UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





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


OF THE
SECURITIES ACT OF 1934


For
the quarterly period ended March 31, 2009





OR





o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d)


OF THE
SECURITIES ACT OF 1934





For
the transition period from ___________to ____________





Commission File Number
333-123465





UNIVERSAL
BIOENERGY, INC.


(Exact
name of Registrant as specified in its charter)


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


19800
Mac Arthur Blvd., Suite 300


Irvine,
CA  92612


(Address
of principal executive offices)


(888) 263-2009


(Issuer’s
telephone number)


Indicate
by check mark whether the Registrant (1) has filed all reports required by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements
for the past 90 days:  Yes   ̈
    No  x





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





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





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





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b–2 of the Exchange Act).  Yes   ̈    No  x


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





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





Class
            
            Outstanding atJune
      24, 2010Common
      stock, $0.001 par value
            
            45,155,000








UNIVERSAL
BIOENERGY, INC.


INDEX


INDEX
TO FORM 10Q FILING




FOR THE
THREE MONTHS ENDED MARCH 31, 2009 AND 2008





TABLE
OF CONTENTS





PAGEPART
      I
                            FINANCIAL
      INFORMATIONPART
      I - FINANCIAL INFORMATIONItem 1.
                          
                          Condensed
      Consolidated Financial StatementsCondensed
      Consolidated Balance Sheets
                          
                          3Condensed
      Consolidated Statements of Income
                          
                          4Condensed
      Consolidated Statement of Cash Flows
                          
                          5Notes
      to Condensed Consolidated Financial Statements
                          
                          6Item 2.
                          
                          Management
      Discussion & Analysis of Financial Condition and Results of
      Operations
                          
                          19Item 3
                          
                          Quantitative
      and Qualitative Disclosures About Market Risk
                          
                          26Item 4.
                          
                          Controls
      and Procedures
                          
                          26PART
      II - OTHER INFORMATIONItem 1.
                          
                          Legal
      Proceedings
                          
                          27Item 1A
                          
                          Risk
      Factors
                          
                          27Item 2.
                          
                          Unregistered
      Sales of Equity Securities and Use of Proceeds
                          
                          34Item 3.
                          
                          Defaults
      Upon Senior Securities
                          
                          34Item 4.
                          
                          Removed
      and Reserved
                          
                          34Item 5
                          
                          Other
      information
                          
                          34Item 6.
                          
                          Exhibits
                          
                          34




CERTIFICATIONS





Exhibit
      31 – Management certificationExhibit
      32 – Sarbanes-Oxley Act


2


PART
I — FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS





UNIVERSAL BIOENERGY, INC.(An
      Development Stage Company)CONDENSED
      CONSOLIDATED BALANCE SHEET





(Unaudited)
                            
                            
                            (Audited)March 31, 2009
                            
                            
                            December 31, 2008ASSETS:
      (Substantially pledged)CURRENT
      ASSETSCash
                            
                            $
                            -
                            
                            
                            $
                            -Prepaid
      expenses
                            
                            
                            -
                            
                            
                            
                            -Total
      current assets
                            
                            
                            -
                            
                            
                            
                            -PROPERTY
      AND EQUIPMENT
                            
                            
                            290,000
                            
                            
                            
                            290,000Deposit
                            
                            
                            3,100
                            
                            
                            
                            3,100TOTAL
      ASSETS
                            
                            $
                            293,100
                            
                            
                            $
                            293,100LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT):CURRENT
      LIABILITIES:Bank
      overdraft
                            
                            $
                            1,213
                            
                            
                            $
                            1,213Accounts
      payable and accrued expenses
                            
                            
                            219,834
                            
                            
                            
                            74,355Advances
      from affiliates
                            
                            
                            32,405
                            
                            
                            
                            24,405Note
      payable- affiliate
                            
                            
                            100,000
                            
                            
                            
                            100,000Total
      current liabilities
                            
                            
                            353,451
                            
                            
                            
                            199,973TOTAL
      LIABILITIES
                            
                            
                            353,451
                            
                            
                            
                            199,973STOCKHOLDERS'
      EQUITY (DEFICIT):Preferred
      stock Series A, $.001 par value, 1,000,000 sharesauthorized,
      100,000 issued and outstanding sharesMarch
      31, 2009 and December 31, 2008, respectively
                            
                            
                            100
                            
                            
                            
                            100Preferred
      stock Series B, $.001 par value, 1,000,000 sharesauthorized,
      232,080 issued and outstanding sharesMarch
      31, 2009 and December 31, 2008, respectively
                            
                            
                            232
                            
                            
                            
                            232Common
      stock, $.001 par value, 200,000,000 shares authorized;21,525,000  issued
      and outstanding as ofMarch
      31, 2009 and December 31, 2008, respectively
                            
                            
                            21,525
                            
                            
                            
                            21,525Additional
      paid-in capital
                            
                            
                            12,976,283
                            
                            
                            
                            12,976,284Accumulated
      deficit - development stage company
                            
                            
                            (13,058,491
                            )
                            
                            
                            (12,905,012
                            )Total
      stockholders' equity (deficit)
                            
                            
                            (60,352
                            )
                            
                            
                            93,129TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                            
                            $
                            293,100
                            
