UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 2007 OR [ ] 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 814-00717 UNITED ECOENERGY CORP. (Exact Name of Registrant as Specified in Its Charter) NEVADA 84-1517723 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 409 Brevard Avenue, Cocoa, FL 32922 (Address of Principal Executive Offices) (Zip Code) (321)-433-1136 (Registrants Telephone Number, Including Area Code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X ] No [ ] Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12b-2 of the Act). Yes [ ] No [X ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X ] The number of shares of the Registrant?s Common Stock, $0.001 par value, outstanding as of August 1, 2007, was 28,781,639 shares. TABLE OF CONTENTS PAGE NO. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets as of June 30, 2007 and December 31, 2006 F-1 Schedule of Investments as of June 30, 2007 F-2 Statements of Operations for the three and six-month periods ended June 30, 2007 and 2006 F-3 Statements of Cash Flows for the six-month periods ended June 30, 2007 and 2006 F-4 Notes to Financial Statements F-5 Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations 3 Item 3. Quantitative and Qualitative Disclosures about Market Risk 9 Item 4. Controls and Procedures 9 PART II. OTHER INFORMATION 10 Item 1. Legal Proceedings 10 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 10 Item 3. Defaults Upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 11 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. UNITED ECOENERGY CORP. BALANCE SHEETS June 30, 2007 December 31, 2006 (unaudited) --------------- --------------- Assets: Cash and cash equivalents $ 15,903 $ 24,169 Due from affiliate 18,300 6,800 Rent deposit 972 972 ------------ ------------ Total Current Assets 35,175 31,941 Other Assets: Investments in Portfolio Companies - - ------------ ------------ Total Assets $ 35,175 31,941 ============ ============ Liabilities and Stockholders? Equity (Deficit) Accounts payable $ 14,216 $ 2,666 Due to affiliate 135,000 90,000 Short term loans 80,000 - Accrued interest 2,551 - ------------ ------------ Total Current Liabilities 231,767 92,666 Long Term Liabilities: - - ------------ ------------- Total Liabilities 231,767 92,666 ------------ ------------- Commitments and Contingencies Stockholders? Equity (Deficit): Common stock, par value $0.001 authorized 150,000,000 shares, issued 28,781,639 shares at June 30, 2007 and December 31, 2006 28,782 28,782 Convertible preferred stock, par value $0.001, authorized 5,000,000 shares, issued 1,000,000 shares at June 30, 2007 and December 31, 2006. 1,000 1,000 Additional paid-in capital 126,742 126,742 Accumulated deficit (353,116) (217,249) ------------ ------------ Total Stockholders? Equity (Deficit): (196,592) (60,725) ------------ ------------ Total Liabilities and Stockholders? Equity (Deficit): $ 35,175 $ 31,941 ============ ============ Net Asset value per common share $ (0.00674) $ (0.00211) The accompanying notes are an integral part of these financial statements. F-1 UNITED ECOENERGY CORP. SCHEDULE OF INVESTMENTS (unaudited) June 30, 2007 Portfolio Industry Amount Cost Fair % of Investments or Number Value Net assets ------------------- --------- ----------- -------- --------- ----------- -- -- -- $ - $ - - -------- --------- ----------- Total $ - $ - - ======== ========= =========== The accompanying notes are an integral part of these financial statements. F-2 UNITED ECOENERGY CORP. STATEMENTS OF OPERATIONS For the three and six months ended June 30, 2007 June 30, 2006 (unaudited) (unaudited) 3 months 6 months 3 months 6 months ---------- ---------- ---------- ---------- Investment income: Interest income $ - $ - $ - $ - Dividend income - - - - Other income - - - - ---------- ---------- ---------- ---------- Total income - - - - Operating expenses: Investment advisory fees Base fee - - - - Incentive fee - - - - Capital gains fee - - - - ---------- ---------- ---------- ---------- Total investment advisory fees - - - - General & administrative: Consulting expenses 60,000 122,500 60,000 78,120 Rent expense 1,350 2,700 1,350 2,250 Professional fees 6,166 6,166 1,500 1,500 Other expenses 2,651 4,501 280 2,358 ---------- ---------- ---------- ---------- Total operating costs 70,167 135,867 63,130 84,228 ---------- ---------- ---------- ---------- Net investment loss (70,167) (135,867) (63,130) (84,228) ---------- ---------- ---------- ---------- Net realized income from disposal of investments - - - - Net unrealized appreciation in investments - - - - ---------- ---------- ---------- ---------- Net decrease in stockholders equity resulting from operations $ (67,616) $(135,867) $ (63,130) $ (84,228) ========== =========== ========== ========= Basic and diluted net decrease in stockholder equity per common share resulting from operations $ (0.0023) $ (0.0047) $ (0.0022) $ (0.0029) ========== =========== =========== ========= Weighted number of common shares outstanding-basic 28,781,639 28,781,639 28,471,841 28,470,876 ========== =========== =========== ========= Weighted number of common shares outstanding-diluted 43,781,639 43,781,639 43,471,841 39,658,721 ========== =========== =========== ========= The accompanying notes are an integral part of these financial statements. F-3 UNITED ECOENERGY CORP. STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED June 30, 2007 and 2006 (unaudited) For the six months ended June 30, 2007 June 30, 2006 Unaudited) (unaudited) ----------------- ---------------- Cash flows from operating activities: Net decrease in stockholders? equity from operations $ (135,867) $ (84,228) Adjustments to reconcile net decrease in stockholders? equity from operations to net cash used in operating activities: Increase in accounts payable 11,550 - Increase in amounts due to affiliate 45,000 22,500 Increase in deposits - (972) Increase in amounts due from affiliate (11,500) - Increase in amounts due to stockholder - 620 Increase in accrued interest 2,551 - ------------ ----------- Net cash used in operating activities (88,266) (62,080) Cash flows from financing activities: Net proceeds from issuance of preferred stock 60,000 Net proceeds from issuance of common stock - 34,650 Net proceeds from issuance of short- term debt 80,000 - ------------ ----------- Net cash provided by financing activities 80,000 94,650 ------------ ----------- Net increase (decrease) in cash (8,266) 32,570 Cash, beginning of period 24,169 - ------------ ----------- Cash, end of period $ 15,903 $ 32,570 ============ =========== The accompanying notes are an integral part of these financial statements. F-4 UNITED ECOENERGY CORP. