UNITED
STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,
D.C. 20549



FORM
10-K

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

EXCHANGE
ACT OF 1934

For
the Fiscal Year Ended December 31, 2011

OR

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

EXCHANGE
ACT OF 1934

For
the transition period from N/Ato N/A

Commission
File Number: 333-123465



Universal
Bioenergy, Inc.

(Name
of registrant as specified in its charter)



Nevada 	 	20-1770378

State
of Incorporation IRS Employer Identification No.



19800
Mac Arthur Blvd., Suite 300

Irvine,
CA 92612

(Address
of principal executive offices)



(949)-559-5017

(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.£Yes   
SNo



Indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
£Yes    S 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.
YesS  No [ ]



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



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 or any amendment to this Form 10-K. £



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



|Large accelerated filer£
        Non-accelerated filer  
£ |  | Accelerated filer  £
        Smaller
        Reporting company  S |  | 
|---------------------------------------------------------- |  | ----------------------------------------------------------------- |  | 



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act. Yes£

No
S











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 June 30, 2011, the last
business day of the registrant’s most recently completed second fiscal quarter was approximately $6,260,049



Solely
for purposes of the foregoing calculation, all of the registrant’s directors and officers as of December 31, 2011, are deemed
to be affiliates. This determination of affiliate status for this purpose does not reflect
a determination that any persons are affiliates for any other purposes.



State the number
of shares outstanding of each of the issuer’s classes of equity securities, as of the latest practicable date: As of
April 13, 2012, there were 282,613,298 shares of Common Stock, $0.001 par
value per share issued and outstanding, and 232,080 Series B preferred stock $.001 par value per share outstanding.



Documents
Incorporated By Reference -None









(1)







Universal
Bioenergy, Inc.

FORM
10-K ANNUAL REPORT

FOR
THE FISCAL YEARS ENDED DECEMBER 31, 2011 AND 2010

TABLE
OF CONTENTS





|PART I     | Page
    #
|---------- | ----------
|           |           
|ITEM 1.    |           
|ITEM 1A.   |           
|ITEM 1B.   |           
|ITEM 2.    |           
|ITEM 3.    |           
|ITEM 4.    |           
|PART II    |           
|ITEM 5.    |           
|ITEM 6.    |           
|ITEM 7.    |           
|ITEM 7A.   |           
|ITEM 8.    |           
|ITEM 9.    |           
|ITEM 9A.   |           
|ITEM 9B.   |           
|PART III   |           
|ITEM 10.   |           
|ITEM 11.   |           
|ITEM 12.   |           
|ITEM 13.   |           
|ITEM 14.   |           
|PART IV    |           
|ITEM 15.   |           
|           |           
|           |           
|           |           
|Exhibit 31 |           
|Exhibit 32 |           













(2)







FORWARD-LOOKING
STATEMENTS

Special
Note Regarding Forward-Looking Statements



Some
of our statements under "Business," "Properties," "Legal Proceedings," "Management's Discussion
and Analysis of Financial Condition and Results of Operations, “and elsewhere in this report constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These statements are subject to certain events, risks and uncertainties that may be outside our control. Some of these
forward-looking statements include statements of:



| | · | management's
                                                                                                                                               plans,
                                                                                                                                               objectives
                                                                                                                                               and
                                                                                                                                               budgets
                                                                                                                                               for
                                                                                                                                               its
                                                                                                                                               future
                                                                                                                                               operations
                                                                                                                                               and
                                                                                                                                               future
                                                                                                                                               economic
                                                                                                                                               performance;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | capital
                                                                                                                                               budget
                                                                                                                                               and
                                                                                                                                               future
                                                                                                                                               capital
                                                                                                                                               requirements;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | meeting
                                                                                                                                               future
                                                                                                                                               capital
                                                                                                                                               needs;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | realization
                                                                                                                                               of
                                                                                                                                               any
                                                                                                                                               deferred
                                                                                                                                               tax
                                                                                                                                               assets;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                                                               level
                                                                                                                                               of
                                                                                                                                               future
                                                                                                                                               expenditures;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | impact
                                                                                                                                               of
                                                                                                                                               recent
                                                                                                                                               accounting
                                                                                                                                               pronouncements;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

·        
the outcome of regulatory and litigation matters;

·        
the assumptions described in this report underlying such forward-looking statements; and



Actual
results and developments may materially differ from those expressed in or implied by such statements due to a number of factors,
including:

| | o | those
                                                                                                                                           described
                                                                                                                                           in
                                                                                                                                           the
                                                                                                                                           context
                                                                                                                                           of
                                                                                                                                           such
                                                                                                                                           forward-looking
                                                                                                                                           statements;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | future
                                                                                                                                           service
                                                                                                                                           costs;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | changes
                                                                                                                                           in
                                                                                                                                           our
                                                                                                                                           incentive
                                                                                                                                           plans;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | the
                                                                                                                                           markets
                                                                                                                                           of
                                                                                                                                           our
                                                                                                                                           domestic
                                                                                                                                           operations;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | the
                                                                                                                                           impact
                                                                                                                                           of
                                                                                                                                           federal
                                                                                                                                           policy
                                                                                                                                           on
                                                                                                                                           oil
                                                                                                                                           and
                                                                                                                                           gas;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | the
                                                                                                                                           political,
                                                                                                                                           social
                                                                                                                                           and
                                                                                                                                           economic
                                                                                                                                           climate
                                                                                                                                           in
                                                                                                                                           which
                                                                                                                                           we
                                                                                                                                           conduct
                                                                                                                                           operations;
                                                                                                                                           and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | the
                                                                                                                                           risk
                                                                                                                                           factors
                                                                                                                                           described
                                                                                                                                           in
                                                                                                                                           other
                                                                                                                                           documents
                                                                                                                                           and
                                                                                                                                           reports
                                                                                                                                           filed
                                                                                                                                           with
                                                                                                                                           the
                                                                                                                                           Securities
                                                                                                                                           and
                                                                                                                                           Exchange
                                                                                                                                           Commission.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In
some cases, forward-looking statements are identified by terminology such as "may," "will," "should,"
"could," "would," "expects," "plans," "intends," "anticipates," "believes,"
"estimates," "approximates," "predicts," "potential" or "continue" or the negative
of such terms and other comparable terminology.



Although
we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Moreover, neither we nor anyone else assumes responsibility for the accuracy
and completeness of such statements and are under no duty to update any of the forward-looking statements after the date of this
report.





(3)







PART
I



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



ITEM
1. BUSINESS.



General

Overview
of Our Company

Universal
Bioenergy Inc.

Universal
Bioenergy Inc. is an independent diversified energy company, headquartered in Irvine, California. Our common stock is presently
listed on the OTC Markets Group trading systems under the trading symbol “UBRG”. Universal Bioenergy Inc., was incorporated
on August 13, 2004 in the State of Nevada, under the name of Palomine Mining Inc. On October 24, 2007, the Company changed its
name from Palomine Mining Inc., to Universal Bioenergy Inc. to better reflect its new business plan and strategic direction.

The
Company’s primary business focus is the production, marketing and sales of natural gas, petroleum, coal, propane and alternative
energy. Through its 49% owned subsidiary, NDR Energy Group LLC, the Company presently sells natural gas to 28 of the largest public
utilities, electric power producers and local gas distribution companies that serve millions of commercial, industrial and residential
customers throughout the United States. The Company is also engaged in the acquisition of oil and gas fields, lease acquisitions,
and development of newly discovered or recently discovered oil and gas fields, re-entering existing wells, transmission and marketing
of the products to our customer base. The Company intends to continue its growth through an ongoing series of acquisitions.The Company achieved revenues of $71.74 million, and had total assets of $11.21 million as of December 31, 2011.

Our
principal and administrative offices are located at 19800 MacArthur Blvd., Suite 300, Irvine, California 92612. Our telephone
number is 949-559-5017.

Universal
Bioenergy files or furnishes various reports with the Securities and Exchange Commission (“SEC”). These reports, including
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports
filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“1934 Act”),
are available free of charge on Universal Bioenergy’s corporate website, www.universalbioenergy.com, as promptly as practicable
after they are filed with, or furnished to, the SEC. The information contained on these websites is not incorporated by reference
into this Annual Report on Form 10-K and should not be considered part of this report. Reports filed with the SEC are also made
available on its website at www.sec.gov.

NDR
Energy Group LLC.

In
April 2010, we expanded into the natural gas energy market by the acquisition of a 49% stake in NDR Energy Group LLC, in Charlotte,
North Carolina (“NDR Energy”). NDR Energy Group was established in the State of Maryland on September 28, 2005. Through
NDR Energy, we have contracts signed with 28 major utility companies in the United States, with strong Standard & Poor’s
credit ratings. NDR Energy Group markets and distributes natural gas and propane to 28 of the largest public utilities, electric
power producers and local gas distribution companies that serve millions of commercial, industrial and residential customers throughout
the country. Our customers include Southern California Gas Company, Pacific Gas & Electric, CenterPoint Energy Resources,
Baltimore Gas & Electric, Memphis Light Gas & Water, Duke (Ohio & Kentucky), Michigan Consolidated and National Grid.
Our gas suppliers include EDF Trading, Chevron Texaco, Conoco Phillips, Chesapeake Energy Marketing, and Anadarko.

Business
Strategy

In
the year 2010, management re-organized and re-structured the Company with a new strategic direction and business plan, of which
these strategies were implemented in 2011 and are ongoing. Our primary objective is to exploit changes in the energy market, with
the intent to propel the Company to a dominant market position, and be one of the top independent energy companies in the United
States. Another major objective in our revised business plan is to finding new ways to create more value for our shareholders
and investors. Our management intends to deliver greater value to our shareholders and investors by generating increasing revenues,
producing solid earnings, and improving returns on invested capital, for the long-term growth of our Company. We believe this
is the ultimate measure of our success.

Our
management is proud of our results this past year, and believes that our business model and strategy is working very successfully.
Universal Bioenergy is a high growth company that is rapidly growing at double-digit rates. The Company achieved sales of $41,320,647
for 2010 and increased its sales by 73.64% to a record $71,747,840 in 2011.

By
building on our successes in 2011, we plan to achieve these future objectives by pursuing the following strategies;

Mergers
and Acquisitions

We
plan to continue our growth by means of mergers and acquisitions of other companies in the natural gas, propane, petroleum, coal
and alternative energy industries. This may also include liquefied natural gas (LNG), compressed natural gas (CNG), biofuels,
syngas and acquisitions of patented energy technologies.



Vertical
Integration and Acquisition of Our Own Oil and Gas Supplies

We
have adapted our business strategy to become a more vertically integrated company to give us greater management control over our
supply chain, from the producer, through marketing, distribution, and directly to our customer. We plan to own and/or control
our own natural gas supply by obtaining the gas at the wellhead from supplies with large reserves and inventories, to market and
distribute directly to our growing customer base.



Oil
and Gas Field Development

We
intend to pursue the acquisition of more oil and gas properties and assets. This includes existing oil and gas fields, development
of newly discovered or recently discovered oil and gas fields, re-entering existing capped wells and lease acquisitions. We especially
have a high level of interest in the development of existing fields whereby we can re-enter previously drilled capped wells to
extract the oil and gas using new drilling/extraction methods and techniques. Fields with previously drilled capped wells would
be of highest priority for us, since they had been “proven wells” before, and would therefore have lower development
costs and lower associated financial risks.



Strategic
Focus on Increasing Earnings.

A
major goal for the fiscal 2012 year and beyond is to begin to generate earnings for the Company. We intend to increase our operating
income and earnings through current and future acquisitions in the energy industry, and high profit centers which will include
gas storage, physical and financial gas trading, transportation, management and higher sales of natural gas, propane, oil and
coal. We also plan to obtain our natural gas supplies at the wellhead and aggregating the purchase of our gas supply through a
large number of independent producers with long-term purchase agreements to supply to our customers.



Our
Company’s Capital Structure

In
its efforts to grow the Company, management must obtain the necessary capital to achieve those objectives, decide on the best
methods to obtain that capital, and determine the best capital structure for the Company. The primary ways a company will raise
capital is either through debt financing (borrowing money), or equity financing (selling a portion of the company via shares of
stock) or a combination of both. Management decided not to raise capital through an equity offering in its initial start-up and
development stage for a variety of reasons. Since the Company is in a high growth stage, it required immediate capital to rapidly
expand, grow, restructure its operations, enter new markets, finance new acquisitions and execute its marketing plans, raising
capital through debt financing was in management’s opinion, our best alternative. This strategy resulted in our gaining
a greater share of the energy market, increased revenues, increased assets, market capitalization value and our shareholders owning
a portion of a much larger and more valuable company. Management will evaluate options, alternatives, and make strategic decisions
for the best investment opportunities and financing for the Company’s future growth at that time. For more detailed information
please see; Item 7 - Management's Discussion and Analysis of Financial Condition and Results of or Plan of Operation, under The
Company’s Capital Structure, and Convertible Debt.

Business
Development

In
2009 our present management team inherited a development stage company that, although it had more than nominal operations and
assets consisting of more than cash or cash equivalents, it generated no revenue, earnings, had limited operations, and had very
little volume and liquidity in its stock, since it was established in 2004. Since 2009, we believe the current management team,
managed to build a strong, solid operating company, with strong revenues in one to two years, in the worst economic downturn the
United States has experienced since the “Great Depression”. Overall, our management is highly pleased with the progress
we made last year. We strategically planned what we intended to do, and successfully implemented most of our strategies and tactics.
We managed to turn around a small development stage company with no revenues, built a strong operating company, and generated
revenues in excess of $71.74 million, all in less than two years.



(4)





Significant
Accomplishments



Record
Revenues of $71.74 Million

The
Company achieved a record in sales revenue of $71,747,840, for the year ending December 31, 2011, as compared to $41,320,647 for
the same period in 2010. The Company projects that it will continue its rapid growth in revenues in the next 12 months through
more acquisitions, gas storage, gas trading and higher sales of natural gas, propane, oil and coal for electric power plants.
For more details see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”,
and Item 8 “Consolidated Financial Statements and Supplementary Data”.



Universal
and Progas Energy “Strikes Oil & Gas”

On
March 3, 2011, the Company announced that Progas Energy Services had stuck oil and gas on several wells that it had drilled in
the Northwest Premont oil and gas field in Jim Wells County, Texas. Although there are no guarantees as to the quantity of oil
that can be extracted or the maintaining of current oil prices, management believes that the field possibly houses 20,000,000
Bbls of oil, and over 20,000,000 mcf of natural gas.



Standard
& Poor's Initiates Stock Report Coverage on Universal

On
April 7, 2011, Standard & Poor’s commenced Factual Stock Report coverage on Universal Bioenergy. S&P’s Factual
Stock Report coverage will be accessible on an ongoing basis to the investment community by scores of buy-side institutions, and
sell-side firms that utilize S&P research and information platforms daily.





Application
for Listing on the Frankfurt Stock Exchange

On
February 8, 2011, the Company announced that it applied to have its stock listed on the Frankfurt Stock Exchange in Frankfurt,
Germany. The Frankfurt Stock Exchange is one of largest trading exchanges for securities in the world. The Frankfurt Stock Exchange
is home to public companies from over 80 different countries with almost 40% from North America.

Universal
Bioenergy Increases Authorized Shares of Common Stock to 1 Billion Shares

On
May 19, 2011, we announced we amended our Articles of Incorporation and increased our authorized shares of common stock
from 200,000,000 to 1,000,000,000 shares. This is a long-term strategic move intended to expand our company and benefit our shareholders.



Approval
of Stock Dividend

On
June 6, 2011, our Board of Directors passed a resolution and declared a stock dividend to distribute to all registered shareholders
of record on or before July 1, 2011, on a 10 for 1 basis. On July 12, 2011, our transfer agent, issued 11,415,311 shares of common
stock to all registered shareholders of record in accordance with the resolution and declaration.



Universal’s
NDR Energy Group Expands into Propane Gas Market

On
July 27, 2011 we announced that we are expanding into the propane gas market. Our subsidiary NDR Energy was awarded a contract
in June 2011 to supply propane gas to Washington Gas Light Company.



Universal
Bioenergy’s Launches New Corporate Website

On
October 11, 2011, the Company launched a totally new corporate website to better serve the needs of its shareholders, investors
and the public interests.



Acquisition
of Whitesburg Friday Branch Mine LLC Thermal Coal Mining Operations

On
October 17, 2011, (and amended on February 20, 2012), our company and Whitesburg Friday Branch Mine LLC, a Kentucky Limited Liability
Company, entered into a Member Interest Exchange Agreement. Pursuant to the Exchange Agreement, and subject to the conditions
set forth therein, the Company will acquire 40% of the Member Interests and assets of Whitesburg Friday Branch Mine LLC, of Kentucky,
from JLP and Partners LLC, a Kentucky Limited Liability Company. The Whitesburg Friday Mine, operates, mines and produces thermal
coal in eastern Kentucky for sale to electric utilities for use in coal fired generation, steam plant electric power production.
This acquisition was reported on the Company Report on Form 8-K, filed with the Securities and Exchange Commission on February
28, 2012.



PRODUCTS



Natural
Gas Industry Market Segment

Industry
and Market Overview



In
his 2011 State of the Union Address, President Obama identified natural
gas as playing a core role in our country’s “clean energy future.” According to the American Petroleum Institute,
the “Oil and Gas Industry” supports more than 9.2 million American jobs and makes significant economic contributions
as an employer and purchaser of American goods and services. The industry supported a total value added to the national economy
of more than $1 trillion or 7.7 percent of the U.S. gross domestic product. The natural gas industry supports nearly 3 million
jobs and adds about $476 billion to the national economy.



Natural
gas is very important part of the energy sector of the U.S. economy. About 99 percent of the natural gas used in the United States
comes from North America, and is transported through a 2.3 million mile underground pipeline system. According to the U.S. Energy
Information Administration, (EIA), the United States marketed production of natural gas reached 22.6 trillion cubic feet (Tcf)
in 2010, its highest recorded annual total since 1973, surpassing 2009's production figure of 21.6 Tcf. A total of about 25% of
all energy used in the United States in 2010 came from natural gas. According to the American Gas Association, it is one of the
cleanest burning fossil fuels, and its use is expected to continue to grow. Natural gas is used in the production of steel, glass,
paper, clothing, brick, electricity, and as an essential raw material for many common products. Some products that use natural
gas as a raw material are: paints, fertilizer, plastics, antifreeze, dyes, photographic film, medicines, and explosives. According
to the EIA, 50.5% of the homes in the United States use natural gas as their main heating fuel. Natural gas is also used in homes
to fuel stoves, water heaters, clothes dryers, and other household appliances.



In
2009, the Natural Gas Supply Association reviewed existing data and estimated that in 2008 there were approximately 4 million
Americans who are employed either directly or indirectly by the natural gas industry - America's "Blue Jobs." Using
a different set of parameters, America's Natural Gas Alliance placed the number at closer to 3 million Americans working as a
result of natural gas production, delivery, and usage.



In
July of 2010, a report released by the American Petroleum Institute stated that natural gas production in the Marcellus Shale
region if developed could create 280,000 new American jobs and add $6 billion in new tax revenues to local, state and federal
governments over the next decade.



Additionally,
the use of natural gas is growing as an alternative fuel source in the transportation sector. According to the Natural Gas Vehicle
Coalition, there are currently 150,000 Natural Gas Vehicles (NGVs) on the road in the United States today, and more than 5 million
NGVs worldwide. In fact, the transportation sector accounts for 3 percent of all natural gas used in the United States. Natural
gas vehicles, when designed to run on natural gas alone, are among the cleanest vehicles in the world.



Gas
Industry Market Segments

The
physical structure of U.S. natural gas industry is divided into several major segments and principal activities that are required
to bring the gas to commercial, industrial and residential consumers. The principal activities are:



Exploration
and Production

Exploration
and production include finding and producing natural gas from natural gas fields or associated gas that is produced with crude
oil.



Processing Natural gas processing removes impurities and the higher valued products and prepares a dry gas stream that meets
industry standards for transportation in high-pressure pipelines.



Transportation Natural gas is transported in high-pressure pipelines from producing areas to industrial end users, storage areas, and
local distribution companies.



StorageThe natural gas production and delivery system is not designed to produce and transport the full amount of natural gas
consumer’s want during periods of peak demand. In order to meet peak demand, large customers and distribution companies
put gas into underground storage, mostly near final consumers. The stored gas is withdrawn to meet consumers’ needs during
times of peak demand, such as a cold winter day.



(5)









Local
Distribution



Local
distribution companies own and operate the network of pipes that carry natural gas from high-pressure trunk lines to final consumers.
These consumers include residential, commercial, and industrial customers.



Gas
Marketers



Natural
gas marketing involves the process of selling of natural gas from the wellhead to the end users. Gas marketers purchase their
gas from major gas companies, independent producers and aggregate the supply into quantities to market and sell to the utilities,
local distribution companies (LDC), and their commercial and industrial customers. They also arrange for its transportation, gas
storage and delivery to facilitate the sale of natural gas. Most residential and commercial customers purchase natural gas from
a local distribution company. However, many industrial customers have the option to purchase natural gas from a marketer or producer
instead of from the distribution company.



Future
Outlook of Natural Gas Market



Short-Term
Outlook



On
March 6, 2012 the U.S. Energy Information Administration (“EIA”) released its “Short-Term Energy Outlook”
EIA expects that natural gas consumption will average 68.9 billion cubic feet per day (Bcf/d) in 2012, an increase of 2.1 Bcf/d
(3.1 percent) from 2011. EIA expects that large gains in electric power use will offset declines in residential and commercial
use. Because of the much-warmer-than-normal winter this year, EIA expects residential and commercial consumption to fall by 0.5
percent and 0.1 percent, respectively, in 2012, reflecting a downward revision in projected consumption from last month’s
Outlook.



Projected
consumption of natural gas in the electric power sector grows by close to 9 percent in 2012, primarily driven by the relative
advantages of natural gas over coal for power generation in a growing number of economic dispatch decisions. Consumption in the
electric power sector peaks in the third quarter of 2012, when electricity demand for air conditioning is highest.



Growth
in total natural gas consumption continues into 2013, with forecast consumption averaging 69.3 Bcf/d (U.S. Natural Gas Consumption
Chart). Consumption in the residential and commercial sectors increases in 2013 because of the forecast return to near-normal
temperatures next winter. The increase in consumption in these sectors more than offsets a decline in power sector natural gas
burn stemming from the projected increase in natural gas prices relative to coal prices later this year and next.



Gas
Inventories



On
March 6, 2012, the EIA reported in its “Short-Term Energy Outlook”, that natural gas working inventories working natural
gas inventories continue to set new seasonal record highs as a very warm winter has contributed to much-lower-than-normal inventory
draws. As of February 24, 2012, according to EIA’s Weekly Natural Gas Storage Report, working inventories totaled 2,513
Bcf, 756 Bcf greater than last year’s level. EIA expects the winter heating season, which goes through March 31, will end
with working inventories of about 2,270 Bcf, which would be highest end-of-March level on record. In the last 20 years, end-of-March
inventories have not risen over 1,700 Bcf, and prior to that, rose above 2,100 Bcf just once, in 1983. With only a few exceptions,
weekly inventory withdrawals have been smaller than the previous five-year average during this year’s winter heating season.
EIA expects inventory levels at the end of October in both 2012 and 2013 will set new record highs as well (U.S. Working Natural
Gas in Storage Chart).



U.S.
Natural Gas Production and Exports



On
March 6, 2012, the EIA reported in its “Short-Term Energy Outlook”, that total marketed production of natural
gas grew by an estimated 4.8 Bcf/d (7.9 percent) in 2011, the largest year-over-year volumetric increase in history. This strong
growth was driven in large part by increases in shale gas production. While EIA expects year-over-year production growth to continue
in 2012 and 2013, the projected increases occur at a much lower rate than in 2011 as low prices reduce new drilling plans. According
to Baker Hughes, the natural gas rig count fell to 691 as of March 2, 2012, from a 2011 high of 936 in mid-October. So far, the
lower rig count has not impacted production levels, partly reflecting improved drilling efficiency. However, fewer horizontal
natural gas wells, particularly in areas such as the Haynesville Shale, contribute to small short-term production declines through
June 2012. These declines reverse later in the year as prices rise, wet natural gas production rises, and associated gas production
from oil wells increases.



Long-Term
Outlook



The
U.S. Energy Information Administration, in its “Annual Energy Outlook 2011 Report”, estimates that natural gas demand
in the United States could grow from 21.0 Tcf to be 26.3 Tcf, (Trillion Cubic Feet), by the year 2035. The EIA, “Natural
Gas Year-In Review 2009, Report” stated, “Over the past several years, natural gas use for electric power has increased,
with gas making up an increasing percentage share of total generation relative to coal. In 2009, natural gas made up almost 24
percent of net power generation with 931,000 Megawatt-hours (MWH) of electric power generated from natural gas. By comparison,
in 1996, natural gas made up only 14 percent of power generation.” Consumption of natural gas for electric power increased
from a level of 18.3 billion cubic feet, (Bcf) per day in 2008, to 18.9 Bcf per day in 2009. This increase was caused by fuel-switching
due to sharp declines in the price of natural gas, as coal prices actually rose between 2008 and 2009, while consumption of coal
at electric power plants declined 11 percent.



The
U.S. Energy Information Administration, in its “Annual Energy Outlook 2011 Report stated that, Shale gas production in the
United States grew at an average annual rate of 17 percent between 2000 and 2006. Early success in shale gas production was achieved
primarily in the Barnett Shale in Texas. By 2006, the success in the Barnett shale, coupled with high natural gas prices and technological
improvements, turned the industry focus to other shale plays. The combination of horizontal drilling and hydraulic fracturing
technologies has made it possible to produce shale gas economically, leading to an average annual growth rate of 48 percent over
the 2006 to 2010 period. Shale gas production continues to increase strongly through 2035 in the AEO2011 Reference case, growing
almost fourfold from 2009 to 2035. While total domestic natural gas production grows from 21.0 trillion cubic feet in 2009 to
26.3 trillion cubic feet in 2035, shale gas production grows to 12.2 trillion cubic feet in 2035, when it makes up 47 percent
of total U.S. production—up considerably from the 16-percent share in 2009.



Seasonal
Nature of Natural Gas Business



Generally,
the demand for natural gas decreases during the summer months and increases during the winter months. Seasonal anomalies such
as mild winters or hot summers sometimes lessen this fluctuation. In addition, pipelines, utilities, local distribution companies
and industrial users utilize natural gas storage facilities and purchase some of their anticipated winter requirements during
the summer. This can also lessen seasonal demand fluctuations.



Our
Product Mix and Sales



Our
primary business focus is the production, marketing and sales of natural gas, (methane), propane, coal, oil and alternative energy.
Through NDR Energy we presently sell natural gas to 28 of the largest public utilities, electric power producers and local gas
distribution companies that serve millions of commercial, industrial and residential customers throughout the United States. We
are also engaged in the acquisition of oil and gas fields, lease acquisitions and development of newly discovered or recently
discovered oil and gas fields, re-entering existing wells, transmission and marketing of the products to our customer base.

Our
growing and proposed product mix that we intend to develop and market includes;

• Natural Gas

• Liquefied
Natural Gas (LNG)

• Compressed
Natural Gas (CNG)

• Petroleum

• Propane

• Thermal/Steam
Coal

• Biofuels
• Syngas





(6)







Gas Supplies



We
presently obtain our supply of natural gas from a variety of gas suppliers having contracts with major companies including;



•
EDF Trading

•
Chevron Texaco

•
Conoco Phillips

•
Chesapeake Energy Marketing

• Total SA
• Anadarko



Our
plans are to acquire and own/control our own natural gas supply by obtaining the gas at the wellhead from supplies with large
reserves and inventories, to market and distribute directly to our growing customer base. We also intend to obtain more gas by
consolidating the purchase of gas supply through a large number of independent producers and pipeline companies with long-term
purchase agreements to supply gas to our customers. We select our suppliers based their ability to supply and deliver a firm base
load of gas to our customers and their designated delivery points.



We
intend to pursue the acquisition of more oil and gas properties and assets. This includes existing oil and gas fields, development
of newly discovered or recently discovered oil and gas fields, re-entering existing capped wells and lease acquisitions. Consolidating
the purchase of gas supply through a large number of independent producers with long-term purchase agreements to supply to our
customers, we deliver our gas to our customers through the national intrastate and interstate pipelines.



Review
of Our Business Operations



The
general terms and conditions upon which we currently operate in the acquisition of our customers, obtaining gas supplies and contracts
are presented as follows;



Natural
Gas Pricing



Our
gas is purchased based on an Index Price from the “Inside FERC Gas Market Report”, first of the month posted index
price or “Gas Daily” Midpoint as published by PLATTS. The index pricing of the gas is based on the New York Mercantile
Exchange (“NYMEX”), or the Henry Hub index price, at the Sabine Pipe Line Co.’s, Henry Hub connection point
in Louisiana, which is used as the standard in the gas industry.



Purchase
Agreement





We
generally enter into a purchase or sales agreement with the customer and/or supplier, using the North American Energy Standards
Board (“NAESB”), “Base Contract for Sale and Purchase of Natural Gas”, which is the standard agreement
used in use the natural gas industry.



Gas
Inventory, Title and Warranty



Pursuant
to the terms of the NAESB contract regarding title to the gas we purchase, it states "Seller warrants that it will have the
right to convey and will transfer good merchantable title to all Gas sold hereunder delivered to Buyer, free and clear of all
liens, encumbrances and claims." This means the gas that is sold to Universal and NDR Energy by the suppliers has no claims
or liens, from either the Suppliers own oil/gas wells, and/or from other producers that they procure it from. After we purchase
the gas, we own it, and it becomes part of our inventory until we deliver it to our customer.



Contract
Term.



Our
contract terms are usually 1 to 5 years to supply gas to our customers, however in some cases shorter terms of 1 to 6 months will
be considered for some customers. We normally start taking delivery of the gas from our suppliers within 30 days of signing of
a contract.



Contract
Types



a.	Daily
gas sales and purchases

b.	Monthly
Terms

c.	Annual
Terms



Purchase
Terms and Conditions.



We
currently invoice our customers between the 10th and 15th of each month, for the previous months gas sales. The customer, in accordance
with our “Purchase Agreement”, sends us full payment via wired funds by the 25th of the month, or 10 to15 days after
receipt of our invoice. The documents that are usually submitted to the customer to receive payments are; (a) Commercial Invoice,
(b) Gas Pipeline Confirmation, and a (c) Gas Pipeline Report. If there are any imbalances between what was ordered by the customer
and what was actually received from the supplier, a reconciliation report is generated to account for the imbalances, and a settlement
of the accounts is made to compensate for the differences.



Presently
NDR Energy turns over its accounts receivables for the sale of natural gas about 7 to 12 times per year or every 30 to 40 days.
We are currently in the process of re-negotiating our agreements with our electric utility customers to change the invoicing and
payment terms from 30 to 40 days, to invoicing them on a weekly basis. While there are no assurances this will be implemented,
management believes that this will increase the accounts receivables turnover times to 52 times per year, and will shorten the
collection time that we receive payment on our customer’s invoices.



NATURAL
GAS MARKETING



Natural
gas marketing involves the process of selling of natural gas from the wellhead to the customers. Our goal is to locate buyers
for our natural gas, and ensure a stable supply of natural gas in the market to reach our customers. It also involves purchasing
the gas, arranging its transportation, gas storage, delivery and related back office services and accounting to facilitate the
sale of natural gas.



NDR
Energy has a solid customer base, many years of experience and a wealth of knowledge in the industry to develop a more extensive
customer base. We plan to create an aggressive marketing campaign that will allow for the rapid and sustained growth of the Company.
Our management is presently researching new opportunities and more potential customers in multiple industry sectors to advance
the use of natural gas. We are working towards establishing a strong financial foundation and effective long-term marketing strategies
that we believe will help position us to potentially achieve a material increases in sales or market capitalization value.





Electric
Utility Customers



Presently
there are reportedly over 3240 utilities in the United States using natural gas for electricity generation or for general distribution
to their commercial and residential customers and for other uses. This does not include “private” users of natural
gas positioned inside the “city gates” or within the areas of local distribution companies (LDCs). Through NDR Energy
we have contracts with 28 of these utilities and we are working on establishing contracts other electric utilities.

Through
NDR Energy, we presently sell natural gas to 28 of the largest public utilities, electric power producers and local gas distribution
companies that serve millions of commercial, industrial and residential customers throughout the United States. Some of the customers
we have agreements with include;



•
Southern California Gas Company

•
Pacific Gas & Electric

•
Baltimore Gas & Electric

•
Brooklyn Union Gas

•
Memphis Light Gas & Water

•
Duke (Ohio & Kentucky)

•
Nicor Gas

•
Michigan Consolidated

•
Entergy (Texas and Gulf States)

•
CenterPoint Energy Resources

•
National Grid



In
2010 and 2011, while building our business, we focused on generating substantial sales revenues, a broad customer base, and gaining
the greatest share of the market in the shortest period of time. That strategy affected how we obtained our supplies, their relative
cost, and how we priced our products for sell to our customers. To gain a great market share in a short period of time, initially
resulted in higher cost of goods sold, and selling the product, at or slightly below our costs, and that directly impacted our
profitability. This caused almost negligible gross profit and negative earnings, in 2011. This strategy was only a temporary measure,
while we were building greater market share in the last two years.



The
high proportionate cost of sales relative to the gross revenues, is also due in part to purchasing gas from some suppliers at
close to retail cost, using their costly “trade credit”, and associated high financing costs, added to the gas by
some suppliers.



