UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K/A


(Amendment No. 2)




x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934


For
the Fiscal Year Ended December 31, 2007


OR


 ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934


For the
transition period from N/A to N/A


Commission
File Number:  333-137170




Universal
Bioenergy, Inc.


(Name of
small business issuer as specified in its charter)


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


19800
Mac Arthur Blvd. Ste. 300


Irvine, CA
92612


(Address
of principal executive offices)




(888)
263-2009


(Issuer’s
telephone number)




Securities
registered under Section 12(b) of the Exchange
Act:  None


Securities
registered under Section 12(g) of the Exchange Act:


Common
Stock, $0.001 par value per share


(Title
of Class)


Common
Stock, $.001 Par Value




Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.oYesxNo


Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. o
Yes    x No


Indicate
by check mark whether the registrant (1) has 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  ̈   
No x




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




Indicate
by check mark if 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-K/A or any
amendment to this Form 10-K/A. o


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


Large accelerated filer   ̈
              Non-accelerated filer ̈
            
            Accelerated filer ̈
              Smaller
      reporting companyx




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


The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant's most recently completed fiscal quarter was
$1,213,289.




State the
number of shares outstanding of each of the issuer’s classes of equity
securities, as of the latest practicable date: As April 15, 2008, there were
22,514,191 shares of Common Stock, $0.001 par value per share issued and
outstanding.


Documents
Incorporated By Reference - None




EXPLANATORY
NOTE




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









Universal
Bioenergy, Inc.


FORM
10-K/A ANNUAL REPORT


FOR
THE FISCAL YEARS ENDED DECEMBER 31, 2007 AND JANUARY 31, 2007


TABLE
OF CONTENTS




PART IITEM 1.
                          
                          BUSINESS
                          
                          4ITEM 1A.
                          
                          RISK
      FACTORS
                          
                          10ITEM 1B.
                          
                          UNRESOLVED
      STAFF COMMENTS
                          
                          14ITEM 2.
                          
                          PROPERTIES
                          
                          14ITEM 3.
                          
                          LEGAL
      PROCEEDINGS
                          
                          15ITEM 4.
                          
                          SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                          
                          15PART IIITEM 5.
                          
                          MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
                          
                          16ITEM 6.
                          
                          SELECTED
      FINANCIAL DATA
                          
                          17ITEM 7.
                          
                          MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                          
                          18ITEM 7A.
                          
                          QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                          
                          24ITEM 8.
                          
                          CONSOLIDATED
      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                          
                          25ITEM 9.
                          
                          CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
                          
                          26ITEM 9A.
                          
                          CONTROLS
      AND PROCEDURES
                          
                          26ITEM 9B.
                          
                          OTHER
      INFORMATION
                          
                          28PART IIIITEM 10.
                          
                          DIRECTORS,
      EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
                          
                          29ITEM 11.
                          
                          EXECUTIVE
      COMPENSATION
                          
                          31ITEM 12.
                          
                          SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
                          
                          34ITEM 13.
                          
                          CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
                          
                          36ITEM 14.
                          
                          PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                          
                          37PART IVITEM 15.
                          
                          EXHIBITS AND FINANCIAL STATEMENT
      SCHEDULES
                          
                          38SIGNATURES
                          
                          38CERTIFICATIONSExhibit
      31 – Management certificationExhibit
      32 – Sarbanes-Oxley Act




2




FORWARD-LOOKING
STATEMENTS




This
Annual Report contains certain forward-looking statements regarding management’s
plans and objectives for future operations including plans and objectives
relating to our planned marketing efforts and future economic performance. The
forward-looking statements and associated risks set forth in this Annual Report
include or relate to, among other things, (a)  our growth strategies,
(b) anticipated trends in the mining industry, (c) our ability to
obtain and retain sufficient capital for future operations, and (d) our
anticipated needs for working capital. These statements may be found under
“Management’s Discussion and Analysis or Plan of Operations” and “Business,” as
well as in this Annual Report generally. Actual events or results may differ
materially from those discussed in forward-looking statements as a result of
various factors, including, without limitation, the risks outlined under “Risk
Factors” and matters described in this Annual Report generally. In light of
these risks and uncertainties, there can be no assurance that the
forward-looking statements contained in this Annual Report will in fact
occur.




The
forward-looking statements herein are based on current expectations that involve
a number of risks and uncertainties. Such forward-looking statements are based
on assumptions described herein. The assumptions are based on judgments with
respect to, among other things, future economic, competitive and market
conditions, and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control.
Accordingly, although we believe that the assumptions underlying the
forward-looking statements are reasonable, any such assumption could prove to be
inaccurate and therefore there can be no assurance that the results contemplated
in forward-looking statements will be realized. In addition, as disclosed
elsewhere in the “Risk Factors” section of this annual report, there are a
number of other risks inherent in our business and operations which could cause
our operating results to vary markedly and adversely from prior results or the
results contemplated by the forward-looking statements. Management decisions,
including budgeting, are subjective in many respects and periodic revisions must
be made to reflect actual conditions and business developments, the impact of
which may cause us to alter marketing, capital investment and other
expenditures, which may also materially adversely affect our results of
operations. In light of significant uncertainties inherent in the
forward-looking information included in this annual report, the inclusion of
such information should not be regarded as a representation by us or any other
person that our objectives or plans will be achieved.




Some
of the information in this annual report contains forward-looking statements
that involve substantial risks and uncertainties. Any statement in this annual
report that is not a statement of an historical fact constitutes a
“forward-looking statement”. Further, when we use the words “may”, “expect”,
“anticipate”, “plan”, “believe”, “seek”, “estimate”, “internal”, and similar
words, we intend to identify statements and expressions that may be forward-
looking statements. We believe it is important to communicate certain of our
expectations to our investors. Forward-looking statements are not guarantees of
future performance. They involve risks, uncertainties and assumptions that could
cause our future results to differ materially from those expressed in any
forward-looking statements. Many factors are beyond our ability to control or
predict. You are accordingly cautioned not to place undue reliance on such
forward-looking statements. Important factors that may cause our actual results
to differ from such forward-looking statements include, but are not limited to,
the risk factors discussed herein.


3


PART
I




As used
in this annual report, “we”, “us”, “our”, “Universal”, “Company” or “our
company” refers to Universal Bioenergy, Inc. and all of its
subsidiaries.





ITEM
1.  BUSINESS.





Company
History





Palomine
Mining, Inc. was incorporated in the State of Nevada in August, 2004. Before
closing down all operations in 2007, Palomine's primary business was as an
exploration stage company engaged in the acquisition and exploration of mineral
properties with a view to exploiting any mineral deposits that it discovered
that demonstrate economic feasibility. Palomine had the sole and exclusive right
and option to acquire an 80% undivided right, title and interest in and to the
mineral property known as the Gab claim.





Palomine’s
plan of operation was to conduct exploration work on the Gab property in order
to ascertain whether it possessed economic quantities of gold. Mineral property
exploration is typically conducted in phases.  Each subsequent phase of
exploration work is recommended by a geologist based on the results from the
most recent phase of exploration.  Palomine did not commence the initial
phase of exploration on the Gab claim.





Due to a
lack of funding, Palomine’s directors decided not to proceed with the
exploration of the Gab claim and abandoned this business model at the close of
the third quarter 2007.





New
Business Model





Beginning
with the second quarter 2007, the board of directors directed the Company's
management to begin searching for acquisition targets with a business possessing
greater potential to add value to shareholders.




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




As a
result of the closing, UBNA became a wholly owned subsidiary of Palomine.
In exchange for all of the issued and outstanding shares of UBNA, Palomine
issued to the shareholders of UBNA 2,000,000 shares of common stock of Palomine.
Mortensen, a shareholder of Palomine contributed 1,800,000 shares of common
stock of Palomine towards the amount of shares being delivered
to UBNA shareholders by Palomine. Such issuance represents an issuance
of 44% of the issued and outstanding shares of Palomine. In addition, pursuant
to the terms of the Agreement, an amendment to the certificate of incorporation
of Palomine was filed with the State of Nevada whereby: (i) the name of the
company has been changed to Universal Bioenergy, Inc.(UBRG), (ii) the shares of
common stock of Palomine issued and outstanding at the time of the closing
(4,300,000 shares) were increased by a forward stock split in the amount of five
(5) shares for each share of UBRG issued and outstanding (resulting in
22,500,000 shares issued and outstanding); and (ii) the authorized shares of
UBRG were increased to 200,000,000 shares of common stock with a par value of
$0.001 per share; and 1,000,000 shares of preferred stock with a par value of
$0.001 per share.


4





History
of Universal Bioenergy North America, Inc. (UBNA)





Universal
Bioenergy North America, Inc. was formed as a Nevada Corporation on January 23,
2007.





UBNA owns
a biodiesel fuel refinery located at Nettleton, Mississippi, acquired from
Biodiesel of Mississippi, Inc. through Bankruptcy sale. It was the first
biodiesel manufacturing refinery to sell biodiesel to the public in the state of
Mississippi. The plant is located in the northeastern part of the state on 4.3
acres of land that at one time was the home of the old Bunge Grain Elevator
facility. During the grain elevator operation time, there was a railway spur
constructed to facilitate the movement of huge quantities of various
grains.




In 2002,
Biodiesel of Mississippi, Inc. ("BMI") acquired the land from the city of
Nettleton and started building a biodiesel refinery. The original idea was to
construct an economically designed, but highly efficient refinery like a rig in
the middle of the sea. The plant started producing the biodiesel during 2004.
BMI management had a dispute with their customer/investor(s) over a major
operational issue and filed for bankruptcy protection under Chapter-11 in early
2006. The Bankruptcy Court of the Northern District of Mississippi in its Order
Granting Debtor‘s Motion to Sell Assets Free and Clear Of All Liens, Claims and
Encumbrances Outside The Ordinary Course Of Business dated December 21, 2006
(the "Order"), authorized BMI to convey certain property to UBNA.




UBNA
entered into a bill of sale with BMI on January 26th, 2007 (the "Bill of Sale")
to acquire certain assets from BMI, including the fixtures on the land, the
refinery and certain equipment, tools and other assets as listed in the
Bill of Sale (collectively, the "Assets"). For all the terms and provisions of
the Bill of Sale it is attached in its entirety as Exhibit 2.2 to UBRG’s Current
Report on Form 8-K as filed on December 14, 2007.




The plant
and assets were not in operation during the bankruptcy period. As a result, the
facility needed major repair, cleanup, painting and maintenance to get it ready
to be brought back into operation. The plant had the original capacity to
produce approximately 20,000 gallons of biodiesel per day. However, the plant
was never operated consistently at its full production capacity during the
period due to or lack of capital and washing and storage capacity. The company
had two 50,000 capacity reactors, two 12,000 gallon capacity washing tanks and
two 50,000 gallon capacity storage tanks.





UBNA commenced
the extensive project of cleaning, painting and repairing the plant in late
February 2007. Weather was not favorable during February-April for the exterior
cleaning. However, major cleaning, repairing, maintenance and painting were
competed by October 2007.





Further,
since the acquisition of the assets from bankruptcy, management acquired
additional reactors and tanks to increase the processing, washing and storage
capacity. Today, UBNA has four 50,000 gallon each jacketed reactors, four
washing tanks, and additional storage tanks.





Management
believes its production capacity could reach 10 million gallons per year
(MGPY) with the installed equipment. With additional heating sources, management
believes that the capacity can be increased to 20 MGPY and is expected to reach
production capacity of 50 MGPY as soon as it can install already acquired
additional equipment, excess storage capacity, and additional heating
source.




5




BACKGROUND




Biodiesel
is a domestically produced, renewable fuel that can be manufactured from
vegetable oils, animal fats, or recycled restaurant greases. Biodiesel is safe,
biodegradable, and reduces serious air pollutants such as particulates, carbon
monoxide, hydrocarbons, and air toxics. Blends of 20% Biodiesel with 80%
petroleum diesel (B20) can generally be used in unmodified diesel engines. The
U.S. has also developed a low sulfur diesel standard. This has encouraged the
blending of diesel and biodiesel, with biodiesel having the benefits of being
non-toxic, biodegradable and sulfur-free. In addition, Biodiesel provides
similar fuel economy and better engine lubrication than petroleum diesel-thus
prolonging the life of the diesel engine. Biodiesel can be blended in any
concentration, from 0 to 100% (B100), and used without diesel engine
modification. However, current industry capacity is also unable to meet the
growing demand.





According
to the US Department of Energy, the use of Biodiesel has grown dramatically
during the last few years. The Energy Policy Act was amended by the Energy
Conservation Reauthorization Act of 1998 to include biodiesel fuel use as a way
for federal, state, and public utility fleets to meet requirements for using
alternative fuels.





Pure
biodiesel (B100) is considered an alternative fuel under the EPAct. Lower-level
biodiesel blends are not considered alternative fuels, but covered fleets can
earn one EPAct credit for every 450 gallons of B100 purchased for use in blends
of 20% or higher.





That
amendment started the sharp increase in the number of biodiesel users, which now
include the U.S. Postal Service and the U.S. Departments of Defense, Energy, and
Agriculture. Countless school districts, transit authorities, national parks,
public utility companies, and garbage and recycling companies also use the
fuel.




Currently,
there is a biodiesel tax incentive that is a federal tax credit. The credit
equates to one penny for every 1 percent of biodiesel in a fuel
blend made from agricultural products like vegetable oils, and one-half penny
per percent for recycled oils. This incentive is taken by petroleum distributors
and passed on to consumers. The USDA developed a study that estimated this
incentive will increase the demand for biodiesel to at least 124 million gallons
per year exceeding 800 million gallons by 2010, and depending on other factors,
including crude oil prices, the industry projects that demand could be much
higher.




Any
diesel car can run on biodiesel, with no conversion necessary. This year just 4
percent of U.S. passenger cars run on diesel, but analysts expect that number to
rise fast, in lockstep with rising oil prices. J.D. Power Automotive Forecasting
predicts that diesel's share of the market will increase to more than 10 percent
by the middle of the next decade - fueled in large part by the surge in
biodiesel production and popularity.





Total
production shot up from 25 million gallons in 2004 to 250 million last year.
Nearly 100 new plants are now under construction




Feedstock
costs account for a large percentage of the direct biodiesel production costs,
including capital cost and return.  The feed stock will assist the
company in moving forward in its development stage
commitments.   It takes about 7.6 pounds of soybean oil, which
costs about 45 cents per pound, to produce a gallon of biodiesel. Feedstock
costs alone, therefore, are at least $3.40 per gallon of soy biodiesel. Fats and
greases cost less and produce less expensive biodiesel, as low as $2.00 per
gallon. The quality of the fuel is equivalent to soy biodiesel fuel.




REFINERY
PLANT





UBRG owns
a biodiesel fuel refinery located in northeastern Mississippi. The plant is
located on 4.3 acres of land and provides ample space to
expand.


6


EQUIPMENT




The plant
had original capacity to produce about 20,000 gallons of biodiesel per week.
However, the plant was never operated consistently at its full production
capacity during the period due to a lack of capital and washing and storage
capacity. The company had two 50,000 capacity reactors, two 12,000 gallon
capacity washing tanks, and two 50,000 gallon capacity storage
tanks.





The
Company’s management commenced the extensive project of cleaning, painting and
repairing the plant in late February 2007. Weather was not favorable during
February-April for the exterior cleaning. However, major cleaning, repairing,
maintenance, and painting were completed in October, 2007.





