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 September 30, 2010
 
 OR
 
  ̈ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d)
 OF THE
SECURITIES ACT OF 1934
 
 For
the transition period from ___________to ____________
 
 Commission File Number
333-123465
 
 UNIVERSAL
BIOENERGY, INC.
 (Exact
name of Registrant as specified in its charter)
 Nevada
                
                20-1770378State
      of Incorporation
                
                IRS
      Employer Identification No.
 19800
Mac Arthur Blvd., Suite 300
 Irvine,
CA  92612
 (Address
of principal executive offices)
 (888)
263-2009
 (Issuer’s
telephone number)
 Indicate
by check mark whether the Registrant (1) has filed all reports required by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements
for the past 90 days:  Yes  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 o No x
 
 Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
 
 Class
                
                Outstanding atDecember 23, 2010Common
      stock, $0.001 par value
                
                77,247,517
  
 
 UNIVERSAL
BIOENERGY, INC.
 INDEX
 INDEX
TO FORM 10Q FILING
  FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 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 Operations
                                                                
                                                                4Condensed
      Consolidated Statement of Cash Flows
                                                                
                                                                5Notes
      to Condensed Consolidated Financial Statements
                                                                
                                                                6Item 2.
                                                                
                                                                Management
      Discussion & Analysis of Financial Condition and Results of
      Operations
                                                                
                                                                25Item 3
                                                                
                                                                Quantitative
      and Qualitative Disclosures About Market Risk
                                                                
                                                                40Item 4.
                                                                
                                                                Controls
      and Procedures
                                                                
                                                                40PART
      II - OTHER INFORMATIONItem 1.
                                                                
                                                                Legal
      Proceedings
                                                                
                                                                42Item 1A
                                                                
                                                                Risk
      Factors
                                                                
                                                                42Item 2.
                                                                
                                                                Unregistered
      Sales of Equity Securities and Use of Proceeds
                                                                
                                                                45Item 3.
                                                                
                                                                Defaults
      Upon Senior Securities
                                                                
                                                                45Item 4.
                                                                
                                                                Removed
      and Reserved
                                                                
                                                                45Item 5
                                                                
                                                                Other
      information
                                                                
                                                                46Item 6.
                                                                
                                                                Exhibits
                                                                
                                                                46CERTIFICATIONSExhibit
      31 – Management certificationExhibit
      32 – Sarbanes-Oxley Act
  
  PART
I — FINANCIAL INFORMATION
 
 ITEM
1. FINANCIAL STATEMENTS
 
 UNIVERSAL BIOENERGY, INC.
 
 CONDENSED CONSOLIDATED BALANCE
      SHEET(Unaudited)
                                
                                
                                (Audited)September 30, 2010
                                
                                
                                December 31, 2009ASSETS:
      (Substantially pledged)CURRENT
      ASSETSCash
                                
                                $
                                17,151
                                
                                
                                $
                                2,819Accounts
      receivables
                                
                                
                                2,412,623
                                
                                
                                
                                -Total
      current assets
                                
                                
                                2,429,774
                                
                                
                                
                                2,819PROPERTY
      AND EQUIPMENT - net
                                
                                
                                302,221
                                
                                
                                
                                290,000Advances
      for affiliates
                                
                                
                                13,967
                                
                                
                                
                                -Intangible
      assets
                                
                                
                                250,000
                                
                                
                                
                                -Deposit
                                
                                
                                6,620
                                
                                
                                
                                3,100TOTAL
      ASSETS
                                
                                $
                                3,002,582
                                
                                
                                $
                                295,919LIABILITIES
      AND STOCKHOLDERS' DEFICIT:CURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                                
                                $
                                2,989,112
                                
                                
                                $
                                725,790Advances
      from affiliates
                                
                                
                                54,757
                                
                                
                                
                                54,050Note
      payable- affiliate
                                
                                
                                -
                                
                                
                                
                                70,000Total
      current liabilities
                                
                                $
                                3,043,869Long
      term liabilties
                                
                                
                                312,119
                                
                                
                                
                                849,840TOTAL
      LIABILITIES
                                
                                
                                3,355,988
                                
                                
                                
                                849,840STOCKHOLDERS'
      DEFICIT:Preferred
      stock Series A, $.001 par value, 1,000,000 sharesauthorized,
      0 and 100,000 issued and outstanding sharesSeptember
      30, 2010 and December 31, 2009, respectively
                                
                                
                                -
                                
                                
                                
                                100Preferred
      stock Series B, $.001 par value, 1,000,000 sharesauthorized,
      232,080 issued and outstanding sharesSeptember
      30, 2010 and December 31, 2009, respectively
                                
                                
                                232
                                
                                
                                
                                232Common
      stock, $.001 par value, 200,000,000 shares authorized;77,247,517
      and 39,405,000 issued and outstanding as ofSeptember
      30, 2010 and December 31, 2009, respectively
                                
                                
                                77,247
                                
                                
                                
                                39,405Additional
      paid-in capital
                                
                                
                                15,301,859
                                
                                
                                
                                14,183,804Noncontrolling
      interest
                                
                                
                                (40,978
                                )
                                
                                
                                -Accumulated
      deficit
                                
                                
                                (15,691,766
                                )
                                
                                
                                (14,777,460
                                )Total
      stockholders' deficit
                                
                                
                                (353,406
                                )
                                
                                
                                (553,919
                                )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                                
                                $
                                3,002,582
                                
                                
                                $
                                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 Nine Months EndedSeptember 30,
                  
                  
                  September 30,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009REVENUES
                  
                  $
                  6,388,639
                  
                  
                  $
                  -
                  
                  
                  $
                  20,355,534
                  
                  
                  $
                  -COST
      OF SALES
                  
                  
                  6,381,535
                  
                  
                  
                  -
                  
                  
                  
                  20,332,897
                  
                  
                  
                  -GROSS
      PROFIT
                  
                  
                  7,104
                  
                  
                  
                  -
                  
                  
                  
                  22,637
                  
                  
                  
                  -OPERATING
      EXPENSES:General
      and administrative
                  
                  
                  530,093
                  
                  
                  
                  217,635
                  
                  
                  
                  933,327
                  
                  
                  
                  845,601Sales
      and marketing
                  
                  
                  5,591
                  
                  
                  
                  -
                  
                  
                  
                  22,317
                  
                  
                  
                  -Depreciation
      expense
                  
                  
                  873
                  
                  
                  
                  -
                  
                  
                  
                  873
                  
                  
                  
                  -Total
      operating expenses
                  
                  
                  536,557
                  
                  
                  
                  217,635
                  
                  
                  
                  956,517
                  
                  
                  
                  845,601OTHER
      (INCOME) AND EXPENSES:Other
      income
                  
                  
                  (1,143
                  )
                  
                  
                  -
                  
                  
                  
                  (2,007
                  )
                  
                  
                  -Interest
      expense
                  
                  
                  13,055
                  
                  
                  
                  1,808
                  
                  
                  
                  23,411
                  
                  
                  
                  1,808Total
      other expense
                  
                  
                  11,912
                  
                  
                  
                  1,808
                  
                  
                  
                  21,404
                  
                  
                  
                  1,808NET
      PROFIT (LOSS)
                  
                  $
                  (541,365
                  )
                  
                  $
                  (219,443
                  )
                  
                  $
                  (955,284
                  )
                  
                  $
                  (847,409
                  )Net
      income attributable to noncontrolling interest
                  
                  $
                  18,637
                  
                  
                  $
                  -
                  
                  
                  $
                  40,978
                  
                  
                  $
                  -NET
      INCOME (LOSS) ATTRIBUTABLE TO UNIVERSAL
                  
                  $
                  (522,728
                  )
                  
                  $
                  (219,443
                  )
                  
                  $
                  (914,306
                  )
                  
                  $
                  (847,409
                  )NET
      PROFIT (LOSS) PER SHARE:Basic
      and diluted loss per share
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.03
                  )Weighted
      average of shares outstanding
                  
                  
                  57,760,431
                  
                  
                  
                  30,325,000
                  
                  
                  
                  47,940,347
                  
                  
                  
                  26,940,385
 
 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 Nine Months EndedSeptember 30,2010
                    
                    
                    2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Loss
                    
                    $
                    (914,306
                    )
                    
