UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)


OF THE
SECURITIES ACT OF 1934


For
the quarterly period ended March 31, 2010





OR





 ̈ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d)


OF THE
SECURITIES ACT OF 1934





For
the transition period from ___________to ____________





Commission File Number
333-123465





UNIVERSAL
BIOENERGY, INC.


(Exact
name of Registrant as specified in its charter)





Nevada
              
              20-1770378State
      of Incorporation
              
              IRS
      Employer Identification No.


19800
Mac Arthur Blvd., Suite 300


Irvine,
CA  92612


(Address
of principal executive offices)


(888) 263-2009


(Issuer’s
telephone number)


Indicate
by check mark whether the Registrant (1) has filed all reports required 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  ̈
    No   x





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





Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non–accelerated filer. See definition of “accelerated
filer large accelerated filer” and “smaller reporting company” in Rule 12b–2 of
the Exchange Act. (Check one):





Large
accelerated filer   ̈      Accelerated
filer   ̈     Non–Accelerated
filer   ̈Smaller reporting
company  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


Transitional
Small Business Disclosure Format (check one): Yes  ̈ No x





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





Class
                
                Outstanding atAugust
      14, 2010Common
      stock, $0.001 par value
                
                45,455,000





UNIVERSAL
BIOENERGY, INC.


INDEX


INDEX
TO FORM 10Q FILING




FOR THE
THREE MONTHS ENDED MARCH 31, 2010 AND 2009





TABLE
OF CONTENTS





PAGEPART
      IFINANCIAL
      INFORMATIONPART
      I - FINANCIAL INFORMATIONItem 1.
                Condensed
      Consolidated Financial StatementsCondensed
      Consolidated Balance Sheets
                3Condensed
      Consolidated Statements of Income
                4Condensed
      Consolidated Statement of Cash Flows
                5Notes
      to Condensed Consolidated Financial Statements
                6Item 2.
                Management
      Discussion & Analysis of Financial Condition and Results of
      Operations
                22Item 3
                Quantitative
      and Qualitative Disclosures About Market Risk
                26Item 4.
                Controls
      and Procedures
                26PART
      II - OTHER INFORMATIONItem 1.
                Legal
      Proceedings
                27Item 1A
                Risk
      Factors
                27Item 2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                31Item 3.
                Defaults
      Upon Senior Securities
                31Item 4.
                Removed
      and Reserved
                31Item 5
                Other
      information
                31Item 6.
                Exhibits
                32CERTIFICATIONSExhibit
      31 – Management certificationExhibit
      32 – Sarbanes-Oxley Act


2


PART
I — FINANCIAL INFORMATION




Item 1. Interim Consolidated
Financial Statements and Notes to Interim Consolidated Financial
Statements
  General
  The
accompanying reviewed interim consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q. Therefore, they do
not include all information and footnotes necessary for a complete presentation
of financial position, results of operations, cash flows, and stockholders'
equity in conformity with generally accepted accounting principles. Except as
disclosed herein, there has been no material change in the information disclosed
in the notes to the consolidated financial statements included in the Company's
annual report on Form 10-K for the year ended December 31, 2009. In the opinion
of management, all adjustments considered necessary for a fair presentation of
the results of operations and financial position have been included and all such
adjustments are of a normal recurring nature. Operating results for the three
months ended March 31, 2010 are not necessarily indicative of the results that
can be expected for the year ending December 31, 2010.










UNIVERSAL BIOENERGY, INC.


(An
Development Stage Company)





CONDENSED
CONSOLIDATED BALANCE SHEET





(Unaudited)
                  
                  
                  (Audited)March 31, 2010
                  
                  
                  December 31, 2009ASSETS:
      (Substantially pledged)CURRENT
      ASSETSCash
                  
                  $
                  -
                  
                  
                  $
                  2,819Prepaid
      expenses
                  
                  
                  -
                  
                  
                  
                  -Total
      current assets
                  
                  
                  -
                  
                  
                  
                  2,819PROPERTY
      AND EQUIPMENT
                  
                  
                  290,000
                  
                  
                  
                  290,000Deposit
                  
                  
                  3,100
                  
                  
                  
                  3,100TOTAL
      ASSETS
                  
                  $
                  293,100
                  
                  
                  $
                  295,919LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT):CURRENT
      LIABILITIES:Bank
      overdraft
                  
                  $
                  463
                  
                  
                  $
                  -Accounts
      payable and accrued expenses
                  
                  
                  680,400
                  
                  
                  
                  720,649Accrued
      interest
                  
                  
                  10,319
                  
                  
                  
                  5,141Advances
      from affiliates
                  
                  
                  83,142
                  
                  
                  
                  54,050Convertible
      notes payable
                  
                  
                  70,000
                  
                  
                  
                  70,000Total
      current liabilities
                  
                  
                  844,323
                  
                  
                  
                  849,840TOTAL
      LIABILITIES
                  
                  
                  844,323
                  
                  
                  
                  849,840STOCKHOLDERS'
      EQUITY (DEFICIT):Preferred
      stock Series A, $.001 par value, 1,000,000 shares authorized, 100,000
      issued and outstanding shares March 31, 2010 and December 31, 2009,
      respectively
                  
                  
                  100
                  
                  
                  
                  100Preferred
      stock Series B, $.001 par value, 1,000,000 shares authorized, 232,080
      issued and outstanding shares March 31, 2010 and December 31, 2009,
      respectively
                  
                  
                  232
                  
                  
                  
                  232Common
      stock, $.001 par value, 200,000,000 shares authorized; 40,455,000 and
      39,405,000  issued and outstanding as of March 31, 2010 and
      December 31, 2009, respectively
                  
                  
                  40,455
                  
                  
                  
                  39,405Additional
      paid-in capital
                  
                  
                  14,358,322
                  
                  
                  
                  14,183,804Accumulated
      deficit - development stage company
                  
                  
                  (14,950,332
                  )
                  
                  
                  (14,777,460
                  )Total
      stockholders' equity (deficit)
                  
                  
                  (551,224
                  )
                  
                  
                  (553,919
                  )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                  
                  $
                  293,100
                  
                  
                  $
                  295,919





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


3





UNIVERSAL BIOENERGY, INC.


(An
Development Stage Company)





CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS - unaudited


For the PeriodFor the Three Months Ended
                
                
                from August 13, 2004March 31,
                
                
                (inception) through2010
                
                
                2009
                
                
                March 31, 2010OPERATING
      EXPENSES:General
      and administrative
                
                $
                167,694
                
                
                $
                153,479
                
                
                $
                2,842,661Impairment
      of assets
                
                
                
                
                
                
                -
                
                
                
                11,970,692Total
      operating expenses
                
                
                167,694
                
                
                
                153,479
                
                
                
                14,813,353OTHER
      (INCOME) AND EXPENSES:Interest
      income
                
                
                -
                
                
                
                -
                
                
                
                (2
                )Interest
      expense
                
                
                5,178
                
                
                
                -
                
                
                
                136,981Total
      other expense
                
                
                5,178
                
                
                
                -
                
                
                
                136,979NET
      LOSS
                
                $
                172,872
                
                
                $
                153,479
                
                
                $
                14,950,332NET
      LOSS PER SHARE:Basic
      and diluted loss per share
                
                $
                0.00
                
                
                $
                0.01Weighted
      average of shares outstanding
                
                
                40,415,400
                
                
                
                21,525,000





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


4





UNIVERSAL BIOENERGY, INC.


(An
Development Stage Company)





CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS - unaudited


For the PeriodFor the Three Months Ended
                      
                      
                      from August 13, 2004March 31
                      
                      
                      (inception) through2010
                      
                      
                      2009
                      
                      
                      March 31, 2010CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Loss
                      
                      $
                      (172,872
                      )
                      
                      $
                      (153,479
                      )
                      
                      $
                      (14,950,332
                      )Adjustments
      to reconcile net loss to net cash (used in) operating
      activities:In
      kind rent
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      9,000Impairment
      of assets
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      11,970,692Common
      stock issued for services
                      
                      
                      18,000
                      
                      
                      
                      -
                      
                      
                      
                      1,186,278Preferred
      Series A stock issued for services
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      11,850Beneficial
      conversion feature
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      9,000Stock
      dividend
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      18,000Changes
      in assets and liabilities:Accounts
      payable and accrued expenses
                      
                      
                      122,961
                      
                      
                      
                      145,479
                      
                      
                      
                      872,942Net
      cash used by operating activities
                      
                      
                      (31,911
                      )
                      
                      
                      (8,000
                      )
                      
                      
                      (872,570
                      )CASH
      FLOWS FROM INVESTING ACTIVITIES:Cash
      from acquisition
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      108,974Net
      cash used in investing activities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      108,974CASH
      FLOWS FROM FINANCING ACTIVITIES:Advances
      from affiliates
                      
                      
                      29,092
                      
                      
                      
                      8,000
                      
                      
                      
                      83,142Proceeds
      from the issuance of common stock
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      23,200Proceeds
      from notes payable
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      657,254Net
      cash provided by financing activities
                      
                      
                      29,092
                      
                      
                      
                      8,000
                      
                      
                      
                      763,596INCREASE
      IN CASH
                      
                      
                      (2,819
                      )
                      
                      
                      -
                      
                      
                      
                      -CASH,
      BEGINNING OF YEAR
                      
                      
                      2,819
                      
                      
                      
                      -
                      
                      
                      
                      -CASH,
      END OF YEAR
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -SUPPLEMENTAL
      CASH FLOW INFORMATION:Interest
      paid
                      
                      $
                      -
                      
                      
                      $
                      -Taxes
      paid
                      
                      $
                      -
                      
                      
                      $
                      -Common
      stock issued in conversion of debt
                      
                      $
                      157,568
                      
                      
                      $
                      -





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


5




UNIVERSAL
BIOENERGY, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




NOTE
1 - DESCRIPTION OF BUSINESS





Universal
Bioenergy, Inc. (UBRG) f/k/a Palomine Mining, Inc. was incorporated on August
13, 2004 under the laws of the State of Nevada.





