**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**





(Mark
      One)





x
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934
                FOR THE QUARTERLY PERIOD ENDED**SEPTEMBER
                30, 2007**





or





o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
                ACT




For
      the
      transition period from _______________ to _______________





Commission
      File Number: **000-30172**





**Renewal
      Fuels, Inc.**


(Exact
      name of small business issuer as specified in its charter)




**Delaware**
            **22-1436279**(State
                or other jurisdiction of incorporation or
                organization)
            (IRS
                Employer Identification
                No.)





**1818
      North Farwell Avenue, Milwaukee, WI 53202**


(Address
      of principal executive offices)





**(414)
      283-2625**


(Issuer’s
      telephone number)





**Tech
      Laboratories, Inc.**


(Former
      name if changed from last report)





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





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


Yes
      o No x





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: 28,832,455 shares of common stock, $0.001
      par
      value per share, as of November 16, 2007.





Transitional
      Small Business Disclosure Format (Check one): Yes oNo x







**RENEWAL
      FUELS, INC.**





**FORM
      10-QSB**





**QUARTERLY
      PERIOD ENDED SEPTEMBER 30, 2007**





**TABLE
      OF CONTENTS**




PART
                1  FINANCIAL INFORMATIONItem
                1.
            Financial
                Statements (Unaudited)Consolidated
                Balance Sheet
            4Consolidated
                Statements of Operations
            6Consolidated
                Statement of Stockholders’ Equity
            7Consolidated
                Statements of Cash Flows
            9Notes
                to Consolidated Financial Statements
            11Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            31Item
                3.
            Controls
                and Procedures
            54PART
                II OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            56Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            56Item
                3.
            Defaults
                Upon Senior Securities
            56Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            56Item
                5.
            Other
                Information
            56Item
                6.
            Exhibits
            57SIGNATURES
            
            59




2




PART
      1.
 FINANCIAL INFORMATION





FORWARD-LOOKING
      STATEMENTS





This
      Form
      10-QSB contains “forward-looking statements” relating to Renewal Fuels, Inc.
      (formerly Tech Laboratories, Inc.) (referred to as the “Company” or “we”, “us”
or “our” in this Form 10-QSB), which represent the Company’s current
      expectations or beliefs including, but not limited to, statements concerning
      the
      Company’s operations, performance, financial condition and growth. For this
      purpose, any statements contained in this Form 10-QSB that are not statements
      of
      historical fact are forward-looking statements. Without limiting the generality
      of the foregoing, words such as “may”, “anticipation”, “intend”, “could”,
“estimate”, or “continue” or the negative or other comparable terminology are
      intended to identify forward-looking statements. These statements by their
      nature involve substantial risks and uncertainties, such as credit losses,
      dependence on management and key personnel, variability of quarterly results,
      and the ability of the Company to continue its growth strategy and competition,
      certain of which are beyond the Company’s control. Should one or more of these
      risks or uncertainties materialize or should the underlying assumptions prove
      incorrect, actual outcomes and results could differ materially from those
      indicated in the forward-looking statements.





Any
      forward-looking statement speaks only as of the date on which such statement
      is
      made, and the Company undertakes no obligation to update any forward-looking
      statement or statements to reflect events or circumstances after the date on
      which such statement is made or to reflect the occurrence of unanticipated
      events. New factors emerge from time to time and it is not possible for
      management to predict all of such factors, nor can it assess the impact of
      each
      such factor on the business or the extent to which any factor, or combination
      of
      factors, may cause actual results to differ materially from those contained
      in
      any forward-looking statements.




3




**ITEM
      1. FINANCIAL STATEMENTS**





**RENEWAL
      FUELS, INC.**





**CONSOLIDATED
      BALANCE SHEET**


**AS
      OF SEPTEMBER 30, 2007**


(Unaudited)





**ASSETS****Current
                assets:**Cash
            
            $
            540,056Inventories
            
            
            47,282Prepaid
                expenses and other current assets
            
            
            83,016**Total
                current assets**
            
            
            670,354Property
                and equipment - net
            
            
            240,986Deferred
                finance fees, net of accumulated amortization of $447,325
            
            
            1,679,695Intangibles,
                net of accumulated amortization of $52,807
            
            
            350,193Tradename
            
            
            118,000Goodwill
            
            
            323,684**Total
                assets**
            
            $
            3,382,912




(- *continued)*


4




**RENEWAL
                FUELS, INC.**
              
              **CONSOLIDATED
                BALANCE SHEET**
              **AS
                OF SEPTEMBER 30, 2007**
              (Unaudited)
              