                    $
                    (847,409
                    )Adjustments
      to reconcile net loss to net cash(used
      in) operating activities:Depreciation
      expense
                    
                    
                    873
                    
                    
                    
                    -Non
      controlling interest
                    
                    
                    (40,978
                    )
                    
                    
                    -Common
      stock issued for services
                    
                    
                    332,007
                    
                    
                    
                    307,999Changes
      in assets and liabilities:Accounts
      recievables
                    
                    
                    (2,412,623
                    )
                    
                    
                    -Accounts
      payables
                    
                    
                    2,767,114
                    
                    
                    
                    -Advances
      affiliate
                    
                    
                    707
                    
                    
                    
                    -Deposits
                    
                    
                    (3,520
                    )
                    
                    
                    487,516Net
      cash used by operating activities
                    
                    
                    (270,726
                    )
                    
                    
                    (51,894
                    )CASH
      FLOWS FROM INVESTING ACTIVITIES:Advances
      to affiliate
                    
                    
                    (13,967
                    )
                    
                    
                    -Property
      and equipment
                    
                    
                    (13,094
                    )
                    
                    
                    -Net
      cash used in investing activities
                    
                    
                    (27,061
                    )
                    
                    
                    -CASH
      FLOWS FROM FINANCING ACTIVITIES:Advances
      from affiliates
                    
                    
                    -
                    
                    
                    
                    26,894Proceeds
      from notes payable
                    
                    
                    312,119
                    
                    
                    
                    25,000Net
      cash provided by financing activities
                    
                    
                    312,119
                    
                    
                    
                    51,894INCREASE
      IN CASH
                    
                    
                    14,332
                    
                    
                    
                    -CASH,
      BEGINNING OF YEAR
                    
                    
                    2,819
                    
                    
                    
                    -CASH,
      END OF YEAR
                    
                    $
                    17,151
                    
                    
                    $
                    -SUPPLEMENTAL
      CASH FLOW INFORMATION:Interest
      paid
                    
                    $
                    -
                    
                    
                    $
                    -Taxes
      paid
                    
                    $
                    -
                    
                    
                    $
                    -Issuance
      of company stock for the conversion of debt
                    
                    $
                    573,981
                    
                    
                    $
                    -
 
 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,
petroleum, solar, biofuels, wind, and green technology
products.    In April 2010, we expanded into the natural gas
energy market, by the acquisition of NDR Energy Group. 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.
 
 One of
the Company’s primary goals is to acquire and develop oil and gas properties and
assets. This includes oil and gas lease acquisitions, development of newly
discovered or recently discovered oil and gas fields, re-entering existing
wells, transmission and marketing of the products to our customer
base.  We are currently targeting natural gas producers, to obtain
natural gas and other fuels directly from the wellhead.
 
 NDR Energy Group
LLC
 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.
 
 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.
 
 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.
  6
 
 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.
 
 NOTE
2 - 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 nine months ended September
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
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  The
Company prepares its financial statements in accordance with accounting
principles generally accepted in the United States of
America.  Significant accounting policies are as follows:
 
 Principle of
Consolidation
 
 The
consolidated financial statements include the accounts of Universal Bioenergy,
Inc., 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.
The Company recognizes 49% as a non controlling interest in the company since
the Company only owns 49% of NDR.  That 49% reduction is incorporated
in the Financial Statements a noncontrolling interest in the amount of $40,978
as this amount represents 49% of NDR’s loss of $83,629
  7
 
 Accounts
Receivable
 
 Substantially
all of the Company’s accounts receivable balance is related to trade
receivables. Trade accounts receivable are recorded at the invoiced amount and
do not bear interest. The allowance for doubtful accounts is the Company’s best
estimate of the amount of probable credit losses in its existing accounts
receivable. The Company will maintain allowances for doubtful accounts for
estimated losses resulting from the inability of its customers to make required
payments for products. Accounts with known financial issues are first reviewed
and specific estimates are recorded. The remaining accounts receivable balances
are then grouped in categories by the amount of days the balance is past due,
and the estimated loss is calculated as a percentage of the total category based
upon past history. The Company did not recognize any bad debt as there was no
risk of non-collection of the accounts receivables
 
 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 the majority of its consolidated
revenue and cash flow from the sale of natural gas and related energy products
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 September 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:
 
 AssetCategory
                  
                  Depreciation/
                    AmortizationPeriodBuilding
                  
                  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 no events or
changes in circumstances that necessitated an impairment of long lived
assets.
 
 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 September
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.
  10
  The
Company adopted ASC Topic 820, Fair Value Measurements (“ASC Topic 820”), which
defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements.  The standard
provides a consistent definition of fair value which focuses on an exit price
that would be received upon sale of an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement
date.  The standard also prioritizes, within the measurement of fair
value, the use of market-based information over entity specific information and
establishes a three-level hierarchy for fair value measurements based on the
nature of inputs used in the valuation of an asset or liability as of the
measurement date.
 The
three-level hierarchy for fair value measurements is defined as
follows:
 
 
              Level
      1 – inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets;
 
              Level
      2 – inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      or the asset or liability other than quoted prices, either directly or
      indirectly including inputs in markets that are not considered to be
      active;
 
              Level
      3 – inputs to the valuation methodology are unobservable and significant
      to the fair value. measurement
 
 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
4 - 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:
 
 FortheNine
                          MonthsEnded
                          September30,
                          2010
                        
                        
                        FortheNine
                          MonthsEnded
                          September30,2009Income
      and Losses available for common shareholders
                        
                        $
                        (914,306
                        )
                        
                        $
                        (847,409
                        )Weighted
      average common shares outstanding
                        
                        
                        (47,940,347
                        )
                        
                        
                        (26,940,385
                        )Basic
      and fully diluted loss per share
                        
                        $
                        (.02
                        )
                        
                        $
                        (.03
                        )
 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
5 - 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 77,247,517
are issued and outstanding as of September 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 September 30,
2010.  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.  On July 22, 2010
the Company cancelled the 100,000 preferred A shares of the company where as no
preferred A shares were issued and outstanding of that date.
 
 Common Stock
Issued
 
 2010
 
 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 compensation by
$157,568.
  12
  On March
26, 2010, the Company issued 300,000 to a consultant and expensed
$18,000.
 
 On April
12, 2010 the Company issued 5,000,000 common shares for the acquisition of NDR
Energy Group, LLC. (See Note 10 – Acquisition).
 
 Under
terms of their employment agreements, on September 13, 2010 the Company issued
1,411,150 to each officer and director of the Company with total shares issued
of 4,233,450.  The stock was trading at $.06 and the Company expensed
$84,669 for each issuance of shares of stock with a total expense of
$254,007.  Also under the terms of his employment agreement an
employee was issued 1,000,000 common shares at the trading price of $.06 and the
Company expensed $60,000 as compensation.
 
 On
September 13, 2010 the Company converted its notes payable for a total of
$47,936 and issued 2,000,000 common shares for that conversion.  This
conversion of debt reduced our notes payables of $42,500 and accrued interest of
$5,436.
 
 On
September 27, 2010 the Company converted its accrued compensation for a total of
$368,386 and issued 24,559,067 common shares for that
conversion.  This conversion of debt reduced our accrued compensation
of $368,386.
 
 At
September 30, 2010, there were no outstanding stock options or
warrants.
 
 On
June18, 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.
 
 2009
 
 Under
terms of their employment 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.
 
 Under
terms of their employment agreements, on November 23, 2009 the Company issued 1,
360,000 to each officer and director of the Company with total shares issued of
4,080,000.  The stock was trading at $.105 and the Company expensed
$142,800 for each issuance of shares of stock with a total expense of
$428,400.
 
 On
November 30, 2009 the Company issues 5,000,000 common shares in the conversion
of a $100,000 note payable.
 
 Issuance
of preferred shares
 
 On
September 18, 2008 the Company converted the following debt to preferred
shares:
  13
  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.
 
 Preferred
Series A shares are 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.  On July 22, 2010 the Company cancelled the 100,000 preferred
A shares of the company where as no preferred A shares were issued and
outstanding of that date.
 
 Preferred
Series B shares are non-voting.
 
 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 2.9%
dilution as of September 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 5.7% dilution as of September 30 2010.
 
