950,000
            
            $
            2.00
            
            
            May
                17, 2009100,000
            
            $
            1.25
            
            
            February 28, 2012100,000
            
            $
            1.50
            
            
            February
                28, 2012100,000
            
            $
            1.75
            
            
            February
                28, 2012500,000
            
            $
            1.34
            
            
            April
                27, 2015500,000
            
            $
            2.00
            
            
            April
                27, 20156,016,000
            
            $
            1.00
            
            
            March
                24, 20117,991,000
            
            $
            1.14




**8.**  **INCOME
      TAXES**





Deferred
      income taxes are provided for the temporary difference between the financial
      reporting basis and tax basis of the Company's assets and liabilities including
      those assets and liabilities recorded in connection with acquisitions. Deferred
      tax assets and liabilities result principally from recording certain expenses
      or
      income in the financial statements in a different period from recognition for
      income tax purposes. As of March 31, 2008, the Company had a net operating
      loss
      carryforward for tax purposes of approximately $16,790,000, which is available
      to reduce its future taxable income, and expires at various dates through 2027.
      $106,000 is expiring in 2015, $820,000 expiring in 2016, $889,000 expiring
      in
      2017, $736,000 expiring in 2018, $100,000 expiring in 2020, $782,000 expiring
      in
      2021, $2,692,000 expiring in 2022, $2,404,000 expiring in 2023, $1,709,000
      expiring in 2024, $2,840,000 expiring in 2025, $1,972,000 expiring in 2026
      and
      $1,740,000 expiring in 2027. A full valuation allowance has been established
      against the deferred tax assets, which are mainly related to the net loss
      carryforward, due to the uncertainties surrounding the utilization of the
      carryforward and limitations resulting from a change in control. There are
      no
      other significant timing differences.





Utilization
      of the net operating loss carryforwards may be subject to a substantial annual
      limitation due to the ownership change limitations provided by the Internal
      Revenue Code and similar state provisions. The annual limitation may result
      in
      the expiration of net operating loss carryforwards before
      utilization.





**9.**  **EMPLOYEE
      BENEFITS PLAN**





*Stock
      Option Plans*





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





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





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





There
      were no stock options to purchase shares of common stock for future grant as
      of
      March 31, 2008 under the 2001 equity incentive plan.


F-15




*Fair
      Value of Stock Options*





For
      disclosure purposes under SFAS No. 123 and SFAS No. 123(R), the fair value
      of
      each option grant is estimated on the date of grant using the Black-Scholes
      option valuation model with the following weighted-average
      assumptions:




**2008**
            
            **2007**Expected
                life (in years)
            
            
            10
            
            
            10Risk-free
                interest rate
            
            
            4.54
            %
            
            4.54
            %Volatility
            
            
            79.16-
                88.50
            
            
            90.58Dividend
                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
      $1.15 and $1.17 for the years ended March 31, 2008 and 2007,
      respectively.





*Summary
      Stock Option Activity* **





The
      following table summarizes stock option information with respect to all stock
      options for the years ended March 31, 2008 and 2007:




**Number
                of**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Life
                (Years)**
            
            **Aggregate**
              **Intrinsic**
              **Value**Options
                outstanding March 31, 2006
            
            
            3,185,000
            
            $
            1.11
            
            
            8.48Exercised
            
            
            (
                12,500
            )Granted
            
            
            340,000
            
            $
            1.74Cancelled
            
            
            (10,000
            )
            $
            1.00Options
                outstanding March 31, 2007
            
            
            3,502,500
            
            $
            1.17
            
            
            7.16Granted
            
            
            285,000
            
            $
            1.00Options
                outstanding March 31, 2008
            
            
            3,787,500
            
            $
            1.15
            
            
            6.36Vested
                and expected to vest – end of year
            
            
            3,787,500
            
            $
            1.15
            
            
            6.36
            
            $
            —Exercisable
                – end of year
            
            
            3,580,021
            
            $
            1.16
            
            
            6.19
            
            $
            —





During
      the year ended March 31, 2008, pursuant to the terms of an employment agreement
      dated April 17, 2007, with Ronald Wilen, Chief Executive Officer, President
      and
      Secretary, 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. The initial grant of 50,000 stock options will
      be
      granted out of the 2001 Equity Incentive Plan at the one year anniversary.
      In
      addition, the stock option to purchase 135,000 shares has been reserved for
      Mr.
      Wilen out of the 2001 Equity Incentive Plan. After the reservation described
      in
      the immediately preceding sentence, no shares remain available for grant out
      of
      the 2001 Equity Incentive Plan. Thus, the remaining stock options to purchase
      65,000 shares granted to Mr. Wilen will be non-qualified stock options, unless
      the Company amends the 2001 Equity Incentive Plan in order to increase the
      number of shares that may be granted pursuant to such plan or adopts a new
      stock
      option plan.





Options
      outstanding at March 31, 2008 have an exercise price ranging between $0.70
      to
      $2.05.





The
      aggregate intrinsic value in the table above represents the total intrinsic
      value (the difference between United Energy’s closing stock price on March 31,
      2008 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 March 31, 2008. This amount changes based upon
      changes in the fair market value of United Energy’s stock. As of March 31, 2008,
      $76,400 of the total unrecognized compensation costs related to stock options
      is
      expected to be recognized over the next four years.


F-16




**10.**  **SEGMENT
      REPORTING**





SFAS
      No.
      131, "Disclosures about Segments of an Enterprise and Related Information,"
      establishes standards for the way that public companies report information
      about
      operating segments in annual financial statements and requires reporting of
      selected information about operating segments in interim financial statements
      issued to the public. It also establishes standards for disclosures regarding
      products and services, geographic areas and major customers. SFAS No. 131
      defines operating segments as components of a company about which separate
      financial information is available that is evaluated regularly by management
      in
      deciding how to allocate resources and in assessing performance.





Geographic
      Information:




2008
            
            2007U.S.
            
            $
            729,678
            
            $
            682,090Nigeria
            
            
            255,024
            
            
            —Other
            
            
            57,618
            
            
            129,803Totals
            
            $
            1,042,320
            
            $
            811,893




F-17