Our
goal for 2012 and beyond is to become more "profit oriented". We will have a different strategy for procuring our supplies,
and the quantities and price points that we sell the product for, to our customers. That's why we’re contracting directly
with the gas producers to obtain our supplies from the wellhead. The Company is currently pursuing obtaining its own bank and
funding “lines of credit”, instead of using the suppliers “trade credit”, to purchase the gas. This will
allow us to purchase gas in larger quantities, with greater economies of scale, on better terms, at lower purchase costs. This
means our cost of sales should significantly decrease, and our pricing structure to our customers will be more flexible, resulting
in potentially higher profit margins for the Company.



(7)









Expanded
Customer Base



We
currently have a very strong and solid customer base of electric utility companies to sell natural gas to. However, to increase
our revenues and profits, we are working diligently to grow and expand that customer base by diversifying and adding to its these
potential types of customers;



•
Federal departments and agencies

•
United States Military

•
State departments and agencies

•
Cities and Municipalities

•
Large commercial users

•
Large industrial plants and factories





New
Profit Centers



We
also plan to increase our revenues and profits by engaging in some are all of the services indicated below. These services are
currently being provided to us by our natural gas suppliers and the cost for these services are charged to us, and are included
in the price of the gas that we purchase from them. We believe that implementing these new profit centers may generate an additional
$0.05 to $0.25 in revenue per mcf, of natural gas that we sell to our customers. These services include;



1.
Scheduling - tracking nominations, confirmations product movement and verification

2.
Gas Nominations - delivery of a specified volume over a defined period of time

3.
Capacity Releases - release of transportation capacity on interstate natural gas pipelines

4.
Gas Transmission - Delivery via the interstate pipeline system to the Local Utility and customers

5.
Pipeline Balancing - matching customer's daily usage with the customer's confirmed pipeline delivery

6.
Risk Management – developing supply pricing strategy, options, demand, daily and futures contracts

7.
Gas Storage - match seasonal load variations, and production over periods of fluctuating demand

8.
Gas Trading - physical trading and financial trading, and hedging of gas futures



NATURAL
GAS DISTRIBUTION

Distribution
of our natural gas product is managed and transported through the 2.4 million mile intrastate and interstate underground gas pipeline
system through the United States. This total includes 2.1 million miles of local utility distribution pipes; and 300,000 miles
of transmission lines. We typically would deliver the gas to the local gas utility, also called a local distribution company (LDC),
to delivery points located on large interstate and intrastate pipelines. The local distribution companies will typically transport
the natural gas from these delivery points located on the pipelines to households and businesses through thousands of miles of
small-diameter distribution pipe.

To
further improve our distribution, we have adapted our business strategy to become a more vertically integrated company. This will
give us greater management control over our supply chain, from the producer, through marketing, distribution, and directly to
the customer. We believe, but cannot guarantee, this will bring even greater net profits for our Company.

By
obtaining our gas at the wellhead from independent producers such as Progas Energy Services and other gas field development joint
ventures, thereby owning our own supply will bring three major benefits to Universal:

1.
First it allows Universal to acquire natural gas reserves from the ground, for a small fraction of the purchase costs that it
currently pays to other producers that it currently markets natural gas for.

2.
Second it would provide Universal with a source of natural gas of its own at the “producers’ price”, which can
be marketed to its major utility gas customers throughout the U.S. While most gas marketers are limited to a 1% to 2% profit on
the spread of natural gas prices, (less than 1 cent per mcf), Universal’s exploration costs for its share of the field is
estimated to be at 10% of the NYMEX price allowing Universal, in management’s opinion to earn a potential 90% gross profit,
on the spread of gas that it owns in the field, and that it sells into the market place. This will give, we believe, Universal
a distinct advantage in the marketplace and a considerably higher profit margin for gas that is sold to its customers.

3.
Third, while many gas marketing companies have to buy gas from third parties; their ability to purchase gas is somewhat subject
to availability. Universal will be able to supply the natural gas produced, that it owns, as well as the natural gas of the other
industry partners in the development of the field, such as Progas Energy, who have offered Universal the right to market their
gas.

With
this strategy we will be able to become a producer and direct distributor of our own natural gas inventory and manage the transportation
and delivery of the supply to our customers throughout the United States.

Gas
Delivery Points



We
currently ship natural gas to our customers through nearly 41 intrastate and interstate transmission pipelines to various delivery
points to our customers nationwide. The information below includes the top 10 of the most utilized of the transmission pipelines/
Delivery Points for our major customers;



| | 1. | Transco
                                                                                                                                                                  -
                                                                                                                                                                  Station
                                                                                                                                                                  65
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | Transco
                                                                                                                                                                  -
                                                                                                                                                                  Station
                                                                                                                                                                  85
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | SoCal
                                                                                                                                                                  -
                                                                                                                                                                  Citygate
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | Transwestern
                                                                                                                                                                  -
                                                                                                                                                                  San
                                                                                                                                                                  Juan
                                                                                                                                                                  Blanco
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | Columbia
                                                                                                                                                                  Gas
                                                                                                                                                                  Transmission
                                                                                                                                                                  (CGT)
                                                                                                                                                                  -
                                                                                                                                                                  Mainline
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6. | Natural
                                                                                                                                                                  Gas
                                                                                                                                                                  Pipeline
                                                                                                                                                                  (NGOL)
                                                                                                                                                                  -
                                                                                                                                                                  Midcontinent
                                                                                                                                                                  Pool
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 7. | Oasis
                                                                                                                                                                  -
                                                                                                                                                                  Katy
                                                                                                                                                                  Interconnect
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 8.  | ANR
                                                                                                                                                                  -
                                                                                                                                                                  Southeast                                                                                                                                                                                                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 9.  | Texas
                                                                                                               Eastern Transportation
                                                                                                               (TETCO) - So. Texas
                                                                                                               (STX)                                                                                                                                                                                                                                                              
| | 10. | El
                                                                                                                                                           Paso
                                                                                                                                                           -
                                                                                                                                                           Blanco
                                                                                                                                                           Pool







(8)









NATURAL
GAS INDUSTRY COMPETITION



The
natural gas industry in the United States can be very competitive, especially since natural gas is sold as a commodity, similar
to pork bellies, corn, copper, oil and other commodities. After the natural gas it has been processed for sale and distribution
to the market, it is basically the same product where ever it is produced. The market for commodities is inherently volatile,
which means the price of commodities, including natural gas are sometimes subject to rapid and drastic changes. Most companies
that sell natural gas to their respective customers complete primarily on price.



There
are several different types of gas marketing companies with different origins from the industry. Many natural gas marketers were
originally entities spun off from interstate pipeline companies, while other are made up of entities affiliated with local distribution
companies. Some of the top natural gas marketers were originally affiliated with producers, and some entities were also formed
from large volume natural gas consumers. The last type is the independent, newly formed entities that represent an estimated 10
percent of top natural gas marketers. Due to their varied experience, some natural gas marketers are active in a variety of energy
markets, including the marketing of crude petroleum and electricity.



We
do not directly compete with the major gas exploration and production companies. These companies are financially stronger than
we are, however they may not able to respond to opportunities and changes in the marketplace as quickly as we may be able to.
They usually have very large staffs and high overhead and operating costs. Our direct competition is primarily limited to the
array of small to mid-sized gas marketers.Many of these firms are undercapitalized, and do not have their own gas supply
and must obtain their gas supplies from the wellhead, at or near retail prices.



Most
companies that sell natural gas to their respective customers complete primarily on price. However, we believe that with our comprehensive
strategies to diversify the company, we will not only be able to compete on price, but also mitigate our risks in the marketplace
and reposition our competition so that we can compete effectively. These strategies include;



• Acquisitions
of small to mid-sized oil and gas producers and marketers to gain market share

• Acquisition
of interests in gathering and transportation pipelines

• Vertical
integration to manage the supply chain

• Oil and gas
field development

• Owning and
controlling our own gas supply

• Re-negotiating
our existing supply agreements

• Obtaining
gas at the producers price

• Aggregation
of supply from multiple independent suppliers

• Access to
the capital markets

• Offer a diversified
energy product mix

• Alternative
energy, e.g., biofuels and syngas to balance our portfolio

• Attract and
retain quality personnel with incentive and equity based compensation

• Addition
of new higher margin profit centers



We believe these
strategies will protect us from many of shocks and volatility in the marketplace, and enable us to build a strong, profitable
company that can compete effectively for the long-term in the industry.





GOVERNMENTAL
REGULATIONS



The
oil and natural gas industry is subject to various types of regulation throughout the world. Laws, rules, regulations and other
policy implementations affecting the oil and natural gas industry have been pervasive and are under constant review for amendment
or expansion. Pursuant to public policy changes, numerous government agencies have issued extensive laws and regulations binding
on the oil and natural gas industry and its individual members, some of which carry substantial penalties for failure to comply.
Such laws and regulations have a significant impact on oil and gas exploration, production and marketing and midstream activities.
These laws and regulations increase the cost of doing business and, consequently, affect profitability. Because public policy
changes affecting the oil and natural gas industry are commonplace and because existing laws and regulations are frequently amended
or reinterpreted, we are unable to predict the future cost or impact of complying with such laws and regulations. However, we
do not expect that any of these laws and regulations will affect our operations in a manner materially different than they would
affect other oil and natural gas companies of similar size and financial strength.

Gas
Deregulation



In
November of 1978, Congress enacted legislation known as the Natural Gas Policy Act (“NGPA”), as part of broader legislation
known as the National Energy Act (NEA), which began the process of de-regulating the natural gas industry. The process was completed
in January 1, 1993, when all remaining NGPA “price regulations” were eliminated, allowing the market to completely
determine the “price of natural gas”.



Although
oil and natural gas prices are currently unregulated, Congress historically has been active in the area of oil and natural gas
regulation. We cannot predict whether new legislation to regulate oil and natural gas might be proposed, what proposals, if any,
might actually be enacted by Congress or the various state legislatures, and what effect, if any, the proposals might have on
our operations. Sales of condensate and oil and natural gas liquids are not currently regulated and are made at market prices.

Historically,
federal legislation and regulatory controls have affected the price of the natural gas that is produced and the manner in which
the gas that is produced is marketed. The Federal Energy Regulatory Commission (“FERC”) has jurisdiction over the
transportation and sale for resale of natural gas in interstate commerce by natural gas companies under the Natural Gas Act of
1938 and the Natural Gas Policy Act of 1978. Various federal laws enacted since 1978 have resulted in the complete removal of
all price and non-price controls for sales of domestic natural gas sold in first sales, which include all of our sales of our
own production. Under the Energy Policy Act of 2005, FERC has substantial enforcement authority to prohibit the manipulation of
natural gas markets and enforce its rules and orders, including the ability to assess substantial civil penalties.

Natural
Gas Sales and Transportation

The
availability, terms and cost of transportation significantly affect sales of oil and natural gas. The interstate transportation
and sale for resale of oil and natural gas is subject to federal regulation, including regulation of the terms, conditions and
rates for interstate transportation, storage and various other matters, primarily by the FERC. Federal and state regulations govern
the price and terms for access to oil and natural gas pipeline transportation. The FERC’s regulations for interstate oil
and natural gas transmission in some circumstances may also affect the intrastate transportation of oil and natural gas.

FERC
also regulates interstate natural gas transportation rates and service conditions and establishes the terms under which we may
use interstate natural gas pipeline capacity, which affects the marketing of natural gas that we produce, as well as the revenues
we receive for sales of our natural gas and release of our natural gas pipeline capacity. Commencing in 1985, FERC promulgated
a series of orders, regulations and rule makings that significantly fostered competition in the business of transporting and marketing
gas. Today, interstate pipeline companies are required to provide nondiscriminatory transportation services to producers, marketers
and other shippers, regardless of whether such shippers are affiliated with an interstate pipeline company. FERC’s initiatives
have led to the development of a competitive, open access market for natural gas purchases and sales that permits all purchasers
of natural gas to buy gas directly from third-party sellers other than pipelines. However, the natural gas industry historically
has been very heavily regulated; therefore, we cannot guarantee that the less stringent regulatory approach currently pursued
by FERC and Congress will continue indefinitely into the future nor can we determine what effect, if any, future regulatory changes
might have on our natural gas related activities.

(9)







COAL
INDUSTRY MARKET SEGMENT



To
further enhance our growth and expansion, the Company has decided to expand into the coal energy sector of the energy industry.
Thermal/Steam non-coking coal is used as a primary source of energy for coal fired powered plant electric generation. Universal
plans to mine, produce and market “Thermal/Steam” coal to sale to other major coal producers and electric utility
customers for power generation. The Company will be pursuing acquisitions of mining operations which are the surface and high
wall mining type and that does not include any underground mining.  According to the American Coal Foundation, 9 out of every
10 tons of coal mined in the United States today is used to generate electricity, and more than half of the electricity used in
this country is coal generated electricity. The following is a summary and overview of the industry and market, which information
was excerpted primarily from the U.S. Department of Energy’s, “Energy Information Agency” (EIA).





Types
of Coal



Coal
is classified into four main types, or ranks (lignite, subbituminous, bituminous, anthracite), depending on the amounts and types
of carbon it contains and on the amount of heat energy it can produce. For the most part, the higher ranks of coal contain more
heat-producing energy. Coals with a high heat content are generally higher priced.



Bituminous
coal contains 45-86% carbon. Bituminous coal was formed under high heat and pressure. It is the most abundant rank of coal found
in the United States, accounting for about half of U.S. coal production. Bituminous coal is used to generate electricity and is
an important fuel and raw material for the steel and iron industries. West Virginia, Kentucky, and Pennsylvania are the largest
producers of bituminous coal.



According
to the Energy Administration (EIA) in its “Annual Coal Report” released November 30, 2011, (which the information
below is derived), due to its relatively low cost and abundance, coal is used to generate about half of the electricity consumed
in the United States. Coal is the largest domestically-produced source of energy. Coal use, however, results in higher amounts
of carbon dioxide per unit of energy than the use of oil or natural gas. The United States is home to the largest recoverable
reserves of coal in the world. In fact, we have enough coal to last more than 200 years, based on current consumption levels.
Coal is produced in 25 States spread across three coal-producing regions, but approximately 72% of current production originates
in just five States: Wyoming, West Virginia, Kentucky, Pennsylvania, and Montana.



•U.S.
coal production totaled 1,084.4 million short tons, about the same as the 2009 total of 1,074.9 million short tons. Wyoming continued
to be the largest coal-producing State with 442.5 million short tons, 2.6 percent higher than the 2009 total of 431.1 million
short tons.



•Coal
consumption totaled 1,051.3 million short tons, up 5.1 percent from the 2009 consumption level of 997.5 million short tons. This
increase can be attributed to higher consumption in the electric power, manufacturing, and coke sectors in 2010.



Use
of Coal for Electric Power



About
86% of U.S. electricity is generated by three fuels: coal, natural gas, and nuclear (2011):



•	Coal
— 42%

•	Natural
Gas — 25%

•	Nuclear
— 19%

•	Hydroelectric
— 8%

•	Other
Renewables — 5%

•	Petroleum
and Other — 1%



Net
generation of electricity in the United States was about 4,106 billion kilowatt hours (kWh).



In
2011, coal was the fuel for about 42% of the 4 trillion kilowatt hours of electricity generated in the United States. About 93%
of U.S. coal consumption is in the electric power sector. Since 1976, coal has been the least expensive fossil fuel used to generate
electricity when measured based on the cost per Btu (a unit of energy content). Although the cost of generating electricity from
coal has increased, it is still lower than generating electricity from either natural gas or petroleum in most areas. Coal also
has certain industrial applications such as cement making and conversion to coke for the smelting of iron ore at blast furnaces
to make steel. A small amount of coal is also burned to heat commercial, military, and institutional facilities, and an even smaller
amount is used to heat homes. Over the past 10 years, about 5% of the coal produced in the United States, on average, has been
exported. The United States also imports a small amount of coal; some power plants along the Gulf Coast and the Atlantic Coast
find it cheaper to import coal by sea from South America than to have it transported from domestic coal mines.



The
United States has more than 1,400 coal-fired electricity generating units in operation at more than 600 plants across the country.
Together, these power plants generate almost half of the electricity produced in the United States and consume about one billion
short tons of coal per year. The share of our electricity generated from coal is expected to decrease by 2035. However, our growing
demand for electricity is expected to lead to an increase in the actual amount of coal used, in the absence of new policies to
limit or reduce emissions of carbon dioxide and other greenhouse gases. Such new policies could significantly change the outlook
for coal use.



Industrial
Uses of Coal



A
variety of industries use coal's heat and by-products. Separated ingredients of coal (such as methanol and ethylene) are used
in making plastics, tar, synthetic fibers, fertilizers, and medicines. Coal is also used to make steel. Coal is baked in hot furnaces
to make coke, which is used to smelt iron ore into iron needed for making steel. It is the very high temperatures created from
the use of coke that gives steel the strength and flexibility for things like bridges, buildings, and automobiles. The concrete
and paper industries also use large amounts of coal.



Surface
Mining



Surface
mining (including mountain top removal) is used to produce most of the coal in the United States because it is less expensive
than underground mining. Surface mining can be used when the coal is buried less than 200 feet underground. In surface mining,
giant machines remove the top soil and layers of rock known as "overburden" to expose the coal seam. Once the mining
is finished, the dirt and rock are returned to the pit, the topsoil is replaced, and the area is replanted. U.S. laws require
that dust and water runoff from the affected area has to be controlled, and that the area has to be "reclaimed" close
to its original condition. Many surface mines have been reclaimed so well that it can be hard to tell that there was a surface
mine in the area.



(10)







Processing
and Transporting Coal



After
coal is mined and processed, it is ready to be shipped to market. The cost of shipping coal can cost more than the cost of mining
it. About 71% of coal in the United States is transported, for at least part of its trip to market, by train. Coal can also be
transported by barge, ship, truck, and even pipeline. It is often cheaper to transport coal on river barges, but barges cannot
take coal everywhere that it needs to go. If the coal will be used near the coal mine, it can be moved by trucks and conveyors.
Coal can also be crushed, mixed with water, and sent through a "slurry" pipeline. Sometimes, coal-fired electric power
plants are built near coal mines to lower transportation costs.



Reducing
the Impacts of Coal Use



The
Clean Air Act and the Clean Water Act require industries to reduce pollutants released into the air and the water. Industry has
found several ways to reduce sulfur, nitrogen oxides (NOx), and other impurities from coal. They have found more effective ways
of cleaning coal after it is mined, and coal consumers have shifted towards greater use of low sulfur coal. Power plants use flue
gas desulfurization equipment, also known as "scrubbers," to clean sulfur from the smoke before it leaves their smokestacks.
In addition, industry and government have cooperated to develop technologies that can remove impurities from coal or that make
coal more energy-efficient so less needs to be burned.



Equipment
intended mainly to reduce SO2 (such as scrubbers), NOx (such as catalytic converters), and particulate matter (such as electrostatic
precipitators and baghouses) is also able to reduce mercury emissions from some types of coal. Scientists are also working on
new ways to reduce mercury emissions from coal-burning power plants. Research is underway to address emissions of carbon dioxide
from coal combustion. Carbon capture separates CO2 from emissions sources and recovers it in a concentrated stream. The CO2 can
then be sequestered, which puts CO2 into storage, possibly underground, in such a way that it will remain there permanently.



Reuse
and recycling can also reduce coal’s environmental impact. Land that was previously used for coal mining can be reclaimed
for uses like airports, landfills, and golf courses. Waste products captured by scrubbers can be used to produce products like
cement and synthetic gypsum for wallboard.

Scientists
are working on ways to lower the costs and improve the efficiency of various carbon capture and sequestration (CCS) technologies
with a goal of capturing approximately 90% of the carbon dioxide from coal plants before it is emitted into the atmosphere and
then storing it below the Earth's surface.



International
Coal Market



Worldwide,
compared to all other fossil fuels, coal is the most abundant and is widely distributed across the continents. The estimate for
the world's total recoverable reserves of coal as of January 1, 2009 was 948 billion short tons.



Estimated
Recoverable Reserves" include only the coal that can be mined with today’s mining technology, after accessibility constraints
and recovery factors are considered. EIA estimates there are 261 billion short tons of U.S. recoverable coal reserves, about 54%
of the Demonstrated Reserve Base. Based on U.S. coal consumption for 2010, the U.S. recoverable coal reserves represent enough
coal to last 249 years. However, EIA projects in the most recent Annual Energy Outlook (April 2011) that U.S. coal consumption
will increase at about 1.1% per year for the period 2009-2035. If that growth rate continues into the future, U.S. recoverable
coal reserves would be exhausted in about 119 years if no new reserves are added.



Future
Outlook for the Coal Industry



International
– The international market for coal consumption is a very dynamic and fast changing one especially in developing regions
due to industrialization and technological development. This change has been one of increased consumption as noted in the EIA’s
report International Energy Outlook 2011 where we see that in the years from 2000 to 2010, there have been significant increases
in yearly coal consumption globally ranging from as little as 0.8% to as high 10.7% annually. Due to the industrialization in
the developing regions of the globe, this trend of increasing coal consumption will remain a reality. EIA projections show a conservative
average of almost 1.4% increased coal consumption each year through 2035.



The
U.S. Energy Information Administration (EIA) says, coal as a fuel source for electricity generation will increase 25% by 2035
in the United States. Overall, the EIA predicts that coal will remain the dominate fuel source for electricity generation, growing
to about 11,000 terawatt hours from its current level of about 8,000.



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Employees



As
of fiscal year end December 31, 2011, the Company had 13 employees. Each management hire has been carefully selected to address
immediate needs in particular functional areas, but also with consideration of the Company’s future needs during a period
of expected rapid growth and expansion. Value is placed not only on outstanding credentials in specific areas of functional expertise,
but also on cross-functionality, collegiality, a strong knowledge of content acquisition and distribution, along with hands-on
experience in scaling operations from initial beta and development stage through successful commercial deployment. We believe
that the relationship with our employees is excellent. We regularly use independent consultants and outside contractors to perform
various professional services, particularly in the areas of drilling, engineering, field, on-site production services and certain
accounting functions.





Executive
Officers of Universal Bioenergy and NDR Energy Group LLC



Our
executive officers are appointed by, and serve at the pleasure of our Board of Directors. Set forth below is biographical information
about each of our executive officers.



Vince
M. Guest - President and Chief Executive Officer



Vince
M. Guest was appointed as President and CEO on April 14, 2010. He has been a Director of Universal since March 5, 2009. He has
over 25 years of professional management experience drawn from Fortune 500 firms in the U.S. His experience includes business
management, operations, strategic alliances, energy services, organizational development, marketing, commercial real estate acquisitions,
corporate finance, and management of real estate assets with a combined portfolio value exceeding $2.5 billion. He has arranged
over $500 million in corporate capital funding and commercial and residential financing. He served as President of AmeriCapital
Financial Corporation directing the commercial and residential real estate investment services group for 26 states nationwide.
Previously, he served as Director of Energy Services for New Energy Ventures, managing the energy services division for the state
of California. He worked as Director of Engineering for Trammel Crow-Winthrop Management and in management and professional positions
at TRW, Citicorp, and Bristol-Myers Squibb.



Solomon
RC Ali - Senior Vice President of Corporate Finance and Investor Relations



Solomon
RC Ali was appointed as Senior Vice President of Corporate Finance and Investor Relations and Director on March 5, 2009. He was
appointed as Corporate Vice President on May 25, 2010. He has over 23 years’ experience in investor relations, investment
banking, mergers, acquisitions, corporate structure, marketing, asset management and is an expert in financial engineering and
raising investment capital. He has personally managed and completed over 140 mergers and acquisitions in his career. As a highly
qualified corporate executive he served as CEO of Rainco Industries, managed over 500 employees, managed over $100 million in
assets and arranged over $250 million in investment capital and structured financing. His experience also includes corporate valuation,
capitalization structure, development of Private Placement Memoranda, business plans, client positioning, managing the investment
process with securities attorneys and accountants, for SEC and FINRA regulatory compliance and corporate registration filings.
Mr. Ali has developed and implemented new policies, systems, procedures and strategically re-organized, re-structured, re-financed
and turned around many troubled small cap companies and improved their operations and market capitalization value.



Ken
Harris – NDR Energy Group - President and Chief Executive Officer



Ken
Harris was appointed as President and CEO of NDR Energy Group on April 1, 2011. Ken has 22 years of experience as an Attorney,
with experience in business operations, management, negotiations of NAESB supply and purchase contracts, business development,
regulatory compliance, operations systems design and organizational development. Mr. Harris has worked as an Attorney with a legal
practice covering business transactions, tort litigation, criminal law, personal injury, sports agency management. He also serves
as a Founder / Partner with the law firm of Ken Harris and Associates. Previously he worked as a Founding Partner for Todd, Parham,
Harris and Dixon, a Founding Partner for Harris and Drummond, an Associate with Hoover and Williams, an Associate with Wishart,
Norris, Henninger & Pittman, and as a NBA/NFL Sports Agent for Bill Duffy & Associates. Ken also serves as host of the
radio talk show “Law 360” on WGIC Radio in Charlotte, North Carolina. Ken received a B.A in Political Science, and
a Juris Doctorate from the University of North Carolina at Chapel Hill. Ken Harris has represented some of the most significant
business brands in urban America, and has worked extensively with Magic Johnson Enterprises for over 18 years.



Rickey
Hart – NDR Energy Group – Senior Vice President and Business Development Officer



Rickey
Hart serves in the position of Senior Vice President and Business Development Officer for NDR Energy Group. He founded NDR in
2000, and has over 25 years over professional experience, which includes 16 years in the oil and gas industry. His professional
industry experience covers operations, marketing, and business development, negotiations of NAESB supply and purchase contracts,
sales of natural gas, propane, lubricants and related energy services. He has also developed new markets for products, sales of
pipeline transmission capacity, developed hedge programs, managed sales teams, and developed marketing, sales and promotions programs
for many companies during his career. Previously he worked as a General Manager for New Image Consultants, Marketing Manager for
SDS Petroleum Products, Account Manager for Texas Liquids and other managerial and professional positions for Jones and Associates,
M&S Staff Consultants, and Twentieth Century Fox.





Ray
Crooks – NDR Energy Group – Managing Partner and Principal Consultant



Ray
Crooks has over 25 years of professional experience in energy services and the gas industry. He provides technical consulting
services for NDR Energy’s public and private sector clients in the areas of natural gas planning, gas supply and pipeline
management, contract negotiations for NAESB supply and purchase contracts, strategic planning, risk management and cost of service
analyses. Ray is a candidate for a Doctorate in Business Administration, (DBA), and holds a Masters in Management Information
Systems from Nova Southeastern University, a MBA in Finance from Webber International University, and a B.S. in Business Administration
from the University of Central Florida.



(12)









WHERE
YOU CAN FIND MORE INFORMATION



We
will make available free of charge any of our filings as soon as reasonably practicable after we electronically file these materials
with, or otherwise furnish them to, the Securities and Exchange Commission (“SEC”). We are not including the information
contained in our website as part of, or incorporating it by reference into, this report on Form 10-K.



The
public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington,
D.C. 20002. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers
that file electronically with the SEC at (http://www.sec.gov).



ITEM 1A
- Risk Factors





As
a smaller reporting company we are not required to provide a statement of risk factors. However, we believe this information may
be valuable to our shareholders for this filing although we reserve the right to not provide risk factors in our future filings.
You should carefully consider the following risk factors together with the other information contained in this Annual Report on
Form 10-K, and in prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933, as
amended. If any of the risks factors actually occur, our business, financial condition or results of operations could be materially
adversely affected. In such cases, the trading price of our common stock could decline. We believe there are no changes that constitute
material changes from the risk factors previously disclosed in the prior reports pursuant to the Securities Exchange Act of 1934,
as amended and the Securities Act of 1933 and include or reiterate the following risk factors:



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



Our
common stock is traded on the OTCBB “Pink Sheets”. The OTCBB “Pink Sheets” is often highly illiquid, in
part because it does not have a national quotation system by which potential investors can follow the market price of shares except
through information received and generated by a limited number of broker-dealers that make markets in particular stocks. There
is a greater chance of volatility for securities that trade on the OTCBB “Pink Sheets”as compared to a national
exchange or quotation system. This volatility may be caused by a variety of factors, including the lack of readily available price
quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions.
Investors in our common stock may experience high fluctuations in the market price and volume of the trading market for our securities.
These fluctuations, when they occur, may have a negative effect on the market price for our securities. Accordingly, our stockholders
may not be able to realize a fair price from their shares when they determine to sell them or may have to hold them for a substantial
period of time until the market for our common stock improves.



Our
operations are exposed to market risks that are beyond our control which could adversely affect our financial results and capital
requirements.



Our
risk management operations are subject to market risks beyond our control, including market liquidity, commodity price volatility
caused by market supply and demand dynamics and counterparty creditworthiness. Although we maintain a risk management policy,
we may not be able to completely offset the price risk associated with volatile gas prices, particularly in the non-regulated
business segments, which could lead to volatility in our earnings.



Further
disruptions in the credit markets could limit our ability to access capital and increase our costs of capital.



We
rely upon access to both short-term and long-term credit markets to satisfy our liquidity requirements. The global credit markets
have experienced significant disruptions and volatility during the last few years to a greater degree than has been seen in decades.
In some cases, the ability or willingness of traditional sources of capital to provide financing has been reduced.



Volatility
of natural gas and oil prices significantly affects our cash flow and capital resources and could hamper our ability to produce
natural gas and oil economically.



Our
financial results are highly dependent on the general supply and demand for oil and gas, which impact the prices we ultimately
realize on our sales of these commodities. Natural gas and oil prices are volatile, and a decline in prices adversely affects
our profitability and financial condition. The oil and gas industry is typically cyclical, and prices for natural gas and oil
have been volatile. Historically, the industry has experienced downturns characterized by oversupply and/or weak demand. Long-term
supply and demand for oil and gas is uncertain and subject to numerous factors outside of our control.



Estimates
of Oil and Gas Reserves are Uncertain



The
process of estimating oil and gas reserves is complex and requires significant judgment in the evaluation of available geological,
engineering and economic data for each reservoir, particularly for new discoveries. Because of the high degree of judgment involved,
different reserve engineers may develop different estimates of reserve quantities and related revenue based on the same data.
In addition, the reserve estimates for a given reservoir may change substantially over time as a result of several factors including
additional development activity, the viability of production under varying economic conditions and variations in production levels
and associated costs. Consequently, material revisions to existing reserve estimates may occur as a result of changes in any of
these factors. Such revisions to proved reserves could have a material adverse effect on our estimates of future net revenue,
as well as our financial condition and profitability.



We
depend significantly upon the continued involvement of our present management.



Our
success depends to a significant degree upon the involvement of our management, who are in charge of our strategic planning and
operations. We may need to attract and retain additional talented individuals in order to carry out our business objectives. The
competition for such persons could be intense and there are no assurances that these individuals will be available to us.





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Climate change
and related regulatory responses may impact our business.



Climate
change as a result of emissions of greenhouse gases is a significant topic of discussion and may generate U.S. federal and other
regulatory responses in the near future. It is impracticable to predict with any certainty the impact of climate change on our
business or the regulatory responses to it, although we recognize that they could be significant. However, it is too soon for
us to predict with any certainty the ultimate impact, either directionally or quantitatively, of climate change and related regulatory
responses.



To
the extent that climate change increases the risk of natural disasters or other disruptive events in the areas in which we operate,
we could be harmed. While we maintain business recovery plans that are intended to allow us to recover from natural disasters
or other events that can be disruptive to our business, our plans may not fully protect us from all such disasters or events.



Compliance
with changing regulation of corporate governance and public disclosure will result in additional expenses and pose challenges
for our management.



Changing
laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform
and Consumer Protection Act and the rules and regulations promulgated there under, the Sarbanes-Oxley Act and SEC regulations,
have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S.
public markets. Our management team will need to devote significant time and financial resources to comply with both existing
and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion
of management time and attention from revenue generating activities to compliance activities.



The
market price for our common stock may be volatile, and you may not be able to sell our stock at a favorable price or at all.



Many
factors could cause the market price of our common stock to rise and fall, including:

- actual
or anticipated variations in our quarterly results of operations;
- changes
in market valuations of companies in our industry;
- changes
in expectations of future financial performance;
- fluctuations
in stock market prices and volumes;
- issuances
by us of dilutive common stock or other securities in the future;
- the
addition or departure of key personnel; and
- announcements
by us or our competitors of acquisitions, investments or strategic alliances.

It
is possible that the proceeds from sales of our common stock may not equal or exceed the prices you paid for the shares after
including the costs and fees of making the sales.



Substantial
sales of our common stock, or the perception that such sales might occur, could depress the market price of our common stock.



We
cannot predict whether future issuances of our common stock or resale in the open market will decrease the market price of our
common stock. The consequence of any such issuances or resale of our common stock on our market price may be increased as a result
of the fact that our common stock is thinly, or infrequently, traded. The exercise of any options, or the vesting of any restricted
stock that we may grant to directors, executive officers and other employees in the future, the issuance of common stock in connection
with acquisitions and other issuances of our common stock may decrease the market price of our common stock.



Holders
of our common stock have a risk of potential dilution if we issue additional shares of common stock in the future.



Although
our Board of Directors intends to utilize its reasonable business judgment to fulfill its fiduciary obligations to our then existing
stockholders in connection with any future issuance of our common stock, the future issuance of additional shares of our common
stock would cause immediate, and potentially substantial, dilution to the net tangible book value of those shares of common stock
that are issued and outstanding immediately prior to such transaction. Any future decrease in the net tangible book value of our
issued and outstanding shares could have a material adverse effect on the market value of our shares.



Certain
shares of our common stock are restricted from immediate resale. The lapse of those restrictions, coupled with the sale of the
related shares in the market, or the market’s expectation of such sales, could result in an immediate and substantial decline
in the market price of our common stock.