 NOTE
6 - PROPERTY AND EQUIPMENT
 
 The
Company has fixed assets as of September 30, 2010 and December 31, 2009 as
follows:
 
 September
                        30,2010
                      
                      
                      December 31,
                        2009Equipment
                      
                      $
                      178,094
                      
                      
                      $
                      165,000Land
                      
                      
                      50,000
                      
                      
                      
                      50,000Building
                      
                      
                      75,000
                      
                      
                      
                      75,000Accumulated
      depreciation
                      
                      
                      (873
                      )Total
                      
                      $
                      302,221
                      
                      
                      $
                      290,000
  14
 
 There was
$873 and $0 depreciation expense for the three months ended September 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.
 
 NOTE
7 – CONVERTIBLE DEBENTURE
 
 September 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.
                  
                  
                  -
                  
                  
                  
                  22,500On
      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.
                  
                  
                  2,500
                  
                  
                  
                  22,500On
      May 24, 2010 the Company entered into a two (2) year convertible
      promissory note with a non-related creditor for $10,500 at 10%
      interest.  The holder has the right to convert the note to
      common stock on November 24, 2010 at $.05
                  
                  
                  10,500
                  
                  
                  
                  -On
      May 24, 2010 the Company entered into a two (2) year convertible
      promissory note with a non-related creditor for $10,500 at 10%
      interest.  The holder has the right to convert the note to
      common stock on November 24, 2010 at $.05
                  
                  
                  10,500
                  
                  
                  
                  -On
      February 16, 2010 the Company entered into a two (2) year convertible
      promissory note with a non-related creditor for $13,000 at 10%
      interest.  The holder has the right to convert the note to
      common stock on August 17,2010 at $.05
                  
                  
                  13,000
                  
                  
                  
                  -On
      May 25, 2010 the Company entered into a two (2) year convertible
      promissory note with a non-related creditor for $100,000 at 10%
      interest.  The holder has the right to convert the note to
      common stock on November 25, 2010 at $.03
                  
                  
                  100,000
                  
                  
                  
                  -On
      July 15, 2010 the Company entered into a two (2) year convertible
      promissory note with a non-related creditor for $4,500 at 10%
      interest.  The holder has the right to convert the note to
      common stock on January 15, 2011 at $.05
                  
                  
                  4,500
                  
                  
                  
                  -On
      July 15, 2010 the Company entered into a two (2) year convertible
      promissory note with a non-related creditor for $4,500 at 10%
      interest.  The holder has the right to convert the note to
      common stock on January 15, 2011 at $.05
                  
                  
                  4,500
                  
                  
                  
                  -On
      June 30, 2010 the Company entered into a two (2) year convertible
      promissory note with a non-related creditor for $32,000 at 10%
      interest.  The holder has the right to convert the note to
      common stock on December 31, 2010 at $.03
                  
                  
                  32,000
                  
                  
                  
                  -August
      26, 2010 the Company entered into a two (2) year convertible promissory
      note with a non-related creditor for $36,919 at 10%
      interest.  The holder has the right to convert the note to
      common stock on February 28, 2011 at $.03
                  
                  
                  36,919
                  
                  
                  
                  -On
      August 30, 2010 the Company entered into a two (2) year convertible
      promissory note with a non-related creditor for $25,300 at 10%
      interest.  The holder has the right to convert the note to
      common stock on February 28, 2011 at $.05
                  
                  
                  25,300
                  
                  
                  
                  -On
      August 30, 2010 the Company entered into a two (2) year convertible
      promissory note with a non-related creditor for $25,300 at 10%
      interest.  The holder has the right to convert the note to
      common stock on February 28, 2011 at $.05
                  
                  
                  25,300
                  
                  
                  
                  -On
      April 26, 2010 the Company entered into a two (2) year convertible
      promissory note with a non-related creditor for $25,300 at 10%
      interest.  The holder has the right to convert the note to
      common stock on October 26, 2010 at $.05
                  
                  
                  6,750
                  
                  
                  
                  -On
      April 26, 2010 the Company entered into a two (2) year convertible
      promissory note with a non-related creditor for $25,300 at 10%
      interest.  The holder has the right to convert the note to
      common stock on October 26, 2010 at $.05
                  
                  
                  6,750
                  
                  
                  
                  -On
      March 30, 2010 the Company entered into a two (2) year convertible
      promissory note with a non-related creditor at 10%
      interest.  The holder has the right to convert the note to
      common stock on September 30, 2010 at $.05
                  
                  
                  8,600
                  
                  
                  
                  -Advances
      from affiliates
                  
                  
                  54,757
                  
                  
                  
                  -Total
      long-term note payable
                  
                  
                  366,876
                  
                  
                  
                  70,000Less
      current portion
                  
                  
                  54,757
                  
                  
                  
                  70,000Long-term
      portion of note payable
                  
                  $
                  312,119
                  
                  
                  $
                  -
  15
 
 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
8 - 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.
  16
  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.
 
 NOTE
9 – RELATED PARTY TRANSACTION
  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.
  17
 
 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.  .
 
 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 a 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 a 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.
 
 Under
terms of their employment agreements, on March 26, 2010 the Company issued
1,411,150 to each officer and director of the Company with total shares issued
of 4,233,450.  The stock was trading at $.06 and the Company expensed
$84,669 for each issuance of shares of stock with a total expense of
$254,007.  Also under the terms of his employment agreement and
employee was issued 1,000,000 common shares at the trading price of $.06 and the
Company expensed $60,000 as compensation.
 
 Under
terms of their employment agreements, on November 23, 2009 the Company issued
1,360, 000 to each officer and director of the Company with total shares issued
of 4,080,000.  The stock was trading at $.105 and the Company expensed
$142,800 for each issuance of shares of stock with a total expense of
$428,400.
  18
 
 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 a 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.
 
 Solomon
Ali. Under Solomon Ali's employment agreement, he has agreed to serve as the
Senior Vice President of Investor Relations and Corporate Finance. 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 a 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.  On
September 13, 2010 the Company converted its notes payable for a total of
$47,936 and issued 2,000,000 common shares for that conversion and on September
27, 2010 the Company converted its accrued compensation for a total of $368,386
and issued 24,559,067 common shares for that conversion.
 
 On July
22, 2010, the Board of Directors approved that the Company convert debt and
liabilities through December 31, 2009 to the Company’s common stock at a
conversion price of $.005 to $.05 cents to offset any decline in
value.
  19
 
 NOTE
10 – 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.
 
 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.
  20
 
 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 Consolidation Services,
      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
                      
                      
                      Nine Months Ended2010
                      
                      
                      2009
                      
                      
                      2010
                      
                      
                      2009REVENUES
                      
                      
                      3,980,202
                      
                      
                      
                      3,124,065
                      
                      
                      
                      17,947,097
                      
                      
                      
                      20,876,656Net
      Loss
                      
                      
                      (514,058
                      )
                      
                      
                      (478,025
                      )
                      
                      
                      (949,470
                      )
                      
                      
                      (734,079
                      )Net
      income per share basic and diluted
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.02
                      )
                      
                      $
                      (0.03
                      )Weighted
      average of shares outstanding
                      
                      
                      57,760,431
                      
                      
                      
                      28,864,451
                      
                      
                      
                      47,940,347
                      
                      
                      
                      25,210,028
 
 NOTE 11 - 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.
  21
  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, which declined to provide clarification
or comment.
 
 The risk of
rescission
 
 Management
has also recently become aware that the stated September 17, 2008 restructuring
of debt to preferred shares was transacted subsequent to a September 11, 2008
injunction obtained by the SEC freezing the assets of Lacroix and
Mortensen.  The restructuring accordingly may constitute an illegal
act.  Current and former management both assert that they did not
receive notice of the freeze and were not aware of the freeze at the time of the
conversion.
 
 Current
management has also recently become aware that former management was contacted
by SEC enforcement pertaining to the above related to an informal investigation
of another company.  It should be noted that the Company and its then
management were not the focus of the informal
investigation.  Documents provided by former management to the SEC
establish that the discussions between former management, Lacroix and Mortensen
began at least two months in advance of the freeze order.
 
