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 June 30, 2010





OR





o 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  x
    No   ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  ̈ No
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
            
            OutstandingatAugust14,2010Common
      stock, $0.001 par value
            
            45,455,000








UNIVERSAL
BIOENERGY, INC.


INDEX


INDEX
TO FORM 10Q FILING




FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009





TABLE
OF CONTENTS





PART
I


FINANCIAL
INFORMATION





PAGEPART
      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
                            
                            23Item 3
                            
                            Quantitative
      and Qualitative Disclosures About Market Risk
                            
                            32Item 4.
                            
                            Controls
      and Procedures
                            
                            32PART
      II - OTHER INFORMATIONItem 1.
                            
                            Legal
      Proceedings
                            
                            34Item 1A
                            
                            Risk
      Factors
                            
                            34Item 2.
                            
                            Unregistered
      Sales of Equity Securities and Use of Proceeds
                            
                            37Item 3.
                            
                            Defaults
      Upon Senior Securities
                            
                            38Item 4.
                            
                            Removed
      and Reserved
                            
                            38Item 5
                            
                            Other
      information
                            
                            38Item 6.
                            
                            Exhibits
                            
                            38




CERTIFICATIONS





Exhibit
      31 – Management certificationExhibit
      32 – Sarbanes-Oxley Act







PART
I — FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS


UNIVERSAL
BIOENERGY, INC.
 
 CONDENSED
CONSOLIDATED BALANCE SHEET
 (Unaudited)
                    
                    
                    (Audited)June 30, 2010
                    
                    
                    December 31, 2009ASSETS:
      (Substantially pledged)CURRENT
      ASSETSCash
                    
                    $
                    5,371
                    
                    
                    $
                    2,819Accounts
      receivables - natural gas sales contracts
                    
                    
                    2,316,755
                    
                    
                    
                    -Prepaid
      expenses
                    
                    
                    7,331
                    
                    
                    
                    -Total
      current assets
                    
                    
                    2,329,457
                    
                    
                    
                    2,819PROPERTY
      AND EQUIPMENT
                    
                    
                    303,094
                    
                    
                    
                    290,000OTHER
      ASSETSIntangible
      assets
                    
                    
                    250,000
                    
                    
                    
                    -Deposit
                    
                    
                    6,320
                    
                    
                    
                    3,100Total
      other assets
                    
                    
                    256,320
                    
                    
                    
                    3,100TOTAL
      ASSETS
                    
                    $
                    2,888,871
                    
                    
                    $
                    295,919LIABILITIES
      AND STOCKHOLDERS' DEFICIT:CURRENT
      LIABILITIES:Accounts
      payable - natural gas purchase contracts
                    
                    $
                    2,314,001
                    
                    
                    $
                    -Accounts
      payable and accrued expenses
                    
                    
                    1,059,061
                    
                    
                    
                    725,790Advances
      from affiliates
                    
                    
                    214,142
                    
                    
                    
                    54,050Notes
      payable
                    
                    
                    70,000
                    
                    
                    
                    70,000Total
      current liabilities
                    
                    
                    3,657,204
                    
                    
                    
                    849,840TOTAL
      LIABILITIES
                    
                    
                    3,657,204
                    
                    
                    
                    849,840STOCKHOLDERS'
      DEFICIT:Preferred
      stock Series A, $.001 par value, 1,000,000 shares authorized, 0 and
      100,000 issued and outstanding shares June 30, 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 June 30, 2010 and December 31, 2009,
      respectively
                    
                    
                    232
                    
                    
                    
                    232Common
      stock, $.001 par value, 200,000,000 shares authorized; 45,455,000 and
      39,405,000 issued and outstanding as of June 30, 2010 and December
      31, 2009, respectively
                    
                    
                    45,455
                    
                    
                    
                    39,405Additional
      paid-in capital
                    
                    
                    14,603,322
                    
                    
                    
                    14,183,804Noncontrolling
      interest in consolidated subsidiary
                    
                    
                    (26,775
                    )
                    
                    
                    -Accumulated
      deficit
                    
                    
                    (15,390,667
                    )
                    
                    
                    (14,777,460
                    )Total
      stockholders' deficit
                    
                    
                    (768,333
                    )
                    
                    
                    (553,919
                    )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                    
                    $
                    2,888,871
                    
                    
                    $
                    295,919
 
 The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  3
 
 UNIVERSAL
BIOENERGY, INC.
 
 CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS - unaudited
 For the Three Months Ended
                  
                  
                  For the Six Months EndedJune 30,
                  
                  
                  June 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009REVENUES
                  
                  $
                  13,966,895
                  
                  
                  $
                  -
                  
                  
                  $
                  13,966,895
                  
                  
                  $
                  -COST
      OF SALES
                  
                  
                  13,951,362
                  
                  
                  
                  -
                  
                  
                  
                  13,951,362
                  
                  
                  
                  -GROSS
      PROFIT
                  
                  
                  15,533
                  
                  
                  
                  -
                  
                  
                  
                  15,533
                  
                  
                  
                  -OPERATING
      EXPENSES:General
      and administrative
                  
                  
                  470,568
                  
                  
                  $
                  474,486
                  
                  
                  $
                  639,195
                  
                  
                  $
                  627,966Total
      operating expenses
                  
                  
                  470,568
                  
                  
                  
                  474,486
                  
                  
                  
                  639,195
                  
                  
                  
                  627,966LOSS
      FROM OPERATIONS
                  
                  
                  (455,035
                  )
                  
                  
                  (474,486
                  )
                  
                  
                  (623,662
                  )
                  
                  
                  (627,966
                  )OTHER
      (INCOME) AND EXPENSES:Interest
      expense
                  
                  
                  5,178
                  
                  
                  
                  -
                  
                  
                  
                  10,356
                  
                  
                  
                  -Total
      other expense
                  
                  
                  5,178
                  
                  
                  
                  -
                  
                  
                  
                  10,356
                  
                  
                  
                  -NET
      PROFIT (LOSS)
                  
                  $
                  (460,213
                  )
                  
                  $
                  (474,486
                  )
                  
                  $
                  (634,018
                  )
                  
                  $
                  (627,966
                  )Net
      loss attributable to noncontrolling interest
                  
                  $
                  20,811
                  
                  
                  $
                  -
                  
                  
                  $
                  20,811
                  
                  
                  $
                  -NET
      INCOME (LOSS) ATTRIBUTABLE TO UNIVERSAL
                  
                  $
                  (439,402
                  )
                  
                  $
                  (474,486
                  )
                  
                  $
                  (613,207
                  )
                  
                  $
                  (627,966
                  )NET
      PROFIT (LOSS) PER SHARE:Basic
      and diluted loss per share
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.02
                  )Weighted
      average of shares outstanding
                  
                  
                  45,455,000
                  
                  
                  
                  28,864,451
                  
                  
                  
                  42,948,923
                  
                  
                  
                  25,210,028
 
 The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  4
 
 UNIVERSAL
BIOENERGY, INC.
 
 CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS - unaudited
 For the Six Months EndedJune 302010
                  
                  
                  2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Loss
                  
                  $
                  (613,207
                  )
                  
                  $
                  (627,966
                  )Adjustments
      to reconcile net loss to net cash (used in) operating
      activities:Common
      stock issued for services
                  
                  
                  18,000
                  
                  
                  
                  307,999Changes
      in assets and liabilities:Accounts
      recievable - gas sales contracts
                  
                  
                  (1,160,698
                  )
                  
                  
                  -Prepaid
      expenses
                  
                  
                  (7,331
                  )
                  
                  
                  -Accounts
      payables - gas purchase contracts
                  
                  
                  1,174,150
                  
                  
                  
                  -Accounts
      payable and accrued expenses
                  
                  
                  420,955
                  
                  
                  
                  294,992Deposits
                  
                  
                  (3,220
                  )
                  
                  
                  -Net
      cash used by operating activities
                  
                  
                  (171,351
                  )
                  
                  
                  (24,975
                  )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of property and equipment
                  
                  
                  (409
                  )
                  
                  
                  -Net
      cash used in investing activities
                  
                  
                  (409
                  )
                  
                  
                  -CASH
      FLOWS FROM FINANCING ACTIVITIES:Advances
      from affiliates
                  
                  
                  160,886
                  
                  
                  
                  24,975Repayment
      of advances
                  
                  
                  (7,794
                  )
                  
                  
                  -Non-controlling
      interest in consolidated subsidiary
                  
                  
                  20,811
                  
                  
                  
                  -Net
      cash provided by financing activities
                  
                  
                  173,903
                  
                  
                  
                  24,975INCREASE
      IN CASH
                  
                  
                  2,552
                  
                  
                  
                  -CASH,
      BEGINNING OF YEAR
                  
                  
                  2,819
                  
                  
                  
                  -CASH,
      END OF YEAR
                  
                  $
                  5,371
                  
                  
                  $
                  -SUPPLEMENTAL
      CASH FLOW INFORMATION:Interest
      paid
                  
                  $
                  -
                  
                  
                  $
                  -Taxes
      paid
                  
                  $
                  -
                  
                  
                  $
                  -Common
      stock issued in acquisition
                  
                  $
                  250,000
                  
                  
                  $
                  -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


Overview
of Our Company




Universal
Bioenergy Inc., is an alternative energy company headquartered in Irvine,
California. Our new strategic direction is to develop and market a diverse
product line of alternative and natural energy products including, natural gas,
solar, biofuels, wind, wave, tidal, and green technology
products.   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 have adapted 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 our
company and more value to our shareholders.