Furthermore,
since the acquisition of the assets from bankruptcy, management acquired
additional reactors and tanks to increase the processing, washing and storage
capacity. Today, UBRG has four 50,000 gallons each jacketed reactors, with the
total capacity to process 20,000 gallons of biodiesel per batch, four wash tanks
with total capacity to clean and wash 90,000 gallons of biodiesel per batch, and
the required storage tanks.





Management
believes its production capacity could reach 10 million gallons per year (MGPY)
with the installed equipment. With additional heating sources, management
believes that the capacity can be increased to 20 MGPY and is expected to reach
production capacity of 50 MGPY with additional equipment, additional heating
source, and storage tanks.





PROCESS





Management
believes Universal’s economical and efficient processing is a unique processing
system. Management estimates that the system will reduce the process time and
will be able to produce ASTM grade biodiesel fuel at reduced costs.





Universal’s
simple process can be described as follows:





·
            Feed
      stock is pre heated at required temperature in double wall jacketed
      reactors





·
            Methoxide
      pre mixture is added to the pre heated feed stock formulated to meet
      various feed stocks chemical reaction
  requirement





·
            Inline
      boiler keeps the feed stock at required temperature through out the
      reaction process





·
            Reaction
      process continues for about 3 hours as four giant 50 horsepower pumps
      involving forced air mix the product at extremely high pressure creating
      ultra-vibration and fusion reaction. Universal’s unique reaction saves
      considerable processing time and heating while creating a better burning
      fuel.





·
            The
      product moves to separation tanks where biodiesel and glycerin are
      separated





·
            Glycerin
      is moved to storage tank




7





·
            Biodiesel
      is moved to Universal’s wash system. This is a unique system because it
      employs intense vibration powered by air. The air is injected in to the
      fuel by a 4” pipe which is turned down at the bottom of a tank deflected
      upward which pushes oxygen and water through thousands of tiny holes,
      placed at specific distance. The oxygen attaches to the water and these
      tiny bubbles explode on the surface attaching the methanol to the water
      and falling back to the bottom when the system is turned off. This system
      scrubs the fuel, removing the excess methanol soap and other impurities,
      leaving a very clear, light in color, meeting ASTM specification Biodiesel
      fuel.





·
            Specially
      designed pumps and wash tank completely take out all the impurities and
      methanol from the biodiesel during a four hour process. Biodiesel is moved
      to biodiesel storage tanks.





The whole
process is expected to be completed in 10 to 12 hours.





LOGISTICS





The plant
is located in northeastern Mississippi, about 100 miles south east of Memphis,
TN. Memphis is considered as America’s Distribution Center.




The
location of the Memphis region has given rise to an important complex of
transportation and logistics resources including water, air, road and rail
transportation and telecommunications. “North America's Distribution
Center,”Memphis is
home to the largest cargo airport (Memphis International Airport) in the world,
four north-south runways, a Northwest Airlines hub, and the FedEx
headquarters/global operations center. In addition to the resources found in the
Memphis metropolitan region, the regional cities of Olive Branch (6,000 ft.
runway), Millington (8,000 ft. runway), West Memphis (6,000 ft. runway) and
Blytheville (11,602 ft. runway) have important general aviation airports. The
former Eaker Air Force Base in Blytheville has become a major economic
development center in the northern part of the region. The second largest inland
port in the country and a series of water ports (including Helena, W. Memphis,
N. Memphis and Blytheville Ports) are found along the Mississippi River. The
I-40 and I-55 interstates, extending east-west and north-south respectively,
position the region at a key crossroad in the interstate highway system. As a
result, the Memphis region is also an important trucking hub. With five Class-I
railroads (BNSF, UP, CN/IC, CSX, and NS), the region is also an important rail
hub. The region's extensive logistic functions also support the Super Terminal
and growth of the area's global communications infrastructure. As a result,
Memphis is poised to emerge as an important information processing and
communications hub.




In
addition, Toyota is building a plant near New Albany, MS, about 40 miles North
West of the plant. Universal’s refinery is located therefore in the middle of
one of the highest truck traffic area and furniture industry centers in the
United States and near the largest automotive arts manufacturing facility of MS.
Thus it is located in the middle of one of the largest potential diesel
consumption market in the United States.





There is
a railway line in close proximity to the facility, and the old railway spur
could be reconstructed for an estimated cost of $250k. The railway is a
cost-effective and efficient way to move Biodiesel by tank car from a gathering
location or single origin to a single destination.





The
Tombigbee Waterway is also located just six miles away from the facility, which
can barge about 500,000 gallons of material at a time.





Management
believes that the rail and waterway transport potential provides excellent
logistic benefit to the facility.


8


PRODUCTS




Universal
owns a biodiesel fuel processing refinery. Universal’s mission is to manufacture
biodiesel and bring it to market cost effectively.





Universal
also intends to sell the byproducts from its bio-fuel manufacturing. Although
this is not a significant revenue source, it effectively reduces expenses by
avoiding disposal costs. For example glycerin is a byproduct of biodiesel
manufacturing, and is used in cosmetic industry products, such as soap. The
current price of pharmaceutical glycerin is high; however, that is likely to
change in the next few years due to an increase in supply from  biodiesel
production (and thus an increase of available glycerin). An alternative is for
Universal to purchase a glycerin-to-methanol converter. Since methanol is one of
the ingredients needed to manufacture biodiesel, producing its own may allow
Universal to avoid the expense of purchasing (and transporting) methanol from
outside sources-and the cost of the converter would be offset by the cost
savings. Although the technology is only one step beyond experimental, it does
present a promising alternative.





DISTRIBUTION





Universal
is planning to sell biodiesel products to the refineries prior customers, truck
stops, local distributors and export to the European market. Universal is also
exploring the possibility to distribute their complete production thru a well
known and nationally reputed distributor of biodiesel and other biofuel
products.





Universal
is negotiating contracts with various vendors to meet their raw material
requirements. Universal is also exploring the possibility of importing oil from
Africa and Asia. In order to achieve its strategic goals, Universal intends to
develop a network of qualified representatives and staff that are knowledgeable
in the bio-fuels industry to coordinate with both suppliers and distributors to
market and sell Universal’s products. In addition, the Company intends to expand
its current management to retain skilled directors, officers and employees with
experience relevant to its business focus. Obtaining the assistance of
individuals with an in-depth knowledge of markets will allow us to build market
share more effectively.




Off-Balance
Sheet Arrangements




We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.





Limited
Operating History; Need for Additional Capital




There is
no historical financial information about us on which to base an evaluation of
our performance. We are an exploration stage company and have not generated
revenues from operations. We cannot guarantee we will be successful in our
business operations. Our business is subject to risks inherent in the
establishment of a new business enterprise, including limited capital resources,
possible delays in the exploration of our property, and possible cost overruns
due to increases in the cost of services.




To become
profitable and competitive, we must conduct the exploration of our properties
before we start into production of any minerals we may find. We are seeking
funding from this offering to provide the capital required for our exploration
program. We believe that the funds from this offering will allow us to operate
for one year.


9


Revenues




Revenue
from product sales is recognized upon shipment to customers at which time such
customers are invoiced. Units are shipped under the terms of FOB shipping point
when determination is made that collectability is probable. Our company has
adopted the Securities and Exchange Commission’s Staff Accounting Bulletin (SAB)
No. 104, which provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements.





Employees





As
of December 31, 2007, the Company had 4 employees.





WHERE YOU CAN FIND MORE
INFORMATION





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





ITEM 1A
- Risk Factors





An
investment in our common stock involves a high degree of risk. You should
carefully consider the following information about these risks, together with
the other information contained in this Annual Report on Form 10-K/A, before
investing in our common stock. If any of the events anticipated by the risks
described below occur, our results of operations and financial condition could
be adversely affected which could result in a decline in the market price of our
common stock, causing you to lose all or part of your investment.




The
Report Of Our Independent Registered Public Accounting Firm Contains Explanatory
Language That Substantial Doubt Exists About Our Ability To Continue As A Going
Concern




The
independent auditor’s report on our financial statements contains explanatory
language that substantial doubt exists about our ability to continue as a going
concern. The report states that we depend on the continued contributions of our
executive officers to work effectively as a team, to execute our business
strategy, and to manage our business. The loss of key personnel, or their
failure to work effectively, could have a material adverse effect on our
business, financial condition, and results of operations. If we are unable to
obtain sufficient financing in the near term or achieve profitability, then we
would, in all likelihood, experience severe liquidity problems and may have to
curtail our operations. If we curtail our operations, we may be placed into
bankruptcy or undergo liquidation, the result of which will adversely affect the
value of our common shares.




We
lack an operating history and have losses which we expect to continue into the
future. As a result, we may have to suspend or cease activities.




We were
incorporated in August, 2004, and we have not started our proposed business
activities or realized any revenues. We have no operating history upon which an
evaluation of our future success or failure can be made. Our net loss was
$8,631,056 from inception to December 31, 2007. Our ability to achieve and
maintain profitability and positive cash flow is dependent
upon:


10




·
            our
      ability to generate revenues


·
            our
      ability to implement our refinery


·
            our
      ability to reduce costs.




Based
upon current plans, we expect to incur operating losses in future periods. As a
result, we may not generate revenues in the future. Failure to generate revenues
will cause us to suspend or cease activities.




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




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





II.  Risks
Associated with Our Current Stage of Business





If
a market for our common stock does not develop, shareholders may be unable to
sell their shares and will incur losses as a result.




There is
currently no market for our common stock and no certainty that a market will
develop. We currently plan to apply for listing of our common stock on the over
the counter bulletin board upon the effectiveness of the registration statement,
of which this prospectus forms a part. Our shares may never trade on the
bulletin board. If no market is ever developed for our shares, it will be
difficult for shareholders to sell their stock. In such a case, shareholders may
find that they are unable to achieve benefits from their
investment.




Failure
to achieve and maintain effective internal controls in accordance with section
404 of the Sarbanes-Oxley act could have a material adverse effect on our
business and operating results.




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




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


11


Pursuant
to Section 404 of the Sarbanes-Oxley Act and current SEC regulations,
beginning with our August, 2004 report on Form 10-Q for our fiscal period
ending January 31, 2006, we will be required to prepare assessments regarding
internal controls over financial reporting and beginning with our annual report
on Form 10-K for our fiscal period ending January 31, 2006, furnish a
report by our management on our internal control over financial reporting. We
have begun the process of documenting and testing our internal control
procedures in order to satisfy these requirements, which is likely to result in
increased general and administrative expenses and may shift management time and
attention from revenue-generating activities to compliance activities. While our
management is expending significant resources in an effort to complete this
important project, there can be no assurance that we will be able to achieve our
objective on a timely basis. There also can be no assurance that our auditors
will be able to issue an unqualified opinion on management's assessment of the
effectiveness of our internal control over financial reporting. Failure to
achieve and maintain an effective internal control environment or complete our
Section 404 certifications could have a material adverse effect on our
stock price.




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




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




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




Because We Are Quoted On The Pink
sheets Instead Of An Exchange Or National Quotation System, Our Investors May
Have A Tougher Time Selling Their Stock Or Experience Negative Volatility On The
Market Price Of Our Stock.




Our
common stock is traded on the Pink Sheets. The Pink Sheets is often highly
illiquid. There is a greater chance of volatility for securities that trade on
the Pink Sheets as compared to a national exchange or quotation system. This
volatility may be caused by a variety of factors, including the lack of readily
available price quotations, the absence of consistent administrative supervision
of bid and ask quotations, lower trading volume, and market conditions.
Investors in our common stock may experience high fluctuations in the market
price and volume of the trading market for our securities. These fluctuations,
when they occur, have a negative effect on the market price for our securities.
Accordingly, our stockholders may not be able to realize a fair price from their
shares when they determine to sell them or may have to hold them for a
substantial period of time until the market for our common stock
improves.


12




Once
publicly trading, the application of the “penny stock” rules could adversely
affect the market price of our common shares and increase your transaction costs
to sell those shares. The Securities and Exchange Commission has adopted rule
3a51-1 which establishes the definition of a “penny stock,” for the purposes
relevant to us, as any equity security that has a market price of less than
$5.00 per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless
exempt, rule 15g-9 require:




·
            that
      a broker or dealer approve a person’s account for transactions in penny
      stocks; and


·
            the
      broker or dealer receive from the investor a written agreement to the
      transaction, setting forth the identity and quantity of the penny stock to
      be purchased.





In order
to approve a person’s account for transactions in penny stocks, the broker or
dealer must:




·
            obtain
      financial information and investment experience objectives of the person;
      and


·
            make
      a reasonable determination that the transactions in penny stocks are
      suitable for that person and the person has sufficient knowledge and
      experience in financial matters to be capable of evaluating the risks of
      transactions in penny stocks.





The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the SEC relating to the penny stock market,
which, in highlight form:




·
            sets
      forth the basis on which the broker or dealer made the suitability
      determination; and


·
            that
      the broker or dealer received a signed, written agreement from the
      investor prior to the transaction.


·
            Generally,
      brokers may be less willing to execute transactions in securities subject
      to the “penny stock” rules. This may make it more difficult for investors
      to dispose of our common stock and cause a decline in the market value of
      our stock.




FINRA
sales practice requirements may also limit a stockholder's ability to buy and
sell our stock.





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




The
market price for our common shares is particularly volatile given our status as
a relatively unknown company with a small and thinly traded public float,
limited operating history and lack of profits which could lead to wide
fluctuations in our share price. The price at which you purchase our common
shares may not be indicative of the price that will prevail in the trading
market. You may be unable to sell your common shares at or above your purchase
price, which may result in substantial losses to you.


13


The
market for our common shares is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our share price is attributable to a number of factors. First,
as noted above, our common shares are sporadically and thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our shareholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for
example, decline precipitously in the event that a large number of our common
shares are sold on the market without commensurate demand, as compared to a
seasoned issuer which could better absorb those sales without adverse impact on
its share price. Secondly, we are a speculative or “risky” investment due to our
limited operating history and lack of profits to date, and uncertainty of future
market acceptance for our potential products. As a consequence of this enhanced
risk, more risk-adverse investors may, under the fear of losing all or most of
their investment in the event of negative news or lack of progress, be more
inclined to sell their shares on the market more quickly and at greater
discounts than would be the case with the stock of a seasoned issuer. Many of
these factors are beyond our control and may decrease the market price of our
common shares, regardless of our operating performance. We cannot make any
predictions or projections as to what the prevailing market price for our common
shares will be at any time, including as to whether our common shares will
sustain their current market prices, or as to what effect that the sale of
shares or the availability of common shares for sale at any time will have on
the prevailing market price.




Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer;
(2) manipulation of prices through prearranged matching of purchases and
sales and false and misleading press releases; (3) boiler room practices
involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (4) excessive and undisclosed bid-ask
differential and markups by selling broker-dealers; and (5) 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. The occurrence
of these patterns or practices could increase the volatility of our share
price.




Volatility
in our common share price may subject us to securities litigation, thereby
diverting our resources that may have a material effect on our profitability and
results of operations.




As
discussed in the preceding risk factors, the market for our common shares is
characterized by significant price volatility when compared to seasoned issuers,
and we expect that our share price will continue to be more volatile than a
seasoned issuer for the indefinite future. In the past, plaintiffs have often
initiated securities class action litigation against a company following periods
of volatility in the market price of its securities. We may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management’s attention and
resources.





ITEM
1B.  UNRESOLVED STAFF COMMENTS





The
Company is presently in the process of clearing outstanding SEC
comments.