Universal
Bioenergy North America, Inc (“UBNA”), our wholly owned subsidiary, was
incorporated in the State of Nevada on January 23, 2007.





UBNA was
organized to operate and produce biodiesel fuel using primarily soybean and
other vegetable oil and grease in a refining process to yield biodiesel fuel and
a marketable byproduct of glycerin. The Company is located in Nettleton,
Mississippi. UBNA and UB are hereafter referred to as “(the
Company)”.





In
October 2007, UBNA entered into a Purchase Agreement with UBRG. In October 2007,
UBRG, a then shell corporation, acquired UBNA. On October 24, 2007, the Company
changed its name to Universal Bioenergy, Inc. to better reflect its business
plan. The purchase was consummated on December 6, 2007.





On March
7, 2008, the Board of Directors approved a change in the Company’s fiscal year
end from January 31 to December 31.





NOTE
2 - GOING CONCERN ISSUES




The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America which
contemplate continuation of the Company as a going concern.  The
Company has net losses for the period from inception (August 13, 2004) to March
31, 2010 of $14,950,332.  Further, the Company has inadequate working
capital to maintain or develop its operations, and is dependent upon funds from
private investors and the support of certain stockholders.




These
factors raise some doubt about the ability of the Company to continue as a going
concern.  The financial statements do not include any adjustments that
might result from the outcome of these uncertainties.  In this regard,
Management is planning to raise any necessary additional funds through loans and
additional sales of its common stock. There is no assurance that the Company
will be successful in raising additional capital.




The
Company's ability to meet its obligations and continue as a going concern is
dependent upon its ability to obtain additional financing, achievement of
profitable operations and/or the discovery, exploration, development and sale of
mining reserves. The Company cannot reasonably be expected to earn revenue in
the exploration stage of operations. Although the Company plans to pursue
additional financing, there can be no assurance that the Company will be able to
secure financing when needed or to obtain such financing on terms satisfactory
to the Company, if at all.


6


NOTE
3 - BASIS OF PRESENTATION





Interim
Financial Statements




The
accompanying interim unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
8 of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In our opinion, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month periods ended June 30, 2010 and
2009 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2010. While management of the Company believes that the
disclosures presented herein and adequate and not misleading, these interim
condensed consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and the footnotes thereto for the
fiscal year ended December 31, 2009 as filed with the Securities and Exchange
Commission.




NOTE
4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




The
Company prepares its financial statements in accordance with accounting
principles generally accepted in the United States of
America.  Significant accounting policies are as follows:





Principle of
Consolidation





The
consolidated financial statements include the accounts of Universal Bioenergy,
Inc. and Universal Bioenergy North America, Inc.  Intercompany
accounts and transactions have been eliminated in the consolidated financial
statements.





Use of Estimates and
Assumptions





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States (“GAAP”) requires management to make
estimates and assumptions that affect (i) the reported amounts of assets
and liabilities, (ii) the disclosure of contingent assets and liabilities
known to exist as of the date the financial statements are published, and
(iii) the reported amount of net sales and expenses recognized during the
periods presented. Adjustments made with respect to the use of estimates often
relate to improved information not previously available. Uncertainties with
respect to such estimates and assumptions are inherent in the preparation of
financial statements; accordingly, actual results could differ from these
estimates.





Revenue and Cost
Recognition





Revenue
includes product sales. The Company recognizes revenue from the sale of
biodiesel fuel and related byproducts at the time title to the product
transfers, the amount is fixed and determinable, evidence of an agreement exists
and the customer bears the risk of loss, net of provision for rebates and sales
allowances in accordance with ASC Topic 605 “Revenue Recognition in Financial
Statements”.


7


Cash and Cash
Equivalents





The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. At March 31, 2010 and 2009 the
Company had no cash equivalents.





Property and
Equipment





Property
and equipment is recorded at cost and depreciated over the estimated useful
lives of the assets using principally the straight-line method. When items are
retired or otherwise disposed of, income is charged or credited for the
difference between net book value and proceeds realized. Ordinary maintenance
and repairs are charged to expense as incurred, and replacements and betterments
are capitalized.





The range
of estimated useful lives used to calculated depreciation for principal items of
property and equipment are as follow:





Asset Category
              
              Depreciation/
                Amortization PeriodBuilding
                Plant
      Equipment
                Furniture
      and Fixture
              
              40
      Years
                15
      Years
                3
      YearsOffice
      equipment
              
              3
      YearsLeasehold
      improvements
              
              5
      Years





Goodwill and Other
Intangible Assets




The
Company adopted Statement of Financial Accounting Standard (“FASB”) Accounting
Standards Codification (“ASC”) Topic 350 Goodwill and Other Intangible
Assets, effective July 1, 2002. In accordance with (“ASC Topic 350”)
"Goodwill and Other Intangible Assets," goodwill, represents the excess of the
purchase price and related costs over the value assigned to net tangible and
identifiable intangible assets of businesses acquired and accounted for under
the purchase method, acquired in business combinations is assigned to reporting
units that are expected to benefit from the synergies of the combination as of
the acquisition date. Under this standard, goodwill and intangibles with
indefinite useful lives are no longer amortized. The Company assesses goodwill
and indefinite-lived intangible assets for impairment annually during the fourth
quarter, or more frequently if events and circumstances indicate impairment may
have occurred in accordance with ASC Topic 350. If the carrying value of a
reporting unit's goodwill exceeds its implied fair value, the Company records an
impairment loss equal to the difference. ASC Topic 350 also requires that the
fair value of indefinite-lived purchased intangible assets be estimated and
compared to the carrying value. The Company recognizes an impairment loss when
the estimated fair value of the indefinite-lived purchased intangible assets is
less than the carrying value.


8


Impairment of Long-Lived
Assets





In
accordance with ASC Topic 365, long-lived assets, such as
property, plant, and equipment, and purchased intangibles, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Goodwill and other
intangible assets are tested for impairment.  Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to estimated undiscounted future cash flows expected to be generated by
the asset. If the carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the fair value of the asset. There were events or
changes in circumstances that necessitated an impairment of long lived assets.
During 2008, the Company impaired its long lived assets based on the value of
the Land, Equipment, and building facility by $1,655,972.  Due to the
reduction in valuations in Mississippi of land and building and diminished
economic viability of biodiesel production the total valuations of that
acquisition has reduced significantly the overall value of the assets to
$290,000.





Income
Taxes





Deferred
income taxes are provided based on the provisions of ASC Topic 740, "Accounting for Income Taxes",
to reflect the tax consequences in future years of differences between the tax
bases of assets and liabilities and their financial reporting amounts based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income.  Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.





The
Company adopted the provisions of ASC Topic 740; "Accounting For Uncertainty In
Income Taxes-An Interpretation Of ASC Topic 740 ("ASC Topic
740").  ASC Topic 740 contains a two-step approach to recognizing and
measuring uncertain tax positions. The first step is to evaluate the tax
position for recognition by determining if the weight of available evidence
indicates it is more likely than not, that the position will be sustained on
audit, including resolution of related appeals or litigation processes, if any.
The second step is to measure the tax benefit as the largest amount, which is
more than 50% likely of being realized upon ultimate settlement. The Company
considers many factors when evaluating and estimating the Company's tax
positions and tax benefits, which may require periodic adjustments. At March 31,
2010, the Company did not record any liabilities for uncertain tax
positions.





Share-Based
Compensation





The
Company applies Topic 718 “Share-Based Payments” (“Topic 718”) to share-based
compensation, which requires the measurement of the cost of services received in
exchange for an award of an equity instrument based on the grant-date fair value
of the award.  Compensation cost is recognized when the event occurs.
 The Black-Scholes option-pricing model is used to estimate the fair value
of options granted.





Concentration of Credit
Risk





The
Company maintains its operating cash balances in banks located in Irvine,
California.  The Federal Depository Insurance Corporation (FDIC)
insures accounts at each institution up to $250,000.


9


Earnings Per
Share





Basic
income (loss) per share is computed by dividing net income (loss) available to
common shareholders by the weighted average number of common shares outstanding
during the reporting period. Diluted earnings per share reflects the potential
dilution that could occur if stock options, warrants, and other commitments to
issue common stock were exercised or equity awards vest resulting in the
issuance of common stock that could share in the earnings of the Company.
Diluted loss per share is the same as basic loss per share, because the effects
of the additional securities, a result of the net loss would be
anti-dilutive.





Fair Value of Financial
Instruments




The
Company's financial instruments consist primarily of cash,
accounts payable and accrued expenses, and
debt.  The carrying amounts of
such financial instruments approximate their
respective estimated fair value due to the short-term maturities and
approximate market interest rates of these instruments.  The
estimated fair value is not necessarily indicative of the amounts the Company
would realize in a current market exchange or from future earnings or
cash flows.





