UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-KSB


(Mark
one)





|X|
            ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
fiscal year ended: 
December
31, 2007




|_|
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
transition period from _________ to ___________




Commission
file number: 333-136349





FLEX FUELS ENERGY,
INC.


(formerly
Malibu Minerals, Inc)


(Name of
small business issuer in its charter)





Nevada
              (State
      or other jurisdiction of incorporation or organization)
            
            20-5242826
              (I.R.S.
      Employer Identification No.)





30
      St Mary Axe
              London, United
      Kingdom
              (Address of
      principal executive offices)
            
            EC3A
      8EP
              (Zip
      Code)





Issuer’s
telephone Number: +44 (0)8445 862
780











Securities
registered under Section 12(b) of the Exchange Act: Not applicable





Securities
registered under Section 12(g) of the Exchange Act: Common stock, par value $0.001 per
share




Check
whether the issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months(or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
|X| No |_|




Check if
there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-K. |_|











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




The
Issuer's revenue for its fiscal year ended December 31, 2007 is:
Nil.





As of
December 31, 2007,  the aggregate market value of the registrant's
Common Stock held by non-affiliates of the Registrant was approximately
$14,297,498.




As of
December 31, 2007, there were outstanding 69,315,441 shares of Common Stock,
0.001 par value per share.





Transitional Small
Business Disclosure Format (Check one): Yes |_| No |X|




NOTE
REGARDING SHARE AND PER SHARE DATA





On May
21, 2007, the Board of Directors declared a stock split, distributable May 22,
2007, in the form of a dividend of five additional shares of the Company's
Common Stock for each share owned by stockholders of record at the close of
business on May 21, 2007. Accordingly, all share and per share data has been
restated to reflect the split.

















TABLE OF CONTENTS





PART
      I
            PAGEITEM
      1.
            Description
      of Business.
            2ITEM
      2.
            Description
      of Property.
            25ITEM
      3.
            Legal
      Proceedings.
            25ITEM
      4.
            Submission
      of Matters to a Vote of Security Holders.
            25PART
      IIITEM
      5.
            Market
      for Common Equity and Related Stockholder Matters.
            26ITEM
      6.
            Management’s
      Discussion and Analysis of Operations.
            28ITEM
      7.
            Financial
      Statements.
            35ITEM
      8.
            Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure.
            36ITEM
      8A(T).
            Controls
      and Procedures.
            37ITEM
    8B.
            Other
      Information
            40PART
      IIIITEM
      9.
            Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance With Section 16(a) of the Exchange Act.
            41ITEM
      10.
            Executive
      Compensation.
            44ITEM
      11.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
            49ITEM
      12.
            Certain
      Relationships and Related Transactions, and Director
      Independence.
            50ITEM
      13.
            Exhibits.
            51ITEM
      14.
            Principal
      Accountant Fees and Services.
            52Signatures
            
            54












1






ITEM
1. DESCRIPTION OF BUSINESS





Information
Regarding Forward Looking Statements





Flex
Fuels Energy, Inc. (“Flex Fuels” "we" ,“us” , "our") (formerly Malibu Minerals,
Inc.) has made forward-looking statements (within the meaning of the Private
Securities Litigation Reform Act of 1995) in this Annual Report on Form 10-KSB
(the “Annual Report”) that are not historical facts are "forward-looking
statements" which can be identified by the use of terminology such as
"estimates," "projects," "plans," "believes," "expects," "anticipates,"
"intends," or the negative or other variations, or by discussions of strategy
that involve risks and uncertainties. We urge you to be cautious of the
forward-looking statements, that such statements, which are contained in this
Annual Report, reflect our current beliefs with respect to future events and
involve known and unknown risks, uncertainties and other factors affecting our
operations, market growth, mineral claims, mineral exploration activities and
licenses. No assurances can be given regarding the achievement of future
results, as actual results may differ materially as a result of the risks we
face, and actual events may differ from the assumptions underlying the
statements that have been made regarding anticipated events. Factors that may
cause actual results, our performance or achievements, or industry results, to
differ materially from those contemplated by such forward-looking statements
include without limitation:





1. Our
ability to successfully attract and retain management;


2. Our
ability to successfully engage in mineral exploration activities;


3. The
intensity of competition;


4.
Fluctuations in the price of oilseed feedstocks, products thereof (including
biodiesel), gold and other minerals;


5.
Regulation and changes in regulation by federal and provincial governments in
territories where we operate;


6. Our
ability to successfully integrate, if at all, our alternative fuel operations;
and


7.
General economic conditions that affect our industry or the global environment
in which we operate.





Organizational
History





Flex
Fuels was incorporated in the State of Nevada on March 10, 2006, to engage in
the business of exploration and discovery of gold, minerals, mineral deposits
and reserves. Flex Fuels has staked one mineral claim containing eight cell
claim units totaling 165.685 hectares. Throughout this Annual Report, we refer
to these mining claims as the “Malibu Gold Mine Property” or “Malibu Gold
Property”. Flex Fuels purchased the Malibu Gold Property in March of 2006. The
Malibu Gold Property is located approximately 110 km northwest of Vancouver,
British Columbia, and 75 km north of Sechelt, BC. The property is situated on
the south side of Queen’s Reach on upper Jervis Inlet, at the entrance to
Princess Louisa Inlet. Access to the property is available via plane from
Vancouver or Sechelt, or by boat from Egmont or Pender Harbor on the Sechelt
Peninsula.





During
the fourth quarter of our 2006 fiscal year, for the purpose of diversifying our
business, acquiring capital, gaining greater access to the capital markets and
with the assistance of newly acquired capital promotion of Flex Fuels business
of exploration and discovery of gold, minerals, mineral deposits and reserves,
Flex Fuels entered into the Agreement with Flex Fuels Energy Limited (“FFE Ltd”)
and the Stockholders of FFE Ltd as more fully described below.








Flex
Fuels is currently engaged in two sectors:





·
            developing
      our business of manufacturing and distributing biodiesel products through
      our wholly owned subsidiary, FFE
Ltd.


·
            the
      exploration and discovery of gold, minerals, mineral deposits and reserves
      through our Malibu Gold operation.






2





In May of
2007, Flex Fuels authorized and affected a dividend in the form of Common Stock,
whereby each stockholder of record of Flex Fuels as of the end of the business
day on May 21, 2007, received five shares of common stock, in exchange for one
share of existing common stock held.





In
November of 2006, Flex Fuels filed a Form 211 application with the NASD in order
to obtain its approval for the listing and quotation of Flex Fuels common stock
on the Over-The-Counter Bulletin Board (the “OTCBB”). In May of 2007, the NASD
declared that it had no further comments on the Application and assigned a
symbol of “MLBU.OB” to Flex Fuels (formerly named Malibu Minerals, Inc) common
stock. Following the renaming of the Company as Flex Fuels Energy, Inc. which
the NASD declared effective on July 16, 2007, Flex Fuels shares are now quoted
on the OTCBB under the symbol “FXFL.OB”.





Our
fiscal year end is December 31.







Acquisition
of FFE Ltd





On May
29, 2007 (the “Closing Date”) Flex Fuels, pursuant to the terms of the
acquisition agreement (the “Agreement”), and as amended via the terms of the
addendum to the agreement dated May 29, 2007 (the “Addendum”), entered into by
the Company and FFE Ltd, a development stage company formed under the laws of
England and Wales, the stockholders of FFE Ltd (collectively the “Stockholders”)
and the individuals signatories thereto, as previously reported by the Company
in its Current Report on Form 8-K filed with the United States Securities and
Exchange Commission (the “SEC”), for the purpose of diversifying the Company’s
business, the Company acquired the remaining 85% of the entire authorized
share capital (the “Shares”) of FFE Ltd (the “Acquisition”). As consideration
for the acquisition of the Shares, we issued an aggregate of 24,854,477 shares
(the “Consideration Shares”) of our Common Stock, $0.001 par value to the
stockholders of FFE Ltd (the “Stockholders”). Furthermore, as part of the
Acquisition, the Company completed a Financing (as defined below) and provided
funds in the amount of $11,800,000 to FFE Ltd out of the Proceeds (as defined
below) obtained from the Financing. As a result of the Acquisition, there were
64,443,403 shares of the Company’s Common Stock issued and outstanding post
Acquisition and FFE Ltd became a wholly-owned subsidiary of the
Company.





Pursuant
to the Agreements, each of the Stockholders agreed not to dispose of any of the
Consideration Shares received by them for a period of two years from the Closing
Date. Furthermore, among other things, pursuant to the Agreements the Company
delivered Voting Trust Agreements entered into by the stockholders of the
Company holding in aggregate approximately 11.5% of the issued and outstanding
shares of the Company’s Common Stock prior to the Closing Date (“11.5%
Stockholders”) which provide that during the 12 months from the Closing Date (i)
11.5% Stockholders agree not to dispose any of the shares held by them, and (ii)
the voting rights attached to the shares subject to the Voting Trust Agreements,
a total of approximately 7,384,227 shares of Common Stock shall be exclusively
exercised in accordance with the written directions of a majority of the
directors of the Company then in place.





In
addition, the Agreement provides that on Completion and for a twenty four month
period thereafter shareholders of the Company (excluding the FFE Ltd
shareholders) holding in the aggregate not less than 25% of the total issued
share capital of the Company shall have the right to nominate, appoint and
remove two directors to the board of directors of the Company.  Further,
during the twelve month period each of the FFE Ltd shareholders (holding in the
aggregate at least 38% of the total issued share capital of the Company post
transaction) agree to exercise all votes exercisable by each of them as a
director and/or shareholder of the Company in favor of the appointment as
directors of the Company as shall be nominated by the shareholders of the
Company.




3




Further,
pursuant to the Voting Trust Agreement to be entered into, the stockholders will
be agreeing to grant the trustee the power to vote their shares in accordance
with the majority of the votes cast by the Directors on a particular matter at a
meeting of the Directors at which a majority of the Directors is present in
person or by proxy, with each Director entitled to one vote.





The
acquisition of FFE Ltd has been accounted for using the purchase method of
accounting and, accordingly, the assets acquired and liabilities assumed have
been recorded at their fair values as of the date of the acquisition. The excess
of the purchase price over the fair value of the assets acquired and liabilities
assumed has been recorded as excess of purchase price over net assets acquired
on the accompanying balance sheet. The fair value of any separately identifiable
intangible assets and the excess of purchase price over net assets has been
based on an independent valuation by Intangible Business Limited.




FFE
      Ltd Purchase Price Allocation on Acquisition:$Minority
      Interest acquired
            
            
            774,000Excess
      of Purchase Price overNet
              Assets
      Acquired
            
            
            21,595,000$
            22,369,000




Previously,
on December 29, 2006 we acquired 15 % of FFE Ltd. In consideration for the
shares of FFE Ltd’s common stock acquired we paid $1,500,000.





As the
Company had determined that FFE Ltd was a Variable Interest Entity under FIN46R
“Consolidation of Variable Interest Entities” the balance sheet and results of
FFE Ltd were consolidated with the Company’s balance sheet and results. The
determination was based on the basis that although the Company acquired a 15%
holding in FFE Ltd the Company provided all of the initial capital for the
operations of FFE Ltd and therefore took on risks in excess of its percentage
holding or voting rights. The investment of 15% of FFE Ltd has been accounted
for using the purchase method of accounting and, accordingly, the assets
acquired and liabilities assumed have been recorded at their fair values as of
the date of the acquisition.





FFE Ltd
Purchase Price Allocation on Acquisition of 15% holding:





$Minority
      Interest acquired
            
            
            217,000Excess
      of Purchase Price over Net
              Assets
      Acquired
            
            
            1,303,000$
            1,520,000








Under
United States Generally Accepted Accounting Principles (“GAAP”) where the
acquired company is a “development stage” enterprise then any Excess of Purchase
Price over Net Assets Acquired is expensed at the time of
acquisition.





The
Financial Accounting Standards Board (“FASB”) has provided guidelines as to
identifying a “development stage” enterprise:






4





“an
enterprise shall be considered to be in the development stage if it is devoting
substantially all of its efforts to establishing a new business and either of
the following conditions exists:





a)
Planned principal operations have not commenced.





b)
Planned principal operations have commenced, but there has been no significant
revenue there from.





A
development stage enterprise will typically be devoting most of its efforts to
activities such as financial planning; raising capital; exploring for natural
resources; developing natural resources; research and development; establishing
sources of supply; acquiring property, plant, equipment, or other operating
assets, such as mineral rights; recruiting and training personnel; developing
markets; and starting up production.”





The
Company has determined that FFE Ltd is a development stage company and therefore
the Excess of Purchase Price over Net Assets Acquired of $21,595,000 has been
expensed in the Fiscal 2007 and $1,303,000 was expensed in Fiscal
2006.





Business
Overview





FFE Ltd





FFE Ltd,
a development stage company, was formed on November 26, 2006 under the laws of
England and Wales.





FFE
Ltd is headquartered in London, England. FFE Ltd plans to construct, own and
manage seed processing facilities, refineries producing biodiesel products (and
associated power generation facilities if commercially desirable) and to engage
in the business of supplying and distributing biodiesel products. FFE Ltd
further plans to specialize in the conversion of oil seed bearing crops to
energy. FFE Ltd is comprised of the following core business areas aimed at a
vertically integrated strategy to realize maximum value from the energy crop
supply chain:




Flex Fuel Farming “FFF” - The
purchase or production of raw feedstock necessary for the production of
vegetable oils;


Flex Fuel Crush “FFC” - The
treatment of feedstock to produce the oils necessary to the production of
Biodiesel. This company will also seek to own a combined heat and power plant
for onsite energy requirements.


Flex Fuel Refineries “FFR” -
The refining and conversion of feedstock oils into biodiesel
products;


Flex Fuel Biomass “FFB” -
Electrical power generation from the oil cake derived from the oil seed crush
process (and potentially OSR straw)


Flex Fuel Trading “FFT” - The
purchase of raw materials and sale of biodiesel products





FFE Ltd
has incurred operating losses since inception and has generated no revenues from
continuing operations. As a result, FFE Ltd has generated negative cash flows
from operations and has an accumulated deficit at December 31, 2007. Flex Fuels,
and FFE Ltd as its wholly owned subsidiary, are currently seeking additional
funding. While Flex Fuels and FFE Ltd are optimistic and believe appropriate
actions are being taken, there can be no assurance that management’s efforts
will be successful or that the products of Flex Fuels and/or FFE Ltd develop and
markets will be accepted by consumers.




FFE Ltd
Strategy





FFE Ltd’s
goal is to deliver a number of high yielding renewable energy projects that
logically fit into a vertically integrated structure. The overarching principal
is for FFE Ltd to manage (directly or indirectly) the biofuel supply chain from
“farm to fuel”. Currently, FFE Ltd is negotiating United Kingdom oil seed rape
supply which is expected to form a reliable contracted base line supply of oil
seed that can be crushed to produce high quality oil for the refinery business.
The seed will form the base line supply for the crush plant and refinery in
combination with offshore swing oils to improve margins. FFE Ltd is also
evaluating oil seed production in Eastern Europe and other sustainable
feed-stocks as feedstock options. Ultimately, the Company’s management believes
that the United Kingdom energy market provides significant incentives for
renewable sources of energy and this would allow for advantageous contracts to
be formed which would underpin FFE Ltd’s project economics.






5








Industry
Overview
 
 European Diesel
Market
 
 The chart
below shows how the market share of diesel powered cars in Western Europe has
increased since 1990. This trend would suggest that the EU Biofuels Directive
will be met predominantly from biodiesel as opposed to bio-ethanol by
2010.
 
 Diesel
Share of New Car Registrations in Western Europe 1990-2007
  
 Source:
ACEA – European Automobile Manufacturers Association.
 
 European & United
Kingdom Biodiesel Market
 
 The EU
Biofuels Directive requires all member states to set indicative targets for
biofuel sales in 2005 and 2010 against reference values of 2% and 5.75% (based
on energy content) respectively. The majority of member states have now set
their target and as such the European biodiesel demand is expected to grow
significantly over the next 5 years. It is anticipated that demand could reach
well in excess of 10 million tonnes/annum by 2010 compared with an estimated
European production capacity of 4.89 million tonnes in 2006 (source: European
Biodiesel Board, July 2007).
 
 Current UK Market
Size.
 
 The UK
Diesel Engine Road Vehicle (“DERV”) consumption in 2006/07 was put at around
20.1 million tonnes by Her Majesty's Revenue and Customs
(“HMRC”).  This is projected to rise to between 21 to 21.5 million
tonnes by 2010 (Wood Mackenzie, HMRC).  Biodiesel consumption in
2006/07 was 316,000 tonnes, representing around 1.47% of DERV. Nameplate
biodiesel production capacity in 2007 was 437,000 tonnes, representing around
2.03% of DERV.
 
 UK Potential Market
Growth
 
 The UK
biodiesel market will be provided with significant support by the Renewable
Transport Fuel Obligation (“RTFO”) which will be introduced in April 2008
resulting in up to 35p per liter support for biodiesel in 2008.
 To
fulfill the UK RTFO target of 5% in 2010/11 biodiesel demand is implied to climb
from 2007 production and demand levels by two to three times, to 1 million to
1.1 million tonnes per annum. To satisfy this demand indigenously the UK would
likely require a growth in capacity of over 550,000 million tonnes per annum by
2010.




6


UK
Competition





The
following table shows the biodiesel refineries operating or under construction
in the United Kingdom:





COMPANY
            LOCATION
            
            CAPACITY (t/a)
            
            
            NotesArgent Energy
            Motherwell (Scot)
            
            
            45,000Biofuels Corp plc
            Teesside
            
            
            250,000Greenergy
            Immingham
            
            
            200,000
            
            
            
            (1)D1
      Oils
            Middlesborough
            
            
            42,000D1 Oils
            Bromborough
            
            
            50,000
            
            
            
            (2)




The
following table shows the operating rapeseed oil extraction facilities operating
in the United Kingdom:





COMPANY
            LOCATION
            CAPACITY (t/a)Cargill
            Liverpool
            600,000Cargill
            Hull
            150,000Archer Daniel Midland
            Erith
            800,000




Notes:


(1) The
second 100,000t/a plant is currently under construction.


(2)
Currently being commissioned.


t/a =
Metric input tonnes per annum maximum operating capacity.


The above
list excludes plants under 20,000t capacity.





Based on
current equipment capacity, the current UK supply of rapeseed and the future
forecast demand for biodiesel, the Company and FFE Ltd believe that the market
justifies the planned expenditure on oilseed processing and biodiesel refining
equipment.





Governmental
Regulation





FFE Ltd
is, and will be upon completion of its biodiesel production facilities, subject
to various government 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, access to and use of water supply, and the health and safety of its
employees. These laws and regulations can 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
result in substantial fines, natural resource damage claims, criminal sanctions,
permit revocations and facility shutdowns. FFE Ltd does not anticipate a
material adverse impact on its business or financial condition as a result of
our efforts to comply with these requirements. FFE Ltd expects to incur capital
expenditures for equipment and construction works required to prevent and
control foreseeable pollution in this or the succeeding fiscal year. These
expenditures are part of the budget to procure and construct its processing
equipment which is considered as part of the ordinary course of
business.






7







There is
a risk of liability for the investigation and cleanup of environmental
contamination at each of the properties that FFE Ltd owns or operates or plans
to own or operate and at off-site locations where FFE Ltd will arrange for the
disposal of hazardous substances. If these substances have been or are disposed
of or released at sites that undergo investigation or remediation by regulatory
agencies, FFE Ltd may be responsible under the applicable environmental laws for
all or part of the costs of investigation or remediation and for damage to
natural resources. FFE Ltd also may be subject to related claims by private
parties alleging property damage and personal injury due to exposure to
hazardous or other materials at or from these properties. Some of these matters
may require us to expend significant amounts for investigation and/or cleanup or
other costs. FFE Ltd does not have material environmental liabilities relating
to contamination at or from its facilities or at off-site locations where it has
transported or arranged for the disposal of hazardous substances.




In
addition, new laws, new interpretations of existing laws, increased governmental
enforcement of environmental laws or other developments could require FFE Ltd to
make additional significant expenditures. Continued government and public
emphasis on environmental issues can be expected to result in increased future
investments for environmental controls at its ongoing operations. Present and
future environmental laws and regulations and related interpretations applicable
to FFE Ltd’s operations, more vigorous enforcement policies and discovery of
currently unknown conditions may require substantial capital and other
expenditures. FFE Ltd’s air emissions are subject to the various national UK and
local laws and associated regulations. The UK government has promulgated
national emission standards for hazardous air pollutants that could apply to
facilities that FFE Ltd owns or operates or plans to own or operation if the
emissions of hazardous air pollutants exceed certain thresholds. If a facility
FFE Ltd operates or will operate is authorized to emit hazardous air pollutants
above the threshold level, then FFE Ltd would be required to comply with the
related environmental and emission laws and regulations applicable to its
manufacturing process and would be required to come into compliance with those
laws and regulations applicable to its facilities. Although estimated emissions
from its plants are not expected to exceed the relevant threshold levels, new or
expanded facilities would be required to comply with both standards upon startup
if they exceed the hazardous air pollutant threshold. In addition to costs for
achieving and maintaining compliance with these laws, more stringent standards
also may limit its operating flexibility. Because other UK biodiesel
manufacturers will have similar restrictions, however, FFE Ltd believe that
compliance with more stringent air emission control or other environmental laws
and regulations is not likely to materially affect its competitive
position.





The
hazards and risks associated with producing and transporting its products, such
as fires, natural disasters, explosions, abnormal pressures and pipeline
ruptures also may result in personal injury claims or damage to property and
third parties. As protection against operating hazards, FFE Ltd has obtained or
intends to obtain insurance coverage against some, but not all, potential losses
once its facility is operating. FFE Ltd coverage includes physical damage to
assets, employer’s liability, comprehensive general liability and business
interruption. FFE Ltd believes that its insurance is adequate and customary for
its industry, but losses could occur for uninsurable or uninsured risks or in
amounts in excess of existing insurance coverage. FFE Ltd does not currently
have pending material claims for damages or liability to third parties relating
to the hazards or risks of its business.





Occupational
Safety Regulations





FFE Ltd
is subject to various UK and European Union laws and regulations intended to
promote occupational health and safety. FFE Ltd is in the process of
implementing environmental and safety policies and procedures designed to
protect the safety of its own supervisory staff and to monitor all subcontracted
operations for compliance with applicable regulatory requirements and lease
conditions, including environmental and safety compliance. FFE Ltd considers the
cost of compliance a manageable and necessary part of its business.









8




Malibu Gold
Property





Property
Acquisition Details




On March
27, 2006, the Company acquired a mineral license for the Malibu Gold Property
from Mr. James Laird, a director and stockholder, for $10,000.





