UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q/A


1st
Amendment


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


OF THE
SECURITIES ACT OF 1934


For
the quarterly period ended March 31, 2008





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
              
              20-1770378(State
      or other jurisdiction of incorporation or organization)
              
              (I.R.S.
      Employer Identification No.)





19800
Mac Arthur Blvd. Suite 300


Irvine,
CA  92612


(Address,
including zip code, 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 atJanuary 16, 2010Common
      stock, $0.001 par value
              
              30,325,000


EXPLANATORY
NOTE


This
Amended Quarterly Report on Form 10-Q/A is being filed for the following
purposes: Upon reviewing Rule 12b-2 of the Exchange Act, management determined
that Universal Bioenergy, Inc., has issued restate financial statements and
updated the filings for the Securities Exchange Act of 1934 changes required
with this filing.  Please note that nothing else has been
updated  The restatement was a change from a reverse acquisition and
recapitalization to a purchase method of accounting based on comments received
by the Securities and Exchange Commission.








UNIVERSAL
BIOENERGY, INC.


INDEX


INDEX
TO FORM 10Q/A FILING




FOR THE
THREE MONTHS ENDED MARCH 31, 2008 AND APRIL 30, 2007 GIVING THE


EFFECT OF
THE CHANGE IN YEAR END.





TABLE
OF CONTENTS





PART
I


FINANCIAL
INFORMATION


PAGEPART
      I - FINANCIAL INFORMATIONItem 1.
                      Condensed
      Consolidated Financial Statements
                      3Condensed
      Consolidated Balance Sheets
                      3Condensed
      Consolidated Statements of Income
                      4Condensed
      Consolidated Statement of Cash Flows
                      5Notes
      to Condensed Consolidated Financial Statements
                      6Item 2.
                      Management
      Discussion & Analysis of Financial Condition and Results of
      Operations
                      23Item 3
                      Quantitative
      and Qualitative Disclosures About Market Risk
                      31Item 4.
                      Controls
      and Procedures
                      31PART
      II - OTHER INFORMATIONItem 1.
                      Legal
      Proceedings
                      33Item 1A
                      Risk
      Factors
                      33Item 2.
                      Unregistered
      Sales of Equity Securities and Use of Proceeds
                      41Item 3.
                      Defaults
      Upon Senior Securities
                      41Item 4.
                      Submission
      of Matters to a Vote of Security Holders
                      41Item 5
                      Other
      information
                      41Item 6.
                      Exhibits
                      41CERTIFICATIONSExhibit
      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)ASSETS:
      (Substantially pledged)
                    
                    
                    
                    
                    RestatedMarch
      31, 2008
                    
                    
                    December
      31, 2007CURRENT
      ASSETSCash
                    
                    $
                    3,402
                    
                    
                    $
                    133,177Prepaid
      expenses
                    
                    
                    -
                    
                    
                    
                    178,076Total
      current assets
                    
                    
                    3,402
                    
                    
                    
                    311,253PROPERTY
      AND EQUIPMENT
                    
                    
                    290,000
                    
                    
                    
                    1,945,972Intangible
      assets
                    
                    
                    -
                    
                    
                    
                    1,650,000Deposit
                    
                    
                    3,100
                    
                    
                    
                    3,100TOTAL
      ASSETS
                    
                    $
                    296,502
                    
                    
                    $
                    3,910,325LIABILITIES
      AND STOCKHOLDERS' EQUITY:CURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                    
                    $
                    45,533
                    
                    
                    $
                    87,218Accrued
      interest
                    
                    
                    132,712
                    
                    
                    
                    97,850Convertible
      note, net of debt discount - affiliate
                    
                    
                    126,491
                    
                    
                    
                    -Derivative
      liability - affiliate
                    
                    
                    -
                    
                    
                    
                    7,867Note
      payable- affiliate
                    
                    
                    404,047
                    
                    
                    
                    304,047Note
      payable
                    
                    
                    1,650,000
                    
                    
                    
                    162,250Total
      current liabilities
                    
                    
                    2,358,783
                    
                    
                    
                    659,231Derivative
      liability - affiliate
                    
                    
                    230,629
                    
                    
                    
                    300,000Note
      payable - affiliate
                    
                    
                    44,000
                    
                    
                    
                    44,000Note
      payable
                    
                    
                    -
                    
                    
                    
                    1,487,750TOTAL
      LIABILITIES
                    
                    
                    2,633,412
                    
                    
                    
                    2,490,981STOCKHOLDERS'
      EQUITY:Preferred
      stock, $.001 par value, 1,000,000 shares authorized; none issued and
      outstanding shares
                    
                    
                    -
                    
                    
                    
                    -Common
      stock, $.001 par value, 200,000,000 shares authorized; 22,510,000 and
      22,500,000 issued and outstanding as of March 31, 2008 and December 31,
      2007
                    
                    
                    22,510
                    
                    
                    
                    22,500Additional
      paid-in capital
                    
                    
                    10,096,590
                    
                    
                    
                    10,045,900Accumulated
      deficit - development stage company
                    
                    
                    (12,456,009
                    )
                    
                    
                    (8,649,056
                    )Total
      stockholders' equity
                    
                    
                    (2,336,909
                    )
                    
                    
                    1,419,344TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                    
                    $
                    296,502
                    
                    
                    $
                    3,910,325
 
 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,
                  
                  
                  April 30,
                  
                  
                  (inception) through2008
                  
                  
                  2007
                  
                  
                  March 31, 2008Consolidated
                  
                  
                  
                  
                  
                  ConsolidatedRevenue
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Total
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -OPERATING
      EXPENSES:General
      and administrative
                  
                  
                  257,225
                  
                  
                  
                  13,294
                  
                  
                  
                  399,078Sales
      and marketing expenses
                  
                  
                  25,121
                  
                  
                  
                  -
                  
                  
                  
                  25,121Depreciation
      and amortization expense
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,390Impairment
      of assets
                  
                  
                  3,484,048
                  
                  
                  
                  -
                  
                  
                  
                  11,970,692Total
      operating expenses
                  
                  
                  3,766,394
                  
                  
                  
                  13,294
                  
                  
                  
                  12,397,281OTHER
      (INCOME) AND EXPENSES:Interest
      expense
                  
                  
                  40,559
                  
                  
                  
                  -
                  
                  
                  
                  40,728Total
      other expense
                  
                  
                  40,559
                  
                  
                  
                  -
                  
                  
                  
                  40,728NET
      LOSS
                  
                  $
                  3,806,953
                  
                  
                  $
                  13,294
                  
                  
                  $
                  12,438,009NET
      LOSS PER SHARE:Basic
      and diluted loss per share
                  
                  $
                  0.17
                  
                  
                  $
                  0.00Weighted
      average of shares outstanding
                  
                  
                  22,509,778
                  
                  
                  
                  4,300,000
 
 The
accompanying notes are an integral part of these condensed consolidated
financial statements.
  4
 
 UNIVERSAL BIOENERGY, INC.
 (An
Development Stage Company)
 
 CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS - unaudited
 
 For
      the PeriodFor
      the Three Months Ended
                      
                      
                      from
      August 13, 2004March
      31
                      
                      
                      April
      30
                      
                      
                      (inception)
      through2008
                      
                      
                      2007
                      
                      
                      March
      31, 2008Consolidated
                      
                      
                      
                      
                      
                      ConsolidatedCASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Loss
                      
                      $
                      (3,806,953
                      )
                      
                      $
                      (13,294
                      )
                      
                      $
                      (12,438,009
                      )Adjustments
      to reconcile net loss to net cash (used in) operating
      activities:In
      kind rent
                      
                      
                      600
                      
                      
                      
                      600
                      
                      
                      
                      7,800Impairment
      of assets
                      
                      
                      3,484,048
                      
                      
                      
                      -
                      
                      
                      
                      11,970,692Common
      stock issued for services
                      
                      
                      50,100
                      
                      
                      
                      
                      
                      
                      
                      50,100Changes
      in assets and liabilities:Prepaid
      expenses
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Accounts
      payable
                      
                      
                      (41,685
                      )
                      