 As
creditor note holders, Lacroix and Mortensen had preference over equity holders
in the event of liquidation.   Additionally, even though the
Lacroix note was “secured” by the biodiesel plant, no real or personal property
liens were ever filed to perfect the liens.  At the time of the
conversion the Company lacked liquidity to pay the principal and interest due on
these notes.  The conversion to preferred shares abated the further
accrual of interest on the notes.
 
 As
preferred shareholders, Lacroix and Mortensen still have preference over common
shareholders in the event of liquidation, after satisfaction of the
creditors.  While the conversion of these shares to common would
eliminate this preference, it could also result in improving the liquidity of
these shares, once the restrictive legends are removed, and enable distribution
of the shares as discussed below.
 
 At the
advice of counsel, management believes it is possible, but unlikely that the SEC
would move to rescind the note to preferred conversion transaction which would
improve their standing in the event of liquidation, but would dilute the
potential of liquidity through the market.  In an attempt to obtain
clarification of this, and to provide full and fair disclosure, management
requested clarification from SEC staff, which 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 agree 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 2.9%
dilution as of September 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 5.7% dilution as of September 30,
2010.
  22
 
 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,
which 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.
 
 NOTE
12 – SUBSEQUENT EVENTS
 
 On
October 11, 2010 the company, signed a Letter of Intent with ProGas Energy
Services Inc., of Texas, to jointly develop a newly discovered or recently
discovered oil and gas field located in Texas's Gulf Coast natural trend in Jim
Wells County, Texas. The plans include the development of ten initial wells, and
the potential development of up to 110 oil and gas wells from this field, to
supply oil and natural gas for Universal's customers nationwide.
 
 October
25, 2010 the Company signed a definitive agreement for the acquisition of Roblex
Aviation Inc., for a purchase price of $10.4 million.  Roblex is a FAA
registered, first class air Cargo Company, located in San Juan Puerto Rico,
serving the Caribbean market. Roblex's flies out of San Juan International
Airport, with primary routes to the Dominican Republic, and the U.S. and British
Virgin Islands. Roblex's blue chip customers and clients include the United
States Postal Service, Amerijet, and Delta Cargo, and United Parcel Service. In
accordance with the provisions of the Agreement, and due to certain issues
discovered in its due diligence of Roblex Aviation, Management terminated the
Agreement on December 14, 2010. The Company has the option to consider reviewing
Roblex Aviation, for an acquisition, and a new agreement at a later
date.
 
 On
November 6, 2010 the Company signed a Letter of Intent with WBH Capital Inc.,
based in Claremont, California, to form a new joint venture for strategic
business acquisitions and development of alternative energy projects. The intent
of the "Venture" is to raise up to $200 million in capital for the various
acquisitions and projects. The acquisitions, include companies, patents and
licensing technologies in the natural and alternative energy industries,
including solar, algae based biofuels, wind, tidal, green technology products,
and waste to energy projects.
  23
 
 On
December 13, 2010 our subsidiary NDR Energy Group, signed an agreement with
Amerisource Funding of Houston, Texas for Amerisource to provide it with
an   aggregate $36 million dollar annual revolving funding line,
for its future growth and expansion.
 
 On
December 8, 2010 we established a new company, known as Texas Gulf Oil & Gas
Inc. This company will develop oil and gas field projects, obtain products from
the wellhead, and positions us be a producer and direct supplier of oil and
natural gas to our customers. The company will also manage the transmission and
marketing of the product to our customers. The major benefits to the Company
are, greater revenues, higher profit margins, lower product costs, and increased
competitiveness.
 
 On
December 17, 2010 we signed an agreement with ProGas Energy Services Inc., of
Texas, to jointly develop newly discovered or recently discovered oil and gas
field, known as the Northwest Premont Oil & Gas Field, located in Texas’s
Gulf Coast natural trend, in Jim Wells County Texas. The plans include
potentially developing up to 110 oil and gas wells from this field. Three
initial wells have already been drilled, are producing oil and gas, and should
bring immediate profit to Universal.
 
 *  *  *  *  *  *
  24
 
 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 natural
energy products including natural gas and petroleum and alternative energy
products including,  solar, biofuels, wind, , 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.
  25
 
 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.
 
 One of
the Company’s primary goals is to acquire and develop oil and gas properties and
assets. This includes oil and gas lease acquisitions, development of newly
discovered or recently discovered oil and gas fields, re-entering existing
wells, transmission and marketing of the products to our customer
base.  We are currently targeting natural gas producers, to obtain
natural gas and other fuels directly from the wellhead.
 
 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.  The Company officers own 2% of NDR
Energy Group, LLC and the Company recognize 49% of non-controlling interest in
its subsidiary.
 
 Based on
Management’s review of NDR’s financial records, NDR generated revenues of
$34,455,243   in energy and fuel sales for the period of January
1, 2010 through September 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.
 .
 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.
  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.
  26
  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.
 
 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 nine 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.
 
 Progas Energy
Services Inc. On October 11, 2010 the company, signed a Letter of Intent
with ProGas Energy Services Inc., of Texas, to jointly develop a newly
discovered or recently discovered oil and gas field located in Texas's Gulf
Coast natural trend in Jim Wells County, Texas. The plans include the
development of ten initial wells, and the potential development of up to 110 oil
and gas wells from this field, to supply oil and natural gas for Universal's
customers nationwide.
 
 Roblex Aviation
Inc. October 25, 2010 the Company signed a definitive agreement for the
acquisition of Roblex Aviation Inc., for a purchase price of $10.4
million.  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. The aircraft Hanger in Aguadilla is currently being leased to
FEDEX.
  27
 
 In
accordance with the provisions of the Agreement, and due to certain issues
discovered in its due diligence of Roblex Aviation, the Company terminated the
Agreement on December 14, 2010. The Company has the option to consider reviewing
Roblex Aviation, for an acquisition, and a new agreement at a later
date.
 
 WBH Capital
Business Capital Inc. On November 6, 2010 the Company signed a Letter of
Intent with WBH Capital Inc., based in Claremont, California, to form a new
joint venture for strategic business acquisitions and development of alternative
energy projects. The intent of the "Venture" is to raise up to $200 million in
capital for the various acquisitions and projects. The acquisitions, include
companies, patents and licensing technologies in the natural and alternative
energy industries, including solar, algae based biofuels, wind, tidal, green
technology products, and waste to energy projects.
 
 Southern
California Gas Company Gas Purchase Agreement.   On
November 17, 2010, NDR Energy Group signed a purchase order in accordance with
its NAESB agreement to supply natural gas to Southern California Gas Company, a
subsidiary of Sempra Energy, for the month of December 2010.
 
 According
to Southern California Gas Company, it is the nation’s largest natural gas
distribution utility, with 20.7 million customers. Sempra Energy, its parent
company, reported revenues of $8.1 billion, including $3.8 billion from
natural gas sales and transportation in 2009, as indicated in its 2009 annual
report.The NAESB
agreement limits us from disclosing the details; however this Southern
California Gas transaction will generate millions of dollars in revenues for the
Company. With this agreement, NDR Energy Group will deliver a record amount of
gas to Southern California Gas, for a company of our size, and assisting them to
provide natural gas to their 20.7 million customers in their service
area.
 
 Amerisource
Funding. On December 13, 2010 the Company signed an agreement with
Amerisource Funding of Houston, Texas for Amerisource to provide it with an
aggregate $36 million dollar annual revolving funding line, for its future
growth and expansion. The agreement will provide the Company and NDR Energy with
working capital and accounts receivable financing for an indefinite term, and
has provisions for increasing the funding line as the Company grows. Amerisource
Funding is a market leader in providing working capital and accounts receivable
management solutions to small and middle market businesses. Founded in 1984,
Amerisource has financed over $1 billion of funding for thousands of companies
in virtually every U.S. State and Canada, and has provided small and middle
market businesses with financing solutions and outsourced management of accounts
receivable, credit and collection functions, all of which are vital to the
success of any business.
 