Since
non-Canadian individuals or companies cannot directly hold mineral licenses in
British Columbia, James Laird (a director) holds the license on behalf of the
Company.




Land Status, Topography,
Location, and Access




The
Malibu Gold Property is located approximately 110 km northwest of Vancouver, BC,
and 75 km north of Sechelt, BC. The property is situated on the south side of
Queen’s Reach on upper Jervis Inlet, due south of Malibu at the entrance to
Princess Louisa Inlet.




Access is
by float plane from Vancouver or Sechelt, or by boat from Egmont or Pender
Harbor on the Sechelt Peninsula. Several campsite locations with good water
supplies can be found within a few kilometers of the property. Supplies and
services are available in Egmont or Pender Harbor.




The
topography along Jervis Inlet extents from sea level to mountain tops in excess
of 2,000 meters elevation. In the vicinity of the old mining tunnels on the
Malibu Gold Property, short, steep cliffs extend to tidewater, but elsewhere on
the property slopes are more manageable.




The
climate is typical of the west coast of British Columbia, mild and wet overall
with some snowfall in the winter months. The summers are usually warm with less
rainfall, and year-round work is possible on the property. Vegetation is a dense
growth of coniferous forest, with cedar, fir, spruce, alder and maple trees.
Ground vegetation is usually Salal and various berry bushes.





Mining
Claims




The
Malibu Gold Property comprises one mineral claim containing 8 cell claim units
totaling 165.685 hectares.





BC
      Tenure #
            Work
      Start Date
            Staking
      Date
            Total
      Area (Ha.)525215
            Jan.
      12, 2007
            Jan.
      12, 2006
            165.685






Geology of the Mineral
Claims




The
Malibu Gold Property hosts gold and base metal deposits within quartz veins and
quartz-filled shear zones. Two short tunnels (adits) have been driven on the
mineralized areas, exposing lower grade gold, silver, copper, lead and zinc in
the 9 metre long #1 adit, and a high-grade gold vein in the #2 adit. The #2 adit
was driven 2 meters on a shallow-dipping 40 cm wide quartz vein with
arsenopyrite, minor pyrite, chalcopyrite and native gold. The vein pinches and
swells and can be followed for at least 200 meters along the shoreline cliffs.
The #2 adit gave a gold assay 0.72 oz/t Au, with minor values in cobalt, copper
and bismuth.




The Upper
Jervis Inlet area is underlain by a variety of Jurassic to Tertiary granitic
intrusives of the Coast Plutonic Complex. The granitic rocks intrude and
metamorphose Jurassic to Lower Cretaceous argillaceous sediments and andesitic
to felsic volcanics of the Gambier Group. The Gambier Group hosts the 60 MT
Britannia copper, zinc, lead, silver, gold deposit on Howe Sound about 80 km to
the southeast.






9






The
Malibu Gold Property is underlain by a relatively small stock of gabbro-diorite
that has intruded dark grey, partly limey argillaceous shale and slate of the
Gambier Group. Silicification and mineralization occurs on the contact and
within the stock in a number of areas.





Exploration History and
Previous Operations




The
Malibu Gold Property has at least one adit dating prior to 1907, when the first
and only mention of the working was made in a Geological Survey Report dated
1908. GSC geologist O. E. LeRoy noted that pyrrhotite and chalcopyrite occurred
along a diorite-slate contact and a 9 metre long adit had been driven on the
zone. A second 2 metre long adit nearby was not mentioned, so it may post-date
LeRoy’s visit.





There are
physical work records of additional work being done on the property during the
1940’s, however  the prospector’s hand-drawn maps attached do not show
exactly where the development is in relation to recognizable land features. This
work apparently consisted of at least four shafts up to 6 meters deep and a 30
metre long trench.




Laird
Exploration Ltd. first explored the property in 1983 as part of the BC
Prospector’s Grant Program. Several assays were taken and the area was
geologically mapped. Two assays from the #1 adit gave moderate values in gold,
silver, copper, lead and zinc. The maximum gold assay was 0.08 oz/t Au. The #2
adit was driven 2 meters on a shallow-dipping 40 cm wide quartz vein with
arsenopyrite, minor pyrite, chalcopyrite and native gold. The vein pinches and
swells and can be followed for at least 200 meters along the shoreline cliffs.
The #2 adit gave a gold assay 0.72 oz/t Au, with minor values in cobalt, copper
and bismuth.




The
location was sold by Laird Exploration Ltd. to Oriole Resources Ltd. in 1988. A
work program consisting of geological mapping, rock sampling, and a soil
geochemical survey was completed in 1988. The #2 adit gold values were confirmed
by assay and additional gold-bearing areas were located at the #1 adit. The soil
grid showed a 200 metre-long gold anomaly extending northwest from the #1 adit,
with values up to 3710 ppb (3.7 g/t Au or 0.11 oz/t Au) in soils. Additional
work was recommended but no further work has been recorded on the property since
1988.







Proposed Program of
Exploration




Our work
program includes geological mapping and rock sampling of surface showings and
underground workings, construction of a control grid, a soil and silt
geochemical sampling program, EM and magnetometer geophysical surveys, and rock
trenching. Based on a compilation of these results, a diamond drill program will
be designed to explore and define any potential resources. We intend to
implement the following three result-contingent phases for the Malibu Gold
Property, as well as to other potential properties containing mineral rights and
claims:





Phase
1





· Engage in
reconnaissance geological mapping, prospecting, rock and soil
sampling.


· Retain the services
of a geologist, consultant/project manager and a sampler/geological assistant in
order to implement phase I.


· Evaluate rock, soil
and silt samples obtained in order to render a geological map of the Malibu Gold
Property.


· Acquire various
sampling and field supplies to be used in connection with the geological mapping
and prospecting and to implement the evaluation and analysis of the obtained
samples.





Costs for
this phase are estimated to be $25,000 which will be incurred in
2008.








10







Phase
2





· Generate detailed
surface and underground geological mapping and rock sampling, cutline grid
construction, soil and silt geochemical survey, EM and Mag surveys.


· Establish drill and
trenching targets based on the results of the surveys.


· Retain the services
of a four-man crew capable of executing required drilling programs.


· Produce a summary
report of the current geological and mineral state of the Malibu Gold
Property.





Costs for
this phase are estimated to be $85,000 if phase 1 has been
successful.





Phase
3





· Engage in 1000
meters of diamond drilling and retain qualified geological experts to implement
the drilling program.





Costs for
this phase are estimated to be $200,000 if phase 2 has been
successful.








Compliance with Government
Regulation




We will
be required to conduct all mineral exploration activities in accordance with the
state and federal regulations. Such operations are subject to various laws
governing land use, the protection of the environment, production, exports,
taxes, labor standards, occupational health, waste disposal, toxic substances,
mine safety and other matters. Unfavorable amendments to current laws,
regulations and permits governing operations and activities of resource
exploration companies, or more stringent implementation thereof, could have a
materially adverse impact and cause increases in capital expenditures which
could result in a cessation of operations. We have had no material costs related
to compliance and/or permits in recent years, and anticipate no material costs
in the next year. We will not be required to obtain a permit in order to conduct
Phases 1 and 2 of our proposed exploration program.





Employees




As of
December 31, 2007, we had 12 employees. We anticipate that we will be conducting
most of our business through agreements with consultants and third parties. To
the extent that we are successful in developing our businesses we would
anticipate hiring additional employees/contractors in the next year to handle
anticipated growth.





Reports
to security holders





We file annual, quarterly, current
and special reports and other information with the Securities and Exchange
Commission. You may read and copy any reports, statement or other information
that we file with the Commission at the Commission's public reference rooms at
450 Fifth Street, N.W., Washington, D.C. 20549 Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. These
Commission filings are also available to the public from commercial document
retrieval services and at the Internet site maintained by the Commission at
http://www.sec.gov.





In addition our filings can be viewed
on the “investor” section of the Company’s Internet site at
www.flexfuelsenergy.com.









11





RISK
FACTORS








You
should carefully consider the risks described below as well as other information
provided to you in this Annual Report, including information in the section of
this Annual Report entitled "Information Regarding Forward Looking
Statements."  The risks and uncertainties described below are not the
only ones we face.  Additional risks and uncertainties not presently
known to us or that we currently believe are immaterial may also impair our
business operations.  If any of the following risks actually occur,
our business, financial condition or results of operations could be materially
adversely affected, and you may lose all or part of your
investment.





RISKS
RELATED TO OUR FINANCIAL RESULTS





We
have incurred losses since our incorporation, have yet to achieve profitable
operations and anticipate that we will continue to incur losses for the
foreseeable future.





For our
2007 fiscal year, we incurred a net operating loss of $23,912,000.  We
have no revenues to date.  We have plans to increase significantly our
expenses associated with exploitation of mineral claims and with the development
of our alternative fuels business.  There is no assurance we will be
able to derive revenues from the exploitation of our mineral claims or
alternative fuels business, to successfully achieve positive cash flow or that
our mineral exploitation business or alternative fuels business will be
successful.  If we achieve profitability, we may be unable to sustain
or increase profits on a quarterly or annual basis to generate revenues in the
future.





We
believe that long-term profitability and growth will depend on our ability
to:





·
            commercially
      exploit the mineral deposits or reserves located on the Malibu Gold
      Property;




·
            identify
      and commercially exploit gold and other mineralized deposits through
      development, mining, production or sale;
and




·
            develop
      and integrate our alternative fuel
operations.




Inability
to successfully execute on any of the above, among other factors, could have a
material adverse effect on our business, financial results or
operations.





Because
we have a limited operating history, have yet to attain profitable operations
and will need additional financing to fund our businesses, there is doubt about
our ability to continue as a going concern.





The
financial statements for the year ended December 31, 2007 have been prepared
assuming that the Company will continue as a going concern, which contemplates
the realization of assets and the liquidation of liabilities in the normal
course of business. However, the Company has accumulated a loss to date and has
relied on raising funds through private placements. From inception (March 31,
2006) to December 31, 2007 the Company raised $18,978,000 and at December 31,
2007 held $16,156,000 in cash. The financial statements do not include any
adjustments that might result from this uncertainty.





As shown
in the accompanying financial statements, the Company has incurred a net loss of
$25,293,000 for the period from March 10, 2006 (inception) to December 31, 2007
and has not generated any revenues. The future of the Company is dependent upon
its ability to obtain financing and upon future profitable operations from the
development of acquisitions. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts of and classification of liabilities that might be
necessary in the event the Company cannot continue in existence.






12







We expect
our mineral exploration activities and the planned development of our biofuels
business, together with anticipated general, legal, accounting and
administrative expenses, including those associated with our filing reports with
the Securities and Exchange Commission will require us to spend $23,100,000 to
$44,100,000 in 2008.





Therefore,
we will require additional financing to fund our planned
operations.  We will seek these additional funds via equity financing,
private placements of our securities or loans from financial institutions, our
directors or our stockholders.  Currently, we do not have definite
arrangements for additional funds.    There can be no
assurances we will be able to do so on terms acceptable to us. If we do not
obtain additional financing, our business will fail.





Obtaining
additional financing is subject to a number of factors, including investor
acceptance of the value of our mineral claims and our alternative fuel
business.  These factors may adversely affect the timing, amount,
terms, or conditions of any financing that we may obtain or make any additional
financing unavailable to us.





To date,
our sources of cash have been primarily limited to the sale of our equity
securities.  We cannot be certain that additional funding via this
means will be available on acceptable terms if at all.  To the extent
that we are able to raise additional funds by issuing equity securities, our
existing stockholders may experience significant dilution.  Any debt
financing that we may secure, if available, may involve restrictive covenants
that impact our ability to conduct our business.  If we are unable to
raise additional capital, when required, or on acceptable terms, we may have to
delay or scale back significantly or discontinue our planned exploration and
development projects.  Inability to obtain these or other sources of
capital could have a material adverse effect on our business, financial results
or operations.








RISKS
RELATED TO OUR MANAGEMENT AND CORPORATE GOVERNANCE





Our
management team consists of four members who are also our sole directors, which
poses a significant risk for us from a corporate governance
perspective.





We have
four executive officers, namely Brian Barrows, our chief executive officer; Paul
Gothard, our chief financial officer; Thomas Barr, vice president for our
alternative fuels business; and James Laird, our co-founder and vice president
of our mineral exploration business.  These individuals also serve as
our sole directors.  Messrs Barrows, Gothard and Barr joined us in
2007.  Until their appointments, Mr. Laird served as our sole
executive officer.  Mr. Gothard has announced his resignation as our
chief financial officer effective June 2, 2008.  Our
directors/executive officers are required to make interested decisions, such as
the approval of related party transactions, their level of compensation, and
oversight of our accounting function.  Our directors/executive
officers also exercise control over all matters requiring stockholder approval,
including the nomination of directors and the approval of significant corporate
transactions. We have chosen not to implement various corporate governance
measures, the absence of which may cause stockholders to have more limited
protections against transactions implemented by our board of directors,
conflicts of interest and similar matters.





We also
do not have an audit committee, nor other independent committees, as we
presently do not have any independent directors.  Stockholders should
bear in mind our current lack of corporate governance measures in formulating
their investment decisions.





In April
2007 we determined, after consultation with our independent public accounting
firm, to restate our financial statements for the year ended December 31, 2006,
filed as part of our required disclosure obligations on Form 10-KSB filed with
the Securities and Exchange Commission on April 17, 2007 (the
"Report").  We filed an amended report on Form 10-KSB/A on May 15,
2007 (the "Amended Report") solely to (i) amend and restate our financial
statements filed aspart of the Report to
correct (a) "Paid in Capital" "Retained earnings (deficit)" and resulting
changes in "Total stockholders’ equity" and "Total liabilities and stockholders’
equity" as at December 31, 2006, set forth in the Balance Sheet on page F-3 of
the Amended Report, (b) entries for "Deficient Accumulated During Development
Stage" and "Total Equity" as at December 31, 2006, set forth in the Statement of
Shareholders Equity on page F-5 of the Amended Report, (c) entries for "Cash
Flow from Financing Activities", "Cash at end of period" and "Shares issued in
Lieu of Payment for Service" for the fiscal year ended December 31, 2006, set
forth in the Statement of Cash Flows on page F-6 of the Amended Report, and (ii)
correctly disclose director compensation paid to a member of our board of
directors during the fiscal year ended December 31, 2006, set forth on page 33
of the Amended Report.






13





On May
29, 2007, we completed the acquisition of Flex Fuels Energy Limited. In
connection with and following the completion of that transaction, our management
changed and, thereafter, we engaged new independent accountants.  In
July 2007, our executive officers concluded that our financial statements
covering the fiscal year ended December 31, 2006, and the quarterly period ended
March 31, 2007 which had been filed by us with the Securities and Exchange
Commission on Form 10-KSB/A and Form 10-QSB on April 26, 2007 and May 15, 2007,
respectively, should no longer be relied upon because of errors in such
financial statements asfurther addressed
below.  During July 2007, management reviewed our internal controls
over financial reporting as of December 31, 2006 and identified the following
material weaknesses for the period in question:





●
            we
      did not maintain a proper in-house finance function and relied upon a
      third party to maintain the finance function and prepare the financial
      reports;


●
            we
      did not maintain a timely and accurate period-end financial statement
      closing process or effective procedures for reconciling and compiling our
      financial records in a timely fashion. With respect to these procedures,
      management determined that the material weakness arose due to the lack of
      training, experience or knowledge of persons preparing the financial
      records. We did not effectively monitor the third-party accounting
      function and our oversight of financial controls;
  and


●
            our
      knowledge of US GAAP was limited.





We
consequently prepared and filed in September 2007 a further amended Form 10-KSB
for the fiscal year ended December 31, 2006 (the "Further Amended Report"), as
well as an amended Form 10-QSB for the fiscal quarter ended March 31, 2007,
which reports included financial statements audited by our new independent
accountants and restated unaudited financial statements that corrected the prior
errors contained in such financial statements and filings. Specifically, we
filed the Further Amended Report solely to:





(i)
            reflect
      certain unrecorded liabilities incurred in the year ended December 31,
      2006 that were not reflected in the Amended
  Report;


(ii)
            to
      restate certain legal costs associated with the investment in Flex Fuels
      Energy Limited and the private placement that were expensed incorrectly in
      the Statement of Operations for the fiscal year ended December 31, 2006
      contained in the Amended Report;


(iii)
            to
      amend the fair value attributed in the Amended Report to the stock issued
      to Mr. Tom Barr;


(v)
            to
      consolidate the balance sheet and results of Flex Fuels Energy Limited;
      and


(vi)
            to
      correctly disclose related party
transactions.





In
addition, we filed an amended quarterly report on Form 10-QSB solely
to:





(i)
            reflect
      unrecorded liabilities of $42,000 and correct other errors in recording
      liabilities totaling $10,050 incurred in the quarter ended March 31,
      2007;


(ii)
            amend
      the balance sheets to reflect adjustments made in the statements for the
      period ended December 31, 2006, filed in the Further Amended
      Report;


(iii)
            include
      the periods missing from the previous filing (inception to March 31, 2006
      and from our inception to March 31, 2007) in the Statements of Operations
      and Statements of Cash Flows;


(iv)
            consolidate
      the balance sheet and results of Flex Fuels Energy Limited;
      and


(v)
            correctly
      disclose related party disclosures.






14







We
will need to increase our size, and may experience difficulties in managing
growth.





We are a
small company with 12 employees as of December 31, 2007. We hope to experience a
period of expansion in headcount, facilities, infrastructure and overhead to
develop our mining and biofuels businesses to address potential growth and
market opportunities.  Future growth will impose significant added
responsibilities on members of management, including the need to identify,
recruit, maintain and integrate additional independent contractors and managers.
Our future financial performance and our ability to compete effectively will
depend, in part, on our ability to manage any future growth
effectively.  Inability to manage future growth could have a material
adverse effect on our business, financial results or operations.





Our
business is headquartered in the United Kingdom and none of our directors are
resident in the United States; accordingly, it may be difficult to enforce any
liabilities against them.





If an
event occurs that gives rise to any liability on the part of our officers and
directors who are not resident in the United States, including liabilities
arising under the US securities laws, stockholders would likely have difficulty
in enforcing such liabilities.  Stockholders may not be able to obtain
jurisdiction in the United States over such non-resident officers and directors,
and any judgment obtained against such persons in the United States may not be
recognized or enforceable in the foreign jurisdiction where such person's assets
are located.





Mr.
James Laird, the executive in charge of our mining businesses' has other
business interests and may not be able or willing to devote a sufficient amount
of time to our mining operations.





It is
possible that the demands on Mr. James Laird, the executive in charge of our
mining business and a member of our board of directors, from other obligations
could increase, with the result that he would no longer be able to devote
sufficient time to the management of our mining business. In addition, he may
not possess sufficient time for our miming business if the demands of managing
our business increased substantially beyond current levels.





Mr.
Paul Gothard, our chief financial officer, has announced his resignation and we
have not yet identified someone to replace him.





Mr. Paul
Gothard, our chief financial officer, has announced his resignation and
departure effective on June 2, 2008.  We expect to hire a new chief
financial officer by that date, but we have not yet done so.  If we
are required to outsource our finance function, we risk impairing our financial
controls.  Our lack of a finance executive in the past contributed to
our inadequate financial controls and the consequent need to amend and restate
our financial statements and amend our required disclosure reports to the
Securities and Exchange Commission for the year ended December 31, 2006 and the
quarters ended March 31, 2007 and June 30, 2007.


.


RISKS
RELATING TO OUR MINING BUSINESS





If
we do not conduct mineral exploration on our mineral claims and keep the claims
in good standing, then our right to the see mineral claims will lapse and we may
lose the entire value of our investment.





We must
complete mineral exploration work on our mineral claims and keep the claims in
good standing.  If we do not fulfill our work commitment requirements
on our claims or keep the claims in good standing, then our right to the claims
will lapse and we will lose all interest that we have in these mineral
claims.  Loss of these interests could have a material adverse effect
on our business, financial results or operations.





The
imprecision of mineral deposit estimates may cause any resource calculations
that we make to be unreliable.





Mineral
deposit estimates and related databases are expressions of judgment based on
knowledge, mining experience, and analysis of drilling results and industry
practices. Valid estimates made at a given time may significantly change when
new information becomes available. By their nature, mineral deposit estimates
are imprecise and depend upon statistical inferences, which may ultimately prove
unreliable. Mineral deposit estimates included here, if any, have not been
adjusted in consideration of these risks and, therefore, no assurances can be
given that any mineral deposit estimate will ultimately be reclassified as
reserves.






15





We
are sensitive to fluctuations and volatility in the price of gold and other
minerals, which are beyond our control.





The
prices for gold and other metals fluctuate and are affected by numerous factors
beyond our control. Factors that affect the price of gold and other metals
include consumer demand, economic conditions, over supply from secondary sources
and costs of production. Price volatility and downward price pressure, which can
lead to lower prices, could have a material adverse effect on the costs and
viability of our projects, which could in turn have a material adverse effect on
our business, financial condition or results of operations.





Mineral
exploration and prospecting is a highly competitive and speculative business and
we may not be successful in seeking or executing on available
opportunities.





The
process of mineral exploration and prospecting is a highly competitive and
speculative business. In seeking available opportunities, we will compete with a
number of other companies, including established, multi-national companies that
have more experience and financial and human resources than us. Because we may
not have the financial and managerial resources to compete with other companies,
we may not be successful in our efforts to acquire new projects.





Compliance
with environmental considerations and permitting could have a material adverse
effect on the viability costs of our projects.  The historical trend
towards stricter environmental regulation may continue and, as such, represent
an unknown factor in our planning processes.





All
mining in Canada is regulated by government agencies at the federal and
provincial levels in that country. Compliance with such regulation could have a
material effect on the economics of our operations and the timing of project
development. Our primary regulatory costs will be related to obtaining licenses
and permits from government agencies before the commencement of mining
activities. An environmental impact study that must be obtained on each
property, in order to obtain governmental approval to mine on the properties, is
also a part of the overall operating costs of a milling company.





The gold
and mineral mining business is subject not only to worker health and safety, and
environmental risks associated with all mining businesses, but is also subject
to additional risks uniquely associated with gold and other minerals mining.
Although we believe that our operations will be in compliance, in all material
respects, with all relevant permits, licenses and regulations involving worker
health and safety, as well as the environment, the historical trend toward
stricter environmental regulation may continue. The possibility of more
stringent regulations exists in the areas of worker health and safety, the
dispositions of wastes, the decommissioning and reclamation of mining and
milling sites and other environmental matters, each of which could have an
adverse material effect on the viability costs of a particular
project.