The
Company adopted ASC Topic 820, Fair Value Measurements (“ASC Topic 820”), which
defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements.  The standard
provides a consistent definition of fair value which focuses on an exit price
that would be received upon sale of an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement
date.  The standard also prioritizes, within the measurement of fair
value, the use of market-based information over entity specific information and
establishes a three-level hierarchy for fair value measurements based on the
nature of inputs used in the valuation of an asset or liability as of the
measurement date.


The
three-level hierarchy for fair value measurements is defined as
follows:





 ̈
            Level
      1 – inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets;


 ̈
            Level
      2 – inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are
      observable or the asset or liability other than quoted prices,
      either directly or indirectly including inputs in markets that are
      not considered to be active;


 ̈
            Level
      3 – inputs to the valuation methodology are unobservable and significant
      to the fair value.





Reclassification





Certain
prior period amounts have been reclassified to conform to current year
presentations.





Recent Accounting
Pronouncements





Recent
accounting pronouncements that the Company has adopted or that will be required
to adopt in the future are summarized below.




In
January 2010, the FASB issued an amendment to ASC 505, Equity, where entities
that declare dividends to shareholders that may be paid in cash or shares at the
election of the shareholders are considered to be a share issuance that is
reflected prospectively in EPS, and is not accounted for as a stock dividend.
This standard is effective for interim and annual periods ending on or after
December 15, 2009 and is to be applied on a retrospective basis. The
adoption of this standard is not expected to have a significant impact on the
Company’s consolidated financial statements.


10


On
February 24, 2010, the FASB issued guidance in the “Subsequent Events”
topic of the FASC to provide updates including: (1) requiring the company
to evaluate subsequent events through the date in which the financial statements
are issued; (2) amending the glossary of the “Subsequent Events” topic to
include the definition of “SEC filer” and exclude the definition of “Public
entity”; and (3) eliminating the requirement to disclose the date through
which subsequent events have been evaluated. This guidance was prospectively
effective upon issuance. The adoption of this guidance did not impact the
Company’s results of operations of financial condition.





In
January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance
to amend the disclosure requirements related to recurring and nonrecurring fair
value measurements. The guidance requires new disclosures on the transfers
of assets and liabilities between Level 1 (quoted prices in active market for
identical assets or liabilities) and Level 2 (significant other observable
inputs) of the fair value measurement hierarchy, including the reasons and the
timing of the transfers. Additionally, the guidance requires a roll forward
of activities on purchases, sales, issuance, and settlements of the assets and
liabilities measured using significant unobservable inputs (Level 3 fair value
measurements). The guidance became effective for us with the reporting period
beginning January 1, 2010, except for the disclosure on the roll forward
activities for Level 3 fair value measurements, which will become effective for
us with the reporting period beginning July 1, 2011. Other than requiring
additional disclosures, adoption of this new guidance did not have a material
impact on our financial statements.


On
July 1, 2009, we adopted guidance issued by the FASB on business
combinations. The guidance retains the fundamental requirements that the
acquisition method of accounting (previously referred to as the purchase method
of accounting) be used for all business combinations, but requires a number of
changes, including changes in the way assets and liabilities are recognized and
measured as a result of business combinations. It also requires the
capitalization of in-process research and development at fair value and requires
the expensing of acquisition-related costs as incurred. Adoption of the new
guidance did not have a material impact on our financial
statements.





On
July 1, 2009, guidance issued by the FASB those changes the accounting and
reporting for non-controlling interests. Non-controlling interests are to be
reported as a component of equity separate from the parent’s equity, and
purchases or sales of equity interests that do not result in a change in control
are to be accounted for as equity transactions. In addition, net income
attributable to a non-controlling interest is to be included in net income and,
upon a loss of control, the interest sold, as well as any interest retained, is
to be recorded at fair value with any gain or loss recognized in net income.
Adoption of the new guidance did not have a material impact on our financial
statements.


On
July 1, 2009, we adopted guidance on fair value measurement for
nonfinancial assets and liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually). Adoption of the new guidance did not have a material impact on
our financial statements.




The
Company has implemented all new accounting pronouncements that are in effect and
that may impact its financial statements and does not believe that there are any
other new accounting pronouncements that have been issued that might have a
material impact on its financial position or results of operations.




NOTE
5 - NET LOSS PER SHARE





The net
loss per common share is calculated by dividing the loss by the weighted average
number of shares outstanding during the periods.


11


The
following table represents the computation of basic and diluted losses per
share:





For the Quarter
                          Ended
                          March 31, 2010
                        
                        
                        For the Quarter
                          Ended
                          March 31,,
                          2009Losses
      available for common shareholders
                        
                        $
                        (172,872
                        )
                        
                        $
                        (153,479
                        )Weighted
      average common shares outstanding
                        
                        
                        (40,415,400
                        )
                        
                        
                        (21,525,000
                        )Basic
      and fully diluted loss per share
                        
                        $
                        (.00
                        )
                        
                        $
                        (..01
                        )


Net loss
per share is based upon the weighted average shares of common stock
outstanding





The
effect of common shares issuable under convertible notes is Anti-Dilutive and
not included in Diluted loss per share.





NOTE
6 - EQUITY





On
November 3, 2007, the Company amended its articles of incorporation and
authorized 200,000,000 shares of common stock, at $.001 par value and 40,455,000
are issued and outstanding as of March 31, 2010.





On
November 3, 2007, the Company authorized an aggregate of 1,000,000 preferred
series A and B shares, at $.001 par value and there are 100,000 series A issued
and 232,350 series B issued and outstanding, respectively, as of March 31,
2010.





Under
terms of the above agreements, on April 14, 2009 the Company issued 2,200,000 to
each officer and director of the Company with total shares issued of
8,800,000.  The stock was trading at $.035 and the Company expensed
$77,000 for each issuance of shares of stock with a total expense of
$308,000.





Common Stock
Issued





On
January 1, 2010, the Company issued 750,000 to its prior CFO for extinguishment
of his employment contract and the company reduced the accrued expenses by
$157,568.





On March
26, 2010, the Company issued 300,000 to a consultant and expensed
$18,000.





Forward
Split





On
November 3, 2007, the Company authorized a 5 for 1 forward split of its
4,300,000 issued and outstanding which was treated as a stock dividend. After
the 5 for 1 forward split the Company has 22,500,000 issued and outstanding on
December 31, 2007.





At March
31, 2010, there were no outstanding stock options or warrants.


12


Issuance
of preferred shares





On
September 18, 2008 the Company converted the following debt to preferred
shares:





Converting
                        
                        Preferred
      B
                        
                        
                        Debt
      & Accrued
                        
                        
                        Common
      StockParties
                        
                        Shares issued
                        
                        
                        Interest Converted
                        
                        
                        SurrenderedMortenson
      Financial, Inc.
                        
                        
                        34,000
                        
                        
                        
                        745,991
                        
                        
                        
                        -LaCroix
      Financial, Inc.
                        
                        
                        82,500
                        
                        
                        
                        1,818,821
                        
                        
                        
                        -Mortenson
      Financial, Inc.
                        
                        
                        15,850
                        
                        
                        
                        300,000
                        
                        
                        
                        -Mortenson Financial, Inc.
                        
                        
                        100,000
                        
                        
                        
                        -
                        
                        
                        
                        (1,000,000
                        )





In
September 18, 2008 the Company converted the Notes payables of Lacroix
International Holdings, Ltd. in the amount of $1,818,821 of principle and
accrued interest for 82,500 preferred Series B shares.





On
September 18, 2008 the Company converted the notes payables of Mortenson
Financial Ltd. in the amount of $745,991 of principle and accrued interest for
34,000 of preferred Series B shares and converted another note in the amount of
$300,000 to 15,850 of preferred Series B Shares.





On
September 18, 2008 Mortenson Financial Ltd. converted 1,000,000 common shares to
100,000 of preferred Series B Shares.





The
Preferred Series B shares are non-voting.





100,000
shares of Preferred Series A shares were also issued to then management for
compensation.  The Preferred Series A shares are voting at the ratio
of 300 common shares per one share of preferred. On April 26, 2010, Richard D.
Craven surrendered the 100,000 shares of Preferred Series A shares to the
Company, after his resignation from his position with the Company.





The
Preferred Series B shares are convertible to common shares at a rate to be
mutually agreed upon by the Company, Lacroix, and
Mortensen.   However, documents provided by former management to
the SEC establish that management of Lacroix and Mortensen had tentatively
agreed to convert the preferred shares received from the note conversions into
common shares at the rate of ten shares of common to one share of
preferred.  Additionally, common shares were converted to preferred
shares by Mortensen at a 10:1 ratio.  Conversion at the 10:1 rate
would result in the issuance of 2,320,800 shares of common stock or 5.6%
dilution as of March 31, 2010.  Conversion at an implied market rate
($.06 per share) would result in the issuance of approximately 3,868,000 shares
of common stock or 8.9% dilution as of March 31 2010.