Most
of our shares of common stock are restricted from immediate resale in the public market. The restricted shares are restricted
in accordance with Rule 144, which states that if unregistered, restricted securities are to be sold, a minimum of one year must
elapse between the later of the date of acquisition of the securities from the issuer or from an affiliate of the issuer, and
any resale of those securities in reliance on Rule 144. The Rule 144 restrictive legend remains on the stock until the holder
of the stock holds the stock for longer than six months (unless an affiliate) and meets the other requirements of Rule 144 to
have the restriction removed. The sale or resale of those shares in the public market, or the market’s expectation of such
sales, may result in an immediate and substantial decline in the market price of our shares. Such a decline will adversely affect
our investors, and make it more difficult for us to raise additional funds through equity offerings in the future.



Our
Company’s Business Is Impacted By Any Instability And Fluctuations In Global Financial Systems.



The
recent credit crisis and related instability in the global financial system, although somewhat abated, has had, and may continue
to have, an impact on our prospective business and our prospective financial condition. We may face significant challenges if
conditions in the financial markets do not continue to improve. Our ability to access the capital markets may be severely restricted
at a time when we wish or need to access such markets, which could have a materially adverse impact on our flexibility to react
to changing economic and business conditions or carry on our operations.



Reporting
Requirements May Utilize A Substantial Portion Of Our Cash And Reduce The Period Of Time We Can Survive On Our Available Cash
Reserves Prior To Generating Revenue.



We
will incur ongoing costs and expenses for SEC reporting and compliance. To be eligible for quotation on the OTCQB, issuers must
remain current in their filings with the SEC. Market Makers are not permitted to begin quotation of a security whose issuer does
not meet this filing requirement. Securities already quoted on the OTCQB that become delinquent in their required filings will
be removed following a 30 day grace period if they do not make their required filing during that time. In order for us to remain
in compliance we will require future revenues to cover the cost of these filings, which could comprise a substantial portion of
our available cash resources.



The
Regulation Of Penny Stocks By SEC and FINRA (Financial Industry Regulatory Authority, Inc.) May Discourage The Tradability Of
The Company's Securities And Thereby Make It Hard For Investors To Sell Their Shares At The Time And Prices They Might Otherwise
Expect.



We
are a "penny stock" company. We are subject to a Securities and Exchange Commission rule that imposes special sales
practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors.
For purposes of the rule, the phrase "accredited investors" means, in general terms, institutions with assets in excess
of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or
that, when combined with a spouse's income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make
a special suitability determination of the purchaser and receive the purchaser's written agreement to the transaction prior to
the sale. Effectively, this discourages broker-dealers from executing trades in penny stocks. Consequently, the rule will affect
the ability of purchasers in this offering to sell their securities in any market that might develop, because it imposes additional
regulatory burdens on penny stock transactions.



In
addition, the Securities and Exchange Commission has adopted a number of rules to regulate "penny stocks". Such rules
include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, and 15g-9 under the Securities and Exchange Act of 1934, as amended.
Because our securities constitute "penny stocks" within the meaning of the rules, the rules would apply to us and to
our securities. The rules will further affect the ability of owners of shares to sell their securities in a market that might
develop for them because it imposes additional regulatory burdens on penny stock transactions.



Shareholders
should be aware that, according to the Securities and Exchange Commission Release No. 34-29093, the market for penny stocks
has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security
by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged
matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices involving high-pressure
sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials
and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, leaving investors with 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 the Company's securities.



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



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



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



Pursuant
to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, we are required to prepare assessments regarding internal
controls over financial reporting and, 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. 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.





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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.



If
we experience delays and/or defaults in customer payments, we could be unable to recover all expenditures.



Because
of the nature of our contracts, at times we commit resources to projects prior to receiving payments from the customer in amounts
sufficient to cover expenditures on projects as they are incurred. Delays in customer payments may require us to make a working
capital investment. If a customer defaults in making their payments on a project in which we have devoted resources, it could
have a material negative effect on our results of operations.



Our
recent and future acquisitions may not be successful.



We
expect to continue pursuing selective acquisitions of businesses. We cannot assure you that we will be able to locate acquisitions
or that we will be able to consummate transactions on terms and conditions acceptable to us, or that acquired businesses will
be profitable. Acquisitions may expose us to additional business risks different than those we have traditionally experienced.
We also may encounter difficulties integrating acquired businesses and successfully managing the growth we expect to experience
from these acquisitions.



We
may choose to finance future acquisitions with debt, equity, cash or a combination of the three. We can give no assurances that
any future acquisitions will not dilute earnings or disrupt the payment of a stockholder dividend. To the extent we succeed in
making acquisitions, a number of risks will result, including:



•The possible assumption of material liabilities (including for environmental-related costs);

•Failure of due diligence to uncover situations that could result in legal exposure or to quantify the true liability exposure
from known risks;

•The diversion of management's attention from the management of daily operations to the integration of

operations;

•Difficulties in the assimilation and retention of employees and difficulties in the assimilation of different cultures and
practices, as well as in the assimilation of broad and geographically dispersed personnel and operations, as well as the retention
of employees generally;

•The risk of additional financial and accounting challenges and complexities in areas such as tax planning, treasury management,
financial reporting and internal controls; and

•We
may not be able to realize the cost savings or other financial benefits we anticipated prior to the acquisition.



The
failure to successfully integrate acquisitions could have an adverse effect on our business, financial condition and results of
operations.



Oil
and Natural Gas investments are highly risky.



The
selection of prospects for oil and natural gas drilling, the drilling, ownership and operation of oil and natural gas wells, and
the ownership of non-operating interests in oil and natural gas properties are highly speculative. We cannot predict whether any
prospect will produce oil or natural gas or commercial quantities of oil or natural gas, nor can we predict the amount of time
it will take to recover any oil or gas we do produce. Drilling activities may be unprofitable, not only from non-productive wells,
but from wells that do not produce oil or natural gas in sufficient quantities or quality to return a profit. Delays and added
expenses may also be caused by poor weather conditions affecting, among other things, the ability to lay pipelines. In addition,
ground water, various clays, lack of porosity and permeability may hinder, restrict or even make production impractical or impossible.



We
may be required to pay delay rentals to hold drilling prospects, which may deplete our capital.



Oil
and gas leases generally must be drilled upon by a certain date or additional funds known as delay rentals must be paid to keep
the lease in effect. Delay rentals typically must be paid after the first year of entering into a lease if no production or drilling
activity has commenced. If delay rentals become due on any property we acquire, we will have to pay our share of such delay rentals
or lose its lease on the property. These delay rentals could equal or exceed the cost of the property. Further, payment of these
delay rentals could seriously deplete the capital available to fund drilling activities, if and when they do commence.



A
substantial or extended decline in oil or natural gas prices may adversely affect our business, financial condition and results
of operations.



The
price that the we receive for oil or natural gas production from wells in which we have an interest will significantly affect
our revenue, profitability, access to capital and future growth rate. Historically, the oil and natural gas markets have been
volatile and will likely continue to be volatile in the future. The prices that we will receive for our interests in production
and the levels of production depend on numerous factors. These factors include, but are not limited to, the following:



| | · | changes
                                                                                                                                      in
                                                                                                                                      supply
                                                                                                                                      and
                                                                                                                                      demand
                                                                                                                                      for
                                                                                                                                      oil
                                                                                                                                      and
                                                                                                                                      natural
                                                                                                                                      gas;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                                                      price
                                                                                                                                      and
                                                                                                                                      quantity
                                                                                                                                      of
                                                                                                                                      imports
                                                                                                                                      of
                                                                                                                                      foreign
                                                                                                                                      oil
                                                                                                                                      and
                                                                                                                                      natural
                                                                                                                                      gas;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | speculation
                                                                                                                                      as
                                                                                                                                      to
                                                                                                                                      the
                                                                                                                                      future
                                                                                                                                      prices
                                                                                                                                      of
                                                                                                                                      oil
                                                                                                                                      and
                                                                                                                                      natural
                                                                                                                                      gas
                                                                                                                                      and
                                                                                                                                      the
                                                                                                                                      speculative
                                                                                                                                      trading
                                                                                                                                      of
                                                                                                                                      oil
                                                                                                                                      or
                                                                                                                                      natural
                                                                                                                                      gas
                                                                                                                                      futures
                                                                                                                                      contracts;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | global
                                                                                                                                      economic
                                                                                                                                      conditions;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                                                      level
                                                                                                                                      of
                                                                                                                                      global
                                                                                                                                      oil
                                                                                                                                      and
                                                                                                                                      natural
                                                                                                                                      gas
                                                                                                                                      exploration
                                                                                                                                      and
                                                                                                                                      production
                                                                                                                                      activity;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                                                      level
                                                                                                                                      of
                                                                                                                                      global
                                                                                                                                      oil
                                                                                                                                      and
                                                                                                                                      natural
                                                                                                                                      gas
                                                                                                                                      inventories
                                                                                                                                      and
                                                                                                                                      oil
                                                                                                                                      refining
                                                                                                                                      capacities;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | technological
                                                                                                                                      advances
                                                                                                                                      affecting
                                                                                                                                      energy
                                                                                                                                      consumption
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                                                      price
                                                                                                                                      and
                                                                                                                                      availability
                                                                                                                                      of
                                                                                                                                      competitors’
                                                                                                                                      supplies
                                                                                                                                      of
                                                                                                                                      oil
                                                                                                                                      or
                                                                                                                                      natural
                                                                                                                                      gas;
                                                                                                                                      and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | the
                                                                                                                                      price
                                                                                                                                      and
                                                                                                                                      availability
                                                                                                                                      of
                                                                                                                                      alternative
                                                                                                                                      fuels
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Oil
and natural gas prices have fluctuated dramatically in recent years and will likely continue to be volatile in the future. Lower
oil or natural gas prices may not only decrease our revenues but also may reduce the amount of oil or natural gas that may be
produced economically from our prospects. A substantial or extended decline in oil and natural gas prices may materially and adversely
affect our future business, financial condition, results of operations, liquidity or ability to finance planned capital expenditures.





(15)







Our
future interests are subject to numerous environmental, health and safety regulations which may result in material liabilities
and costs.



Our
future interests will be subject to various federal, state and local environmental, health and safety laws and regulations governing,
among other things, the emission and discharge of pollutants into the ground, air or water, the generation, storage, handling,
use and transportation of regulated materials and the health and safety of our employees. The operator of wells will be required
to obtain environmental permits from governmental authorities for certain operations, including drilling permits for wells. There
is a risk that the holder of any such permit will not be at all times in complete compliance with these permits and the environmental
laws and regulations to which the operator is subject. If the operator violates or fails to comply with these laws, regulations
or permits, the operator could be fined or otherwise sanctioned by regulators, including through the revocation of permits or
the suspension or termination of operations. Failure to obtain permits in a timely manner or at all (due to opposition from community
or environmental interest groups, governmental delays, or any other reasons) could impede operations, which could have a material
adverse effect on our results of operations and its financial condition.



We
could be held liable for all environmental, health and safety costs and liabilities arising out of its actions and omissions as
well as those of third-party contractors and operators. To the extent we do not address these costs and liabilities or if it is
otherwise in breach of applicable lease requirements, such leases could be suspended or terminated.



In
addition, we expect continued legislative, regulatory and judicial attention to climate change issues. Various countries and U.S.
states and regions have agreed to regulate emissions of greenhouse gases, including methane (a primary component of natural gas)
and carbon dioxide, a byproduct of oil and natural gas combustion. The U.S. federal government, as well as the U.S. Environmental
Protection Agency, are currently considering national greenhouse gas regulation, each having proposed bills or rules which would
require or result in greenhouse gas emissions reductions. Final laws or regulations could be adopted this or next year. The regulation
of greenhouse gases in the areas in which we and the end-users of oil and gas products operate could increase our operating costs
or adversely affect the demand for natural gas and oil and, as a result, adversely impact our financial condition.



Environmental,
health and safety laws are complex, change frequently and have tended to become increasingly stringent over time. Costs of complying
with current and future environmental, health and safety laws, and potential liabilities arising from releases of, or exposure
to, regulated substances may adversely affect the our results of operations and its financial condition.



We
may engage in future acquisitions that could dilute the ownership interests of our stockholders, cause us to incur debt and assume
contingent liabilities.



As
part of our business strategy, we review acquisition and strategic investment prospects that we believe would complement our current
product offerings, augment our market coverage or enhance our technological capabilities, or otherwise offer growth opportunities.
From time to time we review investments in new businesses and we expect to make investments in, and to acquire, businesses, products,
or technologies in the future. In the event of any future acquisitions, we could:



- issue
equity securities which would dilute current stockholders’ percentage ownership;
- incur
substantial debt;
- assume
contingent liabilities;
- expend
significant cash



These
actions could have a material adverse effect on our operating results or the price of our Common Stock. Moreover, even if we do
obtain benefits in the form of increased sales and earnings, there may be a lag between the time when the expenses associated
with an acquisition are incurred and the time when we recognize such benefits. We cannot ensure that we will be able to successfully
integrate any businesses, products, technologies, or personnel that we might acquire in the future, and our failure to do so could
have a material adverse effect on our business, operating results and financial condition.





If
we do not effectively manage our growth, our existing infrastructure may become strained, and we may be unable to increase revenue
growth.



Our
past growth that we have experienced, and in the future may experience, may provide challenges to our organization, requiring
us to expand our personnel and our operations. Future growth may strain our infrastructure, operations and other managerial and
operating resources. If our business resources become strained, our earnings may be adversely affected and we may be unable to
increase revenue growth. Further, we may undertake contractual commitments that exceed our labor resources, which could also adversely
affect our earnings and our ability to increase revenue growth.



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



ITEM
1B. UNRESOLVED STAFF COMMENTS



This
Item is not applicable to us as we are not an accelerated filer, a large accelerated filer, or a well-seasoned issuer.





(16)







ITEM
2. PROPERTIES



The
principal office of the Company is located at 19800 MacArthur Blvd., Suite 300, Irvine, California 92612.



The
principal offices of our subsidiary NDR Energy Group LLC are located at 525 N. Tryon Street, Suite 1600, Charlotte, North Carolina
28202.



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. REMOVED AND RESERVED





(17)







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 OTC Markets Group Inter-dealer Quotation System and can
be accessed on the Internet at www.otcmarkets.com under the symbol “UBRG.”



At
December 31, 2011, there were 199,969,927 shares of common stock of Universal issued and outstanding and there were approximately
54 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.



Price
Range of Common Stock



|Periods                                      |  | High |        | Low | 
|-------------------------------------------- |  | ---- | ------ | --- | 
|Fiscal
    Year 2011                         |  |      |        |     | 
|First
    Quarter (January – March 2011)     |  |      | $0.068 |     | 
|Second
    Quarter (April – June 2011)       |  |      | $0.109 |     | 
|Third
    Quarter (July – September 2011)    |  |      | $0.109 |     | 
|Fourth
    Quarter (October – December 2011) |  |      | $0.058 |     | 





|Periods                                      |  | High |       | Low
|-------------------------------------------- |  | ---- | ----- | ---
|Fiscal
    Year 2010                         |  |      |       |    
|First
    Quarter (January – March 2010)     |  |      | $0.09 |    
|Second
    Quarter (April – June 2010)       |  |      | $0.11 |    
|Third
    Quarter (July – September 2010)    |  |      | $0.07 |    
|Fourth
    Quarter (October – December 2010) |  |      | $0.10 |    



On
December 31, 2011, the closing bid price of our common stock was $0.024.



Transfer
Agent



Universal’s
Transfer Agent and Registrar for the common stock is: Corporate Stock Transfer located at 3200 Cherry Creek Drive South, Suite
430, Denver, Colorado 80209.



RECENT
SALES OF UNREGISTERED SECURITIES



Common
Stock Issued





Fiscal
Year 2011



At
December 31, 2011, there were no outstanding stock options or warrants.



On
February 10, 2011, the Company issued 1,000,000 shares of common stock to Progas Energy Services in accordance with the Amendment
to the Participation and Operating Agreements, valued at $42,000 on the date of issue.



On
February 14, 2011, the Company issued 2,500,000 shares of common stock to a consultant in accordance with their consulting agreement
valued at $111,250 on the date of issue.



On
February 15, 2011, the Company converted three of its Notes payable, dated 4/26/10, 5/24/10 and 7/15/10 for a combined total of
$21,750 and issued 4,350,000 common shares for that conversion. No accrued interest was due on the note upon conversion. This
conversion of debt reduced the Company’s notes payables by $21,750.



On
February 15, 2011, the Company converted an additional three of its Notes payable dated 4/26/10, 5/24/10 and 7/15/10 for a combined
of $21,750 and issued 4,350,000 common shares for that conversion. No accrued interest was due on the note upon conversion. This
conversion of debt reduced the Company’s notes payables by $21,750. These notes were for a different investor than the one
indicated above.



On
February 15, 2011, the Company issued 1,000,000 shares of common stock to a consultant in accordance with their agreement valued
at $40,000 on the date of issue.



On
March 7, 2011, the Company converted one of its Notes payable dated 6/30/10, for a total of $32,000 and issued 6,400,000 common
shares for that conversion. No accrued interest was due on the note upon conversion. This conversion of debt reduced the Company’s
notes payables by $32,000.



On
March 14, 2011, the Company converted one of its Notes payable dated 5/20/10, for a total of $28,000 and issued 5,600,000 common
shares for that conversion. No accrued interest was due on the note upon conversion. This conversion of debt reduced the Company’s
notes payables by $28,000.



On
March 22, 2011, the Company converted one of its Notes payable dated 7/20/10, for a total of $15,350 and issued 3,070,000 common
shares for that conversion. No accrued interest was due on the note upon conversion. This conversion of debt reduced the Company’s
notes payables by $15,350.



On
June 24, 2011, the Company converted four of its Notes payable dated 7/4/09, 2/16/10, 3/20/10 and 5/25/10 for a combined total
of $146,600 and issued 8,635,555 shares of common stock. This conversion of debt reduced the Company’s notes payables by
$146,600.



On
July 12, 2011, the Company issued 11,415,311 shares of common stock, as a stock dividend to all registered shareholders of record
in accordance with the Company’s resolution and declaration. Previously, on June 6, 2011, our Board of Directors passed
a resolution and declared a stock dividend to distribute to all registered shareholders of record on or before July 1, 2011, on
a 10 for 1 basis the stock indicated above.



On
July 29, 2011 the Company converted one of its Notes payable dated 9/27/10, for a total of $50,000 and issued 10,000,000 common
shares for that conversion. No accrued interest was due on the note upon conversion. This conversion of debt reduced the Company’s
notes payables by $50,000.



On
September 14, 2011, the Company issued 3,000,000 shares of common stock for services, of which 1,000,000 shares were issued to
an employee of the Company, and 1,000,000 shares each, was issued to two employees of NDR Energy Group LLC for services, valued
at $133,500 on the date of issue.



On
September 22, 2011 the Company converted one of its Notes payable dated 11/23/10, for a total of $12,000 and issued 2,400,000
common shares for that conversion. No accrued interest was due on the Note upon conversion. This conversion of debt reduced the
Company’s Notes payables by $12,000.



On
October 12, 2011 the Company converted one of its notes payable dated 12/31/10, for a total of $30,000 and issued 1,500,000 common
shares for that conversion. No accrued interest was paid on the Note upon conversion. This conversion of debt reduced the Company’s
notes payables by $30,000.



On
October 19, 2011 the Company completed a partial conversion of one of its Notes payable dated 12/31/10, and issued 23,545,000
common shares for that conversion. On October 20, 2011 the Company completed the final conversion of this Note and issued 18,487,600
shares for that conversion. The principal amount of the Note was $164,833, with $45,329 in accrued interest due on the Note upon
conversion. The total amount due to the Holder at the time of conversion, (with principal and interest) was $210,162. This conversion
of debt reduced the Company’s notes payables by $210,162.



On
October 25, 2011 the Company completed a partial conversion of one of its Notes payable dated 08/26/10, with a principal amount
of $36,919. A total of $27,249 worth of the Note was converted, and 5,449,800 common shares were issued for that part of the conversion,
which leaves a remaining balance of $9,670 of the principal of the Note. No accrued interest was paid on the Note upon conversion.
This conversion of debt reduced the Company’s notes payables by $27,249.



On
October 27, 2011 the Company converted one of its Notes payable dated 12/31/10, with a principal amount of $16,045, and one dated
12/31/10 for $89,014 and issued 7,396,767 common shares for that conversion. The combined principal amount of the Notes was $105,059,
with $10,238 in combined accrued interest due on the Notes upon conversion. The total amount due to the Holder at the time of
conversion, (with principal and interest) was $115,297. This conversion of debt reduced the Company’s notes payables by
$115,297.



On
December 29, 2011 the Company completed a partial conversion one of its revised Notes payable dated 12/23/11, with an amount of
$99,134. A total of $30,000 worth of the Note was converted, and 2,622,377 common shares were issued for that part of the conversion,
which leaves a remaining balance of $69,134 of the principal of the Note. No accrued interest was paid on the Note upon conversion.
This revised Note combined two existing Notes, one dated March 28, 2011 for $72,500, and one dated May 20, 2011 for $20,600, which
were purchased by the current Note Holder from the previous Note Holder on December 23, 2011. This conversion of debt reduced
the Company’s notes payables by $30,000.



2010



On
October 5, 2010 the Company converted one of its Notes payable, for a total of 24,559,067 to shares of our Common Stock. This
conversion of debt reduced the Company’s notes payables by $184,000, and the Company expensed $494,752.



Forward
Stock Splits



There
were no forward stock splits to report on for this period. On 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 the Form 10-K Annual Report for the
period ended December 31, 2007.



Stock
Dividend



On
June 6, 2011, our Board of Directors passed a resolution and declared a stock dividend to distribute to all registered shareholders
of record on or before July 1, 2011, on a 10 for 1 basis. On July 12, 2011, our transfer agent, issued 11,415,311 shares of common
stock to all registered shareholders of record in accordance with the resolution and declaration.



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.





(18)









Summary
of Statements of Operations of Universal Bioenergy







|Statement of Operations Data                       |        | For the Years Ended                     
|-------------------------------------------------- | ------ | ----------------------------------------
|                                                   |        | December 31,                            
|                                                   |        | 2011                                    
|                                                   |        |                                         
|Revenues                                           |        | $                         71,747,840    
|Cost of Sales                                      |        | (71,604,210)                            
|Operating and Other Expenses                       |        | (2,253,186)                             
|                                                   |        |                                         
|Net income attributable to noncontrolling interest | 72,514 |                                         
|                                                   |        |                                         
|Net Loss                                           |        | $                          (2,037,042)  
|                                                   |        |                                         
|Balance Sheet Data:                                |        | For the Years Ended                     
|                                                   |        | December 31,                            
|                                                   |        | 2011                                    
|                                                   |        |                                         
|Cash                                               |        | $                                  3,706
|Total Assets                                       |        | 11,212,845                              
|Current Liabilities                                |        | 10,422,309                              
|Non Current Liabilities                            |        | 494,646                                 
|Total Liabilities                                  |        | 10,916,955                              
|Working Capital (Deficit)                          |        | (414,481)                               
|Shareholders' (Deficit) Equity                     |        | $                              295,890  







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



The
following discussion and analysis presents management’s perspective of our business, financial condition and overall performance.
This information is intended to provide investors with an understanding of our past performance, current financial condition and
outlook for the future and should be read in conjunction with “Item 8. Financial Statements and Supplementary Data”
of this report.



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



Management’s
Discussion and Analysis contains various “forward looking statements” within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, regarding future events or the future financial performance of the Company that involve risks
and uncertainties. Certain statements included in this Form 10K, including, without limitation, statements related to anticipated
cash flow sources and uses, and words including but not limited to “anticipates”, “believes”, “plans”,
“expects”, “future” and similar statements or expressions, identify forward looking statements. Any forward-looking
statements herein are subject to certain risks and uncertainties in the Company’s business, including but not limited to,
reliance on key customers and competition in its markets, market demand, technological developments, maintenance of relationships
with key suppliers, difficulties of hiring or retaining key personnel and any changes in current accounting rules, all of which
may be beyond the control of the Company. The Company adopted at management’s discretion, the most conservative recognition
of revenue based on the most astringent guidelines of the SEC in terms of recognition of software licenses and recurring revenue.
Management will elect additional changes to revenue recognition to comply with the most conservative SEC recognition on a forward
going accrual basis as the model is replicated with other similar markets (i.e. SBDC). The Company’s actual results could
differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set
forth therein.



Forward-looking
statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to
be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect
our results and achievements and cause them to materially differ from those contained in the forward-looking statements include
those identified in the section titled “Risk Factors” in the Company’s this Annual Report on Form 10-K for the
year ended December 31, 2011, as well as other factors that we are currently unable to identify or quantify, but that may exist
in the future.



In
addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking
statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update
any forward-looking statements.



Overview
of Our Company

Universal
Bioenergy Inc. is an independent diversified energy company, headquartered in Irvine, California. Our common stock is presently
listed on the OTC Markets Group under the trading symbol “UBRG”. Universal Bioenergy Inc. was incorporated on August
13, 2004 in the State of Nevada, under the name of Palomine Mining Inc. On October 24, 2007, the Company changed its name from
Palomine Mining Inc., to Universal Bioenergy Inc. to better reflect its new business plan and strategic direction.

Our
primary business focus is the production, marketing and sales of natural gas, propane, coal, oil and alternative energy. Through
our subsidiary, NDR Energy, we presently sell natural gas to 28 of the largest public utilities, electric power producers and
local gas distribution companies that serve millions of commercial, industrial and residential customers throughout the United
States. We are also engaged in the acquisition of oil and gas fields, lease acquisitions and development of newly discovered or
recently discovered oil and gas fields, re-entering existing wells, transmission and marketing of the products to our customer
base. We are continuing our growth through an ongoing series of acquisitions.

NDR
Energy Group LLC.

In
April 2010, we expanded into the natural gas energy market by the acquisition of a 49% stake in NDR Energy Group LLC, in Charlotte,
North Carolina (“NDR Energy”). NDR Energy Group was established in the State of Maryland on September 28, 2005. Through
NDR Energy, we have contracts signed with 28 major utility companies in the United States, with strong Standard & Poor’s
credit ratings. NDR Energy Group markets and distributes natural gas and propane to 28 of the largest public utilities, electric
power producers and local gas distribution companies that serve millions of commercial, industrial and residential customers throughout
the country. Our customers include Southern California Gas Company, Pacific Gas & Electric, CenterPoint Energy Resources,
Baltimore Gas & Electric, Memphis Light Gas & Water, Duke (Ohio & Kentucky), Michigan Consolidated and National Grid.
Our gas suppliers include EDF Trading, Chevron Texaco, Conoco Phillips, Chesapeake Energy Marketing, and Anadarko.



Our
Business Strategy

Our
primary objective is be one of the top independent energy companies in the U.S., and to deliver maximum value to our shareholders,
and generate increasing revenues and solid earnings for the long-term growth of our Company. By building on our successes in 2011,
we plan, although we cannot provide assurances as to timing and attainment, to achieve these future objectives by pursuing the
following strategies;

In
the year 2010, management totally re-organized and re-structured the Company with a new strategic direction and business plan,
of which these strategies were implemented in 2011 and are ongoing. Our primary objective is to exploit changes in the energy
market, with the intent to propel the Company to a dominant market position, and be one of the top independent energy companies
in the United States. Another major objective in our revised business plan is to finding new ways to create more value for our
shareholders and investors. Our management intends to deliver greater value to our shareholders and investors by generating increasing
revenues, producing solid earnings, and improving returns on invested capital, for the long-term growth of our Company. We believe
this is the ultimate measure of our success.

Our
management believes that our business model and strategy is working very successfully. We are a high growth company that is rapidly
growing at double-digit rates. We achieved sales of $41,320,647 for 2010 and increased its sales by 73.64% to a record $71,747,840
in 2011.



Mergers
and Acquisitions

We
plan to continue our growth by means of mergers and acquisitions of other companies in the natural gas, propane, petroleum, coal
and alternative energy industries. This may also include liquefied natural gas (LNG), compressed natural gas (CNG), biofuels,
syngas and acquisitions of patented energy technologies.



Vertical
Integration

We
have adapted our business strategy to become a more vertically integrated company to give us greater management control over our
supply chain, from the producer, through marketing, distribution, and directly to our customer.





Oil
and Gas Field Development

We
intend to pursue the acquisition of more oil and gas properties and assets. This includes existing oil and gas fields, development
of newly discovered or recently discovered oil and gas fields, re-entering existing capped wells and lease acquisitions. We especially
have a high level of interest in the development of existing fields whereby we can re-enter previously drilled capped wells to
extract the oil and gas using new drilling/extraction methods and techniques. Fields with previously drilled capped wells would
be of highest priority for us, since they had been “proven wells” before, and would therefore have lower development
costs and lower associated financial risks.



Own
Our Oil and Gas Supply

We
plan to own and/or control our own natural gas supply by obtaining the gas at the wellhead from supplies with large reserves and
inventories, to market and distribute directly to our growing customer base.



Increase
Operating Income

We
intend to increase our operating income and earnings by obtaining our gas at the wellhead at the producers’ price, and aggregating
the purchase of our gas supply through a large number of independent producers with long-term purchase agreements to supply to
our customers.





(19)







CORPORATE
FINANCE



The
Company’s Capital Structure

In
management’s efforts to grow and expand the Company, we must obtain the necessary capital to achieve those objectives, decide
on the best methods to obtain that capital, and the capital structure of the Company. The primary ways a company will raise capital
is either through debt financing (borrowing money), or equity financing (selling a portion of the company via shares of stock)
or a combination of both. The type of capital chosen (debt or equity), and methods of raising the capital depend on a number of
factors including; the company’s life cycle stage, e.g., start-up, development, high-growth or maturity, future growth prospects,
strength of the national economy and the credit markets.



Potential
investors in any company, including ours will consider those factors and the relative risks to their investment capital. To limit
their risks, these investors may limit the size of their investment, or provide it to the company in stages, that is contingent
upon the company reaching stated goals e.g., production, marketing, distribution and revenues. The ultimate question for management
is; how do you get the investors to commit to making what could be a high risk investment for them, although one that would correspondingly
benefit the Company, however one that the investor could lose if the Company were to fail. Management considered both the equity
and the debt financing options based on the Company’s life cycle stage, economy, credit markets and other circumstances
at the time, and reached the following conclusions;



Equity
Financing - Management decided not to raise capital through an equity offering in its initial start-up and development
stage for a variety of reasons;



(1)
The Company would have had to go through the process of filing a registration statement.



(2)
The direct and indirect flotation costs of the issuance of an equity capital raise could have run $250,000 or more, and the Company
did not have those funds available.



(3)
It would have been very difficult to get an investment banker to underwrite a new issuance for a development stage company with
a limited operating history and revenues.



(4)
Many investors did not want to take an equity position in the Company at that time and the corresponding risks of ownership.



(5)
The issuance of equity to these investors, after resolving the potential regulatory hurdles, legal issues, time constraints, and
costs would have resulted in immediate dilution for the other shareholders, giving them only limited hopes that value would be
created.



Therefore,
due to the above stated reasons, the economic climate and the Company’s circumstances at that time, management elected not
to pursue raising capital through an equity offering at that time.



Debt
Financing– Management elected to raise capital for the Company through debt financing
for the following reasons;



(1)
Due to the Companies rapid growth, it had immediate and continuous need for capital.



(2)
The investors were more willing to invest funds more expeditiously, and take a creditor’s position instead of as an owner
by taking an equity position.



(3)
With those immediately available funds, management could grow the Company rapidly and create short-term economic value to the
Company by closing on several target mergers and acquisitions prior to any equity dilution taking place.



(4)
The investors were issued Promissory Notes that were unsecured without any collateral (taking a high risk).



(5)
The Notes required no monthly payments which allowed us to use that free cash flow for operating expenses, reduced our cash outlays,
interest payments and improve our budget, plans and forecast our cash flow.



(6)
The investor received the potential upside of conversion of the Notes into equity while protecting our downside with the use of
the cash flow.



(7)
Should the investors decide to convert the Notes into common stock, then the Company’s debt would be eliminated from its
balance sheet.



(8)
The tax benefits of debt financing is that it’s less expensive, while the Company is taxed on earnings, it is not generally
taxed on borrowed money and the interest on the Notes is tax deductible.



(9)
Since the investors does not have any equity interests, it has no voting rights or other control over the management of the Company,
its operations and no claim to its future earnings.



(10)
If the Company ever suffers a negative financial situation, it is much easier to re-negotiate the terms of the Notes with the
individual investors than with a bank, or a group of investors through an equity or bond offering.



Based
on the reasons above, and since the Company required immediate capital to rapidly expand, grow, restructure its operations, enter
new markets, finance new acquisitions and execute its marketing plans; raising capital through debt financing was our best alternative.
This strategy resulted in our gaining a greater share of the energy market, increased revenues, increased assets, market capitalization
value and our shareholders owning a portion of a much larger and more valuable company. As the Company continues to advance and
develop through the different stages of its business life cycle, management will evaluate options, alternatives, and make strategic
decisions for the best investment opportunities, financing and capital structure at that time.



Accounts
Receivables



We
are currently seeking to obtain additional accounts receivable financing and commercial letters of credit to significantly improve
our revenues and profits for the purchase and sale of natural gas. We currently invoice our customers between the 10th and 15th
of the month, for the previous months gas sales. The customer in accordance with our “Purchase Agreement” sends us
full payment via wired funds by the 25th of the month, or 10 to15 days after receipt of our invoice.



Presently
NDR Energy turns over its accounts receivables for the sale of natural gas about 7 to 12 times per year or every 30 to 40 days.
We are currently in the process of re-negotiating our agreements with our electric utility customers to change the invoicing and
payment terms from 30 to 40 days, to invoicing them on a weekly basis. While there can be no guarantees, management believes that,
if implemented, this will increase the accounts receivables turnover times to 52 times per year, and will shorten the collection
time that we receive payment on our customer’s invoices. This change coupled with the use of an accounts receivables factoring
line will give NDR Energy the ability to purchase gas from our suppliers at larger discounts, thereby increasing the overall profit
margin to as much as $0.07 to $0.20 per mcf (MMBtu) in the sale of gas to our existing customers.