                            
                            $
                            293,100





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


3





UNIVERSAL
      BIOENERGY, INC.(An
      Development Stage Company)CONDENSED
      CONSOLIDATED STATEMENT OF OPERATIONS - unaudited





For the PeriodFor the Three Months Ended
                
                
                from August 13, 2004March 31,
                
                
                (inception) through2009
                
                
                2008
                
                
                March 31, 2009OPERATING
      EXPENSES:General
      and administrative
                
                $
                153,479
                
                
                $
                282,346
                
                
                $
                970,137Impairment
      of assets
                
                
                -
                
                
                
                3,484,048
                
                
                
                11,970,692Total
      operating expenses
                
                
                153,479
                
                
                
                3,766,394
                
                
                
                12,940,829OTHER
      (INCOME) AND EXPENSES:Interest
      expense
                
                
                -
                
                
                
                40,559
                
                
                
                117,662Total
      other expense
                
                
                -
                
                
                
                40,559.00
                
                
                
                117,662NET
      LOSS
                
                $
                153,479
                
                
                $
                3,806,953
                
                
                $
                13,058,491NET
      LOSS PER SHARE:Basic
      and diluted loss per share
                
                $
                0.01
                
                
                $
                0.17Weighted
      average of shares outstanding
                
                
                21,525,000
                
                
                
                22,509,778





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


4





UNIVERSAL
      BIOENERGY, INC.(An
      Development Stage Company)CONDENSED
      CONSOLIDATED STATEMENT OF CASH FLOWS - unaudited





For the PeriodFor the Three Months Ended
                  
                  
                  from August 13, 2004March 31
                  
                  
                  (inception) through2009
                  
                  
                  2008
                  
                  
                  March 31, 2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Loss
                  
                  $
                  (153,479
                  )
                  
                  $
                  (3,806,953
                  )
                  
                  $
                  (13,058,491
                  )Adjustments
      to reconcile net loss to net cash(used
      in) operating activities:In
      kind rent
                  
                  
                  -
                  
                  
                  
                  600
                  
                  
                  
                  9,000Impairment
      of assets
                  
                  
                  -
                  
                  
                  
                  3,484,048
                  
                  
                  
                  11,970,692Common
      stock issued for services
                  
                  
                  -
                  
                  
                  
                  50,100
                  
                  
                  
                  51,878Preferred
      Series A stock issued for services
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  11,850Changes
      in assets and liabilities:Accounts
      payable and accrued expenses
                  
                  
                  145,479
                  
                  
                  
                  (6,824
                  )
                  
                  
                  263,238Net
      cash used by operating activities
                  
                  
                  (8,000
                  )
                  
                  
                  (279,029
                  )
                  
                  
                  (751,833
                  )CASH
      FLOWS FROM INVESTING ACTIVITIES:Cash
      from acquisition
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  108,974Net
      cash used in investing activities
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  108,974CASH
      FLOWS FROM FINANCING ACTIVITIES:Advances
      from affiliates
                  
                  
                  8,000
                  
                  
                  
                  -
                  
                  
                  
                  32,405Proceeds
      from the issuance of common stock
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  23,200Proceeds
      from notes payable
                  
                  
                  -
                  
                  
                  
                  149,254
                  
                  
                  
                  587,254Net
      cash provided by financing activities
                  
                  
                  8,000
                  
                  
                  
                  149,254
                  
                  
                  
                  642,859INCREASE
      IN CASH
                  
                  
                  -
                  
                  
                  
                  (129,775
                  )
                  
                  
                  -CASH,
      BEGINNING OF YEAR
                  
                  
                  -
                  
                  
                  
                  133,177
                  
                  
                  
                  -CASH,
      END OF YEAR
                  
                  $
                  -
                  
                  
                  $
                  3,402
                  
                  
                  $
                  -SUPPLEMENTAL
      CASH FLOW INFORMATION:Interest
      paid
                  
                  $
                  -
                  
                  
                  $
                  -Taxes
      paid
                  
                  $
                  -
                  
                  
                  $
                  -





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


5





UNIVERSAL
BIOENERGY, INC.


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




NOTE
1 - DESCRIPTION OF BUSINESS





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





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





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





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





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





NOTE
2 - GOING CONCERN ISSUES




The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America which
contemplate continuation of the Company as a going concern.  The Company
has net losses for the period from inception (August 13, 2004) to March 31, 2009
of $13,058,491.  Further, the Company has inadequate working capital to
maintain or develop its operations, and is dependent upon funds from private
investors and the support of certain stockholders.




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




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


6




NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




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





Principle of
Consolidation





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





Use of Estimates and
Assumptions





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





Revenue and Cost
Recognition





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





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 December 31, 2008 and 2007
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.


7





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





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





Goodwill and Other
Intangible Assets




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





Impairment of Long-Lived
Assets





In
accordance with ASC Topic 365, long-lived assets, such as
property, plant, and equipment, and purchased intangibles, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Goodwill and other
intangible assets are tested for impairment.  Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the fair value of the asset. There were events or
changes in circumstances that necessitated an impairment of long lived
assets.





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.