 Texas Gulf Oil
& Gas Inc.On December 8, 2010, as part of our plans for growth and
expansion, we established a new division, known as Texas Gulf Oil & Gas Inc.
This division’s purpose is develop projects, and allow us to be a
producer  and direct supplier of  natural gas, and we would
also  manage the  transmission and marketing of the product
to our 22 existing major utility customers nationwide.  We will obtain
the gas directly from the ground, at the “wellhead”. The major benefits to the
Company are, greater revenues, significantly higher profit margins, lower
product costs, increased assets, and increased competitiveness.
  28
 
 Progas Energy
Services.On December 20, 2010 the Company signed an agreement with
ProGas Energy Services Inc., of Texas.  The agreement is a joint
venture between "Texas Gulf Oil & Gas," Universal's new subsidiary, and
ProGas, to jointly develop a newly discovered or recently discovered oil and gas
field located in the Premont Northwest  oil and gas field, in Texas's
Gulf Coast natural trend, in Jim Wells County Texas. The plans include
potentially developing up to 110 oil and gas wells from this field. Three
initial wells have already been drilled, are producing oil and gas, and should
bring immediate profit to Universal.
  Record Sales Volumes of Natural Gas
for December 2010.The Company achieved a new record of natural gas sales
in a single month. The Company sold a record sales volume of 3.41 billion cubic
feet, (Bcf) of natural gas to six of its 22 major electric utility customers for
the month of December, through its subsidiary NDR Energy Group. The record sales
were due to the increased demand for natural gas from our utility customers, and
the hard work and innovative marketing efforts of the executive staff at NDR
Energy Group.
  New Horizons
Energy Group LLC.On January 7, 2011, NDR Energy Group LLC, signed an
Agreement to retain the services of New Horizons Energy Group LLC, based in Mt
Dora, Florida. New Horizons Energy Group is a natural gas and energy services
consulting company. The company will be providing an array of services to NDR
Energy and Universal Bioenergy, that will include information on the U.S.
natural gas market, natural gas scheduling, natural gas nominations, daily gas
monitoring, capacity release for procurement and sales, daily and monthly
pipeline balancing, risk management and hedging policy, procurement and
management of gas storage assets, and managing operating accounts for designated
pipelines. They will also assist with the procurement of natural gas and
negotiations of gas purchase contracts. One of the managing members of NDR
Energy Group, who is a Universal Bioenergy shareholder, is also a managing
member of New Horizons Energy Group.
 
 The
Company’s Future Plans and Outlook
  On
January 12, 2010 the Company announced it was charting a bold new course for the
company by diversifying and shifting its focus to far more profitable energy
technologies. In April 2010, we expanded into the natural gas energy market, by
the acquisition of NDR Energy Group. This was a very good move for the Company,
as this brought a major financial benefit to Universal, and its shareholders, by
bringing the Company millions of dollars in revenues. Therefore, based on the
future outlook for the industry, Management believes this potential increase in
the future demand for natural gas, should prove to be very favorable for our
plans to sell gas to our customers as a “direct supplier”. At our Business
Summit, we took a hard look at global trends in alternative energy, and
concluded we wanted to be in markets with the lowest development costs, ease of
commercialization, and the highest revenues and profits. We’re diversifying into
high growth areas, and reducing our dependence on just
biodiesel.
  29
  Current
State and Future Out Look For the Natural Gas Industry
  U.S. Natural Gas
Market.Natural gas is very important part of the energy
sector of the U.S. economy. About 99 percent of the natural gas used in the
United States comes from North America, and is transported through a 2.3-million
mile underground pipeline system. According to the U.S.  Energy
Information Administration, (EIA), the United States used approximately 22.84
trillion cubic feet (Tcf) of natural gas in 2009. A total of about 25% of all
energy used in the United States in 2009 came from natural gas. Additionally, it
is one of the cleanest burning fossil fuels, and its use is expected to continue
to grow. Natural gas is used in the production of steel, glass, paper, clothing,
brick, electricity, and as an essential raw material for many common products.
Some products that use natural gas as a raw material are: paints, fertilizer,
plastics, antifreeze, dyes, photographic film, medicines, and explosives.
Slightly more than half of the homes in the United States use natural gas as
their main heating fuel. Natural gas is also used in homes to fuel stoves, water
heaters, clothes dryers, and other household appliances.
  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.” Consumption of natural gas for electric
power increased from a level of 18.3 billion cubic feet, (Bcf) per day in 2008,
to 18.9 Bcf per day in 2009. This increase was caused by fuel-switching due to
sharp declines in the price of natural gas, as coal prices actually rose between
2008 and 2009, while consumption of coal at electric power plants declined 11
percent.
  Future Outlook. Consumption of
natural gas will increase 20% by 2030, according to the U.S. Department of
Energy (DOE). The EIA’s “Annual Energy Outlook 2010”, includes estimates for
total technically recoverable natural gas resources in the United States as of
January 1, 2008 at 2,119 Tcf. This estimate includes proved reserves, inferred
reserves, and undiscovered technically recoverable resources.
  According
to a report released by the Massachusetts Institute of Technology, it stated
that, “Natural gas will provide an increasing share of America’s energy needs
over the next several decades, doubling its share of the energy market to 40
percent, from 20 percent.
  Texas Gulf Oil
& Gas Inc.  On December 8, 2010, as part of our plans for
growth and expansion, we established a new division known as “Texas Gulf Oil
& Gas Inc.”, domiciled in Georgia. The company will acquire and enter joint
ventures to develop oil and natural gas field projects, and this will position
us we to be a “direct supplier” of   natural gas to our current
and our future utility and corporate customers. We will then be able to purchase
the gas from the “wellhead”. This division will also manage the transmission and
marketing of the product to our 22 existing major utility customers
nationwide.  The major benefits to the Company are, greater revenues,
significantly higher profit margins, lower product costs, increased assets, and
increased competitiveness. This will also position 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, through marketing,
distribution, and selling directly to the customer.  The Company is
currently in discussions with several independent oil and 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 NDR Energy Group.
  Progas Energy
Services.  On December 203, 2010 the Company signed an
agreement with ProGas Energy Services Inc., of Texas.  The agreement
is a joint venture between "Texas Gulf Oil & Gas," Universal's new
subsidiary, and ProGas, to jointly develop a newly discovered or recently
discovered oil and gas field located in the Premont Northwest  oil and
gas field, in Texas's Gulf Coast natural trend, in Jim Wells County Texas. The
plans include potentially developing up to 110 oil and gas wells from this
field. Three initial wells have already been drilled, are producing oil and gas,
and should bring immediate profit to Universal. The Premont Northwest field is
potentially one of the largest oil fields discovered in Jim Wells County, Texas,
the most prolific oil and gas producing county in the state of
Texas.
  30
  According
to Progas, the field was originally discovered in the 50’s and was thought to be
a small extension of the Northwest Premont field. However, the field was not
developed before the previous operators passed away, and many zones were not
known to be potentially productive as have been recently proven with modern
drilling and testing techniques. Progas, the operator and developer of the
property, prior to Universal’s involvement, re-entered existing wells that were
abandoned by the previous operator to test potential zones for production.
Initial estimated reserves of the field were under 2,000,000 bbls of oil and
just over 4,000,000 mcf of natural gas. However after testing these wells and a
considerable geologic study, the projected and estimated reserves were adjusted
to over 20,000,000 barrels of oil and 17 billion cubic feet (bcf), 17,000,000
mcf, of gas from 11 potentially productive oil and gas sands. Based on the
estimated reserves of the field of 20 million barrels of oil, the oil would have
an estimated value of $1.82 billion, based on the November 28, 2010, NYMEX price
of $91.42 per barrel.
  This
joint venture is major step for the Company, and has three major benefits to
Universal and its shareholders.  First it allows Universal to acquire
natural gas reserves from the ground, for a small fraction of the purchase costs
that it currently pays to other producers that it markets natural gas for.
Second it would provide Universal, with a source of natural gas of its own,
which can be marketed to its major utility gas customers throughout the U.S.
While most gas marketers are limited to a 1% to 2% profit on the spread of
natural gas prices, (less than 1 cent per mcf),  Universal’s
exploration costs for its share of the field is estimated to be less than 10% of
the  NYMEX price for November 28, 2010, which is $4.26 per mcf,
allowing Universal to earn a 90% gross profit, or $3.83 per mcf at current
prices,  on the spread of gas that it owns in the field, and that it
sells into the market place.  This will give Universal a distinct
advantage in the marketplace and a considerably higher profit margin for gas
that is sold to its customers. Third, while many gas marketing companies have to
buy gas from others, their ability to purchase gas is somewhat subject to
availability. Universal will be able to supply the natural gas produced,
that  it owns, as well as the natural gas of the other industry
partners in the development of the field, such as Progas Energy, who have
offered Universal the right to market their gas. Based on the estimated reserves
of 17 billion cubic feet (bcf), (17 million mcf), of gas, this would have an
estimated value of $72.4 million, based on the November 28, 2010, NYMEX price of
$4.26 per mcf.
  Mergers &
Acquisitions. Management is planning for 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 to 3 years.
Some  companies being targeted are, natural gas
producers,  to obtain natural gas  directly from the
wellhead,  solar energy companies for polymer based thin film solar
cells,  companies to build tidal energy facilities, and the
acquisition of energy technology patents and licenses. We’re also looking at
acquiring natural gas assets and properties in the Eagle Ford Shale region in
south Texas, which has very large supplies of oil and natural gas. Acquiring
interests in properties in this area will work very well with our strategic
plans for Texas Gulf Oil & Gas Inc., and Progas Energy
Services.   We’re presently in discussions with a company, with a
radical new frictionless wind energy technology, that improves wind energy
capacity by as much as 80%. that we believe will totally revolutionize the
industry. We’re also looking at algae based biofuels and other green energy
technology products to bring to market.
  31
  National Stock Exchange Listing.With its planned growth by mergers, acquisitions, and future revenues,
Universal’s 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 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.
 