The
growth and position of NDR Energy will be further enhanced once the company is able to sell off its account receivables. NDR will
then have the ability to purchase and sell gas more often, for example, on a daily and weekly basis instead of just on a monthly
basis or longer. This would also allow us to generate more accounts receivables and purchase even larger quantities of gas. The
profit margins for the sales of gas on the daily “Spot Market” and the weekly sales of gas is significantly higher,
by as much $1.00 to $5.00 or more in the winter months than the margins on the NYMEX futures market. Therefore, it is critical
that NDR Energy have access to accounts receivables (AR) funding line and Letters of Credit so it may take advantage of opportunities
and discounts to sell gas on the daily and weekly time frames. It will also enable NDR to develop new gas supplier relationships
and agreements with better terms, conditions and less restrictive repayment policies. There can be no assurances that these objectives
can be attained.





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Recent
Developments and Significant Accomplishments



Progas
Energy Services Inc. - Oil and Gas Field Development

On
December 10, 2010, we signed an agreement with Progas Energy Services Inc., of Texas. The agreement is a joint venture between
"Texas Gulf Oil & Gas", Universal's new subsidiary, and ProGas, to jointly develop the Northwest Premont Oil &
Gas Field, located in Texas’s Gulf Coast natural trend, in Jim Wells County Texas. The plans include potentially developing
up to 115 oil and gas wells from this field. Progas has developed over 2000 oil and gas wells, and they have over 200 years of
combined experience in the oil and gas industry. According to Progas Energy, the estimated reserves of the field are over 20 million
barrels of oil, and over 20 billion cubic feet (Bcf), of gas.



Texas
Gulf Oil & Gas Inc.

On
December 8, 2010, as part of our plans for growth and expansion, we established a new division known as Texas Gulf Oil & Gas
Inc. Its purpose is to develop oil and gas projects, and allow us to be a producer and direct supplier of natural gas, and to
manage the transmission and marketing of the product to our major utility customers nationwide. We will obtain the gas directly
from the “wellhead”. We believe that the major benefits to the Company are, greater revenues, higher profit margins,
lower product costs, increased assets, and increased competitiveness.



NDR
Energy Group Signs Agreement with New Horizons Energy Group LLC

On
January 7, 2011, NDR Energy, signed an Agreement with New Horizons Energy Group LLC, a natural gas and energy services consulting
company based in Mt. Dora, Florida. We will provide consulting services, including U.S. natural gas market information, gas scheduling,
gas nominations, daily gas monitoring, capacity release, daily and monthly pipeline balancing, risk management and hedging policy,
procurement and management of gas storage assets, and managing operating accounts for designated pipelines. They will also assist
with the procurement of natural gas and negotiations of gas purchase contracts.



Universal
Bioenergy Applies for Listing on the Frankfurt Stock Exchange

On
February 8, 2011, Universal Bioenergy announced that it had applied to have its Company's stock listed on the Frankfurt Stock
Exchange in Frankfurt, Germany. The Frankfurt Stock Exchange is one of largest trading exchanges for securities in the world,
and is the home of the DAX "blue chip" stock market index. The Frankfurt Stock Exchange is home to public companies
from over 80 different countries with almost 40% from North America.



Universal
Bioenergy and Progas Energy “Strikes Oil & Gas”

On
March 3, 2011, we announced that Progas Energy Services had stuck oil and gas on several wells that it had drilled in Texas. Progas
Energy Services is Universal’s joint venture partner in developing an oil and gas field in Jim Wells County, Texas. According
to Progas, the field possibly houses 20,000,000 Bbls of oil, with an estimated value of $1.98 billion based on the, June
10, 2011 NYMEX, West Texas Intermediate (WTI) price of, $95.60, and over 20,000,000 mcf of natural gas, with an estimated value
of $95.60 million, based on the, June 10, 2011 NYMEX price of $4.78.



Universal
Bioenergy Retains Small Cap Consulting GmbH as Advisors

On
March 7, 2011, we announced that it had engaged the services of Small Cap Consulting GmbH, based in Travemunde, Germany as their
business consultant and advisor in Europe. Small Cap Consulting will coordinate the process to help us obtain final approval for
listing on the Frankfurt Stock Exchange, in Germany. Small Cap Consulting will also provide advisory services in the areas of
investor relations, financial communications, media relations, and mergers and acquisitions for the European financial market
place.



Universal
Bioenergy In Talks For Acquisition of Oil & Gas Properties to Develop In Louisiana

On
March 7, 2011, we announced that its key executives and its acquisition team are in talks with representatives to acquire oil
and gas properties to develop in Louisiana. While no assurances can be provided as to closing any acquisitions, our acquisition
team completed a trip to Louisiana for direct talks and negotiations with representatives of land owners to acquire oil and gas
lease rights for a field with several thousand acres of land.



Standard &
Poor's Initiates Factual Stock Report Coverage on Universal Bioenergy

On
April 7, 2011, Standard & Poor’s announced that it has commenced Factual Stock Report coverage our company. S&P’s
Factual Stock Report coverage will be accessible on an ongoing basis to the investment community by scores of buy-side institutions,
and sell-side firms that utilize S&P research and information platforms daily. S&P’s Report is distributed to an
estimated 85,000 brokers and financial consultants, scores of global institutional fund managers, and over 24 million self-directed
online individual investors. The weekly Report covers the latest pricing, trading volume, recent developments, a financial review,
key operating information, Industry and peer comparisons, institutional holdings analysis, Street Consensus and opinions, performance
charts, business summary, fundamental data, and news.



Universal
Signs Agreement With International Monetary

On
April 13, 2011, we announced we signed an agreement to retain the services of International Monetary (“IM”), based
in Newport Beach, California, as its investment banking consulting firm. “IM” will also provide strategic advisory
services, proprietary investor relations services (IR), financial solutions, debt/equity sources, and advise the Company’s
management on other strategic decisions.



Universal’s
2010 President’s Annual Letter To Our Shareholders

On
April 29, 2011, management issued its 2010 Annual Letter to Shareholders that covered updates on our operations, finances and
future outlook for the shareholders and the investment community. A complete copy of the Letter can be read in the attachment
to the Form 8K filed with the SEC on April 29, 2011.



Universal’s
NDR Energy Group Awarded $2.8 Million Gas Supply Agreement with Nicor Gas

On
May 5, 2011, we announced that NDR Energy was awarded a contract to supply natural gas to Nicor Gas, one of the nation's largest
gas distribution companies. Accordingly to Nicor, Nicor has distributed natural gas for over 50 years, and serves more than 2
million customers in a service territory that encompasses most of the northern third of Illinois, excluding the city of Chicago.
In 2010, the customer’s parent company reported revenues of over $2.7 billion. The
value of gas to be supplied under the agreement is expected, but not guaranteed, to be approximately $2.8 million. Since most
of these contracts are for delivery of gas from between 1 to 12 months in the future, due to price fluctuations in gas supplies,
transportation and other factors, the final net profit cannot be determined until after the delivery, invoicing and payment of
the gas from the customer. The resultant profit will be reflected in the Company’s financials for the corresponding period
after the delivery, invoicing and payment of the gas. The natural gas is scheduled to be delivered to Nicor Gas at a rate of 6750
mcf per day from December 1, 2010, through February 28, 2012.



Universal’s
NDR Energy Awarded $3.6 Million Gas Supply Contract with Southern California Gas

On
May 16, 2011, we announced that NDR Energy was awarded a contract to supply natural gas to Southern California Gas Company,
a subsidiary of Sempra Energy. According to Southern California Gas Company, Southern California Gas Company is the nation’s
largest natural gas distribution utility, with 20.7 million customers. The contract signed on May 12, 2011, is to supply 775 million
cubic feet of natural gas with an estimated value of approximately $3.6 million,
to the customer for a period of thirty days. Since most of these contracts are for delivery of gas from between 1 to 12 months
in the future, due to price fluctuations in gas supplies, transportation and other factors, the final net profit cannot be determined
until after the delivery, invoicing and payment of the gas from the customer. The resultant profit will be reflected in the Company’s
financials for the corresponding period after the delivery, invoicing and payment of the gas.



Universal
Bioenergy Increases Authorized Shares of Common Stock to 1 Billion Shares

On
May 19, 2011, we announced that we amended our Articles of Incorporation and increased our authorized shares of common
stock from 200,000,000 to 1,000,000,000 shares. On May 9, 2011, we filed a Certificate of Amendment to the Company’s Articles
of Incorporation with the Nevada Secretary of State. This is a long-term strategic move that was planned in June of 2010 to expand
our company and benefit our shareholders.



The
shares will remain within the corporate treasury until we need to use them. Furthermore, the Board of Directors does not intend
to use them for a reverse stock split. We believe our shareholders could receive many benefits starting with an increase in the
stock price, more revenues, earnings, greater market valuation of our company, millions of dollars in assets and more liquidity.
This action will enable us grow and expand very quickly through some potentially large mergers and acquisitions that we have been
working on for some time, therefore we need to have the shares available to us now, and the flexibility to meet those goals.



Management
plans to use those additional authorized shares for acquisitions and needs to be able to respond very quickly to these business
opportunities as they become available in the marketplace. Some of these near term projects include the further development of
the North Premont field in Texas with Progas Energy, the acquisition of some other very large oil and gas fields, and acquiring
interests in gathering and transport pipelines. Some of the acquisition targets are in the $10 to $25 million range and management
believes, but cannot guarantee, that these acquisitions could result in significant profits and asset value. The additional authorized
shares may also be used for building strategic relationships with other major companies, expanding our product lines and the acquisition
of alternative energy patents and technologies.



NDR
Energy Awarded $1.9 Million Gas Supply Contract with Keyspan Gas East Corporation

On
May 31, 2011, we announced that NDR Energy was awarded a gas supply contract with Keyspan Gas East Corporation. The contract was
awarded by a subsidiary of an entity reporting to be a $21.2 billion international electric and gas utility company, and is one
of the largest natural gas distribution utilities in the United States that provides gas to around 3.5 million customers in its
service area. Since most of these contracts are for delivery of gas from between 1 to 12 months in the future, due to price fluctuations
in gas supplies, transportation and other factors, the final net profit cannot be determined until after the delivery, invoicing
and payment of the gas from the customer. The resultant profit will be reflected in the Company’s financials for the corresponding
period after the delivery, invoicing and payment of the gas.



(21)









Approval
of Stock Dividend



On
June 6, 2011, our Board of Directors passed a resolution and declared a stock dividend to distribute to all registered shareholders
of record on or before July 1, 2011, on a 10 for 1 basis. On July 12, 2011, our transfer agent, issued 11,415,311 shares of common
stock to all registered shareholders of record in accordance with the resolution and declaration.



The
Company received the final notification and confirmation from FINRA on June 8, 2011 announcing the final approval to distribute
the common stock dividend to our shareholders. The final notification was posted on FINRA’s, OTC Bulletin Board website
at www.otcbb.com, under the tab “Daily List”, and the “Headlines By Date”, 2011 Daily List Index for dividends
for June 8, 2011.



Of
the 11,415,311dividend shares, a total of 8,666,676 shares were issued as free trading shares, pursuant to an exemption from registration
requirements of Rule 144, under the Securities Act of 1933 (the “Securities Act”), to all shareholders holding free
trading shares as of the record date.



On
July 12, 2011, the 8,666,676 dividend shares were deposited with the Depository Trust Company (“DTC”), and registered
in the name of the DTC’s nominee, CEDE & Company, who subsequently distributed the shares to the DTC’s participants,
banks and broker dealers for final distribution and deposit of the shares into the accounts of the beneficial shareholders. The
balance of the 11,415,311 shares, or a total of 2,748,635 dividend shares were issued with a restrictive legend in a hard certificate
form and sent via certified mail to all shareholders with restricted shares as of the record date.



The
payment of a dividend in stock instead of cash helps the Company to maintain its cash and still reward our shareholders with a
dividend. We feel this will reward our loyal shareholders for their ongoing support, and to give them a greater stake in our Company.



The
Depository Trust Company Deposit Restrictions or “Chill”



The
Depository Trust Company (DTC), is a subsidiary of the Depository Trust & Clearing Corporation. The DTC manages the electronic
clearing and settlement of stocks and other securities, similar to an escrow agent. Securities that are eligible to be electronically
cleared and settled through the DTC are considered "DTC eligible". Universal’s stock has been “DTC eligible”
for the Deposit/Withdrawal At Custodian (DWAC) and the Fast Automated Securities Transfer (FAST) program, (an electronic method
of transferring shares) in the secondary market for many years.



On
July 27, 2011 the DTC’s Corporate Compliance Department notified our transfer agent Corporate Stock Transfer, who subsequently
notified the Company, that the DTC had imposed a “Chill” or minor deposit restriction/suspension on Universal’s
stock on July 22, 2011, and the Company was removed from the DWAC/FAST Program.



On
July 12, 2011, the Company issued a stock dividend to all shareholders of record as of July 1, 2011. Based on our discussions
with the DTC, the “Chill” may have been caused by the issuance of the stock dividend. The DTC informed us that they
required verification that the dividend shares and/or other shares issued by the Company, were either properly registered with
the SEC, or exempt from registrationunder the Securities Act of 1933 (the “Securities Act”). According to
the DTC’s “Deposit User Guide”, it appears a “Chill” or suspension is an action that is sometimes
taken by the DTC when there is either a “Corporate Action” taken by an issuer, or due to “temporary service
problems” of the transfer agent. It can also be triggered by a large stock dividend, a forward stock split or reverse stock
split by an issuer.



The
“Chill” does not affect our normal business operations. However, shareholders with internet brokerage accounts such
as TD Ameritrade or E*Trade may not be able to purchase our stock, although they should still be able to sell our stock through
these internet brokers as usual. However, full service stock brokerage firms will still clear and settle our stock manually, the
shares be traded as freely as usual without any DTC imposed restrictions.



The
DTC requires one of their Members/Participants to verify that the issued stock was either “properly registered with the
SEC or exempt from registration”. We have engaged the services of a DTC Participant to assist the Company in resolving this
matter. We have all of the documentation regarding the issuance of the stock dividend shares and all other shares that have been
issued by the Company. The documentation will all be submitted to the DTC in cooperation with one of their Participants. We feel
very confident, although we cannot guarantee, that once all of the required information is submitted and reviewed by the DTC’s
compliance department, the “Chill” will be lifted





(22)









NDR
Energy Group Expands Into Propane Gas Market



NDR
Energy Group Awarded Contract with Washington Gas Light Company



On
July 27, 2011 we announced that we are expanding into the propane gas market. Our subsidiary NDR Energy was awarded a contract
in June 2011 to supply propane gas to Washington Gas Light Company. Headquartered in Washington, DC, according to Washington Gas
Light Company (Washington Gas Company) delivers natural gas to more than one million residential, commercial and industrial customers
throughout Washington, DC, and the surrounding region. Washington Gas is a regulated subsidiary of WGL Holdings, Inc., a public
utility holding company. Under the terms of the agreement NDR Energy is to supply an initial quantity of 990,000 gallons of propane
gas to the customer with an estimated value of $1.5 million As part of our new business model, we are positioning the Company
to be a huge player in the propane gas market. We believe this will be another major profit center for the Company. Since most
of these contracts are for delivery of gas from between 1 to 12 months in the future, due to price fluctuations in gas supplies,
transportation and other factors, the final net profit cannot be determined until after the delivery, invoicing and payment of
the gas from the customer. The resultant profit will be reflected in the Company’s financials for the corresponding period
after the delivery, invoicing and payment of the gas.



NDR
Energy Awarded Gas Supply Contract with Pacific Gas & Electric



On
August 8, 2011, we announced that NDR Energy was awarded a gas supply contract with Pacific Gas & Electric’s, Electric
Fuel Division Corporation. According to Pacific Gas & Electric, PG&E is one of the largest combination natural gas and
electric utilities in the United States. PG&E provides natural gas and electric service to approximately 15 million people
throughout a 70,000-square-mile service area in northern and central California. Its parent
company is traded on the NYSE and reported  revenues of $13.84 billion in its 2010 annual report. The value of the
gas to be supplied under the agreement is approximately $1.9 million in a single month. Since most of these contracts are for
delivery of gas from between 1 to 12 months in the future, due to price fluctuations in gas supplies, transportation and other
factors, the final net profit cannot be determined until after the delivery, invoicing and payment of the gas from the customer.
The resultant profit will be reflected in the Company’s financials for the corresponding period after the delivery, invoicing
and payment of the gas.



Letter
of Intent Signed with Whitesburg Friday Branch Mine LLC





On
August 11, 2011, we signed a Letter of Intent with Whitesburg Friday Branch Mine LLC, a Kentucky Limited Liability Company to
acquire a major interest in its thermal coal production and mining operations in eastern Kentucky. No assurances can be provided
that a definitive agreement shall be reached.



NDR
Energy Awarded Gas Supply Contract with Ameren Illinois



On
August 17, 2011 the Company announced that NDR Energy was awarded a contract to supply natural gas to Ameren Illinois, the third
largest natural gas distribution utility in Illinois. The parent company, Ameren Corporation is one
of the largest investor owned utilities in the nation, andprovides natural gas and electric service to approximately 2.4
million electric customers and nearly one million natural gas customers. Its parent company,
traded on the NYSE, reported  revenues of $7.6 billion in 2010.



Report
Update on the Northwest Premont Oil & Gas Field Development





On
August 30, 2011, we announced an updated report on the Guerra #2 well. According to Progas, in previous reports regarding the
Guerra #2 well, this well was drilled to 4000 feet and tested oil and gas in 12 potentially productive sands at depths from 2200
to 3950 feet, encountering a total of 118 net feet of natural gas pay.



After
running 45 days of tests to draw down the pressure of each of the productive zones in the well, and selling test gas to the Tennessee
Gas pipeline, the open flow calculations were performed by independent engineer, AP Yang PE of Houston. The resulting open flow
calculations were as follows;



a.
The lower lobe flow of the Laughlin oil sand deposit tested at 15,541 mcf per day, (mcf/d), or 15,541,000

cubic
feet of gas per day



b.
The upper lobe flow tested at 5,063 mcf/d or 5,063,000 cubic feet per day



This
results in a combined total of 20,604 mcf/d or 20,604,000 cubic feet per day, which is an exceptional rate for a well producing
from a depth of 3324 to 3340 feet in depth, a total of 16 net feet of natural gas pay. This is a new zone that was not expected
to produce natural gas, and therefore new field discovery documents will be filed with the Railroad Commission of Texas (RRC),
which has primary regulatory jurisdiction over the oil and natural gas industry it Texas, to announce its discovery. In addition
to the Laughlin sand, there are at least another 9 zones which cored and tested natural gas in over 70 feet of gas sands, and
2 oil sands which tested and flowed oil when perforated, that are behind pipe below the gas zones for production at a later date.
It is to be noted, that the calculated open test flow rates are not the flow rates at which the wells will normally operate to
produce natural gas. The calculated rates are based on test flows of natural gas to the atmosphere through various choke sizes,
(oil and gas service valves) from which is then extrapolated to an absolute open flow potential of the well. A well will normally
produce natural gas at a rate of 5% to 15% of the open flow rate.



According
to Progas, the reserves estimates for the Guerra #2 well have not been completed at this time, however the preliminary estimates
are 100,000 to 150,000 barrels (bbls) oil, and 1,5000,000 mcf to 2,500,000 mcf (1.5 billion cubic feet, “bcf “ to
2.5 bcf) of natural gas.



The
above estimates of oil and gas are the tests from only one single zone in the Guerra #2 well. There are at least another 9 zones
which cored and tested natural gas in over 70 feet of gas sand, and 2 oil sands which tested and flowed oil when perforated, that
are behind pipe below the gas zones for production at a later date. The oil and gas and the future revenues from these zones are
not included in the estimates indicated above. The investors/partners, Including Universal Bioenergy, that have a working interest
in the wells, would receive 60% of the estimated total value of the oil and gas produced and sold from the Guerra #2 well, as
indicated above.



NDR
Energy Group Signs Contract with Duke Energy Commercial Asset Management Group, Inc



On
September 26, 2011, we announced that NDR Energy Group, its subsidiary, signed an agreement to supply natural gas to	Duke Energy
Commercial Asset Management Group Inc., the commercial power division of Duke Energy, one of the largest electric power companies
in the United States. Duke Energy, isa Fortune 500 company, traded on the New York Stock
Exchange, and reported revenues of $14.27 billion in 2010 in their SEC filings.Duke Energy supplies and delivers energy
to approximately 4 million U.S. customers. They have approximately 35,000 megawatts of electric generating capacity in the Carolinas
and the Midwest, and natural gas distribution services in Ohio and Kentucky. Their commercial and international businesses own
and operate diverse power generation assets in North America and Latin America, including a portfolio of renewable energy assets.



Universal
Bioenergy Launch of New Corporate Website



On
October 11, 2011, the Company launched a totally new corporate website to better serve the needs of its shareholders, investors
and the public interests. The new website reflects Universal’s commitment to be one of the largest independent energy companies,
and provides the investment community with the most current information on the Company’s products, mergers, acquisitions,
growth and expansion. It also highlights the Company’s subsidiaries such as NDR Energy Group and Texas Gulf Oil & Gas.



The
corporate website was designed specifically with our shareholders in mind, and was designed to allow the user the ability to explore
a wide variety of valuable information about the Company. Among the highlights of the website are, a History of the Company, Business
Strategy, Marketing Plans, Product Distribution, the Energy Industry and Future Plans and Outlook of the Company. It also features
current information on the Company’s Stock Performance, a Newsroom, News Releases, a weekly Standard & Poor’s
Factual Stock Report on Universal and an extensive Investors Relations section for their shareholders and investors. The website
can be located atwww.universalbioenergy.com. The website and its contents
are expressly not incorporated into this filing.



Acquisition
of Whitesburg Friday Branch Mine LLC Thermal Coal Mining Operations



On
October 17, 2011, our company and Whitesburg Friday Branch Mine LLC, a Kentucky Limited Liability Company (“Whitesburg”),
entered into a Member Interest Exchange Agreement, (the “Exchange Agreement”). Pursuant to the Exchange Agreement,
and subject to the conditions set forth therein, the Company will acquire 40% of the Member Interests and assets of Whitesburg
Friday Branch Mine LLC, of Kentucky, a privately held company, from JLP and Partners LLC, a Kentucky Limited Liability Company
(“JLP”), for a total consideration of $2.5 million. The Whitesburg Friday Mine, operates, mines and produces thermal
coal in eastern Kentucky for sale to electric utilities for use in coal fired generation, steam plant electric power production.



Steam
plant electrical power production is highly dependent on thermal coal. Thermal coal is used as a primary source of energy for
coal fired steam powered generators in electric utility plants. The Whitesburg mining operations are the surface and high wall
mining type, and does not include any underground mining. Whitesburg already owns the leases for the coal mineral rights and has
the required mining permits from the State of Kentucky. Since NDR Energy Group already sells natural gas to our electric utility
customers to generate electricity, thermal coal would give us another energy related product to sell to our current and expanding
customer base to increase our revenues. The Agreement also includes provisions for us to develop the oil and natural gas potential
on the mine property if these resources are discovered. According to the Energy Information Administration, coal as a fuel source
for electricity generation will increase 25% by 2035 in the United States. As petroleum reserves diminish, gas to liquid process
can use coal as a source for many chemical compounds for the chemical, polymer and other industries. Additionally, an advantage
of using clean coal technology will be to increase demand for coal as the source to produce synthetic natural gas (syngas). According
to Whitesburg Friday Branch Mine LL, the mine is projected to produce over $264 million in revenues from the sale of coal in the
next 5 years. No assurances can be provided that such revenues will transpire.



This
acquisition was reported on the Company Report on Form 8-K, filed with the Securities and Exchange Commission on February 28,
2012.





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NDR
Energy Group Signs Contract with Laclede Gas Company



On
October 25, 2011, NDR Energy Group completed the execution of a natural gas supply agreement with Laclede Gas Company.Laclede
Gas is a public utility engaged in the retail distribution and sale of natural gas.According
to Laclede Gas Company, it is the largest natural gas distribution utility in Missouri, serving approximately 630,000 residential,
commercial and industrial customers in the city of St. Louis and ten other counties in Eastern Missouri. As an adjunct to its
gas distribution business,Laclede Gas Companyoperates an underground natural gas
storage field, a propane storage cavern and propane vaporization facilities.Laclede Gas Company is a wholly owned subsidiary
of the Laclede Group, Inc., a public utility holding company which reported over $1.73 billion in revenue 2010, in its SEC filings.



NDR
Energy Group Signs Agreement with The Energy Authority



On
December 20, 2011 the Company announced NDR Energy Group signed an agreement to supply natural gas to “The Energy Authority”,
(TEA) an energy consortium with 46 public power companies’ members. This partnership
brings Universal and NDR Energy together with The Energy Authority’s 46 public power utilities members and partners across
the nation, which represent more than 25,000 MW of combined generation assets with all fuel types. The Energy Authority with its
headquarters in Florida, was organized in 1997 by three of its seven current owners to consolidate the purchase of energy supplies
for its 46 power company members, enhance the use of its owners' electric generating assets in the wholesale electric power market,
optimize power purchases from the wholesale market for its owners, and create economies of scale and reduced operating costs with
respect to energy trading and marketing. In 2010, the TEA purchased over $824 million in energy for its members.



Universal’s
Creditors Express Strong Support and Confidence in Company’s Growth Prospects



On
December 21, 2011, we announced that its major creditors and investors have given it strong support and a major vote of confidence
in the future growth of our Company for 2012 and beyond. These investors and creditors invested funds in the Company when we were
still a development stage company with a limited operating history, limited revenues, negative earnings and limited stock liquidity.
They accepted Promissory Notes with the option to convert them to stock, and were taking what was considered to be a high risk
investment at that time. They have indicated to management that they will be holding their debt and equity positions in our Company,
and currently, to our knowledge, have no plans to sell their respective shares into the marketplace. They have expressed confidence
in management’s efforts to progressively build strong business fundamentals, increasing revenues, improving the balance
sheet, stock liquidity, future acquisitions, and the company’s long-term growth. They consider themselves long-term investors.
Therefore, we believe, although we can provide no assurances, that they will be extending the us more credit and making additional
investments into our Company in the future.





Company
Terminated Agreements



Letter
of Intent with Pacific Rim Native American Investments Corporation



On
May 9, 2011, we executed a Letter of Intent with Pacific Rim Native American Investments Corporation, a Native American company
whereby, we would act as Developer and Manager for Pacific Rim for a period of 5 years to develop, explore, drill, manage and
market the oil and natural gas potential on lands and territories owned, managed or controlled by Pacific Rim on behalf of many
sovereign Indian Nations and Tribes.Management and their consultants completed their preliminary due diligence and decided
not to move forward to complete this transaction. In accordance with the provisions of the Letter of Intent, during the due diligence
process, we terminated the Letter of Intent on August 12, 2011.



Letter
of Intent with Indian Odyssey Corporation



On
May 9, 2011, we executed a Letter of Intent with Indian Odyssey Corporation, a Native American
company whereby we would act as Developer and Manager forIndian Odyssey for a period
of 5 years to develop, explore, drill, manage and market the oil and natural gas potential on lands and territories owned, managed
or controlled byIndian Odyssey Rim on behalf of several sovereign Indian Nations
and Tribes.Management and their consultants completed their preliminary due diligence and decided not to move forward
to complete this transaction. In accordance with the provisions of the Letter of Intent, during the due diligence process, we
terminated the Letter of Intent on August 12, 2011.



Universal
in Talks to Acquire Ownership Interest in Gas Pipelines



On
May 12, 2011, we announced that our acquisition team is in talks to acquire an ownership interest in a natural gas gathering company
that owns several gas pipelines that are used to transport natural gas from the wells in the Premont Northwest oil and gas field
to the main Tennessee Gas Pipeline Tap. The combined value of those pipelines is estimated to be in the tens of millions of dollars,
and should bring additional revenue, potential profits and asset value to our company if the contemplated transactions are completed.
No assurances can be provided that any definitive agreement will be executed. This transaction has been terminated.



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THE
COMPANY’S FUTURE PLANS AND OUTLOOK

Stock
Dividends and Distributions

Due
to management’s strong confidence in the current and future growth and expansion of the Company, it is considering additional
ways to bring more value to our shareholders. We are considering, but can provide no assurances as to implementation, the following
proposals for dividends and distributions;



1. A
special dividend in the form of common stock
2. Regular
dividends issued in stock or cash (subject to the Company’s future earnings and availability of funds)
3. A
dividend in the form of Preferred stock, or Preferred stock with the option to convert them to common stock. The issuance of any
options or its exercise at a cost would be subject to SEC guidelines and a possible registration of an offering.
4. The
issuance of warrants or options to buy additional shares from the Company, (subject to SEC guidelines)



In
addition to potential price appreciation of the common stock, this could provide the shareholders with additional current income,
cash flow and (although we cannot guarantee it) the potential to earn higher returns from these stock dividends and distributions
than they might earn on their other investments.



The
Company’s management is currently evaluating the above proposals and others in this regard and its potential benefits to
the shareholders and impacts on the Company, however no decisions have been made regarding this matter. We believe this
will reward our loyal shareholders for their ongoing support, and to give them a greater stake in our Company.





Universal
Bioenergy Considers Changing Its Name



The
Company is presently considering changing its name to reflect its current business model and its future growth as it continues
to expand its marketing of natural gas, propane, petroleum and thermal coal. The name Universal Bioenergy, reflected our Company’s
original plans to produce and market “green” energy technologies, such as biodiesel fuel, solar, wind, wave and other
technologies. In December 2009, after conducting its business summit in Las Vegas, Nevada, on January 12, 2010, we announced that
it was charting a bold new course for the Company. We shut down our biodiesel refinery in Nettleton, Mississippi in 2010, and
later on March 31, 2011, we completed the dismantling of the facilities structures and plant equipment at the biodiesel refinery.
This marked our exit from green energy technologies, and to grow and expand into more profitable conventional energy products
and technologies. The name “Universal Bioenergy” has also caused some confusion in the minds of potential shareholders,
and investors because we no longer market and produce “green energy” products. We believe a strategic name change
will help us to build a better “brand”, improve our image, attract more shareholders and investors, and more fully
reflect the emphasis of our current and future business trends in the marketplace. On June 18th 2010, the majority
of the shareholders, and the Board of Directors each approved separate Resolutions to amend the Articles of Incorporation granting
the Board of Directors the right to change our Company’s name.On May 9, 2011, we filed a Certificate of Amendment
with the Nevada Secretary of State, to amend our Articles of Incorporation, which granted the Board of Directors the full right
and authority to change the name of the Corporation at a future date without out any shareholder action or approval.



Universal
Bioenergy – Considers Options for Merger, Acquisition or Consolidation

Our
management is considering the possibility of completing a merger or consolidation with another company to increase its market
share, share price, market value, expand horizontally into other national or international geographical markets, expand vertically
and create more value for its shareholders. Our Company’s management is currently evaluating the possibility of a merger
or consolidation and its potential benefits and impacts on our Company, however no decisions have been made regarding this matter.
Any final proposals regarding this matter would be presented to the Board of Directors and the shareholders for approval as required
by Federal and State laws, guidelines and our corporate By-Laws.

The
issues and benefits that would have to be considered include;

1. The
potential value of the synergies and strategic fit of the target or acquiring company
2. The
financial, accounting, tax and legal effects
3. The
acquisition or sell of stock and/or assets of either company
4. Consideration
of a merger or consolidation with another company to create a new stronger more valuable company
5. Completion
of a horizontal acquisition of a competitor or other company in our industry
6. Completion
of a vertical acquisition with another company either upstream or downstream in our industry that may include exploration companies,
producers, distributors and marketers
7. Consideration
of a triangular or a reverse triangular merger with a strong operating company on another exchange such as the NASDAQ, NYSE/AMEX
or OTCBB
8. Potential
increase in the price of our common stock
9. Economies
of scale from the two companies combined resources
10. Potential
reductions in operating costs
11. Potential
to increase the earnings and earnings per share of the Company
12. The
potential to create more value for our shareholders



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Plans
to Up-List to NASDAQ or other National Stock Exchange

Based
on our growth by mergers, acquisitions, and revenues, and future plans for expansion, our management is evaluating and positioning
the Company to potentially qualify, and apply to up-list to a major national stock exchange, which stock exchanges list similarly
situated energy technology companies, such as NASDAQ, NYSE Amex Equities, or others. Our management has already been in discussions
with several investment bankers, advisory firms and our securities counsel to review the exchange requirements, legal issues involved,
improving our capital structure, procedural guidelines and other related issues to qualify to be listed on one of the major national
exchanges. Management believes that, if we can successfully position our company to qualify to meet the listing requirements for
one of the stock exchanges, it would greatly increase our market value, and should make it attractive to more retail and institutional
investors. We also feel this would be of great benefit to our shareholders. No assurances can be provided that this aspect of
our long-term business plan will be achieved.