              (-*continued)***LIABILITIES
                AND STOCKHOLDERS' EQUITY****Liabilities****Current
                liabilities:**Accounts
                payable
            
            $
            280,571Other
                payables
            
            
            88,931Convertible
                debt, in default
            
            
            1,099,626**Total
                current liabilities**
            
            
            1,469,128Convertible
                debt
            
            
            1,348,487Convertible
                preferred stock of subsidiary (preference in liquidation -
                $1,000,000)
            
            
            800,000**Total
                liabilities**
            
            
            3,617,615**Commitments
                and contingencies****Stockholders’
                equity:**Capital
                stock:Preferred
                stock - par value of $.001; 20,000,000 shares authorized;no
                shares issued and outstanding
            
            
            -Common
                stock - par value of $.001; 3,000,000,000 shares
                authorized;27,488,705
                shares issued and outstanding
            
            
            27,488Common
                stock - 1,343,750 shares to be issued
            
            
            215,000Additional
                paid-in capital
            
            
            10,053,600Accumulated
                deficit
            
            
            (10,530,791
            )**Total
                stockholders’ equity**
            
            
            (234,703
            )**Total
                liabilities and stockholders’ equity**
            
            $
            3,382,912




**See
                accompanying notes to consolidated financial
                statements.**


5




**RENEWAL
      FUELS, INC.**




**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


(Unaudited)




Successor
                Business
            
            
            
            Predecessor
                BusinessThree
                Months Ended
              September
                30, 2007
            
            March
                9, 2007 (Date of Inception)
              to
                September 30, 2007
            
            
            
            Three
                Months Ended
              March
                31, 2007
            
            Three
                Months Ended
              September
                30, 2006
            
            Nine
                Months Ended
              September
                30, 2006**Sales**
            
            $
            148,800
            
            $
            392,887
            
            
            
            $
            104,360
            
            $
            571,386
            
            $
            1,638,813Cost
                of sales
            
            
            109,048
            
            
            251,390
            
            
            
            
            76,802
            
            
            350,804
            
            
            1,034,220**Gross
                profit**
            
            
            39,752
            
            
            141,497
            
            
            
            
            27,558
            
            
            220,582
            
            
            604,593**Operating
                expenses:**Employee
                compensation and benefits
            
            
            243,101
            
            
            277,373
            
            
            
            
            52,320
            
            
            65,405
            
            
            197,103Stock-based
                transaction expense
            
            
            -
            
            
            5,131,231
            
            
            
            
            -
            
            
            -
            
            
            -Occupancy
                and equipment
            
            
            71,045
            
            
            79,302
            
            
            
            
            18,666
            
            
            24,705
            
            
            98,481Advertising
            
            
            96,187
            
            
            140,170
            
            
            
            
            8,474
            
            
            37,452
            
            
            55,542Research
                and development
            
            
            3,140,000
            
            
            3,140,000
            
            
            
            
            -
            
            
            -
            
            
            -Professional
                fees
            
            
            80,150
            
            
            429,891
            
            
            
            
            8,474
            
            
            6,588
            
            
            18,617Other
                general and administrative
            
            
            217,665
            
            
            315,209
            
            
            
            
            19,085
            
            
            34,918
            
            
            119,299Amortization
                of intangible assets
            
            
            52,807
            
            
            52,807
            
            
            
            
            -
            
            
            -
            
            
            -Total
                operating expenses
            
            
            3,900,955
            
            
            9,565,983
            
            
            
            
            107,019
            
            
            169,068
            
            
            489,042**Operating
                income (loss)**
            
            
            (3,861,203
            )
            
            (9,424,486
            )
            
            
            
            (79,461
            )
            
            51,514
            
            
            115,551Interest
                income
            
            
            68
            
            
            823
            
            
            
            
            -
            
            
            -
            
            
            -Interest
                expense
            
            
            (221,050
            )
            
            (636,477
            )
            
            
            
            -
            
            
            -
            
            
            -Deferred
                financing fees
            
            
            (266,076
            )
            
            (447,325
            )
            
            
            
            -
            
            
            -
            
            
            -Other
                expense
            
            
            (23,326
            )
            
            (23,326
            )
            
            
            
            -
            
            
            -
            
            
            -Net
                income (loss)
            
            $
            (4,371,587
            )
            $
            (10,530,791
            )
            