Company
History





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
originally 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’s refinery is
located in Nettleton, Mississippi. UBNA and UBRG 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 from Palomine Mining Inc., 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.




6




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 an accumulated losses  through June 30, 2010 of
$15,390,667.  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.   To continue as a
going concern, Management is planning to raise additional
funds through debt or equity capital to
fund the growth of the Company.Management
has re-engineered and re-positioned the Company, through its recent mergers and
acquisitions.. Management is hopeful that the Company will be successful in
raising additional capital to fund the Company’s plans for growth and expansion.




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 generating continuing additional revenue through
the sale of natural gas and other alternative energy products. Although the
Company plans to pursue additional debt and/or equity 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.




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 and six months 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:





7




Principle of
Consolidation





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





On April
12, 2010 the Company acquired a direct 49% financial interest in
NDR.  Additionally, an entity owned by officers of the Company
acquired an additional 2% financial interest in NDR for a total direct and
indirect financial interest of 51% of NDR The operating agreement of NDR, an LLC
provides for voting in proportion to ownership.  The Company has 51%
voting control of NDR and has accordingly consolidated its financial position,
results of operations, and cash flows into these 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”.





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 June 30, 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.




8




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
                
                40
      YearsPlant
      Equipment
                
                15
      YearsFurniture
      and Fixture
                
                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.




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.




9




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 June 30,
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.




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.




10




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.




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.




11




NOTE
5 - NET LOSS PER SHARE





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





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





For the Six
                    Months Ended
                    June 30, 2010
                  
                  
                  For the Six Months
                    Ended
                    June 30, 2009Income
      and Losses available for common shareholders
                  
                  $
                  (634,018
                  )
                  
                  $
                  (627,966
                  )Weighted
      average common shares outstanding
                  
                  
                  (42,948,923
                  )
                  
                  
                  (25,210,028
                  )Basic
      and fully diluted loss per share
                  
                  $
                  .01
                  
                  
                  $
                  (.02
                  )


Net
income and 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 45,455,000
are issued and outstanding as of June 30, 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 June 30,
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.




On May
25, 2010, the Company granted 2,000,000 to a consultant for her services
rendered in the acquisition of NDR Energy LLC, as of June 30, 2010 those shares
have not been issued.





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.





At June
30, 2010, there were no outstanding stock options or warrants.




12




On June
18, 2010 the Board of Directors approved increasing the authorized common shares
to 1,000,000,000 and is in the process of filing the necessary paperwork with
the State of Nevada.





Issuance
of preferred shares





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





Converting
                  
                  Preferred B
                  
                  
                  Debt & Accrued
                  
                  
                  Common StockParties
                  
                  Sharesissued
                  
                  
                  InterestConverted
                  
                  
                  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 and the
preferred stock is now recorded as treasury stock until the company cancels the
shares.





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 5.4%
dilution as of June 30, 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 June 30 2010.




13




NOTE
7 - PROPERTY AND EQUIPMENT





The
Company has fixed assets as of June 30, 2010 and December 31, 2009 as
follows:





June 30,
                    2010
                  
                  
                  December 31,
                    2009Equipment
                  
                  $
                  178,094
                  
                  
                  $
                  165,000Land
                  
                  
                  50,000
                  
                  
                  
                  50,000Building
                  
                  
                  75,000
                  
                  
                  
                  75,000Accumulated
      depreciationTotal
                  
                  $
                  303,094
                  
                  
                  $
                  290,000





There was
no depreciation expense for the three months ended June 30, 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





June 30, 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 and
determined that bifurcation was not required.





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."





On April
12, 2010, 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.  See Note 6
for additional discussion.





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.





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.




17




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.





NOTE
11 – ACQUISTION





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 for 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.





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.




18




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, arrange, establish
or otherwise make available to  NDR a loan or line of creditto
provide $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.





The
following table summarizes the consideration paid by Universal and the amounts
of the assets acquired at the acquisition date:


Purchase Price Allocation
                        
                        April 12, 2010Consideration:Equity
      instruments (5,000,000 common shares of Universal Bioenergy
      Inc.)
                        