ITEM
2.  PROPERTIES.




The
principal office of the Company is located at 19800
Mac Arthur Blvd. Ste. 300,Irvine, CA 92612 . UBRG owns
UBNA which owns a biodiesel fuel refinery located in northeastern Mississippi.
The plant is located on 4.3 acres of land which provides ample space to expand
at address 128 Biodiesel Drive, Nettleton MS 38858.


14





ITEM
3.  LEGAL PROCEEDINGS


We are
currently not involved in any litigation that we believe could have a materially
adverse effect on our financial condition or results of operations. There is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of our company or any of our
subsidiaries, threatened against or affecting our company, our common stock, any
of our subsidiaries or of our company’s or our company’s subsidiaries’ officers
or directors in their capacities as such, in which an adverse decision could
have a material adverse effect.





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





No
matters were submitted to a vote of shareholders of the Company during
the fiscal eleven months ended December 31, 2007.


15


PART
II





ITEM
5.  MARKET FOR REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS
AND ISSUERS PURCHASES OF EQUITY SECURITIES.





Universal
common stock is traded in the over-the-counter market, and quoted in the
National Association of Securities Dealers Inter-dealer Quotation System and can
be accessed on the Internet at www.pinksheets.com
under the symbol “UBRG.PK.”





At
December 31, 2007, there were 22,500,000 shares of common stock of Universal
outstanding and there were approximately 21 shareholders of record of the
Company’s common stock.





The
following table sets forth for the periods indicated the high and low bid
quotations for Universal’s common stock. These quotations represent inter-dealer
quotations, without adjustment for retail markup, markdown or commission and may
not represent actual transactions.





Periods
                
                High
                
                
                LowFiscal
      Year 2007 – 11 monthsFirst
      Quarter (January – March 2007)
                
                $
                00
                
                
                $
                .00Second
      Quarter (April – June 2007)
                
                $
                00
                
                
                $
                00Third
      Quarter (July – September 2007)
                
                $
                0.005
                
                
                $
                0.00Fourth
      Quarter (October – December 2007)
                
                $
                5.05
                
                
                $
                5.05





On April
24, 2008, the closing bid price of our common stock was
$5.01.





Dividends





We may
never pay any dividends to our shareholders. We did not declare any dividends
for the eleven months ended December 31, 2007. Our Board of Directors
does not intend to distribute dividends in the near future. The declaration,
payment and amount of any future dividends will be made at the discretion of the
Board of Directors, and will depend upon, among other things, the results of our
operations, cash flows and financial condition, operating and capital
requirements, and other factors as the Board of Directors considers relevant.
There is no assurance that future dividends will be paid, and if dividends are
paid, there is no assurance with respect to the amount of any such
dividend.





Transfer
Agent





Universal’s
Transfer Agent and Registrar for the common stock is Corporate Stock Transfer
located in Denver, Colorado.





Recent
Sales of Unregistered Securities




Shareholder Name
                  
                  Number of Shares OwnedWWF
      International, Ltd (1)
                  
                  
                  1,000,000Forester
      Capital, Inc (1)
                  
                  
                  1,000,000Lyon
      Global Investments, LLC (1)
                  
                  
                  1,000,000Morrison
      Holdings, LLC (1)
                  
                  
                  1,000,000Lakewood
      Management, Inc. (1)
                  
                  
                  1,000,000Kaifeng,
      Ltd. (1)
                  
                  
                  1,000,000Lemma
      II, LLC (1)
                  
                  
                  1,000,000L&S
      Capital Management, LLC (1)
                  
                  
                  1,000,000Centaur
      Partners, Inc (1)
                  
                  
                  1,000,000Sunrise
      Financial, LLC (1)
                  
                  
                  1,000,000




16




(1) These
shareholders received their shares as a result of the consummation by the
Company of its acquisition of Universal Bioenergy North America, Inc., a Nevada
Corporation ("Universal"). As a result of the closing, Universal has become a
wholly owned subsidiary of the Company. In exchange for all of the issued and
outstanding shares of Universal, the Company issued to the shareholders of
Universal 2,000,000 shares of common stock of the company (pre-forward split of
1 for 5 shares). Mortensen Financial Ltd., a shareholder of the Company
contributed 1,800,000 shares of common stock of the Company to the amount of
shares being delivered to Universal shareholders by the Company. The
shareholders are all of the former shareholders of Universal. The shares were
issued with the standard restrictive legend with respect to transferability. All
such transactions were private offerings made without advertising or public
solicitation. The transaction was exempt from the registration requirement of
the Securities Act of 1933, as amended, by Section 4(2).





Forward
Stock Splits





Share
data in this report have been adjusted to reflect the following stock splits
relating to the Company's common stock: November 14, 2007 the board of directors
authorized a 5-for-1 forward split. This forward split is reflected in the
statement of shareholder’s equity for December 31, 2007 by way of a stock
dividend.





ITEM
6.  SELECTED FINANCIAL DATA.





The
following information has been summarized from financial information included
elsewhere and should be read in conjunction with such financial statements and
notes thereto.





Summary
of Statements of Operations of UBRG





Eleven
Months Ended December 31, 2007 and Year Ended January 31,
2007


17





Statement of Operations
Data
                            
                            For the Eleven Months Ended
                            
                            
                            For the Year EndedDecember 31,
                            
                            
                            January 31,2007
                            
                            
                            2007Revenues
                            
                            $
                            -
                            
                            
                            $
                            -Operating
      and Other Expenses
                            
                            
                            8,589,616
                            
                            
                            
                            13,764Net
      Loss
                            
                            $
                            (8,589,616
                            )
                            
                            $
                            (13,764
                            )Balance
      Sheet Data:December 31,
                            
                            
                            January 31,2007
                            
                            
                            2007Cash
                            
                            $
                            133,177
                            
                            
                            $
                            2,820Prepaid
      Expenses
                            
                            
                            178,076
                            
                            
                            
                            5,100Total
      Assets
                            
                            
                            3,910,325
                            
                            
                            
                            2,920Current
      Liabilities
                            
                            
                            659,231
                            
                            
                            
                            16,360Non
      Current Liabilities
                            
                            
                            1,831,750
                            
                            
                            
                            -Total
      Liabilities
                            
                            
                            2,490,981
                            
                            
                            
                            16,360Working
      Capital (Deficit)
                            
                            
                            (195,798
                            )
                            
                            
                            (13,440
                            )Shareholders'Equity
      (Deficit)
                            
                            $
                            1,419,344
                            
                            
                            $
                            (13,440
                            )





ITEM
7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OR PLAN OF OPERATION.





The
following is management’s discussion and analysis of certain significant factors
that have affected our financial position and operating results during the
periods included in the accompanying consolidated financial statements, as well
as information relating to the plans of our current management. This report
includes forward-looking statements. Generally, the words “believes,”
“anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,”
“continue,” and similar expressions or the negative thereof or comparable
terminology are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, including the matters set forth
in this report or other reports or documents we file with the Securities and
Exchange Commission from time to time, which could cause actual results or
outcomes to differ materially from those projected. Undue reliance should not be
placed on these forward-looking statements which speak only as of the date
hereof. We undertake no obligation to update these forward-looking
statements.





The
following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto and other
financial information contained elsewhere in this Form 10-K/A.


18


Overview





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





UBNA (now
a subsidiary of UBRG) is a start-up Nevada corporation formed on January 23,
2007, for the purpose of operating a maximum capacity 50,000,000 gallons per
year (MGPY) biodiesel plant in Nettleton, Mississippi to produce biodiesel fuel
and a marketable byproduct of glycerin. We do not expect to generate any revenue
until the plant is completely operational. Our board of directors reserves the
right to change the location of the plant site, in their sole discretion, for
any reason. We anticipate the final plant site will have access to water, truck,
and rail transportation.




Based
upon estimates of management, the plant will annually produce approximately 10
million, 20 million, and 50 million gallons of fuel grade biodiesel from soybean
oil (or other suitable feedstock) per the first 12, 24, and 36 month periods
respectively after the start of production and produce corresponding amounts
(10% by biodiesel production volume) of marketable glycerin. We are still in the
development phase, and until the proposed biodiesel plant is operational, we
will generate no revenue. We anticipate that accumulated losses will continue to
increase until the biodiesel plant is operational.




Over the
past year and three months, the plant has undergone site improvement and
development. General clean up and improvements of the site have taken place
utilizing the debt financing previously obtained through LaCroix International
Ltd and Mortensen Financial Ltd.





Plan
of Operations for Initial Start-Up of Biodiesel Plant





Environmental
permits were obtained from the State of Mississippi in April 2008 to allow the
company to begin the scale-up phase of production to reach the nominal first
stage 10 MGPY subject to confirmation of effluent emissions. Pending
confirmation of these effluent emissions and issuance of the final permits by
the State of Mississippi, the plant will work to increase production
to meet the first stage goal over the subsequent twelve month period.
During this early stage, Universal is planning to sell biodiesel products to the
refinery's prior customer base, truck stops, and local distributors. As
production is scaled up to the 20 MGPY level and above in subsequent months
after the first stage goal is reached, export to the European market is expected
with the higher production volume. Universal is exploring the possibility to
distribute their complete production volume through a well known and nationally
respected distributor of biodiesel and other biofuel products.





Management
believes that present cash reserves incurred through debt financing will be
sufficient for expenses for needed feedstock and reaction materials to begin
production. Sustaining production at the 10 MGPY level and expansion of the
plant to increase production capacity to the second stage goal of 20 MGPY using
already acquired equipment and subsequent purchases and installation will
require the successful raising of further capital through the initial offering
and additional debt if necessary.





Management
believes in the next twelve months approximately $ 2,000,000 of working capital
will be needed for operating expenses, and management further believes the
company's cash reserves will be insufficient to cover such costs. The company is
working with vendors to establish credit for feedstock materials and further
plans to raise needed capital through the continued issuance of outstanding
shares from the initial offering, revenue from sales of products, and if
necessary through additional debt until sufficient production volume can be
reached to cover operating costs and debt service. The raising of such capital
through stock issuance or debt is uncertain at best due to the present
volatility in the marketplace.


19


We
believe our cash balance will not be sufficient to cover the expenses we will
incur during the next twelve months in a limited operations scenario or until we
raise the funding from this offering. If we experience a shortage of funds prior
to funding we may utilize funds from our director, who has informally agreed to
advance funds to allow us to pay for offering costs, filing fees, and
professional fees, however he has no formal commitment, arrangement or legal
obligation to advance or loan funds to the company. In order to achieve our
business plan goals, we will need the funding from this offering. We have
generated no revenue to date.





Our
auditor has issued a going concern opinion. This means that there is substantial
doubt that we can continue as an on-going business for the next twelve months
unless we obtain additional capital to pay our bills. This is because we have
not generated revenues and no revenues are anticipated until we begin processing
Biodesiel in our refinery. There is no assurance we will ever reach that
point.





Critical
Accounting Policies




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




Basis
of Presentation




The
Company has produced minimal revenue from its principal business and is a
development stage company as defined by the Statement of Financial Accounting
Standards (SFAS) No. 7 “Accounting and Reporting by Development Stage
Enterprises”.




Use
of Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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. These estimates and assumptions also affect the
reported amounts of revenues, costs and expenses during the reporting period.
Management evaluates these estimates and assumptions on a regular basis. Actual
results could differ from those estimates.




Reclassifications




Certain
prior year amounts have been reclassified to conform to the current period
presentation for comparative purposes.




Revenue
Recognition




As the
Company is continuing to implement our refinery, no significant revenues have
been earned to date. The Company recognizes revenues at the time of delivery of
the product.  Revenue includes sales value received for our principle
product, Biodiesel.  Revenue is recognized when title to of our
Biodesiel products and its by-products passes to the buyer and when
collectibility is reasonably assured. The passing of title to the customer is
based on terms of the sales contract.




Pursuant
to guidance in Staff Accounting Bulletin ("SAB") No. 104, "Revenue
Recognition for Financial Statements", revenue is recognized when persuasive
evidence of an arrangement exists, delivery has occurred, the price is fixed or
determinable, no obligations remain and collectability is probable. The passing
of title to the customer is based on the terms of the sales
contract.




Cash
and Cash Equivalents




The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. At December 31, 2007, cash and cash
equivalents include cash on hand and cash in the bank.


20


Property
and Equipment




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




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




Asset Category
                              
                              Depreciation/
                                Amortization PeriodFurniture
      and Fixture
                              
                              3
      YearsOffice
      equipment
                              
                              3
      YearsLeasehold
      improvements
                              
                              5
      Years





The
Company's corporate office is located in Phoenix, Arizona and the office is
provided free of charge by our Treasurer.





Impairment
of Long-Lived Assets




In
accordance with SFAS No. 144, long-lived assets, such as property, plant,
and equipment, and purchased intangibles, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Goodwill and other intangible assets are tested for
impairment annually. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. The Company has impaired the goodwill in the purchase
of its subsidiary of $8,486,644.  The Company has valued the
intangible assets of $1,650,000 with a useful life of ten years.  The
Company based that value on the bankruptcy court determination at the time of
purchase.  The Company has not impaired these intangible assets since
management believes that their existing value is a fair value of the
assets.




Income
Taxes




Deferred
income taxes are provided based on the provisions of SFAS No. 109,
"Accounting for Income Taxes" ("SFAS 109"), to reflect the tax consequences in
future years of differences between the tax bases of assets and liabilities and
their financial reporting amounts based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.




Concentration
of Credit Risk




The
Company maintains its operating cash balances in banks in Palm Coast, Florida.
The Federal Depository Insurance Corporation (FDIC) insures accounts at each
institution up to $250,000 until December 31, 2007.




Share-Based
Compensation




The
Company applies SFAS No. 123 “Share-Based Payments” (“SFAS
No. 123(R)”) to share-based compensation, which requires the measurement of
the cost of services received in exchange for an award of an equity instrument
based on the grant-date fair value of the award. Compensation cost is recognized
when the event occurs. The Black-Scholes option-pricing model is used to
estimate the fair value of options granted.  The Company has not
issued any stock for compensation for the years ended December 31,
2007.




21


Basic
and Diluted Net Loss Per Share




Net loss
per share was computed by dividing the net loss by the weighted average number
of common shares outstanding during the period. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighting
them by the amount of time that they were outstanding. Diluted net loss per
share for the Company is the same as basic net loss per share, as the inclusion
of common stock equivalents would be antidilutive.




Fair
Value of Financial Instruments




The fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties other than in a
forced sale or liquidation.




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




Off-Balance
Sheet Arrangements





We have
not entered into any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources and would be considered material to
investors. Certain officers and directors of the Company have provided personal
guarantees to our various lenders as required for the extension of credit to the
Company.




Accounting
policies subject to estimation and judgment





Management's
Discussion and Analysis of Financial Condition and Results of Operations are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. When preparing
our financial statements, we make estimates and judgments that affect the
reported amounts on our balance sheets and income statements, and our related
disclosure about contingent assets and liabilities. We continually evaluate our
estimates, reserves for income taxes, and litigation. We base our estimates on
historical experience and on various other assumptions, which we believe to be
reasonable in order to form the basis for making judgments about the carrying
values of assets and liabilities that are not readily ascertained from other
sources. Actual results may deviate from these estimates if alternative
assumptions or condition are used.