                      
                      10,176
                      
                      
                      
                      (41,685
                      )Accrued
      expenses
                      
                      
                      34,861
                      
                      
                      
                      -
                      
                      
                      
                      35,076Notes
      payable
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Net
      cash used by operating activities
                      
                      
                      (279,029
                      )
                      
                      
                      (2,518
                      )
                      
                      
                      (416,026
                      )CASH
      FLOWS FROM INVESTING ACTIVITIES:Cash
      from acquisition
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      108,974Net
      cash used in investing activities
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      108,974CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from the issuance of common stock
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      23,200Proceeds
      from notes payable
                      
                      
                      149,254
                      
                      
                      
                      -
                      
                      
                      
                      287,254Net
      cash provided by financing activities
                      
                      
                      149,254
                      
                      
                      
                      -
                      
                      
                      
                      310,454INCREASE
      IN CASH
                      
                      
                      (129,775
                      )
                      
                      
                      (2,518
                      )
                      
                      
                      3,402CASH,
      BEGINNING OF YEAR
                      
                      
                      133,177
                      
                      
                      
                      2,820
                      
                      
                      
                      -CASH,
      END OF YEAR
                      
                      $
                      3,402
                      
                      
                      $
                      302
                      
                      
                      $
                      3,402SUPPLEMENTAL
      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 - BASIS OF
PRESENTATION




The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the rules and regulations of the Securities and Exchange Commission for
interim financial information.  Accordingly, they do not include all the
information necessary for a comprehensive presentation of financial position and
results of operations.




It is
management’s opinion however, that all material adjustments (consisting of
normal recurring adjustments) have been made, which are necessary for a fair
financial statements presentation.  The results for the interim period are
not necessarily indicative of the results to be expected for the
year.




NOTE
2 - GOING CONCERN ISSUES




The
accompanying financial statements, the Company is in the development stage with
limited resources, and had a loss as of March 31, 2008 of $3,806,953 and
accumulated loss since inception of $12,438,009. This raises substantial doubt
about its ability to continue as a going concern. The ability of the 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 the Company is unable to
continue as a going concern.




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, development and sale of Bio Diesel. The Company cannot
reasonably be expected to earn revenue in the development 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.




NOTE 3
-  ORGANIZATION




Universal
Bioenergy North America, Inc (a development stage company) (“UBNA”) was
incorporated in the State of Nevada on January 23, 2007.





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





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)”.


6





On
October 24, 2007, the Company changed its name to Universal Bioenergy, Inc. to
better reflect its business plan.




NOTE
4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





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





Principle of
Consolidation





The
condensed 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 Estimatesand
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.





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
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 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 March 31, 2008, cash
and cash equivalents include cash on hand and cash in the bank.


7





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 PeriodFurniture
      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.  The Company impaired its
intangible assets by 1,650,000 as the impairment was due to the expirations of
permits and Environmental Protection Agency status.





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.   The Company impaired its long lived assets based on the
value of the Land, Equipment and building facility by $1,655,972.  Due
to the reduction in valuations in Mississippi of land and building and
diminished economic viability of biodiesil production the total valuations of
that acquisition has reduced significantly in overall value of the assets to
$290,000.


8





Income
Taxes





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





The
Company adopted the provisions of ASC Topic 740; "Accounting For Uncertainty In
Income Taxes-An Interpretation Of ASC Topic 740 ("ASC Topic
740").  ASC Topic 740 contains a two-step approach to recognizing and
measuring uncertain tax positions.  The first step is to evaluate the
tax position for recognition by determining if the weight of available evidence
indicates it is more likely than not, that the position will be sustained on
audit, including resolution of related appeals or litigation processes, if any.
The second step is to measure the tax benefit as the largest amount, which is
more than 50% likely of being realized upon ultimate settlement.  The
Company considers many factors when evaluating and estimating the Company's tax
positions and tax benefits, which may require periodic adjustments. At March 31,
2008, the Company did not record any liabilities for uncertain tax
positions.





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 and accrued liabilities, income tax payable and related party
payable approximate fair value due to their most maturities.





Reclassification





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


9





Derivative
Liabilities





Convertible
debt is accounted for in accordance with ASC Topic 815, Accounting for Derivative
Instruments and Hedging Activities (“Topic 815”) and ASC Topic 815. 40,
Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in a Company’s Own
Stock, (“Topic 815.40”). According to these pronouncements, we have
recorded the embeddedconversionoption related to our convertible debt at fair value on
the reporting date, resulting in the convertible instrument itself being
recorded at a discount from the face amount.





Business
Segments





The
Company operates in one segment and therefore segment information is not
presented.





Advertising and Promotional
Expense




Advertising
and other product-related costs are charged to expense as incurred. For the
three months ended March 31, 2008 and April 30, 2007 advertising expense was
$1,154, and $0, respectively.





Recent Accounting
Pronouncements





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





On
September 30, 2009, the Company adopted updates issued by the Financial
Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These
changes establish the FASB Accounting Standards CodificationTM (ASC) as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with GAAP. Rules and interpretive releases of the Securities and
Exchange Commission (“SEC”) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. The FASB will no longer issue
new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts; instead the FASB will issue Accounting Standards
Updates. Accounting Standards Updates will not be authoritative in their own
right as they will only serve to update the Codification. These changes and the
Codification itself do not change GAAP. Other than the manner in which new
accounting guidance is referenced, the adoption of these changes had no impact
on the Condensed Consolidated Financial Statements.





In June
2009, the FASB issued guidance now codified as ASC Topic 105, “Generally Accepted Accounting
Principles” (“ASC 105”), which establishes the FASB Accounting Standards
Codification as the source of GAAP to be applied to nongovernmental agencies.
ASC 105 explicitly recognizes rules and interpretive releases of the SEC under
authority of federal securities laws as authoritative GAAP for SEC registrants.
ASC 105 became effective for interim or annual periods ending after
September 15, 2009. ASC 105 does not have a material impact on the
Company’s consolidated financial statements presented hereby.





In May
2009, the FASB issued guidance now codified as ASC Topic 855, “Subsequent Events” (“ASC
855”). The pronouncement modifies the definition of what qualifies as a
subsequent event—those events or transactions that occur following the balance
sheet date, but before the financial statements are issued, or are available to
be issued—and requires companies to disclose the date through which it has
evaluated subsequent events and the basis for determining that date. The Company
adopted the provisions of ASC 855 in the second quarter of 2009, in accordance
with the effective date.


10





On April
1, 2009, the Company adopted updates issued by the FASB to the recognition and
presentation of other-than-temporary impairments. These changes amend existing
other-than-temporary impairment guidance for debt securities to make the
guidance more operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities. The recognition
provision applies only to fixed maturity investments that are subject to the
other-than-temporary impairments. If an entity intends to sell, or if it is more
likely than not that it will be required to sell an impaired security prior to
recovery of its cost basis, the security is other-than-temporarily impaired and
the full amount of the impairment is recognized as a loss through earnings.
Otherwise, losses on securities which are other-than-temporarily impaired are
separated into: (i) the portion of loss which represents the credit loss; or
(ii) the portion which is due to other factors.




The
credit loss portion is recognized as a loss through earnings, while the loss due
to other factors is recognized in other comprehensive income (loss), net of
taxes and related amortization. A cumulative effect adjustment is required to
accumulated earnings and a corresponding adjustment to accumulated other
comprehensive income (loss) to reclassify the non-credit portion of previously
other-than-temporarily impaired securities which were held at the beginning of
the period of adoption and for which the Company does not intend to sell and it
is more likely than not that the Company will not be required to sell such
securities before recovery of the amortized cost basis. These changes were
effective for interim and annual periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. The Company adopted
these changes effective April 1, 2009.





In April
2009, the FASB issued guidance now codified as ASC Topic 825, “Financial
Instruments” (“ASC 825”). The pronouncement amends previous ASC 825 guidance to
require disclosures about the fair value of financial instruments in all interim
as well as annual financial statements. This pronouncement was effective for
interim periods ending after June 15, 2009 and the Company adopted its
provisions in the second quarter of 2009.