Consideration
of Reverse Stock Split



As
an additional requirement to qualify to be listed on one of the major national stock exchanges, management in consultation with
its accountants, auditors, investment advisors and securities counsel is considering the options of the benefits of implementing
a reverse split of its common stock. If a reverse stock split were effected, it would result in a reduction in the number of the
Company’s outstanding shares, and a corresponding increase in the price of our stock or its earnings per share. Some of
the factors under consideration are;



1. Improving
the liquidity and marketability of the stock to a more popular trading range to make it more attractive to institutional and other
major investors
2. Increase
the price to a range to reflect the revenues, growth and stability of the Company
3. Increase
the price to qualify for the minimum share price requirements to qualify for a major stock exchange such as NASDAQ or NYSE/AMEX
4. The
Company may consider purchasing the shares of some of the minority shareholders
5. Allow
the Company to raise more capital for its growth and expansion



Management
believes that the current stock price is currently undervalued, and the share price does not fully reflect its true value in proportion
to its operating fundamentals, and based on the Company’s rapid growth, revenues, acquisitions and plans for expansion.
Many institutional investors and investment funds have guidelines that prevent them from investing in our common stock at the
current prices that the stock trades at. With a high stock price, it is possible that many institutional investors, larger private
equity firms, hedge funds, pensions and trusts that were previously prohibited from acquiring our shares, could then purchase
our shares. The reverse stock split of our shares of common stock may also help to create greater investor interest in the Company
by producing a share price the common stock for our Company that is more consistent with other high growth companies of our size
in our in the market place. If a reverse stock split was implemented it would reduce the amount of outstanding shares, increase
our share price, and help the Company qualify to up-list to a major stock exchange such as NASDAQ, or NYSE/AMEX. Management believes
this would be beneficial to our shareholders.



Our
management is currently evaluating the possibility of a reverse stock split and its potential benefits and impacts on our Company,
however no decisions have been made regarding this matter. Any final proposals regarding this matter would be presented to the
Board of Directors and the shareholders for approval as required by Federal and State laws, guidelines and our corporate By-Laws.



New
Business Model

Mergers
and Acquisitions

Management
has determined that it is in our best interests to chart a bold new course for the Company to grow by mergers and acquisitions.Management is planning for expansion, by additional mergers and acquisitions, to generate greater revenues and profits,
and by shifting our focus to invest in far more profitable natural and alternative energy technologies. We anticipate, but can
provide no assurances, acquiring 3 to 5 additional new companies in the next 2 to 3 years.



Some  companies
being targeted are, natural gas producers  to obtain natural gas  directly from the wellhead,  gas
gathering pipeline companies, propane producers, high wall surface coal mines and the acquisition of energy technology patents
and licenses. We’re also looking at acquiring petroleum and gas wells, assets and properties in Texas, Louisiana and other
states. Acquiring interests in properties in these areas will work very well with our strategic plans for Texas Gulf Oil &
Gas Inc.  We have adapted our business strategy to become a more vertically integrated
company, to give us greater management control over our supply chain, from the producer, through marketing, distribution, and
directly to the customer. We believe this will bring even greater revenues for our company and more value to our shareholders.



Termination
of Acquisitions- As part of our business strategy, we review acquisition and strategic
investment prospects that we believe would complement our current product offerings, augment our market coverage or enhance our
technological capabilities, or otherwise offer growth opportunities. From time to time we review investments in new businesses
and we expect to make investments in, and to acquire, businesses, products, or technologies in the future. We expect to continue
pursuing selective acquisitions of businesses. Very often during the acquisition and due diligence process, management will not
be able to consummate the transaction because we cannot close it on terms and conditions acceptable to us, or because of other
negative factors as described below.



In
the event that management and its acquisitions team have identified a strong potential target company, we will issue a Letter
of Intent to start the due diligence process to acquire that company. Afterwards, our legal counsel will prepare a definitive
agreement with all of the final terms and conditions to complete the acquisition. Proper due diligence for proper technical, financial
and legal review can be very expensive and time consuming. Often during the due diligence process we discover that the representations
and warranties made by the target company regarding its business, operations, assets, financials, books, records, properties,
contracts, liabilities, pending litigation, permits, licenses and business status are not accurate or complete, there may be misrepresentations,
or there is an adverse material change in the business prior to the closing of the acquisition. In that event, management will
elect to terminate that acquisition to avoid any negative impacts on our operations, avoid any adverse legal and financial exposure
to the Company and to protect our shareholders. Due to these factors we and other companies that pursue other companies as acquisition
targets do not expect that they will close on every potential acquisition target.





Market
Expansion



Management
believes that there are currently there are 3240 utilities in the United States. Through NDR Energy, we have firm contracts
signed with 22 of these major utilities, and are in discussions with another 14 utility companies to obtain contracts from them
also. Our plans are to develop an aggressive sales force, to obtain agreements with a total of 100 utilities, and other customers
including, Federal and State Departments and Agencies, Cities, Municipalities, and large commercial and industrial corporate
clients, in the next 12 to 24 months. This will give us a much greater market share, more customers for our gas supply division,
thereby further increasing our revenues and profits.





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Forecast
of Projected Revenues and Earnings and Market Value

Our
primary objective is to exploit changes in the energy market to propel the Company to a dominant market position, and be one of
the top independent energy companies in the United States. Another major goal is to finding new ways to create more value for,
and maximize the wealth of our shareholders, and bring increased value to our stakeholders and the investment community. The financial
projections presented below are estimates based on Management’s analysis of the present targeted market segments of the
energy industry we are involved in, future industry trends, our current and growing customer base, our strategic joint ventures,
strategic alliances, and other capital development projects we are pursuing. The financial plan is intended for rapid but controlled
growth and required Management to make certain assumptions and estimates.

Focus
on Earnings

We
achieved a record in sales revenue of $71,747,840, for the year ending December 31, 2011, as compared to $41,320,647 for the same
period in 2010, which is an increase of 73.64%. In 2010 and 2011, while building our business, we focused on generating substantial
sales revenues, a broad customer base, and gaining the greatest share of the market in the shortest period of time.
That strategy affected how we obtained our supplies, their relative cost, and how we priced our products for sell
to our customers. To gain a great market share in a short period of time, initially resulted in higher cost of goods sold,
and selling the product, at or slightly below our costs, and that directly impacted our profitability. This caused almost
negligible gross profit and negative earnings, in 2010 and 2011. This strategy was only a temporary measure, while we were building
greater market share, last year.

A major goal for the fiscal 2012 year and beyond is to begin to generate earnings
for the Company. We intend to increase our operating income and earnings through current and future acquisitions in the energy
industry, and high profit centers which will include gas storage, physical and financial gas trading, transportation, management
and higher sales of natural gas, propane, oil and coal. We also plan to obtain our natural gas supplies at the wellhead and aggregating
the purchase of our gas supply through a large number of independent producers with long-term purchase agreements to supply to
our customers.



Or
management’splans for increasing earnings include the following;



•
First, we are changing our strategy for obtaining our supplies of natural gas.

•
Second, we are negotiating with independent oil and gas producers to obtain our supplies at the wellhead, and aggregating the
supply under long-term supply agreements to market to our customers.

•
Third, we engaged in a joint venture with Progas Energy Services, to develop the Northwest Premont oil and gas field in Texas.
We will obtain our share of the oil and gas from that field, from the wellhead at the producer’s price.

•
Forth, we are attempting to obtain more bank funding, lines of credit, and Letters of Credit, as opposed to using the suppliers
“trade credit”, to purchase the gas.

•
Fifth, we will be re-negotiating our existing supplier agreements to purchase the gas in larger quantities, with greater economies
of scale, on better terms, at lower purchase costs, and reduce the high financing costs. This should drive our costs down, and
potentially produce higher profit margins for our company.

•
Sixth, our management has decided to expand into the coal energy sector of the energy industry. Thermal/Steam non-coking coal
is used as a primary source of energy for coal fired powered plant electric generation. Universal plans to mine, produce and market
“Thermal/Steam” coal to sale to other major coal producers and electric utility customers for power generation.

•
Seventh, our the Company through NDR Energy Group has expanded its product mix to include the sales and distribution of propane
due to the higher profit margins.

•
Eighth, we intend to expand into gas storage, physical and financial gas trading, transportation and, gas management.

New
Profit Centers

We
also plan to increase our revenues and profits by engaging in some are all of the services indicated below. These services are
currently being provided to us by our natural gas suppliers and the cost for these services are charged to us, and are included
in the price of the gas that we purchase from them. Implementing these new profit centers may generate an additional $0.05 to
$0.25 in revenue per mcf, of natural gas that we sell to our customers. These services include;

1.
Scheduling - tracking nominations, confirmations product movement and verification

2.
Gas Nominations - delivery of a specified volume over a defined period of time

3.
Capacity Releases - release of transportation capacity on interstate natural gas pipelines

4.
Gas Transmission - Delivery via the interstate pipeline system to the Local Utility and customers

5.
Pipeline Balancing - matching customer's daily usage with the customer's confirmed pipeline delivery

6.
Risk Management – developing supply pricing strategy, options, demand, daily and futures contracts

7.
Gas Storage - match seasonal load variations, and production over periods of fluctuating demand

8.
Gas Trading - physical trading and financial trading, and hedging of gas futures



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Value of Our
Customer Contracts



Our
customer contracts are a very valuable asset for us. Through NDR Energy, we presently sell natural gas to 28 of the largest
public utilities, electric power producers and local gas distribution companies that serve millions of commercial, industrial
and residential customers throughout the United States. Since they are regulated by various Federal and/or State agencies, they
must guarantee a constant uninterruptible supply of natural gas and electricity to their customers, which include private homes,
commercial and industrial users, medical facilities, educational facilities, federal/ state buildings, the military and many more.
Therefore the public gas and electric utility companies have very stringent guidelines about the suppliers and vendors they do
business with. The pursuit and acquisition of new customers by us, can be time consuming and very costly, especially when you
are attempting to transact business with large national and multinational companies with very strict guidelines. They usually
require us and NDR Energy to respond to a very rigorous Request for Qualifications (RFQ) or Request for Proposals (RFP) process,
which includes extensive background information on the Company, it officers, operations staff, financial stability, credit worthiness,
track record, and our ability to them with a firm, reliable, uninterruptible supply of natural gas. We are responsible for transportation
of the gas to their contracted delivery points, any shortages, and the gas must meet certain standards in terms of quality, pressure,
and heat content. There can also be substantial legal and monetary damages to us for failure to pay our suppliers for the gas,
and for failure to deliver the gas to the utilities, because they could not supply electricity and gas to the general public.



The
information presented below is a revised conservative estimated projection of our gas sales for 2011. They are not guaranteed,
and could be more or less. However, it will give some insight into where we think we could be this year. These projections are
for sales of natural gas only and do not include sales of petroleum or any other alternative energy products.Based on
these projections, each of our customer contracts would have a potential to generate an estimated $12+ million annually in natural
gas sales. We believe, the retail value of each of these contracts could very significant, if someone were to purchase one or
more these contracts based on their potential sales value over a period of 5 to 10 years or more.



Future
Capital Funding

To
ensure our ability to remain as a going concern, and develop a long-term profitable business, Management is planning to raise
additional funds in debt or equity capital to fund the growth of our company. We anticipate using the proceeds to purchase some
of the companies we have targeted for future acquisitions, and some for working capital. Management believes, although we cannot
guarantee, that we successful in raising additional capital to fund our plans for growth and expansion.

The
raising of additional capital through the sale of equity may result in a dilution of the current shareholders interests. However,
management anticipates that the shareholders would likely receive greater potential financial rewards by means of a significant
increase in the price of the stock, greater market value of the Company, and more liquidity. Since our management has re-engineered
our company by creating more value to it, through its recent acquisitions, and is positioning it to qualify/apply to be listed
on another stock exchange, we believe this should make it attractive to more retail and institutional investors. We feel this
would be of great benefit to our shareholders.

Financial
Restructuring Plan

On
February 25, 2011, the Board of Directors approved a Resolution and a “Financial Restructuring Plan” to reduce debt
and improve the companies “Balance Sheet”. The plan calls for our company to reduce its debt, and converting the balance
of the outstanding debt on the Balance Sheet to shares of our Common Stock, to our various Note Holders and creditors. This will
result in an additional issuance of shares of our Common Stock that will likely increase the issued and outstanding shares of
our Common Stock to an undeterminable amount of 150 shares. Many of the existing Notes carry interest rates that are very high,
and that are above the current market rates. The benefit to us is to eliminate the outstanding debt and liabilities owed by our
company, reduce interest expenses, enhance our financial position, strengthen the Balance Sheet, and increase our liquidity. Management
believes that taking these actions will improve our profitability, and allow us to pursue our strategies for our growth and expansion.
We believe that this should also be very beneficial to our shareholders.

Corporate
Governance and Management



Amendment
to Company’s Articles of Incorporation



On
May 9, 2011, we filed a Certificate of Amendment with the Nevada Secretary of State, to amend our Articles of Incorporation. The
information regarding the Amendment was fully disclosed in a Form 8K that was filed on for the quarterly periods ending June 30,
2010 and September 30, 2010. A complete copy of the Amendment is attached as Exhibit 99.1 the Amendment incorporated the following
changes;



1. Increased
the number of authorized shares of the Company’s common stock from 200,000,000 to a total of 1,000,000,000 shares.
2. Grant
to the Board of Directors the full right and authority to increase or otherwise change the authorized shares of common stock and
preferred stock without any shareholder action or approval.
3. Grant
to the Board of Directors the full right and authority to change the name of the Corporation at a future date without out any
shareholder action or approval.
4. To
authorize that each Director shall be elected to serve for a minimum period of one year, and up to three years, or shall serve
until his successor is elected and qualifies. Directors need not be stockholders.





Our
Beneficial Shareholders



At
December 31, 2011, there were 199,969,927 shares of our Common Stock issued and outstanding and there were approximately 54 shareholders
of record of our common stock on the records of our transfer agent. See Part II, Item 5. The shareholder of record is the name
of an individual or entity that an issuer or transfer agent carries in its records as the registered holder (not necessarily the
beneficial owner) of the issuer's securities. Dividends and other distributions are paid only to shareholders of record.



The
actual “Beneficial Shareholder”, (the true owner of the shares) will generally have their shares held in the “street
name” of their nominee, within a brokerage account, a mutual fund or a custodian bank for safety and convenience of trading,
with the bank or broker holding title to the shares. The Depository Trust Company (DTC) through its partnership nominee CEDE &
Company is the largest shareholder of record of our shares of Common Stock. CEDE & Company as nominee holds 81,218,528 million
shares of our common stock for its Broker Dealers and other members on behalf of their beneficial shareholders. Management believes
based on its tracking of the transactional record data of OTCMarkets / Pink Sheets of the total volume of stock trades and number
of executed trades, that the estimated amount of beneficial shareholders of our stock is in the range of 3000 to 4000.



Management
Incentive Programs



The
Company has an incentive program for the Officers, in accordance with their Employment Agreements, whereby they may receive bonuses
and equity awards based on the “economic value added”, that they bring to the Company. This may include increases
in revenues, earnings, cash flow, debt reduction, return on net assets, return on stockholders equity, return on assets, return
on capital, stockholder returns, return on sales, gross or net profit margin, productivity, expense, margins, operating efficiency,
objective measures of customer satisfaction, working capital, financing, earnings per share, market share, inventory turns, acquisitions
or strategic transactions, or other means of bringing additional value to the Company. Since management has deferred most or all
of their compensation, provisions have been made to issue them long-term Notes for their salary, with the option to convert the
Notes into to common stock of the Company.



Our
present management team inherited a development stage company that in previous years had no revenue, earnings, limited operations,
and very little volume and liquidity in its stock. They built a good, solid operating company, with strong revenues in a short
period of time, during the worst economic downturn the United States has experienced since the “Great Depression”.
They managed to turn around a small development stage company with no revenues, built an operating company, and generated revenues
in excess of $71 million, all in two year.



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Voting
Trust and Control of NDR Energy Group LLC



The
Company and Varlos Energy Holdings LLC entered into a Voting Trust, via a Voting Trust Agreement whereby Varlos Energy granted
and transferred its Two (2%) percent member interests to the Company and its Voting Trustee, Vince M. Guest, for the purpose of
having the Company to vote Varlos Energy’s member interests in NDR Energy Group LLC, for any corporate lawful act for a
period not to exceed Ten (10) years. This Voting Trust vests in the Company, and the Trustee, Fifty One (51%) percent (the “Majority”)
of the control of the membership ownership interests of NDR Energy Group LLC, and the authority over all of its management and
operations decisions, with the combination of the Company’s Forty Nine (49%) percent member interests and the voting rights
and control of Varlos Energy’s Two (2%) percent member interests.





Universal
Bioenergy North America Inc.



Discontinued
Operations



Universal
Bioenergy North America, Inc., (UBNA), is a subsidiary of our company. It is a Nevada corporation that was formed on January 23,
2007 that was acquired by our company in December 2007, for the purpose of operating a biodiesel plant in the city of Nettleton,
County of Monroe, Mississippi to produce biodiesel fuel and a marketable byproduct of glycerin. The biodiesel plant was acquired
by Universal Bioenergy North America out of a bankruptcy action. As of the date of this report, we have not manufactured any biodiesel
fuel We have generated no revenues from the subsidiary, Universal Bioenergy North America, Inc., as the refinery was not in production
as of September 30, 2011. Due to the current state and future outlook of the biodiesel market, management decided to dismantle
the refinery, and engaged an outside contractor to complete the work.

On
March 31, 2011, we completed the dismantling of the facilities structures and plant equipment at the biodiesel refinery in Nettleton,
Mississippi. The plant was dismantled due to the following reasons; (1) the current negative economic climate, (2) the collapse
of the biodiesel market in 2009 and 2010, (3) the market operating at 10% to 17% capacity, (4) a glut of idle biodiesel plants
on the market and bankrupt producers, (5) the negative future market outlook, (6) the estimated cost of over $500,000 to restart
the plant, (7) potential legal liabilities, (8) lack of a clear and strong U.S energy policy, (9) lack of consistent federal government
support, tax credits and subsidies, (10) inability of biodiesel to effectively compete against petroleum diesel, (11) low profit
margins, (12) and the volatility and high cost of feedstocks.

On
August 31, 2011, the property located in Nettleton that was formerly used as a biodiesel refinery, was sold by the Monroe County
Chancery Clerk, of the State of Mississippi at a county tax forfeiture sale to recover the property taxes due the County. After
consulting with our outside professionals, and due to the circumstances indicated above regarding the dismantling of the plant,
the negative state of the biodiesel industry and our new direction to pursue the production and marketing of natural gas, petroleum,
coal and propane; our management determined that retaining the property would provide no further benefit to our company, and furthermore
it was not consistent with our long-term business objectives. Therefore, it was decided not to pay the property taxes, thereby
forfeiting the property and allow the Monroe County Chancery Clerk to sell the property at the tax forfeiture sale. According
to the Monroe County tax records, the property was purchased at the tax forfeiture sale by another company which had no relationship
with our company, or any of our Officers, Directors or Employees.



RESULTS
OF OPERATIONS



Fiscal
Years Ended December 31, 2011 compared to December 31, 2010



Review
and Analysis of Current Results of Operations



Revenues



With
a business plan focused on producing revenues, current management has created significant value and since the acquisition of NDR
Energy on April 12, 2010, when previously there were no revenue generated in the prior 2 to 3 years. Our primary revenues from
this period are from the sale of natural gas and propane.  Our revenues for the twelve months ended December 31, 2011 were
$71,747,840 as compared to $41,320,647 for the same period in 2010. This resulted in an increase of $30,427,193 in revenues
or 73.64% over the previous year. Our Cost of Sales for this period was $71,604,210. This has resulted in a gross profit
margin for this period of $143,629.  The high proportionate cost of sales relative to the gross revenues, reflected
in this period, is due to purchasing the gas from some of the suppliers at near retail cost, and high financing costs added to
the gas by the suppliers.   Management plans are to reduce the purchasing cost of the gas, and the financing cost, by
obtaining our own credit facility and lines of credit and obtaining our gas at the wellhead. This will allow us to purchase the
gas in larger quantities, with greater economies of scale, on better terms, at lower costs and reduce the high financing costs,
thereby significantly increasing our the gross profit.



Additionally,
in 2011, while building our business, we focused on generating substantial sales revenues, a broad customer base, and gaining
the greatest share of the market in the shortest period of time. That strategy affected how we obtained our supplies, their
relative cost, and how we priced our products for sell to our customers. To gain a great market share in a short period of
time, initially resulted in higher cost of goods sold, and selling the product at or slightly below our costs, which directly
impacted our profitability. This caused almost negligible gross profit and negative earnings, in 2011. This strategy was
only a temporary measure, while we were building greater market share, last year.  See the sections “New
Business Strategy”, “Focus on Earnings” and “New Profits Centers” above.



We
incurred losses of $2,037,042 for the twelve months ended December 31, 2011 and $1,947,963 for the same period in 2010.
Our accumulated deficit since our inception through December 31, 2011 amounts to $19,470,213. We issued 3,000,000 of
common shares for services with an aggregate fair value of approximately $133,500 that was included in the $1,187,624 in
general and administrative expenses for the twelve month period ended December 31, 2011. Excluding the value of the common
shares of $133,500 from the general and administrative expenses of $1,187,624 would reduce the actual net G&A expenses
to $1,054,124. We also incurred interest (expenses) including amortization of beneficial conversion feature
of $923,644. Excluding the value of the common stock that was issued for services, and interest expenses which
together totaled $,1,054,144 would correspondingly reduce our net loss of $2,037,042 to an adjusted net loss of $979,898 for
the period ending December 31, 2011. Based on an adjusted net loss of $979,898 this loss equals only 1.37% of our
total revenues of $71,747,840 for the period ended December 31, 2011, as compared to 2.48% for the same period
ended 2010.



Operating
Costs and Expenses.



Our
Cost of Sales for the twelve months ended December 31, 2011 were $71,604,210 as compared to $41,273,543 for the same period
in 2010.  Our primary business operations consists of the marketing and distribution of natural gas and propane to
our major customers nationwide. Our general and administrative expenses for the twelve months ended December 31, 2011 were
$1,187,624 as compared to $1,251,674 for 2010 a decrease of

$
64,050. We pay our employees and consultants largely in common shares as our cash availability is currently
limited.



Our
total operating expenses decreased from$1,333,818 for the period ending 2010, by a total of $116,958, or by 8.77%,
to $1,216,860 for the period ending December 31, 2011. Based on
our plans for growth and expansion, and increasing revenues through sales of natural and other products, we believe we will soon
reduce our net losses down to zero, and then move our company toward solid profitability. Since
we are a high growth company, growing by mergers and acquisitions, we expect to have corresponding increases in costs reflected
in our operating expenses. However, although our total revenues
increased by $73.64%, our total operating expenses decreased by only 8.77%.



(29)









Assets



Our
“total assets” have decreased by $2,047,886, or 15.44% to $11,212,845 for the period ending December 31,
2011, compared to $13,260,731 for the same period in 2010. A total of $2,850,371 of that resulted from a reduction in the
amount of our Accounts Receivables from the sales of natural gas due to the unseasonably warm winter on the east coast, a
reduced demand in natural gas for heating, a decline in natural gas prices, and an increase in natural gas working
inventories. Our Property and Equipment and long-term physical assets were also reduced by $127,000 for the period ending
December 31, 2010 and $125,000 December 231, 2011 due to the discontinued operations of our biodiesel refinery in Nettleton,
Mississippi. See – Universal Bioenergy North America Inc., Discontinued Operations for more information. However, this
reduction in our “total assets”, was offset somewhat by an increase in our investment in the Whitesburg Friday
Branch Mine, LLC acquisition.



Liquidity
and Capital Resources



Our
management looks to a variety of funding sources, to meet our short and long-term liquidity requirements. We currently generate
the majority of our consolidated revenues and cash flow from the marketing, sales and distribution of natural gas to our 28 electric
utility customers through our NDR Energy Group subsidiary. Our present revenue, profitability and future growth are largely dependent
on a number of factors including, the prevailing and future prices for natural gas, which is also dependent or influenced by numerous
factors beyond our control, such as regulatory developments, changing economic conditions, and competition from other energy sources.
As we further diversify into the marketing and distribution of propane, oil and coal, our future revenues and profitability will
come from multiple sources and they will be less dependent on the sales of natural gas alone.



Working
Capital



Our
working capital requirements increased significantly, and we incurred significant fluctuations in our working capital for this
period. This resulted in a working capital deficit of $42,481 for the period ending December 31, 2011, as compared to a working
capital deficit of $214,309 for the period ending December 31, 2010. This increased our working capital deficit by $210,172 or
by 98.07%. The working capital deficit was due to the costs of pursuing acquisitions, funding of NDR Energy’s operating
expenses, the amount of funds borrowed from our creditors, purchase of natural gas inventories, our capital spending exceeding
our cash flows from operations, and from the increase in accrued expenses.



We
typically have positive cash flow and working capital each month to meet our capital requirements. The negative working capital
for the period ending December 31, 2011 is an occasional event experienced by many companies and has not had a significant negative
effect on our operations. This is due to our ability to raise capital, the contracts we have with our utility customers, their
strong S&P credit ratings, and their consistent payment of our invoices on schedule. Due to the timing of the transactions,
we are able to maximize the efficiency of the billing and payment cycles, thereby minimizing the impact of any occasional periods
of negative working capital. Additionally, as we purchase gas at the wellhead, obtain lines of credit and accounts receivable
facilities, this should enable us to greatly improve our cash flow and increase our working capital.



Cash
Flows



The
prices and margins in the energy industry are normally volatile, and are driven to a great extent by market forces over which
we have no control. Taking into consideration other extenuating factors, as these prices and margins fluctuate, this would result
in a corresponding change in our revenues and operating cash flows. Our cash flows for the twelve months ended December 31, 2011
and 2010 were as follows:



Cash
Flows from Operating Activities



Our
cash used in operating activities for the twelve months ended December 31, 2011 was ($996,116) as compared to ($322,979) for the
twelve months ended December 31, 2010. The increase was primarily attributable to the costs associated with the growth and expansion
of NDR Energy Group and our other operations.



Cash
Flows from Investing Activities



Cash
used in investing activities for the year ended December 31, 2011 was $889,500 as compared to cash provided by investing activities
of $24,906 for the twelve months ended December 31, 2010. This was an increase of $864,594 or an increase of 3471.43% due to our
cash needs to grow by means of acquisitions. The use of cash in the year ended December 31, 2011 was related to the investment
in participation agreements for Progas Energy Services, the acquisition of the member interests in Whitesburg Friday Branch Mine
LLC, and cash provided by investing activities that is attributable to the purchase of fixed assets of $13,094 and the sale of
property and equipment for $38,000.



Cash
Flows from Financing Activities



Our
cash provided by financing activities for the year ended December 31, 2011 was $1,889,321 as compared to $295,254 for the year
ended December 30, 2010. The net cash provided by financing activities is primarily attributable to our Notes Payables issued
and the investment in the Whitesburg Friday Branch Mine.



Liabilities
/ Indebtedness



Current
liabilities decreased to $10,422,309 for the twelve months ended December 31, 2011, compared to $13,071,803 for the same period
in 2010. This 18.31% decrease was primarily due to a $2,741,102 decrease in accounts payable from the purchasing costs and supplies
of natural gas. Our long term liabilities are $494,646 for the period ending December 31, 2011, compared to $238,355 for the year
ending December 2010. This increase was primarily due to the conversion of the accrued compensation and expenses of certain officers
and employees into long term notes payable, to reduce our current liabilities, improve our cash flow, and improve the Balance
Sheet.





DEBT



Debt
and Debt Financing



Long-Term
Debt and Promissory Notes - In its efforts to expand and grow, the Company borrowed direct cash funds from various investors
to raise capital, and the Company issued them debt instruments in the form of Promissory Notes to evidence that debt. These are
long-term Notes with various rates and maturities, that grants the Note Holder the right, (but not the obligation) to convert
them into common stock of the Company in lieu of receiving payment in cash. The issued Notes are primarily unsecured obligations.
The principal amount of the Notes may be prepaid at the option of Maker, in whole or part at any time, together with all accrued
interest upon written notice to Holder.



Many
of these Notes have above market interest rates, and high price conversion discounts rates to market. Management issued the Note
primarily for the following reasons;



|a. | Universal
    was considered a development stage company, with a limited operating history, and had limited revenues and earnings                                                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|b. | The
    investors that accepted a Note, with deferred payments, with the option to convert the Note to high risk penny stock, for
    the cash obligation, felt they were taking an extremely high risk



|c. | The
    investors’ concern about the historically high inherent risks in penny stocks                    
|-- | ---------------------------------------------------------------------------------------------------------
|d. | The
    investors’ concern about the lack of liquidity and limited trading volume in the Company’s stock.



|e. | The
    investors’ concern about the volatility of the stock price at that time                                                                                          
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|f. | A
        significant price discount to market was required by them to offset declines in the stock price to
        cover
        the risk of partial or even total loss



|g. | The
    investors had very limited or no collateral for their investments or loans to the Company   
|-- | ----------------------------------------------------------------------------------------------------
|h. | Many
    of the Notes were issued when the Company’s stock was trading in the 2 cent to 3 cent range



|i. | The
        loans were made on the best possible terms we could get from the investors at that time, because
        of
        the high risks, the recessionary economy and tight credit lending market at that time.                 
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|j  | Due to these inherent risk factors and their potential affect on
    the investors, the Board of Directors approved the conversion prices for the Notes in range of $.005 to $.05 per share, or
    at a 30% to 50% discount to market.





The
investors have provided us with critical short and long-term funds that we have used for operations, working capital, and investment
capital for our business acquisitions to expand and grow the Company. These investors invested funds in the Company when it was
still a development stage company with a limited operating history, limited revenues, negative earnings and limited stock liquidity.
They accepted Promissory Notes with the option to convert them to stock, and were taking what was considered to be a high risk
investment at that time. The Company has the right to re-negotiate the terms and conditions of the Notes, including increasing
the conversion prices, if the stock price rises considerably and consistently over time, on terms that would be more favorable
to the Company and its shareholders. It could take several years to convert all of the Notes to stock if all of the investors
requested it. It’s possible that some may never convert their Notes to stock and may take cash only when the Company is
in the best position to settle the obligation on a cash basis.



Most
of the Notes that some of the investors elected to convert, were not converted at the stated amount in the Note, (such as $0.005
in some cases), but were converted at a 30% to 50% discount to the market price at the time of conversion to reflect a re-negotiated
conversion price due to a modification of the terms of the Note.



(30)









List
of Notes



On
November 23, 2010 we entered into a two (2) year Promissory Note with a non-related creditor for $12,000 at 10% interest. The
holder has the right to convert the note to common stock. The Note can be converted at $.005.The Note can be converted at $.005.



On
December 3, 2010 we entered into a two (2) year Promissory Note with a non-related creditor for $4800 at 10% interest. The holder
has the right to convert the note to common stock. The Note can be converted at $.005.The Note can be converted at $.005.



On
December 31, 2010 we entered into a two (2) year Promissory Note with Richard D Craven, its former CEO for $16,045 at 10% interest
for the accrued compensation and expenses owed to him for the fiscal year 2008 in accordance with his Employment Agreement. The
holder has the right to convert the note to common stock. The Note can be converted at $.02.



On
December 31, 2010 we entered into a two (2) year Promissory Note with Richard D Craven, its former CEO for $163,694 at 10% interest
for the accrued compensation and expenses owed to him for the fiscal year 2009 in accordance with his Employment Agreement. The
holder has the right to convert the note to common stock. The Note can be converted at $.01.



On
December 31, 2010 we entered into a two (2) year Promissory Note with its Vice President, Solomon Ali for $164,833 at 10% interest
for the accrued compensation owed to him for the fiscal year 2009 in accordance with his Employment Agreement. The holder has
the right to convert the note to common stock. The Note can be converted at $.005.



On
December 31, 2010 we entered into a two (2) year Promissory Note with an Employee, for $30,000 at 10% interest for the accrued
compensation owed to him for the fiscal year 2010 in accordance with his Employment Agreement. The holder has the right to convert
the note to common stock . The Note can be converted at $.02.



On
December 31, 2010 we entered into a two (2) year Promissory Note with its President and CEO, Vince M. Guest for $136,000 at 10%
interest for the accrued compensation owed to him for the fiscal year 2010 in accordance with his Employment Agreement. The holder
has the right to convert the note to common stock. The Note can be converted at $.015.



On
December 31, 2010 we entered into a two (2) year Promissory Note with its Vice President Solomon Ali, for $165,000 at 10% interest
for the accrued compensation owed to him for the fiscal year 2010 in accordance with his Employment Agreement. The holder has
the right to convert the note to common stock. The Note can be converted at $.015.



On
December 31, 2010 we entered into a two (2) year Promissory Note with Richard D Craven, its former CEO for $89,014 at 10% interest
for the accrued compensation and expenses owed to him for the fiscal year 2010 in accordance with his Employment Agreement. The
holder has the right to convert the note to common stock. The Note can be converted at $.015.



On
January 18, 2011 we entered into a two (2) year Promissory Note with a non-related creditor for $10,000 at 10% interest. The holder
has the right to convert the note to common stock. The Note can be converted at $.005.



On
January 19, 2011 we entered into a two (2) year Promissory Note with a non-related creditor for $10,000 at 10% interest. The holder
has the right to convert the note to common stock. The Note can be converted at $.005.



On
February 23, 2011 we entered into a two (2) year Promissory Note with a non-related creditor for $45,400 at 10% interest. The
holder has the right to convert the note to common stock. The Note can be converted at $.005.



On
February 25, 2011 we entered into a six (6) month Promissory Note with a non-related creditor for $9,400 at 10% interest. The
holder has the right to convert the note to common stock. The Note can be converted at $.02.



On
March 10, 2011 we entered into a two (2) year Promissory Note with a non-related creditor for $25,000 at 10% interest. The holder
has the right to convert the note to common stock. The Note can be converted at $.005.



On
March 14, 2011 we entered into a two (2) year Promissory Note with a non-related creditor for $25,000 at 10% interest. The holder
has the right to convert the note to common stock. The Note can be converted at $.005.



On
March 28, 2011 we entered into a two (2) year Promissory Note with a non-related creditor for $72,500 at 10% interest. The holder
has the right to convert the note to common stock. The Note can be converted at $.005.