RESULTS
OF OPERATIONS





Fiscal Eleven
Months Ended December 31, 2007 compared to Year Ended January 31,
2007





The
Company has incurred recurring losses from operations and has a net working
capital deficiency and net capital deficiency that raises substantial doubt
about its ability to continue as a going concern. Historically, our cash
needs have been met primarily through proceeds from private placements of our
equity securities and debt instruments including debt instruments convertible
into our equity securities. Company management intends to raise additional cash
to fund future operations and to provide additional working capital. However,
there is no assurance that such financing will be obtained. The Company expects
that it will require $ 2,000,000 in order to fund its business for the next 12
months. We expect to continue to raise capital in the future, but cannot
guarantee that such financing activities will be sufficient to fund our current
and future projects and our ability to meet our cash and working capital
needs.


22


For
the eleven months ended December 31, 2007 we generated no revenue. Our future
revenue plan is uncertain and is dependent on our ability to effectively
generate sales, and obtain effective equipment for our biodiesel plant in
Mississippi. There are no assurances of the ability of our Company to begin to
process biodiesel. The cost of processing biodiesel is cost intensive so it is
critical for us to raise appropriate capital to implement our business plan. The
Company incurred losses of $8,589,616 for the eleven months ended December 31,
2007. Our losses since our inception through December 31, 2007 amount to
$8,631,056.





Liquidity
and Capital Resources





We have
has maintained a minimum of three months of working capital in our bank account.
This reserve was intended to allow for an adequate amount of time to secure
additional funds from investors as needed. To date, we have succeeded in
securing capital as needed, but there is no guarantee this will
continue.





We
believe we will have to rely on public and private equity and debt financings to
fund our liquidity requirements over the intermediate term. We may be unable to
obtain any additional financings on terms favorable to us, or obtain additional
funding at all. If adequate funds are not available on acceptable terms, and if
cash and cash equivalents together with any income generated from operations
fall short of our liquidity requirements, we may be unable to sustain
operations. Continued negative cash flows could create substantial doubt
regarding our ability to fully implement our business plan and could render us
unable to expand our operations, successfully promote our brand, develop our
products, respond to competitive pressures, or take advantage of acquisition
opportunities, any of which may have a material adverse effect on our business.
If we raise additional funds through the issuance of equity securities, our
stockholders may experience dilution of their ownership interest, and the newly
issued securities may have rights superior to those of our common stock. If we
raise additional funds by issuing debt, we may be subject to limitations on our
operations, including limitations on the payments of dividends





Other
Considerations





There are
numerous factors that affect the business and the results of its operations.
Sources of these factors include general economic and business conditions,
federal and state regulation of business activities, the level of demand for
product services, the level and intensity of competition in the health drink
industry, and the ability to develop new services based on new or evolving
technology and the market's acceptance of those new services, the Company’s
ability to timely and effectively manage periodic product transitions, the
services, customer and geographic sales mix for any particular period, and our
ability to continue to improve our infrastructure including personnel and
systems to keep pace with the Company’s anticipated rapid growth.





Recent
Developments





A.
Employment Agreement




On
February 26, 2008, the Company entered into a one-year employment agreement with
the Company’s Chief Executive Officer. The agreement renews annually so that at
all times, the term of the agreement is one year. Pursuant to this agreement,
the Company will pay an annual base salary of $60,000 for the period February
26, 2008 through February 26, 2009. In addition, the officer received a signing
bonus of $100,000 based on the value of the Company’s common shares on the
effective date of issuance.  That vest one year after issuance. The
agreement also calls for increase in the officer’s base compensation upon the
Company reaching certain milestones:


23





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




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




B.
Stock issued for services





On
February 13, 2008 the Company issued 10,000 shares of common stock for
consulting services having a fair value of $50,600 (See Note 6).





C.
Advances





In
January 2008, the Company received a $10,000 advance from a related party. The
advance is unsecured, non interest bearing and due on demand.





ITEM 7A.  QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





We do not
hold any derivative instruments and do not engage in any hedging
activities


24





ITEM
8.  FINANCIAL STATEMENTS





UNIVERSAL
BIOENERGY, INC.





TABLE OF CONTENTS
                    
                    PageINDEPENDENT
      REGISTERED PUBLIC ACCOUNTING FIRMS:Webb
      & Company P.A.Morgan
      & Company, C.A.FINANCIAL
      STATEMENTS:Consolidated
      Balance Sheet at December 31, 2007 (Restated) and January 31,
      2007
                    
                    
                    F-3Statements
      of Operations for the Period from August 13, 2004 (inception) through
      December 31, 2007 (Consolidated)
                    
                    
                    F-4Statements
      of Stockholders’ Equity (Deficiency) for the Period from August 13, 2004
      (inception) through December 31, 2007 (Consolidated)
                    
                    
                    F-5Statements
      of Cash Flows for the Period from August 13, 2004 (inception) through
      December 31, 2007 (Consolidated)
                    
                    
                    F-6NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
                    
                    
                    F-7




25


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors of:
 Universal
Bioenergy, Inc. and Subsidiary
 (f/k/a
Palomine, Inc.)
 
 We
have audited the accompanying consolidated balance sheet of Universal Bioenergy,
Inc. and Subsidiary (f/k/a Palomine, Inc.) as of December 31, 2007 (restated),
and the related consolidated statements of operations, changes in stockholders’
deficiency and cash flows for the period from February 1, 2007 to December 31,
2007 (restated) and the period August 13, 2004 (inception) 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 audit.  The financial
statements  for the year ended January 31, 2007 were audited by other
auditors whose report dated May 29, 2007 on these statements included an
explanatory paragraph describing conditions that raised substantial doubt about
the Company’s ability to continue as a going concern. The financial statements
for the period from August 13, 2004 (inception) to December 31, 2007 in so
far as they relate to amounts for the period through January 31, 2007, are based
solely on the report of the other auditors.
 
 We
conducted our audit 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.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides 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 Universal Bioenergy, Inc.
and Subsidiary (f/k/a Palomine, Inc.) as of December 31, 2007 (restated) and the
results of its consolidated operations and its cash flows for the period from
February 1, 2007 to December 31, 2007 (restated) and the period August 13, 2004
(inception) to December 31, 2007 in conformity with accounting principles
generally accepted in the United States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 2
to the financial statements, the Company has recurring losses from inception of
$8,631,056 and negative working capital.  These factors raise
substantial doubt about the Company's ability to continue as a going
concern.  Management's plans concerning these matters are also
described in Note 2.  The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
 
 WEBB
& COMPANY, P.A.
 
 Boynton
Beach, Florida
 April
10, 2008, except for note 13, to
 which
the date is December 21, 2009
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Stockholders of
 Palomine
Mining Inc.
 (An
exploration stage company)
 
 We have
audited the accompanying balance sheet of Palomine Mining Inc. (an exploration
stage company) as at January 31, 2007, and the related statements of operations,
cash flows, and stockholders’ equity (deficiency) for the year ended January 31,
2007, and for the cumulative period from August 13, 2004 (inception) to January
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 an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
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 financial statements referred to above present fairly, in all
material respects, the financial position of the Company as at January 31, 2007,
and the results of its operations and its cash flows for the periods indicated
in conformity with accounting principles generally accepted in the United
States.
 
 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.
 
 The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.  As discussed in Note 1 to the financial
statements, the Company has suffered recurring losses from operations, has
negative cash flows, and is dependent upon obtaining adequate financing to
fulfil its exploration activities.  These factors raise substantial
doubt about its ability to continue as a going concern.  Management’s
plans in regard to these matters are also described in Note 1.  The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
 
 Vancouver,
      Canada
                  “Morgan
      & Company”May
      29, 2007
                  Chartered
      Accountants










UNIVERSAL BIOENERGY, INC.
 (A
Development Stage Company)
 
 CONSOLIDATED
BALANCE SHEET
 
 December 31,
                                            2007
                                          
                                          
                                          January 31,
                                            2007(Restated)ASSETS:CURRENT
      ASSETSCash
                                          
                                          $
                                          133,177
                                          
                                          
                                          
                                          2,820Prepaid
      expenses
                                          
                                          
                                          178,076
                                          
                                          
                                          
                                          100Total
      current assets
                                          
                                          
                                          311,253
                                          
                                          
                                          
                                          2,920PROPERTY
      AND EQUIPMENT, net
                                          
                                          
                                          1,945,972
                                          
                                          
                                          
                                          -Intangible
      assets
                                          
                                          
                                          1,650,000
                                          
                                          
                                          
                                          -Deposit
                                          
                                          
                                          3,100
                                          
                                          
                                          
                                          -TOTAL
      ASSETS
                                          
                                          $
                                          3,910,325
                                          
                                          
                                          $
                                          2,920LIABILITIES
      AND STOCKHOLDERS' EQUITY: (DEFICIENCY)CURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                                          
                                          $
                                          87,218
                                          
                                          
                                          
                                          6,360Accrued
      interest
                                          
                                          
                                          97,850
                                          
                                          
                                          
                                          -Convertible
      note - affiliate
                                          
                                          
                                          7,867
                                          
                                          
                                          
                                          -Note
      payable- affiliate
                                          
                                          
                                          260,046
                                          
                                          
                                          
                                          -Note
      payable
                                          
                                          
                                          206,250
                                          
                                          
                                          
                                          10,000Total
      current liabilities
                                          
                                          
                                          659,231
                                          
                                          
                                          
                                          16,360Convertible
      note - affiliate
                                          
                                          
                                          300,000
                                          
                                          
                                          
                                          -Note
      payable - affiliate
                                          
                                          
                                          44,000
                                          
                                          
                                          
                                          -Note
      payable
                                          
                                          
                                          1,487,750
                                          
                                          
                                          
                                          -TOTAL
      LIABILITIES
                                          
                                          
                                          2,490,981
                                          
                                          
                                          
                                          16,360STOCKHOLDERS'
      EQUITY: (DEFICIENCY):Preferred
      stock, $.001 par value, 1,000,000 shares authorized; none issued and
      outstanding shares
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Common
      stock, $.001 par value, 200,000,000 shares authorized; 22,500,000 and
      4,300,000 issued and outstanding as of December 31, 2007 and January 31,
      2007
                                          
                                          
                                          22,500
                                          
                                          
                                          
                                          4,300Additional
      paid-in capital
                                          
                                          
                                          10,045,900
                                          
                                          
                                          
                                          23,700Accumulated
      deficit - development stage company
                                          
                                          
                                          (8,649,056
                                          )
                                          
                                          
                                          (41,440
                                          )Total
      stockholders' equity (deficiency)
                                          
                                          
                                          1,419,344
                                          
                                          
                                          
                                          (13,440
                                          )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
                                          
                                          $
                                          3,910,325
                                          
                                          
                                          $
                                          2,920
  The
accompanying notes are an integral part of these consolidated financial
statements.
  F-3
 
 UNIVERSAL BIOENERGY, INC.
 (A
Development Stage Company)
 
 STATEMENTS
OF OPERATIONS
 
  For
      the PeriodFor
      the Eleven Months Ended
                                                      
                                                      
                                                      For
      the Year Ended
                                                      
                                                      
                                                      from
      August 13, 2004December
      31,
                                                      
                                                      
                                                      January
      31,
                                                      
                                                      
                                                      (inception)
      through2007
                                                      
                                                      
                                                      2007
                                                      
                                                      
                                                      December
      31, 2007Consolidated
                                                        (Restated)
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      ConsolidatedRevenue
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      -Total
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -OPERATING
      EXPENSES:General
      and administrative
                                                      
                                                      
                                                      102,803
                                                      
                                                      
                                                      
                                                      13,764
                                                      
                                                      
                                                      
                                                      144,243Impairment
      of assets
                                                      
                                                      
                                                      8,486,644
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      8,486,644Total
      operating expenses
                                                      
                                                      
                                                      8,589,447
                                                      
                                                      
                                                      
                                                      13,764
                                                      
                                                      
                                                      
                                                      8,630,887OTHER
      EXPENSES:Interest
      expense
                                                      
                                                      
                                                      169
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      169Total
      other expense
                                                      
                                                      
                                                      169
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      169NET
      LOSS
                                                      
                                                      $
                                                      (8,589,616
                                                      )
                                                      
                                                      $
                                                      (13,764
                                                      )
                                                      
                                                      $
                                                      (8,631,056
                                                      )NET
      LOSS PER SHARE:Basic
      and diluted loss per share
                                                      
                                                      $
                                                      (0.40
                                                      )
                                                      
                                                      $
                                                      (0.00
                                                      )Weighted
      average number of shares outstanding
                                                      
                                                      
                                                      21,574,850
                                                      
                                                      
                                                      
                                                      4,300,000
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-4
 
 UNIVERSAL BIOENERGY, INC.
 (A
Development Stage Company)
 STATEMENTS
OF STOCKHOLDER' EQUITY (DEFICIENCY)
 FOR
THE PERIOD FROM AUGUST 13, 2004 (INCEPTION) THROUGH DECEMBER 31,
2007
 
  AccumulatedDeficitAdditional
                                                  
                                                  
                                                  DuringCommon
      Stock
                                                  
                                                  
                                                  Paid-in
                                                  
                                                  
                                                  DevelopmentShares
                                                  
                                                  
                                                  Amount
                                                  
                                                  
                                                  Capital
                                                  
                                                  
                                                  Stage
                                                  
                                                  
                                                  TotalBALANCE
      AT AUGUST 13, 2004
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -Common
      stock issued for cash
                                                  
                                                  
                                                  4,300,000
                                                  
                                                  
                                                  
                                                  4,300
                                                  
                                                  
                                                  
                                                  18,900
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  23,200Net
      loss
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (6,240
                                                  )
                                                  
                                                  
                                                  (6,240
                                                  )BALANCE
      AT JANUARY 31, 2005
                                                  
                                                  
                                                  4,300,000
                                                  
                                                  
                                                  $
                                                  4,300
                                                  
                                                  
                                                  $
                                                  18,900
                                                  
                                                  
                                                  $
                                                  (6,240
                                                  )
                                                  
                                                  $
                                                  16,960Services
      by director
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  2,400
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  2,400Net
      loss
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (21,436
                                                  )
                                                  
                                                  
                                                  (21,436
                                                  )BALANCE
      AT JANUARY 31, 2006
                                                  
                                                  
                                                  4,300,000
                                                  
                                                  
                                                  $
                                                  4,300
                                                  
                                                  
                                                  $
                                                  21,300
                                                  
                                                  
                                                  $
                                                  (27,676
                                                  )
                                                  
                                                  $
                                                  (2,076
                                                  )Services
      by director
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  2,400
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  2,400Net
      loss
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (13,764
                                                  )
                                                  
                                                  
                                                  (13,764
                                                  )BALANCE
      AT JANUARY 31, 2007
                                                  
                                                  
                                                  4,300,000
                                                  
                                                  
                                                  $
                                                  4,300
                                                  
                                                  
                                                  $
                                                  23,700
                                                  
                                                  
                                                  $
                                                  (41,440
                                                  )
                                                  
                                                  $
                                                  (13,440
                                                  )Stock
      dividend
                                                  
                                                  
                                                  18,000,000
                                                  
                                                  
                                                  
                                                  18,000
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (18,000
                                                  )
                                                  
                                                  
                                                  -In-kind
      return of shares
                                                  
                                                  
                                                  (1,800,000
                                                  )
                                                  
                                                  
                                                  (1,800
                                                  )
                                                  
                                                  
                                                  1,800
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -In-kind
      contribution of rent
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  2,400
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  2,400Shares
      issued in purchase of subsidiary
                                                  