On
January 1, 2009, the Company adopted updates issued by the FASB to fair
value accounting and reporting as it relates to nonfinancial assets and
nonfinancial liabilities that are not recognized or disclosed at fair value in
the financial statements on at least an annual basis. These changes define fair
value, establish a framework for measuring fair value in GAAP, and expand
disclosures about fair value measurements. This guidance applies to other GAAP
that require or permit fair value measurements and is to be applied
prospectively with limited exceptions. The adoption of these changes, as it
relates to nonfinancial assets and nonfinancial liabilities had no impact on the
Condensed Consolidated Financial Statements. These provisions will be applied at
such time a fair value measurement of a nonfinancial asset or nonfinancial
liability is required, which may result in a fair value that is materially
different than would have been calculated prior to the adoption of these
changes.





On
January 1, 2009, the Company adopted updates issued by the FASB to
accounting for intangible assets. These changes amend the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset in order to improve the consistency
between the useful life of a recognized intangible asset outside of a business
combination and the period of expected cash flows used to measure the fair value
of an intangible asset in a business combination. The adoption of these changes
had no impact on the Condensed Consolidated Financial
Statements.


11





On
January 1, 2009, the Company adopted updates issued by the FASB to the
calculation of earnings per share. These changes state that unvested share-based
payment awards that contain nonforfeitable rights to dividends or dividend
equivalents (whether paid or unpaid) are participating securities and shall be
included in the computation of earnings per share pursuant to the two-class
method for all periods presented. The adoption of these changes had no impact on
the Condensed Consolidated Financial Statements.





In April
2008, the FASB issued guidance now codified as ASC Topic 350, “Intangibles—Goodwill and
Other” (“ASC 350”). This pronouncement amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under previous ASC 350 guidance,
thereby improving the consistency between the useful life of a recognized
intangible asset under ASC 350 and the period of expected cash flows used to
measure the fair value of the asset under ASC Topic 805, “Business Combinations”
(“ASC 805”). This pronouncement was effective for financial statements issued
for fiscal years beginning after December 15, 2008 and must be applied
prospectively to intangible assets acquired after the effective date. The
Company has not acquired any intangible assets since adopting this
pronouncement. As such, there has been no impact to the Company’s financial
statements since the January 1, 2009 adoption date.





In March
2008, the FASB issued guidance now codified as ASC Topic 815 “Derivatives and Hedging”
(“ASC 815”), which expands the disclosure requirements in previous ASC 815
guidance about an entity’s derivative instruments and hedging activities. This
pronouncement’s disclosure provisions apply to all entities with derivative
instruments subject to the previous ASC 815 guidance. The provisions also apply
to related hedged items, bifurcated derivatives, and nonderivative instruments
that are designated and qualify as hedging instruments. Entities with
instruments subject to this pronouncement must provide more robust qualitative
disclosures and expanded quantitative disclosures. Such disclosures, as well as
existing required disclosures, generally will need to be presented for every
annual and interim reporting period. This pronouncement was effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008. For the nine months ended March 31, 2008, the Company
has included the expanded disclosures about derivative instruments and hedging
activities within the Company’s financial statements.





In
December 2007, the FASB issued guidance now codified as ASC Topic 805, “Business Combinations” (“ASC
805”), which replaces previous ASC 805 guidance. This pronouncement establishes
principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
any non-controlling interest in the acquiree and the goodwill acquired in
connection with a business combination. This pronouncement also establishes
disclosure requirements that will enable users to evaluate the nature and
financial effect of the business combination. This pronouncement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of an entity’s first fiscal year that begins after
December 15, 2008. The Company applied the provisions of ASC 805 in
connection with the acquisition that closed during the first quarter of 2009.
The adoption of this pronouncement did not have a material impact on the
Company’s consolidated financial statements.


12





Updates issued but not yet
adopted





In
October 2009, the FASB issued updates to revenue recognition guidance. These
changes provide application guidance on whether multiple deliverables exist, how
the deliverables should be separated, and how the consideration should be
allocated to one or more units of accounting. This update establishes a selling
price hierarchy for determining the selling price of a deliverable. The selling
price used for each deliverable will be based on vendor-specific objective
evidence, if available, third-party evidence if vendor-specific objective
evidence is not available, or estimated selling price if neither vendor-specific
or third-party evidence is available. The Company will be required to apply this
guidance prospectively for revenue arrangements entered into or materially
modified after January 1, 2011; however, earlier application is permitted. The
Company has not determined the impact that this update may have on its
Consolidated Financial Statements.




In August
2009, the FASB issued updates to fair value accounting for liabilities. These
changes clarify existing guidance that in circumstances in which a quoted price
in an active market for the identical liability is not available, an entity is
required to measure fair value using either a valuation technique that uses a
quoted price of either a similar liability or a quoted price of an identical or
similar liability when traded as an asset, or another valuation technique that
is consistent with the principles of fair value measurements, such as an income
approach (e.g., present value technique). This guidance also states that both a
quoted price in an active market for the identical liability and a quoted price
for the identical liability when traded as an asset in an active market when no
adjustments to the quoted price of the asset are required are Level 1 fair value
measurements. These changes will become effective for the Company’s Consolidated
Financial Statements for the year ended December 31, 2009. The Company has not
determined the impact that this update may have on its Consolidated Financial
Statements.





NOTE 5 STOCKHOLDERS’
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 22,500,000
are issued and outstanding as of December 31, 2007.





On
November 3, 2007, the Company authorized 1,000,000 preferred shares, at $.001
par value and there are no issued and outstanding as of December 31,
2007.





FORWARD
SPLIT





On
November 3, 2007, the Company authorized a 5 for 1 forward split of its
4,500,000 issued and outstanding 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.





The
Company issued 2,000,000 shares in the acquisition of UBNA and cancelled
9,000,000 shares from a related party.




Common
Stock Issued for Cash





During
January 2007, the Company issued 10,000,000 shares of common stock for
$500,000.





Common
Stock Issued for Services





On
February 13, 2008 the Company granted 10,000 shares of common stock for
consulting services having a fair value of $50,100 based upon fair value on the
date of grant. As of March 31, 2008 $50,100 is recorded as deferred compensation
for future consulting services.


13





In
kind contribution





For the
three months ended March 31, 2008, a shareholder of the Company contributed
office space with a fair value of $600 and there was not consideration paid or
owed for this contribution.





For the
year ended December 31, 2007, a shareholder of the Company contributed office
space with a fair value of $600 and there was not consideration paid or owed for
this contribution.





NOTE
6 - PROPERTY AND EQUIPMENT





The
Company has fixed assets as of March 31, 2008 and December 31, 2007 as
follows:





March 31,
                            2008
                          
                          
                          December 31,
                            2007Equipment
                          
                          $
                          165,000
                          
                          
                          $
                          1,698,362Land
                          
                          
                          50,000
                          
                          
                          
                          150,000Building
                          
                          
                          75,000
                          
                          
                          
                          100,000Accumulated
      depreciation
                          
                          
                          
                          
                          
                          
                          (2,390
                          )Total
                          
                          $
                          290,000
                          
                          
                          $
                          1,945,972





Depreciation
expense for the three months ended March 31, 2008 and period ended December 31,
2007 was $0 and $2,390 respectively. The Company has not recorded any
depreciation expense related to its processing facility as it has not been
placed in service as of March 31, 2008.





NOTE
7 - ACQUISITON


Palomine
Mining, Inc. ("Palomine" or "we") consummated its acquisition of Universal
Bioenergy North America, Inc., a Nevada Corporation, ("Universal"), at a closing
held on December 6, 2007. Such acquisition was consummated pursuant to and in
accordance with the Stock Purchase and Agreement (the "Agreement"), dated
October 24, 2007, among Palomine, Universal and Mortensen Financial Limited, a
shareholder of Palomine ("Mortensen").