NOTE
7 - PROPERTY AND EQUIPMENT





The
Company has fixed assets as of March 31, 2010 and December 31, 2009 as
follows:





March 31,
                                2010
                              
                              
                              December 31,
                                2009Equipment
                              
                              $
                              165,000
                              
                              
                              $
                              165,000Land
                              
                              
                              50,000
                              
                              
                              
                              50,000Building
                              
                              
                              75,000
                              
                              
                              
                              75,000Accumulated
      depreciationTotal
                              
                              $
                              290,000
                              
                              
                              $
                              290,000


13


There was
no depreciation expense for the three months ended March 31, 2010 and 2009
respectively. The Company has not recorded any depreciation expense related to
its processing facility as it has not been placed in service as of December 31,
2009.  The Company impaired the assets to its value and adjusted
accumulated depreciation to zero during that impairment.  See Note 4 -
Impairment of Long-Lived Assets.





NOTE
8 – CONVERTIBLE DEBENTURE





March 31, 2010
                      
                      
                      December
                        31, 2009On
      July 9, 2009 the Company sold 25,000 units in a private placement for
      $25,000 at $1.00 per unit.  The Units are similar to a debenture
      and act as a debt to the company. The term is for three
      years, and the Units receive a return of a 30% annual stock
      dividend and no payments are paid for the reduction of this
      debt.  After the six month holding period the purchaser has the
      option to convert part or all of the Units into common stock at
      an exercise price of 5 cents per share, based on the principal
      invested.The
      note is secured by the general assets of the company including the
      property at 128 Biodiesel Drive, Nettleton, MS.
                      
                      
                      25,000
                      
                      
                      
                      25,000On
      November 23, 2009 the Company sold 22,500 units in a private placement for
      $22,500 at $1.00 per unit.  The Units are similar to a debenture
      and act as a debt to the company. The term is for three
      years, and the Units receive a return of a 30% annual stock
      dividend and no payments are paid for the reduction of this
      debt.  After the six month holding period the purchaser has the
      option to convert part or all of the Units into common stock at
      an exercise price of 5 cents per share, based on the principal
      invested. The note is secured by the general assets of the company
      including the property at 128 Biodiesel Drive, Nettleton,
    MS.
                      
                      
                      22,500
                      
                      
                      
                      22,500On
      November 23, 2009 the Company sold 22,500 units in a private placement for
      $22,500 at $1.00 per unit.  The Units are similar to a debenture
      and act as a debt to the company. The term is for three
      years, and the Units receive a return of a 30% annual stock
      dividend and no payments are paid for the reduction of this
      debt.  After the six month holding period the purchaser has the
      option to convert part or all of the Units into common stock at
      an exercise price of 5 cents per share, based on the principal
      invested. The note is secured by the general assets of the company
      including the property at 128 Biodiesel Drive, Nettleton,
    MS.
                      
                      
                      22,500
                      
                      
                      
                      22,500Total
      long-term note payable
                      
                      
                      70,000
                      
                      
                      
                      70,000Less
      current portion
                      
                      
                      70,000
                      
                      
                      
                      70,000Long-term
      portion of note payable
                      
                      $
                      -
                      
                      
                      $
                      -


14


For the
above convertible notes, pursuant to ASC Topic 470, the Company first reviewed
and determined that no beneficial conversion feature existed. The Company then
evaluated the convertible notes to determine if there was an embedded conversion
option requiring bifurcation under ASC Topic 815 and ASC Topic 815.40. We
determined that fair value accounting for an embedded conversion option was
required and that a derivative liability would be recorded. The fair value of
the conversion option is initially computed at its issuance date, then on
subsequent reporting periods, marked-to-market. The change in fair value is
recorded in the statement of operations. Upon conversion of a derivative
instrument, the instrument is marked to fair value at the conversion date and
the related fair value is reclassified to equity.





NOTE
9 - INCOME TAXES





The
Company adopted ASC Topic 740 which requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statement or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the difference
between financial statements and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Temporary differences between taxable income reported for financial
reporting purposes and income tax purposes are insignificant.





For
income tax reporting purposes, the Company’s aggregate unused net operating
losses approximate $14,950,332 which expire in various years through 2028,
subject to limitations of Section 382 of the Internal Revenue Code, as amended.
The Company has provided a valuation reserve against the full amount of the net
operating loss benefit, because in the opinion of management based upon the
earning history of the Company, it is more likely than not that the benefits
will not be realized.




Under the
Tax Reform Act of 1986, the benefits from net operating losses carried forward
may be impaired or limited on certain circumstances. Events which may cause
limitations in the amount of net operating losses that the Company may utilize
in any one year include, but are not limited to, a cumulative ownership change
of more than 50% over a three-year period. The impact of any limitations that
may be imposed for future issuances of equity securities, including issuances
with respect to acquisitions have not been determined.


15


NOTE
10        RELATED PARTY
TRANSACTIONS




Effective
January 2, 2009 management entered into an employment agreement with James
Michael Ator, then CFO, Treasurer, and director, for an annual base pay of
$156,000 plus a signing bonus of $100,000 to vest on January 2, 2010 to be paid
in restricted stock.  The agreement terms also included a vested
equity ownership of 10% of the outstanding common shares, including
anti-dilution provisions.  See Note 10 regarding the subsequent
settlement of this obligation.





Effective
February 27, 2009 management entered into an employment agreement with Dr.
Richard D. Craven, then CEO, President, and director, for an annual base pay of
$156,000 plus a signing bonus of $100,000 to vest on January 2, 2010 to be paid
in restricted stock.  The agreement terms also included a vested
equity ownership of 10% of the outstanding common shares, including
anti-dilution provisions.  See Note 10 regarding the subsequent
resignation of Dr. Craven.  Current management is currently
negotiating settlement of this obligation.





Effective
March 6, 2009 management entered into an employment agreement with Vince M.
Guest, current CEO, CFO, and director, for an annual base pay of $156,000 plus a
signing bonus of $25,000 to be paid in cash or free trading
stock.  The agreement terms also included a vested equity ownership of
10% of the outstanding common shares, including anti-dilution
provisions.  The terms also include a maximum incentive bonus of 17.5%
of funds from the investor relations net operating  department budget
, and a 5% finder’s fee on all debt financing obtained by Mr. Guest on behalf of
the Company.





Effective
March 6, 2009 management entered into an employment agreement with Solomon RC
Ali, current VP of Investor Relations, and director, for an annual base pay of
$156,000 plus a signing bonus of $25,000 to be paid in cash or free trading
stock.  The agreement terms also included a vested equity ownership of
10% of the outstanding common shares, including anti-dilution
provisions.  The terms also include a maximum incentive bonus of 17.5%
of funds from the investor relations net operating  department budget
, and a 5% finder’s fee on all debt financing obtained by Mr. Ali  on
behalf of the Company.





Under
terms of the above agreements, on April 14, 2009 the Company issued 2,200,000 to
each officer and director of the Company with total shares issued of
8,800,000.  The stock was trading at $.035 and the Company expensed
$77,000 for each issuance of shares of stock with a total expense of
$308,000.





On
October 13, 2009 the Company converted the outstanding notes of $100,000 owed to
four unrelated entities to 5,000,000 common shares of stock.  The
stock was trading at $0.1185 and $100,000 was applied to the reduction of debt
and the remaining balance of $480,000 was expensed to consulting
expense.  TheCompany
converted the outstanding notes of $70,000 assigned to three unrelated
entities, and $30,000 to another unrelated entity, which is managed by a
Director of Universal, to 5,000,000 common shares of stock."





The
option to acquire the final 2% member interest in NDR was assigned to the
officers of Universal, Richard D. Craven, Vince M. Guest and Solomon Ali, along
with a grant of 4,000,000 shares of stock as a bonus for managing and closing
the NDR Energy acquisition.  The 2% stake was acquired for 4,000,000 shares
of stock, by exercising the option.  The 4,000,000 in stock was paid as a
premium on the purchase price for the additional 2% of NDR’s member interests.
All of the stock was issued to NDR. . The 2% member interest in NDR Energy is
owned by Varlos Energy Holdings LLC, of which Vince M. Guest, Solomon Ali, and
Richard D. Craven are members of the company. This option
was extended to Richard Craven prior to knowledge of the SEC Enforcement matter
discussed below and current management asserts that they were not fully informed
by Richard Craven of his involvement in the SEC Enforcement
matter.  .


16


On
January 12, 2010 the Company issued 750,000 common shares to James Michael Ator
for settlement of his outstanding employment agreement.





Vince
Guest. Under Vince Guest's employment agreement, he has agreed to serve as the
President and Chief Executive Officer. His term of service under this agreement
commenced on July 1, 2010 and continues for a term of two (2) years with renewal
options. The agreement provides for a base salary of $174,000 for the first year
of the term and an annual increase of at least 8% thereafter. The agreement also
provides Vince Guest with an monthly or quarterly bonus of five percent (5%) of
net profits.  The agreement also provides for participation in the Company’
s programs  to acquire  options or equity incentives in
common stock  subject to the discretion of the Board of Directors,
expense reimbursements, participation in retirement and benefit plans, paid time
off and indemnification and liability coverage. We can terminate Vince Guest's
employment with cause, or without cause upon certain written notice and Vince
Guest can terminate the agreement for "good reason" as defined in the agreement.
There are specific severance provisions, as well as confidentiality and
non-solicitation requirements resulting from any termination.