                        $
                        250,000Recognized amounts of identifiable assets
      acquired:Client
      List
                        
                        
                        250,000Total
      assets
                        
                        $
                        250,000Fair
      value of total assets
                        
                        $
                        250,000





The
following (unaudited) proforma consolidated results of operations have been
prepared as if the acquisition had occurred at January 1, 2009 and
2010.




Three Months Ended
                      
                      
                      Six Months Ended2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009REVENUES
                      
                      
                      13,966,895
                      
                      
                      
                      3,124,065
                      
                      
                      
                      25,182,463
                      
                      
                      
                      11,886,656Net
      Loss
                      
                      
                      (434,224
                      )
                      
                      
                      (478,025
                      )
                      
                      
                      (614,197
                      )
                      
                      
                      (633,079
                      )Net
      income per share basic and diluted
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.03
                      )Weighted
      average of shares outstanding
                      
                      
                      45,455,000
                      
                      
                      
                      28,864,451
                      
                      
                      
                      42,948,923
                      
                      
                      
                      25,210,028




19




NOTE 12
-  CONTINGENCIES





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.




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.




20




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.




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 June 30, 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 June 30, 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




NOTE
13 – SUBSEQUENT EVENTS





On May
25, 2010, the Company granted 2,000,000 to a consultant for her services
rendered in the acquisition of NDR Energy LLC, as of June 30, 2010 those shares
have not been issued.
  On June
18, 2010 the Company approved amend the Articles of Incorporation to increase
the authorized from 200,000,000 to 1,000,000,000 shares with a par value of
$.001.  The Company has not yet amended its articles of
incorporation.
  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.
 
 On July
1, 2010 the company engaged the services of ICaptial Finance, Inc. to provide
consulting services.   The Company also converted Don deLuna’s
salary of $5,673 to 141,825 common shares of the company.  The Company
further granted Don deLuna 1,000,000 common shares for his services on the
NDR Energy Group, LLC acquisition.
  On July
22, 2010 the Board of Directors approved the employement agreements of Vince
Guest and Solomon R.C. Ali, further the Company cancelled the 100,000 Series A
preferred Shares held by Richard C. Craven.
  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 at that
date.


*  *  *  *  *  *


22





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.




23




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 our 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. We are also pursuing  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. Natural gas is one of the cleanest burning fuels available, and
is a very important segment of the U.S. economy. Based  on
Management’s review of NDR’s financial records, NDR generated
revenues  of  $25,182,463 in energy and fuel sales for the
period of January 1, 2010 through June 30, 2010. These revenues
have  been reviewed, however they have not yet been audited by the
Company’s Auditors. The Company anticipates the formal audit of these financial
records, to be completed soon, and the information will be reported and filed
with the SEC.




The
Company intends to expand the product offerings of NDR Energy Group to include
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  on
our 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.




24




As
indicated in our Form 8K filed on 1/25/2010, based on industry standards of
valuation utilizing current average P/E ratios, as noted by Standard &
Poor’s at a multiple of 15 - 17 times earnings, a valuation for the air cargo
company of $17.25 million to $19.55 million dollars is a practical estimate of
additional market value to Universal Bioenergy.





ICapital Finance
Inc.On June 21, 2010,the Company signed an
agreement to retain the services of iCapital Finance Inc., based in Irvine,
California  iCapital is a financial services company, specializing in
the Micro and Small Cap Public Companies and Middle Market Private Companies
offering a wide range of financial advisory services, including; Mergers &
Acquisitions, equity and debt financing, strategic advice, and financial
consulting.  Its primary focus is in
the  Technology,  Healthcare,  Media &
Telecommunications and  Financial Services industries. iCapital has
cultivated and maintains strong affiliations with top-tier firms including;
GMAC, J.P Morgan, Greenwich Capital, and Prudential Securities.




iCapital
will be providing their advisory services to Universal for  financial
and strategic business consulting, asset  and technology purchases,
and  assisting   the Company in its growth plans
for  mergers and acquisition.  They will
also  assist us in our  efforts to position the Company to
qualify, and apply for listing on other  stock exchanges, which list
similarly situated alternative energy technology companies.




Norcor
Technologies Corporation.  On July 28, 2010,  we
executed a Letter of Intent (“LOI”) with Norcor Technologies Corporation
(“Norcor”), of Charlotte, North Carolina, upon which we will acquire a major
stake in Norcor. The terms and conditions of the acquisition are being
negotiated, and will be determined in the definitive agreement. No assurances
can be provided that a definitive agreement will be executed.