As a
result of the closing, Universal has become a wholly owned subsidiary of
Palomine. In exchange for all of the issued and outstanding shares of Universal,
Palomine issued to the shareholders of Universal 2,000,000 shares of common
stock of Palomine. Mortensen, a shareholder of Palomino contributed 1,800,000
shares of common stock of Palomine to the amount of shares being delivered to
Universal shareholders by Palomine. Such issuance represents an issuance of 44%
of the issued and outstanding shares of Palomine. In addition, pursuant to the
terms of the Agreement, an amendment to the certificate of incorporation of
Palomine was filed with the State of Nevada whereby: (i) the name of the company
has been changed to Universal Bioenergy, Inc., (ii) the shares of common stock
of Palomine issued and outstanding at the time of the closing (4,500,000 shares)
were increased by a forward stock split in the amount of five (5) shares for
each share of Palomine issued and outstanding (resulting in 22,500,000 shares
issued and outstanding); and (ii) the authorized shares of Palomine were
increased to 200,000,000 shares of common stock with a par value of $0.001 per
share; and 1,000,000 shares of preferred stock with a par value of $0.001 per
share. As a result the company has treated this acquisition under the purchase
method of accounting, whereas the company issued 2,000,000 shares at the five
day average of the value of the stock given to the seller. The five day average
of the values of stock was $5.01 during the closing of the purchase of the
Companies subsidiary Universal Bioenergy North America, Inc.


14





Prior to
the Agreement, Universal Bioenergy North American, Inc. purchased assets out of
bankruptcy.  The purchase of those assets determined the value of the
stock exchange in the Agreement.





Purchase Price Allocation
                                  
                                  December 6,
                                    2007Tangible Assets AllocationLand
                                  
                                  $
                                  150,000Equipment
      and capital improvements
                                  
                                  
                                  1,695,972Building
                                  
                                  
                                  100,000Prepaid
      expenses
                                  
                                  
                                  178,076Deposits
                                  
                                  
                                  3,100Cash
                                  
                                  
                                  108,974Intangible Asset AllocationPermits
                                  
                                  
                                  225,000Environmental
      Protection Agency approvals (EPA)
                                  
                                  
                                  650,000Mississippi
      Department of Environmental Quality (MDEQ)
                                  
                                  
                                  225,000National
      Biodiesel Board membership
                                  
                                  
                                  50,000Intellectual
      property rights to operate the refinery
                                  
                                  
                                  500,000LiabilitiesAccounts
      payables
                                  
                                  
                                  (45,533
                                  )Accrued
      expenses
                                  
                                  
                                  (83,366
                                  )Convertible
      notes payables
                                  
                                  
                                  (307,867
                                  )Notes
      payables
                                  
                                  
                                  (1,650,000
                                  )Fair
      values of net assets
                                  
                                  
                                  1,533,356Total
      Purchase price
                                  
                                  
                                  10,020,000Goodwill
                                  
                                  $
                                  8,486,644





Proforma
Statement of Operations:





The
Company’s Proforma statement of operations if the companies were consolidated as
of January 1, 2007 would be as follows:





Proforma
Statement of Operations


For the
                        Twelve
                        Months ended
                        December 31,
                        2007Operating ExpensesGeneral
      & Administrative
                      
                      $
                      527,393Total
      Operating Expense
                      
                      
                      527,393Other
      Income (Expenses)Fair
      value of derivative
                      
                      
                      4,094Interest
      Expense
                      
                      
                      (110,909
                      )Interest
      Income
                      
                      
                      2,827Total Other Income
    (Expenses)Net
      Loss
                      
                      $
                      (631,381
                      )


15





NOTE
8- GOODWILL AND OTHER INTANGIBLE ASSETS





The
Company assessed the allocation of the purchase price, primarily through the
determination of the fair value and remaining useful lives of the 2007
Acquisitions' respective intangible assets. As of December 31, 2007 the Company
recorded intangible assets for a total amount of $1,650,000.





The
Company has not amortized the intangible assets since the Company has not
started operation of its Refinery and has no revenues through March 31, 2008 and
still a development stage company. The Company will calculate the weighted
average of the average amortization period, in total and by major define-lived
intangible asset on a straight-line basis over the estimated useful lives of the
related assets that is ten years.





Intangible Assets
                  
                  March 31,
                    2008
                  
                  
                  December
                    31, 2007Other
      Intangible Assets
                  
                  $
                  1,650,000
                  
                  
                  $
                  1,650,000Total
      Intangibles Assets
                  
                  
                  1,650,000
                  
                  
                  
                  1,650,000Impairment
      Intangible Assets
                  
                  
                  (1,650,000
                  )
                  
                  
                  -Accumulated
      Amortization
                  
                  
                  -
                  
                  
                  
                  -Net
      Intangible Assets
                  
                  $
                  -
                  
                  
                  $
                  1,650,000





NOTE
9 – CONVERTIBLE DEBENTURE





March 31, 2008
                
                
                December 31, 2007During
      October 2007, the Company issued a $300,000 convertible note payable. The
      note is 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 is
      unsecured and requires payments of accrued interest and principal by
      October 31, 2010. On April 30, 2008 and October 31, 2008, all accrued
      interest must be paid. Beginning April 30, 2009 and semiannually
      thereafter through October 31, 2010, the Company is to pay $75,000 in
      semiannual installments.  The Company converted the entire note
      to Preferred Series B Stock on September 18, 2008.
                
                $
                201,349
                
                
                $
                307,867On
      March 18, 2008, the Company issued a $43,556 unsecured convertible note
      payable to Mortensen Financial Limited, a related party. The note is
      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 requires
      payments of accrued interest and principal by October 31, 2010. On October
      31, 2008 all accrued interest must be paid. Beginning April 30, 2009 and
      semiannually thereafter through October 31, 2010, the Company is to pay
      $10,889 in semiannual installments. During the three months ended March
      31, 2008 the Company recognized interest expense of approximately $99. The
      Company converted the entire note to Preferred Series B Stock on September
      18, 2008.
                
                
                29,280
                
                
                
                -Total
      long-term note payable
                
                
                230,629.
                
                
                
                307,867Less
      current portion
                
                
                -
                
                
                
                7,867Long-term
      portion of note payable
                
                $
                230,629
                
                
                $
                300,000


16





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





On March
18, 2008, the Company issued a $43,556 unsecured convertible note payable to
Mortensen Financial Limited, a related party. The note is 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 requires payments of accrued interest and
principal by October 31, 2010. On October 31, 2008 all accrued interest must be
paid. Beginning April 30, 2009 and semiannually thereafter through October 31,
2010, the Company is to pay $10,889 in semiannual installments. During the three
months ended March 31, 2008 the Company recognized interest expense of
approximately $99.





The
initial fair value of the embedded conversion option was $29,387; this amount is
recorded as a debt discount which is amortized over the life of the underlying
convertible debt instrument. At March 31, 2008, we recognized interest expense
of $399. At March 31, 2008, upon remeasurement, the derivative liability had a
fair value of $29,280. The resulting change in fair value of $107 was recorded
as a reduction in the derivative liability during the three months ended March
31, 2008.





The
following weighted average assumptions were used on the initial date of issuance
and the remeasurement date of March 18, 2008:





Exercise
      price
                $3.76
      and $3.76Expected
      dividend yield
                0%
      and 0%Expected
      volatility
                66%
      and 66%Risk
      free interest rate
                1.74%
      and 1.79%Expected
      life of conversion option
                2.62
      and 2.59 yearsExpected
      forfeitures
                0%
      and 0%


17




During
October 2007, the Company issued a $300,000 unsecured convertible note payable
to Mortensen Financial Limited, a related party. The note is 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 requires payments of accrued interest and
principal by October 31, 2010. On April 30, 2008 and October 31, 2008 all
accrued interest must be paid. Beginning April 30, 2009 and semiannually
thereafter through October 31, 2010, the Company is to pay $75,000 in semiannual
installments. During the period from inception to March 31, 2008 the Company
recognized interest expense of approximately $8,125.
 
 The
initial value of the embedded conversion option was $218,228; this amount is
recorded as a debt discount which is amortized over the life of the underlying
convertible debt instrument. For the three months ended March 31, 2008, we
recognized interest expense of $18,191. At March 31, 2008, upon remeasurement,
the derivative liability had a fair value of $201,349. The resulting change in
fair value of $12,785 was recorded as a reduction in the derivative liability
during the three months ended March 31, 2008.
 