Solomon
Ali. Under Solomon Ali's employment agreement, he has agreed to serve as the
Senior Vice President. His term of service under this agreement commenced on
July 1, 2010 and continues for a term of two (2) years with renewal options. The
agreement provides for a base salary of $174,000 for the first year of the term
and an annual increase of at least 8% thereafter. The agreement also provides
Solomon Ali with an monthly or quarterly bonus of five percent (5%) of net
profits.  The agreement also provides for participation in the Company’ s
programs  to acquire  options or equity incentives in common
stock  , subject to the discretion of the Board of Directors, expense
reimbursements, participation in retirement and benefit plans, paid time off and
indemnification and liability coverage. We can terminate Solomon Ali's
employment with cause, or without cause upon certain written notice and Solomon
Ali  can terminate the agreement for "good reason" as defined in the
agreement. There are specific severance provisions, as well as confidentiality
and non-solicitation requirements resulting from any termination.





NOTE
11 – SUBSEQUENT EVENTS





Entry into a Material
Definitive Agreement.





Universal
Bioenergy Corporation, a Nevada corporation and NDR Energy Group, LLC, a
Maryland limited liability company (“NDR” or “NDR Energy Group”),
entered into a Member Interest Purchase Agreement, (the “Purchase Agreement”)
dated as of April 12, 2010.  Pursuant to the Purchase Agreement and
subject to the conditions set forth therein, the Company purchased forty nine
49% of the Member Interests of NDR with a total investment valued at $2.5
million in cash and common stock of the Company.





The
completion of the acquisition was approved by the Board of Directors of the
Company.





Each of
the Company and NDR Energy Group has made customary representations and
warranties in the Purchase Agreement. NDR Energy Group has also agreed to
various covenants in the Purchase Agreement, including, among other things, (i)
to conduct its business in the ordinary course consistent with past practice in
all material respects during the period between the execution of the Purchase
Agreement and the closing of the transaction and (ii) not to solicit alternate
transactions.


17


Universal’s
management believes that the association with NDR Energy Group will give the
Company the needed sales outlets through NDR Energy Group’s distribution
channels, the  marketing / brokering of natural gas, biofuels, and
energy efficiency conversions as part of its new business focus.





Additional
Summary of the Purchase Agreement





According
to the agreement, the Company retains the right to purchase additional equity of
the Member Interests of NDR Energy.  NDR Energy will appoint 2 seats
on its Board of Managers as selected by the Company.  The Company
agrees to provide NDR Energy Group with Management Support Services. The Company
will provide NDR Energy Group with $1,000,000 in working capital. The Company
will arrange, on a best efforts basis, a “Financing Facility / Credit Line up to
an estimated amount of $300 million dollars drawn on a major U.S. bank or
similar financial institution, to purchase its natural gas contract receivables,
and help fund its growth and expansion. NDR Energy Group agrees to comply in
accordance with the related financial covenants.





The
original 49% interest in NDR Energy was purchased for 1,000,000 shares of
Universal Bioenergy common stock, and a $1,000,000 loan to NDR.





The
option to acquire the final 2% member interest in NDR was assigned to the
officers of Universal, Richard D. Craven, Vince M. Guest and Solomon Ali, along
with a grant of 4,000,000 shares of stock as a bonus for managing and closing
the NDR Energy acquisition.  The 2% stake was acquired for 4,000,000 shares
of stock, by exercising the option.  The 4,000,000 in stock was paid as a
premium on the purchase price for the additional 2% of NDR’s member interests.
All of the stock was issued to NDR. .  The 2% member interest in NDR
Energy is owned by Varlos Energy Holdings LLC, of which Vince M. Guest, Solomon
Ali, and Richard D. Craven are members of the company.This
option was extended to Richard Craven prior to knowledge of the SEC Enforcement
matter discussed below and current management asserts that they were not fully
informed by Richard Craven of his involvement in the SEC Enforcement
matter.





Departure of Directors or
Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.





On April
14, 2010, Dr. Richard D. Craven submitted his resignation as a member of our
Board of Directors and as Chief Executive Officer and Principal Financial
Officer to pursue other business matters. Dr. Richard D. Craven did not have
any disagreement with the Company, on any matter related to the Company’s
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure.





Vince M.
Guest has taken the position as Chief Executive Officer and Principal
Financial Officer.





Vince
Guest. Under Vince Guest's employment agreement, he has agreed to serve as the
President and Chief Executive Officer. His term of service under this agreement
commenced on July 1, 2010 and continues for a term of two (2)years with renewal
options. The agreement provides for a base salary of $174,000 for the first year
of the term and an annual increase of at least 8% thereafter. The agreement also
provides Vince Guest with an monthly or quarterly bonus of five percent (5%) of
net profits.  The agreement also provides for participation in the Company’
s programs  to acquire  options or equity incentives in
common stock  , subject to the discretion of the Board of Directors,
expense reimbursements, participation in retirement and benefit plans, paid time
off and indemnification and liability coverage. We can terminate Vince Guest's
employment with cause, or without cause upon certain written notice and Vice
Guest can terminate the agreement for "good reason" as defined in the agreement.
There are specific severance provisions, as well as confidentiality and
non-solicitation requirements resulting from any termination.


18


Solomon
Ali. Under Solomon Ali's employment agreement, he has agreed to serve as the
Senior Vice President. His term of service under this agreement commenced on
July 1, 2010 and continues for a term of two (2)years with renewal options. The
agreement provides for a base salary of $174,000 for the first year of the term
and an annual increase of at least 8% thereafter. The agreement also provides
Solomon Ali with an monthly or quarterly bonus of five percent (5%) of net
profits.  The agreement also provides for participation in the Company’ s
programs  to acquire  options or equity incentives in common
stock  , subject to the discretion of the Board of Directors, expense
reimbursements, participation in retirement and benefit plans, paid time off and
indemnification and liability coverage. We can terminate Solomon Ali's
employment with cause, or without cause upon certain written notice and Solomon
Ali  can terminate the agreement for "good reason" as defined in the
agreement. There are specific severance provisions, as well as confidentiality
and non-solicitation requirements resulting from any termination.





The Board
of Directors has approved that the Company convert seasoned debt through
December 31, 2009 to the Company’s common stock at a conversion price of $.005
to $.10 cents.  The total outstanding debt of the Company at December
31, 2009 that has been approved for conversion is
$774,699.  Conversion  at a rate of $.05  would
result in the issuance of a range of 15,493,980 or 34% dilution to 7,746,990 or
18% dilutions  based on the number of shares outstanding as of June
30, 2010.  If this conversion is implemented it will result in a
material issuance of common stock and dilution of all shareholders based upon
the Board of Directors approved conversion price.





On July
22, 2010 the Company cancelled the 100,000 preferred A shares of the company
where as no preferred A shares were issued and outstanding of that
date.





On July
28, 2010 the Company signed a Letter of Intent to acquire Norcor Technologies
Corporation, an energy, technology and facilities services company,
headquartered in Charlotte, North Carolina.  Norcor Technologies,
provides a broad range of products and services which are primarily for use in
the Health Care industry, Military Facilities, and the U.S. Department of
Transportation. Its primary focus is selling biodiesel, transportation fuels,
energy services and facility energy efficiency retrofits. No assurances can be
provided that a definitive agreement will be executed.




NOTE
12 - SUBSEQUENT DISCOVERY OF FACTS THAT EXISTED AS OF THE BALANCE SHEET
DATE





Management
has recently become aware that cash and other assets invested in the Company
prior to December 31, 2008 may have been received as a result of illegal
activities by persons affiliated with certain current and former shareholders,
Lacroix International Holdings Ltd. (Lacroix) and Mortensen Financial Ltd.
(Mortensen).  See SEC vs. Abellan, et al, (Case
3:08-CV-05502).   Management has also recently become aware that
the Securities and Exchange Commission (SEC) has subsequently obtained an order
of disgorgement pertaining to the assets held by Lacroix and Mortensen which
currently include shares of preferred and common stock of the
Company.


19


The risk of
disgorgement





The
approximate $1 million in cash invested in the Company by Mortensen has been
depleted.  Additionally, the approximate $1.6 million value of the
dormant biodiesel plant invested by Lacroix, with its unknown but implicit
environmental liability, has been impaired to a net value of
$290,000.  At the advice of counsel, management believes, lacking
definitive proof, it is not likely that the SEC would move to disgorge ownership
of the biodiesel plant from the Company.





According
to the court filings in SEC vs. Abellan et al, the SEC was not able to obtain
the Andorran banking records of Lacroix and Mortensen, and accordingly cannot
currently definitively link the funds invested in the Company to the illegal
activities of Abellan.  At the advice of counsel, management believes,
while it is possible, it is unlikely, that even if the SEC is able to obtain
those records, and is able to definitively link those funds to the assets
invested in the Company that the SEC would move to disgorge ownership of the
biodiesel plant from the Company.  In an attempt to obtain
clarification of this, and to provide full and fair disclosure, management
requested clarification from SEC staff, who declined to provide clarification or
comment.





The risk of
rescission





Management
has also recently become aware that the stated September 17, 2008 restructuring
of debt to preferred shares was transacted subsequent to a September 11, 2008
injunction obtained by the SEC freezing the assets of Lacroix and
Mortensen.  The restructuring accordingly may constitute an illegal
act.  Current and former management both assert that they did not
receive notice of the freeze and were not aware of the freeze at the time of the
conversion.