Mining
and exploration activities are subject to extensive regulation by federal and
provincial governments in Canada.  Future changes in governments,
regulations and policies could adversely affect our results of operations for a
particular period and our long-term business prospects.





Mining
and exploration activities are subject to extensive regulation by federal and
provincial governments in Canada. Such regulation relates to production,
development, exploration, exports, taxes and royalties, labor standards,
occupational health, waste disposal, protection and remediation of the
environment, mine and mill reclamation, mine and mill safety, toxic substances
and other matters. Compliance with such laws and regulations has increased the
costs of exploring, drilling, developing, constructing, operating mines and
other facilities. Furthermore, future changes in governments, regulations and
policies, could adversely affect our results of operations in a particular
period and our long-term business prospects.






16





The
development of mines and related facilities is contingent upon governmental
approvals, which are complex and time consuming to obtain and which, depending
upon the location of the project, involve various governmental agencies. The
duration and success of such approvals are subject to many variables outside of
our control.





RISKS
RELATED TO OUR BIODIESEL FUEL BUSINESS





Our
biofuels business may suffer if we are unable to attract or retain talented
personnel.





Our
success will depend in large measure on the abilities, expertise, judgment,
discretion, integrity and good faith of our management, as well as other
personnel.  We have a small management team, and the loss of a key
individual or inability to attract suitably qualified replacements or additional
staff could adversely affect our business.  Our success also depends
on the ability of management and employees to interpret market and technical
data correctly, as well as respond to economic, market and other
conditions.  No assurance can be given that key personnel will
continue their association or employment with us or that replacement personnel
with comparable skills will be found.  If we are unable to attract and
retain key personnel and additional employees, our business may be adversely
affected.





We
may be unable to locate suitable properties and obtain the development rights
needed to build and expand our biofuels business.





Our long
term business plan focuses on designing, building and operating seed processing
facilities and biodiesel refineries for our own account.  Our ability
to acquire quality properties is uncertain and we may be required to delay
construction of our facilities, which may create unanticipated costs and
delays.  In the event that we are not successful in identifying and
obtaining development rights on suitable properties for building and operating
seed processing facilities and biodiesel refineries, our future prospects for
profitability will likely be substantially limited, and our financial condition
and resulting operations may be adversely affected. We currently hold an option
over the site we have identified in Cardiff which has received certain planning
permissions.





As
a start up operation, the company will be dependent on the one proposed plant
and any operational disruption could result in a reduction of its sales volumes
and could cause it to incur substantial expenditures.





The
proposed plant initially will be in one location.  Any disruption to that
facility will have an adverse effect on the implementation of its business plan
and, later, to its overall operations.  Disruptions may be caused by any
number of things.  Initially it may be construction delays due to labor
stoppages, inability to obtain materials, permitting requirements and redesign
requirements.  After commencement of operations, they may be founded on
other issues such as labor disruptions, disruptions in supply, transportation
difficulties, unscheduled downtime for repair or modification, or hazards
inherent in the industry. Some of those hazards may cause personal injury and
loss of life, severe damage to or destruction of property and equipment and
environmental damage, and may result in suspension or termination of operations
and the imposition of civil or criminal penalties. As protection against these
hazards, the company plans to maintain property, business interruption and
casualty insurance, but it cannot provide any assurance that insurance will be
adequate to fully cover the potential hazards described above or that the
company will be able to obtain or renew insurance on commercially reasonable
terms or at all.




The
production, sale and distribution of processed seed products and biodiesel is
dependent on the existence of sufficient and necessary infrastructure,
development of which may not occur on a timely basis, if at all, and our
operations could be adversely affected by infrastructure
disruptions.





Substantial
investments required for by relevant entities infrastructure changes and
expansion may not be made or may not be made on a timely basis.  Any
delay or failure in making the changes to or expansion of infrastructure could
hurt the demand or prices for our products, impede delivery of our products,
impose additional costs on us or otherwise have a material adverse effect on our
business, financial condition or results of operations.






17





Unanticipated
problems or delays in building our seed processing and biodiesel refineries to
the proper specifications may negatively affect our operations.





Our
current operating cash flow depends on our ability to timely and economically
build, complete and operate seed processing facilities and refineries for the
production of biodiesel products (and associated power generation facilities if
desirable).  If our construction plans are threatened or delayed
because we are unable to finance them or for other reasons, our business may
experience a substantial setback.  Prolonged problems may threaten the
commercial viability of our planned facilities and
refineries.  Moreover, the occurrence of significant unforeseen
conditions or events in connection with these facilities and refineries may
require us to re-examine the thoroughness of our due diligence and planning
processes.  Any change to our business model or management's
evaluation of the viability of these projects could have a material adverse
effect on our business, financial condition or results of
operations.





Projected
construction and financing costs for seed processing facilities and biodiesel
refineries may also increase to a level that would make these facilities and
refineries too expensive to build or unprofitable to
operate.  Contractors, engineering firms, construction firms and
equipment suppliers also receive requests and orders from other companies and,
therefore, we may not be able to secure their services or products on a timely
basis or on acceptable financial terms.  We may suffer significant
delays or cost overruns as a result of a variety of factors, such as increases
in the prices or raw materials, shortages of workers or materials,
transportation constraints, adverse weather, equipment failures, fires, damage
to or destruction of property and equipment, environmental damage, unforeseen
difficulties or labor issues, any of which could delay or prevent us from
commencing operations.  Any of these factors could have a material
adverse effect on our business, financial conditions or results of
operations.





Our
business, financial condition and results of operations and business outlook
will be highly dependent on commodity prices which are subject to significant
volatility and uncertainty, as well as the availability of supplies, which could
cause our results to fluctuate substantially.





Our
results will be dependent on many different commodity prices, especially prices
for biodiesel, seed processing co-products, petroleum diesel, rape seed and
other feedstock and materials used in the construction of our planned seed
processing facilities and biodiesel refineries.  As a result of the
volatility of the prices for these items, our results if and when we are able to
produce biodiesel fuels, may fluctuate substantially and we may experience
periods of declining prices for our products and seed processing co-products,
and increasing costs for our raw materials, which could result in operating
losses.  Declining prices for biodiesel fuel products and increased
prices for required raw materials for a protracted period while we develop our
business plan may impede our ability to finance our planned seed processing
facilities and biodiesel refineries and prevent us from commencing
operations.  If we are able to commence operations we may attempt to
offset some of the effects of fluctuations in prices by entering into forward
contracts to supply biodiesel or purchase feedstock or other items or by
engaging in transactions involving exchange-traded futures contracts, the amount
and quantity of which will vary.





Duration
of these hedging and other risk mitigation activities may vary substantially
over time and these activities also involve substantial risks.





Biodiesel
fuel is a commodity whose price is determined based on the price of petroleum
diesel, world demand, supply and other factors, all of which are beyond our
control.  World prices for biodiesel fuel have fluctuated widely in
recent years.  We expect that prices will continue to fluctuate in the
future.  Price fluctuations will have a significant impact upon our
revenue, the return on our investment in seed processing facilities and
biodiesel refineries and on our general financial condition.  Price
fluctuations for biodiesel fuel may also affect the investment market, and our
ability to raise investor capital.  Future decreases in the prices of
biodiesel or petroleum diesel fuel could have a material adverse effect on our
business, financial condition or results of operations.






18





The main
product from processing oil-seed rape, other than raw oil, is oil cake, commonly
sold as animal feed. This significant co-product is a commodity whose price is
determined based on the price of alternative animal feeds, such as wheat, world
demand, supply and other factors, all of which are beyond our
control.  World prices for oil cake have fluctuated widely in recent
years.  We expect that prices will continue to fluctuate in the
future.  Price fluctuations will have a significant impact upon our
revenue, the return on our investment in seed processing facilities and
biodiesel refineries and on our general financial condition.  Price
fluctuations for oil cake may also affect the investment market, and our ability
to raise investor capital.  Although market prices for biodiesel fuel
rose to near record levels during 2007 and have remained near or above those
levels since then, there is no assurance that these prices will remain at high
levels.  Future fluctuations in the price of oil cake or fluctuations
in the price alternate animal feeds could have a material adverse effect on our
business, financial condition or results of operations.





The price
of feedstock is influenced by market demand, weather conditions, factors
affecting crop yields, farmer planting decisions and general economic, market
and regulator factors.  These factors include government policies and
subsidies with respect to agriculture and international trade, and global and
local demand and supply.  The significance and relative effect of
these factors on the price of feedstock is difficult to project.  Any
event that tends to negatively affect the supply of feedstock, such as increased
demand, adverse weather or crop disease, could increase feedstock prices and
potential harm our business. Such a shortage or quality control issues could
require us to suspend operations until feedstock of acceptable quality is
available at economical terms, which delay could have a material adverse effect
on our business, financial condition or results of operations. The price we pay
for feedstock at a facility could increase if an additional multi-feedstock
biodiesel production facility is built in the same general vicinity or if
alternative uses are found for lower costs feedstocks.





Strategic
relationships on which we may rely are subject to change.





Our
ability to identify and enter into commercial arrangements with feedstock
suppliers, construction contractors, equipment fabricators, transportation,
logistics and marketing services providers and biodiesel customers will depend
on developing and maintaining close working relationships with industry
participants.  Our success in this area will also depend on our
ability to select and evaluate suitable projects as well as to consummate
transactions in a highly competitive environment.  These realities are
subject to change and may impair our ability to grow.





To
develop our business, we may form strategic relationships.  These
relationships may take the form of joint ventures with other private parties or
local government bodies, contractual arrangements with other companies,
including those that supply feedstock that we will use in our business, or
minority investments from third parties.  There can be no assurances
that we will be able to establish these strategic relationships, or, if
established, that the relationships will be able to be maintained.  In
addition, the dynamics of our relationships with strategic partners may require
us to incur expenses or undertake activities we would not otherwise be inclined
to incur or undertake in order to fulfill our obligations to these partners or
maintain these relationships.  If we do not successfully establish or
maintain strategic relationships our business may be negatively
affected.





The
U.K. biodiesel industry is highly dependent upon extensive legislation,
incentivisation and regulation and any changes in this regime could have a
material adverse effect on our business, financial condition or results of
operations.





The
production of biodiesel is made significantly more competitive by various tax
and other government incentives such as described below:





The
EU Biofuels Directive requires all member states to set indicative targets for
biofuel sales in 2005 and 2010 against reference values of 2% and 5.75% (based
on energy content) respectively. The majority of member states have now set
their target and as such the European biodiesel demand is expected to grow
significantly over the next 5 years. It is anticipated that demand could reach
well in excess of 10 million tonnes/annum by 2010 compared with an estimated
European production capacity of 4.89 million tonnes in 2006(source: European
Biodiesel Board, July 2007).






19





The UK
biodiesel market has been provided significant support with the recent
announcement of a Renewable Transport Fuel Obligation which will be introduced
in April 2008 resulting in up to 35p per liter support for biodiesel in
2008.





These
incentives are meant to lower the cost of biodiesel in comparison to petroleum
diesel.  The elimination or significant reduction in these incentive
programs benefiting biodiesel may have a material adverse effect on our
business, financial condition or results of operations.





Adverse
public opinion concerning the biodiesel industry could harm our
business.





Public
acceptance of biodiesel produced by us as a reliable, high-quality alternative
to diesel may be limited or slower than anticipated due to several factors,
including:





·
            possible
      public perception that the use of blends of biodiesel greater than 5% will
      require excessive engine modifications, or that engines running biodiesel
      will not reliably start in cold weather
  conditions;




·
            actual
      or perceived problems with biodiesel quality or performance;
      and




·
            concern
      that using biodiesel will void engine
  warranties.




Quality
control issues in biodiesel that is produced by other industry participants
could result in a decrease in demand or mandates for biodiesel, with a resulting
decrease in our revenue.  Such public perceptions or concerns, whether
substantiated or not, may adversely affect the demand for our biodiesel, which
in turn could decrease our sales, and have a material adverse effect on our
business, financial condition or results of operations.








Competition
in the biofuels industry may impair our success.





We face
competition from other producers of biodiesel with respect to the procurement of
feedstock, obtaining suitable properties for the construction of seed processing
facilities and biodiesel refineries and selling biodiesel and related products.
Such competition could be intense, thus driving up the cost of feedstock and
driving down the price for our products. Competition will likely increase as
prices of energy in the commodities market, including petroleum and biodiesel
rise, as they have in recent years.





Additionally,
new companies are constantly entering the market, thus increasing
competition.


Larger
foreign owned and domestic companies who have been engaged in the biofuels
business for substantially longer periods of time, such as vertically integrated
agricultural and food supply companies, or companies that decide to enter the
biofuels business, may have access to greater resources.  These
companies may have greater success in the recruitment and retention of qualified
employees, as well as in conducting their own refining and fuel marketing
operations, and may have greater access to feedstocks, market presence,
economies of scale, financial resources and engineering, technical and marketing
capabilities, which may give them a competitive advantage. In addition, actual
or potential competitors may be strengthened through the acquisition of
additional assets and interests. If we are unable to compete effectively or
adequately respond to competitive pressures, this could have a material adverse
effect on our business, financial condition or results of operation and could
also have a negative impact on our ability to obtain additional capital from
investors.






20




Competition
due to advances in alternative fuels may lessen the demand for biodiesel and
negatively impact our profitability.





Alternative
fuels, gasoline oxygenates, ethanol and biodiesel production methods are
continually under development. A number of automotive, industrial and power
generation manufacturers are developing alternative clean power systems using
fuel cells or clean-burning gaseous fuels that, like biodiesel, may address
increasing worldwide energy costs, the long-term availability of petroleum
reserves and environmental concerns. Additionally, there is significant research
and development being undertaken regarding the production of ethanol from
cellulosic biomass, the production of methane from anaerobic digesters and the
production of electricity from wind and tidal energy systems, among other
potential sources, of renewable energy. If these alternative fuels continue to
expand and gain broad acceptance such that the overall demand for diesel is
reduced, we may not be able to compete effectively.





Our
business is subject to local legal, political and economic factors which are
beyond our control.





We
believe that the current political environment for construction of seed
processing facilities and biodiesel refineries is sufficiently supportive to
enable us to plan and implement our operations. However, there are risks that
conditions will change in an adverse manner. These risks include, but are not
limited to, laws or policies affecting mandates or incentives to promote the use
of biodiesel, environmental issues, land use, air emissions, water use, planning
permissions, workplace safety, restrictions imposed on the biodiesel fuel
industry such as restrictions on production, substantial changes in product
quality standards, restrictions on feedstock supply, price controls and export
controls. Any changes in biodiesel fuel, financial incentives, investment
regulations, policies or a shift in political attitudes are beyond our control
and could have a material adverse effect on our business, financial condition or
results of operations.





Changes
in industry specification standards for biodiesel may increase production costs
or require additional capital expenditures to upgrade or modernize our biodiesel
production facilities. Such upgrades or modifications may entail delays in
construction or stoppages of production.





In
Europe, the biodiesel standard is EN 14214, which has been modified to a more
stringent standard in Germany.  The European standard setting bodies
have modified the biodiesel specifications in the past, and are expected to
continue to modify the specification in the future as the use of biodiesel
expands.  There is no guarantee that our production facilities will be
able to produce compliant biodiesel in the event of changes to the
specifications.  We may need to invest significant capital resources
to upgrade or modify our production facilities, which might cause delays in
construction or stoppages of production and the resultant loss of revenue, or
which might not be economically feasible at all.  Any modification to
our production facilities or to the biodiesel specification with which we
attempt to comply may entail increased construction or production costs or
reduced production capacity.  These consequences could have a material
adverse effect on our business, financial condition or results of
operations.





Environmental
risks and regulations may adversely affect our biofuels business.





All
phases of designing, constructing and operating seed processing facilities and
biodiesel refineries present environmental risks and hazards. We are subject to
environmental regulation implemented or imposed by a variety of national and
municipal laws and regulations as well as international conventions. Among other
things, environmental legislation provides for restrictions and prohibitions on
spills and discharges, as well as emissions of various substances produced in
association with biodiesel fuel operations. Legislation also requires that
facility sites be operated, maintained, abandoned and reclaimed in such a way
that would satisfy applicable regulatory authorities. Compliance with such
legislation can require significant expenditures and a breach in compliance may
result in the imposition of fines and penalties, some of which may be material.
Environmental legislation is evolving in a manner we expect may result in
stricter standards and enforcement, larger fines and liability, as well as
potentially increased capital expenditures and operating costs.






21





The
presence or discharge of pollutants in or into the air, soil or water may give
rise to liabilities to governments and third parties and may require us to incur
costs to remedy such presence or discharge. If we are unable to remediate such
conditions economically or obtain reimbursement or indemnification from third
parties, this could have a material adverse effect on our business, financial
condition or results of operations.





Penalties
we may incur could impair our biofuels business.





Failure
to comply with government regulations could subject us to civil and criminal
penalties, require us to forfeit property rights and may affect the value of our
assets or our ability to conduct our business. We may also be required to take
corrective actions, including, but not limited to, installing additional
equipment, which could require us to make substantial capital expenditures. We
could also be required to indemnify our employees in connection with any
expenses or liabilities that they may incur individually in connection with
regulatory action against them. These could result in a material adverse effect
on our business, financial condition or results of operations.





Our
biofuels business will suffer if we cannot obtain or maintain necessary permits
or licenses.





Our
operations will require licenses, permits and in some cases renewals of these
licenses and permits from various governmental authorities.  Our
ability to obtain, sustain, or renew such licenses and permits on acceptable,
commercially viable terms are subject to change, as, among other things, the
regulations and policies of applicable governmental authorities may change. Our
inability to obtain or extend a license or a loss of any of these licenses or
permits could have a material adverse effect on our business, financial
condition or results of operations.





Our
insurance may be inadequate to cover liabilities we may incur.





Our
involvement in the design, construction and operation of seed processing
facilities and biodiesel refineries may result in our becoming subject to
liability for pollution, property damage, personal injury, or other hazards.
Although we will obtain insurance in accordance with industry standards to
address those risks, insurance has limitations on liability that may not be
sufficient to cover the full extent of our liabilities. In addition, some risks
may not be insurable or, in certain circumstances, we may choose not to obtain
insurance to manage specific risks due to the high premiums associated with the
insurance, or for other reasons. The payment of uninsured liabilities could
reduce the funds available for operations or capital needs. If we suffer a
significant event or occurrence that is not fully covered by insurance, or if
the insurer of a particular incident is not solvent, this could result in a
material adverse effect on our business, financial condition or results of
operations.





Increases
in our energy costs will affect operating results and financial
condition.





Our
biodiesel production costs will be dependent on the costs of the energy sources
used to run our facilities and refineries. These costs are subject to
fluctuations and variations in different locations where we intend to operate,
and we may not be able to predict or control these costs. If these costs exceed
our expectations, this could have a material adverse effect on our business,
financial condition or results of operations.





We
will rely on technology to conduct our biofuels business and our technology
could become ineffective or obsolete.





We will
be required to continually enhance and update our technology to maintain its
efficacy and to avoid obsolescence.  The costs of doing so may be
substantial and may be higher than the costs that we anticipate for technology
maintenance and development. If we are unable to maintain the efficacy of our
technology, our ability to manage our business and to compete may be impaired.
Even if we are able to maintain technical effectiveness, our technology may not
be the most efficient means of reaching our objectives, in which case we may
incur higher operating costs than we would if our technology was more effective.
The impact of technical shortcomings could have a material adverse effect on our
business, financial condition or results of operations.






22








Decommissioning
costs are unknown and may be substantial.





We may
become responsible for costs associated with abandoning facilities that we use
for production of biodiesel, which we anticipate will have a useful life of
twenty years in the absence of a major overhaul. Abandonment and reclamation of
these facilities and the associated costs are often referred to as
"decommissioning." We have not yet determined if we will establish a reserve
account for these potential costs for any of our biodiesel refineries or if we
will be able to pay for the costs of decommissioning from the proceeds of future
sales. The use of other funds to pay for decommissioning costs could have a
material adverse effect on our business, financial condition or results of
operations.





RISKS
RELATING TO OUR COMMON STOCK





We
are subject to compliance with securities law, which exposes us to potential
liabilities, including potential rescission rights.





We have
periodically offered and sold our Common Stock to investors pursuant to certain
exemptions from the registration requirements of the Securities Act, as well as
those of various state securities laws. The basis for relying on such exemptions
is factual; that is, the applicability of such exemptions depends upon our
conduct and that of those persons contacting prospective investors and making
the offering. While we believe that such exemptions were applicable to offers
and sales of our Common Stock, we have not received a legal opinion to the
effect that any of our prior offerings were exempt from registration under any
federal or state law. Instead, we have relied upon the operative facts as the
basis for such exemptions, including information provided by investors
themselves.





If any
prior offering did not qualify for such exemption, an investor would have the
right to rescind its purchase of the securities if it so desired. It is possible
that if an investor should seek rescission, such investor would succeed. A
similar situation prevails under state law in those states where the securities
may be offered without registration in reliance on the partial pre-emption from
the registration or qualification provisions of such state statutes under the
National Securities Markets Improvement Act of 1996.  If investors
were successful in seeking rescission, we would face severe financial demands
that could adversely affect our business and
operations.  Additionally, if we did not in fact qualify for the
exemptions upon which we have relied, we may become subject to significant fines
and penalties imposed by the SEC and state securities agencies.





We
will need additional capital that will dilute the ownership interest of
investors.





We
require substantial capital to fund our business. If we raise additional funds
through the issuance of equity, equity-related or convertible debt securities,
these securities may have rights, preferences or privileges senior to those of
the rights of holders of our Common Stock, who may experience dilution of their
ownership interest of our Common Stock. We cannot predict whether additional
financing will be available to us on favorable terms when required, or at all.
Since our inception, we have experienced negative cash flow from operations and
expect to experience significant negative cash flow from operations in the
future. The issuance of additional Common Stock by our management may have the
effect of further diluting the proportionate equity interest and voting power of
holders of our Common Stock.





Our
Common Stock is listed on the OTC-Bulletin Board (Ticker: FXFL.OB) and our
shares may qualify as penny stock and, as such, we are subject to the risks
associated with "penny stocks".  Regulations relating to "penny
stocks" limit the ability of our stockholders to sell their shares and, as a
result, our stockholders may have to hold their shares
indefinitely.





Our
Common Stock may be deemed to be "penny stock" as that term is defined in
Regulation Section 240.3a51-1 of the Securities and Exchange Commission. Penny
stocks are stocks: (a) with a price of less than U.S. $5.00 per share; (b) that
are not traded on a "recognized" national exchange; (c) whose prices are not
quoted on the NASDAQ automated quotation system (NASDAQ - where listed stocks
must still meet requirement (a) above); or (d) in issuers with net tangible
assets of less than U.S. $2,000,000 (if the issuer has been in continuous
operation for at least three years) or U.S. $5,000,000 (if in continuous
operation for less than three years), or with average revenues of less than U.S.
$6,000,000 for the last three years.