 The
following weighted average assumptions were used on the initial date of issuance
and the remeasurement date of October 31, 2007 and March 31, 2008,
respectively:
 
 Exercise
      price
                $3.75
      and $3.76Expected
      dividend yield
                0%
      and 0%Expected
      volatility
                66%
      and 66%Risk
      free interest rate
                3.82%
      and 1.71%Expected
      life of conversion option
                2.83
      and 2.58 yearsExpected
      forfeitures
                0%
      and 0%
 
 The
following table summarizes the derivative liabilities and convertible notes
payable as of March 31, 2008:
 
 Description
                      
                      
                      Convertible
                        Note Payable
                      
                      
                      Less: Debt
                        Discount
                      
                      
                      Convertible Note
                        Payable, net of Debt
                        Discount
                      
                      
                      Derivative
                        LiabilityMortensen
      Financial
                      
                      
                      $
                      300,000
                      
                      
                      $
                      188,078
                      
                      
                      $
                      111,922
                      
                      
                      $
                      201,349Mortensen
      Financial
                      
                      
                      $
                      43,556
                      
                      
                      $
                      28,987
                      
                      
                      $
                      14,569
                      
                      
                      $
                      29,280Total
                      
                      
                      $
                      343,556
                      
                      
                      $
                      217,065
                      
                      
                      $
                      126,491
                      
                      
                      $
                      230,629
 
 At March
31, 2008 future minimum principle payments are as follows:
  2009
                            
                            $
                            171,7782010
                            
                            
                            171,778Total
      payments
                            
                            
                            343,556




18




NOTE
10 – NOTE PAYABLE AND NOTE PAYABLE AFFILIATES





Notes
payable affiliates comprise the following as of:





March 31, 2008
                
                
                December 31, 2007During
      December 2007, the Company entered into an $88,000 unsecured note payable
      to Mortensen Financial Limited, a related party. The interest rate is 6.5%
      per annum. The note requires payment of accrued interest and principal by
      December 31, 2010. On April 30, 2008 and October 31, 2008 all accrued
      interest must be paid. Beginning April 30, 2009 and semiannually
      thereafter through October 31, 2010, the Company is to pay $22,000 in
      semiannual installments. During the period from inception to March 31,
      2008, the Company incurred interest expense of approximately $1,599. The
      Company converted the entire note to Preferred Series B Stock on September
      18, 2008.
                
                $
                88,000
                
                
                $
                88,000During
      October 2007, the Company entered into a $250,000 unsecured note payable
      to Mortensen Financial Limited, a related party. The interest rate is 6.5%
      per annum. The note requires payment of accrued interest and principal by
      December 31, 2008.  During the period from inception to March
      31, 2008, the Company incurred interest expense of approximately $6,771.
      The Company converted the entire note to Preferred Series B Stock on
      September 18, 2008.
                
                
                250,000
                
                
                
                250,000During
      December 2007, the Company received a $10,046 advance from
      an affiliate. Pursuant to the terms of the advance, the advance is
      non interest bearing, unsecured, and due on demand. The Company converted
      the entire note to Preferred Series B Stock on September 18,
      2008.
                
                
                10,047
                
                
                
                10,047In
      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
                
                
                
                -Total
      long-term note payable
                
                
                448,047
                
                
                
                348,047Less
      current portion
                
                
                404,047
                
                
                
                304,047Long-term
      portion of note payable
                
                $
                44,000
                
                
                $
                44,000




19


Notes
payable comprise of the following as of:





March 31, 2008
                          
                          
                          December 31,
                            2007During
      January 2007, the Company entered into a $1,650,000 secured note payable.
      The note payable is secured by all assets of the Company. The interest
      rate is 6% per annum and the note is secured by all the assets of the
      Company. The note requires semi annual principle payments of $103,125 plus
      interest on June and December of each year. During the period from
      inception to March 31, 2008, the Company incurred interest expense of
      approximately $116,359.  The Company is delinquent and was
      required to make its first semi annual payment on March 31, 2008 and has
      not.  The note is accordingly classified as
    current.
                          
                          $
                          1,650,000
                          
                          
                          $
                          1,650,000Total
      long-term note payable
                          
                          
                          1,650,000
                          
                          
                          
                          1,650,000Less
      current portion
                          
                          
                          1,650,000
                          
                          
                          
                          162,250Long-term
      portion of note payable
                          
                          $
                          -
                          
                          
                          $
                          1,487,750





As of
March 31, 2008, future minimum principle payments are as follows:





2008
                        
                        $
                        206,2502009
                        
                        
                        206,2502010
                        
                        
                        206,2502011
                        
                        
                        206,2502012
      and thereafter
                        
                        
                        825,000Total
      payments
                        
                        
                        1,650,000Less
      Current portion
                        
                        
                        (1,650,000
                        )The
      Company is delinquent on all required payments
                        
                        $
                        -





NOTE 11
              COMMITMENTS




On
February 26, 2008, the Company entered into a one-year employment agreement with
the Company’s Chief Executive Officer. The employment agreement renews annually.
Pursuant to this employment agreement, the Company will pay an annual base
salary of $60,000 for the period February 26, 2008 through February 26, 2009. In
addition, on February 27, 2009 the officer was to have received a signing bonus
of 19,763 shares of Company common stock with a fair value of $100,000 based on
the value of the Company’s common stock on the effective date of the
agreement.  The officer never received the shares of Company common
stock and the $100,000 stock bonus was converted to a note payable at no
interest.  As of March 31, 2008 the note payable is still
outstanding.  The agreement also calls for increase in the officer’s
base compensation upon the Company reaching certain milestones:


20




1.
            For
      every $1,000,000 in Company’s profit the Executive is eligible for an
      annual performance bonus equal to 1% of the profit in cash and 4% of the
      profit on Common Stock.





2.
            For
      each successfully completed Transaction, which includes a merger or
      acquisition, the Company will pay 1% of the transaction value, of which
      10% is to be paid in cash and 90% in Common
  Stock.





On
January 15, 2008 the Company appointed a board of advisors for a twelve month
period. The Advisors are to be paid a total of $10,000 per month of which $2,500
is in cash and the remaining $7,500 in shares of common stock. Upon the
execution of the agreement, the Company paid an advance of $7,500 and will issue
4,491 shares of Company common stock with a fair value of $22,500. For the
quarter ended March 31, 2008; $18,750 is recorded as a consulting
expense.  The Company never issued the shares of Company common stock
and the Company and the parties terminated the contract in January
2008.





During
2007, as part of the sale of the facility by the bankruptcy court, the Company
assumed an agreement entered into by the former operators of the biodiesel
facility with the state of Mississippi Commission on Environmental Quality. The
agreement requires the Company to deposit $50,000 into a trust fund to be used
by the state of Mississippi for closure of the facility in the event the Company
ceases operations. In addition, the Company is required to obtain approval from
the state of Mississippi and meet certain environmental operating criteria as
agreed to in the settlement agreement prior to beginning operations at the
facility. As of the date of this report, the Company has not completed its
obligations to the state of Mississippi and has not received approval to begin
operations





On
November 20, 2007, the Company entered into an agreement with an unrelated party
to provide consulting services. The term of the services to be provided is from
November 20, 2007 to October 22, 2008. As compensation for services received the
Company is required to pay an annual fee of $200,000, a staffing fee up to
$78,000 per month, a $10,000 travel and other expense allowance, and up to
$30,000 per month for two months of Internet Campaign. For the period ended
March 31, 2008 $116,655 has been recorded as a prepaid expense.  The
Company and the parties mutually terminated this agreement early January
2008.





On
December 17, 2007, the Company entered into a consulting agreement. The
Consultant is to be paid $100 per hour of which $50 is in cash and the remaining
$50 is in Common Stock. As part of compensation the Company issued shares of
common stock with a fair value of $50,600 based on the stock price within 45
days of the agreement. The agreement is to be in effect until canceled by either
party. On February 13, 2008 the Company issued 10,000 shares of common with a
fair value of $50,100 on the grant date.