According
to our Management,  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. Norcor’s primary focus
is  selling  transportation fuels,
biodiesel,  energy services, and facility energy efficiency retrofits.
Norcor’s management  states that they are in discussions with the U.S.
Military for a contract to provide several of their bases with approximately
$49,000,000 in biodiesel and transportation fuels, over the next one to three
years.  Management has been informed, they are also
evaluating  the building of a new biodiesel fuel blending facility, a
solar energy plant in the U.S. and have an interest in  natural gas
wells in Oklahoma.





We intend
to work with Norcor to further its business model and expansion plans in the
fuel and energy services industry. Our management believes that Norcor
will  us allow us to market biofuels, transportation fuels and energy
services, to Norcor’s  customer
base  and  marketing channels, as part of our new business
focus. This major shift in strategy means that, by obtaining supplies of natural
gas directly from the wellhead, Universal would become a supplier and would make
significant more revenues and profits from higher margins.  The
natural gas would  be marketed  by NDR Energy Group, to its
customers. Based solely on our  initial due diligence, we believe that
if the acquisition is completed,
the  potential  profit  to be generated from this
acquisition  is in the multi-million dollar range
annually.




25


Gas Purchase
Agreement with CenterPoint Energy Resources Corp.On August 11, 2010, NDR
Energy Group, signed a Gas Purchase Agreement with  CenterPoint Energy
Resources Corp., a wholly owned subsidiary of CenterPoint Energy Inc., based in
Houston, Texas. CenterPoint Energy Inc., reported total  revenues of
$8.2 Billion, including  $3.7 Billion for their National Gas
Distributions operations, for the year ended December 31, 2009.




Under the
terms of the agreement, NDR Energy Group will sell natural gas
directly  to  CenterPoint Energy Resources
Corp.  CenterPoint Energy Inc., (NYSE: CNP), based on their filings
with the SEC,  is the nation’s third largest publicly
traded  gas distribution company, with 3.2 million natural gas
customers in six states, including Arkansas, Louisiana, Minnesota, Mississippi,
Oklahoma, and Texas.




With the
signing of the agreement, our company and NDR Energy will assist CenterPoint
Energy Resources Corp., in providing clean and reliable natural gas to its 3.2
million residential, commercial and industrial customers.
Management  believes, although we cannot guarantee, this transaction
with CenterPoint Energy Resources Corp., should generate millions of dollars in
additional  revenues, for the Company. Management also believes the
transaction should have a significant impact on Universal’s market value and
assets.
 
 OTC Bulletin
Board.On August 18, 2010, our common stock  was approved
to   began  trading on the OTC Bulletin Board again.
The OTC Bulletin Board® (OTCBB) is a regulated quotation service that displays
real-time quotes, last-sale prices, and volume information in over-the-counter
(OTC) equity securities.
 
 The
Company’s Future Plans and Outlook
  Universal Gas
Supply Division.As part of our plans for growth and expansion, we are
proposing to  establish a new division, whereby we will be a “direct
supplier” of   natural gas to our 22 current major
utility  customers and our future customers. We will then be able to
purchase the gas at  wholesale, or at “wellhead pricing”. Management
believes that the major benefits to  our company are, greater
revenues, significantly higher profit margins, lower product costs, increased
assets, and increased competitiveness. This will also allow us to implement our
business strategy to become a more  vertically integrated company,
giving  us greater control over the  supply chain, directly
from the producer, (with our company as the supplier), through marketing,
distribution, and selling directly to the customer.  Our management is
currently in discussions with several gas/oil production companies, to obtain
agreements to purchase natural gas and other fuels directly from the
wellhead,  to market directly to our customers. The gas would then be
marketed and sold to our customers, through our subsidiary, NDR Energy
Group.




According
to the U.S. Energy Information Administration, (EIA) energy from natural gas
accounts for 24 percent of total energy consumed in the United States, making it
a vital component of the nation's energy supply. Additionally, the U.S. Energy
Information Administration, in its Annual Energy Outlook 2009 Report, estimates
that natural gas demand in the United States could be 24.36 Tcf, (Trillion Cubic
Feet), by the year 2030. The EIA, Natural Gas Year-In Review 2009, Report
stated,  Over the past several years, natural gas use for electric
power has increased, with gas making up an increasing percentage share of total
generation relative to coal. In 2009, natural gas made up almost 24 percent of
net power generation with 931,000 Megawatt-hours (MWH) of electric power
generated from natural gas. By comparison, in 1996, natural gas made up only 14
percent of power generation. Therefore, we feel this increase in future demand
for natural gas should prove to be very favorable for our plans to sell gas to
our customers as a “direct supplier”.