Current
management has also recently become aware that former management was contacted
by SEC enforcement pertaining to the above related to an informal investigation
of another company.  It should be noted that the Company and its then
management were not the focus of the informal
investigation.  Documents provided by former management to the SEC
establish that the discussions between former management, Lacroix and Mortensen
began at least two months in advance of the freeze order.





As
creditor note holders, Lacroix and Mortensen had preference over equity holders
in the event of liquidation.   Additionally, even though the
Lacroix note was “secured” by the biodiesel plant, no real or personal property
liens were ever filed to perfect the liens.  At the time of the
conversion the Company lacked liquidity to pay the principal and interest due on
these notes.  The conversion to preferred shares abated the further
accrual of interest on the notes.





As
preferred shareholders, Lacroix and Mortensen still have preference over common
shareholders in the event of liquidation, after satisfaction of the
creditors.  While the conversion of these shares to common would
eliminate this preference, it could also result in improving the liquidity of
these shares, once the restrictive legends are removed, and enable distribution
of the shares as discussed below.





At the
advice of counsel, management believes it is possible, but unlikely that the SEC
would move to rescind the note to preferred conversion transaction which would
improve their standing in the event of liquidation, but would dilute the
potential of liquidity through the market.  In an attempt to obtain
clarification of this, and to provide full and fair disclosure, management
requested clarification from SEC staff, who declined to provide clarification or
comment.


20


The risk of
dilution





As stated
elsewhere, the preferred shares are convertible to common shares at a rate to be
mutually agreed upon by the Company, Lacroix, and
Mortensen.   However, documents provided by former management to
the SEC establish that management of Lacroix and Mortensen had tentatively
agreed to convert the preferred shares received from the note conversions into
common shares at the rate of ten shares of common to one share of preferred with
the final conversion rate to mutually agreed upon by both
parties.  Additionally, common shares were converted to preferred
shares by Mortensen at a 10:1 ratio.  Conversion at the 10:1 rate
would result in the issuance of 2,320,800 shares of common stock or 5.4%
dilution as of March 31, 2010.  Conversion at an implied market rate
($.05 per share) would result in the issuance of approximately 4,641,600 shares
of common stock or 10.3% dilution as of March 31, 2010.





Current
management has advised the stock transfer agent to freeze the preferred and
common shares of Lacroix and Mortensen held in name or in street name,
preventing their further conversion to cash.  The Board of Directors
of the Company has also frozen the option to convert the preferred shares to
common.  Counsel has advised management that such conversion of
preferred shares to common could constitute a further violation of the asset
freeze.  In an attempt to obtain clarification of this, and to provide
full and fair disclosure, management requested clarification from SEC staff, who
declined to provide clarification or comment.





In
consideration of the above, management asserts that they will not convert the
preferred shares to common without the explicit consent of the
SEC.  Additionally, management is contemplating, under the authority
of the SEC disgorgement order, seeking permission of the SEC to convert the
preferred shares to common in the least dilutive fashion discussed above (10:1)
and distribute those shares and other common shares owned by Lacroix and
Mortensen to the shareholders harmed by Abellan.





The
docket currently shows the status of the Abellan case as “terminated”, leaving
Company counsel to believe that further action by the SEC against the Company is
possible but unlikely.





*  *  *  *  *  *


21


In this
Quarterly Report on Form 10-Q, “Company,” “our company,” “us,” and “our” refer
to Universal Bioenergy, Inc. and its subsidiaries, unless the context requires
otherwise.





ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS




Management’s
Discussion and Analysis contains various “forward looking statements” within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
regarding future events or the future financial performance of the Company that
involve risks and uncertainties. Certain statements included in this Form 10Q,
including, without limitation, statements related to anticipated cash flow
sources and uses, and words including but not limited to “anticipates”,
“believes”, “plans”, “expects”, “future” and similar statements or expressions,
identify forward looking statements. Any forward-looking statements herein are
subject to certain risks and uncertainties in the Company’s business, including
but not limited to, reliance on key customers and competition in its markets,
market demand,  technological developments, maintenance of
relationships with key suppliers, difficulties of hiring or retaining key
personnel and any changes in current accounting rules, all of which may be
beyond the control of the Company. The Company adopted at management’s
discretion, the most conservative recognition of revenue based on the most
astringent guidelines of the SEC in terms of recognition of software licenses
and recurring revenue. Management will elect additional changes to revenue
recognition to comply with the most conservative SEC recognition on a forward
going accrual basis as the model is replicated with other similar markets (i.e.
SBDC). The Company’s actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth therein.





Forward-looking
statements involve risks, uncertainties and other factors, which may cause our
actual results, performance or achievements to be materially different from
those expressed or implied by such forward-looking statements. Factors and risks
that could affect our results and achievements and cause them to materially
differ from those contained in the forward-looking statements include those
identified in the section titled “Risk Factors” in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2009, as well as other factors that
we are currently unable to identify or quantify, but that may exist in the
future.




In
addition, the foregoing factors may affect generally our business, results of
operations and financial position. Forward-looking statements speak only as of
the date the statement was made. We do not undertake and specifically decline
any obligation to update any forward-looking statements.




Overview
of Our Company





We are an
alternative energy company headquartered in Irvine, California. Our new
strategic direction is to develop and market a diverse product line of
alternative energy products including, natural gas, solar, biofuels, wind, wave,
tidal, and green technology products.   We also intend to provide
energy and facilities services to government and commercial customers for
facilities retrofits, modifications, lighting systems, building control systems
and related energy saving technologies.


22


We plan
to continue our growth by means of mergers and acquisitions of other companies
in the alternative energy and related industries, and to acquire patents and
license technologies to fully exploit in the marketplace. We are adapting our
business strategy to become a more vertically integrated company, to give us
greater management control over our supply chain, from the producer, through
marketing, distribution, and directly to the customer. We believe this will
bring greater revenues for the company and more value to our
shareholders.





We are
currently targeting natural gas producers, to obtain natural gas and other fuels
directly from the wellhead, and solar energy companies for polymer based thin
film solar cells that will produce greater energy conversion efficiencies, with
less cost than silicon based photovoltaic cells.





Recent
Developments





NDR Energy Group
LLC.  As part plans for growth, on April 12, 2010, we acquired
a 49% stake in NDR Energy Group LLC, located in Charlotte, North
Carolina.





NDR
markets energy and fuel commodities such as natural gas, and transportation of
petroleum fuels.  The management of NDR reported to us, that they sold
$60 - $70 million in energy and fuel in 2009.  The revenues have not
been verified and there are no assurances that such revenues will result in
2010.  The management of NDR intends to expand, in coordination with
our company, into biofuels, solar, alternative fuels, and commercial energy
efficiency conversion projects, and retrofits. NDR Energy currently has firm
contracts signed with 22 major utility companies nationwide. Some of the
customers it  has agreements with include, Southern California Gas
Company, Pacific Gas & Electric, Baltimore Gas & Electric, Memphis Light
Gas & Water, Duke (Ohio & Kentucky), Southern Company, Michigan
Consolidated, Entergy (Texas and Gulf States),  and the National Grid,
the largest power producer in New York State. Some of the suppliers it has
contracts with are Chevron Texaco, Chesapeake Energy Marketing, Conoco Phillips,
Total and Anadarko.





Our plans
in coordination with NDR Energy Group are to maximize the sales value of our
utility contracts. As part of our new business model, we believe, this
acquisition should provide us  with distribution channels for
marketing natural gas, biofuels, alternative fuels, solar, and green energy
products to these and potential new customers.




Roblex Aviation,
Inc.On
January 6, 2010, we executed a Letter of Intent (“LOI”) with Roblex Aviation,
Inc. (“Roblex”) of Carolina, Puerto Rico, upon which UBE would acquire all of
Roblex. The terms and conditions of the acquisition are still being negotiated,
and will be determined in the definitive agreement. No assurances can be
provided that a definitive agreement will be executed. To date, the definitive
agreement remains in negotiation stages.




Based
solely on our preliminary due diligence,  Roblex is a 13 year old air
cargo company that has grown to be a noted leader in air cargo in the Puerto
Rican and Caribbean Islands. It has principal routes to the Dominican Republic
and US and British Virgin Islands with significant potential for growth and
expansion. Roblex has over 40 employees and flies principally out of two
locations, San Juan and Aguadilla, Puerto Rico. Roblex’s major clients include
the United States Postal Service, Amerijet, and others as well as on-demand
cargo services.





Norcor
Technologies Corporation.  On
July 28, 2010 the Company signed a Letter of Intent to acquire Norcor
Technologies Corporation, an energy, technology and facilities services company,
headquartered in Charlotte, North Carolina.  Norcor Technologies,
provides a broad range of products and services which are primarily for use in
the Health Care industry, Military Facilities, and the U.S. Department of
Transportation. Its primary focus is selling biodiesel, transportation fuels,
energy services and facility energy efficiency retrofits. No assurances can be
provided that a definitive agreement will be executed.