NOTE 12     RELATED PARTY
TRANSACTIONS




On March
18, 2008, the Company issued a $43,556 convertible note payable to Mortensen
Financial Limited, a related party. The interest rate is 6.5 % per annum. The
note is 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 requires
payments of accrued interest and principal by October 31, 2010. On October 31,
2008 all accrued interest must be paid. Beginning April 30, 2009 and
semiannually thereafter through October 31, 2010, the Company is to pay $10,889
in semiannual installments. During the three months ended March 31, 2008 the
Company recognized interest expense of approximately $99.


21


During
December 2007, the Company entered into an $88,000 note payable with Mortensen
Financial Limited, a related party. The interest rate is 6.5% per annum. The
note requires payment of accrued interest and principal by December 31, 2010. On
April 30, 2008 and October 31, 2008 all accrued interest must be paid. Beginning
April 30, 2009 and semiannually thereafter through October 31, 2010 Company is
to pay $22,000 semiannual installments. During the period from inception to
March 31, 2008 the Company incurred interest expense of approximately
$1,599.





During
October 2007, the Company issued a $300,000 convertible note payable to
Mortensen Financial Limited, a related party. The note is 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 requires payments of accrued interest and
principal by October 31, 2010. On April 30, 2008 and October 31, 2008 all
accrued interest must be paid. Beginning April 30, 2009 and semiannually
thereafter through October 31, 2010 Company is to pay $75,000 in semiannual
installments. During the period from inception to March 31, 2008 the Company
incurred interest expense of approximately $8,125.





During
October 2007, the Company entered into a $250,000 note payable to Mortensen
Financial Limited, a related party. The interest rate is 6.5% per annum. The
note requires payment of accrued interest and principal by December 31, 2008.
During the period from inception to March 31, 2008 the Company incurred interest
expense of approximately $6,771.





For the
three months ended March 31, 2008, a shareholder of the Company contributed
office space with a fair value of $600.





During
the year ended December 31, 2007, the Company received $10,046 from a
stockholder. Pursuant to the terms of the loan, the loan is non interest
bearing, unsecured and due on demand.





For the
year ended December 31, 2007 the shareholder of the Company contributed $600 of
services on behalf of the Company.





NOTE 13
              SUBSEQUENT
EVENTS




DERIVATIVE
LIABILITY AND CONVERTIBLE NOTE PAYABLE





On April
7, 2008, the Company issued a $300,000 unsecured convertible note payable to
Mortensen Financial Limited, a related party. The note is 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 requires payments of accrued interest and
principal by October 31, 2010. On October 31, 2008 all accrued interest must be
paid. Beginning April 30, 2009 and semiannually thereafter through October 31,
2010 Company is to pay $75,000 in semiannual installments.


22


In
September 2008 the Company allowed the temporary operating permits to expire,
effectively discontinuing the biodiesel operation.





In
September 18, 2008 the Company converted $2,539,904 of Notes payables to Lacroix
International Holdings, Ltd. in the amount of $1,818,913 of principle and
accrued interest for 82,500 preferred Series B shares, Mortenson Financial Ltd.
in the amount of $720,992 of principle and accrued interest for 49,580 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.





On
September 29, 2008 the Company issued 7,500 common shares to Traci Placo for
services rendered as officer and director of the Company.  The shares
were trading at $.1185 per share and the Company expensed $889.





On
September 29, 2008 the Company issued 7,500 common shares to James Earnest for
services rendered as officer and director of the Company.  The shares
were trading at $.1185 per share and the Company expensed $889.





On April
14, 2009 the Company issued 2,200,000 to each officer and director of the
Company with a 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.





In March
2009 the Company entered into a Lease Agreement with MIPCO.  The lease
with MIPCO required the Company to retrofit the building and update the
permits.  MIPCO paid a deposit of $10,000 and failed to fulfill the
Agreement and the Lease Agreement has been terminated.





On
September 30, 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 $.1185 and $100,000 was applied to the reduction of debt
and the remaining balance of $492,500 was expensed to interest
expense.





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/A,
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.


23


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





Universal
Bioenergy North America, Inc. is a start-up 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. As of the date of this report, we have not manufactured
any biodiesel fuel.




Based
upon estimates of management, the plant will 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, and equipment expansion.
Additionally, the plant will produce corresponding amounts (10% by biodiesel
production volume) of marketable glycerin. As of the date of this report, we are
still in the development phase, and until the proposed biodiesel plant is
operational, we will generate no revenue. We anticipate that accumulated losses
will continue to increase until the biodiesel plant is operational.




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 start date
of actual production can not be accurately predicted based on current economic
environment in the marketplace. The provisional permits allow the processing of
typical batch sizes to characterize the waste water emissions that will be
produced. Testing of these emissions will 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 will be obtainable
but are not certain of the time it will take.


24


The high
cost of virgin feedstock materials makes it unprofitable to use these as sole or
primary feedstock choices. Alternative feedstock types are being investigated
which are at a lower cost than the virgin feedstocks, 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. Management anticipates that allocated funds from recently acquired debt
from Mortensen Financial Limited, a shareholder and substantial debt holder of
the Company, will be sufficient to acquire feedstocks, reagents, and
manufacturing costs for approximately two batches (20-24,000 gallons each). The
revenues from the sale of the fuel once the State approves the fuel can be then
cycled to acquire additional feedstocks and reagents to continue a low volume
processing level (significantly less than the 10 million gallons per year). 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. 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 year and three months, the plant has undergone site improvement and
development. General clean up and improvements of the site have taken place
utilizing the debt financing previously obtained through LaCroix International
and Mortensen Financial Limited, related parties.





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.





In an
attempt to satisfy the provisional permit requirements for processing,
management has sought feedstocks 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 Of Testing And
Materials specifications using the present production equipment on site. During
further attempts to identify a new supplier, the time limitations for the
provisional permits expired in September 2008. Due to the high cost of
feedstocks 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 practical 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.


25


Management
anticipates that as 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
market 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 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 to move 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.





Management
further believes our  cash reserves will be insufficient to cover such
costs for the next 12 months and may require restructuring its present debt. The
Company is working with vendors to establish credit for feedstock materials and
further plans to raise needed capital through the further sale of stock in the
Company, revenue from sales of products, and if necessary through additional
debt financing until sufficient production volume can be reached to cover
operating costs and debt service. The raising of such capital through stock
issuance, proceeds, or debt is uncertain at best due to the present volatility
in the marketplace primarily in feedstock and transportation costs. Failure by
the Company to raise the required capital will limit the overall production
capacity of the site and the Company will not be able to sustain the losses
incurred due to the limited production.


26


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.





Results
of Operations





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, 2008 and
will continue to accrue operating losses until sufficient production levels can
be reached to meet all liabilities.





For the
three months ended March 31, 2008 we generated no 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. There are
no assurances of the ability of our Company to begin to start refining
feedstock. The cost of modifying our refinery is cost intensive so it is
critical for us to raise appropriate capital to implement our business plan. The
Company incurred losses of approximately $3,806,953 from January 1, 2008 to
March 31, 2008. Our losses since our inception through March 31, 2008 amount to
$12,438,009.





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 feels 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 of
March 31, 2008, our current assets were $3,402, as compared to $311,253 at
December 31, 2007. The reduction in assets is due to the increase in
expenses particularly the increase in salaries by adding Dr. Craven as Chief
Executive Officer and associated expenses pursuant to his employment agreement,
purchase of fixed assets, and increase in expenses in consulting costs to secure
environmental permits and in costs associated with securing further operational
debt. As of March 31, 2008, our current liabilities were $2,358,783, as compared
to $659,231 at December 31, 2007. The LaCroix note is classified as current
since it is in default.




As
reflected in the accompanying financial statements, we are in the development
stage with limited resources, used cash in operations of $416,026 from
inception, a working capital deficiency of $2,355,381. and has an accumulated
deficit during the development stage of $12,438,009. This raises substantial
doubt about its ability to continue as a going concern. The ability of the
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 the Company
is unable to continue as a going concern.