 Natural Gas
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. Total revenues for the period ending
September 30, 2010 were $20,355,534, compared to no reported revenues for the
same period in 2009.  Current management has created significant value
and generated revenues of $20,355,534,since the acquisition of
NDR Energy on April 12, 2010,when previously there were no revenue
generated in the prior 2 to 3 years.
 
 In 2010,
as we were building our business, we were revenue oriented, and focused
primarily on generating substantial sales revenues first, building a strong
foundation with a broad customer base, and gaining greater market share.
Our goal was to gain the greatest share of the energy market
in the shortest period of time. That strategy initially affected how
we obtained our supplies, their relative cost, and how we
ultimately priced our products for sell to our customers. To gain
greater markets share in a rapid fashion, initially resulted in a
higher ”burn rate", higher cost of goods sold, and it directly
impacted our profitability. This caused almost negligible gross profit and
negative earnings, in 2010. This strategy was only a temporary measure,
while we were building greater market share, this past
year.
 
 The high
proportionate cost of sales relative to the gross revenues,  is also due in
part to purchasing  gas from
some suppliers  at close to retail cost, using their
costly “trade credit”, and associated high financing  costs, added to the
gas by some suppliers. This has resulted in a reduced gross profit margin for
this period of $22,637, Our goal was to build a solid customer base and revenues
first. We believe we achieved that objective.
  32
  Our goal
for 2011, since we have built a solid customer base, and captured a good share
of the market, is to become more "profit oriented". We’ll have a
different strategy for procuring our supplies, and the quantities and
price points that we sell the product for, to our customers.
That's why we’re contracting directly with the oil & gas producers to
obtain our supplies from the wellhead. The Company is currently pursuing
obtaining its own bank and funding “lines of credit”, instead of using the
suppliers “trade credit”,  to purchase the gas.  This will
allow us to purchase the gas in larger quantities, with greater economies of
scale, on better terms, at lower purchase costs, and reduce the high financing
costs. This means our cost of sales should significantly decrease,
and our pricing structure to our customers will be more flexible, resulting
in potentially higher profit margins for the Company.
 
 Other
“profit centers” that we plan to use to increase our revenues and profits, will
include performing our own gas scheduling, gas nominations, capacity releases,
transmission, pipeline balancing, risk management, storage and gas
trading/hedging.  We feel that by implementing these strategies and
tactics, this should be very favorable for the Company and our
shareholders.
 
 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 $2,709,482, or 924% to $3,002,582 for
the period ending September 30, 2010, compared to $293,100 for the same period
in 2009. 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.
 
 Analysis of
Projected Revenue, Earnings and Market Value. The management of our
company continues to act 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 $34,455,243,  in energy and fuel sales for the period of January 1, 2010
through September 30, 2010. Due to the acquisition, of the total of $34,455,243
in revenues, we have generated revenues of $20,355,534, from the close of the
transaction through the end of September 30, 2010, although our cost of sales
reduced our profit from these revenues to just over $22,637.   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 approximately 1,136,000 MMBtus
or $4.84 million, in natural gas to each of its 22 customers on a monthly basis.
This is based on the NYMEX Henry Hub December, 2010 MTD, (month-to-date) average
price, of $4.26 per MMBtu’s. This would result in a projected 25,000,000 MMBtus
monthly or $106.5 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 $1.278   billion in revenues annually from the
sales of natural gas alone. This would result in a conservatively projected net
profit to the Company of $25 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.
  33
  Future Capital
Funding. To ensure our ability to remain as a going concern, and 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, and remains confident, that we will be able
to raise capital in sufficient amounts to execute the business strategies, plans
and decisions that have been made, and to meet the potential challenges in the
current economic environment.  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.
 
 Financial Restructuring Plan to
Reduce Debt and Improve Balance Sheet.Management intends to restructure
its Balance Sheet, by reducing its debt, and converting the balance of the
outstanding debt on the Balance Sheet to shares of common stock, and issue the
shares to its various Note Holders and creditors. This will result in an
additional issuance of shares of stock that will likely increase the outstanding
shares of the Company’s common stock to an amount exceeding 100 million
shares.  Many of the existing Notes carry interest rates that are very
high, and that are above the current market rates. The benefit to the Company is
to eliminate the outstanding debt and liabilities owed by the Company, reduce
interest expenses, enhance our financial position, strengthen the Balance Sheet,
and increase our liquidity. Management believes that taking these actions will
improve our profitability, and allow us to pursue our strategies for our growth
and expansion. This should also be very beneficial 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.  Presently, UBNA’s plant is non-operational and the company is
seeking new acquisitions in the natural and 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.
  34
  Net Loss as adjusted for non-recurring and/or non-cash expenses
 
 Nine Months
                                          Ended
                                        
                                        
                                        Nine Months
                                          EndedSeptember 30,
                                        
                                        
                                        September 30,2010
                                        
                                        
                                        2009Losses
      available for common shareholders
                                        
                                        $
                                        (914,306
                                        )
                                        
                                        $
                                        (847,409
                                        )Other
      non-cash expenses
                                        
                                        
                                        873
                                        
                                        
                                        
                                        -Stock
      issued for services
                                        
                                        
                                        332,007
                                        
                                        
                                        
                                        307,999Losses
      available for common shareholder, as adjusted
                                        
                                        $
                                        (581,426
                                        )
                                        
                                        $
                                        (539,410
                                        )
 
 RESULTS
OF OPERATIONS
 
 Nine
Months Ended September 30, 2010 compared to the Nine Months Ended September 30,
2009
 
 Revenues
 Our
revenues for the three months ended September 30, 2010 were $6,388,639 as
compared to $0 for the same period in 2009.  Revenues for the nine
months ended September 30, 2010 was $20,355,534 as compared to $0 for the same
period in 2009.  Our primary revenues from this period are from the
sale of natural gas.   We incurred losses of approximately
$914,734 and $847,409 for the nine months ended September 30, 2010 and 2009. Our
losses since our inception through September 30, 2010 amount to $15,691,766. We
issued 5,983,450 of common shares for services with an aggregate fair value of
approximately $332,007 that was included in the $933,327 in general and
administrative expenses for the nine month period ended September 30, 2010.
Excluding the value of the common shares of $332,007 from the general and
administrative expenses of $933,327, would reduce the actual net G&A
expenses to $601,320, and correspondingly reduce our actual net loss to $582,299
for the period ended September 30, 2010.  This would reduce our actual
net loss by a total of $265,110 or 31.28% to $582,299 from the period ending
September 30, 2010 compared to $847,409 from the same period in
2009.
 
 Operating
Costs and Expenses.
 Our
Cost of Sales for the three months ended September 30, 2010 were $6,381,535 as
compared to $0 for 2009.  Cost of Sales for the nine months ended
September 30, 2010 were $20,332,897 as compared to $0 for the same period in
2009.  Our primary operation is the marketing of natural gas to our
major customers nationwide.
 