26




Universal
Energy Services Division.As part of our
plans for growth and expansion, we are proposing to  establish a new
division, we provide energy and facilities services to our existing and growing
customer base. Theplan  would
include marketing and implementing facilities  services, building
modernization, energy system retrofits capital improvement projects, facilities
systems, energy  supplies, energy management
consulting  services, and / cost reduction
strategies.  Potentialcustomers would
encompass Federal and State Departments and
Agencies,  Cities, Municipalities, and  large
commercial and industrial corporate
clients.




Mergers &
Acquistions. Management is planning for more aggressive growth and
expansion, by additional  mergers and acquisitions, to
generate  significant revenues and profits,  and by shifting
our focus to invest in far  more profitable  alternative
energy technologies. We anticipate, but can provide no
assurances,   acquiring 5 to 10 additional new companies in the
next   2 years. Some of the companies being targeted are, 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, and other companies to build tidal energy facilities, acquisition of
energy technology patents and licenses.




National Stock
Exchange Listing. With its planned growth by mergers, acquisitions, and
future revenues, Management is evaluating and  positioning the Company
to potentially qualify, and apply to be listed on a major national stock
exchange, which stock exchanges list similarly situated alternative energy
technology companies, such as NASDAQ,  NYSE Amex Equities, or
others.




Management
has fully reviewed the qualifications for the relative national stock exchanges
to determine which one we can best position the Company to qualify for, and
apply to be listed. Therefore, on June 18, 2010 the Company approved amending
the Articles of Incorporation to increase the amount of authorized shares of
common stock from 200,000,000 to 1,000,000,000 shares with a par value of $.001.
One of the qualifications requirements to be listed on most stock exchanges is a
minimum bid price for  a company’s shares of stock. The minimum share
bid price to  qualify for NASDAQ, is $4.00 per share, and for NYSE
Amex, the minimum share price is $2.00 to $3.00 per share, depending on which
initial listing standard a company may qualify for. For the Company to qualify
for either of those to stock exchanges, our share price would have to increase
to the $2.00 to $4.00 range. Management believes that, if we
can  successfully position the Company to qualify to meet the listing
requirements for one of the stock exchanges, it would greatly increase the
market value of  the Company, and should  make
it  attractive to more retail and institutional investors. We also
feel this would be of great benefit to our shareholders.





Financial
Analysis Summary and Projected Revenues and Earnings.





New Business
Model.At our Strategic Business Summit in Las Vegas, in December 2009,
we  announced  we were charting a bold new course to grow by
mergers and acquisitions, and by shifting our  focus to invest in
far  more profitable  alternative energy technologies. This
will allow  us to drive our business forward this year to build solid
revenue and profits.  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 have adapted 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 even greater revenues
for our company and more value to our shareholders.




27




Market
Expansion. Management believes that there are currently
there  are 3240 utilities in the United States. Through NDR, we
have firm contracts signed with 22 of these major utilities, and are in
discussions with another 14 utility companies to obtain contracts from them
also. Our plans are to develop an aggressive sales force, to obtain agreements
with  a total of 100utilities, andother customers
including, Federaland
State Departments and
Agencies,  Cities, Municipalities,and  large commercial and industrial corporate clients, in the next 12 to 24
months.This
will give us a much greater market share, more customers for our gas supply
division, thereby further increasing our revenues and
profits.
 
 Analysis of
Current Results of Operations. With the aggressive pursuit of producing
revenues, current management has created significant value and
generated  revenues  of $13,966,895, since the
acquisition of NDR Energy on April 12, 2010,when previously there were
no revenue generated in the prior 2 to 3 years. The high proportionate cost of
sales relative to the gross revenues, reflected in this period, is due to
purchasing the gas from some of the suppliers at  near retail cost,
and additional high financing and factoring costs added to the gas by the
suppliers. This has resulted in a reduced gross profit margin for this period,
as
reflected in the financial information section of this report. Management
plans are  to reduce the purchasing cost of  the gas, and
the financing cost, by obtaining our own  credit facility, and lines
of credit. This will allow us to purchase the gas in larger quantities, with
greater economies of scale, on better terms, at lower costs and reduce the high
financing costs, thereby significantly   increasing our the gross
profit. We have already submitted our documentation to several financial
institutions and funding companies to obtain the credit facilities.
 
 To
provide us with even greater revenues and profit, our management is in
discussions with several gas/oil production companies, to purchase natural gas
and other fuels directly from the wellhead, at wholesale or “wellhead
prices”  to market directly to our customers. Then our management
believes, but cannot guarantee, we will be a supplier, thereby
generating  greater revenues, significantly higher profit margins,
lower product costs, increased assets, and increased
competitiveness.
 