23





Section
15(g) of the United States Securities Exchange Act of 1934 and Regulation
240.15g(c)2 of the Securities and Exchange Commission require broker dealers
dealing in penny stocks to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor's account. Potential investors in our Common Stock are
urged to obtain and read such disclosure carefully before purchasing any common
shares that are deemed to be "penny stock".





Moreover,
Regulation 240.15g-9 of the Securities and Exchange Commission requires broker
dealers in penny stocks to approve the account of any investor for transactions
in such stocks before selling any penny stock to that investor. This procedure
requires the broker dealer to: (a) obtain from the investor information
concerning his or her financial situation, investment experience and investment
objectives; (b) reasonably determine, based on that information, that
transactions in penny stocks are suitable for the investor and that the investor
has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (c) provide the investor with
a written statement setting forth the basis on which the broker dealer made the
determination in (ii) above; and (d) receive a signed and dated copy of such
statement from the investor confirming that it accurately reflects the
investor's financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors in
our Common Stock to resell their shares to third parties or to otherwise dispose
of them. Stockholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, dated April 17, 1991, the market for penny
stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include:





(i)
            control
      of the market for the security by one or a few broker-dealers that are
      often related to the promoter or
issuer;


(ii)
            manipulation
      of prices through prearranged matching of purchases and sales and false
      and misleading press releases;


(iii)
            boiler
      room practices involving high-pressure sales tactics and unrealistic price
      projections by inexperienced sales
persons;


(iv)
            excessive
      and undisclosed bid-ask differential and mark-ups by selling
      broker-dealers; and


(v)
            the
      wholesale dumping of the same securities by promoters and broker-dealers
      after prices have been manipulated to a desired level, along with the
      resulting inevitable collapse of those prices and with consequent investor
      losses.





Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our
securities.






24




ITEM
2. DESCRIPTION OF PROPERTY





Principal
Executive Offices





Our
principal executive offices are located at: 30 St. Mary Axe, London EC3A 8EP,
United Kingdom, and out telephone number is +44 (0) 8445 862
780.   We utilize our principal executive
offices without having a formal agreement with the landlord and we do not
pay any rent to use these offices.  We do not own any real
estate.





FFE Ltd
has temporary operational offices located at Regus House, Falcon Drive, Cardiff
Bay, Cardiff, CF10 4RU, United Kingdom. The offices at Regus House cover
approximately 500 square feet and cost approximately $4,000 per
month.





Malibu
Gold Property





For a
description of Malibu Gold Property and our mineral properties, see “Description
of Business.”








ITEM
3. LEGAL PROCEEDINGS





None.





From time
to time we may be a defendant and plaintiff in various legal proceedings arising
in the normal course of our business. We are currently not a party to any
material legal proceedings or government actions, including any bankruptcy,
receivership, or similar proceedings. In addition, we are not aware of any known
litigation or liabilities involving the operators of our properties that could
affect our operations. Furthermore, as of the date of this Annual Report, our
management is not aware of any proceedings to which any of our directors,
officers, or affiliates, or any associate of any such director, officer,
affiliate, or security holder is a party adverse to our company or has a
material interest adverse to us.


.





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





On April
25, 2007, the Company’s stockholders of record as of the same date (the “Record
Date”), via the affirmative vote of the Company’s stockholders holding the
majority of the Company’s issued and outstanding shares as of the Record Date
approved the following proposals:





1.   
To amend the Company's Articles of Incorporation to increase the authorized
number of Common Stock from 100,000,000 shares to 500,000,000 shares;
and





2.    
To amend the Company's Articles of Incorporation to create a class of Preferred
Stock, authorizing the issuance of 10,000,000 shares, $0.001 par value per
share.




The
Company filed a Certificate of Amendment with the Secretary of State of the
State of Nevada on April 26, 2007, effective as of equal date, to amend the
Company's Articles of Incorporation in accordance with points one and two
above.





25







PART
II





ITEM
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.





Market
Information





Prior to
June 2007, our Common Stock did not quote on any public market. Currently, our
Common Stock is quoted on the OTCBB under the symbol of “FXFL.OB”.





The
following table shows the reported high and low closing bid quotations per share
for our common stock based on information provided by the OTC Bulletin Board.
Particularly since our common stock is traded infrequently, such
over-the-counter market quotations reflect inter-dealer prices, without markup,
markdown or commissions and may not necessarily represent actual transactions or
a liquid trading market.






Fiscal
      2007High
              
              
              LowSecond
      quarter
              
              $
              2.25
              
              
              $
              2.00Third
      quarter
              
              $
              2.55
              
              
              $
              1.90Fourth
      quarter
              
              $
              1.90
              
              
              $
              0.51Fiscal
      2008High
              
              
              LowFirst
      quarter – to March 24, 2008
              
              $
              1.15
              
              
              $
              0.70





On May
21, 2007, the Board of Directors declared a stock split, distributable May 22,
2007, in the form of a dividend of five additional shares of the Company's
Common Stock for each share owned by stockholders of record at the close of
business on May 21, 2007. Accordingly, all share and per share data has been
restated to reflect the split.





Holders





As of
December 31, 2007 there were 192 stockholders of record of our Common
Stock.





Dividends





We have
never declared any cash dividends and do not anticipate paying such dividends in
the near future. We anticipate future earnings, if any, to be retained for use
in our business. Any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon our results of
operations, financial conditions, contractual restrictions, and other factors
deemed relevant by the Board of Directors. We are under no contractual
restrictions in declaring or paying dividends to our common or preferred
stockholders.





Sales
of Unregistered Securities





Information
regarding our sales of our unregistered securities for the period from inception
(March 10, 2006) to fiscal year ended December 31, 2007, has been previously
furnished in our Registration Statement on Form SB-2 and our Current Reports on
Form 8-K.





All of
the above offerings and sales were deemed to be exempt under either rule 506 of
Regulation D and/or Section 4(2) of the Securities Act or pursuant to Regulation
S promulgated under the Securities Act. For offerings and sales deemed to be
exempt from registration under either rule 506 of Regulation D and/or Section
4(2) of the Securities Act, no advertising or general solicitation was employed
in offering the securities. The offerings and sales were made to a limited
number of persons, all of whom were accredited investors, business associates of
our company or executive officers of our company, and transfer was restricted by
us in accordance with the requirements of the Securities Act. In addition to
representations by the above-referenced persons, we have made independent
determinations that all of the above-referenced persons were accredited or
sophisticated investors, and that they were capable of analyzing the merits and
risks of their investment, and that they understood the speculative nature of
their investment. Furthermore, all of the above-referenced persons were provided
with access to our Securities and Exchange Commission filings.






26






For
offerings and sales deemed to be exempt from registration pursuant to Regulation
S promulgated under the Securities Act, the offers and sales to the purchasers
were made in offshore transactions. None of the purchasers were a U.S. person as
defined in Rule 902(k) of Regulation S, and no sales efforts were conducted in
the U.S., in accordance with Rule 903(c). Such purchasers acknowledged that the
securities purchased must come to rest outside the U.S., and the certificates
contain a legend restricting the sale of such securities until the Regulation S
holding period is satisfied.





Purchases
of Equity Securities by the Issuer and Affiliated Purchasers





None





Equity
Compensation Plan Information





Apart
from the 65,000 shares of Common Stock to be issued to Mr. Paul Gothard in May
2008 on the successful filing of the 1st quarter
2008 Form 10Q, as of December 31, 2007, the Company has not adopted any equity
compensation plans pursuant to which we may grant equity awards to eligible
persons.




For the
information required by Item 201 of Regulation S-B please see Item 11 “Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters” of this Annual Report.






27





ITEM
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS





Flex
Fuels Energy, Inc. (“Flex Fuels” "we" ,“us” , "our") (formerly Malibu Minerals,
Inc.) has made forward-looking statements (within the meaning of the Private
Securities Litigation Reform Act of 1995) in this Annual Report on Form 10-KSB
(the “Annual Report”) that are not historical facts are "forward-looking
statements" which can be identified by the use of terminology such as
"estimates," "projects," "plans," "believes," "expects," "anticipates,"
"intends," or the negative or other variations, or by discussions of strategy
that involve risks and uncertainties. We urge you to be cautious of the
forward-looking statements, that such statements, which are contained in this
Annual Report, reflect our current beliefs with respect to future events and
involve known and unknown risks, uncertainties and other factors affecting our
operations, market growth, mineral claims, mineral exploration activities and
licenses. No assurances can be given regarding the achievement of future
results, as actual results may differ materially as a result of the risks we
face, and actual events may differ from the assumptions underlying the
statements that have been made regarding anticipated events. Factors that may
cause actual results, our performance or achievements, or industry results, to
differ materially from those contemplated by such forward-looking statements
include without limitation:





1. Our
ability to successfully attract and retain management;


2. Our
ability to successfully engage in mineral exploration activities;


3. The
intensity of competition;


4.
Fluctuations in the price of oilseed feedstocks, products thereof (including
biodiesel), gold and other minerals;


5.
Regulation and changes in regulation by federal and provincial governments in
territories where we operate;


6. Our
ability to successfully integrate, if at all, our alternative fuel operations;
and


7.
General economic conditions that affect our industry or the global environment
in which we operate.


Overview





We are a
development/exploration stage company engaged in the businesses of manufacturing
and supplying biodiesel and the exploration and discovery of gold, minerals,
mineral deposits and reserves.




We have
not earned any revenues to date. We plan to earn revenues from sales of any
discovered gold, minerals, mineral deposits and reserves. We do not anticipate
earning revenues until such time as we commercially exploit the mineral deposits
or reserves located on the property, if any. We have not attained profitable
operations and are dependent upon obtaining financing to pursue our business
plan.





During
the fourth quarter of our 2006 fiscal year, for the purpose of diversifying our
business, acquiring capital, gaining greater access to the capital markets and
with the assistance of newly acquired capital promotion of our business of
exploration and discovery of gold, minerals, mineral deposits and reserves, we
acquired Flex Fuels Energy Limited as more fully described below.





We have
staked one mineral claim containing 8 cell claim units totaling 165.685
hectares. Throughout this Annual Report, we refer to these mining claims as the
“Malibu Gold Mine Property” or “Malibu Gold Property”. We purchased the Malibu
Gold Property in March of 2006. The Malibu Gold Property is located
approximately 110 km northwest of Vancouver, BC, and 75 km north of Sechelt, BC.
The property is situated on the south side of Queen’s Reach on upper Jervis
Inlet, due south of Malibu at the entrance to Princess Louisa Inlet. Access to
the property is available via plane from Vancouver or Sechelt, or by boat from
Egmont or Pender Harbor on the Sechelt Peninsula.





The
following discussion of our financial condition and plan of operations should be
read in conjunction with our financial statements and the notes to those
statements included in this Annual Report starting on Page F-1. In addition to
the historical consolidated financial information, the following discussion and
analysis contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
those set forth under "Risk Factors" and elsewhere in this Annual
Report.








28







Plan
of Operations




The
following discussion and analysis summarizes our plan of operation for the next
twelve months, and our results of operation for the year ended December 31,
2007.




Subject
to the availability of resources and personnel, our business plan for the next
twelve months is to proceed





·
            developing
      our business of manufacturing and distributing biodiesel products through
      our wholly owned subsidiary, FFE
Ltd.


·
            the
      exploration and discovery of gold, minerals, mineral deposits and reserves
      through our Malibu Gold operation.







Proposed Program of
Exploration




Our work
program includes geological mapping and rock sampling of surface showings and
underground workings, construction of a control grid, a soil and silt
geochemical sampling program, EM and magnetometer geophysical surveys, and rock
trenching. Based on a compilation of these results, a diamond drill program will
be designed to explore and define any potential resources. We intend to
implement the following three result-contingent phases for the Malibu Gold
Property, as well as to other potential properties containing mineral rights and
claims:





Phase
1





· Engage in
reconnaissance geological mapping, prospecting, rock and soil
sampling.


· Retain the services
of a geologist, consultant/project manager and a sampler/geological assistant in
order to implement phase I.


· Evaluate rock, soil
and silt samples obtained in order to render a geological map of the Malibu Gold
Property.


· Acquire various
sampling and field supplies to be used in connection with the geological mapping
and prospecting and to implement the evaluation and analysis of the obtained
samples.





Phase
2





· Generate detailed
surface and underground geological mapping and rock sampling, cutline grid
construction, soil and silt geochemical survey, EM and Mag surveys.


· Establish drill and
trenching targets based on the results of the surveys.


· Retain the services
of a four-man crew capable of executing required drilling programs.


· Produce a summary
report of the current geological and mineral state of the Malibu Gold
Property.








29







Phase
3





· Engage in diamond
drilling at a depth of 1000 meters and retain qualified geological experts to
implement the drilling program.





We
commenced Phase 1 of the exploration program during the second calendar quarter
of 2007 which will continue through 2008. Phase 2 and Phase 3 will commence
after the successful completion of the Phase 1 program. As such, we anticipate
that we will incur the following expenses over the three phases:




·
            $25,000
      in connection with the completion of Phase 1 of our recommended geological
      work program;·
            $85,000
      in connection with the completion of Phase 2 of our recommended geological
      work program;·
            $200,000
      in connection with the completion of Phase 3 of our recommended geological
      work program.







FFE
Ltd





FFE Ltd
plans to construct, own and manage seed processing facilities, refineries
producing biodiesel products (and associated power generation facilities if
commercially desirable) and to engage in the business of supplying and
distributing biodiesel products. FFE Ltd further plans to specialize in the
conversion of oil seed bearing crops to energy. FFE Ltd is comprised of the
following core business areas aimed at a vertically integrated strategy to
realize maximum value from the energy crop supply chain:





Flex Fuel Farming “FFF” - The
purchase or production of raw feedstock necessary for the production of
vegetable oils;


Flex Fuel Crush“FFC” - The
treatment of feedstock to produce the oils necessary to the production of
Biodiesel. This company will also seek to own a combined heat and power plant
for onsite energy requirements.


Flex Fuel Refineries“FFR” -
The refining and conversion of feedstock oils into biodiesel
products;


Flex Fuel Biomass“FFB” -
Electrical power generation from the oil cake derived from the oil seed crush
process (and potentially OSR straw);


Flex Fuel Trading “FFT” -The purchase of raw
materials and sale of biofuel products.







FFE Ltd’s
goal is to deliver a number of high yielding renewable energy projects that
logically fit into a vertically integrated structure. The overarching principal
is for FFE Ltd to manage (directly or indirectly) the biofuel supply chain from
“farm to fuel”. Currently, FFE Ltd is negotiating United Kingdom (“UK”) oil seed
rape supply which is expected to form a reliable contracted base line supply of
high quality oil for the refinery business. The seed will form the basis for the
crush plant and refinery with offshore swing oils to improve margins. FFE Ltd is
also evaluating oil seed production in Eastern Europe and swing oil as current
feedstock options. Additionally FFE Ltd has applied for planning permission on a
site in the West of England and is concluding the negotiation of a lease on this
site. Ultimately, the Company’s management believes that the UK energy market
provides significant incentives for renewable sources of energy and this would
allow for advantageous off-take contracts to be formed which underpin FFE Ltd’s
project economics.




As a
result of the Acquisition, our management believes that our goal to diversify
our business via (i) the alternative fuel business to be conducted by our wholly
owned subsidiary, FFE Ltd, and (ii) the exploration and discovery of minerals
and gold business to be conducted by our company, is attractive to capital
markets and allows for maximum valuation of our business as a
whole.








30







Based on
our current operating plan, we do not expect to generate revenue that is
sufficient to cover our expenses for at least the next twelve months. In order
to undertake the construction of our biodiesel facility we will need to obtain
additional financing. We may raise the capital necessary to fund our business
through a private placement of our common stock, debt financing or a combination
of both. Additional financing, whether through public or private equity or debt
financing, arrangements with  stockholders or other sources to fund
operations, may not be available, or if available, may be on terms unacceptable
to us. Our ability to maintain sufficient liquidity is dependent on our ability
to raise additional capital. If we issue additional equity securities to raise
funds, the ownership percentage of our existing stockholders would be reduced.
New investors may demand rights, preferences or privileges senior to those of
existing holders of our common stock. Debt incurred by us would be senior to
equity in the ability of debt holders to make claims on our assets. The terms of
any debt issued could impose restrictions on our operations. If adequate funds
are not available to satisfy either short or long-term capital requirements, our
operations and liquidity could be materially adversely affected and we could be
forced to cease operations.





RESULTS
OF OPERATIONS




The
accompanying financial statements show that we have incurred a net loss of
$25,293,000 for the period from March 10, 2006 (inception) to December 31, 2007
and have not yet generated any revenues that can offset operating expenses. We
anticipate that we will not earn revenues until such time as we have entered
into commercial production, if any, of our mineral properties. We are presently
in the exploration stage of our business and we can provide no assurance that we
will discover commercially exploitable levels of mineral resources on our
properties, or if such resources are discovered, that we will enter into
commercial production of our mineral properties.








Revenue




We did
not earn any revenues during the year ended December 31, 2007 or for the period
from inception (March 10, 2006) to December 31, 2006. We anticipate that we will
not earn revenues until such time as we have entered into commercial production,
if any, of our mineral properties or biofuels business.





Mining
exploration costs




For the
year ended December 31, 2007 the Company incurred expenses of $8,000 in mining
exploration costs (December 31, 2006 - $nil) as the Company initiated phase 1 of
its exploration program.




Selling,
general and administrative charges




For the
year ended December 31, 2007 the Company incurred selling, general and
administrative charges of $3,213,000 (December 31, 2006 - $68,000).





The main
components of the charges consisted of the following: $1,477,000 in directors’
salaries, $224,000 in staff salaries and other costs, $503,000 in professional
fees, $270,000 in consulting fees, $148,000 in rent and other property costs and
$149,000 in travel and entertaining costs.   The directors
salaries include the fair value $308,000 attributed to the compensatory element
of the non-retirement of shares held by Tom Barr, the fair value of $124,000
attributed to the 137,244 shares issued to Tom Barr on May 22, 2007 for services
rendered , the fair value of $178,000 attributed to the 200,000 shares acquired
by Tom Barr from Esther Briner (a stockholder) on May 25, 2007 at below market
rate and a charge of $35,000 for the fair value of 65,000 shares of Common Stock
(based on a value of $0.90 per share -  the market value of a share at
the date of grant) to be distributed to Paul Gothard on the successful listing
of four financial reports as per his employment agreement.





We
anticipate that our operating expenses will increase as we continue to undertake
our plan of operation, and our plan of diversification to the extent
feasible.






31




Impairment
of excess of purchase price over net assets acquired





For the
year ended December 31, 2007 the Company incurred an expense of $21,595,000
(December 31, 2006 - $1,303,000) representing the impairment of excess of
purchase price over net assets acquired.





Under
United States Generally Accepted Accounting Principles (“GAAP”) where the
acquired company is a “development stage” enterprise then any Excess of Purchase
Price over Net Assets Acquired is expensed at the time of
acquisition.





The
Financial Accounting Standards Board (“FASB”) have provided guidelines as to
identifying a “development stage” enterprise:





“an
enterprise shall be considered to be in the development stage if it is devoting
substantially all of its efforts to establishing a new business and either of
the following conditions exists:





a)
Planned principal operations have not commenced.





b)
Planned principal operations have commenced, but there has been no significant
revenue there from.





A
development stage enterprise will typically be devoting most of its efforts to
activities such as financial planning; raising capital; exploring for natural
resources; developing natural resources; research and development; establishing
sources of supply; acquiring property, plant, equipment, or other operating
assets, such as mineral rights; recruiting and training personnel; developing
markets; and starting up production.”





The
Company has determined that FFE Ltd is a development stage company and therefore
the Excess of Purchase Price over Net Assets Acquired has been
expensed.








Impairment
of license





For the
year ended December 31, 2007 the Company incurred an impairment charge of $nil
(December 31, 2006 - $10,000).





The
Company determined that its Malibu Gold Property license was to be fully
impaired in the nine months ended September 30, 2006, as per SFAS 144:
“Accounting for the Impairment of Long-Live Assets.” Impairment is the condition
that exists when the carrying amount of a long-lived asset (asset group) exceeds
its fair value. An impairment loss shall be recognized only if the carrying
amount of a long- lived asset (asset group) is not recoverable and exceeds its
fair value. The carrying amount of a long-lived asset (asset group) is not
recoverable if it exceeds the sum of the undisclosed cash flows expected to
result from the use and eventual disposition of the asset (asset group). Our
determination is based on the Company’s current period operating loss combined
with the Company’s history of operating losses and our projection that
demonstrates continuing losses associated with the Malibu Gold
Property.





In
accordance with FASB 144, 25, “An impairment loss recognized for a long-lived
asset (asset group) to be held and used shall be included in income from
continuing operations before income taxes in the income statement of a business
enterprise and in income from continuing operations in the statement of
activities of a not-for-profit organization. If a subtotal such as “income from
operations” is presented, it shall include the amount of that loss.” The Company
has recognized the impairment of a long-lived asset by declaring that amount as
a loss in income from operations in accordance with an interpretation of FASB
144.






32







Net
Loss




We
incurred a net loss in the amount of $23,912,000 for the year ended December 31,
2007 as opposed to $1,381,000 for the period from inception (March 10, 2006) to
December 31, 2006. We have not earned any revenues to date. We can provide no
assurance that we will earn any revenue or that any revenue earned will exceed
the expenses incurred.








LIQUIDITY
AND CAPITAL RESOURCES




At
December 31, 2007, cash was $16,156,000. We had other current assets of $156,000
and current liabilities of $305,000. We attribute our net loss to having no
revenues to offset our operating costs. At December 31, 2006 the Company had
$1,613,000 in cash and current liabilities of $74,000.




Net cash
used in operating activities was $2,169,000 during the year ended December 31,
2007 and $2,000 for the period from inception (March 10, 2006) to December 31,
2006.





During
the year to December 31, 2007 the Company used net cash in investing activities
of $787,000. The Company used $787,000 in purchasing property and equipment –
principally on planning permissions and the EWA with Lurgi. During the period
from inception (March 10, 2006) to December 31, 2006 the Company used net cash
in investing activities of $30,000 acquiring a mineral license from Jim Laird
(director and stockholder) and acquiring the 15% interest in FFE
Ltd.





During
the year to December 31, 2007 the Company received net cash provided by
financing activities of $17,333,000 as a result of the private placements
completed on May 29, 2007 and July 31, 2007. During the period from inception
(March 10, 2006) to December 31, 2006 the Company received net cash provided by
financing activities of $1,645,000 from private placements.