 Our
general and administrative expenses for the three months ended September 30,
2010 were $530,093 as compared to $217,635 for 2009.  General and
administration expenses for the nine months ended September 30, 2010 were
$933,327 as compared to $845,601 for 2009.   The increase in general
and administrative expenses was due to the additions to our management team and
the hiring of consultants in anticipation of future acquisitions.  We
pay our employees and consultants largely in common shares as our cash
availability is currently limited. We issued 5,983,450 of common shares for
services with an aggregate fair value of approximately $332,007, that was
included in the $933,327 in general and administrative expenses for the nine
month period ended September 30, 2010.
 
 Our
“total assets” have increased by $2,709,482, or 924% to $3,002,582 for the
period ending September 30, 2010, compared to $293,100 for the same period in
2009.   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.
  35
 
 Liquidity
and Capital Resources
 
 The
Company looks to a variety of funding sources, to meet our short and long-term
liquidity requirements. The Company currently generates the majority of its
consolidated revenues and cash flow from the marketing and sale of natural gas
to its 22 electric utility customers. The Company’s revenues, profits and future
growth depend to a great extent on the prevailing prices of natural gas. The
revenue, profitability and future growth of our Company,  are largely
dependent on a number of factors including,  the prevailing and future
prices for natural gas,  which is also dependent or influenced by
numerous factors beyond our control, such as regulatory developments, changing
economic conditions,  and competition from other energy
sources.
 
 Working
Capital
 Our
working capital requirements increased significantly, and we incurred
significant fluctuations in our working capital for this period. This resulted
in a working capital deficit of $614,095 due to the acquisition of NDR Energy,
the amount of funds borrowed from our creditors, our capital spending exceeding
our cash flows from operations, and from the increase in accounts payable and
accrued expenses.
 
 Cash
Flows
 The
prices and margins in the energy industry are normally volatile, and are driven
to a great extent by market forces over which the Company has no control. Taking
into consideration other extenuating factors, as these prices and margins
fluctuate, this would result in a corresponding change in our revenues and
operating cash flows. Our cash flows for the nine months ended September 30,
2010 and 2009 were as follows:
 
 Cash Flows from Operating
Activities
 Our cash
used in operating activities for the nine months ended September 30, 2010 was
$270,726   as compared to $51,894 for the nine months ended
September 30, 2009.  The increase was primarily attributable to the costs
associated with the launch of NDR’s natural gas operations.
 
 Cash Flows from Investing
Activities
 Cash use
in investing activities for the nine months ended September 30, 2010 was $27,061
as compared to $0.00 for the nine months ended September 30, 2009.
  The increase was related to the purchase of fixed assets of $13,094
and advances to an affiliate of $13,967.
 
 Cash Flows from Financing
Activities
 Our cash
provided by financing activities for the nine months ended September 30, 2010
was $312,119 as compared to $51,894 for the nine months ended September 30,
2009.   The proceeds were from a series of convertible notes
payables.
 
 Liabilities
/ Indebtedness
 Current
liabilities increased to $3,043,869 for the nine months ended September 30,
2010, compared to $714,381 for the same period in 2009. This was primarily due
to a $2,335,452 increase in accounts payable from the purchase of supplies of
natural gas, accrued expenses and some costs incurred as part of the NDR Energy
acquisition.  Our long term liabilities have decreased by $537,721, or
63.27% to $312,119 for the period ending September 30, 2010, compared to
$849,840 for the period ending December 2009.   This was due to
the conversion of certain notes payable, and accrued compensation to common
stock to reduce the debt, and improve the balance sheet.
  36
 
 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.  This
note was converted to common stock and is no longer due.
 
 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.  This
note converted $20,000 to common stock and has an outstanding balance of
$2,500.
 
 On May
24, 2010 the Company entered into a two (2) year convertible promissory note
with a non-related creditor for $10,500 at 10% interest.  The holder
has the right to convert the note to common stock on November 24, 2010 at
$.05
 On May
24, 2010 the Company entered into a two (2) year convertible promissory note
with a non-related creditor for $10,500 at 10% interest.  The holder
has the right to convert the note to common stock on November 24, 2010 at
$.05
 On
February 16, 2010 the Company entered into a two (2) year convertible promissory
note with a non-related creditor for $13,000 at 10% interest.  The
holder has the right to convert the note to common stock on August 17,2010 at
$.05
 On May
25, 2010 the Company entered into a two (2) year convertible promissory note
with a non-related creditor for $100,000 at 10% interest.  The holder
has the right to convert the note to common stock on November 25, 2010 at
$.03
  37
  On July
15, 2010 the Company entered into a two (2) year convertible promissory note
with a non-related creditor for $4,500 at 10% interest.  The holder
has the right to convert the note to common stock on January 15, 2011 at
$.05
 On July
15, 2010 the Company entered into a two (2) year convertible promissory note
with a non-related creditor for $4,500 at 10% interest.  The holder
has the right to convert the note to common stock on January 15, 2011 at
$.05
 On June
30, 2010 the Company entered into a two (2) year convertible promissory note
with a non-related creditor for $32,000 at 10% interest.  The holder
has the right to convert the note to common stock on December 31, 2010 at
$.03
 August
26, 2010 the Company entered into a two (2) year convertible promissory note
with a non-related creditor for $36,919 at 10% interest.  The holder
has the right to convert the note to common stock on February 28, 2011 at
$.03
 On August
30, 2010 the Company entered into a two (2) year convertible promissory note
with a non-related creditor for $25,300 at 10% interest.  The holder
has the right to convert the note to common stock on February 28, 2011 at
$.05
 On August
30, 2010 the Company entered into a two (2) year convertible promissory note
with a non-related creditor for $25,300 at 10% interest.  The holder
has the right to convert the note to common stock on February 28, 2011 at
$.05
 On April
26, 2010 the Company entered into a two (2) year convertible promissory note
with a non-related creditor for $25,300 at 10% interest.  The holder
has the right to convert the note to common stock on October 26, 2010 at
$.05
 On April
26, 2010 the Company entered into a two (2) year convertible promissory note
with a non-related creditor for $25,300 at 10% interest.  The holder
has the right to convert the note to common stock on October 26, 2010 at
$.05
 On March
30, 2010 the Company entered into a two (2) year convertible promissory note
with a non-related creditor for $8,600 at 10% interest.  The holder
has the right to convert the note to common stock on September 30, 2010 at
$.05
  Off-Balance Sheet
Arrangements
 
 We have
no off-balance sheet arrangements including arrangements that would affect the
liquidity, capital resources, market risk support and credit risk support or
other benefits.
 
 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.
  38
  CAUTIONARY
STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
 
 This
report includes forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. You can identify our forward-looking statements by the words “anticipate,”
“estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,”
“potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,”
“forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar
expressions.
 
 We based
the forward-looking statements on our current expectations, estimates and
projections about ourselves and the industries in which we operate in general.
We caution you these statements are not guarantees of future performance as they
involve assumptions that, while made in good faith, may prove to be incorrect,
and involve risks and uncertainties we cannot predict. In addition, we based
many of these forward-looking statements on assumptions about future events that
may prove to be inaccurate. Accordingly, our actual outcomes and results may
differ materially from what we have expressed or forecast in the forward-looking
statements. Any differences could result from a variety of factors, including
the following:
 