27


Debt





Non-Convertible





During
December 2007, we entered into an $88,000 note payable in favor of Mortensen
Financial Limited, a shareholder of our company. The interest rate is 6.5% per
annum. The note requires payment of accrued interest and principal by December
31, 2010. On April 30, 2008 and October 31, 2008 all accrued interest must be
paid. Beginning April 30, 2009 and semiannually thereafter through October 31,
2010, we are to pay $22,000 in semiannual installments. During the period from
inception to March 31, 2008, we incurred interest expense of approximately
$1,599.





During
October 2007, we entered into a $250,000 note payable in favor of Mortensen
Financial Limited, a shareholder our company. The interest rate is 6.5% per
annum. The note requires payment of accrued interest and principal by December
31, 2008. During the period from inception to March 31, 2008, we incurred
interest expense of approximately $6,771.





During
January 2007, we entered into a $1,650,000 note payable in favor of Lacroix
International Holdings, Inc. The interest rate is 6% per annum and the note is
secured by all the assets of the Company. The note requires semi-annual
principle payments of $103,125 plus interest on June and December of each year.
During the period from inception to March 31, 2008, we incurred interest expense
of approximately $116,359. On March 31, 2008, a payment of $103,000 was due to
Lacroix International Holdings, Inc. pursuant to the note. It is uncertain that
the company will be able to make an interest payment since it may not be
officially in permitted production at that time. The interest will accrue until
the next planned payment date.  We are delinquent in the required
semi-annual payments effective March 31, 2008 and have not made any principle
reduction of this note.





During
the year ending December 31, 2007, we received an advance in the amount of
$10,046 from Mortensen Financial Limited, a stockholder of our company. Pursuant
to the terms of the advance, the advance is non interest bearing, unsecured and
due on demand.





Convertible
Debt





On March
18, 2008, we issued a $43,555.50 convertible note payable in favor of Mortensen
Financial Limited, a shareholder of our company. The note is 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 requires payments of accrued interest and
principal by October 31, 2010. On October 31, 2008 all accrued interest must be
paid. Beginning April 30, 2009 and semiannually thereafter through October 31,
2010, we are to pay $10,889 in semiannual installments. During the three months
ended March 31, 2008, we recognized interest expense of approximately
$99.





During
October 2007, we issued a $300,000 convertible note payable in favor of
Mortensen Financial Limited, a shareholder of our Company. The note is
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 requires payments of accrued
interest and principal by October 31, 2010. On April 30, 2008 and October 31,
2008 all accrued interest must be paid. Beginning April 30, 2009 and
semiannually thereafter through October 31, 2010, we are to pay $75,000 in
semiannual installments. During the period from inception to March 31, 2008 we
recognized interest expense of approximately $8,125.


28


Subsequent
Event – Convertible Note





During
April 2008, we issued a $300,000 convertible note payable to Mortensen Financial
Limited, a shareholder of our company. The note is 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 is unsecured and requires payments of accrued interest
and principal by October 31, 2010. Beginning April 30, 2009 and semiannually
thereafter through October 31, 2010, we are to pay $75,000 in semiannual
installments.





Mortensen
Financial Limited, a shareholder of our company, has lent us an aggregate of
$981,556 pursuant to notes as described above (non-convertible notes in the
aggregate of $338,000; convertible notes in the aggregate of
$643,556).





In
September 18, 2008 the Company converted $2,539,904 of Notes payables to Lacroix
International Holdings, Ltd. in the amount of $1,818,913 of principle and
accrued interest for 82,500 preferred Series B shares, Mortenson Financial Ltd.
in the amount of $720,992 of principle and accrued interest for 49,580 of
preferred Series B shares.





Critical
Accounting Policies





Use of Estimatesand
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.





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”





Cash and Cash
Equivalents





The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.  At March 31, 2008, cash
and cash equivalents include cash on hand and cash in the bank.


29


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 PeriodFurniture
      and Fixture
              
              3
      YearsOffice
      equipment
              
              3
      YearsLeasehold
      improvements
              
              5
      Years





Income
Taxes





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





The
Company adopted the provisions of ASC Topic 740; "Accounting For Uncertainty In
Income Taxes-An Interpretation Of ASC Topic 740 ("ASC Topic
740").  ASC Topic 740 contains a two-step approach to recognizing and
measuring uncertain tax positions.  The first step is to evaluate the
tax position for recognition by determining if the weight of available evidence
indicates it is more likely than not, that the position will be sustained on
audit, including resolution of related appeals or litigation processes, if any.
The second step is to measure the tax benefit as the largest amount, which is
more than 50% likely of being realized upon ultimate settlement.  The
Company considers many factors when evaluating and estimating the Company's tax
positions and tax benefits, which may require periodic adjustments. At March 31,
2008, the Company did not record any liabilities for uncertain tax
positions.





Derivative
Liabilities





Convertible
debt is accounted for in accordance with ASC Topic 815, Accounting for Derivative
Instruments and Hedging Activities (“Topic 815”) and ASC Topic 815, 40,
Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in a Company’s Own
Stock, (“Topic 815.40”). According to these pronouncements, we have
recorded the embedded conversion option related to our convertible debt at fair
value on the reporting date, resulting in the convertible instrument itself
being recorded at a discount from the face amount.


30


WHERE YOU CAN FIND MORE
INFORMATION





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





ITEM 3.
            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





We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified by the SEC
and that such information is accumulated and communicated to management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow for timely decisions regarding required disclosure. In
designing and evaluating our disclosure controls and procedures, we recognize
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.




Our Chief
Executive Officer and Chief Financial Officer, has designed the Company’s
disclosure controls and procedures to provide reasonable assurance of achieving
the desired objectives. As required by SEC Rule 13a-15(b), in connection
with filing this Quarterly Report on Form 10Q/A, the Chief Executive Officer and
Chief Financial Officer conducted an evaluation with the participation of our
management , of the effectiveness of the design and operation of our disclosure
controls and procedures, as such term is defined under Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as of March 31, 2008, the
end of the period covered by this report.




Our Chief
Executive Officer AND Chief Financial Officer are responsible for establishing
and maintaining adequate internal control over financial reporting. The
Company’s internal control over financial reporting is designed to provide
reasonable assurances regarding the reliability of financial reporting and the
preparation of the consolidated financial statements of the Company in
accordance with U.S. generally accepted accounting principles. Because of
its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree or compliance
with the policies or procedures may deteriorate.


31


Based
upon the evaluation conducted by our Chief Executive Officer and our Chief
Financial Officer, our management conducted an evaluation of the effectiveness
of our internal control over financial reporting as of March 31, 2008 based on
the framework in Internal
Control—Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our evaluation and the
material weaknesses described below, management concluded that the Company did
not maintain effective internal control over financial reporting as of March 31,
2008 based on the specified criteria. Our Chief Executive Officer and Chief
Financial Officer identified control deficiencies regarding 1) lack of
segregation of duties; 2) lack of timely completion of financial control and
reporting processes; and 3) need for stronger internal control environment. We
believe that these material weaknesses are due to the small size of the
Company’s accounting staff. The small size of the Company’s accounting staff may
prevent adequate controls in the future, such as segregation of duties, due to
the cost/benefit of such remediation.




The
ineffectiveness of internal controls as of March 31, 2008 stemmed in large part
from several significant changes within the Company. The organization
structure was changing as we hired additional management and were restructuring
the company obtaining new financing, adopting new accounting procedures, and
discontinuing operations. This placed additional stress on the organization
and our internal reporting and controls as financial personnel adjusted to the
many changes instituted within the company. Although we believe the
time to adapt in the first quarter has better positioned us to provide
improved internal control functions into the future, during the transition,
these changes caused control deficiencies, which in the aggregate resulted in a
material weakness.





These
control deficiencies could result in a misstatement of account balances that
would result in a reasonable possibility that a material misstatement to our
financial statements may not be prevented or detected on a timely basis.
Accordingly, we have determined that these control deficiencies as described
above together constitute a material weakness.