The
Company expects to incur costs on the Malibu Gold Property of $100,000 and,
additionally, $500,000 on general corporate, investor relations and regulatory
costs over the next 12 months to December 31, 2008.





The
Company’s wholly owned subsidiary, FFE Ltd, expects to incur continuing
operating costs of approximately $2.5m to $3.5m over the next 12 months to
December 31, 2008 as it ramps up its operations and increases the total
employees from 7 to approximately 15+. Additionally FFE Ltd expects to incur
expenditures of between $20m and $40m over the next 12 months to December 31,
2008 on a 200,000 metric tonne capacity biodiesel plant subject to FFE Ltd
signing Early Works (signed September 28, 2007 with Lurgi) and Engineering,
Procurement and Construction agreements for the proposed Cardiff site which has
recently been granted planning permission for the crush and solvent extraction
plants.





Based on
our current operating plan, we do not expect to generate revenue that is
sufficient to cover our expenses for at least the next twelve months. At
December 31, 2007 we had cash of approximately $16.2m so we may need to obtain
additional financing to operate our business for the next twelve months. We aim
to raise any further capital necessary to fund our business through either a
private placement of our common stock or debt or a combination of both.
Additional financing, whether through public or private equity or debt
financing, arrangements with stockholders or other sources to fund operations,
may not be available, or if available, may be on terms unacceptable to us. Our
ability to maintain sufficient liquidity is dependent on our ability to raise
additional capital. If we issue additional equity securities to raise funds, the
ownership percentage of our existing stockholders would be reduced. New
investors may demand rights, preferences or privileges senior to those of
existing holders of our common stock. Debt incurred by us would be senior to
equity in the ability of debt holders to make claims on our assets. The terms of
any debt issued could impose restrictions on our operations. If adequate funds
are not available to satisfy either short or long-term capital requirements, our
operations and liquidity could be materially adversely affected and we could be
forced to cease operations.








33




Recent
Accounting Pronouncements





In June
2006, the Financial Accounting Standards Board ("FASB") issued FIN 48 “Accounting for Uncertain Tax
Positions - an Interpretation of FASB Statement No. 109”, which
prescribes a recognition and measurement model for uncertain tax positions taken
or expected to be taken in the Company's tax returns. FIN 48 provides guidance
on recognition, classification, presentation, and disclosure of unrecognized tax
benefits. The Company has adopted FIN 48 and it has not had a material impact on
its financial position, operations or cash flows.





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(“SFAS No. 157”), which defines fair value, establishes a framework for
measuring fair value in accordance with generally accepted accounting principles
and expands disclosures about fair value measurements. SFAS No. 157 applies to
other accounting standards that require or permit fair value measurements.
Accordingly, it does not require any new fair value measurement. SFAS No. 157
will be effective for the Company on January 1, 2008. The Company is currently
evaluating the impact the adoption of SFAS No. 157 will have on its financial
position and results of operations.





In
February 2007, the FASB issued SFAS No.159, “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS No.159”), which permits
entities to choose to measure many financial instruments and certain other items
at fair value that are not currently required to be measured at fair value. SFAS
No.159 will be effective for the Company on January 1, 2008. The Company is
currently evaluating the impact the adoption of SFAS No.159 will have on its
financial position and results of operations.






34







In
December 2007, the FASB issued SFAS No. 141(R),"Business Combinations"
("SFAS No. 141(R)"), which establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in an
acquiree, including the recognition and measurement of goodwill acquired in a
business combination. SFAS No. 141R is effective as of the beginning of the
first fiscal year beginning on or after December 15, 2008.  Earlier
adoption is prohibited and the Company is currently evaluating the effect, if
any, that the adoption will have on its financial position, results of
operations or cash flows.




In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interest in
Consolidated Financial Statements, an amendment of ARB No. 51"
("SFAS No. 160"), which will change the accounting and reporting for
minority interests, which will be recharacterized as noncontrolling interests
and classified as a component of equity within the consolidated balance sheets.
 SFAS No. 160 is effective as of the beginning of the first fiscal year
beginning on or after December 15, 2008.  Earlier adoption is
prohibited and the Company is currently evaluating the effect, if any, that the
adoption will have on its financial position, results of operations or cash
flows.








ITEM
7. FINANCIAL STATEMENTS





Financial
statements as of and for the fiscal year ended December 31, 2007 been examined
to the extent indicated in their report by BDO Stoy Hayward LLP, independent
registered public accounting firm, and have been prepared in accordance with
GAAP and pursuant to Regulation S-B as promulgated by the SEC. The
aforementioned financial statements are included herein starting with page
F-1.





35





ITEM
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.





On June
29, 2007, Flex Fuels Energy, Inc. (the "Company") dismissed Moore &
Associates, Chartered (“Moore”) as its independent accountants. Effective as of
the same date, the Company's Board of Directors approved the decision to change
the independent accountants.





Except
for a “Going Concern” disclaimer issued by Moore in connection with the audit of
our financial statements for the fiscal year ended December 31, 2006, the report
of Moore on the financial statements for the last fiscal year contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principle.





In
connection with its audit for the most recent fiscal year and up to the date of
the Current Report filed on July 3, 2007, there have been no disagreements with
Moore on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of Moore would have caused them to make reference thereto in
their report on the financial statements for such years.





During
the two most recent fiscal years Moore did not advise the Company with respect
to items listed in Regulation S-B Item 304(a)(1)(iv)(B)). We have has requested
that Moore furnish us with a letter addressed to the SEC stating whether or not
it agrees with the above statements. A copy of such letter was filed as exhibit
#16.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 3,
2007.





Subsequent
to their dismissal significant errors were discovered leading to the amended
December 31, 2006 Annual Report. In light of the discovery of these errors, BDO
Stoy Hayward LLP (“BDO”) was engaged by the Company to also re-audit the
Company’s financial statements for the fiscal year ended December 31, 2006,
included in the Company’s Annual Report on Form 10-KSB/A filed by the Company
with the SEC on April 26, 2007.





The
Company engaged BDO as its new independent accountants as of June 29, 2007.
During the two most recent fiscal years and through the date of this Annual
Report, the Company has not consulted with BDO regarding either (i) the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
the Company's financial statements, and neither a written report was provided to
the Company nor oral advice was provided that BDO concluded was an important
factor considered by the Company in reaching a decision as to the accounting,
auditing or financial reporting issue; or (ii) any matter that was either the
subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of
Regulation S-B and the related instructions to Item 304 of Regulation S-B.






36








ITEM 8A(T). CONTROLS AND
PROCEDURES.




(a)
Evaluation of Disclosure Controls and Procedures





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. The Securities Exchange Act of 1934 defines
internal control over financial


reporting
in Rule 13a-15(f) and 15d-15(f) as a process designed by, or under the
supervision of, the company’s principal executive and principal financial
officers and effected by the company’s board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:


•
            Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of the assets of the
      company;





•
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts
              and
      expenditures of the company are being made only in accordance with
      authorizations of management and directors of the company;
    and





•
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition,
              use
      or disposition of the company’s assets that could have a material effect
      on the consolidated financial
statements.





In
connection with the preparation of this Annual Report, our management, with the
participation of our Chief Executive Officer and our Chief Financial Officer,
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures as of December 31, 2007. Based on this
evaluation, our principal executive officer and principal financial officer have
concluded that our disclosure controls and procedures are, as of December 31,
2007 reflected in this Form 10-KSB, effective to ensure that the information
required to be disclosed by us that we file or submit under the Exchange Act, is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission rules and forms.





Based
upon its assessment, our management concluded that, as of
December 31, 2007, our internal controls over financial reporting are
effective.





This
annual report does not include an attestation report of the company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management’s report
in this annual report.





In
April 2007, the Company determined, after consultation with its independent
registered public accounting firm, that a restatement of its financial
statements for the year ended December 31, 2006 filed as part of its Annual
Report on Form 10-KSB filed with the Securities and Exchange Commission on April
17, 2007, was necessary due to certain erroneous entries appearing in its
financial statements. Specifically, the Company filed an amended Annual Report
on Form 10-KSB/A for the year ended December 31, 2006 (“the Amended Report”)
that amended and restated the Report solely to:





(i) amend
and restate the Company’s financial statements filed as part of the Report to
correct:








37





(a) erroneous “Paid in Capital” entry
and “Retained earnings (deficit)” entry and resulting changes in “Total
stockholders’ equity” and “Total liabilities and stockholders’ equity” entries
as of December 31, 2006, set forth in the Balance Sheet located on page F-2 of
the Amended Report,





(b) erroneous “Deficiency Accumulated
During Development Stage” entry and “Total Equity” entry as of December 31,
2006, set forth in the Statement of Shareholders Equity on page F-5 of the
Amended Report,





(c) erroneous “Cash Flow from Financing
Activities” entry, “Cash at end of period” entry, and “Shares issued in Lieu of
Payment for Service” entry for the fiscal year ended December 31, 2006, set
forthin the Statement of Cash Flows
located on page F-6 of the Amended Report, and





(ii)
correctly disclose director compensation paid to a member of the Company’s board
of directors during the fiscal year ended December 31, 2006, set forth on page
28 of the Amended Report.





Thereafter,
on May 29, 2007, the Company completed the acquisition of Flex Fuels Energy
Limited. In connection with and following the completion of such transaction,
management of the Company changed and, thereafter, the Company engaged new
independent accountants. Following such changes, in July 2007, the Company’s
executive officers after having discussions with the Company’s board of
directors noticed that the while the Company had filed their Form 10-KSB/A in
April, the Company continued to state that the Company’s Controls and Procedures
were effective.  The Company’s executive officers concluded that the
Company’s previously issued financial statements covering the fiscal year ended
December 31, 2006, along with the Report of Independent Registered Certified
Public Accounting Firm and quarterly period ended March 31, 2007 which had been
filed by the Company with the Securities and Exchange Commission on Form
10-KSB/A and Form 10-QSB on April 26, 2007 and May 15, 2007, respectively,
should no longer be relied upon because of errors in such financial statements
as further addressed below. Subsequently, during July 2007 the Company reviewed
the internal controls as of December 31, 2006, and identified the following
material weaknesses in our internal control over financial
reporting:




·
            We
      did not maintain a proper in-house finance function and relied upon a
      third party to maintain the finance function and prepare the financial
      reports;


·
            We
      did not maintain a timely and accurate period-end financial statement
      closing process or effective procedures for reconciling and compiling our
      financial records in a timely fashion. With respect to these procedures
      management determined that the material weakness arose due to the lack of
      training, experience or knowledge of persons preparing the financial
      records;


·
            We
      did not effectively monitor the third-party accounting function and our
      oversight of financial controls;
and


·
            The
      Company’s knowledge of US GAAP was
limited





The
Company consequently prepared and filed in September 2007 a further amended Form
10-KSB for the fiscal year ended December 31, 2006, as well as an amended Form
10-QSB for the fiscal quarter ended March 31, 2007, which reports included
audited financial statements that had been audited by the Company’s new
independent accountants and restated unaudited financial statements that
corrected all of the prior errors contained in such financial statements and
filings. Specifically, (a) the amended Annual Report on Form 10-KSB/A was filed
by the Company solely to correct:





1.
            unrecorded
      liabilities incurred in the year ended December 31,
  2006;


2.
            certain
      legal costs associated with the investment in Flex Fuels Energy Limited
      and the private placement that were expensed incorrectly in the Statement
      of Operations for the fiscal year ended December 31,
  2006;


3.
            to
      amend the fair value attributed to the stock issued to Mr. Tom
      Barr;


4.
            to
      consolidate the balance sheet and results of Flex Fuels Energy Limited;
      and


5.
            to
      correctly disclose related party
transactions.






38







In
addition, the amended Quarterly Report on Form 10-QSB was filed by the Company
solely to correct:





1.
            unrecorded
      liabilities of $42,000 and other errors totaling $10,050 incurred in the
      quarter ended March 31, 2007;


2.
            to
      amend the balance sheets to reflect adjustments made in the Financial
      Statements for the period ended December 31, 2006 filed in the further
      amended Form 10-KSB;


3.
            to
      include the periods missing from the previous filing (Inception to March
      31, 2006 and Inception to March 31, 2007) in the Statements of Operations
      and Statements of Cash Flows;


4.
            to
      consolidate the balance sheet and results of Flex Fuels Energy Limited;
      and


5.
            to
      correctly disclose related party
disclosures.





We
believe that the issues surrounding the restatements of these reports, mainly
the maintenance of a proper in-house finance function, maintenance of internal
controls related to the financial closing, review, and analysis process,
oversight of financial controls, and the Company’s knowledge of US GAAP have
been addressed as of the date of filing the amended Forms 10-KSB/A and 10-QSB/A
(September 12, 2007). We further believe that the addition of new management
personnel, including new management which resulted from the Company’s
acquisition of Flex Fuels Energy Limited with its own finance function and the
appointment of Paul Gothard, an experienced qualified accountant, as Chief
Financial Officer, has addressed and remedied the material weaknesses described
above, strengthened our internal controls and ensure that they will be effective
in future periods. On March 3, 2008 Mr. Gothard subsequently resigned from the
Company but we are in the process of assessing replacements who we expect to be
of a similar caliber and experience. We note that the Company expended the sum
of $60,000 in connection with the re-audit of the Company’s historical financial
statements by its new independent accountants.





To remedy
such material weaknesses, controls installed in the quarter to September 30,
2007 include but are not limited to the following:





·
            Hiring
      staff experienced in both US GAAP and SEC reporting
      requirements


·
            Segregating
      preparation and review duties of quarterly and annual
    reports


·
            Installing
      a monthly financial closing and management reporting process including
      reconciliations of material and significant accounts (such as bank,
      payables and fixed assets)


·
            Formal
      purchasing and approval policies and associated
  limits


·
            Establishing
      budgeting and forecasting
procedures


·
            Ensuring
      staff are properly trained


·
            Appointing
      new independent auditors








39





Limitations
on the Effectiveness of Controls




The
Company's disclosure controls are designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles.




Management,
including the Company’s Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls or our internal controls over
financial reporting will prevent all error and fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, but no
absolute, assurance that the objectives of a control system are
met.  Further, any control system reflects limitations on resources,
and the benefits of a control system must be considered relative to its costs.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and may not be detected. Also, any
evaluation of the effectiveness of controls in future periods are subject to the
risk that those internal controls may become inadequate because of changes in
business conditions, or that the degree of compliance with the policies or
procedures may deteriorate.





(b)
Changes in Internal Controls




There
were changes in the Company's internal control over financial reporting during
the period covered by this Annual Report on Form 10-KSB, which were identified
in connection with management's evaluation required by paragraph (d) of rules
13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.







ITEM
8B(T).           OTHER
INFORMATION.





None.






40







PART
III





ITEM
9.                 
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.





The
following table sets forth information regarding our directors and executive
officers as of December 31, 2007:





Name
            
            Age
            
            Position
            
            Director
      SinceBrian
      Barrows(1)
            
            63
            
            Chief
      Executive Officer and Director
            
            October
      2007Paul
      Gothard (2)
            
            40
            
            Chief
      Financial Officer and Director
            
            May
      2007James
      Laird (3)
            
            52
            
            Vice
      President of Mineral Operations and Director
            
            March
      2006Thomas
      Barr (4)
            
            48
            
            Vice
      President of Alternative Fuel Operations and Director
            
            December
      2006





(1) Mr.
Barrows was appointed as our Chief Executive Officer and a director on October
17, 2007.


(2) Mr.
Gothard was appointed as our Chief Financial Officer on June 11, 2007 and
director on May 29, 2007, in connection with the Acquisition of FFE
Ltd.


(3) Mr.
Laird was appointed as our Chief Executive Officer, acting Chief Financial
Officer, President and director from the date of inception of our company, March
10, 2006. Subsequently, on June 11, 2007 Mr. Laird resigned as our Chief
Executive Officer and our acting Chief Financial Officer, and was appointed as
our Vice President of Mineral Exploration Operations.


(4) Mr.
Barr was appointed as our director on December 18, 2006, and as our Vice
President of Alternative Fuel Operations on April 12, 2007.




The term
of office of each director of the Company ends at the next annual meeting of the
Company’s stockholders or when such director’s successor is elected and
qualifies. No date for the annual meeting of stockholders is specified in the
Company’s bylaws or has been fixed by the Board of Directors.




The
following information sets forth the backgrounds and business experience of the
directors, executive officers and key employees:





Brian Barrows, 63. Brian
Barrows was appointed Chief Executive Officer and a member of our board of
directors effective as of October 17, 2007. Brian is currently the Chief
Executive Officer and director of FFE Ltd, the Company’s wholly owned
subsidiary. Brian joined FFE Ltd in July 2007. From July 1997 to June 2007 Mr.
Barrows served as Head of Energy Operations for the devolved administration in
Wales, initially within the Welsh Development Agency and ultimately for the
Welsh Assembly Government. This was a strategic role across the entire energy
spectrum, including upstream and downstream oil & gas, coal extraction,
large scale power generation, renewable energy and both electricity and gas
transport infrastructure. In this role Mr. Barrows prepared Ministerial briefs
and correspondence, attended Ministerial inter-governmental and industry visits
in the UK and overseas.  Mr. Barrows participated in Policy
development and had a facilitation role in over $15 billion of energy projects
and related strategic supply chains. This included two major LNG terminals and
associated gas infrastructure reinforcement, several CCGT and coal fired power
plants, both the UK’s first major onshore and offshore wind farms, a 350 MWe CFB
biomass generation plant and the incubation of advanced new renewable
technologies for marine generation, coal mining and pyrolysis gasification. From
1973 to 1997, Mr. Barrows worked in the international Offshore Oil & Gas
industry progressing through junior to senior project management positions in a
range of both capital and operational engineering projects including deployment
of a variety of high value marine and sub-sea assets on a global
basis.








41





Paul Gothard, 40. Paul
Gothard, a chartered accountant, was appointed as a member of our board of
directors effective as of May 29, 2007. Paul is currently the Chief Financial
Officer of FFE Ltd. Paul joined FFE Ltd in January 2007. Prior to joining FFE
Ltd, Paul was the Chief Financial Officer and director of MGT Capital
Investments, Inc (formerly Medicsight, Inc), an investment company that focuses
on the Healthcare Information Technology sector. Paul joined MGT in July 2001 as
Group Financial Controller and was appointed Chief Financial Officer and
director to the board in November 2002. Paul left MGT in March 2006 after
successfully listing it on the American Stock Exchange. Between April 2006 and
December 2006 Paul enjoyed a career break. Paul obtained a BA (Honours) degree
in 1989 in Accounting and Finance and subsequently became a member of the
Institute of Chartered Accountants in England and Wales in 1993.




James Laird, 52. Jim Laird has
been a prospector and mining exploration contractor for more than 30 years.
Mr. Laird completed the BC EMPR course “Advanced Mineral Exploration for
Prospectors, 1980”. Mr. Laird is familiar with the geology of the project area
and has more than 30 years experience consulting in British Columbia,
Canada.





Thomas Barr, 48. Thomas Barr
was appointed as a member of our board of directors on December 18, 2006. From
February 1 of 2006 to date, Mr. Barr has served as a consultant to Index Oil and
Gas Inc. providing investor and public relations advice. From January 1 of 2005
to January 31 of 2006, Mr. Barr acted as a consultant to small and medium sized
private enterprises regarding prospective funding, investor and public relations
strategy, collateral creation and public market quotation. From December of 2001
to December of 2004 Mr. Barr served as a consultant to EasyScreen PLC, a fully
listed London Stock Exchange Company, at which Mr. Barr’s main duties were to
draft and implement corporate statements and was an integral part of the team
involved in several private placement funding rounds prior to the company’s
acquisition. From January 1996 to November 2001 Mr. Barr was private analyst and
investor in publicly quoted stocks. From 1981 to 1996, Mr. Barr worked for 15
years in the North Sea as a professional saturation diver involved in oil and
gas field sub-sea construction. Mr. Barr obtained a BSc in Biology from Stirling
University, Scotland, in 1981.





Board
Committees:




At this
time, the board has no committees, including an audit, nominating or
compensation committee, but the Company intends to create such committees
following the annual meeting and election of directors. Furthermore, our Board
of Directors intends to form an Audit Committee based on the following
terms.




Members
of our audit committee will serve for a term or terms as determined by our Board
of Directors. The purpose of the Audit Committee of the Board of Directors of
the Company will be to provide assistance to the Board in fulfilling its
responsibility relating to oversight of corporate accounting, reporting
practices of the Company, the quality and integrity of the financial reports of
the Company, the Company's compliance with legal and regulatory requirements,
the qualifications and independence of the Company's independent auditors and
the performance of the Company's independent auditors and internal audit
function. The Committee shall maintain free and open communication between the
directors, the independent auditors, the internal auditor and the financial
management of the Company.





The Audit
Committee shall be composed of at least three directors who are independent of
the management of the Company and are free of any relationship that, in the
opinion of the Board of Directors, would interfere with their exercise of
independent judgment as Committee members. All members of the Audit Committee
must have a working familiarity with basic finance and accounting practices and
shall meet the independence, experience and expertise requirements of the New
York Stock Exchange and other applicable laws and regulations (including SEC
Rule 10A-3). At least one member of the Committee must have accounting or
related financial management expertise as defined by the Securities and Exchange
Commission (the "SEC") and, in the judgment of the Board of Directors, be
capable of serving the functions expected of an audit committee financial
expert.






42





Family
Relationships





None.




Code
of Ethics





As of the
date of this Annual Report, we have adopted a Code of Ethics (the “Code of
Ethics”) applicable to our principal executive, financial and accounting officer
or persons performing similar functions.




Compliance
with Section 16 of the Exchange Act.





Section
16(a) of the Exchange Act requires our directors, officers and persons who own
more than 10% of a registered class of our equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Directors, officers and greater than 10% stockholders are required by SEC
regulations to furnish us with copies of all Section 16(a) forms they file.
Based solely upon our review of the copies of such forms that we received during
the fiscal year ended December 31, 2007, apart from the 10% stockholder detailed
below, we believe that each person who at any time during the fiscal year was a
director, officer or beneficial owner of more than 10% of our Common Stock
complied with all Section 16(a) filing requirements during such fiscal
year.




Gillian Penton – the holder of
7,865,341 shares of Common Stock.






43







ITEM
10. EXECUTIVE COMPENSATION





The
following table provides certain summary information concerning compensation
awarded to, earned by or paid to our Chief Executive Officer and other named
executive officers and directors of our company whose total annual salary and
bonus exceeded $100,000 (collectively, the “named officers”) for the year ended
December 31, 2007.