23


History
of Universal Bioenergy North America





Our
subsidiary, Universal Bioenergy North America, Inc. is a development stage
Nevada corporation formed on January 23, 2007 which was acquired by our company
in December 2007, for the purpose of operating a biodiesel plant in Nettleton,
Mississippi to produce biodiesel fuel and a marketable byproduct of glycerin.
The biodiesel plant was acquired by Universal Bioenergy North America out of a
bankruptcy action. We do not expect to generate any revenue unless and until the
plant is completely operational or other revenue generating merger/acquisition
(M&A) candidate is located, purchase negotiated, and closed. As of the date
of this report, we have not manufactured any biodiesel fuel but are negotiating
with potential M&A candidates. Presently, UBNA’s plant is non-operational
and the company is seeking new acquisitions in the alternative energy
industry.





The
economic viability of most biodiesel producers, including us, is dependent on
the biodiesel fuel tax credit.  The tax credit was allowed to expire
on December 31, 2009, causing widespread layoffs in the biodiesel industry since
the credit is needed by most producers to remain economically
viable.  The Senate voted on March 10, 2010 to restore the
credit.  Restoration of the credit required reconciliation and
signature of President Obama which did not occur before the Augus summer
recess.




RESULTS
OF OPERATIONS





Fiscal
Year Ended March 31, 2010 compared to March 31, 2009





Universal
Bioenergy North America, Inc. is a developmental stage company and operating
subsidiary of the Company. The Company has generated no revenues as Universal
Bioenergy North America, Inc. was not in production as of March 31, 2010 and
will continue to accrue operating losses until sufficient production levels can
be reached to meet all liabilities.





The
Company has never generated any revenues.  Our future revenue plan is
uncertain and is dependent on our ability to effectively refine our products,
generate sales, and obtain contract feedstock opportunities or merge or acquire
companies presently generating revenues. There are no assurances of the ability
of our company to begin refining feedstock or identifying, negotiating, and
successfully closing mergers or acquisition candidates. The cost of modifying
our refinery is cost intensive as is merging or acquiring other business
entities, so it is critical for us to raise appropriate capital to implement our
business plan. We incurred losses of approximately $172,872 and $153,479 for the
three months ended March 31, 2010 and 2009. Our losses since our inception
through March 31, 2010 amount to $14,950,332.





Part of
these losses and need for impairment as determined by management is due in part
to a decrease in value of assets related to the economic downturn in the local
area and in the commercial real estate marketplace. Management believes that
there has been a 30% or greater reduction in the value of real property at the
Nettleton, MS plant site due to these conditions. There is no guarantee that
such asset reduction will be recouped as economic conditions
improve.


24


Liquidity
and Capital Resources





As
reflected in the accompanying financial statements and footnotes, we are in the
development stage with limited resources, used cash in operations of $872,570
from inception, a working capital deficiency of $844,323 and have an accumulated
deficit during the development stage of $14,950,332 this raises substantial
doubt about our ability to continue as a going concern. The ability of our
company to continue as a going concern is dependent on the Company’s ability to
raise additional capital and implement its business plan. The financial
statements do not include any adjustments that might be necessary if we are
unable to continue as a going concern.





Debt





Convertible
Debt





On July
9, 2009, we sold 25,000 units in a private placement for $25,000 at $1.00 per
unit.  The Units are similar to a debenture and act as a debt to the
company. The term is for three years, and the Units receive a
return of a 30% annual stock dividend and no payments are paid for the
reduction of this debt.  After the six month holding period the
purchaser has the option to convert part or all of the Units into common stock
at an exercise price of 5 cents per share, based on the principal
invested.  The note is secured by the general assets of the company
including the property at 128 Biodiesel Drive, Nettleton, MS.





On
November 23, 2009, we sold 22,500 units in a private placement for $22,500 at
$1.00 per unit.  The Units are similar to a debenture and act as a
debt to the company. The term is for three years, and the Units
receive a return of a 30% annual stock dividend and no payments are
paid for the reduction of this debt.  After the six month holding
period the purchaser has the option to convert part or all of the Units into
common stock at an exercise price of 5 cents per share, based on the
principal invested. The note is secured by the general assets of the company
including the property at 128 Biodiesel Drive, Nettleton, MS.





On
November 23, 2009,we sold 22,500 units in a private placement for $22,500 at
$1.00 per unit.  The Units are similar to a debenture and act as a
debt to the company. The term is for three years, and the Units
receive a return of a 30% annual stock dividend and no payments are
paid for the reduction of this debt.  After the six month holding
period the purchaser has the option to convert part or all of the Units into
common stock at an exercise price of 5 cents per share, based on the
principal invested. The note is secured by the general assets of the company
including the property at 128 Biodiesel Drive, Nettleton, MS.





WHERE YOU CAN FIND MORE
INFORMATION





You are
advised to read this Form 10Q in conjunction with other reports and documents
that we file from time to time with the SEC. In particular, please read our
Quarterly Reports on Form 10Q, Annual report on Form 10-K, and Current Reports
on Form 8-K, including all amendments that we file from time to time. You may
obtain copies of these reports directly from us or from the SEC at the SEC’s
Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may
obtain information about obtaining access to the Reference Room by calling the
SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic
filers at its website http://www.sec.gov.


25


ITEM 3.   QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





We do not
hold any derivative instruments that engage in any hedging activities. Most of
our activity is in the development stage of our refining of
feedstock.





ITEM
4.  CONTROLS AND PROCEDURES




Evaluation
of Disclosure Controls and Procedures





Our Chief
Executive Officer and Chief Financial Officer evaluated the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this
report. Based on that evaluation, Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures as of the end of
the period covered by this report were effective such that the information
required to be disclosed by us in reports filed under the Securities Exchange
Act of 1934 is (i) recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms and (ii) accumulated and
communicated to the Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding disclosure. A controls system
cannot provide absolute assurance, however, that the objectives of the controls
system are met, and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have
been detected.





Our Chief
Executive Officer and Chief Financial Officer is responsible for establishing
and maintaining adequate internal control over financial reporting (as defined
in Rule 13a-15(f) under the Exchange Act). Our 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 accounting principles generally
accepted in the United States.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance of achieving their control
objectives. Furthermore, smaller reporting companies face additional
limitations. Smaller reporting companies employ fewer individuals and find it
difficult to properly segregate duties. Often, one or two individuals control
every aspect of the Company's operation and are in a position to override any
system of internal control. Additionally, smaller reporting companies tend to
utilize general accounting software packages that lack a rigorous set of
software controls.





Our Chief
Executive Officer and Chief Financial Officer evaluated the effectiveness of the
Company's internal control over financial reporting as of March 31, 2010. In
making this assessment, our Chief Executive Officer and Chief Financial Officer
used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control — Integrated Framework.
Based on this evaluation, our Chief Executive Officer and Chief Financial
Officer, concluded that, as of March 31, 2010, our internal control over
financial reporting was effective.





b)
Changes in Internal Control over Financial Reporting.





During
the Quarter ended March 31, 2010, there was no change in our internal control
over financial reporting (as such term is defined in Rule 13a-15(f) under the
Exchange Act) that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.


26


The
Company’s concern was the filing of our 2007 Form 10K/A on September 9, 2009 by
James Michael Ator the former CFO, without Board of Directors approval and
without approval from our independent auditors. The other area of concern was
the proper internal signature by the Board of Directors for all filings that are
issued. The Company’s former management further did not properly record the
acquisition of UBNA as the purchase method of accounting and recorded it as a
reverse merger and recapitalization. The acquisition was less than 51% and
should have been recorded as the purchase method of accounting.





The
Company’s Richard Craven the former CEO was also involved with the Mortenson and
LaCroix transactions as described in Note 12 to the financial statements.
Although former management asserts they had no knowledge of the Abellan scheme
or the freeze order, in the best interest of the Company they resigned,
surrendered the preferred A shares, and have no further affiliation with the
Company.  Due to the size of our Company and the costs associated to
remediate these issues, we still consider these concerns to be extremely
relevant.




PART
II – OTHER INFORMATION




ITEM
1. LEGAL PROCEEDINGS





There is
no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of our company or any of our
subsidiaries, threatened against or affecting our company, our common stock, any
of our subsidiaries or of our companies or our subsidiaries' officers or
directors in their capacities as such, in which an adverse decision could have a
material adverse effect.





ITEM 1A
- Risk Factors





Risk
Factors




You
should carefully consider the following risk factors together with the other
information contained in this Interim Report on Form 10-Q, and in prior reports
pursuant to the Securities Exchange Act of 1934, as amended and the Securities
Act of 1933, as amended.  If any of the risks factors actually occur,
our business, financial condition or results of operations could be materially
adversely affected. In such cases, the trading price of our common stock could
decline. We believe there are no changes that constitute material changes from
the risk factors previously disclosed in the prior reports pursuant to the
Securities Exchange Act of 1934, as amended and the Securities Act of 1933 and
include or reiterate the following risk factors:




Risk
Factors Related to Our Business





The Company Has
No Revenues Which Make It Difficult To Forecast Our Future
Results.


As a
result of having no sales or revenues, it is impossible to predict the Company's
future performance or the period of time in which it can sustain its
existence.


27


As we have had no operating history
as a producer of biodiesel, investors have no basis to evaluate our ability to
operate profitably.


The
Company has a limited operating history as the company was formed in August 13,
2004 and its operating subsidiary, Universal Bioenergy North America, Inc., was
formed in January 2007. The Company has not earned any revenues in our
contemplated biodiesel business. Accordingly, it may be difficult for investors
to evaluate its business prospects.