8





The
Company adopted the provisions of ASC Topic 740; "Accounting For Uncertainty In
Income Taxes-An Interpretation Of ASC Topic 740 ("ASC Topic 740").  ASC
Topic 740 contains a two-step approach to recognizing and measuring uncertain
tax positions. The first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates it is more likely than
not, that the position will be sustained on audit, including resolution of
related appeals or litigation processes, if any. The second step is to measure
the tax benefit as the largest amount, which is more than 50% likely of being
realized upon ultimate settlement. The Company considers many factors when
evaluating and estimating the Company's tax positions and tax benefits, which
may require periodic adjustments. At March 31, 2009, 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 fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties other than in a
forced sale or liquidation.





The
carrying amounts of the Company’s financial instruments, including cash,
accounts payable, accrued liabilities, and related party payables approximate
fair value, due to maturities.





Reclassification





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


9





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 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 n our financial statements.




On
July 1, 2009, we adopted guidance issued by the FASB on business
combinations. The guidance retains the fundamental requirements that the
acquisition method of accounting (previously referred to as the purchase method
of accounting) be used for all business combinations, but requires a number of
changes, including changes in the way assets and liabilities are recognized and
measured as a result of business combinations. It also requires the
capitalization of in-process research and development at fair value and requires
the expensing of acquisition-related costs as incurred. We have applied this
guidance to business combinations completed since July 1,
2009.




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




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




Recent
Accounting Guidance Not Yet Adopted




In June
2009, the FASB issued guidance on the consolidation of variable interest
entities, which is effective for us beginning July 1, 2010. The new
guidance requires revised evaluations of whether entities represent variable
interest entities, ongoing assessments of control over such entities, and
additional disclosures for variable interests. We believe adoption of this new
guidance will not have a material impact on our financial
statements.





NOTE
4 - NET LOSS PER SHARE





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


10





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





For the Quarter
                    Ended
                    March 31, 2009
                  
                  
                  For the Quarter
                    Ended
                    March 31, 2008Losses
      available for common shareholders
                  
                  $
                  (153,479
                  )
                  
                  $
                  (3,806,953
                  )Weighted
      average common shares outstanding
                  
                  
                  (21,525,000
                  )
                  
                  
                  (22,509,778
                  )Basic
      loss per share
                  
                  $
                  (.01
                  )
                  
                  $
                  (.17
                  )Fully
      diluted loss per share
                  
                  $
                  (.01
                  )
                  
                  $
                  (.17
                  )Net
      loss per share is based upon the weighted average shares of common stock
      outstanding





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





NOTE
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 21,515,000
are issued and outstanding as of December 31, 2008.





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 December 31,
2008.





FORWARD
SPLIT


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





At
December 31, 2008, there were no outstanding stock options or
warrants.





Issuance
of preferred shares





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





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


11





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





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


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





The
Preferred Series B shares are non-voting.





100,000
shares of Preferred Series A shares were also issued to then management for
compensation.  The Preferred Series A shares are voting at the ratio of 300
common shares per one share of preferred.





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 9.7% dilution as of March 31, 2009. 
Conversion at an implied market rate ($.02 per share) would result in the
issuance of approximately 11,604000 shares of common stock or 35.0% dilution as
of March  31, 2009.  See Note 10 regarding legal restrictions on
the conversion of these shares to common stock.





NOTE
6 - PROPERTY AND EQUIPMENT





The
Company has fixed assets as of March 31, 2009 and December 31, 2008 as
follows:





March
      31,2009
                        
                        
                        December
      31,
                          2008Equipment
                        
                        $
                        165,000
                        
                        
                        $
                        165,000Land
                        
                        
                        50,000
                        
                        
                        
                        50,000Building
                        
                        
                        75,000
                        
                        
                        
                        75,000Accumulated
      depreciationTotal
                        
                        $
                        290,000
                        
                        
                        $
                        290,000





There was
no depreciation expense for the years ended March 31, 2009 and 2008
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,
2008.  The Company impaired the assets to its value and adjusted
accumulated depreciation to zero during that impairment.  See Note 3, -
Impairment of Long-Lived Assets.


12





NOTE
7 –NOTE PAYABLE AFFILIATES





Notes
payable to affiliates comprise the following as of:





March 31,
                  2009
                
                
                December 31,
                  2008In
      February 2008 the Company did not issue the required stock for the
      $100,000 bonus and the Company issued a note payable that has no interest
      rate and is due upon demand
                
                
                100,000
                
                
                
                100,000Total
      long-term note payable
                
                
                100,000
                
                
                
                100,000Less
      current portion
                
                
                100,000
                
                
                
                100,000Long-term
      portion of note payable
                
                $
                -
                
                
                $
                -





On
September 18, 2008 the Company converted the debt to preferred shares as
disclosed in Note 5 above.





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 $2,420,035 which expire in various years through 2028,
subject to limitations of Section 382 of the Internal Revenue Code, as amended.
The Company has provided a valuation reserve against the full amount of the net
operating loss benefit, because in the opinion of management based upon the
earning history of the Company, it is more likely than not that the benefits
will not be realized.




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





NOTE
9  RELATED PARTY TRANSACTIONS




In
February 2008 the Company did not issue the required stock for the $100,000
bonus and the Company issued a note payable that has no interest rate and is due
upon demand. 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.


13





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 additional
investment capital, 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 additional
investment capital, and a 5% finder’s fee on all debt financing obtained by Mr.
Ali on behalf of the Company.