 a.
                Fluctuations
      in crude oil, natural gas and natural gas liquids prices, refining and
      marketing margins.b.
                Potential
      failures or delays in achieving expected reserve or production levels from
      existing  and future oil and gas development projects due to
      operating hazards, drilling risks and the  inherent
      uncertainties in predicting oil and gas reserves and oil and gas reservoir
      performance.
 c.
              Failure
      of new products and services to achieve market
  acceptance.
 d.
              Unexpected
      technological or commercial difficulties in manufacturing, refining or
      transporting our products.
 e.
              Lack
      of, or disruptions in, adequate and reliable transportation for our crude
      oil, natural gas, natural gas liquids, LNG and refined
      products.
 f.
              Inability
      to timely obtain or maintain permits, including those necessary for
      construction projects; or to comply with government regulations; or make
      capital expenditures required to maintain
  compliance.
 g.
              Failure to complete definitive
      agreements and feasibility studies for, and to timely complete
      construction of, announced and future exploration and production, LNG, and
      transportation
projects.
 h.
              Potential
      disruption or interruption of our operations due to accidents,
      extraordinary weather events, civil unrest, political events or
      terrorism.
 i.
              International
      monetary conditions and exchange
controls.
 j.
              Substantial
      investment or reduced demand for products as a result of existing or
      future environmental rules and
regulations.
 k.
              Liability
      resulting from litigation.
 l.
              General
      domestic and international economic and political developments, including
      armed hostilities; expropriation of assets; changes in governmental
      policies relating to crude oil, natural gas, natural gas liquids or
      refined product pricing, regulation or taxation; other political, economic
      or diplomatic developments; and international monetary
      fluctuations.
 m.
              Changes
      in tax and other laws, regulations (including alternative energy
      mandates), or royalty rules applicable to our
  business.
 n.
              Limited
      access to capital or significantly higher cost of capital related to
      uncertainty in the domestic or international financial
      markets.
 o.
              Inability
      to obtain economical financing for projects, construction or modification
      of facilities and general corporate
purposes.
  39
  ITEM 3.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  We do not
hold any derivative instruments that engage in any hedging activities. Most of
our activity is in the 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.
 
 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 September 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 September 30, 2010, our internal control over financial
reporting was effective.
 
 a)
Changes in
Internal Control over Financial Reporting.
 
 During
the Quarter ended September 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.
  40
 
 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. As of January 2,
2010, Mike Ator is no longer associated with the Company.
 
 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.
 
 b) Changes in
Internal Control and Procedures
 
 Our Chief
Executive Officer and Chief Financial Officer evaluated the effectiveness of the
Company's internal controls and procedures as of September 30, 2009. Based upon
our evaluation, Management has addressed the material weaknesses in our internal
control deficiencies as follows:
 
 ·We have
provided more oversight of the Company’s financial reporting and internal
control by those charged with corporate governance.
 
 · We have
communicated a greater sense of control consciousness within our organization,
and the critical nature of maintaining these controls in the current
environment.
 
 · We have
engaged the services of Employees, Management, and outside professionals who
have the qualifications and training to fulfill their assigned functions, with
respect to preparing financial statements, reports and internal controls in
accordance with. generally accepted accounting principles
in    the various transactions.
 
 ∙ Any
deficiencies in terms of completeness, or accuracy in the internal control
process must be reported to Management on a timely basis.
 
 · We have
implemented a more effective internal review and risk assessment function by the
Management team, which functions are important to the monitoring or risk
assessment component of internal control.
 
 · To
create an effective control environment, Management and those charged with
corporate governance must assess the effect of any potential significant
deficiency communicated to them, and correct the significant deficiency or
material weakness that might exist in the internal control
environment.
  41
  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’s growth by
mergers and acquisitions, and by shifting our focus to invest in far more
profitable alternative energy technologies.   We believe,
although we cannot guarantee, and remain confident, that we will be able to
raise capital in sufficient amounts to execute the business strategies, plans
and decisions that have been made by the Company, and to meet the potential
challenges. 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 to achieve our
goals and objectives.  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
may have a material adverse effect on our business.
 
 We
may be adversely affected by environmental, health and safety laws, regulations
and liabilities.
 
 As we pursue our
business plan, we may 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.
  42
 
 Risk
Factors Related to Our Stock
 
 Because
We Are Quoted On The OTCBB “Pink Sheets” Instead Of An Exchange Or National
Quotation System, Our Investors May Have A Tougher Time Selling Their Stock Or
Experience Negative Volatility On The Market Price Of Our Stock.
  Our
common stock is traded on the OTCBB “Pink Sheets”. The OTCBB “Pink Sheets” is
often highly illiquid, in part because it does not have a national quotation
system by which potential investors can follow the market price of shares except
through information received and generated by a limited number of broker-dealers
that make markets in particular stocks. There is a greater chance of volatility
for securities that trade on the OTCBB “Pink Sheets”as compared to a national
exchange or quotation system. This volatility may be caused by a variety of
factors, including the lack of readily available price quotations, the absence
of consistent administrative supervision of bid and ask quotations, lower
trading volume, and market conditions. Investors in our common stock may
experience high fluctuations in the market price and volume of the trading
market for our securities. These fluctuations, when they occur, have a negative
effect on the market price for our securities. Accordingly, our stockholders may
not be able to realize a fair price from their shares when they determine to
sell them or may have to hold them for a substantial period of time until the
market for our common stock improves.
 
 Our
Common Stock Is Subject To Penny Stock Regulation
 
 Our
shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
referred to as the "penny stock" rule. Section 15(g) sets forth certain
requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates
the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.
The Commission generally defines penny stock to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be penny stock unless
that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
the NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
registrant's net tangible assets; or exempted from the definition by the
Commission. Since our shares are deemed to be "penny stock", trading in the
shares will be subject to additional sales practice requirements on
broker/dealers who sell penny stock to persons other than established customers
and accredited investors.
 
 FINRA
Sales Practice Requirements May Also Limit A Stockholder's Ability To Buy And
Sell Our Stock.
 In
addition to the “penny stock” rules described above, the Financial Industry
Regulatory Authority (FINRA) has adopted rules that require that in recommending
an investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to
recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. FINRA requirements make it more difficult
for broker-dealers to recommend that their customers buy our common stock, which
may limit your ability to buy and sell our stock and have an adverse effect on
the market for our shares.
  43
 
 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’s growth by
mergers and acquisitions, and by shifting our focus to invest in far more
profitable alternative energy technologies.  We believe, although we
cannot guarantee, and remain confident, that we will be able to raise capital in
sufficient amounts to execute the business strategies, plans and decisions that
have been made by the Company, and to meet the potential challenges. 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 to achieve our goals and
objectives.  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 may 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.
  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.
  44
  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
September 30, 2010. Except for the Company under terms of the above agreements,
on March 26, 2010 the Company issued 1,411,150 to each officer and director of
the Company with total shares issued of 4,233,450.  The stock was
trading at $.06 and the Company expensed $84,669 for each issuance of shares of
stock with a total expense of $254,007.  Also under the terms of his
employment agreement and employee was issued 1,000,000 common shares at the
trading price of $.06 and the Company expensed $60,000 as
compensation.
 
 On
September 13, 2010 the Company converted is notes payable for a total of $47,936
and issued 2,000,000 common shares for that conversion.  This
conversion of debt reduced our notes payables of $42,500 and accrued interest of
$5,436.
 
 On
September 27, 2010 the Company converted is accrued compensation for a total of
$368,386 and issued 24,559,067 common shares for that
conversion.  This conversion of debt reduced our accrued compensation
of $368,386.
 
 The offer
and sale of such shares of our common stock were effected in reliance on the
exemptions for sales of securities not involving a public offering, as set forth
in Rule 506 promulgated under the Securities Act of 1933 (the “Securities Act”)
and in Section 4(2) of the Securities Act, based on the following:
(a) the investors confirmed to us that they were “accredited investors,” as
defined in Rule 501 of Regulation D promulgated under the Securities Act and had
such background, education and experience in financial and business matters as
to be able to evaluate the merits and risks of an investment in the securities;
(b) there was no public offering or general solicitation with respect to
the offering; (c) the investors were provided with certain disclosure
materials and all other information requested with respect to our company;
(d) the investors acknowledged that all securities being purchased were
“restricted securities” for purposes of the Securities Act, and agreed to
transfer such securities only in a transaction registered under the Securities
Act or exempt from registration under the Securities Act; and (e) a legend
was placed on the certificates representing each such security stating that it
was restricted and could only be transferred if subsequent registered under the
Securities Act or transferred in a transaction exempt from registration under
the Securities Act.
  Item 3. Defaults Upon Senior
Securities
  There
were no defaults upon senior securities during the period ended September 30,
2010.
  Item 4. Removed and
Reserved
  45
  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:
      January 18, 2011
                        
                        By
                        /s/ Vince M. GuestVince
      M. GuestChief
      Executive Officer (Principle Executive Officer)Principle
      Financial Officer, and
President
  46