                                                  
                                                  2,000,000
                                                  
                                                  
                                                  
                                                  2,000
                                                  
                                                  
                                                  
                                                  10,018,000
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  10,020,000Net
      loss
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (8,589,616
                                                  )
                                                  
                                                  
                                                  (8,589,616
                                                  )BALANCE
      AT DECEMBER 31, 2007 (Consolidated) (Restated)
                                                  
                                                  
                                                  22,500,000
                                                  
                                                  
                                                  $
                                                  22,500
                                                  
                                                  
                                                  $
                                                  10,045,900
                                                  
                                                  
                                                  $
                                                  (8,649,056
                                                  )
                                                  
                                                  $
                                                  1,419,344
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-5
 
 UNIVERSAL
BIOENERGY, INC.
 (A
Development Stage Company)
 
 STATEMENTS
OF CASH FLOWS
 
  For
      the PeriodFor
      the Eleven Months Ended
                                                      
                                                      
                                                      For
      the Year Ended
                                                      
                                                      
                                                      from
      August 13, 2004December
      31
                                                      
                                                      
                                                      January
      13,
                                                      
                                                      
                                                      (inception)
      through2007
                                                      
                                                      
                                                      2007
                                                      
                                                      
                                                      December
      31, 2007Consolidated
                                                        (Restated)
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      ConsolidatedCASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Loss
                                                      
                                                      $
                                                      (8,589,616
                                                      )
                                                      
                                                      $
                                                      (13,764
                                                      )
                                                      
                                                      $
                                                      (8,631,056
                                                      )Adjustment
      to reconcile net loss to net cash (used in) operating
      activities:In-kind
      rent
                                                      
                                                      
                                                      2,400
                                                      
                                                      
                                                      
                                                      2,400
                                                      
                                                      
                                                      
                                                      7,200Impairment
      of goodwill
                                                      
                                                      
                                                      8,486,644
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      8,486,644Changes
      in assets and liabilities:Prepaid
      expenses
                                                      
                                                      
                                                      100
                                                      
                                                      
                                                      
                                                      (100
                                                      )
                                                      
                                                      
                                                      -Accounts
      payable
                                                      
                                                      
                                                      (6,360
                                                      )
                                                      
                                                      
                                                      1,816
                                                      
                                                      
                                                      
                                                      -Accrued
      expenses
                                                      
                                                      
                                                      215
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      215Net
      cash (used in) provided by operating activities
                                                      
                                                      
                                                      (106,617
                                                      )
                                                      
                                                      
                                                      (9,648
                                                      )
                                                      
                                                      
                                                      (136,997
                                                      )CASH
      FLOWS FROM INVESTING ACTIVITIES:Cash
      from acquisition
                                                      
                                                      
                                                      108,974
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      108,974Net
      cash used in investing activities
                                                      
                                                      
                                                      108,974
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      108,974CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from the issuance of common stock
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      23,200Proceeds
      from notes payable
                                                      
                                                      
                                                      128,000
                                                      
                                                      
                                                      
                                                      10,000
                                                      
                                                      
                                                      
                                                      138,000Net
      cash provided by financing activities
                                                      
                                                      
                                                      128,000
                                                      
                                                      
                                                      
                                                      10,000
                                                      
                                                      
                                                      
                                                      161,200INCREASE
      IN CASH
                                                      
                                                      
                                                      130,357
                                                      
                                                      
                                                      
                                                      352
                                                      
                                                      
                                                      
                                                      133,177CASH,
      BEGINNING OF PERIOD
                                                      
                                                      
                                                      2,820
                                                      
                                                      
                                                      
                                                      2,468
                                                      
                                                      
                                                      
                                                      -CASH,
      END OF PERIOD
                                                      
                                                      $
                                                      133,177
                                                      
                                                      
                                                      $
                                                      2,820
                                                      
                                                      
                                                      $
                                                      133,177SUPPLEMENTAL
      CASH FLOW INFORMATION:Interest
      paid
                                                      
                                                      $
                                                      169
                                                      
                                                      
                                                      $
                                                      -Taxes
      paid
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      -Supplemental
      disclosure of non-cash activitiesNon-cash
      operating activityIn-kind
      rent
                                                      
                                                      $
                                                      2,400
                                                      
                                                      
                                                      $
                                                      2,400Stock
      dividend
                                                      
                                                      $
                                                      18,000
                                                      
                                                      
                                                      $
                                                      -
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-6




UNIVERSAL
BIOENERGY, INC. (A Development Stage Company)


CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS


AS
OFDECEMBER
31, 2007





NOTE
1 - DESCRIPTION OF BUSINESS





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





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





UBNA was
organized to operate and produce biodiesel fuel using primarily soybean and
other vegetable oil and grease in a refining process to yield biodiesel fuel and
a marketable byproduct of glycerin.




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








NOTE
2 - GOING CONCERN ISSUES




The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America which
contemplate continuation of the Company as a going concern. However, the Company
has period end losses from operations in December 31, 2007. The Company has net
losses for the period from inception (August 13, 2004) to December 31, 2007 of
$8,631,056 Further, the Company has inadequate working capital to maintain or
develop its operations, and is dependent upon funds from private investors and
the support of certain stockholders.




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




The
Company's ability to meet its obligations and continue as a going concern is
dependent upon its ability to obtain additional financing, achievement of
profitable operations. Although the Company plans to pursue additional
financing, there can be no assurance that the Company will be able to secure
financing when needed or to obtain such financing on terms satisfactory to the
Company, if at all.




NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




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




Basis of
Presentation




The
Company has produced no revenue from its principal business and is an
exploration stage company as defined by the Statement of Financial Accounting
Standards (SFAS) No. 7 “Accounting and Reporting by Development Stage
Enterprises”.


F-7


Use of
Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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. These estimates and assumptions also affect the
reported amounts of revenues, costs, and expenses during the reporting period.
Management evaluates these estimates and assumptions on a regular
basis. Actual results could differ from those estimates.




Principles of
Consolidation




The
consolidated financial statements include the accounts of UBRG from August 13,
2004 (Inception) to December 31, 2007 and its wholly-owned subsidiary UBNA from
December 6, 2007 to December 31, 2007. All significant inter-company accounts
and transactions have been eliminated in consolidation.




Revenue
Recognition




Pursuant
to guidance in Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition
for Financial Statements", revenue is recognized when persuasive evidence of an
arrangement exists, delivery has occurred, the price is fixed or determinable,
no obligations remain and collectability is probable. The passing of title to
the customer is based on the terms of the sales contract.




Cash and Cash
Equivalents




The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. At December 31, 2007 and
January 31, 2007, respectively, cash and cash equivalents include cash on hand
and cash in the bank.




Property and
Equipment




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




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




Asset Category
                  
                  Depreciation/
                    Amortization PeriodFurniture
      and Fixture
                  
                  3
      YearsOffice
      equipment
                  
                  3
      YearsLeasehold
      improvements
                  
                  5
      Years





Impairment of Long-Lived
Assets





In
accordance with SFAS No. 144, long-lived assets, such as property, plant, and
equipment, and purchased intangibles, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Goodwill and other intangible assets are tested for
impairment annually. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. The Company has impaired the goodwill recorded on the
purchase method of accounting for the acquisition of Universal Bioenergy North
America, Inc. by $8,486,644.


F-8




Income
Taxes





Deferred
income taxes are provided based on the provisions of SFAS No. 109, "Accounting
for Income Taxes" ("SFAS 109"), to reflect the tax consequences in future years
of differences between the tax bases of assets and liabilities and their
financial reporting amounts based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.





Concentration of Credit
Risk




The
Company maintains its operating cash balances in banks in Palm Coast, Florida.
The Federal Depository Insurance Corporation (FDIC) insures accounts at each
institution up to $100,000 until December 31, 2007.




Share-Based
Compensation




The
Company applies SFAS No. 123 “Share-Based Payments” (“SFAS No. 123(R)”) to
share-based on EITF 96-18 stock issued to consultants as compensation, which
requires the measurement of the cost of services received in exchange for an
award of an equity instrument based on the grant-date fair value of the award.
Compensation cost is recognized when the event occurs. The Black-Scholes
option-pricing model is used to estimate the fair value of options
granted.




Basic and Diluted Net Loss
Per Share




Net loss
per share was computed by dividing the net loss by the weighted average number
of common shares outstanding during the period. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighting
them by the amount of time that they were outstanding. Diluted net loss per
share for the Company is the same as basic net loss per share, as the inclusion
of common stock equivalents would be antidilutive.




Fair Value of Financial
Instruments




The fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties other than in a
forced sale or liquidation.




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




Recent Accounting
Pronouncements





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


F-9


In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
objective of SFAS 157 is to increase consistency and comparability in fair value
measurements and to expand disclosures about fair value measurements. SFAS 157
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS 157 applies under other accounting pronouncements that
require or permit fair value measurements and does not require any new fair
value measurements. The provisions of SFAS No. 157 are effective for fair value
measurements made in fiscal years beginning after November 15, 2007. The
adoption of this statement is not expected to have a material effect on the
Company’s future reported financial position or results of
operations.





In
February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities -
Including an Amendment of FASB Statement No. 115”. This statement permits
entities to choose to measure many financial instruments and certain other items
at fair value. Most of the provisions of SFAS No. 115 apply only to entities
that elect the fair value option. However, the amendment to SFAS No., 115
“Accounting for Certain Investments in Debt and Equity Securities” applies to
all entities with available-for-sale and trading securities. SFAS No. 159 is
effective as of the beginning of an entity’s first fiscal year that begins after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provision of SFAS No. 157, “Fair Value Measurements”. The adoption
of this statement is not expected to have a material effect on the Company’s
financial statements.





In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
160, “Noncontrolling Interests
in Consolidated Financial Statements - an amendment of ARB No. 51”. This
statement improves the relevance, comparability, and transparency of the
financial information that a reporting entity provides in its consolidated
financial statements by establishing accounting and reporting standards that
require; the ownership interests in subsidiaries held by parties other than the
parent and the amount of consolidated net income attributable to the parent and
to the noncontrolling interest be clearly identified and presented on the face
of the consolidated statement of income, changes in a parent’s ownership
interest while the parent retains its controlling financial interest in its
subsidiary be accounted for consistently, when a subsidiary is deconsolidated,
any retained noncontrolling equity investment in the former subsidiary be
initially measured at fair value, entities provide sufficient disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. SFAS No. 160 affects those entities that
have an outstanding noncontrolling interest in one or more subsidiaries or that
deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2008. Early adoption is prohibited. The adoption of this statement is not
expected to have a material effect on the Company's financial
statements.





Disclosure
about Derivative Instruments and Hedging Activities




In March
2008, the FASB issued SFAS No. 161, “Disclosure about Derivative
Instruments and Hedging Activities, an amendment of SFAS No.
133.” This statement requires that objectives for using derivative instruments
be disclosed in terms of underlying risk and accounting designation. The Company
is required to adopt SFAS No. 161 on January 1, 2009. The Company is currently
evaluating the potential impact of SFAS No. 161 on the Company’s consolidated
financial statements.




Delay
in Effective Date




In
February 2008, the FASB issued FSP FAS No. 157-2, “Effective Date of FASB
Statement No. 157”. This FSP delays the effective date of SFAS No. 157 for
all nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value on a recurring basis (at least annually)
to fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years. The impact of adoption was not material to the
Company’s consolidated financial condition or results of
operations.


F-10





NOTE 4
- NET LOSS PER SHARE





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




The
effect of 26,212 shares issuable under convertible notes is anit-Dilutive and
not included in Diluted loss per share.


F-11




The
following table represents the computation of basic and diluted losses per
share:
 
 For the Eleven
                        Months Ended
                        December 31,
                        2007
                      
                      
                      For the Year
                        Ended January31,
                        2007Losses
      available for common shareholders
                      
                      $
                      (8,589,616
                      )
                      
                      $
                      (13,764
                      )Weighted
      average number of common shares outstanding
                      
                      
                      21,574,850
                      
                      
                      
                      4,300,000Basic
      loss per share
                      
                      $
                      (.40
                      )
                      
                      $
                      (.00
                      )Fully
      diluted loss per share
                      
                      $
                      (.40
                      )
                      
                      $
                      (.00
                      )
 Net loss
per share is based upon the weighted average shares of common stock
outstanding


NOTE 5
- EQUITY


On
November 3, 2007, the Company amended its articles of incorporation and
authorized 200,000,000 shares of common stock, at $.001 par value and 22,500,000
are issued and outstanding as of December 31, 2007.





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





FORWARD
SPLIT


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





The
Company issued 2,000,000 shares in the acquisition of UBNA with a fair value of
$10,020,000 and cancelled 1,800,000 shares from a related party.




For
the year ended December 31, 2007 the shareholder of the Company contributed
$2,400 of services on behalf of the Company
  During
2007 a principle stockholder returned 18,000,000 of stock that was treated as a
in-kind contribution.
  On
September 8, 2004, the Company sold 2,000,000 shares of its common stock at
$0.001 per share. On October 4, 2004, the Company sold 1,200,000 shares of its
common stock at $0.001 per share. On October 26, 2004, the Company sold
1,000,000 shares of its common stock at $0.01. On October 29, 2004, the Company
sold 100,000 shares of its common stock at $0.10 per share.
  At
January 31, 2007, there were no outstanding stock options or
warrants.


NOTE 6
- PROPERTY AND EQUIPMENT





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





December
      31,
                                  2007
                                
                                
                                January31,
                                  2007Equipment
                                
                                $
                                1,698,362
                                
                                
                                $
                                -Land
                                
                                
                                150,000
                                
                                
                                
                                -Building
                                
                                
                                100,000
                                
                                
                                
                                -Accumulated
      depreciation
                                
                                
                                (2,390
                                )
                                
                                
                                -Total
                                
                                $
                                1,945,972
                                
                                
                                $
                                -





Depreciation
expense for the period ended December 31, 2007 was $2,390 (January 31, 2007 - $
NIL). The Company has not recorded any depreciation expense related to its
processing facility as it has not been placed in service as of December 31,
2007.