Summary
Compensation Table




Name
      &Principal Position
              Year
              
              Salary
                ($’000)
              
              
              Bonus
                ($’000)
              
              
              Stock
      Awards
                ($’000)
              
              
              Opetion
      Awards
                ($’000)
              
              
              Non
      -Equity Incentive Plan Compensation
                ($’000)
              
              
              Change
      in Pension Value and Non-Quualified Deferred Compensation
      Earnings
                ($’000)
              
              
              All
      Other Compensation
                ($’000)
              
              
              Total
                ($’000)Bria..
      Barrows
                Chief
      Executive Officer andDirector
      (2)
              2007
              
              
              75
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              75Gordo..
      EwartChief
      Executive Officer andDirector
      (3)
              2007
              
              
              193
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              193Paul
      GothardChief
      Financial Officer andDirector
      (4)
              2007
              
              
              149
              
              
              
              -
              
              
              
              35
              (7)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              184Jim
      LairdDirector
      (5)
              2007
              
              
              34
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              342006
              
              
              4
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4Thomas
      BarrDirector
      (6)
              2007
              
              
              101
              
              
              
              -
              
              
              
              610
              (8)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              7112006
              
              
              -
              
              
              
              -
              
              
              
              48
              (9)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              48





(1)
With the exception of reimbursement of expenses incurred by our named executive
officers during the scope of their employment and stated stock award amounts,
none of the named executive received any other compensation, perquisites, and
personal benefits in excess of $10,000.


(2) Mr.
Barrows was appointed as our Chief Executive Officer and a director on October
17, 2007.


(3) Mr.
Ewart was appointed as our Chief Executive Officer on June 11, 2007 and director
on May 29, 2007. Subsequently, on October 17, 2007 Mr. Ewart resigned as our
Chief Executive Officer and director.


(4) Mr.
Gothard was appointed as our Chief Financial Officer on June 11, 2007 and
director on May 29, 2007.


(5) Mr.
Laird was appointed as our Chief Executive Officer, acting Chief Financial
Officer, President and director from the date of inception of our company, March
10, 2006. Subsequently, on June 11, 2007 Mr. Laird resigned as our Chief
Executive Officer and our acting Chief Financial Officer.


(6) Mr.
Barr was appointed as our director on December 18, 2006.


(7) Mr.
Gothard is due to receive 65,000 shares of our Common Stock on completion of the
fourth financial filing (Form 10K or 10Q) following his appointment as Chief
Financial Officer. Amount represents stock-based compensation expense for fiscal
year 2006 for awards of stock granted in fiscal year ended December 31, 2007,
under SFAS 123R.


(8)Mr.
Barr’s stock award for fiscal 2007 is comprised of the following:


On May 11, 2007 Mr. Barr was not
required to retire shares of Common Stock in line with other shareholders – fair
value of this compensatory element was $308,000.


Effective as of May 22, 2007, Mr. Barr
received 137,344 shares of our Common Stock in consideration for his services as
a member of our board of directors (fair value $124,000).


On May 25, 2007, Mr. Barr acquired
200,000 shares of Common Stock from a shareholder in a private transaction at
below market value – fair value of this compensatory element was
$178,000.


All
amounts represent stock-based compensation expense for fiscal year 2006 for
awards of stock granted in fiscal year ended December 31, 2007, under
SFAS 123R.






44








(9)
Effective as of December 18, 2006, Mr. Barr received 412,038 shares of our
Common Stock in consideration of his appointment as a member of our board of
directors on the same date. Amount represents stock-based compensation expense
for fiscal year 2006 for awards of stock granted in fiscal year ended December
31, 2006, under SFAS 123R.





In
addition, we do not have either (i) a plan that provides for the payment of
retirement benefits, or benefits that will be paid primarily following
retirement, including but not limited to tax-qualified defined benefit plans,
supplemental executive retirement plans, tax-qualified defined contribution
plans and nonqualified defined contribution plans, nor (ii) any contract, agreement, plan or arrangement, whether
written or unwritten, that provides for payment(s) to any of our named executive
officers at, following, or in connection with the resignation, retirement or
other termination of any of our named executive officers, or in connection with
the change in control of our company or a change in any of our named executive
officers’ responsibilities following a change in control, with respect to each
of our named executive officers.







OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END




The
following table sets forth information with respect concerning unexercised
options; stock that has not vested; and equity incentive plan awards for each of
our named executive officers outstanding as of the end of our fiscal year ended
December 31, 2007 and grants of options to purchase our Common Stock under our
equity compensation plans, if any, to the named executive officers during the
fiscal year ended December 31, 2007. As of December 31, 2007, we have not
adopted any equity compensation plan pursuant to which we may grant equity
awards to eligible persons.





Option Awards
            
            Stock AwardsName
            
            Number
              of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Exercisable
            
            Number
              of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Unexercisable
            
            Equity
              Incentive
              Plan
              Awards:
              Number
              of
              Securities
              Underlying
              Unexercised
              Unearned
              Options
              (#)
            
            Option
              Exercise
              Price
              ($)
            
            Option
              Expiration
              Date
            
            Number
              of Shares
              or Units
              of Stock
              That
              Have
              Not
              Vested
              (#)
            
            Market
              Value
              of
              Shares
              or
              Units
              of
              Stock
              That
              Have
              Not
              Vested
              ($)
            
            Equity
              Incentive
              Plan
              Awards:
              Number
              of
              Unearned
              Shares,
              Units or
              Other
              Rights
              That
              Have
              Not
              Vested
              (#)
            
            Equity
              Incentive
              Plan Awards:
              Market or
              Payout
              Value
              of
              Unearned
              Shares,
              Units or
              Other
              Rights
              That Have
              Not
              Vested
              ($)Brian
      Barrows
            
            ---
            
            ---
            
            —
            
            ---
            
            —
            
            —
            
            —
            
            —
            
            —Gordon
      Ewart
            
            ---
            
            ---
            
            —
            
            ---
            
            —
            
            —
            
            —
            
            —
            
            —Paul
      Gothard(1)
            
            ---
            
            ---
            
            —
            
            ---
            
            —
            
            —
            
            —
            
            65,000
            
            75,000





(1)
            Mr.
      Gothard is due to receive 65,000 shares of our Common Stock on completion
      of the fourth financial filing (Form 10K or 10Q) following his appointment
      as Chief Financial Officer. The common stock is expected to be issued in
      May 2008. The amount of $35,000 has been accrued as stock-based
      compensation expense for fiscal year 2007 for awards of stock granted in
      the year ended December 31, 2007, under
  SFAS 123R.






45




Employment
Agreements





Brian
Barrows





The Company is in the process of
finalizing a contract with Mr. Brain Barrows. Currently, Mr. Barrows is
currently being paid approximately $12,500 per month for his
services.





Paul
Gothard





On May 29, 2007, as a result of a
successful Acquisition of FFE Ltd by Flex Fuels, and effective as of March 28,
2007, FFE Ltd entered into an Employment Agreement with Mr. Paul Gothard to
employ Mr. Gothard as its Chief Financial Officer. In the event Mr. Gothard
agrees to serve in any capacity with the Company, he will be compensated solely
by FFE Ltd for the provision of such services pursuant to the terms of his
employment agreement with FFE Ltd, unless agreed to otherwise. The following are
the material terms of Mr. Gothard’s employment agreement:




Mr.
Gothard is entitled receive an annual salary of $180,000 (£90,000) per year. Mr.
Gothard is also entitled to receive 65,000 shares of Flex Fuels’s Common
Stock subject to the approval of the board of directors of FFE Ltd, and shall be
further subject to an 18 month lock up provision. Mr. Gothard’s salary shall be
subject to a yearly review and shall be also reviewed in the event of a change
of control and he shall be further eligible for an annual bonus, each as
approved by FFE Ltd’ Board of Directors as more fully set forth in the
agreement. Mr. Gothard shall also be entitled to (i) the reimbursement of his
expenses incurred in the performance of his duties as an employee of FFE Ltd,
and (ii) standard holiday and sickness and pension benefits as more fully set
forth in the employment agreement. Mr. Gothard’s employment agreement does not
provide for any pension benefits. Additionally, FFE Ltd agreed to provide to Mr.
Gothard Directors’ and Officers’ Liability Insurance.





The
employment agreement provides for continuous employment without a set date of
termination, unless terminated by either party upon 3 months written notice. FFE
Ltd may also terminate Mr. Gothard’s employment when Mr. Gothard shall reach
such age as FFE Ltd’ Board of Directors determines as the appropriate retirement
age for the senior employees of company. FFE Ltd shall also be entitled to
terminate Mr. Gothard’s employment (i) in the event he is prevented by reason of
ill health or accident from his duties under his employment agreement for a
period of or periods aggregating 180 days in the preceding 12 months, (ii) if
any of the evens set forth in Section 17.1 of the employment agreement occur, or
(iii) at FFE Ltd’ sole and absolute discretion effective immediately on the date
of termination if FFE Ltd provides to Mr. Gothard the amount of his base salary
that he would be entitled for under the applicable period of
notice.





James
Laird





Effective
December 1, 2006 we executed an employment agreement dated April 12, 2007 with
Mr. James Laird (“Laird Employment Agreement”), our Chief Executive Officer,
President, acting Chief Financial Officer, Secretary, Treasurer and a member of
our board of directors, for the services of Mr. Laird to us in the stated
capacities for a one year term ending November 30, 2007 (the “Laird Employment
Term”). The Laird Employment Agreement shall be subject to renewal at our sole
discretion for successive one (1) year periods if we deliver to Mr. Laird a
written notice of our intent to renew the Employment Term by giving notice to
Mr. Laird per the terms of the Laird Employment Agreement. The Laird Employment
Agreement provides for compensation to Mr. Laird solely in the form of a Base
Salary at a monthly rate of $4,000 for the first four months of the Laird
Employment Term, and at a rate of $2,500 thereafter for the remaining duration
of the Laird Employment Term (collectively, the “Base Salary”). Subject to
renewal of the Laird Employment Term, we and Mr. Laird shall mutually agree to
in writing of the amount of the Base Salary that we shall pay to Mr.
Laird.






46






Pursuant
to the terms of the Laird Employment Agreement, Mr. Laird shall be provided by
us with reimbursement of expenses related to his employment by us on a basis no
less favorable than that which may be authorized from time to time by the Board,
in its sole discretion, for senior level Employees as a group. During the Laird
Employment Term Mr. Laird shall be entitled to standard vacation and holiday
benefits, as more fully set forth in the Laird Employment Agreement. Except as
expressly provided in Sections 1.4 through 1.6, Employee shall not be entitled
to any other compensation or benefits.





In
addition, Mr. Laird and our company agreed to certain confidentiality,
non-competition, non-solicitation provisions, as more fully set forth in the
Laird Employment Agreement.





The Laird
Employment Agreement may be terminated in accordance with the following
provisions: (1) by Company with Cause (as provided in the Laird Employment
Agreement), (2) by Company without cause upon not less than 60 days advance
written notice to Mr. Laird; (3) by Mr. Laird’s death or disability, provided
that such disability expected to result in death or to be of a continuous
duration of no less than six (6) months, and the Employee is unable to perform
his usual and essential duties for the Company; (4) for any reason by Mr. Laird
voluntarily terminating the Laird Employment Agreement upon sixty days prior
written notice to the Company.





In the
event we terminate Mr. Laird’s employment, all payments under the Laird
Employment Agreement shall cease, except for the Base Salary to the extent
already accrued. In the event of termination by reason of Mr. Laird’s death
and/or permanent disability, Mr. Laird or his executors, legal representatives
or administrators, as applicable, shall be entitled to an amount equal to Mr.
Laird’s Base Salary accrued through the date of termination. Upon termination of
employment, if Mr. Laird executes a written release, substantially in the form
attached to the Laird Employment Agreement, of any and all claims against us and
all related parties with respect to all matters arising out of Mr. Laird’s
employment by us, unless the Employment Term expires or termination is for
Cause, Mr. Laird shall receive, in full settlement of any claims Mr. Laird may
have related to his employment by us, Base Salary for one month from the date of
termination, provided Mr. Laird is otherwise in full compliance with the terms
of the Laird Employment Agreement.





Thomas
Barr





Effective
January 1, 2007, we executed an employment agreement with Mr. Thomas Barr (“Barr
Employment Agreement”), our Vice President of Alternative Fuel Operations and a
member of our board of directors, for the services of Mr. Barr to us in the
stated capacities for a three month term ending March 31, 2007 (the “Barr
Employment Term”). The Barr Employment Agreement shall be subject to renewal at
our sole discretion on a month to month basis if we deliver to Mr. Barr a
written notice of our intent to renew the Barr Employment Term by giving notice
to Mr. Barr per the terms of the Barr Employment Agreement. The Barr Employment
Agreement provides for compensation to Mr. Barr solely in the form of a Base
Salary at a monthly rate of $10,000 throughout the Barr Employment Term (the
“Base Salary”). Subject to renewal of the Barr Employment Term, we and Mr. Barr
shall mutually agree to in writing of the amount of the Base Salary that we
shall pay to Mr. Barr. Effective as of April 1, 2007, the Barr Employment
Agreement was effectively extended for one more month upon the same terms and
conditions.





Pursuant
to the terms of the Barr Employment Agreement, Mr. Barr shall be provided by us
with reimbursement of expenses related to his employment by us on a basis no
less favorable than that which may be authorized from time to time by the Board,
in its sole discretion, for senior level Employees as a group. During the Barr
Employment Term Mr. Barr shall be entitled to standard vacation and holiday
benefits, as more fully set forth in the Barr Employment Agreement. Except as
expressly provided in Sections 1.4 through 1.6, Employee shall not be entitled
to any other compensation or benefits.










47





In
addition, Mr. Barr and we agreed to certain confidentiality, non-competition,
non-solicitation provisions, as more fully set forth in the Barr Employment
Agreement.





The Barr
Employment Agreement may terminated in accordance with the following provisions:
(1) by us with Cause (as provided in the Barr Employment Agreement), (2) by us
without cause upon not less than 60 days advance written notice to Mr. Barr; (3)
as a result of Mr. Barr’s death or disability, provided that such disability
expected to result in death or to be of a continuous duration of no less than
six (6) months, and the Employee is unable to perform his usual and essential
duties for the Company; (4) for any reason by Mr. Barr voluntarily terminating
the Barr Employment Agreement upon sixty days prior written notice to the
Company.





In the
event we terminate Mr. Barr’s employment, all payments under the Barr Employment
Agreement shall cease, except for the Base Salary to the extent already accrued.
In the event of termination by reason of Mr. Barr’s death and/or permanent
disability, Mr. Barr or his executors, legal representatives or administrators,
as applicable, shall be entitled to an amount equal to Mr. Barr’s Base Salary
accrued through the date of termination. Upon termination of employment, if Mr.
Barr executes a written release, substantially in the form attached to the Barr
Employment Agreement, of any and all claims against us and all related parties
with respect to all matters arising out of Mr. Barr’s employment by us, unless
the Employment Term expires or termination is for Cause, Mr. Barr shall receive,
in full settlement of any claims Mr. Barr may have related to his employment by
us, Base Salary for one month from the date of termination, provided Mr. Barr is
otherwise in full compliance with the terms of the Barr Employment
Agreement.








Director
Compensation




See
Executive Compensation table above for the total amount of compensation received
by members of our board of directors.





Except as
set forth above, directors that are non-officers of our company do not receive a
cash retainer annually nor do they receive any remuneration for attendance at a
board meeting, other than reimbursement for travel expenses.






48







ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT




The
following table sets forth certain information regarding beneficial ownership of
our Common Stock as of December 31, 2007 (i) by each person who is known by us
to beneficially own more than 5% of our Common Stock; (ii) by each of our
officers and directors; and (iii) by all of our officers and directors as a
group. Each person's address is c/o Flex Fuels Energy, Inc., 30 St Mary Axe,
London, EC3A 8EP, United Kingdom. The percentages in the table have been
calculated on the basis of treating as outstanding for a particular person, all
shares of our capital stock outstanding on December 31, 2007, and all shares of
our Common Stock issuable to that person in the event of the exercise of any
outstanding options and other derivative securities owned by that person which
are exercisable within 60 days of December 31, 2007. Except as otherwise
indicated, the persons listed below have sole voting and investment power with
respect to all shares of our Common Stock owned by them.











Beneficial
      owner
            
            Position
            Number of
      shares    Beneficially Owned
            Percentage
      of
              Common Stock OwnedBrian
      Barrows
            
            Chief
      Executive Officer and Director
            --
            --Paul
      Averill Gothard
            
            Chief
      Financial Officer and Director
            --
            --James
      Laird
            
            Vice
      President of Mineral Operations and Director
            100,002
      (2)
            *Thomas
      Barr
            
            Vice
      President of Alternative Fuel Operations and Director
            749,382
      (2)
            1.1%Iestyn
      Morgan
            
            --
            6,606,887
      (2)
            9.5%Gillian
      Penton
            
            --
            7,865,341
      (2)
            11.3%JTC
      Trustees Limited as Trustee of the Logo Investment Trust
            
            --
            7,865,341
      (2) (3)
            11.3%All
      Officers and
              Directors
      as a Group
              (4
      persons)
            
            
            849,384
            1.2%




*
Beneficial ownership set forth above is less than 1%.


(1)
Percentage ownership is based upon 69,315,441 shares of Common Stock outstanding
as of December 31, 2007 and is calculated separately for each person on the
basis of the actual number of outstanding shares beneficially owned as of
December 31, 2007.


(2)
Beneficial ownership consists entirely of our Common Stock.


(3) Mr.
Gordon Ewart’s (the Former Chief Executive Officer) beneficial ownership of the
shares of the Company’s Common Stock solely consists of him being a beneficiary
of the shares held by JTC Trustees Limited as Trustee of the Logo Investment
Trust (“JTC”). Mr. Ewart does not have the disposition or voting power over
shares held by JTC. The combined ownership by JTC and Mr. Ewart is 7,865,341
shares. JTC’s address is 9 Castle Street, St Helier, Jersey JE2
3RT.





As of
December 31, 2007, we have not adopted any equity compensation plan pursuant to
which we may grant equity awards to eligible persons.






49







The
following table summarizes our equity compensation plan information as of
December 31, 2007.







Equity
Compensation Table





Plan Category(1)
            
            Number of Shares to
              Be Issued upon
              Exercise of
              Outstanding
              Options, Warrants
              and Rights)
            
            Weighted-Average
              Exercise Price of
              Outstanding Options,
              Warrants and Rights
              (b)
            
            Number of Shares
              Remaining Available
              for Future Issuance
              Under Equity
              Compensation Plans
              (Excluding Shares
              Reflected in
              Column (a))
              (c)EquiEquity
      Compensation plans approved by stockholders
            
            N/A
            
            N/A
            
            N/AEquiEquity
      Compensation plans not approved by stockholders
            
            N/A
            
            N/A
            
            N/ATotal
            
            N/A
            
            N/A
            
            N/A











ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDANCE




Transactions
with Related Persons, Promoters and Certain Control Persons





On March
27, 2006, the Company acquired a mineral license for the Malibu Gold Property
from Mr. James Laird, a director and stockholder, for $10,000.





Since
non-Canadian individuals or companies cannot directly hold mineral licenses in
British Columbia, James Laird (a director) initially held the license on behalf
of the Company.  In June of 2006 the license was transferred by Mr.
Laird to Esther Briner (a stockholder), a licensed Canadian prospecting agent
and stockholder,  In July of 2007 Ms. Briner subsequently transferred
the license to Coalharbour Consulting, Inc (“Coalharbour”), a licensed Canadian
prospecting agent owned and controlled by Esther Briner.  Subsequently
in December 2007 the license was transferred back to James Laird who currently
holds it on behalf of the Company.




Review,
Approval or Ratification of Transactions with Related Persons




In the
event we enter into any transaction with persons related to us, our board of
directors will evaluate the terms of all of such transactions to ensure that
such are commercially reasonable and no less favorable to us than we could have
obtained from an unaffiliated third party on an arm’s length basis. Our policy
requires that all related parties recuse themselves from negotiating and voting
on behalf of our company in connection with related party
transactions.




Parents




Not
applicable




50








Promoter
and Control Persons




Not
applicable.






CORPORATE
GOVERNANCE




Board Determination of
      Independence




Our board
of directors had previously determined that as of December 31, 2006, Mr. Thomas
Barr is “independent” as that term is defined by the National Association of
Securities Dealers Automated Quotations (“NASDAQ”); however, on April 12, 2007,
we entered into an employment agreement with Mr. Barr, and thus our board of
directors no longer believes that Mr. Barr is “independent” as that term is
defined by the NASDAQ. Under the NASDAQ definition, an independent director
is a person who (1) is not currently (or whose immediate family members are not
currently), and has not been over the past three years (or whose immediate
family members have not been over the past three years), employed by the
company; (2) has not (or whose immediate family members have not) been paid more
than $60,000 during the current or past three fiscal years;  (3) has not
(or whose immediately family has not) been a partner in or controlling
stockholder or executive officer of an organization which the company made, or
from which the company received, payments in excess of the greater of $200,000
or 5% of that organizations consolidated gross revenues, in any of the most
recent three fiscal years; (4) has not (or whose immediate family members have
not), over the past three years been employed as an executive officer of a
company in which an executive officer of our company has served on that
company’s compensation committee; or (5) is not currently (or whose immediate
family members are not currently), and has not been over the past three years
(or whose immediate family members have not been over the past three years) a
partner of our company’s outside auditor. A director who is, or at any time
during the past three years, was employed by the Company or by any parent or
subsidiary of the Company, shall not be considered independent.





We are looking to begin the process of
recruiting suitably experienced individuals to act as independent directors,
including a financially experienced person, to the Board during
2008.








ITEM
13. EXHIBITS





The
      following consolidated financial statements for Flex Fuels Energy, Inc.,
      are filed as a part of this Annual Report:For
      the period from inception (March 10, 2006) to December 31,
      2007
            PageReport
      of Independent Registered Public Accounting Firm
            F-2Consolidated
      Balance Sheets as of December 31, 2007 and December 31,
    2006
            F-3Consolidated
      Statement of Operations for the year ended December 31, 2007, for the
      period from inception (March 10, 2006) to December 31, 2006 and for the
      period from inception (March 10, 2006) to December 31,
2007
            F-4Consolidated
      Statement of Stockholders’ Equity for the year ended December 31, 2007 and
      for the period from inception (March 10, 2006) to December 31,
      2006
            F-5Consolidated
      Statement of Cash Flows for the year ended December 31, 2007, for the
      period from inception (March 10, 2006) to December 31, 2006 and for the
      period from inception (March 10, 2006) to December 31,
2007
            F-6Notes
      to the Consolidated Financial Statements
            F-7
      to F-20





The
following exhibits are included herein, except for the exhibits marked with a
footnote, which are incorporated herein by reference and can be found in the
appropriate document referenced.