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED June 30, 2007 (unaudited) Note 1. Organization and Interim Financial Statements United EcoEnergy Corp. (United EcoEnergy or the Company), a Nevada corporation, was organized in February, 1997 and is a closed-end investment company that filed an election to be treated as a business development company (BDC) under the Investment Company Act of 1940, (the 1940 Act) in February 2006. Prior to the election to be treated as a BDC, the Company had been a development stage company and had not engaged in any operating business activity. As a BDC, the company is subject to the filing requirements of the Securities Exchange Act of 1934 and has elected to be subject to Sections 55 to 65 of the 1940 Act, which apply only to BDCs. The Company is not a registered investment company under the 1940 Act, however, and is not required to file the semi-annual and annual reports required to be filed by registered investment companies under Section 30 of the 1940 Act. As a BDC, the Company also is not eligible to file its periodic reports under the 1934 Act as a small business issuer, and therefore files its periodic reports on applicable Forms 10-Q and 10-K, rather than Forms 10-KSB or 10-QSB. As a BDC, the Company also is subject to the normal financial reporting requirements of Regulation S-X issued by the SEC, but is not subject to Section 6 of Regulation S-X, which provides specific rules for financial reporting of registered investment companies. The Company intends to focus primarily on investments in alternative energy companies, including bio-fuel companies, and expects to invest, under normal circumstances, at least 80 percent of its net assets (including the amount of any borrowings for investment purposes) in these companies. At June 30, 2007, the Company had no net assets invested in alternative energy companies but has signed letters of intent to acquire portfolio investments, subject to funding. The Company expects to concentrate on making investments in alternative energy companies having annual revenues of less than $250.0 million and in transaction sizes of less than $55.0 million. In most cases, these companies will be privately held or have thinly traded public equity. The accompanying financial statements are un-audited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the instructions to Form 10-Q, including Regulation S-X. Accordingly, certain information and footnote disclosures normally included in audited financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited financial statements that were included in the Form 10-K filed by the Company for the year ended December 31, 2006. As a BDC, and therefore as a non-registered investment company, the Company is subject to the normal financial reporting F-5 UNITED ECOENERGY CORP. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED June 30, 2007 (unaudited) Note 1. Organization and Interim Financial Statements (continued) rules of Regulation S-X, as adopted by the SEC, in accordance with Regulation S-X 5.01. It is specifically not subject to Section 6 of Regulation S-X, governing the financial reporting of registered investment companies. The accompanying financial reports have been prepared in accordance with the requirements of Regulation S-X, as explained and interpreted in the Audit and Accounting Guide for Investment Companies of the American Institute of Certified Public Accountants (May 1, 2006)(the Audit Guide). Operating results for the interim periods presented are not necessarily indicative of the results to be expected for a full year. In March, 2006, the Company implemented a 100 for 1 forward split of its common shares. The stock split was given retroactive treatment in the accompanying financial statements. On June 30, 2006, the Company accepted subscriptions for 177,600 common shares under a Regulation E, 1-E exemption offering, for a total of $44,400. Of the total amount subscribed, $34,650 was received on June 30, 2006 and the balance of $9,750 was reported as a subscription receivable at June 30, 2006. This balance was collected during July, 2006. On August 13, 2006, the Company accepted additional subscriptions for 40,600 common shares under the 1-E offering, for a total of $10,150, all of which was received by check or wire transfer for the subscribers. On August 22, 2006, the Company accepted subscriptions for 94,539 common shares under the 1-E offering, for a total of $37,815, which was received by wire transfer. As a result, 28,781,639 common shares were outstanding as of June 30, 2007. Note 2. Significant Accounting Policies The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. The following are significant accounting policies consistently applied by the Company and are based on Chapter 7 of the Audit Guide, as modified by Appendix A: Investments: (a) Security transactions are recorded on a trade-date basis. F-6 UNITED ECOENERGY CORP. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED June 30, 2007 (unaudited) Note 2. Significant Accounting Policies (continued) (b) Valuation: (1) Investments for which market quotations are readily available are valued at such market quotations. (2) Short-term investments which mature in 60 days or less, such as U.S. Treasury bills, are valued at amortized cost, which approximates market value. The amortized cost method involves valuing a security at its cost on the date of purchase and thereafter assuming a constant amortization to maturity of the difference between the principal amount due at maturity and cost. Short-term securities which mature in more than 60 days are valued at current market quotations by an independent pricing service or at the mean between the bid and ask prices obtained from at least two brokers or dealers (if available, or otherwise by a principal market maker or a primary market dealer). Investments in money market mutual funds are valued at their net asset value as of the close of business on the day of valuation. (3) It is expected that most of the investments in the Company?s portfolio will not have readily available market values. Debt and equity securities whose market prices are not readily available are valued at fair value, with the assistance of an independent valuation service where the board of directors considers that advisable, using a valuation policy and a consistently applied valuation process which is under the direction of our board of directors. The factors that may be taken into account in fairly valuing investments include, as relevant, the portfolio company ability to make payments, its estimated earnings and projected discounted cash flows, the nature and realizable value of any collateral, the financial environment in which the portfolio company operates, comparisons to securities of similar publicly traded companies and other relevant factors. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of these investments may differ significantly from the values that would have been used had a ready market existed for such investments, and any such differences could be material. As part of the fair valuation process, the Audit Committee of the Company will review the preliminary evaluations prepared by the Investment Advisor engaged by the Board of Directors, as well as managements valuation recommendations and the recommendations of the Investment Committee. F-7 UNITED ECOENERGY CORP. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED June 30, 2007 (unaudited) Note 2. Significant Accounting Policies (continued) Management and the Investment Advisor will respond to the preliminary evaluation to reflect comments provided by the Audit Committee. The Audit Committee will review the final valuation report and management?s valuation recommendations and make a recommendation to the Board of Directors based on its analysis of the methodologies employed and the various valuation factors as well as factors that the Investment Advisor and management may not have included in their evaluation processes. The Board of Directors then will evaluate the Audit Committee recommendations and undertake a similar analysis to determine the fair value of each investment in the portfolio in good faith. (c) Realized gains or losses on the sale of investments are calculated using the specific identification method. (d) Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. (e) Dividend income is recorded on the ex-dividend date. (f) Loan origination, facility, commitment, consent and other advance fees received by us on loan agreements or other investments are accreted into income over the term of the loan. Federal and State Income Taxes: The Company has not elected to be treated as, and is not, a regulated investment company and does not presently intend to comply with the requirements of the Internal Revenue Code of 1986 (the Code), applicable to regulated investment companies. A regulated investment company is required to distribute at least 90% of its investment company taxable income to shareholders, which the Company does not expect to do for the foreseeable future. Therefore, the Company must make appropriate provision for income taxes in accordance with SFAS 109, Accounting for Income Taxes, using the liability method, which requires the recognition of deferred assets and liabilities for the expected future tax consequences of temporary differences between carry amounts and tax basis of assets and liabilities. At June 30, 2007, the Company has approximately $350,565 of net operating loss carry-forwards available to affect future taxable income and has established a valuation allowance equal to the tax benefit of the net operating loss carry-forwards as realization of the asset is not assured. The net operating loss carry-forwards may be limited under the change of control provisions of the Internal revenue Code, Section 382. Dividends and Distributions: Dividends and distributions to common stockholders will be recorded on the ex-dividend date. The amount, if any, to be paid as a dividend will be F-8 UNITED ECOENERGY CORP. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED June 30, 2007 (unaudited) Note 2. Significant Accounting Policies (continued) approved by the board of directors each quarter and will be generally based upon managements estimates of our earnings for the quarter and our investment needs. Net realized capital gains, if any, will be reviewed at least annually as part of any distribution determination. Consolidation: As an investment company, the Company will only consolidate subsidiaries which are also investment companies. At June 30, 2007, the Company did not have any consolidated subsidiaries. Recent Accounting Pronouncements In September 2006, the FASB issued FAS No. 157, ?Fair Value Measurements?, which establishes a framework for reporting fair value and expands disclosure about fair value measurements. FAS 157 is effective for the Company?s 2008 fiscal year. The Company is currently evaluating the impact of this standard on its financial statements. In February 2007, the FASB issued FAS No. 159, ?The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115. FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. FAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of adopting FAS 159 on its financial statements. Note 3. Portfolio Investments As required by the 1940 Act, we will classify our investments by level of control. As defined in the 1940 Act, control investments are those where there is the ability or power to exercise a controlling influence over the management or policies of a company. Control is generally viewed to exist when a company or individual owns 25% or more of the voting securities of an investee company. Affiliated investments and affiliated companies are defined by a lesser degree of influence and are deemed to exist through ownership of an amount greater than 5% but less than 25% of the voting securities of the investee company. The Company currently has no controlled or affiliated investments. F-9 UNITED ECOENERGY CORP. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED June 30, 2007 (unaudited) Note 4. Related Party Agreements and Transactions Investment Advisory Agreement The Company has entered into an Investment Advisory Agreement with United EcoEnergy Advisors, LLC (the Investment Advisor) under which the Investment Advisor, subject to the overall supervision of the board of directors of the Company, will provide investment advisory services to the Company. United EcoEnergy Advisors, LLC is owned equally by William K. Mackey, Patrick Donelan and Adam Mayblum. Mr. Mayblum and Mr. Donelan are also the equal owners of Enterprise Partners, LLC, which holds 1,567,700 of our common stock, representing approximately 5.47 percent of the common shares outstanding, and 268,481 shares of our Series A Convertible Preferred Stock, representing about 26.8 percent of that class outstanding. Mr. Mayblum also serves as a director of the Company and Mr. Mackey is a director and our Chief Executive Officer. For providing these services the Investment Advisor will receive a fee from the Company, consisting of two components--a base management fee and an incentive fee. The base management fee will be calculated at an annual rate of 2.00 percent on the gross assets of the Company (including amounts borrowed). The base management fee is payable quarterly in arrears based on the average value of the Company?s gross assets at the end of the two most recently completed calendar quarters and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. Base management fees for any partial month or quarter will be appropriately pro rated. The Incentive Fee consists of two parts, as follows: (i) One part will be calculated and payable quarterly in arrears based on the pre-Incentive Fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-Incentive Fee net investment income means interest income, dividend income and any other income (including any other fees, such as commitment, origination, structuring, diligence, consulting fees that the Corporation receives from portfolio companies, but excluding fees for providing managerial assistance) accrued by the Company during the calendar quarter, minus the operating expenses of the Company for the quarter (including the Base Management Fee, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee). Pre-Incentive Fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind interest and zero coupon securities), accrued income that the Company has not yet received in cash and includes the proportionate share of the portfolio F-10 UNITED ECOENERGY CORP. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED June 30, 2007 (unaudited) Note 4. Related Party Agreements and Transactions (Continued) companies net income allocable to equity holdings that has not been distributed as dividends. Pre-Incentive Fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Pre-Incentive Fee net investment income, expressed as a rate of return on the value of the Corporations net assets at the end of the immediately preceding calendar quarter, will be compared to a hurdle rate of 1.75% per quarter (7% annualized). The Company will pay the Adviser an Incentive Fee with respect to the pre- Incentive Fee net investment income in each calendar quarter as follows: (1) no Incentive Fee in any calendar quarter in which the pre-Incentive Fee net investment income does not exceed the hurdle rate; (2) 100% of the pre- Incentive Fee net investment income with respect to that portion of such pre- Incentive Fee net investment income, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter (8.75% annualized); and (3) 20% of the amount of the pre-Incentive Fee net investment income, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized). These calculations will be appropriately pro-rated for any period of less than three months and adjusted for any share issuances or repurchases during the current quarter. (ii) The second part of the Incentive Fee (the Capital Gains Fee) will be determined and payable in arrears as of the end of each fiscal year (or upon termination of this Agreement as set forth below), commencing on March 31, 2009, and will equal 20.0% of the realized capital gains of the Company for the 2008 calendar year, if any, computed net of all realized capital losses and unrealized capital depreciation at the end of such year; provided that the Capital Gains Fee determined as of March 31, 2009 will be calculated for a period of shorter than twelve calendar months to take into account any net realized capital gains, if any, computed net of all realized capital losses and unrealized capital depreciation for the period ending March 31, 2009. The amount of capital gains used to determine the Capital Gains Fee shall be calculated at the end of each applicable year by subtracting the sum of the Cumulative Aggregate Realized Capital Losses and Aggregate Unrealized Capital Depreciation of the Company from the Cumulative Aggregate Realized Capital Gains. If this number is positive at the end of such year, then the Capital Gains Fee for such year is equal to 20.0% of such amount, less the aggregate amount of any Capital Gains Fees paid in all prior years. In the event that the Agreement terminates as of a date that is not a calendar year end, the termination date is treated as though it were a calendar year end for purposes of calculating and paying a Capital Gains Fee. No investment advisory fees have been accrued for the quarter ended June 30, 2007. F-11 UNITED ECOENERGY CORP. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED June 30, 2007 (unaudited) Note 4. Related Party Agreements and Transactions (Continued) On April 1, 2006, the Company entered into a Consulting Agreement with William Mackey, the President and CEO, to cover his services until such time as the Company completes its first portfolio investment in the alternative energy and appoints a permanent CEO. Under the terms of the Consulting Agreement, Mr. Mackey is entitled to an initial signing amount of $22,500 and thereafter to a monthly consulting fee of $7,500, payable on the 15th of each month. Enterprise Partners has paid the accrued amounts due to Mr. Mackey and the total accrued balance at June 30, 2007 of $135,000 is reflected as accrued amounts due to affiliate. The amounts due are non-interest bearing and payable on demand. Amounts due from affiliate totaling $18,300 at June 30, 2007 represent short-term, non-interest bearing advances to an affiliated company. Managerial Assistance As a business development company, we will offer, and provide upon request, managerial assistance to certain of our portfolio companies. This assistance could involve monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. The Company expects to receive fee income for providing these services. Note 5. Stockholders? Equity. The Company issued no common or preferred shares in the quarter ended June 30, 2007. The Company Form 10-K report for the year ended December 31, 2006 contains a table setting forth all of the shares of common and preferred stock issued from inception through December 31, 2006. As a result, there were 28,781,639 common shares issued as of June 30, 2007 and December 31, 2006. The Series A Convertible Preferred Stock is $0.001 par value stock, and may be converted into common stock based on a formula under which conversion is equal to 1 divided by the 30 day trailing average stock price of the common shares at the time of the conversion election, but not more than 15 common shares for each preferred share converted, or a maximum of 15 million common shares. No conversion may occur until after one year from the date of issue. The Company may redeem the Series A Convertible Preferred Stock in whole or in part beginning 181 days after issue at $0.75 per share, and after 365 days from issue at $0.95 per share. The Series A Convertible Preferred Stock automatically converts into common stock following the second anniversary of issue, at the formula price if not redeemed prior to that date. In August, 2006, Enterprise Partners, LLC, our majority common shareholder and the sole holder of our Series A Convertible Preferred Stock, transferred 25,370,600 of the common shares held by it, and also conveyed 731,519 of the F-12 UNITED ECOENERGY CORP. NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED June 30, 2007 (unaudited) Note 5. Stockholders? Equity (continued). Series A Convertible Preferred shares held by it to its debenture holders (23 Persons) As a result of these transactions, Enterprise Partners, LLC holds 1,567,700 shares of our common stock, representing approximately 5.47 percent Of our undiluted common stock outstanding, and 268,481 shares of our Series A Convertible Preferred Stock, representing 26.8 percent of the 1,000,000 shares outstanding, and convertible into a maximum of 4,020,000 shares of our common stock. Therefore, Enterprise Partners, LLC now holds a total of approximately 12.8 percent of our common stock on a fully diluted basis, giving effect to the maximum conversion of the Series A Convertible Preferred Stock held by it. Note 6 FINANCIAL HIGHLIGHTS Financial Highlights The following is a schedule of financial highlights for the six months ended June 30, 2007 and for the twelve months ended December 31, 2006: CHANGES IN NET ASSET VALUE For the For the six months twelve months ended ended June 30, 2007 December 31, 2006 ---------------- ----------------- Net asset value at beginning of period (1) $ (0.00211) $ (0.00077) Proceeds from preferred stock - 0.00209 Proceeds from common stock - 0.00321 Net investment income (0.00463) (0.00664) Net unrealized appreciation - - ------------- -------------- Net asset value, end of period (2) $ (0.00674) $ (0.00211) (1) Financial highlights as of June 30, 2007 and December 31, 2006 are based on 28,781,639 common shares outstanding, giving effect to the 100 for 1 forward split. On a fully diluted basis, there would be 43,781,639 shares outstanding as of June 30, 2007, based on conversion of the Series A Convertible Preferred Stock into 15 million common shares, the maximum conversion possible under the terms of the Series A Preferred Stock, and treating those shares as outstanding as of the date of their issuance at the end of February, 2006. (2) Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in each period. The total return is not annualized. Note 7. OTHER MATTERS. On February 1, 2007, the Company borrowed the sum of $50,000 from an existing minority shareholder for a six month term with interest due at maturity at the F-13 UNITED ECOENERGY CORP. NOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2007 (unaudited) Note 7. OTHER MATTERS (Continued) rate of 9 percent per year. The Company also issued a warrant to purchase 8,000 shares of common stock at an exercise price of $0.40 per share for a period of two years. A total of $1,849 in interest has been accrued on this loan at June 30, 2007 On March 27, 2007, the Company borrowed the sum of $30,000, $15,000 each from two unrelated parties for a six month term with interest due at maturity at the rate of 9 percent per year. The Company also issued a warrant to purchase 3,000 shares of common stock to each of the parties at an exercise price of $0.40 per share for a period of two years. A total of $351 in interest has been accrued on each of these loans at June 30, 2007 The borrowed funds were used as general working capital for the Company. F-14 Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations. This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of revenue, expenses, earnings or losses from operations or investments, or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include risks that are described from time to time in our Securities and Exchange Commission, or the SEC, reports filed before this report. The forward-looking statements included in this quarterly report represent our estimates as of the date of this quarterly report. We specifically disclaim any obligation to update these forward-looking statements in the future. Some of the statements in this quarterly report constitute forward-looking statements, which relate to future events or our future performance or financial condition. Such forward-looking statements contained in this quarterly report involve risks and uncertainties. We use words such as anticipates, believes, expects, future, intends and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason. We caution you that forward-looking statements of this type are subject to uncertainties and risks, many of which