F-12





NOTE 7
- ACQUISITON


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





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





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




Purchase
      Price Allocation
                  
                  December6,
                    2007Tangible Assets AllocationLand
                  
                  $
                  150,000Equipment
      and capital improvements
                  
                  
                  1,695,972Building
                  
                  
                  100,000Prepaid
      expenses
                  
                  
                  178,076Deposits
                  
                  
                  3,100Cash
                  
                  
                  108,974Intangible Asset AllocationPermits
                  
                  
                  225,000Environmental
      Protection Agency approvals (EPA)
                  
                  
                  650,000Mississippi
      Department of Environmental Quality (MDEQ)
                  
                  
                  225,000National
      Biodiesel Board membership
                  
                  
                  50,000Intellectual
      property rights to operate the refinery
                  
                  
                  500,000LiabilitiesAccounts
      payables
                  
                  
                  (45,533
                  )Accrued
      expenses
                  
                  
                  (83,366
                  )Convertible
      notes payables
                  
                  
                  (307,867
                  )Notes
      payables
                  
                  
                  (1,650,000
                  )Fair
      values of net assets
                  
                  
                  1,533,356Total
      Purchase price
                  
                  
                  10,020,000Goodwill
                  
                  $
                  8,486,644


F-13


Proforma
Statement of Operations:





The
Company’s Proforma statement of operations if the companies were
consolidated for the 11 month period ended December 31, 2007 would be
as follows:
  Proforma
Statement of Operations


For theElevenMonthsended
                                                            December31,2007G
      & A
                                                          
                                                          
                                                          605,335Impairment
                                                          
                                                          
                                                          8,486,644Total
      Operation Exp
                                                          
                                                          
                                                          9,091,979Net
      Loss from operations
                                                          
                                                          
                                                          (9,091,979
                                                          )Change
      in FV Derivative
                                                          
                                                          
                                                          4,094Interest
      Expense
                                                          
                                                          
                                                          (98,948
                                                          )Interest
      Income
                                                          
                                                          
                                                          2,827Total
      Other expense
                                                          
                                                          
                                                          (92,027
                                                          )Net
      Loss
                                                          
                                                          
                                                          (9,184,006
                                                          )Proforma
      Loss per Share
                                                          
                                                          
                                                          (0.41
                                                          )Proforma
      Weighted avg Shares outstanding
                                                          
                                                          
                                                          22,500,000




NOTE
8- GOODWILL AND OTHER INTANGIBLE ASSETS





The
Company assessed the allocation of the purchase price, primarily through the
determination of the fair value and remaining useful lives of the 2007
acquisitions' respective intangible assets. As of December 31, 2007 the Company
recorded intangible assets for a total amount of $1,650,000.  As of
December 31, 2007 the Company recorded goodwill for a total of $8,486,644. The
Company has assessed this goodwill and has determined that the goodwill was
impaired since the company had not generated revenues to substantiate such
value.





The
Company has not amortized the intangible assets since the Company has not
started operation of its refinery and has no revenues through December 31, 2007
and still a development stage company. The Company will calculate the weighted
average of the average amortization period, in total and by major define-lived
intangible asset on a straight-line basis over the estimated useful lives of the
related assets that is ten years. The Company has no operating revenue and
believes the goodwill should be impaired. The Company has recorded an impairment
of $8,486,644 in 2007.


F-14





Goodwill and Intangible
      Assets
                    
                    December31,
                      2007Purchase
      AgreementsGoodwill
                    
                    $
                    8,486,644Other Intangible
      Assets
                    
                    
                    1,650,000Total Goodwill and Intangibles
      Assets
                    
                    
                    10,136,644Impairment of Goodwill and
      Intangible Assets
                    
                    
                    (8,486,644
                    )Accumulated
      Amortization
                    
                    
                    —Net Goodwill and Intangible
      Assets
                    
                    $
                    1,650,000





NOTE 9–
NOTES PAYABLE





Notes
payable comprise the following as of:





December 31,
                        2007
                      
                      
                      January 31,
                        2007During December 2007, the Company
      entered into an $88,000 note payable - affiliate. The interest rate is
      6.5% per annum. The note is unsecured and requires payment of accrued
      interest and principal by December 31, 2010. On April 30, 2008 and October
      31, 2008, all accrued interest must be paid. Beginning April 30, 2009 and
      semiannually thereafter through October 31, 2010, Company is to pay
      $22,000 semiannual installments. During the period from inception to
      December 31, 2007, the Company incurred interest expense of approximately
      $169
                      
                      $
                      88,000
                      
                      
                      $
                      0.00During October 2007, the Company
      entered into a $250,000 note payable - affiliate. The interest rate is
      6.5% per annum. The note is unsecured and requires payment of accrued
      interest and principal by December 31, 2008.
                      
                      
                      250,000
                      
                      
                      
                      0.00During the year ended January
      31, 2007 Company received a $10,046 advance from an affiliate.
      Pursuant to the terms of the advance, the advance is non interest bearing,
      unsecured, and due on demand.
                      
                      
                      10,046
                      
                      
                      
                      10,000During February 2007, the Company
      entered into a $1,650,000 note payable. The interest rate is 6% per annum
      and the note is secured by all the assets of the Company. The note
      requires semi annual principle payments of $103,125 plus interest on June
      and December of each year.
                      
                      
                      1,650,000
                      
                      
                      
                      0.00Total
      long-term note payable
                      
                      
                      1,998,046
                      
                      
                      
                      10,000Less
      current portion
                      
                      
                      (466,296
                      )
                      
                      
                      (10,000
                      )Long-term
      portion of note payable
                      
                      $
                      1,531,750
                      
                      
                      $
                      0.00








2008
                                                    
                                                    $
                                                    466,2962009
                                                    
                                                    
                                                    250,2502010
                                                    
                                                    
                                                    250,2502011
                                                    
                                                    
                                                    1,031,250$
                                                    1,998,046


F-15


NOTE
10– CONVERTIBLE DEBENTURE





December 31,
                  2007
                
                
                January 31,
                  2007During October 2007, the Company
      issued a $300,000 convertible note payable. The note is convertible at the
      option of the holder by taking the average bid price of the common stock
      for the five day period preceding the conversion and multiplying by 75%.
      The interest rate is 6.5% per annum. The note is unsecured and requires
      payments of accrued interest and principal by October 31, 2010. On April
      30, 2008 and October 31, 2008, all accrued interest must be paid.
      Beginning April 30, 2009 and semiannually thereafter through October 31,
      2010, the Company is to pay $75,000 in semiannual
      installments.
                
                $
                307,867
                
                
                $
                0.00Total
      long-term note payable
                
                
                307,867
                
                
                
                0.00Less
      current portion
                
                
                (7,867
                )
                
                
                (0.00
                )Long-term
      portion of note payable
                
                $
                300,000
                
                
                $
                0.00




The
unpaid principal amount and accrued interest of this Note shall become
immediately due and payable upon the Maturity Date. Principal and interest shall
be payable in lawful money of the United States of America in immediately
available funds, without any deduction, setoff or counterclaim, at the address
of Holder specified herein. This Note shall bear interest on the unpaid
principal amount hereof commencing on the date hereof at a rate of 6.5% per
annum. Upon the occurrence and during the continuance of an Event of Default,
interest shall accrue on the unpaid principal amount of this Note, from the date
of such default until the earlier of the date the principal sum is paid in full
or, if applicable, the date such default is cured, at the rate of 15% per annum
(but not higher than the applicable maximum rate provided by law). Accrued
interest on the outstanding principal amount of this Note shall be payable on
the Maturity Date, unless accelerated as a result of the occurrence of an Event
of Default as set forth below.





The
principal amount of this Note may be prepaid, at the option of Maker, in whole
at any time, together with all accrued interest upon fifteen (15) days prior
written notice to Holder.








2008
                    
                    $
                    7,8072009
                    
                    
                    150,0002010
                    
                    
                    150,000$
                    307,867


F-16


(a)
Conversion. It is anticipated that Maker will enter into an agreement (“Purchase
Agreement”) with another company which has shares traded on the an electronic
quotation system or other public market (“Public Company”) whereby, in exchange
for the majority of the issued and outstanding shares of Public Company, Public
Company will acquire (by asset or stock acquisition, merger or otherwise) Maker
and the current directors of Maker will, upon closing of the transactions
contemplated by the Purchase Agreement (the “Closing”), become the directors and
officers of Public Company. At any time prior to the Maturity Date, this Note
shall, at the option of the Holder, be convertible into: (i) shares of Maker's
common stock, share (the “Private Stock"); or (ii) if following the Closing,
shares of common stock of Public Company (“Public Company Stock” and together
with Private Stock, “Common Stock”), on the terms and conditions set forth
herein. Notwithstanding anything contained in this Note to the contrary, Holder
shall have the option, by written notice to Maker, at any time on or prior to
the Maturity Date, to convert this Note into that number of fully paid and
non-assessable shares of Common Stock determined by dividing all of the unpaid
principal due on this Note as of the date of conversion by the result of: (i)
the average bid price of the Common Stock of the Maker over the five days prior
to the conversion date as quoted on the OTC Bulletin Board or such other trading
platform that the Common Stock is traded on the conversion date; multiplied by
(ii) 75%.





(b)
Issuance of Securities on Conversion. As soon as practicable after conversion of
this Note, Maker, at its expense, will cause to be issued in the name of and
delivered to the Holder of this Note, a certificate or certificates representing
the number of fully paid and nonassessable shares of Common Stock to which
Holder shall be entitled on such conversion. No fractional shares will be issued
on conversion of this Note. If Holder would otherwise be entitled to a
fractional share, Holder shall receive a cash payment equal to the per share
price of the Common Stock (subject to adjustment, as applicable) multiplied by
the fractional share the Holder would otherwise be entitled to
receive.





The initial value of the embedded
conversion option was $218,228; this amount is recorded as a debt discount which
is amortized over the life of the underlying convertible debt instrument. At
December 31, 2007, we recognized interest expense of $11,961. At December 31,
2007, upon measurement, theconvertible note payablehad a fair value of $214,134. The
resulting change in fair value of $4,094 was recorded as a reduction in the
derivative liability.





NOTE 11 - INCOME
TAXES





The Company adopted Financial Accounting
Standard No. 109 which requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statement or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between
financial statements and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Temporary differences between taxable income reported for financial reporting
purposes and income tax purposes are insignificant.









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


F-17


The
provision (benefit) for income taxes from continued operations for the 11
months period ended December 31, 2007 and year ended January 31, 2007
consist of the following:





December31,
                                                    2007
                                                  
                                                  
                                                  January31,
                                                    2007Current:Federal
                                                  
                                                  $StateDeferred:Federal
                                                  
                                                  $
                                                  2,759,168
                                                  
                                                  
                                                  
                                                  4,422State
                                                  
                                                  
                                                  472,313
                                                  
                                                  
                                                  
                                                  7573,231,481
                                                  
                                                  
                                                  
                                                  5,179Benefit
      from the operating loss carryforward
                                                  
                                                  
                                                  (3,231,481
                                                  )
                                                  
                                                  
                                                  (5,179
                                                  )$(Benefit)
      provision for income taxes, net
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -





The
difference between income tax expense computed by applying the federal statutory
corporate tax rate and actual income tax expense is as follows:





December31,
                              2007
                            
                            
                            January31,
                              2007Statutory
      federal income tax rate
                            
                            
                            34.0
                            %
                            
                            
                            34.0
                            %State
      income taxes and other
                            
                            
                            9.0
                            %
                            
                            
                            9.0
                            %Valuation
      Allowance
                            
                            
                            (43
                            )%
                            
                            
                            (43
                            )%Effective
      tax rate
                            
                            
                            0
                            %
                            
                            
                            0
                            %





Deferred
income taxes result from temporary differences in the recognition of income and
expenses for the financial reporting purposes and for tax purposes. The tax
effect of these temporary differences representing deferred tax asset and
liabilities result principally from the
following:





December31,
                      2007
                    
                    
                    January 31,
                      2007Net
      operating loss carryforward
                    
                    
                    3,231,481
                    
                    
                    
                    5,179Valuation
      allowance
                    
                    
                    (3,231,481
                    )
                    
                    
                    (5,179
                    )Deferred
      income tax asset
                    
                    $
                    -
                    
                    
                    
                    -





The
Company has a net operating loss carryforward of approximately $8,600,000
however in accordance with IRC 382 the loss is limited to 44% of the loss
carryforward.  The loss is limited due the change in control of at
least 50%.  This loss of $4,323,477 available to offset future taxable
income through 2028.





NOTE
12 – COMMITMENTS AND CONTINGENCIES





During 2007, as part of the sale of the
facility by the bankruptcy court, the Company assumed an agreement entered into
by the former operators of the Biodiesel facility with the Mississippi
Department on Environmental Quality (MDEQ). The agreement requires the Company
to deposit $50,000 into a trust fund to be used by the state of Mississippi for
closure of the facility in the event the Company ceases operations. In addition,
the Company is required to obtain approval from the state of Mississippi and
meet certain environmental operating criteria as agreed to in the settlement
agreement prior to beginning operations at the facility. Upon removal of certain
liquids the MDEQ agreed to dismiss the requirement.


F-18





On November 20, 2007, the Company
entered into an agreement with an unrelated party to provide consulting
services. The term of the services to be provided is from November 20, 2007 to
October 22, 2008. As compensation for services received the Company is required
to pay an annual fee of $200,000, a staffing fee up to $78,000 per month, a
$10,000 travel and other expense allowance, and up to $30,000 per month for two
months of Internet Campaign. For the year ended December 31, 2007, the Company
paid $200,000 of which $166,666 has been recorded as prepaid expense, and a
$39,000 staffing fee.





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




On
February 26, 2008, Universal Bioenergy and Dr. Richard Craven entered into an
employment agreement whereby Dr. Craven was appointed as Chief Executive Officer
and a member of the Board of Directors of Universal. The term of the agreement
is for one year. Pursuant to the employment agreement, Dr. Craven will receive a
base salary of $60,000 per year and a signing bonus in common stock of Universal
with a value of $100,000 (determined on the February 26, 2008) to vest on
February 27, 2009. Dr. Craven is also entitled to a performance bonus which is
equal to Five Percent (5%) of every One Million Dollars of profit (before taxes)
of Universal (One Percent (1% to be paid in cash; and Four Percent (4%) to be
paid in restricted common stock of Universal).


NOTE
– 13 RESTATEMENTS





December 31, 2007
                
                
                December 31, 2007
                
                
                December 31, 2007As Originally Reported
                
                
                As Adjusted
                
                
                Effect of ChangeAssetsTotal
      Assets
                
                $
                2,260,325
                
                
                $
                3,910,325
                
                
                $
                1,650,000LiabilitesTotal
      Liabilities
                
                $
                2,490,981
                
                
                $
                2,490,981
                
                
                $
                -Stockholders' EquityAccumulated
      deficit
                
                $
                (628,292
                )
                
                $
                (8,649,056
                )
                
                $
                8,020,764Statement of OperationsOperating
      expenses
                
                $
                (524,304
                )
                
                $
                (8,589,447
                )
                
                $
                8,065,143Other
      expenses
                
                $
                (103,988
                )
                
                $
                (169
                )
                
                $
                103,819Net
      Loss
                
                $
                (628,292
                )
                
                $
                (8,589,616
                )
                
                $
                7,961,324Net
      Loss per share
                
                
                (0.05
                )
                
                
                (0.40
                )
                
                
                (0.29
                )Statement of CashflowsNet
      Loss
                
                $
                (628,292
                )
                
                $
                (8,589,616
                )
                
                $
                7,961,324Net
      cash used in operating activities
                
                $
                (628,507
                )
                
                $
                (106,617
                )
                
                $
                521,890Purchase
      of fixed and intangible assets
                
                $
                (1,948,362
                )
                
                $
                108,974
                
                
                $
                2,057,336Net
      cash provided by financing activities
                
                $
                2,710,046
                
                
                $
                128,000
                
                
                $
                (2,582,046
                )Cash
      – Beginning of the Period
                
                $
                -Cash
      - End of the Period
                
                $
                133,177
                
                
                $
                133,177
                
                
                $
                -





The
restatement for the eleven months ended December 31, 2007 was from the Company
restating its financial statements to the purchase method of accounting for the
acquisition of UBNA which was originally accounted for as a reverse merger and
recapitalization. The Company recognized the purchase method of accounting
because the company acquired less then 51% of the public shell. Due to this
change in accounting method the Company only recognized expenses from UBNA for
the period that the company acquired the subsidiary on December 6, 2007 to
December 31, 2007.