On
May 20, 2011, we entered into a three (3) year Promissory Note with a non-related creditor for $20,600 at 10% interest. The holder
has the right to convert the note to common stock. The Note can be converted at $.005.



On
May 23, 2011, we entered into a three (3) year Promissory Note with a non-related creditor for $89,000 at 10% interest. The holder
has the right to convert the note to common stock. The Note can be converted at $.005.



On
May 30, 2011, we entered into a three (3) year Promissory Note with a non-related creditor for $110,424 at 10% interest. The holder
has the right to convert the note to common stock. The Note can be converted at $.005.



On
June 25, 2011, we entered into a three (3) year Promissory Note with a non-related creditor for $49,200 at 10% interest. The holder
has the right to convert the note to common stock. The Note can be converted at $.005.



On
July 29, 2011, we entered into a three (3) year Promissory Note with a non-related creditor for $40,000 at 10% interest. The holder
has the right to convert the note to common stock. The Note can be converted at $.005.



On
August 29, 2011, we entered into a three (3) year Promissory Note with a non-related creditor for $29,500 at 10% interest. The
holder has the right to convert the note to common stock. The Note can be converted at $.005.



On
October 2, 2011 the Company entered into a three (3) year Promissory Note with a non-related creditor for $202,200 at 10% interest.
The holder has the right to convert the note to common stock. The Note can be converted at $0.005.



On
October 20, 2011 the Company entered into a one (1) year Promissory Note with a non-related creditor for $200,000 at 12% interest.
The holder has the right to convert the note to common stock. The Note can be converted at a 30% discount to the market price.



On
October 22, 2011 the Company entered into a one (1) year Promissory Note with a non-related creditor for $125,000 at 12% interest.
The holder has the right to convert the note to common stock. The Note can be converted at a 30% discount to the market price.



On
October 23, 2011 the Company entered into a one (1) year Promissory Note with a non-related creditor for $125,000 at 12% interest.
The holder has the right to convert the note to common stock. The Note can be converted at a 30% discount to the market price.



On
October 25, 2011 the Company entered into a one (1) year Promissory Note with a non-related creditor for $103,600 at 12% interest.
The holder has the right to convert the note to common stock. The Note can be converted at a 30% discount to the market price.



On
October 25, 2011 the Company entered into a three (3) year Promissory Note with a non-related creditor for $96,400 at 12% interest.
The holder has the right to convert the note to common stock. The Note can be converted at $0.005.



On
October 31, 2011 the Company entered into a three (3) year Promissory Note with a non-related creditor for $74,760 at 10% interest.
The holder has the right to convert the note to common stock. The Note can be converted at $0.005.



On
October 31, 2011 the Company entered into a ten (10) month Promissory Note with a non-related creditor for $68,000 at 8% interest.
The holder has the right to convert the note to common stock. The Note can be converted at a 50% discount to the market price.



On
December 23, 2011 the Company entered into a one (1) year Promissory Note with a non-related creditor for $50,000 at 12% interest.
The holder has the right to convert the note to common stock. The Note can be converted at a 50% discount to the market price.



On
December 31, 2011 the Company entered into a two (2) year Promissory Note with its Vice President, Solomon Ali for $151,400 at
10% interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment Agreement. The
holder has the right to convert the note to common stock. The Note can be converted at $0.01.



On
December 31, 2011 the Company entered into a two (2) year Promissory Note with its Manager of Business Development, Don Deluna,
for $40,500 at 10% interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment
Agreement. The holder has the right to convert the note to common stock. The Note can be converted at $0.02.



On
December 31, 2011 the Company entered into a two (2) year Promissory Note with its President and CEO, Vince M. Guest for $162,175
at 10% interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment Agreement.
The holder has the right to convert the note to common stock. The Note can be converted at $0.01.



On
December 31, 2011 the Company entered into a two (2) year Promissory Note with a non-related creditor for $14,407.92 at 12% interest
for consulting services provided to the Company in accordance with their Consulting Agreement. The holder has the right to convert
the note to common stock. The Note can be converted at $0.01.



On
December 23, 2011, two existing Notes, one dated March 28, 2011 for $72,500, and one dated May 20, 2011 for $20,600 were purchased
from the Note Holder by another non-related creditor. The Notes were assigned via an Assignment and Modification Agreement which
combined the two existing Notes into a revised Note in the amount of $99,134, at 12% interest. The revised $99,134 Note includes
the original principal amount of $93,100 for both Notes and accrued interest in the amount of $6,034. The holder has the right
to convert the note to common stock at a 48% discount to the market price at the time of conversion.



If
all of these Notes were converted to common stock it could result in the potential issuance of an estimated 290,897,966 shares
over several years. This would result in a dilution of the proportional or percentage of ownership of the shareholders, however
we do not believe the value of the shareholders stock would be adversely affected.



In
an effort to build a strong operating company, the officers and some employees of the Company have not taken their salaries for
the last few years, and have become creditors of the Company. The accrued compensation due to them by the Company, has become
a debt or liability on the Company’s books. The Company has issued them Promissory Notes that includes an option to convert
them common stock to reflect these liabilities. This has reduced some of the need from borrowing from outside creditors. They
have also taken on the very same risks upon themselves as the outside lenders and creditors. The officers would prefer to be paid
in cash also as opposed to stock. If the officers ever elect to convert their Notes into common stock, the shares will be subject
to Rule 144 restrictions as control securities when selling them into the market.





(31)







Off-Balance
Sheet Arrangements

We
have no off-balance sheet arrangements including arrangements that would affect the liquidity, capital resources, market risk
support and credit risk support or other benefits.



WHERE
YOU CAN FIND MORE INFORMATION



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





ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



We
are exposed to risks associated with commodity prices and interest rates. Commodity price risk is the potential loss that we may
incur as a result of changes in the fair value of a particular instrument or commodity. Interest-rate risk results from our portfolio
of debt and equity instruments that we issue to provide financing and liquidity for our business activities.



Commodity
Price Risk

Our
most significant market risk relates to the prices we receive for our oil and natural gas production. Realized pricing is primarily
driven by the prevailing worldwide price for crude oil and spot market prices applicable to the production of oil and gas in the
our U.S. and Canada. Pricing for oil and gas production has been volatile and unpredictable for several years. See “Item
1A. Risk Factors.”



Interest
Rate Risk

We
are subject to interest rate risk on our long-term fixed and variable interest rate borrowings. Fixed rate debt, where the interest
rate is fixed over the life of the instrument, exposes us to (i) changes in market interest rates reflected in the fair value
of the debt and (ii) the risk that we may need to refinance maturing debt with new debt at a higher rate. Variable rate debt,
where the interest rate fluctuates, exposes us to short-term changes in market interest rates as our interest obligations on these
instruments are periodically re-determined based on prevailing market interest rates.



As
of December 31, 2011, we were not engaged in any other activities that would cause exposure to the risk of material earnings or
cash flow loss due to changes in interest rates or market commodity prices.





(32)













ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



UNIVERSAL
BIOENERGY, INC.

TABLE
OF CONTENTS





|                                                                                                                                                                                                                                                                                                                 | PAGE #
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------
|REPORT OF
INDEPENDENT                                                                                                REGISTERED
PUBLIC ACCOUNTING FIRM:Bongiovanni & Associates,
CPA’S                                                                                                                           | 33    
|                                                                                                                                                                                                                                                                                                                 |       
|Consolidated
                                                                            Balance Sheets at December 31, 2011 and December 31,
                                                                            2010                                                                                   | 34    
|                                                                                                                                                                                                                                                                                                                 |       
|Consolidated
                                                                            Statements of Operations for the years ended

December
31,2011 and December 31, 2010                                                                                                                                    | 35    
|                                                                                                                                                                                                                                                                                                                 |       
|Consolidated
Statements of Stockholders’ Equity for the years ended

DECEMBER 31, 2011 and December
31, 2010                                                                                                                                                                                                     | 36    
|                                                                                                                                                                                                                                                                                                                 |       
|Consolidated
                                                                                                       Statements of Cash Flows for the years ended

DECEMBER 31, 2011 and DECEMBER
                                                                                                       31, 2010 | 37    
|                                                                                                                                                                                                                                                                                                                 |       
|NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS                                                                                                                                                                                                                                                                   | 38-47 













|
|
|







Bongiovanni & Associates, CPA'S



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM





To the Board
of Directors and

Stockholders
of Universal Bioenergy, Inc.



We
have audited the accompanying consolidated balance sheet of Universal Bioenergy, Inc. (the “Company”) as of December
31, 2011 and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year then
ended. These financial statements are the responsibility of the company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.



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 consolidated financial statements
are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated
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 consolidated
financial position of Universal Bioenergy, Inc. (a Nevada corporation) as of December 31, 2011 and the consolidated results of
its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United
States of America.



The
accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company
has suffered recurring operating losses, has an accumulated deficit, has negative working capital, and has yet to generate an
internal cash flow that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard
to these matters are described in Note 13. The consolidated financial statements do not include any adjustments that might result
from the outcome of this uncertainty.







/s/Bongiovanni & Associates, CPA'S

Bongiovanni & Associates, CPA'S

Cornelius, North Carolina

April 13, 2012















S.E.Clark
& Company,P.C.



Registered Firm: Public Company
Accounting Oversight Board





Report of Independent Registered Public Accounting
Firm





Board of Directors

and Stockholders

Universal Bioenergy, Inc.



We have audited the accompanying consolidated
balance sheet of Universal Bioenergy, Inc. (the “Company”) as of December 31, 2010 and the related consolidated statements
of operations, changes in stockholders’ deficit, and cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.



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 consolidated financial statements are free of material misstatement.  The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our
audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated 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. as of December
31, 2010 and the results of its operations and its cash flows for the year then ended, 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 13 to the consolidated financial
statements, the accumulation of losses and shortage of capital raise substantial doubt about its ability to continue as a going
concern. Management's plans concerning these matters are also described in Note 13 The consolidated financial statements do not
include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification
of liabilities that might result should the Company be unable to continue as a going concern.





Tucson, Arizona

June 30, 2011




742 N. Country Club Road, Tucson, AZ 85716 (520)
323-7774, Fax (520) 323-8174, seclarkcpa@aol.com















(33)









|UNIVERSAL
                                                                                                                                        BIOENERGY,
                                                                                                                                        INC.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|CONSOLIDATED
    BALANCE SHEETS                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                         
|ASSETS:                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                         
|CURRENT ASSETS:                                                                                                                                                                                                                                                                                          
|Cash                                                                                                                                                                                                                                                                                                     
|Accounts receivable                                                                                                                                                                                                                                                                                      
|Other
    loans                                                                                                                                                                                                                                                                                          
|Total
    current assets                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                         
|PROPERTY
    AND EQUIPMENT - net                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                         
|OTHER ASSETS:                                                                                                                                                                                                                                                                                            
|Accounts receivable
    - other                                                                                                                                                                                                                                                                          
|Investments                                                                                                                                                                                                                                                                                              
|Intangible assets                                                                                                                                                                                                                                                                                        
|Deposit                                                                                                                                                                                                                                                                                                  
|Total
    other assets                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                         
|TOTAL
    ASSETS                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                         
|LIABILITIES AND STOCKHOLDERS'
    EQUITY (DEFICIT):                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                         
|CURRENT LIABILITIES:                                                                                                                                                                                                                                                                                     
|Accounts payable                                                                                                                                                                                                                                                                                         
|Other accounts
    payable and accrued expenses                                                                                                                                                                                                                                                          
|Accrued interest                                                                                                                                                                                                                                                                                         
|Line of credit                                                                                                                                                                                                                                                                                           
|Advances
    from affiliates                                                                                                                                                                                                                                                                             
|Total
    current liabilities                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                         
|Long term
    convertible notes payable                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                         
|TOTAL
    LIABILITIES                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                         
|STOCKHOLDERS' EQUITY (DEFICIT):                                                                                                                                                                                                                                                                          
|Preferred stock, $.001 par value,
    1,000,000 shares                                                                                                                                                                                                                                                   
|authorized.
    Preferred stock Series A, zero issued and outstanding shares                                                                                                                                                                                                                             
|December 31, 2011 and December
    31, 2010, respectively                                                                                                                                                                                                                                                
|Preferred
    stock Series B, 232,080 issued and outstanding shares                                                                                                                                                                                                                                      
|December 31, 2011 and December
    31, 2010, respectively                                                                                                                                                                                                                                                
|Common stock, $.001 par value,
    1,000,000,000 shares authorized;                                                                                                                                                                                                                                      
|199,969,927
    and 77,247,517 issued and outstanding as of                                                                                                                                                                                                                                              
|December 31, 2011 and December
    31, 2010, respectively                                                                                                                                                                                                                                                
|Additional
    paid-in capital                                                                                                                                                                                                                                                                           
|Noncontrolling
    interest                                                                                                                                                                                                                                                                              
|Accumulated
    deficit                                                                                                                                                                                                                                                                                  
|Total
    stockholders' deficit                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                         
|TOTAL
    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                         
|The accompanying
    notes are an integral part of these consolidated financial                                                                                                                                                                                                                          









(34)











|UNIVERSAL
    BIOENERGY, INC.                         
|------------------------------------------------------
|CONSOLIDATED
    STATEMENTS OF OPERATIONS             
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|                                                      
|REVENUES                                              
|                                                      
|COST OF SALES                                         
|                                                      
|GROSS PROFIT                                          
|                                                      
|OPERATING EXPENSES:                                   
|General and administrative                            
|Sales and marketing                                   
|Depreciation and amortization
    expense             
|Total operating expenses                              
|                                                      
|LOSS FROM OPERATIONS                                  
|                                                      
|OTHER INCOME (EXPENSE):                               
|Other income                                          
|Interest (expense)                                    
|Total
    other expense                               
|                                                      
|(LOSS) FROM CONTINUING OPERATIONS                     
|                                                      
|(LOSS) FROM DISCONTINUED OPERATIONS                   
|Loss on sale of bio-diesel
    plant equipment        
|                                                      
|Net (Loss)                                            
|                                                      
|Net (loss) attributable to noncontrolling
    interest
|                                                      
|NET INCOME (LOSS) ATTRIBUTABLE
    TO UNIVERSAL       
|                                                      
|NET LOSS PER SHARE:                                   
|Basic and diluted loss per
    share                  
|                                                      
|Weighted average of shares
    outstanding            
|                                                      
|* = Less than (.01)                                   







(35)











UNIVERSAL
BIOENGERGY, INC.

CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR YEARS
ENDED DECEMBER 31, 2010 AND 2011

|
|
|
|





|UNIVERSAL BIOENERGY, INC.Shareholders                     
|----------------------------------------------------------
|                                                          
|                                                          
|                                                          
|                                                          
|BALANCE AT DECEMBER 31, 2009                              
|                                                          
|Common stock issued for compensation                      
|                                                          
|Common stock issued for debt conversion                   
|                                                          
|Common stock issued for acquisition                       
|                                                          
|Common stock issued for services                          
|                                                          
|Beneficial conversion feature of convertible notes payable
|                                                          
|Common stock issued for interest expense                  
|                                                          
|Noncontrolling interest                                   
|                                                          
|Preferred stock surrendered to treasury                   
|                                                          
|Net (Loss)                                                
|BALANCE AT DECEMBER 31, 2010                              
|                                                          
|Common stock issued for debt conversion                   
|                                                          
|Common stock issued for services                          
|                                                          
|Common stock issued for stock dividend                    
|                                                          
|Common stock issued for interest expense                  
|                                                          
|Beneficial conversion feature of convertible notes payable
|                                                          
|Noncontrolling interest                                   
|                                                          
|Net (Loss)                                                
|BALANCE AT DECEMBER 31, 2011                              











(36)















|UNIVERSAL
                                                                                                                                        BIOENERGY,
                                                                                                                                        INC.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|CONSOLIDATED
    STATEMENT OF CASH FLOWS                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                         
|CASH FLOWS FROM OPERATING
    ACTIVITIES:                                                                                                                                                                                                                                                                
|Net (Loss)                                                                                                                                                                                                                                                                                               
|Adjustments to reconcile
    net loss to net cash                                                                                                                                                                                                                                                        
|(used
    in) operating activities:                                                                                                                                                                                                                                                                      
|Depreciation expense                                                                                                                                                                                                                                                                                     
|Common stock issued
    for services                                                                                                                                                                                                                                                                     
|Amortization of Beneficial
    conversion features                                                                                                                                                                                                                                                       
|Common stock issued
    for interest expense                                                                                                                                                                                                                                                             
|Loss from sale of
    equipment                                                                                                                                                                                                                                                                          
|Changes in assets
    and liabilities:                                                                                                                                                                                                                                                                   
|Accounts recievable                                                                                                                                                                                                                                                                                      
|Prepaid expenses
    and other assets                                                                                                                                                                                                                                                                    
|Accrued expenses
    and other liabilities                                                                                                                                                                                                                                                               
|Accounts
    payable                                                                                                                                                                                                                                                                                     
|Net
    cash used for operating activities                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                         
|CASH FLOWS FROM INVESTING
    ACTIVITIES:                                                                                                                                                                                                                                                                
|Proceeds
    from sale of equipment                                                                                                                                                                                                                                                                      
|Purchase
    of property and equipment                                                                                                                                                                                                                                                                   
|Investment
    in participation agreement - see note 5                                                                                                                                                                                                                                                   
|Net
    cash (used in) provided by investing activities                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                         
|CASH FLOWS FROM FINANCING
    ACTIVITIES:                                                                                                                                                                                                                                                                
|Advances (to)
    affiliates                                                                                                                                                                                                                                                                             
|Principal payments
    on notes payable and line of credit                                                                                                                                                                                                                                               
|Proceeds
    from notes payable issued and line of credit                                                                                                                                                                                                                                                
|Net
    cash provided by financing activities                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                         
|INCREASE (DECREASE) IN CASH                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                         
|CASH, BEGINNING OF PERIOD                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                         
|CASH, END OF PERIOD                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                         
|SUPPLEMENTAL
    CASH FLOW INFORMATION:                                                                                                                                                                                                                                                                  
|Interest
    paid                                                                                                                                                                                                                                                                                        
|Taxes
    paid                                                                                                                                                                                                                                                                                           
|Issuance
    of common stock for the conversion of debt                                                                                                                                                                                                                                                  
|Common
    stock issued for intangible assets in acquisition                                                                                                                                                                                                                                             
|Convertible
    notes issued for accrued liabilities                                                                                                                                                                                                                                                     
|Beneficial
    conversion feature of convertible notes payable                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                         
|The accompanying
    notes are an integral part of these consolidated financial statements                                                                                                                                                                                                               









(37)









UNIVERSAL
BIOENERGY, INC.



CONSOLIDATED
NOTES TO FINANCIAL STATEMENTS

AS
OF DECEMBER 31, 2011 AND 2010





NOTE
1 - DESCRIPTION OF BUSINESS



Overview
of Our Company



Universal
Bioenergy Inc. is an independent diversified energy company, headquartered in Irvine, California. Our primary business focus is
the production, marketing and sales of natural gas, propane, oil, coal and alternative energy. We sell natural gas to public utilities,
electric power producers and local gas distribution companies. We are also engaged in the acquisition of oil and gas fields, lease
acquisitions and development of newly discovered or recently discovered oil and gas fields, re-entering existing wells, transmission
and marketing of the products to our customer base. We are continuing our growth through an ongoing series of acquisitions.



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



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



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



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



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



On
April 12, 2010, Universal Bioenergy and NDR Energy Group, LLC, a Maryland limited liability company entered into a Member
Interest Purchase Agreement in which Universal Bioenergy purchased a 49% Member Interest (See Note 9). NDR
Energy Group markets energy and fuel such as natural gas, propane and transportation of petroleum fuels.



NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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



Principle
of Consolidation



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

Use
of Estimates and Assumptions



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



Revenue
and Cost Recognition



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



Management
has considered the various factors discussed in ASC 605-45-14-4-c and ASC 605-45-45 and believe that our natural gas purchase
and sale transactions are appropriately reported gross rather than net. Generally we are the primary obligor in the arrangement,
we have latitude in establishing price, we have discretion in supplier selection, and we have credit risk in the event our customer
defaults on the transaction. Additionally, our supplier is not the primary obligor in the arrangement and the amount we earn is
not fixed. Those transactions where the Company operates as an agent or broker for either the supplier or the customer at a fixed
fee are reported net.

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, 2011 and 2010 the Company had no cash equivalents.



Property
and Equipment



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



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



|Asset
    Category                                                             |  | Depreciation/
        Amortization
        Period                                           
|------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------
|Building
        Plant
        Equipment
        Furniture
        and Fixture |  | 40
                                   Years
        15
        Years
        3
        Years
|Office
    equipment                                                           |  | 3
    Years                                                                                 
|Leasehold
    improvements                                                     |  | 5
    Years                                                                                 





(38)







NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continue)







Goodwill
and Other Intangible Assets



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



Impairment
of Long-Lived Assets



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



Income
Taxes



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



The
Company adopted the provisions of ASC Topic 740; "Accounting For Uncertainty In Income Taxes-An Interpretation Of ASC Topic
740 ("ASC Topic 740"). ASC Topic 740 contains a two-step approach to recognizing and measuring uncertain tax positions.
The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it
is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes,
if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon
ultimate settlement. The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits,
which may require periodic adjustments. At December 31, 2011 and 2010, the Company did not record any liabilities for uncertain
tax positions.



Share-Based
Compensation



The
Company applies Topic 718 “Share-Based Payments” (“Topic 718”) to share-based compensation, which requires
the measurement of the cost of services received in exchange for an award of an equity instrument based on the grant-date fair
value of the award.  Compensation cost is recognized when the event occurs.  The Black-Scholes option-pricing model
is used to estimate the fair value of options granted.



Concentration
of Credit Risk



The
Company maintains its operating cash balances in banks located in Charlotte, North Carolina and Irvine, California. The Federal
Depository Insurance Corporation (FDIC) insures accounts at each institution up to $250,000.



Earnings
Per Share



Basic
income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number
of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could
occur if stock options, warrants, and other commitments to issue common stock were exercised or equity awards vest resulting in
the issuance of common stock that could share in the earnings of the Company. Diluted loss per share is the same as basic loss
per share, because the effects of the additional securities, a result of the net loss would be anti-dilutive.



Fair
Value of Financial Instruments



The Company's financial instruments consist
primarily of cash, accounts payable and accrued expenses, and debt.  The carrying amounts
of such financial instruments approximate their respective estimated fair value due to the short-term maturities
and approximate market interest rates of these instruments.



The
Company adopted ASC Topic 820, Fair Value Measurements (“ASC Topic 820”), which defines fair value, establishes
a framework for measuring fair value, and expands disclosures about fair value measurements.  The standard provides
a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date.  The standard also prioritizes,
within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level
hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement
date.



The three-level
hierarchy for fair value measurements is defined as follows:



|· | Level
                           1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or
        liabilities
        in active markets;                                                                                                                                                                       
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | Level 2
        – inputs to the valuation methodology include quoted prices for similar assets and liabilities in
        active
        markets, and inputs that are observable for the asset or liability other than quoted prices, either
        directly
        or indirectly including inputs in markets that are not considered to be active;
|· | Level 3 – inputs
    to the valuation methodology are unobservable and significant to the fair value. Measurement                                                                                                                                                                                                                                    



Reclassification



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







(39)









NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continue)







Recently
Issued Accounting Standards



The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption
of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated
results of its operations.



In
July 2010, the FASB amended the requirements for Disclosures about the Credit Quality of Financing Receivables and the Allowance
for Credit Losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain
existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses.
The new disclosures as of the end of the reporting period are effective for the fiscal year ending December 31, 2010, while the
disclosures about activity that occurs during a reporting period are effective for the first fiscal quarter of 2011. The adoption
of this guidance will not impact the Company’s consolidated results of operations or financial position.



In
January 2010, the FASB issued authoritative guidance regarding fair value measures and disclosures. The guidance requires disclosure
of significant transfers between level 1 and level 2 fair value measurements along with the reason for the transfer. An entity
must also separately report purchases, sales, issuances and settlements within the level 3 fair value roll forward. The guidance
further provides clarification of the level of disaggregation to be used within the fair value measurement disclosures for each
class of assets and liabilities and clarified the disclosures required for the valuation techniques and inputs used to measure
level 2 or level 3 fair value measurements. This new authoritative guidance is effective for the Company in fiscal years beginning
after December 15, 2010, and for interim periods within those fiscal years. The adoption of this guidance will not impact the
Company’s consolidated results of operations or financial position.



In
September 2011, the FASB issued ASU 2011-08 which provides an entity the option to first assess qualitative factors to determine
whether it is necessary to perform the current two-step test for goodwill impairment. If an entity believes, as a result of its
qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount,
the quantitative impairment test is required. Otherwise, no further testing is required. The revised standard is effective for
annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company does not
expect that the adoption of this standard will have a material impact on the Company’s results of operations, cash flows
or financial condition.



In
December 2011, FASB issued Accounting Standards Update 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and
Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance
sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement
of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new
disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or
after January 1, 2013. The update only requires additional disclosures, as such, the Company does not expect that the adoption
of this standard will have a material impact on the Company’s results of operations, cash flows or financial condition.



No
other accounting standards or interpretations issued recently are expected to a have a material impact on the Company’s
consolidated financial position, operations or cash flows.



NOTE
3 - 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
    following table represents the computation of basic and diluted losses per share:   
|                                                                                            
|                                                                                            
|                                                                                            
|Losses
    available for common shareholders                                                
|                                                                                            
|Weighted
    average common shares outstanding                                              
|Basic
    loss per share                                                                    
|Fully
    diluted loss per share                                                            
|Net
    loss per share is based upon the weighted average shares of common stock outstanding
|                                                                                            



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





(40)







NOTE
4 - EQUITY



On
May 9, 2011, the Company amended itsArticles of Incorporation and increased the authorized shares of common stock to 1,000,000,000
shares at $.001 par value. There are 199,969,927 shares of common stock issued and outstanding as of December 30, 2011.



On
June 6, 2011, our Board of Directors passed a resolution and declared a stock dividend to distribute to all registered shareholders
of record on or before July 1, 2011, on a 10 for 1 basis. On July 12, 2011, our transfer agent, issued 11,415,311 shares of common
stock to all registered shareholders of record in accordance with the resolution and declaration.



The
Company has authorized a total of 1,000,000 shares of Preferred Stock with a par value of $0.001 per share. On September 29, 2008,
the Company authorized 100,000 Series A Preferred shares and 232,080 Series B Preferred Shares of stock. As of December 31, 2011,
there were no Series A preferred shares issued and outstanding, and a total of 232,080 Series B preferred shares issued and outstanding.



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



On
October 24, 2007, we filed a Certificate of Amendment with the Nevada Secretary of State, to amend our Articles of Incorporation.
This action was approved by the Board of Directors and the Majority of the Shareholders on October 22, 2007. Pursuant to the Amendment,
the Company authorized a total of 1,000,000 shares of Preferred Stock with a par value of $0.001 per share. The information regarding
the Amendment was fully disclosed in a Form 8-K that was filed with the U.S. Securities and Exchange Commission on October 24,
2007.



On
September 29, 2008, the Company authorized 100,000 Series A Preferred shares and 232,080 Series B Preferred Shares of stock. The
preferred Series A preferred shares have voting rights at the equivalent of 300 shares of common stock to each preferred share
of stock. The Series B preferred shares bear no voting rights. On July 22, 2010 the Company cancelled the 100,000 Series A preferred
shares of stock, and therefore there were no Series A preferred shares of stock issued and outstanding as of that date. On June
15, 2011, the Series A preferred shares were cancelled by the Transfer Agent and returned to the Company. As of December 31, 2011,
there were no Series A preferred shares issued and outstanding, and a total of 232,080 Series B preferred shares issued and outstanding.





Series
A



There
are no Preferred Series A shares outstanding as of December 31, 2011.



Voting
Rights. Except as otherwise provided herein and as otherwise required by law, each share of the Preferred Stock shall have
300 votes on all matters presented to be voted by the holders of common stock.



Liquidation.
Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”),
the Holders shall be entitled to receive out of the assets of the Corporation, whether such assets are capital or surplus, for
each share of Preferred Stock an amount equal to the current value per share (based on the consideration paid or valued upon initial
receipt of the Preferred Stock) plus any accrued and unpaid dividends thereon and any other fees or liquidated damages owing thereon
before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation
shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be distributed
among the Holders ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. A Change of Control Transaction shall not be treated as Liquidation. The Corporation shall mail written
notice of any such Liquidation, not less than 45 days prior to the payment date stated therein, to each record Holder.



Conversions
at Option of Holder. Each share of Preferred Stock shall be convertible into that number of shares of Common Stock (subject
to the limitations set forth in Section 5(c)) determined by issuing one (1) share of Common Stock of the Corporation for every
share of Preferred Stock converted, at the option of the Holder, at any time and from time to time from and after the Original
Issue Date. Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as
Annex A (a “Notice of Conversion”). Each Notice of Conversion shall specify the number of shares of
Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number of
shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected,
which date may not be prior to the date the Holder delivers such Notice of Conversion to the Corporation by facsimile (the “Conversion
Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such
Notice of Conversion to the Corporation is deemed delivered hereunder. The calculations and entries set forth in the Notice of
Conversion shall control in the absence of manifest or mathematical error. To effect conversions, as the case may be, of shares
of Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing such shares of Preferred Stock
to the Corporation unless all of the shares of Preferred Stock represented thereby are so converted, in which case the Holder
shall deliver the certificate representing such share of Preferred Stock promptly following the Conversion Date at issue. Shares
of Preferred Stock converted or redeemed in accordance with the terms hereof shall be canceled and may not be reissued.



Delivery
of Certificate Upon Conversion. Not later than three Trading Days after each Conversion Date (the “Share Delivery
Date”), the Corporation shall deliver to the Holder (A) a certificate or certificates which, after the Effective Date,
shall be free of restrictive legends and trading restrictions (other than those required by the Purchase Agreement) representing
the number of shares of Common Stock being acquired upon the conversion of shares of Preferred Stock, and (B) a blank check in
the amount of accrued and unpaid dividends (if the Corporation has elected or is required to pay accrued dividends in cash. If
in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable
Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled to elect by written notice to the Corporation
at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event
the Corporation shall immediately return the certificates representing the shares of Preferred Stock tendered for conversion.



Series
B



There
are 232,080 series B preferred shares issued shares outstanding as of December 31, 2011. The preferred series B shares are non-voting
and have no liquidation preferences.



The
Preferred Series B shares are convertible to common shares at a rate to be mutually agreed upon by the Company, Lacroix, and Mortensen.
However, documents provided by former management to the SEC establish that management of Lacroix and Mortensen had tentatively
agreed to convert the preferred shares received from the note conversions into common shares at the rate of ten shares of common
to one share of preferred. Additionally, common shares were converted to preferred shares by Mortensen at a 10:1 ratio. Conversion
at the 10:1 rate would result in the issuance of 2,320,800 shares of common stock or 1.16% dilution as of December 31, 2011. Conversion
at an implied market rate ($.0245 per share) would result in the issuance of approximately 9,472,000 shares of common stock or
4.74% dilution as of December 31, 2011. The Company does not intend to convert these shares unless receiving written consent from
the SEC.(See Issuance of preferred shares in 2008 below).





(41)







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.



Options
and Warrants:



As
of December 31, 2011 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, 2011, the Company had Promissory Notes that have the option to convert them into common stock of the Company, for
of a total of $2,445,764. (See Note 7 - Notes Payables).



Common
Stock Issued for Services



2011



On
February 14, 2011, the Company issued 2,500,000 shares of common stock to a consultant in accordance with their consulting agreement
valued at $111,250 on the date of issue.



On
February 15, 2011, the Company issued 1,000,000 shares of common stock to a consultant in accordance with their agreement valued
at $40,000 on the date of issue.



On
September 14, 2011, the Company issued 3,000,000 shares of common stock for services, of which 1,000,000 shares were issued to
an employee of the Company, and 1,000,000 shares each, was issued to two employees of NDR Energy Group LLC for services, valued
at $133,500 on the date of issue.





2010



On
October 5, 2010 the Company converted one of its Notes payable, for a total of 24,559,067 to common stock. This conversion of
debt reduced our notes payables of $184,000, and the Company expensed $494,752.



Issuance
of Preferred Shares in 2008



On September
29, 2008 the Company converted the following debt to preferred shares:



















|Converting  Parties           |  | Preferred
    B Shares Issued |  | Debt
    & Accrued Interest Converted |  | Common
    Stock Surrendered
|----------------------------- |  | ----------------------------- |  | ------------------------------------- |  | ----------------------------
|                              |  |                               |  |                                       |  |                             
|Mortenson
    Financial, Inc. |  | 34,000                        |  | 745,991                               |  | -                           
|LaCroix
    Financial, Inc.   |  | 82,500                        |  | 1,818,821                             |  | -                           
|Mortenson
    Financial, Inc. |  | 15,580                        |  | 300,000                               |  | -                           
|Mortenson
    Financial, Inc. |  | 100,000                       |  | -                                     |  | -100,000                    







The
Series B preferred shares are non-voting.



On
September 29, 2008 the Company converted a Note payable to Lacroix International Holdings, Ltd. in the amount of $1,818,821, including
principal and accrued interest and issued 82,500 Series B preferred shares for that conversion.



On
September 29, 2008 the Company converted a Note payable to Mortenson Financial Ltd., in the amount of $745,991, including principal
and accrued interest, and issued 34,000 Series B preferred shares for that conversion. On the same date the Company converted
the Note payable to Mortenson Financial Ltd., in the amount of $300,000 and issued 15,580 Series B preferred shares for that conversion.