NOTE
10 – SUBEQUENT EVENTS





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 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.





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 $492,500 was expensed to interest expense.





On
November 22, 2009 the Company sold 45,000 units in a private placement for
$45,000 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.


14


On
November 23, 2009 the Company issued 1,360,000 common shares to Vince
M. Guest in accordance with the terms of his employment agreement. The
stock was trading at $.105 and the Company expensed $142,800 for each issuance
of shares of stock.





On
November 23, 2009 the Company issued 1,360,000 common shares to
Solomon RC Ali in accordance with the terms of his employment
agreement. . The stock was trading at $.105 and the Company expensed
$142,800 for each issuance of shares of stock.





On
November 23, 2009 the Company issued 1,360,000 common shares to
Richard D. Craven in accordance with the terms of his employment
agreement. . The stock was trading at $.105 and the Company expensed
$142,800 for each issuance of shares of stock.





On
January 12, 2010 the Company issued 750,000 common shares to James Michael Ator
for settlement of his outstanding employment agreement.  The stock was
trading at $.05 and the Company expensed $45,000 for each issuance of shares of
stock.





Entry into a Material
Definitive Agreement.





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




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





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




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





Additional Summary of
the Purchase Agreement





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


15





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 another entity.





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.





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





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





The risk of
disgorgement





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





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


16





The risk of
rescission





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





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





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





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





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





The risk of
dilution





As stated
elsewhere, the preferred shares are convertible to common shares at a rate to be
mutually agreed upon by the Company, Lacroix, and Mortensen. 
 However, documents provided by former management to the SEC establish that
management of Lacroix and Mortensen had tentatively agreed to convert the
preferred shares received from the note conversions into common shares at the
rate of ten shares of common to one share of preferred with the final conversion
rate to mutually agreed upon by both parties.  Additionally, common shares
were converted to preferred shares by Mortensen at a 10:1 ratio. 
Conversion at the 10:1 rate would result in the issuance of 2,320,800 shares of
common stock or 9.7% dilution as of March  31, 2009.  Conversion
at an implied market rate ($.02 per share) would result in the issuance of
approximately 11,604,000  shares of common stock or 35.0% dilution as
of March  31, 2009.


17





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





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





*  *  *  *  *  *





18


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, product performance, 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/A 2nd
Amendment for the year ended December 31, 2007, 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





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




Based
upon estimates of management, the plant should be able to produce annually
approximately 10 million, 20 million, and 50 million gallons of fuel grade
biodiesel from soybean oil (or other suitable feedstock) per the first 12, 24,
and 36 month periods respectively after the start of production pending
successful raising of capital for feedstocks, reagents, equipment expansion, and
economic conditions. Additionally, the plant will produce corresponding amounts
(10% by biodiesel production volume) of marketable glycerin or other processed,
value-added products made from the glycerin. As of the date of this report, we
are still in the development phase, and until the proposed biodiesel plant is
operational or companies merged with or acquired, we will generate no revenue.
We anticipate that accumulated losses will continue to increase until the
biodiesel plant is operational or another revenue-generating M&A agreement
is closed.


19





The
original expected production start date was slated for January 2008, but due to
some difficulty in attainment of required permits from the State of Mississippi
to commence operations, the plant did not begin production. In addition, we
require certain raw materials including plant oils/animal fats, catalyst, and
alcohol in order to commence production. As of the date of this report, we have
not acquired any raw materials to engage in production. We are gathering
information and negotiating pricing with vendors, but have not secured any
agreements with providers of such raw materials.




Provisional
permits from the State of Mississippi were received in May 2008, but the start
date of actual production can not be accurately predicted based on the current
economic environment in the marketplace. The provisional permits allowed the
processing of typical batch sizes to characterize the waste water emissions that
would be produced. Testing of these emissions would determine the necessary
pre-treatment (if any) required before disposal into local sewage system
(subsequent to final connection to our system) or have the waste water
transported to larger treatment facilities in a nearby city. With a formalized
plan for handling the waste water, management feels confident that full
permitting could be obtained but are not certain of the time it will take as the
present economic environment makes it unprofitable to produce biodiesel at this
site.  The provisional permits were allowed to expire in September
2008.





The high
cost of virgin feedstock materials makes it unprofitable to use these as sole or
primary feedstock choices to produce biodiesel based on comparable diesel
product prices. Alternative feedstock types are being investigated which are at
a lower cost than the virgin feedstock, but the high cost of similar commodities
has also increased the cost of these feedstock sources. If sufficient quantities
can be located and favorable price including shipping negotiated, the process
operation can produce revenues in excess of processing costs. As of the date of
this report, the Company has no agreements to sell any of its products once
production begins nor secured economically viable feedstock sources due to their
high costs. Management anticipates that in order to reach sustainable
profitability, a monthly volume in excess of 300,000 gallons will be required.
Management believes in the next twelve months approximately $4,000,000 of
working capital will be needed with the greatest portion allocated for feedstock
and reagent costs including shipping with an estimated average cost of
$3,000,000 barring extreme fluctuations in commodity prices; further anticipated
equipment acquisitions, installation, and site modifications based on effluent
emission results and fuel quality estimated at $400,000; and normal operating
overhead expenses of $600,000. This capital will bring production close to the
10 MGPY first-stage level. The Company can give no assurances as to the success
of or the time it will take to raise the necessary capital; therefore, Universal
may not be able to meet the first-stage production goal within the twelve month
period slated or predict how long it will take to achieve the first-stage
goal.