F-19





NOTE
14 – SUBEQUENT EVENTS





A.
Employment Agreement





On
February 26, 2008, the Company entered into a one-year employment agreement with
the Company’s Chief Executive Officer. The agreement renews annually so that at
all times, the term of the agreement is for one year. Pursuant to this
agreement, the Company will pay an annual base salary of $60,000 for the period
February 26, 2008 through February 26, 2009. (In addition, the officer received
a signing bonus of $100,000 based on the value of the Company’s common shares on
the effective date of issuance.)  That vest one year after issuance.
The agreement also calls for increase in the officer’s base compensation upon
the Company reaching certain milestones:





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





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





B.
Stock issued for services





On
February 13, 2008 the Company issued 10,000 shares of common stock for
consulting services having a fair value of $50,600 (See Note 6).





C.
Advances





In
January 2008, the Company received a $10,000 advance from a related party. The
advance is unsecured, non interest bearing and due on demand.





*  *  *  *  *  *


F-20




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




(i) On December 20, 2007, Murrell, Hall,
McIntosh & Co., PLLP (“Murrell”) was dismissed as independent auditor for
the Company. On December 20, 2007, the Company engaged Webb & Company, PA
(“Webb”) as its principal independent accountant. This decision to engage Webb
was ratified by the majority approval of the Board of Directors of the
Company.





(ii) Management of the Company has not
had any disagreements with Murrell related to any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure. For the most recent fiscal year and any subsequent interim period
through Murrell’s termination on December 20, 2007, there has been no
disagreement between the Company and Murrell on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement, if not resolved to the satisfaction of Murrell
would have caused it to make a reference to the subject matter of the
disagreement in connection with its reports.





(iii) The Company’s Board of Directors
participated in and approved the decision to change independent
accountants.





(iv) In connection with its review of
financial statements through July 31, 2007, there have been no disagreements
with Murrell 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 Murrell would have caused them to make reference
thereto in their report on the financial statements.





(v) During the most recent audit period
and the interim period subsequent to December 20, 2007 there have been no
reportable events with the Company as set forth in Item 304(a)(1)(iv)(B) of
Regulation S-B.





(vi) The Company requested that Murrell
furnish it with a letter addressed to the SEC stating whether or not it agrees
with the above statements. A copy of such letter is filed as an Exhibit to the
Form 8-K/A filed with the Securities and Exchange Commission on February 27,
2008.





ITEM 9A. CONTROLS AND
PROCEDURES





Our
management team, under the supervision and with the participation of our
principal executive officer and our principal financial officer, evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures as such term is defined under Rule 13a-15(e) promulgated under
the Securities Exchange Act of 1934, as amended (Exchange Act), as of the last
day of the fiscal period covered by this report, December 31, 2007. The term
disclosure controls and procedures means our controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules
and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
accumulated and communicated to management, including our principal executive
and principal financial officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. Based on
this evaluation, our principal executive officer and our principal financial
officer originally concluded that our disclosure controls and procedures were
effective as of December 31, 2007.


26





However,
our Chief Executive Officer has concluded that our disclosure controls and
procedures as of September 4, 2009 may not be effective due to possible material
weakness in our internal controls over financial reporting described below and
other factors related to the Company’s financial reporting processes. The
Company is in the process of evaluating the internal controls and procedures to
ensure that the internal controls and procedures satisfy the criteriaset forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control —
Integrated Framework.The Company and its independent registered public
accounting firm identified certain significant internal control deficiencies
that we considered to be, in the aggregate, a material weakness. The primary
concern was the filing of our form 10K/A without Board of Directors approval and
without approval from our independent auditors. The other area of concern was
the proper internal signature by the Board of Directors for all filings that are
issued. The Company further did not properly record the acquisition of UBNA as
the purchase method of accounting and recorded it as a reverse merger and
recapitalization.  The acquisition was less than 51% and should have
been recorded as the purchase method of accounting.  Due to the size
of our Company and the costs associated to remediate these issues, we still
consider these concerns to be relevant.





This
annual report on Form 10-K/A does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit us to provide only management’s report in this
annual report on Form 10-K/A.





Changes in Internal Control Over Financial Reporting





During
the fiscal 11 months ended December 31, 2007, there were no changes in
our internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.


There
were no changes in our internal control over financial reporting that occurred
during the last quarter of 2007 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.




27





LACK
OF INDEPENDENT BOARD OF DIRECTORS AND AUDIT COMMITTEE





Management
is aware that an audit committee composed of the requisite number of independent
members along with a qualified financial expert has not yet been established.
Considering the costs associated with procuring and providing the infrastructure
to support an independent audit committee and the limited number of
transactions, Management has concluded that the risks associated with the lack
of an independent audit committee are not justified. Management will
periodically reevaluate this situation.





LACK
OF SEGREGATION OF DUTIES





Management
is aware that there is a lack of segregation of duties at the Company due to the
small number of employees dealing with general administrative and financial
matters. However, at this time management has decided that considering the
abilities of the employees now involved and the control procedures in place, the
risks associated with such lack of segregation are low and the potential
benefits of adding employees to clearly segregate duties do not justify the
substantial expenses associated with such increases. Management will
periodically reevaluate this situation





ITEM
9B. OTHER INFORMATION


None.


28


PART
III





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





Director
and Executive Officer





Set forth below is information regarding
the Company’s current directors and executive officers. There are no family
relationships between any of our directors or executive officers. The directors
are elected annually by stockholders. The executive officers serve at the
pleasure of the Board of Directors.





Name
            
            Age
            
            TitleRichard D.
      Craven
            
            46
            
            Chief Executive Officer, Director,
      Principal Executive  Officer, Principal Financial
      OfficerJames
      Earnest
            
            51
            
            President
      and DirectorTraci
      Plaxico
            
            37
            
            Secretary





The
background and principal occupations of the sole officer and director of the
Company is as follows:





Officers
and Directors:





Dr. Richard D.
Craven





Dr. Richard D. Craven was appointed as
our Chief Executive Officer and a member of the board of directors of the
Company on February 26, 2008. Dr. Craven has more than fourteen years of
business management experience and more than nine years’ experience in
marketing. In addition, he has taught at the university level for nearly two
decades. He has spent much of his career involved in the development of
environmentally-friendly fuels, alternative energy, and biotechnology. Prior to
joining the Company, Dr. Craven was employed as a Managing Director of Antek
Energy, LLC, an alternative energy production, management and consulting concern
from January 2007 to February 2008. During the period May 2005 to February 2008,
Dr. Craven worked as a Senior Advisor for Chemical Research for Antek Research
Incorporated, a renewable energy research firm. Dr. Craven’ s related research
projects were aimed at optimizing and improving biodiesel reactions and
production, from component miscibility to use of reaction by-products to
catalytic reactions for waste-to-fuel conversion and waste conversion to other
useful products. All his work at Antek centers on the development of sustainable
energy source utilization systems and other environmentally conscious
projects.





During the period of December 2004 to
February 2008, Dr. Craven founded Kiraco Financial Services, a business
financial services and commercial mortgages firm.





In addition, Dr. Craven has been a
member of the teaching faculty at the following universities and colleges:
University of Phoenix Online, Phoenix, AZ (11/03 to present); Argosy University,
Chicago, IL (10/07 to present); Art Institute of Pittsburgh, Pittsburgh, PA
(1/03 to present); Axia College of Western International University/University
of Phoenix, Phoenix, AZ (1/05 to 12/06); Mississippi Gulf Coast Community
College - JD Campus, Gulfport, MS (8/02 to 8/03) and Spring Hill College,
Mobile, AL (8/99 to 5/02).


29





James
E. Earnest





Mr.
Earnest has served as the Company’s President and as a member of the board of
directors of the Company since October 24, 2007. Mr. Earnest is a trained
engineer with more than 25 years’ experience successfully managing companies in
industries as diverse as agricultural equipment, wood production and heavy
equipment manufacturing. Mr. Earnest was recently responsible for designing,
planning and setting up a 10 MGPY capacity Biodiesel facility. His skill set
includes engineering, project management and manufacturing. He is an
entrepreneur and nonstop innovator. Previously, he was owner and manufacturing
manager of a furniture component company. In addition he was a plant manager of
a woodworking facility. During this stage, Mr. Earnest gained experience at all
levels of production and distribution. He has also been a design, test, and
project engineer for an agricultural equipment company. These experiences helped
him develop the ability to work with vendors to design new components and
systems, to reduce their costs through manufacturing innovations. He received
his BS in Agricultural Engineering from Mississippi State University. Mr.
Earnest was awarded the Young Engineer Award by the National Society of
Agricultural Engineers in 1986 for the Mississippi Chapter.





For the
recent years, Mr. Earnest has been involved with the following companies: August
2006 to May 2007 Mr. Earnest was Project Manager for Tri-State Petroleum and
from 1994 to 2005 Co-Owner and Vice-President of Wood Technologies,
Inc.





Traci
Plaxico





Mrs.
Plaxico has served as the Company’s Secretary since October 24, 2007. Mrs.
Plaxico has spent her career mastering the economics of the alternative energy
industry and building the financial models necessary for companies in this field
to achieve success. She brings to Universal Bioenergy more than ten years of
executive level management, corporate finance and strategic planning, including
deep experience in the alternative fuel industry, with particular focus on
Biodiesel. Mrs. Plaxico’s expertise includes logistics as well as compliance
with ever-changing government regulations - two critical roles for running a
successful Biodiesel manufacturing facility. In addition, she brings experience
in inventory management, procurement, material flow and recordkeeping. She also
has a background in accounting and finance. Mrs. Plaxico grew up in a farming
environment, studying horticulture. She has attended Itawamba Community
College.





For the
recent years, Mrs. Plaxico was involved with the following companies: September
1999 to January 2004 Mrs. Plaxico was in Customer Relations at National Bank of
Commerce and from October 2004 to April 2006 she was the office manager at
Biodiesel of Mississippi, Inc.





Audit Committee Financial
Expert





The Company does not have an audit
committee or a compensation committee of its board of directors. In addition,
the Company’s board of directors has determined that the Company does not have
an audit committee financial expert serving on the board. When the Company
develops its operations, it will create an audit and a compensation committee
and will seek an audit committee financial expert for its board and audit
committee.





Conflicts
of Interest





Members
of our management are associated with other firms involved in a range of
business activities.  Consequently, there are potential inherent
conflicts of interest in their acting as officers and directors of our company.
Although the officers and directors are engaged in other business activities, we
anticipate they will devote an important amount of time to our
affairs.


30





Our
officers and directors are now and may in the future become shareholders,
officers or directors of other companies, which may be formed for the purpose of
engaging in business activities similar to ours.  Accordingly,
additional direct conflicts of interest may arise in the future with respect to
such individuals acting on behalf of us or other entities. Moreover, additional
conflicts of interest may arise with respect to opportunities which come to the
attention of such individuals in the performance of their duties or
otherwise.  Currently, we do not have a right of first refusal
pertaining to opportunities that come to their attention and may relate to our
business operations.





Our
officers and directors are, so long as they are our officers or directors,
subject to the restriction that all opportunities contemplated by our plan of
operation which come to their attention, either in the performance of their
duties or in any other manner, will be considered opportunities of, and be made
available to us and the companies that they are affiliated with on an equal
basis. A breach of this requirement will be a breach of the fiduciary duties of
the officer or director. If we or the companies with which the officers and
directors are affiliated both desire to take advantage of an opportunity, then
said officers and directors would abstain from negotiating and voting upon the
opportunity. However, all directors may still individually take advantage of
opportunities if we should decline to do so. Except as set forth above, we have
not adopted any other conflict of interest policy with respect to such
transactions.





Compliance
with Section 16(A) Of The Exchange Act 9.A. Directors And Executive Officers,
Promoters, And Control Persons:





The
Company is aware that all filings of Form 4 and 5 required of Section 16(a) of
the Exchange Act of Directors, Officers or holders of 10% of the Company's
shares have not been timely and the Company has instituted procedures to ensure
compliance in the future.




Code
of Ethics




We have
adopted a code of ethics that applies to all of our executive officers,
directors and employees. Code of ethics codifies the business and ethical
principles that govern all aspects of our business. This document will be made
available in print, free of charge, to any shareholder requesting a copy in
writing from the Company and it attached hereto as Exhibit 14.1





ITEM
11.  EXECUTIVE COMPENSATION





General.Mr.
Richard Craven serves as the Company’s chief executive officer.





Summary
Compensation Table





The
following table sets forth for the 11 months ended December 31, 2007
and year ended January 31, 2007 compensation awarded to, paid to, or earned
by, Mr. Richard Craven,
Chief Executive Officer,
andour other
most highly compensated executive officers whose total compensation during the
last fiscal year exceeded $100,000, if any.


31





December 31, 2007and January 31,
2007SUMMARY
COMPENSATION TABLE





Name
      and Principal Position
                            
                            Year
                            
                            
                            Salary ($)
                            
                            Bonus ($)
                            
                            Stock
                              Awards
                              ($)
                            
                            
                            Option
                              Awards
                              ($)
                            
                            
                            Non-Equity
                              Incentive
      Plan
                              Compensation-
                              ion
                              ($)
                            
                            Change
      in
                              Pension
                              Value
      and
                              Nonqualified
                              Deferred
                              Compensation
                              Earnings
                              ($)
                            
                            
                            All
      Other
                              Compensation-
                              ion
                              ($)
                            
                            
                            Total
                              ($)Richard
      Craven
                            
                            
                            to December 31, 2007
                              to
      January 31, 2007
                            
                            
                            
                            0
                              0
                            
                            
                            
                            
                            0
                              0
                            
                            
                            
                            0
                              0
                            
                            
                            
                            0
                              0
                            
                            
                            
                            0
                              0
                            
                            
                            
                            0
                              0
                            
                            
                            
                            0
                              0James
      Earnest, CEO
                            
                            
                            to December 31, 2007
                              to
      January 31, 2006
                            
                            
                            
                            26,585
                              0
                            
                            
                            
                            
                            0
                              0
                            
                            
                            
                            0
                              0
                            
                            
                            
                            0
                              0
                            
                            
                            
                            0
                              0
                            
                            
                            
                            0
                              0
                            
                            
                            
                            26,585
                              0





December 31, 2007 and January 31, 2007OUTSTANDING EQUITY AWARDS
AT FISCAL YEAR-END TABLE





Option
      Awards
                                                                    
                                                                    
                                                                    Stock
      AwardsName
                                                                    
                                                                    Number
      of
                                                                      Securities
                                                                      Underlying
                                                                      Unexercised
                                                                      Options
                                                                      (#)
                                                                    
                                                                    
                                                                    Number
      of
                                                                      Securities
                                                                      Underlying
                                                                      Unexercised
                                                                      Options
                                                                      (#)
                                                                    
                                                                    
                                                                    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
                                                                      ($)Exercisable
                                                                    
                                                                    
                                                                    UnexercisableRichard
      Craven
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0James
      Earnest
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0
                                                                    
                                                                    
                                                                    
                                                                    0
      0





December 31, 2007and January 31, 2007OPTION EXERCISES AND STOCK VESTED
TABLE





December 31, 2007 and January 31, 2007PENSION BENEFITS
TABLE




Name
                        Plan
                          Name
                        
                        Number of
                          Years
                          Credited
                          Service
                          (#)
                        
                        
                        Present
                          Value
                          of Accumulated
                          Benefit
                          ($)
                        
                        
                        Payments During
                          Last
                          Fiscal Year
                          ($)Richard
    Craven
                        
                        
                        
                        0
                          0
                        
                        
                        
                        0
                          0
                        
                        
                        
                        0
                          0James
      Earnest
                        
                        
                        