In light
of this material weakness, we performed additional analyses and procedures in
order to conclude that our consolidated financial statements for the quarter
ending March 31, 2008 included in this Quarterly Report on Form 10Q/A were
fairly stated in accordance with US GAAP. Accordingly, management believes
that despite our material weaknesses, our financial statements for the three
months ending March 31, 2008 are fairly stated, in all material respects, in
accordance with US GAAP.




We may in
the future identify further material weaknesses or significant deficiencies in
our internal control over financial reporting that we have not discovered to
date. We plan to refine our internal control over financial reporting to meet
the internal control reporting requirements included in Section 404 of the
Sarbanes-Oxley Act (SOX 404) to have effective internal controls by December 31,
2009. The effectiveness of the measures we implement in this regard will be
subject to ongoing management review supported by confirmation and testing by
management, as well as audit committee oversight. As a result, we expect
that additional changes could be made to our internal control over financial
reporting and disclosure controls and procedures.





b)
Changes in Internal Control over Financial Reporting.





During
the Quarter ended March 31, 2008, 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.


32




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/A, 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
have been no material changes in the risk factors previously disclosed in our
Annual Report on Form 10-K/A for the fiscal year ended December 31, 2007.
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, 2007 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.





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.


33


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:





o
            effectively
      manage our contemplated business
operations;


o
            recruit
      and retain key personnel;


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


o
            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.





The loss of our Chief Executive
Officer and/or President could limit our ability to execute our growth strategy,
resulting in a slower rate of growth.





The
Company is largely dependent upon its officer, Dr. Richard Craven, for
management and direction. The Company does not maintain “key person” life
insurance for Dr. Craven . The loss of  Dr. Craven  or other
officer could adversely affect the Company’s contemplated operations and results
as the loss could cause a cessation of operations until qualified replacements
can be found and/or a loss of expertise difficult to replace in a given time
frame.





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:





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


o
            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;





o
            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.


34


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.





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.


35


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:





o
            additional
      storage facilities for biodiesel;


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


o
            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.





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.




36


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.





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.


37


Our
Common Stock Is Subject To Penny Stock Regulation





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





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


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





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





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





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.




38


Failure
To Achieve And Maintain Effective Internal Controls In Accordance
With Section 404 Of The Sarbanes-Oxley Act Could Have A Material
Adverse Effect On Our Business And Operating Results.





It may be
time consuming, difficult and costly for us to develop and implement the
additional internal controls, processes and reporting procedures required by the
Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal
auditing and other finance staff in order to develop and implement appropriate
additional internal controls, processes and reporting procedures. If we are
unable to comply with these requirements of the Sarbanes-Oxley Act, we may not
be able to obtain the independent accountant certifications that the
Sarbanes-Oxley Act requires of publicly traded companies.




If we
fail to comply in a timely manner with the requirements of Section 404 of
the Sarbanes-Oxley Act regarding internal control over financial reporting or to
remedy any material weaknesses in our internal controls that we may identify,
such failure could result in material misstatements in our financial statements,
cause investors to lose confidence in our reported financial information and
have a negative effect on the trading price of our common stock.




Pursuant
to Section 404 of the Sarbanes-Oxley Act and current SEC regulations,
beginning with our annual report on Form 10-K for our fiscal period ending
December 31, 2009, we will be required to prepare assessments regarding internal
controls over financial reporting and beginning with our annual report on Form
10-K for our fiscal period ending December 31, 2009, furnish a report by our
management on our internal control over financial reporting. We have begun the
process of documenting and testing our internal control procedures in order to
satisfy these requirements, which is likely to result in increased general and
administrative expenses and may shift management time and attention from
revenue-generating activities to compliance activities. While our management is
expending significant resources in an effort to complete this important project,
there can be no assurance that we will be able to achieve our objective on a
timely basis. There also can be no assurance that our auditors will be able to
issue an unqualified opinion on management’s assessment of the effectiveness of
our internal control over financial reporting. Failure to achieve and maintain
an effective internal control environment or complete our Section 404
certifications could have a material adverse effect on our stock
price.




In
addition, in connection with our on-going assessment of the effectiveness of our
internal control over financial reporting, we may discover “material weaknesses”
in our internal controls as defined in standards established by the Public
Company Accounting Oversight Board, or the PCAOB. A material weakness is a
significant deficiency, or combination of significant deficiencies, that results
in more than a remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected. The PCAOB
defines “significant deficiency” as a deficiency that results in more
than a remote likelihood that a misstatement of the financial statements
that is more than inconsequential will not be prevented or
detected.




In the
event that a material weakness is identified, we will employ qualified personnel
and adopt and implement policies and procedures to address any material
weaknesses that we identify. However, the process of designing and implementing
effective internal controls is a continuous effort that requires us to
anticipate and react to changes in our business and the economic and regulatory
environments and to expend significant resources to maintain a system of
internal controls that is adequate to satisfy our reporting obligations as a
public company. We cannot assure you that the measures we will take will
remediate any material weaknesses that we may identify or that we will implement
and maintain adequate controls over our financial process and reporting in the
future.


39


Any
failure to complete our assessment of our internal control over financial
reporting, to remediate any material weaknesses that we may identify or to
implement new or improved controls, or difficulties encountered in their
implementation, could harm our operating results, cause us to fail to meet our
reporting obligations or result in material misstatements in our financial
statements. Any such failure could also adversely affect the results of the
periodic management evaluations of our internal controls and, in the case of a
failure to remediate any material weaknesses that we may identify, would
adversely affect the annual auditor attestation reports regarding the
effectiveness of our internal control over financial reporting that are required
under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls
could also cause investors to lose confidence in our reported financial
information, which could have a negative effect on the trading price of our
common stock.




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





Our
financial statements contain explanatory language that substantial 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
$413,026from
inception, a working capital deficiency of $2,355,381 and have an accumulated
deficit during the development stage of $12,438,009. 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.




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.


40


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





On
February 13, 2008 the Company issued 10,000 shares of common stock for
consulting services having a fair value of $50,100 based upon fair value on the
date of  issue. As of March 31, 2008, $50,100 has been expensed to
consulting services. The offer and sale of such shares of our common stock were
effected in reliance on the exemptions for sales of securities not involving a
public offering, as set forth in Rule 506 promulgated under the Securities Act
of 1933 (the “Securities Act”) and in Section 4(2) of the Securities Act,
based on the following: (a) the investors confirmed to us that they were
“accredited investors,” as defined in Rule 501 of Regulation D promulgated under
the Securities Act and had such background, education and experience in
financial and business matters as to be able to evaluate the merits and risks of
an investment in the securities; (b) there was no public offering or
general solicitation with respect to the offering; (c) the investors were
provided with certain disclosure materials and all other information requested
with respect to our company; (d) the investors acknowledged that all
securities being purchased were “restricted securities” for purposes of the
Securities Act, and agreed to transfer such securities only in a transaction
registered under the Securities Act or exempt from registration under the
Securities Act; and (e) a legend was placed on the certificates
representing each such security stating that it was restricted and could only be
transferred if subsequent registered under the Securities Act or transferred in
a transaction exempt from registration under the Securities Act.





Item 3. Defaults Upon Senior
Securities





There
were no defaults upon senior securities during the period ended March 31,
2008.





Item 4. Submission of Matters to a Vote of
Security Holders





There
were no defaults upon senior securities during the period ended March 31,
2008.





Item 5. Other Information





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





Item 6. Exhibits





10.3
Universal Bioenergy Inc. promissory note in favor of Mortensen Financial Limited
in the amount of $43,555.50 dated as of March 18, 2007 (1).





10.4
Universal Bioenergy Inc. promissory note in favor of Mortensen Financial Limited
in the amount of $300,000 dated as of April 7, 2007.(1)





31.1 Certification
of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley
Act.(2)





31.2 Certification
of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley
Act.(2)





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.(2)


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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.(2)





(1)
            Previously
      disclosed on Form 10-Q for the period end march 31, 2008, filed
      on  May 30, 2008.


(2)
            File
      herewith.





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:
      February 18, 2010
            
            By
            /s/
      Richard CravenRichard
      CravenChief
      Executive Officer (Principle Executive Officer)Principle
      Financial Officer, and
President


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