cannot be predicted or quantified. The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained elsewhere in this Form 10-Q, as well as the risk factors included in our Form 10-K filed for the year ended December 31, 2006. Overview The Company was incorporated under the Nevada General Corporation Law in February 1997 as MNS Eagle Equity Group III, Inc., and was a development stage company through the end of 2005, and until the Company changed its business model with the election to be treated as a business development company on February 28, 2006. On February 21, 2006, the Company changed its corporate name to United EcoEnergy Corp., to reflect its new business model and plan. On February 21, 2006, our then sole shareholder sold 284,689 pre-split common shares, representing 100 percent of the pre-split outstanding stock of the Company at the time, resulting in a change of control of the Company. Of these shares, 269,689 common shares, representing 94.7 percent of the outstanding shares, were purchased by Enterprise Partners, LLC, 11,000 shares were purchased by Peachtree Consultants, LLC, and 4,000 shares were purchased by Fairmont East Finance, Ltd. As a result of this change of control, our then sole director and president, Stephen Siedow, resigned effective February 22, -3- 2006 after appointing William K. Mackey, William L. Sklar, Adam Mayblum, Alec Hoke and John Paul DeVito as the directors of the Company, to serve until the next annual meeting of shareholders of the Company. The name of the Company was changed from MNS Eagle Equity Group III, Inc. to United EcoEnergy Corp. by the filing of an amendment to the Articles of Incorporation with the State of Nevada on February 21, 2006. On February 27, 2006, the Company filed a Certificate of Designations for Series A Convertible Preferred Stock with the Nevada Secretary of State and the Board of Directors authorized the issuance of 1 million shares of Series A Convertible Preferred Stock to Enterprise Partners, LLC, our majority shareholder, in exchange for the cancellation of $60,000 in loans for funds advanced to the Company by Enterprise Partners LLC to pay off debts of the Company and for initial working capital. The Series A Convertible Preferred Stock is $0.001 par value stock, and may be converted into common stock based on a formula under which conversion is equal to 1 divided by the 30 day trailing average stock price of the common shares at the time of the conversion election, but not more than 15 common shares for each preferred share converted, or a maximum of 15 million common shares. No conversion may occur until after one year from the date of issue. The Company may redeem the Series A Convertible Preferred Stock in whole or in part beginning 181 days after issue at $0.75 per share, and after 365 days from issue at $0.95 per share. The Series A Convertible Preferred Stock automatically converts into common stock following the second anniversary of issue, at the formula price if not redeemed prior to that date. The conversion of the Series A Convertible Preferred into Common stock of the Company is illustrated by the following table: Series A Convertible Preferred Shares Per Share Number of Maximum Shares Common Stock Conversion ratio Common Shares Converted Value of Price (1/per share price) on conversion of Common Stock Preferred ------------------ ---------------- --------------- --------------- --------- 0.0001 10,000.00 10,000,000,000 15,000,000 $ 1,500 0.0003 3,333.33 3,333,333,333 15,000,000 4,500 0.0007 1,428.57 1,428,571,429 15,000,000 10,500 0.0014 714.29 714,285,714 15,000,000 21,000 0.0021 476.19 476,190,476 15,000,000 31,500 0.0042 238.10 238,095,238 15,000,000 63,000 0.0050 200.00 200,000,000 15,000,000 75,000 0.0075 133.33 133,333,333 15,000,000 112,500 0.0100 100.00 100,000,000 15,000,000 150,000 0.1000 10.00 10,000,000 10,000,000 1,000,000 0.5000 2.00 2,000,000 2,000,000 1,000,000 0.7500 1.33 1,333,333 1,333,333 1,000,000 1.0000 1.00 1,000,000 1,000,000 1,000,000 The Common shares of the Company did not then trade on an over-the-counter market or exchange; however, based on the total acquisition price of the Common shares purchased from our former sole shareholder in February, 2006, the shares were purchased for the equivalent of $0.0006 per share in an arms? length -4- transaction. This amount was in excess of the undiluted net asset value of the Common shares at the time. In January, 2007, our common shares were admitted for quotation on the OTC Bulletin Board under the symbol UEEC. The Company has amended the Certificate of Designations for the Series A Convertible Preferred Stock, as filed with the Secretary of State of Nevada, with the consent of the original holder of the shares, Enterprise Partners, LLC. The amendments were designed to insure that the Series A Convertible Preferred Stock meets the requirements of a senior security, as defined in Section 18(g) of the 1940 Act. The Amended Certificate of designations of Series A Convertible Preferred Stock was filed as an exhibit to the Proxy Statement filed with the SEC on Form 14A on June 2006, and both the Amendments and the prior issuance of the Series A Convertible Preferred Stock to Enterprise Partners, LLC was approved unanimously by our public shareholders at our Annual Meeting held on June 30, 2006. Effective February 27, 2006, the Company implemented a 100 for 1 forward split of our outstanding common shares. As a result of the forward split, there were 28,468,900 common shares then outstanding. This forward split has been reflected retroactively on our financial statements We have elected to be treated as a business development company under the 1940 Act. Accordingly, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in qualifying assets, including securities of private or thinly traded public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. We will typically invest under normal circumstances, at least 80% of net assets in alternative energy companies. We intend to invest in companies in the alternative energy industry, including bio-fuel companies, most of which have relatively short or no operating histories. These companies are and will be subject to all of the business risks and uncertainties associated with any new