                        0
                          0
                        
                        
                        
                        0
                          0
                        
                        
                        
                        0
                          0


32





December 31, 2007and January 31,
2007NONQUALIFIED
DEFERRED COMPENSATION TABLE




Name
                    
                    Executive Contributions
                      in Last Fiscal
      Year
                      ($)
                    
                    
                    Registrant
                      Contributions in
                      Last
                      Fiscal Year
                      ($)
                    
                    
                    Aggregate Earnings
                      in Last Fiscal
                      Year
                      ($)
                    
                    
                    Aggregate
                      Withdrawals /
                      Distributions
                      ($)
                    
                    
                    Aggregate Balance at
                      Last Fiscal
      Year-
                      End
                      ($)Richard
    Craven
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0James
      Earnest
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0





December 31, 2007and January 31, 2007DIRECTOR COMPENSATION
TABLE




Name
                  
                  Fees Earned
                    or
                    Paid in Cash
                    ($)
                  
                  
                  Stock Awards
                    ($)
                  
                  
                  Option Awards
                    ($)
                  
                  
                  Non-Equity
                    Incentive
      Plan
                    Compensation
                    ($)
                  
                  
                  Change
                    in Pension
                    Value
and
                    Nonqualified
                    Deferred
                    Compensation
                    Earnings
                    ($)
                  
                  
                  All Other
                    Compensation
                    ($)
                  
                  
                  Total
                    ($)Richard Craven
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0James
      Earnest
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0





December 31, 2007and January 31, 2007ALL OTHER COMPENSATION
TABLE




Name
                    
                    Year
                    
                    
                    Perquisites
                      and
      Other
                      Personal
                      Benefits
                      ($)
                    
                    Tax
                      Reimbursements
                      ($)
                    
                    
                    Insurance
                      Premiums
                      ($)
                    
                    
                    Company
                      Contributions
                      to Retirement and
                      401(k)
      Plans
                      ($)
                    
                    
                    Severance
                      Payments /
                      Accruals
                      ($)
                    
                    
                    Change
                      in Control
                      Payments /
                      Accruals
                      ($)
                    
                    
                    Total ($)Richard
      Craven
                    
                    
                    to December 31, 2007
                      to
      January 31, 2007
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0James
      Earnest
                    
                    
                    to December 31, 2007
                      to
      January 31, 2007
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0
                    
                    
                    
                    0
                      0


33





December 31, 2007and January 31, 2007PERQUISITES TABLE





Name
                  
                  Year
                  
                  
                  Personal Use of
                    Company
                    Car/Parking
                  
                  
                  Financial Planning/
                    Legal
      Fees
                  
                  
                  Club Dues
                  
                  
                  Executive Relocation
                  
                  
                  Total Perquisites
                    and
                    Other Personal
                    BenefitsRichard
      Craven
                  
                  
                  to December 31, 2007
                    to
      January 31, 2007
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0James
      Earnest
                  
                  
                  to
      December 31, 2007
                    to
      January 31, 2007
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0
                  
                  
                  
                  0
                    0





December 31, 2007and January 31, 2007POTENTIAL PAYMENTS UPON TERMINATION OR
CHANGE IN CONTROL TABLE




Name
                                      Benefit
                                      
                                      Before
                                        Change in
                                        Control
                                        Termination
                                        w/o Cause or
      for
                                        Good
      Reason
                                      
                                      After Change in
                                        Control
                                        Termination
                                        w/o Cause
      or
                                        for Good
                                        Reason
                                      
                                      Voluntary
                                        Termination
                                      
                                      Death
                                      
                                      Disability
                                      
                                      Change in
                                        ControlRichard
    Craven
                                      Basic salary
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      -James
      Earnest
                                      Basic salaryTraci
      Plaxico
                                      Basic salary





Compensation of
Directors





Our
current compensation policy for directors is to compensate them through options
to purchase common stock as consideration for their joining our board and/or
providing continued services as a director. We do not currently provide our
directors with cash compensation, although we do reimburse their expenses, with
exception for a chairman of the board. No additional amounts are payable to the
Company’s directors for committee participation or special assignments. There
are no other arrangements pursuant to which any directors was compensated during
the Company’s last completed fiscal year for any service provided.


.


ITEM 12.  SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.


The following table
lists stock ownership of our Common Stock as ofApril 24, 2008,based on22,500,000shares of common stock
issued and outstanding. The information includes beneficial
ownershipby (i) holders of more than 5% of our Common Stock, (ii) each of two
directors and executive officers and (iii) all of our directors and executive
officers as a group. Except as noted below, to our knowledge, each person named
in the table has sole voting and investment power with respect to all shares of
our Common Stockbeneficially owned by them.


Name and Address of Owner
                      Title of Class
                      
                      Number
                        of Shares
                        Owned (1)
                      
                      
                      Percentage
                        of ClassRichard
      Craven
                      Common
      Stock
                      
                      
                      0
                      
                      
                      
                      0
                      %James
      Earnest
                      Common
      Stock
                      
                      
                      0
                      
                      
                      
                      0
                      %Tracy
      Plaxico
                      
                      
                      
                      0
                      
                      
                      
                      0
                      %All
      Officers and Directors
                        As
      a Group (3 persons)
                      Common
      Stock
                      
                      
                      0
                      
                      
                      
                      0
                      %


34





(1)
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities.





As of the time of this 10-K/Afiling, 49% of the outstanding shares
of the Company are owned by 11 foreign entities in an amount of 1,000,000 shares
each (4.45% ownership each). No Form 3, Schedule 13D or Schedule 13G has been
filed with respect to such shareholders and the company has relied on the lack
of filing of such forms that no shareholder is the beneficial owner of more than
its listed holdings (as set forth on the shareholder list) as a result of any
contract, arrangement, understanding, relationship or otherwise that would
entitle such shareholder to vote or direct the vote of another shareholder
and/or investment power (power to dispose, or to direct the disposition of the
common stock held by such other shareholder).





Changes in
Control





We are
not aware of any arrangements that may result in a change in control of the
Company.





DESCRIPTION
OF SECURITIES





General





Our
authorized capital stock consists of 200,000,000 shares of common stock, par
value $ .001 and 1,000,000 preferred shares, par value $.001.





Common
Stock





The
shares of our common stock presently outstanding, and any shares of our common
stock issues upon exercise of stock options and/or warrants, will be fully paid
and non-assessable. Each holder of common stock is entitled to one vote for each
share owned on all matters voted upon by shareholders, and a majority vote is
required for all actions to be taken by shareholders. In the event we liquidate,
dissolve or wind-up our operations, the holders of the common stock are entitled
to share equally and ratably in our assets, if any, remaining after the payment
of all our debts and liabilities and the liquidation preference of any shares of
preferred stock that may then be outstanding. The common stock has no preemptive
rights, no cumulative voting rights, and no redemption, sinking fund, or
conversion provisions. Holders of common stock are entitled to receive
dividends, if and when declared by the Board of Directors, out of funds legally
available for such purpose, subject to the dividend and liquidation rights of
any preferred stock that may then be outstanding.





Voting Rights





Each holder of Common Stock is entitled
to one vote for each share of Common Stock held on all matters submitted to a
vote of stockholders.





Preferred
Stock





The Company authorized 1,000,000 shares
of preferred shares at a $.001 par value and no shares are outstanding as of
December 31, 2007.


35





Dividends





Subject
to preferences that may be applicable to any then-outstanding securities with
greater rights, if any, and any other restrictions, holders of Common Stock are
entitled to receive ratably those dividends, if any, as may be declared from
time to time by the Company’s board of directors out of legally available funds.
The Company and its predecessors have not declared any dividends in the past.
Further, the Company does not presently contemplate that there will be any
future payment of any dividends on Common Stock.





Options
and Warrants:




As
of December 31, 2007 there were no options to acquire shares of the Company’s
common stock outstanding, and there are no warrants outstanding





Convertible
Securities





At
December 31, 2007, the Company has one convertible debt that will convert at the
discretion of the Board of Directors.




Transfer
Agent





On June
1, 2006, the Company engaged Corporate Stock Transfer to serve in the capacity
of transfer agent. Their mailing address and telephone number Corporate Stock
Transfer 3200 Cherry Lane, Denver CO, 89009, Telephone (303) 282-4800, Fax (303)
282-5800.





ITEM
13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.





During
December 2007, the Company entered into an $88,000 note payable with a related
party. The interest rate is 6.5% per annum. The note is unsecured and requires
payment of accrued interest and principal by December 31, 2010. On April 30,
2008 and October 31, 2008, all accrued interest must be paid. Beginning April
30, 2009 and semiannually thereafter through October 31, 2010, Company is to pay
$22,000 semiannual installments. During the period from inception to December
31, 2007 the Company incurred interest expense of approximately
$169.





During
October 2007, the Company issued a $300,000 convertible note payable with a
related party. The note is convertible at the option of the holder by taking the
average bid price of the common stock for the five day period preceding the
conversion and multiplying by 75%. The interest rate is 6.5% per annum. The note
is unsecured and requires payments of accrued interest and principal by October
31, 2010. On April 30, 2008 and October 31, 2008 all accrued interest must be
paid. Beginning April 30, 2009 and semiannually thereafter through October 31,
2010 Company is to pay $75,000 in semiannual installments.





During
October 2007, the Company entered into a $250,000 note payable with a related
party. The interest rate is 6.5% per annum. The note is unsecured and requires
payment of accrued interest and principal by December 31, 2008. Beginning April
30, 2009 and semiannually thereafter through October 31, 2010 Company is to pay
$22,000 in semiannual installments.





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





For the
year ended December 31, 2007 the shareholder of the Company contributed $2,400
of rent on behalf of the Company


36





On
February 26, 2008, Universal Bioenergy and Dr. Richard Craven entered into an
employment agreement whereby Dr. Craven was appointed as Chief Executive Officer
and a member of the Board of Directors of Universal. The term of the agreement
is for one year. Pursuant to the employment agreement, Dr. Craven will receive a
base salary of $60,000 per year and a signing bonus in common stock of Universal
with a value of $100,000 (determined on the February 26, 2008) to vest on
February 27, 2009. Dr. Craven is also entitled to a performance bonus which is
equal to Five Percent (5%) of every One Million Dollars of profit (before taxes)
of Universal (One Percent (1% to be paid in cash; and Four Percent (4%) to be
paid in restricted common stock of Universal). Please see Form 8-K as filed by
the Company on February 28, 2008.





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





ITEM
14.PRINCIPAL ACCOUNTANT FEES
AND SERVICES




Audit Fees. The aggregate
fees billed by Webb & Company PA for professional services rendered for the
audit of the Company’s annual financial statements for 11 months ended
December 31, 2007 and by Morgan and Company for the year ended January 31,
2007  approximated $20,363 and $12,000 respectively. The aggregate
fees billed by Webb & Company PA for the review of the financial statements
included in the Company’s Forms 10-Q for fiscal year 2007 and by Morgan and
Company for the year ended January 31, 2007 approximated
$7,500 and $3,000 per year.





Audit-Related
Fees.  The aggregate fees billed by Webb & Company
PA for assurance and related services that are reasonably related to the
performance of the audit or review of the Company’s financial statements for the
fiscal 11 months ended December 31, 2007 and by Morgan and
Company for the year ended January 31, 2007, and that are not disclosed in the
paragraph captioned “Audit Fees” above, were $0 and $0,
respectively.





Tax Fees.The
aggregate fees billed by Webb & Company for professional services
rendered for tax compliance, tax advice and tax planning for the fiscal 11
months ended December 31, 2007 and by Morgan and Company for the year
ended January 31, 2007 were $0 and $0.





All Other Fees.  The
aggregate fees billed by Webb & Company, PA for products and services, other
than the services described in the paragraphs “Audit Fees,” “Audit-Related
Fees,” and “Tax Fees” above for the fiscal 11 months ended December
31, 2007 and by Morgan and Company for the year ended January 31, 2007
approximated $0 and $0 respectively.





The Board
has received and reviewed the written disclosures and the letter from the
independent registered public accounting firm required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees), and
has discussed with its auditors its independence from the Company. The Board has
considered whether the provision of services other than audit services is
compatible with maintaining auditor independence.




Based on
the review and discussions referred to above, the Board approved the inclusion
of the audited consolidated financial statements be included in the Company’s
Annual Report on Form 10-K/A for its 2007 fiscal year for filing with the
SEC.




The Board
pre-approved all fees described above.


37





PART
IV





ITEM
15.  EXHIBITS AND REPORTS.




Exhibit No.
                        
                        Exhibit2.1
                        
                        The
      Bankruptcy Court of the Northern District of Mississippi in its Order
      Granting Debtor‘s Motion to Sell Assets Free and Clear Of All Liens,
      Claims And Encumbrances Outside The Ordinary Course Of Business dated
      21st  December 2006 (the “Order”). (3)2.2
                        
                        Bill
      of sale with BMI on January 26, 2007 in connection with the Order.
      (3)3.1
                        
                        Articles
      of Incorporation (1)3.2
                        
                        Bylaws
      (1)3.3
                        
                        Amendment
      to Articles of Incorporation (2)5.1
                        
                        Consent
      of Morgan & Company Chartered Accountants10.1
                        
                        Stock
      Purchase and Reorganization Agreement between Palomine, Inc., Universal
      Bioenergy North America, Inc., and Mortensen Financial Limited dated
      October 24, 2007. (2)10.2
                        
                        Universal
      Bioenergy North America, Inc. promissory note in favor of LaCroix
      International Holdings, Inc. in the amount of One Million Six Hundred
      Fifty Thousand Dollars ($1,650,000) dated January 26, 2007.
      (3)10.3
                        
                        Universal
      Bioenergy North America, Inc. promissory note in favor of Mortensen
      Financial Limited in the amount of $300,000 dated October 30, 2007.
      (3)10.4
                        
                        Universal
      Bioenergy North America, Inc. promissory note in favor of Mortensen
      Financial Limited in the amount of $250,000 dated October 30, 2007.
      (3)10.5
                        
                        Employment
      Agreement by and between Universal and Dr. Richard Craven.
    (4)14.1
                        *
                        Code
      of Ethics21
                        *
                        Subsidiaries31.1
                        *
                        Certification
      of Principal Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act.31.2
                        *
                        Certification
      of Principal Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act.32.1
                        *
                        Certification
      of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act.32.2
                        *
                        Certification
      of Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley
      Act.







*filed
herewith


(1)   
  Incorporated by reference to the registration statement on
Form SB-2 as filed on March 21, 2005.





(2)     
Incorporated by reference to the Current Report on Form 8-K as filed on
October 31, 2007.





(3)   
  Incorporated by reference to the Current Report on Form 8-K as
filed on December 14, 2007.





(4)   
  Incorporated by reference to the Current Report on Form 8-K as
filed on February 29, 2008.





ITEM
15: SIGNATURES





SIGNATURES





In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, there unto duly authorized.





Registrant
                  Universal
      Bioenergy, Inc.Date:
      January 4, 2010
                  By:
                  /s/
      Richard CravenRichard
      CravenChief
      Executive Officer (Principle Executive Officer,
                    PrincipalFinancial
      Officer), and President
  Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
 By:
                  /s/ Richard
      CravenRichard
      CravenDirector,
      Chief Executive Officer, (Principal Executive
      Officer,
                    Principal Financial Officer), and
      PresidentBy:
                  /s/
      Soloman AliSoloman
      AliDirectorBy:
                  /s/
      Vince GuestVince
      GuestDirector




38