The
Company’s business is dependent upon the implementation of our business plan,
including our ability to make agreements with suppliers, customers, and with
respect to future investments. There can be no assurance that the Company’s
efforts will ultimately be successful or result in revenues or
profits.





Moreover,
the Company’s prospects must be considered in light of the risks and
uncertainties encountered by an early-stage company and in rapidly evolving
markets, such as other alternative energy and biofuels markets, where supply and
demand may change significantly in a short amount of time.


If we
cannot successfully address these risks, our contemplated business and the
results of our contemplated operations and financial position would suffer
potentially to the point where the company may need to cease
operations.





We
May Not Have Access To Sufficient Capital To Pursue Our Business And Therefore
Would Be Unable To Achieve Our Planned Future Growth.




We intend
to pursue a growth strategy that includes development of the Company business
and technology.  Currently we have limited capital which is
insufficient to pursue our plans for development and growth.  Our
ability to implement our growth plans will depend primarily on our ability to
obtain additional private or public equity or debt financing.  We are
currently seeking additional capital.  Such financing may not be
available at all, or we may be unable to locate and secure additional capital on
terms and conditions that are acceptable to us.  Our failure to obtain
additional capital will have a material adverse effect on our
business.





We
may be adversely affected by environmental, health and safety laws, regulations
and liabilities.





As we pursue our
business plan, we will become subject to various federal, state and local
environmental laws and regulations, including those relating to the discharge of
materials into the air, water and ground, the generation, storage, handling,
use, transportation and disposal of hazardous materials, and the health and
safety of our employees. In addition, some of these laws and regulations require
our suppliers and our contemplated distribution facilities to operate under
permits that are subject to renewal or modification. These laws, regulations and
permits can often require expensive pollution control equipment or operational
changes to limit actual or potential impacts to the environment. A violation of
these laws and regulations or permit conditions can have a material adverse
effect on our business.


28


Risk
Factors Related to Our Stock





Because
We Are Quoted On The OTCBB “Pink Sheets” Instead Of An Exchange Or National
Quotation System, Our Investors May Have A Tougher Time Selling Their Stock Or
Experience Negative Volatility On The Market Price Of Our
Stock.


Our
common stock is traded on the OTCBB “Pink Sheets”. The OTCBB “Pink Sheets” is
often highly illiquid, in part because it does not have a national quotation
system by which potential investors can follow the market price of shares except
through information received and generated by a limited number of broker-dealers
that make markets in particular stocks. There is a greater chance of volatility
for securities that trade on the OTCBB “Pink Sheets”as compared to a national
exchange or quotation system. This volatility may be caused by a variety of
factors, including the lack of readily available price quotations, the absence
of consistent administrative supervision of bid and ask quotations, lower
trading volume, and market conditions. Investors in our common stock may
experience high fluctuations in the market price and volume of the trading
market for our securities. These fluctuations, when they occur, have a negative
effect on the market price for our securities. Accordingly, our stockholders may
not be able to realize a fair price from their shares when they determine to
sell them or may have to hold them for a substantial period of time until the
market for our common stock improves.





Our
Common Stock Is Subject To Penny Stock Regulation





Our
shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be penny stock unless
that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
the NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
registrant's net tangible assets; or exempted from the definition by the
Commission. Since our shares are deemed to be "penny stock", trading in the
shares will be subject to additional sales practice requirements on
broker/dealers who sell penny stock to persons other than established customers
and accredited investors.





FINRA
Sales Practice Requirements May Also Limit A Stockholder's Ability To Buy And
Sell Our Stock.


In
addition to the “penny stock” rules described above, the Financial Industry
Regulatory Authority (FINRA) has adopted rules that require that in recommending
an investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to
recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. FINRA requirements make it more difficult
for broker-dealers to recommend that their customers buy our common stock, which
may limit your ability to buy and sell our stock and have an adverse effect on
the market for our shares.





We
May Not Have Access To Sufficient Capital To Pursue Our Business And Therefore
Would Be Unable To Achieve Our Planned Future Growth.





We intend
to pursue a growth strategy that includes development of the Company business
and technology.  Currently we have limited capital which is
insufficient to pursue our plans for development and growth.  Our
ability to implement our growth plans will depend primarily on our ability to
obtain additional private or public equity or debt financing.  We are
currently seeking additional capital.  Such financing may not be
available at all, or we may be unable to locate and secure additional capital on
terms and conditions that are acceptable to us.  Our failure to obtain
additional capital will have a material adverse effect on our
business.


29


Nevada  Law
And Our Articles Of Incorporation Protect Our Directors From Certain Types Of
Lawsuits, Which Could Make It Difficult For Us To Recover Damages From Them In
The Event Of A Lawsuit.




Nevada
law provides that our directors will not be liable to our company or to our
stockholders for monetary damages for all but certain types of conduct as
directors. Our Articles of Incorporation require us to indemnify our directors
and officers against all damages incurred in connection with our business to the
fullest extent provided or allowed by law. The exculpation provisions may have
the effect of preventing stockholders from recovering damages against our
directors caused by their negligence, poor judgment or other circumstances. The
indemnification provisions may require our company to use our assets to defend
our directors and officers against claims, including claims arising out of their
negligence, poor judgment, or other circumstances.




The
Notes to Our Financial Statements Contain Explanatory Language That Some Doubt
Exists About Our Ability To Continue As A Going Concern





Our
financial statements contain explanatory language that some doubt exists about
our ability to continue as a going concern. The notes discloses that we are in
the development stage with limited resources, used cash in operations of
$872,570from
inception, a working capital deficiency of $844,323 and have an accumulated
deficit during the development stage of $14,950,232. This raises substantial
doubt about our ability to continue as a going concern. Our ability to continue
as a going concern is dependent on our ability to raise additional capital and
implement its business plan. The financial statements do not include any
adjustments that might be necessary if we are unable to continue as a going
concern.




The
failure to raise additional capital and implement its business plan could have a
material adverse effect on our business, financial condition, and results of
operations. If we are unable to obtain sufficient financing in the near term or
achieve profitability, then we would, in all likelihood, experience severe
liquidity problems and may have to curtail our operations. If we curtail our
operations, we may be placed into bankruptcy or undergo liquidation, the result
of which will adversely affect the value of our common shares.




We
Do Not Intend To Pay Dividends




We do not
anticipate paying cash dividends on our common stock in the foreseeable future.
We may not have sufficient funds to legally pay dividends. Even if funds are
legally available to pay dividends, we may nevertheless decide in our sole
discretion not to pay dividends. The declaration, payment and amount of any
future dividends will be made at the discretion of the board of directors, and
will depend upon, among other things, the results of our operations, cash flows
and financial condition, operating and capital requirements, and other factors
our board of directors may consider relevant. There is no assurance that we will
pay any dividends in the future, and, if dividends are rapid, there is no
assurance with respect to the amount of any such dividend.


30


Compliance
with changing regulation of corporate governance and public disclosure will
result in additional expenses and pose challenges for our management
team.




Changing
laws, regulations and standards relating to corporate governance and public
disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection
Act and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act
and SEC regulations, have created uncertainty for public companies and
significantly increased the costs and risks associated with accessing the U.S.
public markets. Our management team will need to devote significant time and
financial resources to comply with both existing and evolving standards for
public companies, which will lead to increased general and administrative
expenses and a diversion of management time and attention from revenue
generating activities to compliance activities.





SHOULD
ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE
UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY
FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR
PLANNED.





ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS





There
were no sales of unregistered upon senior securities during the period ended
March 31, 2010. Except for the Company issued 750,000 shares of common stock to
its prior CFO for extinguishment of his employment contract and Company issued
300,000 shares of common stock to a consultant and expensed
$18,000.  The offer and sale of such shares of our common stock were
effected in reliance on the exemptions for sales of securities not involving a
public offering, as set forth in Rule 506 promulgated under the Securities Act
of 1933 (the “Securities Act”) and in Section 4(2) of the Securities Act,
based on the following: (a) the investors confirmed to us that they were
“accredited investors,” as defined in Rule 501 of Regulation D promulgated under
the Securities Act and had such background, education and experience in
financial and business matters as to be able to evaluate the merits and risks of
an investment in the securities; (b) there was no public offering or
general solicitation with respect to the offering; (c) the investors were
provided with certain disclosure materials and all other information requested
with respect to our company; (d) the investors acknowledged that all
securities being purchased were “restricted securities” for purposes of the
Securities Act, and agreed to transfer such securities only in a transaction
registered under the Securities Act or exempt from registration under the
Securities Act; and (e) a legend was placed on the certificates
representing each such security stating that it was restricted and could only be
transferred if subsequent registered under the Securities Act or transferred in
a transaction exempt from registration under the Securities Act.




Item 3. Defaults Upon Senior
Securities




There
were no defaults upon senior securities during the period ended March 31,
2010.





Item 4. Removed and
Reserved




Item 5. Other Information




There is
no information with respect to which information is not otherwise called for by
this form.


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Item 6. Exhibits




31.1 Certification
of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley
Act.





31.2 Certification
of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley
Act.





32.1 Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley Act.





32.2 Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley Act.





SIGNATURES




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




UNIVERSAL BIOENERGY, INC.Dated:
      August 17, 2010
                            
                            By
                            /s/ Vince M. GuestVince
      M. GuestChief
      Executive Officer (Principle Executive Officer)Principle
      Financial Officer, and
President


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