Over the
past two plus years, the plant underwent site improvement and development.
General clean up and improvements of the site took place utilizing the debt
financing previously obtained through LaCroix International and Mortensen
Financial Limited, related parties.


20





An
environmental order allowing provisional permitted production was received from
the State of Mississippi Department of Environmental Quality in May 2008 to
allow the Company to begin processing and scale-up phase of production to reach
the nominal first-stage 10 million gallons per year (MGPY) goal subject to
confirmation of effluent emissions. Pending confirmation of these effluent
emissions (or appropriate treatments of emissions) from the State of Mississippi
after production has started and verification of fuel quality, the plant will
work to increase production to the meet the first-stage goal over the subsequent
twelve month period. During this early stage, Universal is planning to sell
biodiesel products to the refinery's prior customer base, truck stops, and local
distributors. We currently do not have any agreements to sell its biodiesel
products due to the plant not being in production. The provisional permits were
allowed to expire in September 2008.





In an
attempt to satisfy the provisional permit requirements for processing,
management has sought feedstock that would allow economical production of
biodiesel and allow characterization of effluent emissions as required. Virgin
feedstock plant oils increased in price to a point that made using them as a
primary feedstock uneconomical for the company. Lower cost feedstock sources
were sought and a supplier identified that could supply waste vegetable oils for
our trial processing runs. Upon receiving the initial shipment of feedstock, it
was found that the material did not meet the required quality specifications to
allow production of biodiesel that would meet American Society for Testing and
Materials (ASTM) specifications using the present production equipment on site.
During further attempts to identify an economical new supplier, the time
limitations for the provisional permits expired in September 2008. Due to the
high cost of feedstock at that time and the economic downturn in the biofuels
marketplace, it was deemed by management unprofitable to pursue production of
biodiesel until feedstock costs became more economically viable or petroleum
prices rising to a point that would make biodiesel more competitive overall in
the marketplace. There is no certainty as to when such conditions will exist if
at all.





Management
anticipates that after production commences and production is scaled up to the
20 MGPY level and above when the market conditions improve, pending the raising
of sufficient capital in subsequent months after the first-stage goal is
reached, export to the European and/or other markets is expected with the higher
production volume as it is anticipated that this production volume will exceed
the needs of the local/regional distribution area. Scale-up of the facility to
the first and second stage goal is subject to securing sufficient funding to
cover capital expenditures and feedstock costs for this expansion of production
capacity.





Expansion
of the plant to increase production capacity to the second-stage goal of 20 MGPY
using already acquired equipment and subsequent purchases and installation will
require the successful raising of further capital through further stock
offerings and/or additional debt if necessary. There is no certainty that this
capital can be raised.





Reaching
the 20 MGPY second-stage production level will require additional storage
capacity of both pre and post processing materials and products and improvements
to logistics on the site. Not all costs have been determined or quoted to
achieve this stage; however, Management estimates such cost to be between
$500,000 and $1,000,000, but information and pricing regarding costs is still
being acquired and may vary greatly from the stated estimates. To reach the 50
MGPY third-stage production level will require further expansion of storage
capacity and the building of a rail spur at the site or require additional land
purchase adjacent to the site, which in preliminary discussions with
knowledgeable rail transportation personnel could cost as much as $1,000,000 for
such a rail spur not including land costs. With this in mind and in the present
volatile economic environment, management is contemplating the need and
possibility of moving the plant to a location better suited logistically for the
necessary movement of large volumes of materials and products in and out of the
facility, making more possible the attainment of the higher production level
goals. This likely will require the plant to be located near an active waterway
or port to allow barge transport of materials and products. Costs for such a
move have not been investigated to date.


21





Management
anticipated the lack of working capital and negotiated to restructure its debt
by converting the said debt to preferred shares to better position our company
to secure further capital to cover plant start up and overhead costs for the
next 12 months. The Company will work with vendors to establish credit for
feedstock materials and further plans to raise needed capital through revenue
from sales of products equity and/or debt financing, if necessary, until
sufficient production volume can be reached to cover operating costs and debt
service or other revenue generating businesses are acquired. Management believes
that the inability for our company to raise sufficient capital will limit the
overall production capacity, if any, of the site, and we will not be able to
sustain the losses incurred due to the limited production.





The
economic uncertainty in the present economy and biofuels marketplace
necessitated that management determine a new direction for our company in order
to secure and increase shareholder value. In December 2009, management decided
to diversify the direction and product/service offerings of our company. These
include development of feedstock programs for biofuels to better stabilize and
reduce feedstock costs, seek other value-added products from biodiesel
production byproducts, and seek merger and acquisitions that will allow
diversification into solar, wind, synthetic fuels, energy efficiency technology,
and other related technologies and services that can better facilitate the
development of a vertically integrated energy production/service company.
Management is seeking acquisition and merger candidates and other companies that
can play a synergistic role in our diversification strategy and increase
shareholder value. There is no certainty that such candidates and companies will
or can be found and if found, successfully acquired or merged into our company.
If such candidates or companies are not found, there is doubt of our remaining a
going concern.