On
September 29, 2008, the Company converted 1,000,000 common shares of Mortenson Financial Ltd., to 100,000 Series B preferred shares
of stock.



The
Preferred Series B shares are convertible to common shares at a rate to be mutually agreed upon by the Company, Lacroix, and Mortensen.
However, documents provided by former management to the SEC establish that management of Lacroix and Mortensen had tentatively
agreed to convert the preferred shares received from the note conversions into common shares at the rate of ten shares of common
to one share of preferred. Additionally, if common shares were converted to preferred shares by Mortensen at a 10:1 ratio. Conversion
at the 10:1 rate would result in the issuance of 2,320,800 shares of common stock or 1.16% dilution as of December 31, 2011. Conversion
at an implied market rate ($.0245 per share) would result in the issuance of approximately9,472,000 shares of common stock
or 4.74% dilution as of December 31, 2011. The Company does not intend to convert these shares unless we receive written consent
from the SEC.



On
September 29, 2008, a total of 100,000 Series A preferred shares of stock were issued to the Company’s former President,
Richard D. Craven for compensation. The Series A preferred shares have voting rights at the ratio of 300 common shares per one
share of preferred stock. On April 26, 2010, Richard D. Craven surrendered the 100,000 Series A preferred shares to the
Company, after his resignation from his position with the Company. On July 22, 2011, the Board of Directors cancelled the Series
A preferred shares, and returned the certificates to the transfer agent.





(42)









NOTE
5 - PROPERTY AND EQUIPMENT





The Company
has fixed assets as of the years ended December 31, 2011 and 2010 as follows:



|                             |   | December
                                                                                                           31,
        2011 |   | December
    31, 2010
|---------------------------- | - | ------------------------------------------------------------------------------------------------------------------------------------ | - | ---------------------
|Equipment                    | $ | 13,094                                                                                                                               | $ | 13,094               
|Land                         |   | -                                                                                                                                    |   | 50,000               
|Building                     |   | -                                                                                                                                    |   | 75,000               
|Accumulated
    depreciation |   | (4,143)                                                                                                                              |   | (1,527)              
|Total                        | $ | 8,951                                                                                                                                | $ | 136,567              





Depreciation
expense for the year ended December 31, 2011 was $2,616. The depreciation expense for the year ended December 31, 2010 was $1527.
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, 2011. The Company in its Form 10-K Annual Report for the period ending December 31, 2009, in Part II —
“Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations”, on page 22,
and additionally under “Item 8 - Financial Statements, Note 3 – Summary of Significant Accounting Policies”
on page F-10, under “Impairment of Long-Lived Assets”, stated, “There were events or changes in circumstances
that necessitated an impairment of long lived assets. During 2008, the Company impaired its long lived assets based on the value
of the Land, Equipment, and building facility by $1,655,972. Due to the reduction in valuations in Mississippi of land and building
and diminished economic viability of biodiesel production the total valuations of that acquisition has reduced significantly in
overall value of the assets to $290,000.” The property and equipment was subsequently impaired to a net value of $136,567
as reported in our Form 10-K Annual Report for the period ending December 31, 2010, in Part II – Item 8 – Financial
Statements on the Consolidated Balance Sheet on page F-2. The Company impaired the assets to its net realizable value and
adjusted accumulated depreciation to zero during that impairment.



On
August 31, 2011, the property located in Nettleton that was formerly used as a biodiesel refinery, was sold by the Monroe County
Chancery Clerk, of the State of Mississippi at a county tax forfeiture sale to recover the property taxes due the County. After
consulting with our outside professionals, and due to the circumstances indicated above regarding the dismantling of the plant,
the negative state of the biodiesel industry and our new direction to pursue the production and marketing of natural gas, petroleum,
coal and propane; our management determined that retaining the property would provide no further benefit to our company, and furthermore
it was not consistent with our long-term business objectives. Therefore, it was decided not to pay the property taxes, thereby
forfeiting the property and allow the Monroe County Chancery Clerk to sell the property at the tax forfeiture sale. According
to the Monroe County tax records, the property was purchased at the tax forfeiture sale by another company which had no relationship
with our company, or any of our Officers, Directors or Employees.





NOTE
6 - INTANGIBLE ASSETS



The
Company assessed the allocation of the purchase price in the NDR acquisition, primarily through the determination of the fair
value and remaining useful lives of the respective intangible assets. Management has accordingly determined that the customer
list acquired from NDR has a fair value of $250,000. Management will annual reassess the value of this asset by evaluating the
present value of the projected cash flows projected to result from transactions with these customers.





(43)







NOTE
7 – NOTES PAYABLE



| |  | December
    31, 2011 | December
    31, 2010 | 
| |  | --------------------- | --------------------- | 



|On
    July 4, 2009 the Company sold 25,000 units in a private placement for $25,000 at $1.00 per unit.  The Units are
    similar to a debenture and act as a debt to the company. The term is for three years, and the Units receive a return of
    a 30% annual stock dividend and no payments are paid for the reduction of this debt.  After the six month holding
    period the purchaser has the option to convert part or all of the Units into common stock at $.05. Conversion rate subsequently
    reduced to $.02 per share per Board of Directors resolution. On June 24, 2011 this Note was converted. See Item 5 Common
    Stock issued. |  |  | - |  |  |  | 25,000 | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | - |  |  |  | ------ | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|On
    February 16, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $13,000 at 10% interest.  The
    holder has the right to convert the note to common stock at $.05. Conversion rate subsequently reduced to $.02 per share per
    Board of Directors resolution.  On June 24, 2011 this Note was converted. See Item 5 Common Stock issued.                                                                                                                                                                                                                                                               |  |  | - |  |  |  | 13,000 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|On
    March 30, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $8,600 at 10% interest.  The
    holder has the right to convert the note to common stock at $.05. Conversion rate subsequently reduced to $.005 per share
    per Board of Directors resolution. On June 24, 2011 this Note was converted. See Item 5 Common Stock issued.                                                                                                                                                                                                                                                                   |  |  | - |  |  |  | 8,600  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|On
    April 26, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $6,750 at 10% interest. 
    The holder has the right to convert the note to common stock at $.05. Conversion rate subsequently reduced to $.005 per share
    per Board of Directors resolution. On February 15, 2011 this Note was converted. See Item 5 Common Stock issued.                                                                                                                                                                                                                                                               |  |  | - |  |  |  | 6,750  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|On
    April 26, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $6,750 at 10% interest.  The
    holder has the right to convert the note to common stock at $.05. Conversion rate subsequently reduced to $.005 per
    share per Board of Directors resolution. On February 15, 2011 this Note was converted. See Item 5 Common Stock issued.                                                                                                                                                                                                                                                               |  |  | - |  |  |  | 6,750  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|On
    May 24, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $10,500 at 10% interest.  The
    holder has the right to convert the note to common stock at $.05. Conversion rate subsequently reduced to $.005 per share
    per Board of Directors resolution. On February 15, 2011 this Note was converted. See Item 5 Common Stock issued.                                                                                                                                                                                                                                                                |  |  | - |  |  |  | 10,500 | 







|On
    May 24, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $10,500 at 10% interest.  The
    holder has the right to convert the note to common stock at $.05. Conversion rate subsequently reduced to $.005 per share
    per Board of Directors resolution. On February 15, 2011 this Note was converted. See Item 5 Common Stock issued. |  |  | - |  |  |  | 10,500  | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | - |  |  |  | ------- | 
|                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                            
|On
    May 25, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $100,000 at 10% interest.  The
    holder has the right to convert the note to common stock at $.03. Conversion rate subsequently reduced to $.005 per share
    per Board of Directors resolution. On June 24, 2011 this Note was converted. See Item 5 Common Stock issued.    |  |  | - |  |  |  | 100,000 | 
|                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                            
|On
    June 30, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $32,000 at 10% interest.  The
    holder has the right to convert the note to common stock at $.03. Conversion rate subsequently reduced to $.005 per share
    per Board of Directors resolution. On March 7, 2011 this Note was converted. See Item 5 Common Stock issued.    |  |  | - |  |  |  | 32,000  | 



|On
    July 15, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $4,500 at 10% interest.  The
    holder has the right to convert the note to common stock at $.05. Conversion rate subsequently reduced to $.005 per share
    per Board of Directors resolution. On February 15, 2011 this Note was converted. See Item 5 Common Stock issued.                                                                                                                                                           |  |  | -       |  |  |  | 4,500   | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  | ------- |  |  |  | ------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
|On
    July 15, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $4,500 at 10% interest.  The
    holder has the right to convert the note to common stock at $.05. Conversion rate subsequently reduced to $.005 per share
    per Board of Directors resolution. On February 15, 2011 this Note was converted. See Item 5 Common Stock issued.                                                                                                                                                           |  |  | -       |  |  |  | 4,500   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On
    August 26, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $36,919 at 10% interest.  The
    holder has the right to convert the note to common stock at $.05. On October 25, 2011, $27,249 worth of this note was converted,
    leaving a $9,670 balance. See Item 5 Common Stock issued                                                                                                                                                                                                         |  |  | 9,670   |  |  |  | 36,919  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On
    August 30, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $25,300 at 10% interest.  The
    holder has the right to convert the note to common stock at $.05. *See note below.                                                                                                                                                                                                                                                                                                                    |  |  | 25,300  |  |  |  | 25,300  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On
    August 30, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $25,200 at 10% interest.  The
    holder has the right to convert the note to common stock at $.05. *See note below.                                                                                                                                                                                                                                                                                                                    |  |  | 25,200  |  |  |  | 25,200  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On November 23, 2010
    the Company entered into a two (2) year Promissory Note with a non-related creditor for $12,000 at 10% interest.  The
    holder has the right to convert the note to common stock at $.005. On September 22, 2011 this Note was converted. See Item
    5 Common Stock issued.                                                                                                                                                                                                                                               |  |  | -       |  |  |  | 12,000  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On
    September 27, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $50,000 at 10%
    interest.  The holder has the right to convert the note to common stock at $.005. On July 29, 2011 this Note was
    converted. See Item 5 Common Stock issued.                                                                                                                                                                                                                                                   |  |  | -       |  |  |  | 50,000  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On
    May 20, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $28,000 at 10% interest.  The
    holder has the right to convert the note to common stock at $.03. Conversion rate subsequently reduced to $.005 per share
    per Board of Directors resolution. On March 14, 2011 this Note was converted. See Item 5 Common Stock issued.                                                                                                                                                              |  |  | -       |  |  |  | 28,000  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On
    July 20, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $15,350 at 10% interest.  The
    holder has the right to convert the note to common stock at $.03. Conversion rate subsequently reduced to $.005 per share
    per Board of Directors resolution. On March 22, 2011 this Note was converted. See Item 5 Common Stock issued.                                                                                                                                                             |  |  | -       |  |  |  | 15,350  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On
    December 3, 2010 the Company entered into a two (2) year Promissory Note with a non-related creditor for $4800 at 10% interest.  The
    holder has the right to convert the note to common stock at $.005. *See note below.                                                                                                                                                                                                                                                                                                                    |  |  | 4,800   |  |  |  | 4,800   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On
        December 31, 2010 the Company entered into a two (2) year Promissory Note with Richard D Craven, its former CEO for $16,045
        at 10% interest for the accrued compensation and expenses owed to him for the fiscal year 2008 in accordance with his
        Employment Agreement.  The holder has the right to convert the note to common stock at $.02. On October 27,
        2011 this Note was converted. See Item 5 Common Stock issued.                                                                                         |  |  | -       |  |  |  | 16,045  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On
    December 31, 2010 the Company entered into a two (2) year Promissory Note with Richard D Craven, its former CEO for $163,694
    at 10% interest for the accrued compensation and expenses owed to him for the fiscal year 2009 in accordance with his Employment
    Agreement.  The holder has the right to convert the note to common stock at $.01. *See note below.                                                                                                                                                                        |  |  | 163,694 |  |  |  | 163,694 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On
    December 31, 2010 the Company entered into a two (2) year Promissory Note with its Vice President, Solomon Ali for $164,833
    at 10% interest for the accrued compensation owed to him for the fiscal year 2009 in accordance with his Employment Agreement.  The
    holder has the right to convert the note to common stock at $.005. On October 19, 2011 a partial conversion of this Note was
    completed. On October 20, 2011 the final conversion of the balance due on this Note was completed. See Item 5 Common Stock
    issued. |  |  | -       |  |  |  | 164,833 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On
    December 31, 2010 the Company entered into a two (2) year Promissory Note with an Employee for $30,000 at 10% interest for
    the accrued compensation owed to him for the fiscal year 2010 in accordance with his Employment Agreement.  The
    holder has the right to convert the note to common stock at $.02. On October 12, 2011 this Note was converted. See Item 5
    Common Stock issued.                                                                                                                                           |  |  | -       |  |  |  | 30,000  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On
        December 31, 2010 the Company entered into a two (2) year Promissory Note with its President and CEO, Vince M. Guest for  $136,000
        at 10% interest for the accrued compensation owed to him for the fiscal year 2010 in accordance with his Employment Agreement.  The
        holder has the right to convert the note to common stock at $015. *See note below.                                                                                                                                                                   |  |  | 136,000 |  |  |  | 136,000 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  |         |  |  |  |         | 
|On
    December 31, 2010 the Company entered into a two (2) year Promissory Note with its Vice President Solomon Ali, for $165,000
    at 10% interest for the accrued compensation owed to him for the fiscal year 2010 in accordance with his Employment Agreement.  The
    holder has the right to convert the note to common stock at $015. *See note below.                                                                                                                                                                                      |  |  | 165,000 |  |  |  | 165,000 | 





(44)













NOTE
7 – NOTES PAYABLE (continue)







|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | December
    31, 2011 |   | December
    31, 2010
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------- | - | ---------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    December 31, 2010 the Company entered into a two (2) year Promissory Note with Richard D Craven, its former CEO for $89,014
    at 10% interest for the accrued compensation and expenses owed to him for the fiscal year 2010 in accordance with his Employment
    Agreement.  The holder has the right to convert the note to common stock at $015. On October 27, 2011 this Note
    was converted. See Item 5 Common Stock issued.                                                                                                                                                                                                                                                                           |  | -                     |   | 89,014               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    January 18. 2011 the Company entered into a two (2) year Promissory Note with a non-related creditor for $10,000 at 10% interest.  The
    holder has the right to convert the note to common stock at $.005. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 10,000                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    January 19. 2011 the Company entered into a two (2) year Promissory Note with a non-related creditor for $10,000 at 10% interest.  The
    holder has the right to convert the note to common stock at $.005. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 10,000                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On February 23. 2011
    the Company entered into a two (2) year Promissory Note with a non-related creditor for $45,400 at 10% interest. The holder
    has the right to convert the note to common stock at $.005. Conversion rate subsequently reduced to $.0022 per share per Board
    of Directors resolution. *See note below                                                                                                                                                                                                                                                                                                                                                                                     |  | 45,400                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    February 25. 2011 the Company entered into a two (2) year Promissory Note with a non-related creditor for $9,400 at 10% interest.  The
    holder has the right to convert the note to common stock at $.02. As of November 10, 2011, the $1565 balance was paid. This
    Note has been paid in full.                                                                                                                                                                                                                                                                                                                                                                                                            |  | -                     |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    March 10. 2011 the Company entered into a two (2) year Promissory Note with a non-related creditor for $25,000 at 10% interest.  The
    holder has the right to convert the note to common stock at $005. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | 25,000                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    March 14. 2011 the Company entered into a two (2) year Promissory Note with a non-related creditor for $25,000 at 10% interest.  The
    holder has the right to convert the note to common stock at $005. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | 25,000                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    March 28, 2011 the Company entered into a two (2) year Promissory Note with a non-related creditor for $72,500 at 10% interest.  The
    holder has the right to convert the note to common stock at $.005. On December 23, 2011, this Note was purchased from the
    Note Holder by another non-related creditor. The Note was assigned via an Assignment and Modification Agreement which combined
    this Note with another Note dated May 20, 2011 for $20,600 into a revised Note in the amount of $99,134, at 12% interest.
    The revised $99,134 Note includes the original principal amount of $93,100 for both Notes and accrued interest in the amount
    of $6,034. See Note for $99,134 below.   |  | -                     |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    May 20, 2011 the Company entered into a three (3) year Promissory Note with a non-related creditor for $20,600 at 10% interest.  The
    holder has the right to convert the note to common stock at $.005. On December 23, 2011, this Note was purchased from the
    Note Holder by another non-related creditor. The Note was assigned via an Assignment and Modification Agreement which combined
    this Note with another Note dated March 28, 2011 for $72,500 into a revised Note in the amount of $99,134, at 12% interest.
    The revised $99,134 Note includes the original principal amount of $93,100 for both Notes and accrued interest in the amount
    of $6,034. See Note for $99,134 below. |  | -                     |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    May 23, 2011 the Company entered into a three (3) year Promissory Note with a non-related creditor for $89,000 at 10% interest.  The
    holder has the right to convert the note to common stock at $.005. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | 89,000                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    May 30, 2011 the Company entered into a three (3) year Promissory Note with a non-related creditor for $110,424 at 10% interest.  The
    holder has the right to convert the note to common stock at $.005. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 110,424               |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    June 25, 2011 the Company entered into a three (3) year Promissory Note with a non-related creditor for $49,200 at 10% interest.  The
    holder has the right to convert the note to common stock at $.005. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 49,200                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On July 29, 2011, the
    Company entered into a three (3) year Promissory Note with a non-related creditor for $40,000 at 10% interest.  The holder
    has the right to convert the note to common stock at $005. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 40,000                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On August 29, 2011, the
    Company entered into a three (3) year Promissory Note with a non-related creditor for $29,500 at 10% interest.  The holder
    has the right to convert the note to common stock at $.005. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | 29,500                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    October 2, 2011 the Company entered into a three (3) year Promissory Note with a non-related creditor for $202,200 at 10%
    interest.  The holder has the right to convert the note to common stock on April 2, 2012 at $0.005. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | 202,200               |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    October 20, 2011 the Company entered into a one (1) year  Promissory Note with a non-related creditor for $200,000 at
    12% interest.  The holder has the right to convert the note to common stock on April 20, 2012 at a 30% discount to the
    market price. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                               |  | 200,000               |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On October 22, 2011 the
    Company entered into a one (1) year  Promissory Note with a non-related creditor for $125,000 at 12% interest. 
    The holder has the right to convert the note to common stock on April 22, 2012 at a 30% discount to the market price*See note
    below.                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | 125,000               |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
        October 23, 2011 the Company entered into a one (1) year Promissory Note with a non-related creditor for $125,000 at 12%
        interest. The holder has the right to convert the note to common stock on April 23, 2012 at a 30% discount to the market
        price. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 125,000               |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
        October 25, 2011 the Company entered into a one (1) year Promissory Note with a non-related creditor for $103,600 at 12%
        interest. The holder has the right to convert the note to common stock on April 25, 2012 at a 30% discount to the market
        price. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 103,600               |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
        October 25, 2011 the Company entered into a three (3) year Promissory Note with a non-related creditor for $96,400 at
        12% interest. The holder has the right to convert the note to common stock on April 25, 2012 at $0.005. *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | 96,400                |   |                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On
    October 31, 2011 the Company entered into a three (3) year  Promissory Note with a non-related creditor for $74,760 at
    10% interest.  The holder has the right to convert the note to common stock on May 1, 2012 at $0.005 *See note below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | 74,760                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On October 31, 2011 the
    Company entered into a ten (10) month  Promissory Note with a non-related creditor for $68,000 at 8% interest. 
    The holder has the right to convert the note to common stock on May 1, 2012 at a 50% discount to the market price. *See note
    below.                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | 68,000                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On December 23, 2011
    the Company entered into a one (1) year  Promissory Note with a non-related creditor for $50,000 at 12% interest. 
    The holder has the right to convert the note to common stock on June 23, 2012 at a 50% discount to the market price. *See
    note below.                                                                                                                                                                                                                                                                                                                                                                                                                                |  | 50,000                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On December 31, 2011
    the Company entered into a two (2) year  Promissory Note with  its Vice President, Solomon Ali for $151,400 at 10%
    interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment Agreement. 
    The holder has the right to convert the note to common stock on July 1, 2012 at $0.01.*See note below.                                                                                                                                                                                                                                                                                                                                      |  | 151,400               |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On December 31, 2011
    the Company entered into a two (2) year  Promissory Note with  its Manager of Business Development, Don Deluna,
    for $40,500 at 10% interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment
    Agreement.  The holder has the right to convert the note to common stock on  July 1, 2012 at $0.02.. *See note below.                                                                                                                                                                                                                                                                                                                   |  | 40,500                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On December 31, 2011
    the Company entered into a two (2) year  Promissory Note with its President and CEO, Vince M. Guest for $162,175 at 10%
    interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment Agreement. 
    The holder has the right to convert the note to common stock on  July 1, 2012 at $0.01.*See note below.                                                                                                                                                                                                                                                                                                                                |  | 162,175               |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|On December 31, 2011
    the Company entered into a two (2) year  Promissory Note with  a non-related creditor  for $14,407.92 at 12%
    interest for consulting services provided to the Company in accordance with their Consulting Agreement.  The holder has
    the right to convert the note to common stock on  July 1, 2012 at $0.01. *See note below.                                                                                                                                                                                                                                                                                                                                                          |  | 14,407                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|Modified Note for $99,134.
    On December 23, 2011, two existing Notes, one dated March 28, 2011 for $72,500, and one dated May 20, 2011 for $20,600 were
    purchased from the Note Holder by another non-related creditor. The Notes were assigned via an  Assignment and Modification
    Agreement which combined the two existing  Notes into a revised Note in the amount of $99,134, at 12% interest. The revised
    $99,134 Note includes the original principal amount of $93,100 for both Notes and accrued interest in the amount of $6,034.
    On December 29, 2011, $30,000 worth of this note was converted, leaving a $69,134 balance.   *See note below.                                             |  | 69,134                |   | -                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      
|Total
    long-term note payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 2,445,764             |   | 1,184,255            
|Less
    current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | -                     |   | -                    
|Less
    Discount from Beneficial Conversion Feature                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | 1,951,119             | $ | 970,900              
|Long-term
    portion of note payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | 494,646               |   | 213,355              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                       |   |                      





Principal
maturities of Notes payable as of December 31, 2011 for the next five years and thereafter is as follows:







|2011  | $ -0-          
|----- | ---------------
|2012  | $ 1,201,264    
|2013  | $ 553,016      
|2014  | $ 691,484      
|2015  | $ -0-          
|      |                
|Total | $
    2,445,764







For
the above Notes, pursuant to ASC Topic 470, the Company reviewed and determined that in most cases a beneficial conversion feature
existed since the conversion price was less than market price at the date the notes were issued. The beneficial conversion feature
is amortized over the life of the note using the interest method.



If
all of these Notes were converted to common stock it could result in the potential issuance of an estimated 290,897,966 shares
over several years. This would result in a dilution of the proportional or percentage of ownership of the shareholders, however
management does not believe the value of the shareholders stock would be adversely affected.



See
management’s discussion of the reasons for the conversion price discounts given in the 10-K pages 60-64.





(45)







NOTE
8 - INCOME TAXES



The
Company adopted ASC Topic 740 which requires the recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between financial statements and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income
reported for financial reporting purposes and income tax purposes are insignificant.



For
income tax reporting purposes, the Company’s aggregate unused net operating losses approximate $3,871,000 which expire in
various years through 2028, subject to limitations of Section 382 of the Internal Revenue Code, as amended. The Company has provided
a valuation reserve against the full amount of the net operating loss benefit, because in the opinion of management based upon
the earning history of the Company; it is more likely than not that the benefits will not be realized.

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



The
provision (benefit) for income taxes from continued operations for the year ended December 31, 2011 and 2010 consist of the following:





|                                                  |   | December
    31, 2011 |   | December
    31, 2010
|------------------------------------------------- | - | --------------------- | - | ---------------------
|Current:                                          |   |                       |   |                      
|Federal                                           | $ | -                     | $ | -                    
|State                                             |   | -                     |   | -                    
|                                                  |   |                       |   |                      
|Deferred:                                         |   |                       |   |                      
|Federal                                           | $ | 1,316,000             | $ | 544,442              
|State                                             |   | 348,000               |   | 161,279              
|                                                  |   | 1,664,000             |   | 715,721              
|Valuation
        allowance                       |   | (715,721)             |   | (715,721)            
|(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:



|                                      |  |                       |                      
|------------------------------------- |  | --------------------- | ---------------------
|                                      |  | December
    31, 2011 | December
    31, 2010
|                                      |  |                       |                      
|Statutory
    federal income tax rate |  | 34.0%                 | 34.0%                
|State
    income taxes and other      |  | 9.0%                  | 9.0%                 
|Valuation
    allowance               |  | (43%)                 | (43%)                
|Effective
        tax rate            |  | -                     | -                    
|                                      |  |                       |                      



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:





|                                     |   | December
    31,2011 |   | December
    31, 2010
|------------------------------------ | - | -------------------- | - | ---------------------
|                                     |   |                      |   |                      
|Net
    operating loss carry forward | $ | 1,664,000            | $ | 715,721              
|Valuation
    allowance              |   | (1,664,000)          |   | (715,721)            
|                                     |   |                      |   |                      
|Deferred income tax asset            | $ | -                    | $ | -                    
|                                     |   |                      |   |                      
|                                     |   |                      |   |                      







The
Company has a net operating loss carry forward of approximately $7,900,000 however in accordance with IRC 382 the loss is
limited to 49% of the loss carry forward. The loss is limited due to the change in control of at least 50%; therefore this
loss of approximately $3,871,000 is available to offset future taxable income through 2028.





NOTE
9 – ACQUISTION



Entry
into a Material Definitive Agreement.



Universal
Bioenergy Corporation, a Nevada corporation and NDR Energy Group, LLC, a Maryland limited liability company (“NDR”
or “NDR Energy Group”), entered into a Member Interest Purchase Agreement, (the “Purchase Agreement”)
dated as of April 12, 2010.  Pursuant to the Purchase Agreement and subject to the conditions set forth therein, the
Company purchased Forty Nine (49%) percent of the Member Interests of NDR for common stock of the Company



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



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



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



Additional
Summary of the Purchase Agreement



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



The
original Forty Nine (49%) percent interest in NDR Energy was purchased for 1,000,000 shares of Universal Bioenergy common stock,
and a $1,000,000 loan to NDR.

The option to acquire the final Two (2%) percent member interest
in NDR was assigned to the officers of Universal, Richard D. Craven, Vince M. Guest and Solomon Ali, along with a grant of 4,000,000
shares of stock as a bonus for managing and closing the NDR Energy acquisition. The Two (2%) member interest was transferred and
granted by the officers to a new entity known as Varlos Energy Holdings LLC.  The Two (2%) percent member interests was acquired
for 4,000,000 shares of common stock, by exercising the option pursuant to the Agreement.  The 4,000,000 shares of common
stock was issued and paid directly to the Members of NDR Energy Group as a premium on the purchase price for the additional Two
(2%) percent of NDR’s member interests. The officers did not receive any of the 4,000,000 shares, all of the stock was issued
to the Members of NDR Energy. The Two (2%) percent acquired member interest in NDR Energy is owned by Varlos Energy Holdings LLC,
of which Vince M. Guest, Solomon Ali, and Richard D. Craven are the Members.



Management
determined that the Company was the acquirer in the business combination in accordance with FASB codification Topic 805, "Business
Combinations", based on the following factors: (i) there was not a change in control of the Company since neither NDR, nor
any of the sellers obtained a controlling financial interest (ownership either directly or indirectly of more than 50 percent
of the outstanding voting shares of the Company) or the power to control the Company through a lesser percentage of ownership,
by contract, lease, agreement with other stockholders, or by court decree; (ii) the Company was the entity in the transaction
that issued its equity instruments, and in a business combination, the acquirer usually is the entity that issues its equity interests;
(iii) the Company’s pre-transaction directors retained the largest relative voting rights of the Company post-transaction;
(iv) the composition of the Company’s current board of directors and management has not changed during this acquisition.
The Company had no pre-existing relationship and the Company included the 2% as part of the purchase price allocation since the
2% ownership interest by Varlos Energy Holdings LLC is a related party.



The
purchase price paid for the Acquisition was 5,000,000 restricted shares of the Company’s common stock. The shares had a
quoted market price of $.05 per share on April 12, 2010 or an aggregate quoted market value of approximately $250,000. Accordingly,
the common shares issued and the acquisition was recorded based on the valuation of the stock issued for cash to unrelated third
parties during the time frame of the acquisition. The following table summarizes the fair value of the consideration paid by the
Company and the fair value amounts assigned to the assets acquired on the acquisition date:







The
following table summarizes the consideration paid by Universal and the amounts of the assets acquired at the acquisition date:



|Purchase
        Price Allocation                                             |  | April
    12, 2010 |        
|----------------------------------------------------------------------------- |  | ------------------ | -------
|Consideration:                                                                |  |                    |        
|Equity
    instruments (5,000,000 common shares of Universal Bioenergy, Inc.) |  | $                  | 250,000
|Recognized
    amounts of identifiable assets acquired:                       |  |                    |        
|Client
    List                                                               |  |                    | 250,000
|Total
    assets                                                              |  | $                  | 250,000
|Fair
    value of total assets                                                |  | $                  | 250,000



The
following (unaudited) proforma consolidated results of operations have been prepared as if the acquisition had occurred at January
1, 2010.



|                                           |  |     
|------------------------------------------ |  | ----
|                                           |  | 2010
|                                           |  |     
|REVENUES                                   |  | $   
|                                           |  |     
|Net Loss                                   |  |     
|                                           |  |     
|Net
    income per share basic and diluted |  | $   
|                                           |  |     
|Weighted average of
    shares outstanding |  |     
|                                           |  |     





Voting
Trust and Control of NDR Energy Group LLC

The
Company and Varlos Energy Holdings LLC entered into a Voting Trust, via a Voting Trust Agreement whereby Varlos Energy granted
and transferred its Two (2%) percent member interests to the Company and its Voting Trustee, Vince M. Guest, for the purpose of
having the Company to vote Varlos Energy’s member interests in NDR Energy Group LLC, for any corporate lawful act for a
period not to exceed Ten (10) years. This Voting Trust vests in the Company, and the Trustee, Fifty One (51%) percent (the “Majority”)
of the control of the membership ownership interests of NDR Energy Group LLC, and the authority over all of its management and
operations decisions, with the combination of the Company’s Forty Nine (49%) percent member interests and the voting rights
and control of Varlos Energy’s Two (2%) percent member interests.





(46)









NOTE
10 – COMMITMENTS AND CONTINGENCIES



There
are no Commitments and Contingencies to report for this period.







NOTE
11 - RELATED PARTY TRANSACTIONS



| | 
| | 



On
December 31, 2010 the  Company entered into a two (2) year Promissory Note with  its Vice President, Solomon Ali for
$164,833 at 10% interest for the accrued compensation owed to him for the fiscal year 2009 in accordance with his
Employment Agreement. On October 19, 2011 Mr. Ali elected to make a partial conversion this Note payable dated 12/31/10, and
he received 5,482,600 restricted shares of common stock for that conversion. On October 20, 2011 Mr. Ali elected to make the
final conversion of this Note and he received 5,482,600 restricted shares of common stock for that conversion for
that conversion.



On
December 31, 2011 the Company entered into a two (2) year Promissory Note with its Vice President, Solomon Ali for $151,400 at
10% interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment Agreement. The
holder has the right to convert the Note to common stock at $0.01.



On
December 31, 2011 the Company entered into a two (2) year Promissory Note with its Manager of Business Development, Don Deluna,
for $40,500 at 10% interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment
Agreement. The holder has the right to convert the Note to common stock at $0.02.



On
December 31, 2011 the Company entered into a two (2) year Promissory Note with its President and CEO, Vince M. Guest for $162,175
at 10% interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment Agreement.
The holder has the right to convert the Note to common stock at $0.01.





Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.



There
are no changes to report in our Board of Directors, Officers or compensation arrangements for our Officers during for the period
ending December 31, 2011. The situation regarding these matters has not changed materially from the description in the Annual
Report on Form 10-K for the period ended December 31, 2010, and the Form 10-Q Report for the period ended September 30, 2011.



NOTE
12 – SUBSEQUENT EVENTS

The
following events occurred subsequent to the period covered by this Form 10-K Annual Report for the period ended December 31, 2011.



On
January 19, 2012 the Company completed a partial conversion one of its revised Notes payable dated 12/23/11, with an amount of
$99,134. A total of $30,134 worth of the Note was converted, and 2,897,500 common shares were issued for that part of the conversion,
which leaves a remaining balance of $39,000 of the principal of the Note. This revised Note combined two existing Notes, one dated
March 28, 2011 for $72,500, and one dated May 20, 2011 for $20,600, which were purchased by the current Note Holder from the previous
Note Holder on December 23, 2011. This conversion of debt reduced the Company’s Notes payables by $30,134.



On
February 1, 2012 the Company entered into a ten (10) month convertible Promissory Note with a non-related creditor for $53,000
at 8% interest. The holder has the right to convert the note to common at a 50% discount to the market price.



On
February 2, 2012, the Company issued 227,925 shares of common stock to a consultant in accordance with their consulting agreement.



On
February 9, 2012 the Company completed a partial conversion of one of its Notes payable dated 02/23/11, with a principal amount
of $45,400. A total of $42,100 worth of the Note was converted, and 19,136,364 common shares were issued for that part of the
conversion, which leaves a remaining balance of $3,300 of the principal of the Note. This conversion of debt reduced the Company’s
Notes payables by $42,100.