Exhibit
              Number
            
            Description3(i)
            
            Articles
      of Incorporation of the Company dated March 10, 2006.
  (1)3(ii)
            
            By-laws
      of the Company. (1)10.1
            
            Asset
      Purchase Agreement dated March 27, 2006, entered into by and between James
      Laird and the Company (1)10.2
            
            Acquisition
      Agreement dated December 29, 2006 entered into by and among the Company,
      Flex Fuels Energy Limited, the stockholders of Flex Fuels Energy Limited
      and the individuals signatory thereto. (2)10.3
            
            Form
      of a Voting Trust Agreement to be entered into in connection with the
      Acquisition Agreement. (2)10.4
            
            Form
      of Lock-up Agreement to be entered into in connection with the Acquisition
      Agreement. (2)10.5
            
            Subscription
      Agreement dated December 29, 2006 entered into by and among the Company
      and the subscribers’ signatories thereto. (2)10.6+
            
            Employment
      Agreement dated April 12, 2007 entered into by and between the Company and
      James Laird. (3)10.7+
            
            Employment
      Agreement dated April 12, 2007 entered into by and between the Company and
      Thomas Barr. (3)21.1
            
            List
      of subsidiaries of the Company. (3)





31.1
            
            Certification
      by Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of
      the Exchange Act. *31.2
            
            Certification
      by Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of
      the Exchange Act. *32.1
            
            Certification
      by Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) of
      the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United
      States Code. *32.1
            
            Certification
      by Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) of
      the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United
      States Code. *+
      Compensatory plan or arrangement.*
      Filed herewith.(1)
      Incorporated by reference to the Company’s Registration Statement filed
      with the SEC on Form SB-1 on August 4, 2006.(2)
      Incorporated by reference to the Company’s Current Report filed with the
      SEC on Form 8-K on January 5, 2007.(3)
      Incorporated by reference to the Company’s Annual Report filed with the
      SEC on Form 10-KSB on April 17,
2007.






51







ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES





The
following is a summary of the fees billed to our Company by BDO Stoy Hayward LLP
for professional services rendered in connection with the fiscal years ended
December 31, 2007 and 2006.








December
      31, 2007Audit
      fees
            
            $
            112,000Audit
      related fees
            
            
            -Tax
      fees
            
            
            -All
      other fees
            
            
            -Total
      fees
            
            $
            112,000








December
      31, 2006Audit
      fees
            
            $
            60,000Audit
      related fees
            
            
            -Tax
      fees
            
            
            -All
      other fees
            
            
            -Total
      fees
            
            $
            60,000





The
following is a summary of the fees billed to our Company by Moore &
Associates, Chartered for professional services rendered in connection with the
fiscal year ended December 31, 2006.





December
      31, 2006Fee
      TypeAudit
      fees
            
            $
            41,950Audit
      related fees
            
            
            -Tax
      fees
            
            
            -All
      other fees
            
            
            -Total
      fees
            
            $
            41,950








Audit
fees consist of billings for professional services rendered for the audit of our
company’s consolidated financial statements and review of the interim
consolidated financial statements included in quarterly reports that are
normally provided by independent accounting firms in connection with regulatory
filings, including audit services performed related to mergers and
acquisitions.






52







Audit-related
fees consists of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of our company’s
consolidated financial statements, which are not reported under "Audit
Fees."





Tax fees
consist of billings for professional services for tax compliance and tax
planning regarding federal and state tax filings.





All other
fees consist of fees for products and services other than the services reported
above.





Prior to
our engagement of our independent auditor, such engagement was approved by our
board of directors. The services provided under this engagement may include
audit services, audit-related services, tax services and other services.
Pre-approval is generally provided for up to one year and any pre-approval is
detailed as to the particular service or category of services and is generally
subject to a specific budget. Pursuant our requirements, the independent
auditors and management are required to report to our board of directors at
least quarterly regarding the extent of services provided by the independent
auditors in accordance with this pre-approval, and the fees for the services
performed to date. Our board of directors may also pre-approve particular
services on a case-by-case basis. All audit-related fees, tax fees and other
fees incurred by us for the year ended December 31, 2007, were approved by our
board of directors.









53







SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.




FLEX
      FUELS ENERGY, INC.Date: March
      26, 2008
            By:
            /s/ Brian
      BarrowsBrian
      BarrowsChief
      Executive Officer and DirectorDate: March
      26, 2008
            By:
            /s/ 
      Paul
      GothardPaul
      GothardChief
      Financial Officer (Acting Principal Accounting
  Officer)







In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.





Signature
            
            Title
            
            Date/s/
      Brian Barrows
            
            Chief
      Executive Officer and Director
            
            March
      26, 2008Brian
      Barrows/s/
      Paul Gothard
            
            Chief
      Financial Officer and Director
            
            March
      26, 2008Paul
      Gothard/s/
      James Laird
            
            Vice
      President of Mineral Exploration Operations and Director
            
            March
      26, 2008James
      Laird/s/
      Thomas Barr
            
            Vice
      President of Alternative Fuels Division and Director
            
            March
      26, 2008Thomas
      Barr








54







FLEX FUELS ENERGY, INC.


(formerly
Malibu Minerals, Inc)


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





For the
period from inception (March 10, 2006) to December 31, 2007


PageReport
      of Independent Registered Public Accounting Firm
            F-2Consolidated
      Balance Sheets as of December 31, 2007 and December 31,
    2006
            F-3Consolidated
      Statement of Operations for the year ended December 31, 2007, for the
      period from inception (March 10, 2006) to December 31, 2006 and for the
      period from inception (March 10, 2006) to December 31,
2007
            F-4Consolidated
      Statement of Stockholders’ Equity for the year ended December 31, 2007 and
      for the period from inception (March 10, 2006) to December 31,
      2006
            F-5Consolidated
      Statement of Cash Flows for the year ended December 31, 2007, for the
      period from inception (March 10, 2006) to December 31, 2006 for the period
      from inception (March 10, 2006) to December 31, 2007
            F-6Notes
      to the Consolidated Financial Statements
            F-7
      to F-20







F-1










Report of Independent Registered Public Accounting
Firm




Board of
Directors and Stockholders


Flex
Fuels Energy, Inc


Las
Vegas, Nevada





We have
audited the accompanying Consolidated Balance Sheets of Flex Fuels Energy, Inc
as of December 31, 2007 and 2006 and the related Consolidated Statements of
Operations, Stockholders’ Equity, Comprehensive Loss and Cash Flows for the year
ended December 31, 2007 and for the period from inception of March 10, 2006 to
December 31 2006 and the period of inception of March 10, 2006 to December 31
2007.  These financial statements are the responsibility of the
Company’s management.  Our responsibility is to express an opinion on
these financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such
opinion.  An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audits provide a reasonable basis for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Flex Fuels Energy, Inc at
December 31, 2007 and 2006, and the results of its operations and its cash flows
for the year ended December 31, 2007 and for the period from inception of March
10, 2006 to December 31 2006 and the period of inception of March 10, 2006 to
December 31 2007, in conformity with accounting principles generally accepted in
the United States of America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 3 to the
financial statements, in order for the company to proceed to the construction
phase of the business plan as scheduled in management forecasts it will need to
raise additional finance within the next 12 months.  However, the
Company has no irrevocable commitment to proceed to the construction phase in
accordance with the current forecast timetable and, should the construction
phase be delayed through lack of finance or for some other reason, there are
sufficient funds available to meet current operational cash requirements for at
least the next 12 months. Management’s plans with regard to these matters are
also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.








BDO Stoy
Hayward LLP


London,
England


March 26,
2008






F-2





FLEX
FUELS ENERGY, INC


(A
development/exploration stage company)


Consolidated
Balance Sheets


(Stated
in $’000’s)


As
      of
            
            
            As
      ofDecember
      31
            
            
            December
      312007
            
            
            2006AssetsCash
            
            
            16,156
            
            
            
            1,613Prepaid
      expenses
            
            
            64
            
            
            
            -Sales
      tax and interest receivable
            
            
            92
            
            
            
            -Total
      current assets
            
            
            16,312
            
            
            
            1,613Property
      and Equipment, at cost, net of accumulateddepreciation
      of $13 and $nil respectively
            
            
            776
            
            
            
            2Security
      Deposits
            
            
            8
            
            
            
            
            -Total
      Assets
            
            $
            17,096
            
            
            $
            1,615Current
      LiabilitiesAccounts
      payable
            
            
            67
            
            
            
            20Accruals
            
            
            173
            
            
            
            54Taxation
      and social security
            
            
            65
            
            
            
            -Total
      Liabilities
            
            $
            305
            
            
            $
            74Minority
      Interest
            
            
            -
            
            
            
            1,229Stockholders’
      EquityCommon
      Shares, $0.001 par, 500,000,000 and 100,000,000 shares authorized,
      respectively  69,315,441 and 74,554,884 shares issued and
      outstanding, respectively
            
            
            69
            
            
            
            75Additional
      Paid-in Capital
            
            
            41,971
            
            
            
            1,618Accumulated
      Comprehensive Income
            
            
            44
            
            
            
            -Deficit
      accumulated during exploration/development stage
            
            
            (25,293
            )
            
            
            (1,381
            )Total
      stockholders’ equity
            
            
            16,791
            
            
            
            312Total
      liabilities and stockholders’ equity
            
            $
            17,096
            
            
            $
            1,615






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








F-3






FLEX
FUELS ENERGY, INC


(A
development/exploration stage company)


Consolidated
Statements of Operations


(Stated
in $’000’s except per share data)




For the year
            
            
            For
      the period from inception
            
            
            For
      the period from inceptionended
            
            
            (March
      10, 2006)
            
            
            (March
      10, 2006)December
      31, 2007
            
            
            to
      December 31, 2006
            
            
            to
      December 31, 2007Revenue
            
            $
            -
            
            
            $
            -
            
            
            $
            -ExpensesRecognition
      of an Impairment Loss – mineral claims
            
            
            -
            
            
            
            10
            
            
            
            10Mining
      exploration charges
            
            
            8
            
            
            
            -
            
            
            
            8Selling,
      general and administrative charges
            
            
            3,212
            
            
            
            68
            
            
            
            3,280Excess
      of purchase price over net assets acquired
            
            
            21,595
            
            
            
            1,303
            
            
            
            22,898Total
      Expenses
            
            $
            24,815
            
            
            $
            1,381
            
            
            $
            26,196Operating
      Loss
            
            
            (24,815
            )
            
            
            (1,381
            )
            
            
            (26,196
            )Other
      IncomeInterest
      and other income and gains
            
            
            449
            
            
            
            -
            
            
            
            449Minority
      Interest
            
            
            454
            
            
            
            -
            
            
            
            454Net
      Loss
            
            $
            (23,912
            )
            
            $
            (1,381
            )
            
            $
            (25,293
            )Basic
      & Diluted Loss per Share
            
            
            (0.35
            )
            
            
            (0.02
            )
            
            
            (0.39
            )Weighted
      Average Number of Shares
            
            
            68,052,784
            
            
            
            60,162,280
            
            
            
            64,512,784





Consolidated
Statement of Comprehensive Loss


(Stated
in $’000’s)




For
      the period from inception
            
            
            For
      the period from inceptionFor
      the year ended
            
            
            (March
      10, 2006)
            
            
            (March
      10, 2006)December
      31, 2007
            
            
            to
      December 31, 2006
            
            
            to
      December 31, 2007Net
      Loss
            
            
            (23,912)
            
            
            
            (1,381)
            
            
            
            (25,293)Other
      Comprehensive IncomeGain
      on Foreign Exchange Translation
            
            
            44
            
            
            
            -
            
            
            
            44Total
      Comprehensive Loss
            
            $
            (23,868)
            
            
            $
            (1,381)
            
            
            $
            (25,249)











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







F-4






FLEX
FUELS ENERGY, INC


(A
development/exploration stage company)


Consolidated
Statement of Stockholders’ Equity


From
Inception (March 10, 2006) to December 31, 2007


(Stated
in $’000’s except share numbers)





Shares
            
            
            Amount
            
            
            Additional
      Paid-in Capital
            
            
            Deficit
      accumulated during development stage
            
            
            Accumulated
      Comprehensive Income
            
            
            Stockholders’
      EquityMarch
      10, 2006: shares of Common Stock issued to founders
            
            
            60,000,000
            
            
            
            60
            
            
            
            (50
            )
            
            
            -
            
            
            
            -
            
            
            
            10December
      18, 2006: fair value of shares of Common Stock issued in payment for
      services at $0.1167 per share.
            
            
            412,038
            
            
            
            1
            
            
            
            47
            
            
            
            -
            
            
            
            -
            
            
            
            48December
      29, 2006: shares of Common Stock issued at $0.1167 per
    share.
            
            
            14,142,846
            
            
            
            14
            
            
            
            1,621
            
            
            
            -
            
            
            
            -
            
            
            
            1,635Net
      Loss for period
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,381
            )
            
            
            -
            
            
            
            (1,381
            )Balance,
      December 31, 2006
            
            
            74,554,884
            
            
            
            75
            
            
            
            1,618
            
            
            
            (1,381
            )
            
            
            -
            
            
            
            312May
      11, 2007: shares of Common Stock retired
            
            
            (51,685,723
            )
            
            
            (52
            )
            
            
            52
            
            
            
            -
            
            
            
            -
            
            
            
            -May
      11, 2007: fair value of compensatory element of insider shares not
      retired.
            
            
            -
            
            
            
            -
            
            
            
            308
            
            
            
            -
            
            
            
            -
            
            
            
            308May
      22, 2007: fair value of shares of Common Stock issued in payment for
      services at $0.90 per share.
            
            
            137,344
            
            
            
            -
            
            
            
            124
            
            
            
            -
            
            
            
            -
            
            
            
            124May
      25, 2007: fair value of 200,000 shares of Common Stock acquired at below
      market value.
            
            
            -
            
            
            
            -
            
            
            
            178
            
            
            
            -
            
            
            
            -
            
            
            
            178May
      29, 2007: shares of Common Stock issued at $0.90 per share in a private
      placement.
            
            
            16,582,621
            
            
            
            16
            
            
            
            13,376
            
            
            
            -
            
            
            
            -
            
            
            
            13,392May
      29, 2007: fair value of shares of Common Stock issued on acquisition of
      Flex Fuels Energy Ltd.
            
            
            24,854,477
            
            
            
            25
            
            
            
            22,344
            
            
            
            -
            
            
            
            -
            
            
            
            22,369July
      31, 2007: shares of Common Stock issued at $0.90 per share in a private
      placement.
            
            
            4,871,838
            
            
            
            5
            
            
            
            3,936
            
            
            
            -
            
            
            
            -
            
            
            
            3,941December
      31, 2007: reserve held for shares of Common Stock to be issued for
      compensation
            
            
            -
            
            
            
            -
            
            
            
            35
            
            
            
            -
            
            
            
            -
            
            
            
            35Comprehensive
      Income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            44
            
            
            
            44Net
      Loss for period
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (23,912
            )
            
            
            -
            
            
            
            (23,912
            )Balance,
      December 31, 2007
            
            
            69,315,441
            
            
            
            69
            
            
            
            41,971
            
            
            
            (25,293
            )
            
            
            44
            
            
            
            16,791




The
accompanying notes are an integral part of
these financial statements






F-5




FLEX
FUELS ENERGY, INC


(A
development/exploration stage company)


Consolidated
Statements of Cash Flows


(Stated in $’000’s)







For
      the period
            
            
            For
      the periodFor
      the year
            
            
            from
      inception (March 10, 2006)
            
            
            From
      inception (March 10, 2006)ended
      December 31, 2007
            
            
            to
      December 31, 2006
            
            
            to
      December 31, 2007Cash
      Flow From Operating ActivitiesNet
      loss
            
            $
            (23,912
            )
            
            $
            (1,381
            )
            
            $
            (25,293
            )Recognition
      of an Impairment Loss – mineral claims
            
            
            -
            
            
            
            10
            
            
            
            10Shares
      of Common Stock issued or acquired in Lieu of Payment for
      Service
            
            
            645
            
            
            
            48
            
            
            
            693Excess
      of Purchase Price Over Net Assets Acquired
            
            
            21,595
            
            
            
            1,303
            
            
            
            22,898Foreign
      exchange gain on inter-company balance
            
            
            (131
            )
            
            
            -
            
            
            
            (131
            )Depreciation
            
            
            13
            
            
            
            -
            
            
            
            13Minority
      interest
            
            
            (454
            )
            
            
            -
            
            
            
            (454
            )(Increase)
      in current assetsPrepaid
      expenses
            
            
            (64
            )
            
            
            -
            
            
            
            (64
            )Sales
      tax and interest receivable
            
            
            (92
            )
            
            
            -
            
            
            
            (92
            )Increase
      in current liabilitiesAccounts
      payable
            
            
            47
            
            
            
            14
            
            
            
            61Accruals
            
            
            119
            
            
            
            4
            
            
            
            123Taxation
      and social security
            
            
            65
            
            
            
            -
            
            
            
            65Net
      cash used in operating activities
            
            
            (2,169
            )
            
            
            (2)
            
            
            
            (2,171
            )Cash
      Flow From Investing ActivitiesPurchase
      of property and equipment
            
            
            (787
            )
            
            
            -
            
            
            
            (787
            )Costs
      of investment in FFE Ltd
            
            
            -
            
            
            
            (20)
            
            
            
            (20
            )Purchase
      of mineral claim
            
            
            -
            
            
            
            (10)
            
            
            
            (10
            )


Net
      cash used in investing activities
            
            
            (787
            )
            
            
            (30
            )
            
            
            (817
            )Cash
      Flow from Financing ActivitiesSale
      of shares of Common Stock in private placements
            
            
            17,333
            
            
            
            1,645
            
            
            
            18,978Net
      cash provided by financing activities
            
            
            17,333
            
            
            
            1,645
            
            
            
            18,978Effects
      of exchange rates on cash
            
            
            166
            
            
            
            -
            
            
            
            166Net
      change in cash
            
            
            14,543
            
            
            
            1,613
            
            
            
            16,156Cash
      at beginning of period
            
            
            1,613
            
            
            
            -
            
            
            
            -Cash
      at end of period
            
            $
            16,156
            
            
            $
            1,613
            
            
            $
            16,156Cash
      Paid For:Interest
            
            $
            -
            
            
            $
            -
            
            
            $
            -Income
      Tax
            
            $
            -
            
            
            $
            -
            
            
            $
            -Non-Cash
      Activities ($’000s)Shares
      issued in Lieu of Payment for Service
            
            
            124
            
            
            
            48
            
            
            
            172Excess
      of Purchase Price over Net Assets Acquired expensed in the
      period
            
            
            21,595
            
            
            
            1,303
            
            
            
            22,898Acquisition
      of minority interest
            
            
            774
            
            
            
            -
            
            
            
            774




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








F-6






FLEX
FUELS ENERGY, INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)





NOTE 
      1 -
            BASIS
      OF PRESENTATION





Flex
Fuels Energy, Inc (“Flex Fuels” or the “Company”) (formerly Malibu Minerals,
Inc) has prepared the consolidated financial statements included herein pursuant
to the rules and regulations of the United States Securities and Exchange
Commission (the “SEC”) and in accordance with generally accepted accounting
principles (“GAAP”) of the United States of America (“US GAAP”).





Flex
Fuels was organized under the laws of the State of Nevada on March 10, 2006 to
explore mining claims and property in North America. The Company has diversified
its business by acquiring Flex Fuels Energy Limited (“FFE Ltd”), a development
stage company incorporated under the laws of England and Wales. Flex Fuels plans
to construct, own and manage seed processing facilities, refineries producing
biodiesel products (and associated power generation facilities if commercially
desirable) and to engage in the business of selling supplying and distributing
biodiesel products.





On May
21, 2007, the Board of Directors declared a stock split, distributable May 22,
2007, in the form of a dividend of five additional shares of the Company's
Common Stock for each share owned by stockholders of record at the close of
business on May 21, 2007. Accordingly, all share and per share data has been
restated to reflect the split.





The
Company has elected a December 31 year-end.




NOTE 2
–        SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





a.   
Principles of Consolidation




The
accompanying consolidated financial statements include the accounts of Flex
Fuels and its subsidiaries. Inter-company balances and transactions have been
eliminated on consolidation. FFE Ltd ceased to be a variable interest entity on
May 29, 2007 when the Company acquired the remaining 85% of FFE
Ltd.


.


b.  
Revenue Recognition




The
Company recognizes revenue when persuasive evidence of an arrangement exists,
goods delivered, the contract price is fixed or determinable, and collectability
is reasonably assured.





c.    
Use of Estimates




The
preparation of the financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.







F-7


FLEX
FUELS ENERGY, INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)





NOTE 2
–        SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)





d.     Income
Taxes




Effective
January 1, 2007 the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109, Accounting for Income
Taxes(“FIN 48”). FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in financial statements and requires the impact of a tax
position to be recognized in the financial statements if that position is more
likely than not of being sustained by the taxing authority.  At the
adoption date of January 1, 2007 and also as of December 31, 2007, the
Company did not have any unrecognized tax benefits. We do not expect that the
amount of unrecognized tax benefits will significantly increase or decrease
within the next twelve months.  The Company’s policy is to recognize
interest and penalties related to tax matters in the income tax provision in the
Consolidated Statements of Operations.  There was no interest and penalties
for the year ended December 31, 2007. Tax years beginning in 2004 are
generally subject to examination by taxing authorities, although net operating
losses from all years are subject to examinations and adjustments for at least
three years following the year in which the attributes are used.





Deferred
taxes are computed based on the tax liability or benefit in future years of the
reversal of temporary differences in the recognition of income or deduction of
expenses between financial and tax reporting purposes. The net difference, if
any, between the provision for taxes and taxes currently payable is reflected in
the balance sheet as deferred taxes. Deferred tax assets and/or liabilities, if
any, are classified as current and non-current based on the classification of
the related asset or liability for financial reporting purposes, or based on the
expected reversal date for deferred taxes that are not related to an asset or
liability. Valuation allowances are recorded to reduce deferred tax assets to
that amount which is more likely than not to be realized.





e.    Fixed
Assets





Fixed
assets are stated at cost, net of depreciation once the asset has come into use.
Computer and office equipment are depreciated in a straight-line basis over two
years.





f.     Stock-Based
Compensation





The
Company has adopted Statement of Financial Accounting Standards No. 123
(revised), Share-Based
Payment, (“SFAS 123(R)”), which requires that compensation cost relating
to share-based payment transaction be recognized as an expense in the financial
statements, and that measurement of that cost be based on the estimated fair
value of the equity or liability instrument issued at date of
issue.