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. 
The Senate voted on March 10, 2010 to restore the credit.   As of May
26, 2010 the House was moving towards a vote as well.  Restoration of the
credit will then require reconciliation and signature of President
Obama.




Critical
Accounting Policies





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.


22


These
estimates and assumptions also affect the reported amounts of revenues, costs
and expenses during the reporting period.  Management evaluates these
estimates and assumptions on a regular basis.  Actual results could differ
from those estimates.





Revenue and Cost
Recognition





Revenue
includes product sales. The Company recognizes revenue from the sale of
Biodiesel fuel and related byproducts at the time title to the product transfer,
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 Topic 605 “Revenue Recognition in Financial
Statements”





Property and
Equipment





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





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





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





Depreciation
has been suspended until the plant resumes production.





Additionally,
in consideration of the current economic state of the biodiesel fuel industry,
and the dormant, non-operating, non-permitted status of the plant, management
has impaired the value of the land, plant, and equipment to reflect its current
estimated fair value.





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.





Impairment of Long-Lived
Assets





In
accordance with ASC Topic 3605, long-lived assets, such as
property, plant, and equipment, and purchased intangibles, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Goodwill and other
intangible assets are tested for impairment.  Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the fair value of the asset. There were events or
changes in circumstances that necessitated an impairment of long lived
assets.


23





RESULTS
OF OPERATIONS





Fiscal
Year Ended March 31, 2009 compared to March 31, 2008





Universal
Bioenergy North America, Inc. is a developmental stage company and operating
subsidiary of the Company. The Company has generated no revenues as Universal
Bioenergy North America, Inc. was not in production as of March 31, 2009 and
will continue to accrue operating losses until sufficient production levels can
be reached to meet all liabilities.





The
Company has never generated any revenue.  Our future revenue plan is
uncertain and is dependent on our ability to effectively refine our products,
generate sales, and obtain contract feedstock opportunities or merge or acquire
companies presently generating revenues. There are no assurances of the ability
of our company to begin refining feedstock or identifying, negotiating, and
successfully closing mergers or acquisition candidates. The cost of modifying
our refinery is cost intensive as is merging or acquiring other business
entities, so it is critical for us to raise appropriate capital to implement our
business plan. We incurred losses were $153,479 and $3,806,953 for the three
months ended March 31, 2009 and 2008. Our losses since our inception through
March 31, 2009 amount to $13,058,491.





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





Liquidity
and Capital Resources





As
reflected in the accompanying financial statements, we are in the development
stage with limited resources, used cash in operations of $751,833 from
inception, a working capital deficiency of $199,973 and have an accumulated
deficit during the development stage of $13,058,491 this raises substantial
doubt about our ability to continue as a going concern. The ability of our
company to continue as a going concern is dependent on the Company’s ability to
raise additional capital and implement its business plan. The financial
statements do not include any adjustments that might be necessary if we are
unable to continue as a going concern.





Debt





Convertible
Debt





On March
18, 2008, we issued a $43,555 convertible note payable in favor of Mortensen
Financial Limited, a shareholder of our company. The note was convertible at the
option of the holder by taking the average bid price of the common stock for the
five day period preceding the conversion and multiplying by 75%. The interest
rate was 6.5% per annum. The note requires payments of accrued interest and
principal by October 31, 2010. On October 31, 2008, all accrued interest was
required to be paid. Beginning April 30, 2009 and semiannually thereafter
through October 31, 2010, we were to pay $10,889 in semiannual installments. On
September 18, 2008, we converted this debt to preferred B
shares.


24





On April
7, 2008, the Company issued a $300,000 unsecured convertible note payable to
Mortensen Financial Limited, a related party. The note was convertible at the
option of the holder by taking the average bid price of the common stock for the
five day period preceding the conversion and multiplying by 75%. The interest
rate is 6.5% per annum. The note required payments of accrued interest and
principal by October 31, 2010. On October 31, 2008 all accrued interest was
required to be paid. Beginning April 30, 2009 and semiannually thereafter
through October 31, 2010, we were to pay $75,000 in semiannual
installments.





On
September 18, 2008, we converted all of the above mentioned debt to 132,350
preferred B shares.





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





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





On
September 18, 2008 the Company converted the Notes payables 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 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.





WHERE YOU CAN FIND MORE
INFORMATION





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


25





ITEM 3. 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





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





ITEM
4.  CONTROLS AND PROCEDURES




Evaluation
of Disclosure Controls and Procedures





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





Our Chief
Executive Officer and Chief Financial Officer is responsible for establishing
and maintaining adequate internal control over financial reporting (as defined
in Rule 13a-15(f) under the Exchange Act). Our internal control over financial
reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with accounting principles generally
accepted in the United States.





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





Our Chief
Executive Officer and Chief Financial Officer evaluated the effectiveness of the
Company's internal control over financial reporting as of March 31, 2009. In
making this assessment, our Chief Executive Officer and Chief Financial Officer
used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on
this evaluation, our Chief Executive Officer and Chief Financial Officer,
concluded that, as of March 31, 2009, our internal control over financial
reporting was effective.





b)
Changes in Internal Control over Financial Reporting.