On
February 9, 2012 the Company completed the final conversion one of its revised Notes payable dated 12/23/11, with an amount of
$99,134. A total of $30,390 worth of the Note was converted, and 5,118,243 common shares were issued for that part of the conversion,
which leaves a remaining balance of $0.00 of the principal of the Note. This revised Note combined two existing Notes, one dated
March 28, 2011 for $72,500, and one dated May 20, 2011 for $20,600, which were purchased by the current Note Holder from the previous
Note Holder on December 23, 2011. This conversion of debt reduced the Company’s Notes payables by $30,390.



On
February 10, 2012 the Company completed a partial conversion of one of its Notes payable dated 02/23/11, with a principal amount
of $45,400. A total of $3,300 worth of the Note was converted, and 1,500,000 common shares were issued for that part of the conversion,
which leaves a remaining balance of $0.00 of the principal of the Note. This conversion of debt reduced the Company’s Notes
payables by $3,300.



On
February 13, 2012, a $49,500 partial interest in an existing Note, dated May 23, 2011 for $89,000, was purchased from the Note
Holder by another non-related creditor. On February 13, 2012, the $39,500 portion of the Note payable was completely converted
to common stock, and a total of 6,100,000 shares were issued for this conversion. This conversion of debt reduced the Company’s
Notes payables by $49,500.



On
February 13, 2012, a $55,000 partial interest in an existing Note, dated May 30, 2011 for $110,424, was purchased from the Note
Holder by another non-related creditor. On February 29, 2012, the $55,000 portion of the Note payable was completely converted
to common stock, and a total of 7,543,662 shares were issued for this conversion, which leaves a remaining balance of $0.00 of
the principal of the Note. This conversion of debt reduced the Company’s Notes payables by $55,000.



On
February 15, 2012 the Company entered into a one (1) year convertible Promissory Note with a non-related creditor for $50,000
at 12% interest. The holder has the right to convert the note to common stock at a 50% discount to the market price.



On
February 15, 2012, a $89,000 partial interest, (including $80,000 principal and $9,000 interest) in an existing Note, dated December
31, 2010 for $163,694, was purchased from the Note Holder by another non-related creditor. The $9000 interest was assigned by
the original Note Holder to another party and subsequently purchased by the party that purchased the $80,000 principal. On March
2, 2012, the $89,000 portion of the Note payable was completely converted to common stock, and a total of 13,432,900 shares were
issued for this conversion, which leaves a remaining balance of $0.00 of the principal of the Note. This conversion of debt reduced
the Company’s Notes payables by $89,000.



On
February 20, 2012, the Company “closed” the transaction and acquired forty percent (40%) of the Member Interests of
Whitesburg Friday Branch Mine LLC, a Kentucky Limited Liability Company, in exchange for consideration consisting of two million,
seven hundred thousand dollars ($2,700,000), pursuant to the Member Interest Exchange Agreement dated October 17, 2011, and the
amendment to the Agreement dated February 20, 2012. Whitesburg is engaged in the business of coal mining, operations, production
and marketing of “Thermal/Steam” non-coking coal at a coal mining property known as the Whitesburg Friday Branch Mine,
located in Letcher County, in Whitesburg, Kentucky.



On
February 20, 2012 the Company entered into a two (2) year Promissory Note with Whitesburg Friday Branch Mine LLC for $2,000,000
at 12% interest for the purchase of the member interest in Whitesburg in accordance with the Member Interest Exchange Agreement
dated October 17, 2011. The holder has the right to convert the note to common stock after six months at a 30% discount to market
at the time of conversion.



On
February 23, 2012 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $80,000
at 12% interest. The holder has the right to convert the note to common stock after August 23, 2012 at $0.008.



On
February 27, 2012, a $62,520 partial interest in an existing Note, dated May 30, 2011 for $110,424, was purchased from the Note
Holder by another non-related creditor. On March 8, 2012, the $62,520 portion of the Note payable was completely converted to
common stock, and a total of 8,294,778 shares were issued for this conversion, which leaves a remaining balance of $0.00 of the
principal of the Note. This conversion of debt reduced the Company’s Notes payables by $62,520.



On
February 29, 2012 the Company entered into a three (3) year convertible Promissory Note with a non-related creditor for $122,000
at 12% interest. The holder has the right to convert the note to common stock at $0.005.



On
March 1, 2012, the Company announced that NDR Energy Group was awarded a contract to supply natural gas to Southern California
Gas Company the largest natural gas distribution utility in the country. Under the terms of the contract NDR Energy Group is to
supply the customer with an estimated 25,000 mcf per day, or a total of 4.5 billion cubic feet (bcf) of natural gas for six months
from April through October, with an estimated value of $11,475,000.



On
March 1, 2012, a $83,694 partial interest, in an existing Note, dated December 31, 2010 for $163,694, was purchased from the Note
Holder by another non-related creditor. On March 20, 2012, the $83,694 portion of the Note payable was completely converted to
common stock, and a total of 9,884,965 shares were issued for this conversion, which leaves a remaining balance of $0.00 of the
principal of the Note. This conversion of debt reduced the Company’s Notes payables by $83,694.



On
March 2, 2012, a $9,000 partial interest in an existing Note payable, dated December 31, 2010 for $163,694, was completely converted
to common stock, and a total of 857,143 shares were issued for this conversion, which leaves a remaining balance of $0.00 of the
principal of the Note. This conversion of debt reduced the Company’s Notes payables by $9,000.



On
March 2, 2012, a $9,764 partial interest, ($9,764 of accrued interest) in an existing Note, dated December 31, 2010 for $163,694,
was purchased from the Note Holder by another non-related creditor. The $9,764 interest was assigned by the original Note Holder
to another party and subsequently purchased by the party that previously purchased the $83,694 principal on the Note dated December
31, 2012.



On
March 5, 2012, a $39,500 partial interest in an existing Note, dated May 23, 2011 for $89,000, was purchased from the Note Holder
by another non-related creditor. On March 7, 2012, the $39,500 portion of the Note payable was completely converted to common
stock, and a total of 4,200,000 shares were issued for this conversion, which leaves a remaining balance of $0.00 of the principal
of the Note. This conversion of debt reduced the Company’s Notes payables by $39,500.



On
March 5, 2012, the Company announced that the Whitesburg Friday Branch Mine, in Letcher County, Kentucky began full production
and coal mining operations. Land reclamation work has progressed and passed inspection by the State of Kentucky, paving the way
to extracting coal from the mine. Drilling and blasting in preparation for removal of coal has begun and it is expected that coal
will be on the ground ready for sales and shipment by the end of March 2012.



On
March 7, 2012 the Company entered into a one (1) year convertible Promissory Note with a non-related creditor for $30,000 at 12%
interest. The holder has the right to convert the note to common stock at a 50% discount to the market price.



On
March 15, 2012 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $70,000 at
12% interest. The holder has the right to convert the note to common stock at $0.008.



On
March 30, 2012 the Company entered into a three (3) year convertible Promissory Note with a non-related creditor for $123,600
at 12% interest. The holder has the right to convert the note to common stock at $0.005.



On
April 2, 2012, a $9,764 partial interest in an existing Note payable, dated December 31, 2010 for $163,694, was completely converted
to common stock, and a total of 1,212,919 shares were issued for this conversion. This conversion of debt reduced the Company’s
Notes payables by $9,734.



On
April 4, 2012, we announced that NDR Energy Group was awarded a gas supply contract with Pacific Gas & Electric’s, Electric
Fuel Division Corporation. Under the terms of the contract, NDR Energy Group is to deliver natural gas supplies for the customer’s
electric power generation plants for one to three months, starting on July 1, 2012. The contract is projected to generate millions
of dollars in revenue.



On
April 4, 2012, two existing Notes, one dated July 29, 2011 for $40,000, and one dated June 25, 2011 for $49,200 were purchased
from the Note Holder by another non-related creditor. The Notes were assigned via an Assignment and Modification Agreement which
combined the two existing Notes into a revised Note in the amount of $96,300, at 12% interest. The revised $96,300 Note includes
the original principal amount of $89,200 for both Notes and accrued interest in the amount of $7,100. The holder has the right
to convert the note to common stock at a 50% discount to the market price at the time of conversion.



On
April 4, 2012 the Company entered into a one (1) year convertible Promissory Note with a non-related creditor for $50,000 at 12%
interest. The holder has the right to convert the note to common stock at a 50% discount to the market price.





(47)









*
* * * * * *

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



None



ITEM
9A. CONTROLS AND PROCEDURES



Evaluation
of Disclosure Controls and Procedures

We
maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange
Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s
rules and forms and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls
and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide
reasonable assurance that the controls and procedures would meet their objectives. As required by SEC Rule 13a-15(b), our Chief
Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance
level.



Management’s
Annual Report on Internal Control over Financial Reporting

Our
Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control
over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required
by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal
Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Management has used the framework set forth in the report entitled Internal Control-Integrated Framework published
by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of our internal
control over financial reporting. Based on this assessment, our Chief Executive Officer and Chief Financial Officer have concluded
that our internal control over financial reporting was effective as of December 31, 2011.



Changes
in Internal Control over Financial Reporting



During
the fiscal year ended December 31, 2011, management recognized that there were possible deficiencies in our internal controls
and addressed the material weaknesses in our internal control deficiencies as follows:



•	We
have provided more oversight of the Company’s financial reporting and internal control by those charged with corporate governance.



•	We
have engaged the services of employees, management, and outside professionals who have the qualifications and training to fulfill
their assigned functions, with respect to preparing financial statements, reports and internal controls in accordance with Generally
Accepted Accounting Principles.



•	Any
deficiencies in terms of completeness or accuracy in the internal control process must be reported to management on a timely basis
and we have established a defined process within our organization to remediate these deficiencies, when identified.



•	We
have implemented a more effective internal review and risk assessment function by management, which functions are important to
the monitoring or risk assessment component of internal control.



On
August 18, 2011, the Company engaged a new auditor and, recently, engaged an new outside accounting firm to further develop policies,
controls, and procedures to ensure that internal control over financial reporting will be effective for the year ended December
31, 2011 in light of any material weakness discovered by our current management, the need to ensure that internal controls and
procedures satisfy the criteria set forth by COSO, and to rectify the significant internal control deficiencies identified by
our independent registered public accounting firm.





ITEM
9B. OTHER INFORMATION



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







(48)









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 |  | Title                                                              
|----------- |  | --- |  | -------------------------------------------------------------------
|            |  |     |  |                                                                    
|Vince Guest |  | 54  |  | Chief Executive Officer,
    Director, Principle  Financial Officer
|Solomon Ali |  | 47  |  | Senior Vice President, Director                                    



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



Officers
and Directors:



Vince
M. Guest - President and Chief Executive Officer

Vince
M. Guest was appointed as President and CEO on April 14 2010. He has been a Director of Universal since March 5, 2009. He has
over 25 years of professional management experience drawn from Fortune 500 firms in the U.S. His experience includes business
management, operations, strategic alliances, energy services, organizational development, marketing, commercial real estate acquisitions,
corporate finance, and management of real estate assets with a combined portfolio value exceeding $2.5 billion. He has arranged
over $500 million in corporate capital funding and commercial and residential financing. He served as President of AmeriCapital
Financial Corporation directing the commercial and residential real estate investment services group for 26 states nationwide.
Previously, he served as Director of Energy Services for New Energy Ventures, managing the energy services division for the state
of California. He worked as Director of Engineering for Trammel Crow-Winthrop Management and in management and professional positions
at TRW, Citicorp, Bristol-Myers Squibb, and Ingersoll Rand.





Solomon
RC Ali - Senior Vice President of Corporate Finance and Investor Relations

Solomon
RC Ali was appointed as Senior Vice President of Corporate Finance and Investor Relations and Director on March 5, 2009. He was
appointed as Corporate Vice President on May 25, 2010. He has over 23 years’ experience in investor relations, investment
banking, mergers, acquisitions, corporate structure, marketing, asset management and is an expert in financial engineering and
raising investment capital. He has personally managed and completed over 140 mergers and acquisitions in his career. As a highly
qualified corporate executive he served as CEO of Rainco Industries, managed over 500 employees, managed over $100 million in
assets and arranged over $250 million in investment capital and structured financing. His experience also includes corporate valuation,
capitalization structure, development of Private Placement Memoranda, business plans, client positioning, managing the investment
process with securities attorneys and accountants, for SEC and FINRA regulatory compliance and corporate registration filings.
Mr. Ali has developed and implemented new policies, systems, procedures and strategically re-organized, re-structured, re-financed
and turned around many troubled small cap companies and improved their operations and market capitalization value.







Ken
Harris – NDR Energy Group - President and Chief Executive Officer



Ken
Harris was appointed as President and CEO of NDR Energy Group on April 1, 2011. Ken has 22 years of experience as an Attorney,
with experience in business operations, management, negotiations of NAESB supply and purchase contracts, business development,
regulatory compliance, operations systems design and organizational development. Mr. Harris has worked as an Attorney with a legal
practice covering business transactions, tort litigation, criminal law, personal injury, and sports agency management. He also
serves as a Founder / Partner with the law firm of Ken Harris and Associates. Previously he worked as a Founding Partner for Todd,
Parham, Harris and Dixon, a Founding Partner for Harris and Drummond, an Associate with Hoover and Williams, an Associate with
Wishart, Norris, Henninger & Pittman, and as a NBA/NFL Sports Agent for Bill Duffy & Associates. Ken also serves as host
of the radio talk show “Law 360” on WGIC Radio in Charlotte, North Carolina. Ken received a B.A in Political Science,
and a Juris Doctorate from the University of North Carolina at Chapel Hill. Ken Harris has represented some of the most significant
business brands in urban America, and has worked extensively with Magic Johnson Enterprises for over 18 years.



Rickey
Hart – NDR Energy Group - Vice President of Business Development



Rickey
Hart was appointed to serve as Vice President of Business Development. He originally founded NDR Energy Group and he has over
25 years over professional experience, which includes 16 years in the oil and gas industry. His industry experience covers operations,
marketing, business development, negotiations of NAESB supply and purchase contracts, sales of natural gas, propane, lubricants
and related energy services. He has also developed new markets for products, sales of pipeline transmission capacity, managed
sales teams, and sales and promotions programs for many companies during his career. Previously he worked as a General Manager
for New Image Consultants, Marketing Manager for SDS Petroleum Products, and other managerial and professional positions for Jones
and Associates, M&S Staff Consultants, and Twentieth Century Fox.



Ray
Crooks – NDR Energy Group – Managing Partner and Principal Consultant



Ray
Crooks has over 25 years of professional experience in energy services and the gas industry. He provides technical consulting
services for NDR Energy’s public and private sector clients in the areas of natural gas planning, gas supply and pipeline
management, contract negotiations for NAESB supply and purchase contracts, strategic planning, risk management and cost of service
analyses. His experience also includes financial analysis for electricity and natural gas systems, energy procurement, gas capacity
management, marketing plans, rate systems design, power supply planning, demand forecasting and developing financing plans for
Municipal Utilities using tax exempt Bonds. He also works as a Principal Consultant and owner of “The New Horizons Energy
Group”, an energy management consulting firm. Previously he worked as a Supervising Consultant with Resource Management
International, a Bulk Power and Rates Analyst with the City of St. Cloud, Florida and a Supervising Analyst with R.W. Beck and
Associates. Ray is a candidate for a Doctorate in Business Administration, (DBA), and a Masters in Management Information Systems
from Nova Southeastern University, a MBA in Finance from Webber International University, and a B.S. in Business Administration
from the University of Central Florida.



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. As
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.



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 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:



Section
16(a) of the Exchange Act requires our directors, executive officer and persons who beneficially own more than ten percent of
our outstanding common stock to file reports with the SEC regarding initial statement of ownership, statement of changes of ownership
and, where applicable, annual statement of ownership of our common stock.  Such persons are required by SEC regulations to
furnish us with copies of all such statements they file.  Based solely upon a review of the copies of the forms furnished
to us, while filings for fiscal 2010 were not timely made, as of December 31, 2011, we believe that all required filings
under Section 16(a) for fiscal 2011 to date have been made by our officers and directors.

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.





(49)











ITEM
11. EXECUTIVE COMPENSATION



General.
Effective April 14, 2010 Vince M. Guest presently serves as the Company’s chief executive officer.

Summary
Compensation Table



The
following table sets forth for the year ended December 31, 2011 and 2010 compensation awarded to, paid to, our other most highly
compensated executive officers whose total compensation during the last fiscal year exceeded $100,000, if any.



2011
and 2010 SUMMARY COMPENSATION TABLE







|Name and Principal Position                                          |  | Year |           | Salary ($) | Bonus ($) |  | Stock Awards ($) * |  | Option Awards ($) * |     | Non-Equity Incentive Plan Compensation ($) |  | Nonqualified Deferred Compensation ($) |         | All Other Compensation ($) |  | Total ($)
|-------------------------------------------------------------------- |  | ---- | --------- | ---------- | --------- |  | ------------------ |  | ------------------- | --- | ------------------------------------------ |  | -------------------------------------- | ------- | -------------------------- |  | ---------
|                                                                     |  |      |           |            |           |  |                    |  |                     |     |                                            |  |                                        |         |                            |  |          
|Vince M. Guest                                                       |  |      | 2011 2010 |            |           |  | 174,000 174,000    |  |                     | - - |                                            |  |                                        | -84,669 |                            |  |          
|Chairman of the Board Chief Executive Officer, Principal Accountant, |  |      |           |            |           |  | —                  |  |                     | —   |                                            |  |                                        |         |                            |  |          
|Solomon Ali Senior Vice President, Director                          |  |      | 2011 2010 |            |           |  | 174,000 174,000    |  |                     |     |                                            |  |                                        | -84,669 |                            |  |          







2011
and 2010 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE



The
following table sets forth certain information concerning outstanding stock awards held by the Named Executive Officers as of
December 31, 2011:





|                   | Option
    Awards                                                   | Stock
    Awards                                                     
|------------------ | ------------------------------------------------------------------- | ---------------------------------------------------------------------
|                   |                                                                     |                                                                      
|Name               | Number
    of Securities Underlying Unexercised Options Exercisable | Number
    of Securities Underlying Unexercised Options Unexercisabke
|                   | (#)                                                                 | (#)                                                                  
|                   |                                                                     |                                                                      
|                   |                                                                     |                                                                      
|Vince
    M. Guest | -
    0 -                                                           | -
    0 -                                                            
|                   |                                                                     |                                                                      
|Solomon
    Ali    | -
    0 -                                                           | -
    0 -                                                            













2011
and 2010 OPTION EXERCISES AND STOCK VESTED TABLE



|     |      | Option
    Awards                             | Stock
    Awards                  
|---- | ---- | --------------------------------------------- | ----------------------------------
|Name | Year | Number
    of Shares Acquired on Exercise (#) | Value
    Realized on Exercise ($)
|     |      |                                               |                                   
|NONE |      |                                               |                                   
|     |      |                                               |                                   





2011
and 2010 PENSION BENEFITS TABLE



|Name | Year | Plan
    Name | Number
    of Year of Credited Service | Present
    Value of Accumulated Benefit ($) | Payments
    During Last Fiscal Years (s)
|---- | ---- | ------------- | -------------------------------------- | -------------------------------------------- | -----------------------------------------
|NONE |      |               |                                        |                                              |                                          















2011
and 2010 NON-QUALIFIED DEFERRED COMPENSATION TABLE



|Name | Year | Executive
    Contribution in Last Fiscal Year ($) | Registrant
    Contributions in Last Fiscal Year ($) | Aggregate
    Earnings in Last Fiscal Year ($) | Aggregate
    Withdrawals/ Distributions | Aggregate
    Balance of Last Fiscal Year-End ($)
|---- | ---- | -------------------------------------------------- | ---------------------------------------------------- | ---------------------------------------------- | ---------------------------------------- | -------------------------------------------------
|NONE |      |                                                    |                                                      |                                                |                                          |                                                  















2011
and 2010 DIRECTOR COMPENSATION TABLE



|Name              | Fees
                                                                                                                                                 Earned
                                                                                                                                                 or
                                                                                                                                                 Paid
                                                                                                                                                 in
                                                                                                                                                 Cash
        ($) | Stock
        Awards
        ($)
        * | Option
        Awards
        ($)
        * | Non-Equity
        Incentive Plan Compensation
        ($) | Nonqualified
                                                                                                                                                Deferred
                                                                                                                                                Compensation
                                                                                                                                                Earnings
        ($) | All
        Other Compensation
        ($) | Total
        ($)
|----------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------------- | ---------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -----------------
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                            |                                             |                                                            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                            |                  
|Vince
    M.Guest | 0                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 0                                          | 0                                           | 0                                                          | 0                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 0                                          | 0                
|Solomon
    Ali   | 0                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 0                                          | 0                                           | 0                                                          | 0                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 0                                          | 0                



*	Based
upon the aggregate grant date fair value calculated in accordance with the Accounting Codification Standard Topic 718 “Share-Based
Payments. Our policy and assumptions made in valuation of share based payments are contained in the notes to our financial statements.
The monies shown in the “option awards” column is the total calculated value for each individual.









2011
ALL OTHER COMPENSATION TABLE



|Name | Year | Perquisites
                                                and Other
                                                Personal
                                                Benefits
                                                ($) | Tax
                                                Reimbursement
                                                ($) | Insurance
                                                Premiums
                                                ($) | Company
                                                Contributions
                                                to Retirement and
                                                401(k) Plans
        ($) | Severance
                                                Payments /
                                                Accruals
                                                ($) | Change
                                               in Control
                                               Payments /
                                               Accruals
                                               ($) | Total
        ($)
|---- | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------
|     |      |                                                                                                                                                                                                                                             |                                                                                                                       |                                                                                                                        |                                                                                                                                                                                                                  |                                                                                                                                                                                   |                                                                                                                                                                                                                                       |                  

NONE





2011
PERQUISITES TABLE



|Name | Year | Personal Use of
                                                Company
        Car/Parking
        ($) | Financial Planning/
        Legal
        Fees
        ($) | Club Dues
        ($) | Executive Relocation
        ($) | Total Perquisites and
                                                Other Personal Benefits
        ($)
|---- | ---- | ------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | --------------------- | -------------------------------- | ---------------------------------------------------------------------------------------------------------
|     |      |                                                                                                         |                                                            |                       |                                  |                                                                                                          

NONE







2011
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE



|     |         | Before Change inControl                                                                                                                 | After Change in Control                                                                                                                  |                                                                       |       |           
|---- | ------- | --------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ----- | ----------
|Name | Benefit | Termination
                                                w/o Case or for
                                                Good Reason | Termination
                                                w/o Cause or
                                                for Good Reason | Voluntary
                                                Termination | Death | Disability
|NONE |         |                                                                                                                                         |                                                                                                                                          |                                                                       |       |           
|     |         |                                                                                                                                         |                                                                                                                                          |                                                                       |       |           





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.





(50)











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



The
following table lists stock ownership of our Common Stock as of December 31, 2012 based on 199,969,927 shares of common
stock issued and outstanding. The information includes beneficial ownership by (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 Stock beneficially owned by them.





|Name
    and Address of Owner                                                                         |  | Title
    of Class |  | Number
        of
        Shares
        Owned
        (1) |  | Percentage
        of
        Class
|----------------------------------------------------------------------------------------------------- |  | ------------------ |  | ---------------------------------------------------------- |  | -----------------------------------
|                                                                                                      |  |                    |  |                                                            |  |                                    
|Vince
    M. Guest                                                                                    |  | Common
    Stock   |  | 17,555,508                                                 |  | 8.78%                              
|Solomon
    R.C. Ali                                                                                  |  | Common
    Stock   |  | 16,838,743                                                 |  | 8.42%                              
|                                                                                                      |  | Common
    Stock   |  |                                                            |  |                                    
|All
                                    Officers and Directors
        As
        a Group (2 persons) |  | Common
    Stock   |  | 34,394,251                                                 |  | 17.20%                             



|                                                                                                                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.



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 1,000,000,000 shares of common stock, par value $.001, as of December 31, 2011.



On
May 9, 2011, we amended our Articles of Incorporation and increased our authorized shares of common stock from 200,000,000
to 1,000,000,000 shares.



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



On
October 22, 2007, the Board of Directors and the holders of the majority of the issued and outstanding shares of common stock
of the Company authorized a total of 1,000,000 shares of Preferred Stock with a par value of $0.001 per share.



On
October 24, 2007, we filed a Certificate of Amendment with the Nevada Secretary of State, to amend our Articles of Incorporation
to reflect this authorization of the preferred shares. The information regarding the Amendment was disclosed in a Form 8-K that
was filed with the U.S. Securities and Exchange Commission on October 24, 2007.



On
September 29, 2008, the Company authorized 100,000 Series A Preferred shares and 232,080 Series B Preferred Shares of stock. The
preferred Series A preferred shares have voting rights at the equivalent of 300 shares of common stock to each preferred share
of stock. The Series B preferred shares bear no voting rights. On July 22, 2010 the Company cancelled the 100,000 Series A preferred
shares of stock, and therefore there were no Series A preferred shares of stock issued and outstanding as of that date. The Series
A preferred shares were cancelled by the transfer agent on June 15, 2011 and returned to the Company. As of December 31, 2011,
there were no Series A preferred shares issued and outstanding, and a total of 232,080 Series B preferred shares issued and outstanding.



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.



Options
and Warrants:



As
of December 31, 2011 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, 2011, the Company had no convertible debentures outstanding.



Transfer
Agent



On
October 25, 2007, the Company engaged Corporate Stock Transfer to serve in the capacity of transfer agent. Their mailing address
and telephone number are as follows:



Corporate
Stock Transfer 3200 Cherry Creek Drive South, Suite 430

Denver
CO, 89009

Telephone
(303) 282-4800, Fax (303) 282-5800





(51)







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



The
option to acquire the final Two (2%) percent member interest in NDR was assigned to the officers of Universal, Richard D. Craven,
Vince M. Guest and Solomon Ali, along with a grant of 4,000,000 shares of stock as a bonus for managing and closing the NDR Energy
acquisition. The Two (2%) member interest was transferred and granted by the officers to a new entity known as Varlos Energy Holdings
LLC.  The Two (2%) percent member interests was acquired for 4,000,000 shares of common stock, by exercising the option pursuant
to the Agreement.  The 4,000,000 shares of common stock was issued and paid directly to the Members of NDR Energy Group as
a premium on the purchase price for the additional Two (2%) percent of NDR’s member interests. The officers did not receive
any of the 4,000,000 shares, all of the stock was issued to the Members of NDR Energy. The Two (2%) percent acquired member interest
in NDR Energy is owned by Varlos Energy Holdings LLC, of which Vince M. Guest, Solomon Ali, and Richard D. Craven are the Members.



Voting
Trust and Control of NDR Energy Group LLC

The
Company and Varlos Energy Holdings LLC entered into a Voting Trust, via a Voting Trust Agreement whereby Varlos Energy granted
and transferred its Two (2%) percent member interests to the Company and its Voting Trustee, Vince M. Guest, for the purpose of
having the Company to vote Varlos Energy’s member interests in NDR Energy Group LLC, for any corporate lawful act for a
period not to exceed Ten (10) years. This Voting Trust vests in the Company, and the Trustee, Fifty One (51%) percent (the “Majority”)
of the control of the membership ownership interests of NDR Energy Group LLC, and the authority over all of its management and
operations decisions, with the combination of the Company’s Forty Nine (49%) percent member interests and the voting rights
and control of Varlos Energy’s Two (2%) percent member interests.





Vince
M. Guest. Under Vince Guest's employment agreement, he has agreed to serve as the President and Chief Executive Officer. His term
of service under this agreement commenced on July 1, 2010 and continues for a term of two (2) years with renewal options. The
agreement provides for a base salary of $174,000 for the first year of the term and an annual increase of at least 8% thereafter.
The agreement also provides Vince Guest with a monthly or quarterly bonus of five percent (5%) of net profits.  The agreement
also
provides for participation in the Company’ s programs to acquire options or equity incentive in common stock subject to
the discretion of the Board of Directors, expense reimbursements, participation in retirement and benefit plans, paid time off
and indemnification and liability coverage. We can terminate Vince Guest's employment with cause, or without cause upon certain
written notice and Vice Guest can terminate the agreement for "good reason" as defined in the agreement. There are specific
severance provisions, as well as confidentiality and non-solicitation requirements resulting from any termination.

Solomon Ali. Under Solomon Ali's employment agreement, he
has agreed to serve as the Senior Vice President. His term of service under this agreement commenced on July 1, 2010 and continues
for a term of two (2) years with renewal options. The agreement provides for a base salary of $174,000 for the first year of the
term and an annual increase of at least 8% thereafter. The agreement also provides Solomon Ali with a monthly or quarterly bonus
of five percent (5%) of net profits.  The agreement also provides for participation in the Company’ s programs to acquire
options or equity incentive in common stock , subject to the discretion of the Board of Directors, expense reimbursements, participation
in retirement and benefit plans, paid time off and indemnification and liability coverage. We can terminate Solomon Ali's employment
with cause, or without cause upon certain written notice and Solomon Ali can terminate the agreement for "good reason"
as defined in the agreement. There are specific severance provisions, as well as confidentiality and non-solicitation requirements
resulting from any termination.



ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit
Fees. The aggregate fees billed by Bongiovanni & Associates, CPA’s for professional services rendered for audit
of the Company annual financial statements for 12 months ended December 31, 2011 was approximately $34,000. The aggregate fees
billed by Bongiovanni & Associates, CPA’s for review of the financial statements included in the company’s Forms
10-Q for Fiscal year ended 2011 was approximately $10,500.



The
aggregate fees billed by S.E. Clark & Company for professional services rendered for audit of the Company annual financial
statements for 12 months ended December 31, 2010 was approximately $28,000.  The aggregate fees billed by S.E. Clark
and Company for review of  the financial statements included in the  company’s Forms 10-Q for fiscal
years ended 2011 and 2010 was approximately $0.00 and $11,250 respectively.



Audit-Related
Fees.  The aggregate fees billed by Bongiovanni & Associates, CPA’s 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 years
ended December 31, 2011, and that are not disclosed in the paragraph captioned “Audit Fees” above, was $0.00. The
aggregate fees billed by Bongiovanni & Associates, CPA’s 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 years ended December 31, 2011 and
2010 , and that are not disclosed in the paragraph captioned “Audit Fees” above, were $0.00 and $0.00, respectively



Tax
Fees.The aggregate fees billed by Bongiovanni & Associates, CPA’s for professional services rendered
for tax compliance, tax advice and tax planning for the years ended December, 31, 2011 was $0.00. The aggregate fees billed by
Bongiovanni & Associates, CPA’s for professional services rendered for tax compliance, tax advice and tax planning for
the years ended December, 31, 2011 and 2010 were $0.00 and $0.00.



All
Other Fees.  The aggregate fees billed by for products and services, of Bongiovanni & Associates, CPA’s
other than the services described in the paragraphs “Audit Fees,” “Audit-Related Fees,” and “Tax
Fees” above for the years ended December, 31, 2011 was. The aggregate fees billed by for products and services, of Bongiovanni
& Associates, CPA’s other than the services described in the paragraphs “Audit Fees,” “Audit-Related
Fees,” and “Tax Fees” above for the years ended December, 31, 2011 and 2010 $0.00 and $0.00 respectively.



The
Board of Directors 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 of Directors 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 of Directors approved the inclusion of the audited consolidated financial
statements be included in the Company’s Annual Report on Form 10-K for its 2011 fiscal year for filing with the U.S. Securities
and Exchange commission.



The
Board of Directors pre-approved all fees described above.





(52)









PART
IV



ITEM
15. EXHIBITS AND REPORTS.



|Exhibit No.     |   | Exhibit                                                                                                                                                                                                                                                            
|--------------- | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |   |                                                                                                                                                                                                                                                                    
|2.1             |   | 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 21stt 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)                                                                                                                                                                                                                     
|10.1            |   | 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)                                                                                                                                                                                      
|10.6            |   | Employment Agreement by and between Universal and
    Vince M. Guest                                                                                                                                                                                               
|10.7            |   | Employment Agreement by and between Universal and
    Solomon Ali                                                                                                                                                                                                  
|14.1
        21 |   | Code
        of Ethics (5)
        Subsidiaries
(2)                                                                                                                                                                                                                
|                |   |                                                                                                                                                                                                                                                                    
|31.1            | * | Certification of Chief Executive Officer Pursuant
    to Section 302 of the Sarbanes-Oxley Act.(6)(6 (2)                                                                                                                                                           
|31.2            | * | Certification of Principal Financial and Accounting
    Officer Pursuant to Section 906 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.



(5)
Incorporated by reference to the Form 10K for year ended December 31, 2009 as filed on August 12, 2010.



6)
Incorporated by reference to the 2ndamended Form 10K/A for year ended December 31, 2007 as filed on January 4, 2010.







(53)











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
        
        
        Date:
        April 13, 2012 |  | UNIVERSAL
                                                           BIOENERGY, INC.
        
        
        By:
        /s/ VINCE M. GUEST
|----------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|                                                                  |  | Vince M. Guest                                                                                                                               
|                                                                  |  | President and Chief Executive
    Officer, Principal Financial Officer, Principal Accounting Officer and Director                            





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.



|                                                           |     |                                                                                                                                                       | 
|---------------------------------------------------------- | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Date:
                                      April 16, 2012 | By: | /s/
    VINCE M. GUEST                                                                                                                                | 
|                                                           |     | Vince
        M. Guest                                                                                                                                | 
|                                                           |     | President
        and Chief Executive Officer,
        Principle
        Financial Officer, Principal
        Accounting
        Officer and Director | 
|                                                           |     |                                                                                                                                                       | 
|Date:
                                      April 16, 2012 | By: | /s/
    SOLOMON ALI ________________________________                                                                                                  | 
|                                                           |     | Solomon Ali                                                                                                                                           | 
|                                                           |     | Senior Vice President and
    Director                                                                                                                | 
|                                                           |     |                                                                                                                                                       | 





(54)











Exhibit 21 Subsidiaries





NDR
Energy Group, LLC