business enterprise, including the risk that these companies may not reach their investment objective and the value of our investment in them may decline substantially or fall to zero. As of June 30, 2007, we had not yet made any portfolio or other investments. However, we have signed a letter of intent for the acquisition of GEI Development, LLC, which is engaged in waste management and related services, subject to our obtaining funding. We expect to close on this acquisition during the quarter ending September 30, 2007. Operating Activities During the quarter ended June 30, 2007, the Company continued with the considerable efforts it has expended in the first half of the year to carry out its business plan as a Business Development Company. These efforts included both business development and financing activities. William K. Mackey, our CEO, traveled extensively during the Quarter in pursuit of these objectives, meeting with numerous potential venture partners and portfolio investment companies. Mr. Mackey met with the principals of investment partners as well as potential portfolio companies in New -5- York, Texas, Tennessee, Alabama, Georgia and parts of Florida during the Quarter. These efforts resulted in either mutual understandings, non-binding letters of intent or proposed joint ventures. Also, management explored several potential technologies in both alternative energy and renewable fuels arena as possible investments. The Company has reviewed numerous alternative energy technologies, including proprietary technologies of Woodland Chemical Systems, Pure Energy, Inc. and CTI Biofuels. The Company has signed non-disclosure agreements with all of these firms and with Emissions Technologies, Inc., in order to further explore the technologies and consider an investment. As of December 31, 2006, we had not yet made any portfolio or other investments. However, we signed several letters of intent for acquisitions, subject to our obtaining funding. On February 6, 2007, we announced the signing of a binding letter of intent to acquire GEI Development, LLC and Solid Waste Properties, LLC, in exchange for 25,290,600 shares of our common stock, subject to due diligence and the raising of an initial working capital amount of $2 million. We expect to close on these acquisitions on or before August 31, 2007. A copy of the binding letter of intent was attached to our report on Form 8-K, filed with the SEC on February 6, 2007. The closing date for the proposed acquisitions has been extended to allow the Company to complete its due diligence and to finalize its funding arrangements. The current closing date is August 8, 2007. The Company?s management meets with the Company?s Investment Advisor each Monday, Wednesday and Friday to review the current activities of the Company. Management believes that recent conversations matching business development opportunities and potential financings are moving toward several potential investment scenarios in the next Quarter. Through the end of the Second Quarter of 2007, the Company has expended over $300,000 in connection with its Business Development Company activities. Critical Accounting Policies In determining the fair value of our investments, the Audit Committee will consider valuations from an independent valuation firm, from our Investment Committee and from management Results of Operations For the quarter ended June 30, 2007, we incurred consulting expenses of $60,000, rent expense of $1,350 and other expenses totaling $8,817, compared to consulting expenses of $60,000, rent expenses of $1,350 and professional fee expenses of $1,500 for the quarter ended June 30, 2006. Our total expenses were $70,167 and $63,130, respectively for the quarters ended June 30, 2007 and 2006. We had no income reported for either quarter. Financial Highlights Financial highlights of the Company for the period ending June 30, 2007 are included in Footnote 6 to our Financial Statements. -6- Investment Activity We previously engaged Lempert Brothers US in New York to assist us in raising not less than $10 million to enable us to continue with several pending letters of intent. However, Lempert Bothers failed to provide any services and we have demanded a return of the initial investment banking fee. We have also retained Chardan Capital Markets, LLC to assist us in raising the funds required for the acquisition of GEI Development, LLC. Long-Term Portfolio Investments There were no portfolio investments made during the three months ended June 30, 2007. Investment Income We expect to generate revenue in the form of interest income on the debt securities that we own, dividend income on any common or preferred stock that we own, and capital gains or losses on any debt or equity securities that we acquire in portfolio companies and subsequently sell. Our investments, if in the form of debt securities, will typically have a term of one to ten years and bear interest at a fixed or floating rate. To the extent achievable, we will seek to collateralize our investments by obtaining security interests in our portfolio companies assets. We also may acquire minority or majority equity interests in our portfolio companies, which may pay cash or in-kind dividends on a recurring or otherwise negotiated basis. In addition, we may generate revenue in other forms including commitment, origination, structuring or due diligence fees, and possibly consultation fees. Any such fees generated in connection with our investments will be recognized as earned. We earned no investment income during the quarter ended June 30, 2007. Operating Expenses Operating expenses are broken down as follows: Consulting expenses $ 60,000 Rent 1,350 Other expenses: Accounting fees 6,166 Transfer agent 100 Interest 2,551 --------- 8,817 -------- Total operating expense 70,167 The consulting expenses were paid or due to our CEO, under his Consulting Agreement ($22,500), to CF Consulting, LLC, pursuant to a Consulting Agreement under which Robert Hipple serves as our CFO and Chief Compliance Officer for a monthly fee of $7,500 plus a contractual bonus payable at the rate of $5,000 per month for five months commencing in February, 2007, and the balance to unaffiliated consultants. The rent expense represents