During
the Quarter ended March 31, 2009, there was no change in our internal control
over financial reporting (as such term is defined in Rule 13a-15(f) under the
Exchange Act) that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.


26





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





The
Company’s Richard Craven the former CEO was also involved with the Mortenson and
LaCroix transactions as described in Note 11 to the financial statements.
Although former management asserts they had no knowledge of the Abellan scheme
or the freeze order, in the best interest of the Company they resigned,
surrendered the preferred A shares, and have no further affiliation with the
Company.  Due to the size of our Company and the costs associated to
remediate these issues, we still consider these concerns to be extremely
relevant.




PART II – OTHER INFORMATION




ITEM
1. LEGAL PROCEEDINGS





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





ITEM 1A
- Risk Factors





Risk
Factors





Investing
in our common stock involves a high degree of risk. You should consider
carefully the risks and uncertainties described below, together with all of the
other information in this report, including the consolidated financial
statements and the related notes appearing at the end of this quarterly report
on Form 10Q, with respect to any investment in shares of our common stock.
If any of the following risks actually occurs, our business, financial
condition, results of operations, and future prospects would likely be
materially and adversely affected. In that event, the market price of our common
stock could decline and you could lose all or part of your investment. There has
been no material changes in the risk factors previously disclosed in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2008. However,
the following risk factors, in addition to risk factors previously disclosed in
our Annual Report on Form 10-K for the fiscal year ended December 31, 2008
should be considered




Risk
Factors Related to Our Business





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


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


27





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


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





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





Moreover,
the Company’s prospects must be considered in light of the risks and
uncertainties encountered by an early-stage company and in rapidly evolving
markets, such as other alternative energy and biofuels markets, where supply and
demand may change significantly in a short amount of time. The volatility in
these markets may lead to increases in costs for feedstock materials, reagents,
and for transportation of same to a point where production will be wholly
unprofitable once production has commenced if at all.





Some of
these risks relate to the Company’s business plan and potential inability
to:






            effectively
      manage our contemplated business
operations;



            recruit
      and retain key personnel;



            successfully
      create and maintain relationships with vegetable oil producers and fat
      renderers and develop reliable feedstock and reagent supplies;
      and



            develop
      new products that complement our contemplated business and long term
      stability.





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





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




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


28





Our ability to successfully execute
our business depends on certain conditions, the satisfaction of which, are not
under our control. There is no certainty that we will be able to achieve
satisfaction of any or these conditions.





The
Company’s ability to successfully execute our business plan depends on the
satisfaction of several conditions. The Company’s ability to satisfy these
conditions may be, in part or in whole, beyond our control. The principal
conditions to be satisfied include:






            reaching
      definitive agreements for reliable feedstock supplies for biodiesel at
      prices that permit profitable
production;



            entering
      into satisfactory agreements for the sale of biodiesel at prices that are
      competitive in the market and allow for sufficient revenues to sustain the
      business;



            entering
      into satisfactory agreements for the expansion of the existing
      manufacturing facility which are tied closely to costs of said expansions
      and our ability to secure financing of these planned
      expansions;





Since the
Company has yet to begin full operation as a business but is close to doing so
pending successful acquisition of funding, there is no certainty that we will be
able to achieve satisfaction of any or all of the above conditions in addition
to production volume and costs control.





Petroleum
diesel, vegetable oils, waste oils and animal fats, and other commodity prices
are volatile, and changes in prices of such commodities could have in the future
a material adverse impact on our business.





The
results of operations, financial position, and business outlook of the Company’s
planned business are highly dependent on commodity prices, which are subject to
significant volatility and uncertainty, and influence the availability of
supplies especially for smaller producers. Accordingly, any results of our
contemplated business could fluctuate substantially and even reach cost levels
that could cause a cessation of operations.





Anticipated
results are substantially dependent on commodity prices, especially prices for
vegetable oils, waste oils, animal fats, and also petroleum diesel. The only
help in this area is secure contracts at acceptable prices and terms for these
materials, but no assurance is possible that such agreements can be obtained,
especially without adequate funding.





As a
result of the volatility of the prices for commodities, anticipated results may
fluctuate substantially, and we may experience periods of declining prices for
our products and increasing costs for our raw materials, which could result in
operating losses or cessation of operations entirely.





The
Company’s contemplated business is likely to be highly sensitive to feedstock
and reagent prices, and generally we will be unable to pass on increases in
these prices to our customers.





The
principal raw materials we expect to use to produce biodiesel are plant oil
and/or animal fat feedstocks. As a result, changes in the price of feedstock can
significantly affect our contemplated business. In general, rising feedstock
prices produce lower profit margins. Because biodiesel competes with
fossil-based fuels, the Company is not likely to be able to pass along increased
feedstock costs to customers unless there are corresponding price increases in
petroleum commodities. At certain levels, feedstock prices may make biodiesel
uneconomical to use in fuel markets. Such lack of economy could have detrimental
effects on our ability to maintain production.


29





Weather
conditions and other factors affecting crop yields, farmer planting decisions,
and general economic, market and regulatory factors all influence the price of
feedstocks. Government policies and subsidies with respect to agriculture and
international trade, and global and local demand and supply also impact the
price. The significance and relative effects of these factors on the price of
plant oils and other feedstocks are difficult to predict. Any event that tends
to negatively affect the supply of feedstock, such as adverse weather or crop
disease, could increase feedstock prices and potentially harm our
business.