 To
collect on our accounts receivables, typically, after the gas is delivered from
our supplier to our customer, an invoice is submitted to the customer between
the  10th and
15th
of the month. The  customer then, in accordance with our “Sale and
Purchase Agreement”,  sends us full payment via wired funds by the
25th
of the month,  or 10 –15 days after receipt of the
invoice.
 
 Our
current “total assets” have increased by 976%, to $2,888,971 for the period
ending  June 30, 2010, from $295,919 for the year
ending  December 31 of 2009. Our current estimated book value per
share based on our company’s stockholders equity of $2,888,871 is $0.064 per
share.   We have also  reduced the net “losses from
operations”, by 65%, to a net loss $219,402 for the period ending June 30, 2010,
from $627,966 in the period ending June 30, 2009, a total  reduction
of $408,564.  Based on our plans for growth and expansion, and
increasing revenues through sales of natural and other products, we believe we
will continue the trend to reduce our net losses down to zero, and then move our
company toward solid profitability.




28
  Analysis of
Projected Revenue, Earnings and Market Value. The management
of  our company has already acted in accordance with their new
business strategy. As part of the execution of the plan, on April 12, 2010, we
completed the  acquisition of NDR Energy Group, a marketer of natural
gas and energy.  Based  on Management’s review of NDR’s
financial records, NDR generated revenues  of  $25,182,463
in energy and fuel sales for the period of January 1, 2010 through June 30,
2010. Due to the acquisition, we has generated revenues of $13,966,895, from the
close of the transaction through the end of June 30, 2010 although our cost of
sales reduced our profit from these revenues to just over $15,000.  We
anticipate the formal audit of these financial records, will be completed soon,
and the information will be reported and filed with the SEC.
 
 Management
believes,  but cannot guarantee, that it can sell
approximately1,136,000 MMBtus or  $5.21 million, in  natural
gas  to each of its 22 customers on a monthly basis. This is based on
the NYMEX Henry Hub July 2010 MTD, (month-to-date) average price, of $4.59 per
MMBtu’s. This would result in a projected 25,000,000 MMBtus monthly or $114.8
million in monthly revenues from sales of gas to all of our 22 customers.
The  objective would be to sell 300,000,000 MMBtus annually, resulting
in a  projected $1.377 billion in revenues annually from the sales of
natural gas alone. This would result in a conservatively projected net profit to
the Company of $21 million or more annually, based on purchasing the gas from
our current suppliers. Although no assurances of performance can be provided, we
believe that when our company establishes it own gas supply division, then the
estimated net earnings could  be in the range of $75 million annually
or significantly higher.  Additionally, with the acquisition of
another proposed 100 customers, this will result in even higher revenues and
profits in the future.


Future Capital
Funding. To ensure our ability to  develop a long term
profitable  business,  Management is planning to raise
additional funds  in  debt or equity
capital to fund the growth of our company.We anticipate using the
proceeds to purchase  some of the  companies we have
targeted for future acquisitions, and some for working capital.
Management believes, although we cannot guarantee, that we should be
successful in raising additional capital to fund the Company’s plans for growth
and expansion.


On June
18, 2010 the Company approved amending the Articles of Incorporation to increase
the amount of authorized shares of common stock from 200,000,000 to
1,000,000,000 shares with a par value of $.001.  The purpose of
increasing the number of shares of common stock is to use them for business and
financial purposes, including raising capital, for mergers and acquisitions,
acquiring products or services in exchange for stock, attracting and retaining
employees, increasing our shareholder base, and being able to respond rapidly to
opportunities that arise in the marketplace.
  29
 
 The
raising of  additional capital through the sale of equity may result
in  a dilution of the current shareholders interests. However,
management anticipates that the shareholders  would likely receive
greater potential financial rewards by means of a significant
increase  in the price of the stock, greater market value of the
Company, and more liquidity.   Since Management has re-engineered
the Company by creating more value to it, through its recent acquisitions, and
is positioning it to qualify/apply to be listed on another stock exchange, we
believe this should  make it  attractive to more retail and
institutional investors. We feel this would be of great benefit to our
shareholders.


History
of Universal Bioenergy North America





Our
subsidiary, Universal Bioenergy North America, Inc. is a 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. . 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 August summer
recess.




RESULTS
OF OPERATIONS





For
the Three and Six Months Ended June 30, 2010 compared to June 30,
2009




Universal
Bioenergy Inc.
 