rent paid or due to CF Consulting, LLC for sub-leasing office space, telephone, office equipment and related office services at the rate of $450 per month under the same Consulting Agreement. The remaining expenses were paid or due to non- affiliated parties. -7- Net Investment Income, Net Unrealized Appreciation and Net Increase in Stockholders? Equity Resulting from Operations Our net investment income totaled $0 for the quarter ended June 30, 2007 compared to $0 for the quarter ended June 30, 2006 and $0 for the year ended December 31, 2006. Net unrealized appreciation totaled $0 for the quarter ended June 30, 2007 compared to $0 for the quarter ended June 30, 2006 and $0 for the year ended December 31, 2006. Financial Condition, Liquidity and Capital Resources Our liquidity and capital resources were generated initially from an advance of $60,000 by our then major shareholder, Enterprise Partners, LLC, which was later paid by the issuance of 1 million shares of Series A Convertible Preferred Stock. We also undertook an exempt offering of our common shares pursuant to a Form 1-E Application and Notice filed with the SEC on June 19, 2006, and accepted subscriptions for a total of 312,739 common shares, representing $92,366 in additional working capital. On February 1, 2007, we borrowed the sum of $50,000 from an existing minority shareholder for a six month term with interest due at maturity at the rate of 9 percent per year. The Company also issued a warrant to purchase 8,000 shares of common stock at an exercise price of $0.40 per share for a period of two years. A total of $1,849 in interest has been accrued on this loan at June 30, 2007. On March 27, 2007, the Company borrowed the sum of $30,000, $15,000 each from two unrelated parties for a six month term with interest due at maturity at the rate of 9 percent per year. The Company also issued a warrant to purchase 3,000 shares of common stock to each of the parties at an exercise price of $0.40 per share for a period of two years. A total of $351 in interest has been accrued on each of these loans at June 30, 2007. The borrowed funds were used as general working capital for the Company. We generated no cash flows from operations during 2006 and the current year to date through June 30, 2007. In the future, we may fund a portion of our investments through borrowings from banks, issuances of senior securities or secondary offerings of equity, including further exempt offerings. We may also securitize a portion of our investments in mezzanine or senior secured loans or other assets. Our primary use of funds will be investments in portfolio companies. Risk Factors In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2006, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only -8- risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. Item 3. Quantitative and Qualitative Disclosures about Market Risk. We are subject to financial market risks, including changes in interest rates, equity price risk and some of the loans in our portfolio may have floating rates in the future. We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of higher interest rates with respect to our portfolio of investments. During the six months ended June 30, 2007 and the twelve months ended December 31, 2006, we did not engage in any hedging activities. Item 4. Controls and Procedures. As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934). Based on that evaluation, as of June 30, 2007, the Chief Executive Officer and the Chief Financial Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them to material information relating to the Company that is required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934. Internal Control Over Financial Reporting Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as such responsibility is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, and for performing an assessment of the effectiveness of internal control of financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on the financial statements. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. -9- Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. There have been no changes in our internal controls over financial reporting that occurred during the three months ended June 30, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II. OTHER INFORMATION Item 1. Legal Proceedings. The Company is not a defendant in any legal action arising out of its activities. We are not aware of any other material pending legal proceeding, and no such material proceedings are known to be contemplated, to which we are a party or of which any of our property is subject. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. There were no sales or issues of any equity securities by the Company in the quarter ended June 30, 2007. As a result, there were 28,781,639 common shares issued as of June 30, 2007 and one million shares of Series A Convertible Preferred Stock issued at June 30, 2007. The Series A Convertible Preferred Stock is $0.001 par value stock, and may be converted into common stock based on a formula under which conversion is equal to 1 divided by the 30 day trailing average stock price of the common shares at the time of the conversion election, but not more than 15 common shares for each preferred share converted, or a maximum of 15 million common shares. No conversion may occur until after one year from the date of issue. The Company may redeem the Series A Convertible Preferred Stock in whole or in part beginning 181 days after issue at $0.75 per share, and after 365 days from issue at $0.95 per share. The Series A Convertible Preferred Stock automatically converts into common stock following the second anniversary of issue, at the formula price if not redeemed prior to that date. Item 3. Defaults Upon Senior Securities. Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. -10- Item 6. Exhibits Exhibit Description of Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) 31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/l5d-14(a) 32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350 32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. _/s/__William K. Mackey____ August 14, 2007 William K. Mackey Chief Executive Officer -11-