Fluctuations
in the selling price and production cost of diesel may reduce the Company’s
anticipated profit margins, if profits are achieved.





Historically,
the price of a gallon of petroleum diesel has been lower than the cost to
produce a gallon of biodiesel. Biodiesel prices are influenced by the supply and
demand for diesel, and our anticipated results of operations and financial
position may be materially adversely affected if diesel demand or price
decreases.





The Company’s anticipated business
will be subject to seasonal fluctuations.


The
Company anticipated operating results are likely to be influenced by seasonal
fluctuations in the price of our primary operating input, feedstocks, and the
price of our primary product, biodiesel. Biodiesel prices are substantially
correlated with the price of petroleum diesel, especially in connection with our
indexed, gas-plus sales contracts. The price of petroleum diesel tends to rise
during each summer and winter. Given our lack of operating history, we do not
know yet how these seasonal fluctuations, especially the lows in spring and
fall, will affect our results over time.





Growth
in the sale and distribution of biodiesel is dependent on the changes to and
expansion of related infrastructure which may not occur on a timely basis, if at
all, and the Company’s contemplated operations could be adversely affected by
infrastructure disruptions.





Substantial
development of infrastructure will be required by persons and entities outside
the Company’s control for our contemplated operations, and the renewable fuel
industry generally, to grow. Areas requiring expansion include, but are not
limited to:






            additional
      storage facilities for biodiesel;



            expansion
      of refining and blending facilities to produce biodiesel and form blends
      with petroleum diesel; and



            growth
      in service stations equipped to handle biodiesel
  fuels.





Substantial
investments required for these infrastructure changes and expansions may not be
made or they may not be made on a timely basis in time to benefit the Company.
Any delay or failure in making the changes to or expansion of infrastructure
could hurt the demand or prices for the Company’s contemplated products, impede
delivery of those products, impose additional costs on us, or otherwise have a
material adverse effect on our results of contemplated operations or financial
position. The Company’s contemplated business will be highly dependent on the
continuing availability of infrastructure, and any infrastructure disruptions
could have a material adverse effect on our business.


30





We may not be able to compete
effectively in the U.S. and foreign biodiesel industries.





In the
U.S., the Company’s contemplated business would compete with other existing
biodiesel producers and refineries. A number of competitors are divisions of
substantially larger enterprises and have substantially greater financial
resources than the Company has or plans to have, making the larger suppliers
more able to weather market volatility, whereas, our smaller size would not.
These smaller competitors operate smaller facilities which do not affect the
local price of soybeans grown in the proximity to the facility as much as larger
facilities. In addition, institutional investors and high net worth individuals
could heavily invest in biodiesel production facilities and oversupply the
demand for biodiesel, resulting in lower biodiesel price levels that might
adversely affect the results of the Company’s contemplated operations and
financial position.





Any
increase in domestic competition could result in reduced biodiesel prices. As a
result, we could be forced to take other steps to compete effectively, if at
all, which could adversely affect the results of our contemplated operations and
financial position.





The U.S.
renewable fuel industry is highly dependent upon federal and state legislation,
regulation, and subsidies/incentives and any changes in legislation or
regulation or subsidies/incentives could materially and adversely affect the
results of the Company’s contemplated operations and financial
position.




The cost
of producing biodiesel is made significantly more competitive with petroleum
diesel by federal tax incentives. The elimination or significant reduction in
such federal tax incentives or other programs benefiting biodiesel may have a
material adverse effect on the results of the Company’s contemplated operations
and financial position. Smaller producers due to lack of bargaining ability and
production economies of size are more susceptible to changes in these federal
tax incentives.




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





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





We may not be able to secure the
required zoning and permits to operate and produce
biodiesel.





Although
the Company has been granted a provisional permit from the State of Mississippi,
there is no guarantee that we will be able to obtain the required zoning and
permits to operate and commence production at the levels that are required in
order to become profitable. This could significantly affect the Company’s
ability to generate revenues and would have a material adverse effect on our
business.


31





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.


32





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




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





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




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




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





Our
financial statements contain explanatory language that some doubt exists about
our ability to continue as a going concern. The notes discloses that we are in
the development stage with limited resources, used cash in operations of
$751,833from
inception, a working capital deficiency of $353,451 and have an accumulated
deficit during the development stage of $13,058,491. This raises substantial
doubt about our ability to continue as a going concern. Our ability to continue
as a going concern is dependent on our ability to raise additional capital and
implement its business plan. The financial statements do not include any
adjustments that might be necessary if we are unable to continue as a going
concern.




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




We
Do Not Intend To Pay Dividends




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


33





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





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





There
were no sales of unregistered upon senior securities during the period ended
March 31, 2009.




Item 3. Defaults Upon Senior
Securities




There
were no defaults upon senior securities during the period ended March 31,
2009.





Item 4. Removed and
Reserved




Item 5. Other Information




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




Item 6. Exhibits




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





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





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





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


34





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:
      June 28, 2010
                  
                  By
                  /s/ Vince M. GuestVince
      M. GuestChief
      Executive Officer (Principle Executive Officer)Principle
      Financial Officer, and
President


35