 Analysis of
Current Operations. Management has created significant value and
generated  revenues  of $13,966,895, since the acquisition
of NDR Energy on April 12, 2010, when previously there was none generated in the
prior 2 to 3 years. The high proportionate cost of sales relative to the gross
revenues, reflected in this period, is due to purchasing the gas from some of
the suppliers at  near retail cost, and additional high financing and
factoring costs added to the gas by the suppliers. This has resulted in a
reduced gross profit margin for this period. Management plans are  to
reduce the purchasing cost of  the gas, and the financing cost, by
obtaining our own  credit facility, and lines of credit. This will
allow us to purchase the gas in larger quantities, with greater economies of
scale, on better terms, at lower costs and reduce the high financing costs,
thereby significantly   increasing our the gross profit. We have
already submitted our documentation to several financial institutions and
funding companies to obtain the credit facilities.
  Our
general and administrative expenses increase to $470,568 and $474,486 for the
three months ended June 30, 2010 and 2009, respectively as compared to $639,195
and $627,966 for the six months ended June 30, 2010 and 2009, respectively. The
primary reason for the increase in general and administrative expenses is that
the company issued $395,569 in our common stock as compensation for services for
the six months ended June 30, 2010.
 
 We
incurred losses of approximately $460,213 and $474,486 for the three months
ended June 30, 2010 and 2009 as compared to $634,018 and $627,966 for the six
months ended June 30, 2010 and 2009. Our accumulated losses through June 30,
2010 amount to $15,390,667.
  To
provide us with even greater revenues and profit, the Company is in discussions
with several gas/oil production companies, to purchase natural gas and other
fuels directly from the wellhead, at wholesale or “wellhead
prices”  to market directly to our customers. Then  the
Company will be a supplier, thereby generating  greater revenues,
significantly higher profit margins, lower product costs, increased assets, and
increased competitiveness.
  30
  To
collect on our accounts receivables, typically, after the gas is delivered from
our supplier to our customer, an invoice is submitted to the customer between
the  10th and
15th
of the month. The  customer then, in accordance with our “Sale and
Purchase Agreement”,  sends us full payment via wired funds by the
25th
of the month,  or 10 –15 days after receipt of the
invoice.
 
 The
Company’s current “total assets” have increased by 976%, to $2,888,971 for the
period ending  June 30, 2010, from $295,919 for the year
ending  December 31 of 2009. The Company’s current estimated book
value per share based on the Company’s stockholders equity of $2,888,871 is
$0.064 per share.   We have also  reduced the net
“losses from operations”, by 65%, to a net loss $219,402 for the period ending
June 30, 2010, from $627,966 in the period ending June 30, 2009, by a
total  $408,564.  Based on our plans for growth and
expansion, and increasing revenues through sales of natural and other products,
we believe we will continue the trend to reduce the Company’s net losses down to
zero, and then move the Company toward solid profitability.
 
 Universal
Bioenergy North America, Inc. (UBNA)
 
 Universal
Bioenergy North America, Inc., (UBNA) is a  operating subsidiary of
the Company. The Company has generated no revenues  from the
subsidiary, Universal Bioenergy North America, Inc., as the refinery was not in
production as of June 30, 2010. UBNA  will continue to accrue some
minimal operating losses until the refinery is operating, and at  a
point where sufficient production levels can be reached to meet its
relative  liabilities.
 
 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 $613,207 and
$627,966 for the six months ended June 30, 2010 and 2009. Our losses since our
inception through June 30, 2010 amount to $15,390,667.
 
 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.


Liquidity
and Capital Resources





As
reflected in the accompanying financial statements and footnotes,  we
are operating with limited resources, used cash in operations of $171,351 and
$24,975 for the six months ended June 30, 2010 and 2009, respectively. 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.




Our cash
provided by financing activities for the six months ended June 30, 2010 was
$173,903 as compared to $24,975 for the six months ended June 30, 2009. The
primary increase in financing activities is related to the increase in advances
from shareholders.




31




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.





ITEM 3. 
Q UANTITATIVE
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 resale of natural gas..





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.




32





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 June 30, 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 June 30, 2010, our internal control over financial
reporting was effective.





b)
Changes in Internal Control over Financial Reporting.





During
the Quarter ended June 30, 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.





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.




33





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





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.




34





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.





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.




35





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.





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, and have an accumulated deficit of $15,647,224. 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.




36




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.





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
June 30, 2010. Except for the Company issued 5,000,000 shares of common stock
for the NDR acquisition, 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.




37




Item 3. Defaults Upon Senior
Securities




There
were no defaults upon senior securities during the period ended June 30,
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.




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 30, 2010
                By
                /s/ Vince M. GuestVince
      M. GuestChief
      Executive Officer (Principle Executive Officer)Principle
      Financial Officer, and
President




38