F-8






FLEX
FUELS ENERGY, INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)





NOTE 2
–        SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)





g.    
Foreign Exchange





The
Company’s functional and reporting currency is US Dollars. The accounts of the
Company’s foreign investment, FFE Ltd are maintained using the local currency
(Great British Pound – GBP) as the functional currency. FFE Ltd’s assets and
liabilities are translated into U.S. dollars at year-end exchange rates, and
income and expense accounts are translated at average monthly exchange rates.
Net gains and losses from foreign currency translation are excluded from
operating results and are accumulated as a separate component of stockholders’
equity.





h.   
 Impairment of long-lived Assets





The
Company has determined that its Malibu Gold property is to be impaired, as per
SFAS 144: “Accounting for the Impairment of Long-Live Assets.” Impairment is the
condition that exists when the carrying amount of a long-lived asset (asset
group) exceeds its fair value. An impairment loss shall be recognized only if
the carrying amount of a long- lived asset (asset group) is not recoverable and
exceeds its fair value. The carrying amount of a long-lived asset (asset group)
is not recoverable if it exceeds the sum of the undisclosed cash flows expected
to result from the use and eventual disposition of the asset (asset group). Our
determination is based on the Company’s current period operating loss combined
with the Company’s history of operating losses and our projection that
demonstrates continuing losses associated with the Malibu Gold
property.




In
accordance with FASB 144, 25, “An impairment loss recognized for a long-lived
asset (asset group) to be held and used shall be included in income from
continuing operations before income taxes in the income statement of a business
enterprise and in income from continuing operations in the statement of
activities of a not-for-profit organization. If a subtotal such as “income from
operations” is presented, it shall include the amount of that loss.” The Company
has recognized the impairment of a long-lived asset by declaring that amount as
a loss in income from operations in accordance with an interpretation of FASB
144.





The
license was originally acquired for $10,000 cash and initially held on behalf of
the Company by Jim Laird – see Note 4 - Related Party Transactions.







F-9






FLEX
FUELS ENERGY, INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)





NOTE 2
–        SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)





i.     Minority
Interest





The
Minority Interest represents the equity attributable to the external
shareholders of a subsidiary of variable interest entity. It is comprised of the
portion of the net assets attributable to the minority on acquisition plus the
share of any post acquisition profits less the share of any post-acquisition
losses.




At
      December 31, 2007 the Minority Interest was as follows:$Balance
      at December 31, 2006
            
            
            1,229,000Share
      of losses
            
            
            (454,000
            )Share
      of comprehensive income
            
            
            (1,000
            )Acquired
      by the Company – May 29, 2007
            
            
            (774,000
            )Balance
      at December 31, 2007
            
            $
            -








j.  
Basic Loss Per Share





In
accordance with SFAS No. 128 “Earnings Per Share”, the basic loss per common
share is computed by dividing net loss available to stockholders by the weighted
average number of common shares outstanding. Diluted loss per share is computed
similar to basic loss per common share except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. At December 31, 2007, the Company has no stock
equivalents that were anti-dilutive and excluded in the earnings per share
computation.







From
      inception
              (March
      10, 2006) toYear
      to December 31, 2007$’000
            
            
            December
      31, 2006
              $’000Net
      Loss
            
            $
            (23,912
            )
            
            $
            (1,381
            )Basic
      & Diluted Loss per Share
            
            
            (0.35
            )
            
            
            (0.02
            )Weighted
      Average Number of Shares
            
            
            68,052,784
            
            
            
            60,162,280








F-10





FLEX
FUELS ENERGY, INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)





k.   Share
Capital




a)
Authorized:





500,000,000
shares of Common Stock with par value of $0.001





10,000,000
shares of Preferred Stock with a par value of $0.001








b)
Issued:





As of
December 31, 2007, there are 69,315,441 shares of Common Stock issued and
outstanding at par value of $0.001 per share





There are
no preferred shares outstanding. The Company has issued no authorized preferred
shares.




The
Company has no stock option plan, warrants or other dilutive
securities.




Recent Accounting Pronouncements





In June
2006, the Financial Accounting Standards Board ("FASB") issued FIN 48 “Accounting for Uncertain Tax
Positions - an Interpretation of FASB Statement No. 109”, which
prescribes a recognition and measurement model for uncertain tax positions taken
or expected to be taken in the Company's tax returns. FIN 48 provides guidance
on recognition, classification, presentation, and disclosure of unrecognized tax
benefits. The Company has adopted FIN 48 and it has not had a material impact on
its financial position, operations or cash flows.





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”
(“SFAS No. 157”), which defines fair value, establishes a framework for
measuring fair value in accordance with generally accepted accounting principles
and expands disclosures about fair value measurements. SFAS No. 157 applies to
other accounting standards that require or permit fair value measurements.
Accordingly, it does not require any new fair value measurement. SFAS No. 157
will be effective for the Company on January 1, 2008. The Company is currently
evaluating the impact the adoption of SFAS No. 157 will have on its financial
position and results of operations.







F-11





FLEX FUELS ENERGY, INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)








In
February 2007, the FASB issued SFAS No.159, “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS No.159”), which permits
entities to choose to measure many financial instruments and certain other items
at fair value that are not currently required to be measured at fair value. SFAS
No.159 will be effective for the Company on January 1, 2008. The Company is
currently evaluating the impact the adoption of SFAS No.159 will have on its
financial position and results of operations.







In
December 2007, the FASB issued SFAS No. 141(R),"Business Combinations"
("SFAS No. 141(R)"), which establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in an
acquiree, including the recognition and measurement of goodwill acquired in a
business combination. SFAS No. 141R is effective as of the beginning of the
first fiscal year beginning on or after December 15, 2008.  Earlier
adoption is prohibited and the Company is currently evaluating the effect, if
any, that the adoption will have on its financial position, results of
operations or cash flows.




In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interest in
Consolidated Financial Statements, an amendment of ARB No. 51"
("SFAS No. 160"), which will change the accounting and reporting for
minority interests, which will be recharacterized as noncontrolling interests
and classified as a component of equity within the consolidated balance sheets.
 SFAS No. 160 is effective as of the beginning of the first fiscal year
beginning on or after December 15, 2008.  Earlier adoption is
prohibited and the Company is currently evaluating the effect, if any, that the
adoption will have on its financial position, results of operations or cash
flows.





NOTE 
      3 -
            GOING
      CONCERN




We expect
our mineral exploration activities and the planned development of our biofuels
business, together with anticipated general, legal, accounting and
administrative expenses, including those associated with our filing reports with
the Securities and Exchange Commission will require us to spend $23,100,000 to
$44,100,000 in 2008.  Our cash on hand as at December 31, 2007 was
$16,156,000.  We do not expect to generate revenue that is sufficient
to cover our expenses during the build phase envisaged by our operating plan for
at least the next twelve months.  However, in order to undertake the
construction of our biodiesel facility we will need to obtain additional
financing within the next twelve months, although the construction phase cannot
and will not commence without this necessary additional finance being put in
place.  No commitment currently exists to proceed with the
construction phase without the necessary resources being available
first.





F-12









FLEX
FUELS ENERGY, INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)





We may
raise the capital necessary to fund our business through a private placement of
our common stock, debt financing or a combination of both. Additional financing,
whether through public or private equity or debt financing, arrangements
with  stockholders or other sources to fund operations, may not be
available, or if available, may be on terms unacceptable to us. Should we be
unable to raise additional capital then the company has sufficient funds
currently to meet existing operational needs over the next twelve months. Our
ability to maintain sufficient liquidity is dependent on our ability to raise
additional capital. If we issue additional equity securities to raise funds, the
ownership percentage of our existing stockholders would be reduced. New
investors may demand rights, preferences or privileges senior to those of
existing holders of our common stock. Debt incurred by us would be senior to
equity in the ability of debt holders to make claims on our assets. The terms of
any debt issued could impose restrictions on our operations. If adequate funds
are not available to satisfy either short or long-term capital requirements, our
operations and liquidity could be materially adversely affected and we could be
forced to cease operations.





NOTE 
      4 -
            RELATED
      PARTY TRANSACTIONS





On March
27, 2006, the Company acquired the mineral license from Mr. Jim Laird, a
director and stockholder, for $10,000.





As a
non-Canadian individual or company cannot directly hold a mineral license in
British Columbia therefore it was initially held on behalf of the Company by Jim
Laird (a director). It was subsequently transferred to Esther Briner (a licensed
prospecting agent and stockholder) in June 2006 who then transferred it to
Coalharbour Consulting, Inc (“Coalharbour”), a licensed prospecting agent owned
and controlled by Esther Briner (a stockholder) in July 2007. In December 2007
the license was transferred back to Jim Laird who holds the license on behalf of
the Company.





During
2007 the Company incurred costs of $8,000 with Laird Exploration Ltd (“Laird”)
for phase 1 of its mining operations. Jim Laird is the President and a director
of Laird.





NOTE 5 –        
INCOME TAXES




The
income tax provision is summarized as follows for the years ended December
31:




2007
            
            
            2006($’s)
            
            
            ($’s)CurrentFederal
            
            
            0
            
            
            
            0State
      and local
            
            
            0
            
            
            
            0Foreign
            
            
            0
            
            
            
            0Deferred
            
            
            0
            
            
            
            0Total
      income tax provision (benefit)
            
            
            0
            
            
            
            0











F-13








FLEX FUELS ENERGY,
INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)








Significant
components of deferred tax assets were as follows as of December
31:




2007($’s)Tax
      loss carry-forward
            
            
            1,016,000Capital
      loss carry forward
            
            
            456,000Property
      and plant depreciation methods
            
            
            0Total
            
            
            1,472,000Valuation
      Allowance
            
            
            (1,472,000
            )Net
      deferred tax asset
            
            
            -





2006($’s)Tax
      loss carry-forward
            
            
            27,000Capital
      loss carry forward
            
            
            456,000Property
      and plant depreciation methods
            
            
            0Total
            
            
            483,000Valuation
      Allowance
            
            
            (483,000
            )Net
      deferred tax asset
            
            
            -








The
Company has net operating loss carry-forwards for United States tax purpose to
offset future taxable income of $1,175,000 expiring in years 2008 through 2020.
As it is not more likely than not that the resulting deferred tax benefits will
be realized, a full valuation allowance has been recognized for such deferred
tax assets. The utilization of net operating loss carry forwards may be
significantly limited under the Internal Revenue Code as a result of ownership
changes due to the Company’s stock and other equity offerings.




Under
United Kingdom taxation, FFE Ltd has $1,729,000 of net operating loss
carry-forwards to offset future taxable income expiring in 2014. As it is not
more likely than not that the resulting deferred tax benefits will be realized,
a full valuation allowance has been recognized for such deferred tax
assets.





The Company has net
capital losses to be carried forward in the U.S. of $1,303,000 from the
impairment of its 15% investment in FFE Ltd to in Fiscal 2006 offset against
future capital gains expiring in years 2008 through 2010.





The
impairment of the excess of purchase price over net assets acquired of
$21,595,000 from its acquisition of the remaining 85% of FFE Ltd in May 2007 is
not deductible for tax purposes and therefore is a permanent timing difference
in calculating deferred tax and is not included in the figures
above.









F-14





FLEX
FUELS ENERGY, INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)





The
provision for income tax differs from the amount computed by applying the
statutory federal income tax rate to income before the provision for income
taxes. The sources and tax effects of the differences are as follows for the
year ended December 31:




2007
            
            
            2006Income
      taxes at the federal statutory rates
            
            
            (35%)
            
            
            
            (35%)Change
      in valuation allowance
            
            
            35
            
            
            
            35Foreign
      operations
            
            
            -
            
            
            
            -Effective
      rate of income tax
            
            
            0%
            
            
            
            0%








NOTE 6 –
ACQUISITIONS





On May
29, 2007 Flex Fuels acquired the remaining 85% FFE Ltd, a development stage
company formed under the laws of England and Wales , for the purpose of
diversifying the Company’s business. As consideration for the acquisition of the
Shares, the Company issued an aggregate of 24,854,477 shares of its Common
Stock, $0.001 par value to the stockholders of FFE Ltd.





The
Company has attributed a fair value of $22,369,000 on the shares issued based
upon stock placed at $0.90 per share under the private placement completed on
the same day. Flex Fuels had acquired its initial 15% holding in FFE Ltd in
December 2006.





The
acquisition of FFE Ltd has been accounted for using the purchase method of
accounting and, accordingly, the assets acquired and liabilities assumed have
been recorded at their fair values as of the date of the acquisition. The excess
of the purchase price over the fair value of the assets acquired and liabilities
assumed has been recorded as excess of purchase price over net assets acquired
on the accompanying balance sheet.




FFE
      Ltd Purchase Price Allocation on Acquisition:$Minority
      Interest acquired
            
            
            774,000Excess
      of Purchase Price over Net Assets Acquired
            
            
            21,595,000$
            22,369,000





Previously,
on December 29, 2006 we acquired 15 % of FFE Ltd. In consideration for the
shares of FFE Ltd’s common stock acquired we paid $1,500,000.








F-15








FLEX
FUELS ENERGY, INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)





As the
Company had determined that FFE Ltd was a Variable Interest Entity under FIN46R
“Consolidation of Variable Interest Entities” the balance sheet and results of
FFE Ltd were consolidated with the Company’s balance sheet and results. The
determination was based on the basis that although the Company acquired a 15%
holding in FFE Ltd the Company provided all of the initial capital for the
operations of FFE Ltd and therefore took on risks in excess of its percentage
holding or voting rights. The investment of 15% of FFE Ltd has been accounted
for using the purchase method of accounting and, accordingly, the assets
acquired and liabilities assumed have been recorded at their fair values as of
the date of the acquisition.




FFE Ltd
Purchase Price Allocation on Acquisition of 15% holding:





$Minority
      Interest acquired
            
            
            217,000Excess
      of Purchase Price over Net
              Assets
      Acquired
            
            
            1,303,000$
            1,520,000








Under
United States Generally Accepted Accounting Principles (“GAAP”) where the
acquired company is a “development stage” enterprise then any Excess of Purchase
Price over Net Assets Acquired is expensed at the time of
acquisition.





The
Financial Accounting Standards Board (“FASB”) has provided guidelines as to
identifying a “development stage” enterprise:





“an
enterprise shall be considered to be in the development stage if it is devoting
substantially all of its efforts to establishing a new business and either of
the following conditions exists:





a)
Planned principal operations have not commenced.





b)
Planned principal operations have commenced, but there has been no significant
revenue there from.





A
development stage enterprise will typically be devoting most of its efforts to
activities such as financial planning; raising capital; exploring for natural
resources; developing natural resources; research and development; establishing
sources of supply; acquiring property, plant, equipment, or other operating
assets, such as mineral rights; recruiting and training personnel; developing
markets; and starting up production.”





The
Company has determined that FFE Ltd is a development stage company and therefore
the Excess of Purchase Price over Net Assets Acquired of $21,595,000 and was
expensed in Fiscal 2007 and $1,303,000 was expensed in Fiscal 2006.




F-16








FLEX
FUELS ENERGY, INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)





NOTE 7 –
STOCKHOLDERS’ EQUITY





On April
26, 2007, Malibu Minerals, Inc. (the “Company”) filed with the Secretary of
State of the State of Nevada a Certificate of Amendment to its Articles of
Incorporation (the “Amendment”) that was effective as of the same date. The
Amendment was filed to increase the authorized Common Stock of the Company from
100,000,000 shares to 500,000,000 shares and to create 10,000,000 shares of
“blank check” preferred stock, $0.001 par value per share.





On May
21, 2007, the Board of Directors declared a stock split, distributable May 22,
2007, in the form of a dividend of five additional shares of the Company's
Common Stock for each share owned by stockholders of record at the close of
business on May 21, 2007. Accordingly, all share and per share data has been
restated to reflect the split.





On March
10, 2006 the Company issued 60,000,000 shares of Common Stock to the founders
for $10,000.





On
December 18, 2006 the Company issued 412,038 shares of Common Stock to Mr. Tom
Barr in recognition of services provided to the Company as director. The Company
has recognized compensation expense of $48,000 under SFAS 123(R) based upon a
fair value of $0.1167 per share of Common Stock – the price of shares issued in
the subsequent private placement on December 29, 2006.





On
December 19, 2006 the Company completed a private placement of 14,142,846 shares
of Common Stock at $0.1167 per share to independent third parties. The Company
received $1,635,000 net of legal costs of $20,000.





On May
11, 2007 the Stockholders of the Company, without direction from the Company,
undertook a re-organization of their respective shareholdings by retiring
varying percentages of their stock. In total 51,685,723 shares of Common Stock
were retired.





As Mr.
Tom Barr was not required to retire any stock and therefore gained additional
Common Stock in the stock split on May 21, 2007 the Company, under SFAS 123R,
attributed the fair value of $308,000 under compensatory arrangements based upon
a fair value of $0.90 per share of Common Stock – the price of shares issued in
the subsequent private placement on May 29, 2007.





On May
22, 2007 the Company issued 137,344 shares of Common Stock to Mr. Tom Barr in
recognition of services provided to the Company as director. The Company has
recognized compensation expense of $124,000 under SFAS 123(R) based upon a fair
value of $0.90 per share of Common Stock – the price of shares issued in the
subsequent private placement on May 29, 2007.





On May
25, 2007 Mr. Tom Barr acquired 200,000 shares of Common Stock from a stockholder
at a discount to market value. The Company, under SFAS 123R, have attributed a
fair value of $178,000 to the transaction under compensatory arrangements based
upon a fair value of $0.90 (per share of Common Stock – the price of shares
issued in the subsequent private placement on May 29, 2007) less the amount paid
by Mr. Barr.







F-17






FLEX
FUELS ENERGY, INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)





On May
29, 2007 the Company completed a private placement of 16,582,621 shares of
Common Stock at $0.90 per share to independent third parties. The Company
received $13,392,000 net of placement costs of $1,492,000 and legal costs of
$40,000.





On May
29, 2007 the Company completed the acquisition of FFE Ltd and issued 24,854,477
shares of Common Stock to the stockholders of FFE Ltd. The Company has
attributed a fair value of $22,369,000 on the shares issued based upon stock
placed at $0.90 per share under the private placement completed on the same
day.





On July
31, 2007 Flex Fuels closed on a private placement offering in which it sold an
aggregate of 4,871,838 shares (the “Shares”) of its common stock, $0.001 par
value per share (the “Common Stock”), at a price of $0.90 per Share for
aggregate net proceeds of approximately $3,941,000





International
Capital Partners SA (“ICP”) acted as the placement agent for the Offering. The
Company paid the following fees in connection with the Offering (i) a commission
equal to approximately $438,000 paid to ICP representing 10% of the Proceeds;
and (ii) approximately $6,000 in legal and miscellaneous fees. The net proceeds
of the Offering are expected to be used as by the Company as working capital and
for general corporate purposes.





At
December 31, 2007 the Company had set aside $35,000 in recognition of the fair
value of 65,000 shares of Common Stock to be issued to Mr. Paul Gothard upon the
completion of four financial filings as per his employment agreements. The
estimate of fair value is based on a value of $0.90 per share (the market value
of a share at the date of grant) and is being spread over the 12 months to May
2008. These shares have not been included in the Earnings per Share
calculations.










F-18




FLEX
FUELS ENERGY, INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)





NOTE 
      8 –
            SEGMENTAL
      REPORTING




Under
SFAS no. 131, Disclosures about segments of an Enterprise and Related
Information, operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker, or decision making group in deciding how to
allocate resources and in assessing performance. Our chief operating decision
making group is composed of the Chief Executive Officer and members of senior
management. The Company’s reportable operating segments are Malibu Gold and
BioFuels.





The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. We evaluate performance of our
operating segments based on revenue and operating loss. Segmental information
for 2007 is as follows:




Year
      ended December 31, 2007
            
            Malibu
      Gold
            
            
            BioFuels
            
            
            Corporate
            
            
            Total$
      ’000
            
            
            $
      ’000
            
            
            $
      ’000
            
            
            $
      ’000Net
      revenue to external customers
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Operating
      loss
            
            
            (43
            )
            
            
            (23,518
            )
            
            
            (351
            )
            
            
            (23,912
            )Assets
            
            
            73
            
            
            
            16,968
            
            
            
            55
            
            
            
            17,096Including
      long lived assets
            
            
            -
            
            
            
            748
            
            
            
            -
            
            
            
            748Stock-based
      compensation
            
            
            -
            
            
            
            645
            
            
            
            -
            
            
            
            645Expenditure
      on property and equipment
            
            
            -
            
            
            
            787
            
            
            
            -
            
            
            
            787





Segmental
information for 2006 is as follows:




Malibu
      Gold
              $’000
            
            
            BioFuels

              $’000
            
            
            
            Total$’000Net
      revenue to external customers
            
            
            -
            
            
            
            -
            
            
            
            -Operating
      loss
            
            
            (30
            )
            
            
            (1,351
            )
            
            
            (1,381
            )Assets
            
            
            113
            
            
            
            1,502
            
            
            
            1,615Stock-based
      compensation
            
            
            -
            
            
            
            48
            
            
            
            48Expenditure
      on property and equipment
            
            
            -
            
            
            
            -
            
            
            
            -








The
Company’s Malibu Gold operations are based in Canada and the BioFuels operations
are based in the United Kingdom.











F-19









FLEX
FUELS ENERGY, INC


(A
Development/exploration Stage Company)


Notes to
the Consolidated Financial Statements


For the
year to December 31, 2007


(Stated
in US Dollars)











NOTE 9 –
CONTINGENT LIABILITIES





In
connection with the May and July 2007 Offerings, the Company agreed to file
a registration statement to effect the registration of the Common Shares issued
in the May 2007 and July 2007 Offerings. Further, the Company agreed to use
its reasonable best efforts to cause the Registration Statement to be filed with
the SEC as soon as possible but no later than August 27, 2007. The Company
further agreed to clear any comments issued with respect to the Registration
Statement in order for the SEC to declare the Registration Statement effective
no later than 120 days after the required filing date. If the Company
fails to file the Registration Statement with the SEC or have the Registration
Statement be declared effective on or before the time frame described, the
Purchasers shall be entitled to liquidated damages from the Company in an amount
of approximately $64,000 for each month that the Company is delinquent in filing
or effectiveness of the Registration Statement, subject to an overall limit of
up to 15 months of partial liquidated damages.





The
Company has determined that because it is remote that any Purchaser will make
such a claim the contingent liability will not have a material impact on the
Company’s financial position, results of operations or cash flows.







F-20