            
            $
            (79,461
            )
            $
            51,514
            
            $
            115,551Net
                income (loss) per share:Basic
            
            $
            (0.17
            )
            $
            (0.43
            )
            
            
            $
            (0.01
            )
            $
            0.01
            
            $
            0.02Diluted
            
            $
            (0.17
            )
            $
            (0.43
            )
            
            
            $
            (0.01
            )
            $
            0.01
            
            $
            0.02Weighted
                average shares outstanding:Basic
            
            
            26,228,929
            
            
            24,795,793
            
            
            
            
            7,000,000
            
            
            7,000,000
            
            
            7,000,000Diluted
            
            
            26,228,929
            
            
            24,795,793
            
            
            
            
            7,000,000
            
            
            7,000,000
            
            
            7,000,000**See
                accomSee accompanying notes to consolidated financial
                statements.**






6




**RENEWAL
      FUELS, INC.**




**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITY**


(Unaudited)




Preferred
                Stock
            
            Common
                Stock
            
            CommonStock
                to be
            
            AdditionalPaid-In
            
            AccumulatedShares
            
            Amount
            
            Shares
            
            Amount
            
            Issued
            
            Capital
            
            Deficit
            
            Total**Balances,
                March 9, 2007 (Inception)**
            
            
            -
            
            $
            -
            
            
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Common
                stock sold on March 9, 2007 to founders for cash
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            57,279
            
            
            -
            
            
            57,279Stock-based
                transaction expense related to common stock sold to
                founders
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            5,131,231
            
            
            -
            
            
            5,131,231Common
                stock issued in exchange for net liabilities in a recapitalization
                on
                April 20, 2007
            
            
            -
            
            
            -
            
            
            673,356
            
            
            673
            
            
            -
            
            
            (673
            )
            
            -
            
            
            -Preferred
                stock issued in reverse merger on April 20, 2007
            
            
            343,610
            
            
            343
            
            
            -
            
            
            -
            
            
            -
            
            
            (343
            )
            
            -
            
            
            -Common
                stock warrants issued on April 20, 2007 in connection with issuance
                of
                convertible debentures
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            238,932
            
            
            -
            
            
            238,932Beneficial
                conversion feature of convertible debt instruments issued or
                assumed
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            923,841
            
            
            -
            
            
            923,841Conversion
                of preferred stock to common stock on June 21, 2007
            
            
            (343,610
            )
            
            (343
            )
            
            22,907,323
            
            
            22,907
            
            
            -
            
            
            (22,564
            )
            
            -
            
            
            -Common
                stock issued on conversion of convertible debentures
            
            
            -
            
            
            -
            
            
            224,447
            
            
            225
            
            
            -
            
            
            82,675
            
            
            -
            
            
            82,900Common
                stock issued for purchase of BSI on July 2, 2007
            
            
            -
            
            
            -
            
            
            3,333,333
            
            
            3,333
            
            
            -
            
            
            1,996,667
            
            
            -
            
            
            2,000,000Fair
                value of options granted in conjunction with the purchase of BSI
                on July
                2, 2007
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            48,181
            
            
            -
            
            
            48,181Common
                stock warrants issued on July 2, 2007 in connection with issuance
                of
                convertible debentures
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,104,405
            
            
            -
            
            
            1,104,405Beneficial
                conversion feature of convertible debentures issued on July 2,
                2007
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            348,287
            
            
            -
            
            
            348,287*(continued
                -**)*




7


**RENEWAL
        FUELS, INC.**
  **CONSOLIDATED
        STATEMENT OF STOCKHOLDERS’ EQUITY**
 **AS
        OF SEPTEMBER 30, 2007**
 (Unaudited)
 (- *continued)*


Shares
                issued on conversion of convertible debentures on July 12 and July
                13,
                2007
            
            
            -
            
            
            -
            
            
            350,360
            
            
            350
            
            
            -
            
            
            145,750
            
            
            -
            
            
            146,100Cash
                paid in lieu of fractional shares from the 1-for-15 reverse stock
                split on
                July 31, 2007
            
            
            -
            
            
            -
            
            
            (114
            )
            
            -
            
            
            -
            
            
            (68
            )
            
            -
            
            
            (68
            )Common
                stock issued on October 5, 2007 for conversion of convertible debentures
                on September 21, 2007 - 1,343,750 shares
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            215,000
            
            
            -
            
            
            -
            
            
            215,000Net
                loss for the period
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (10,530,791
            )
            
            (10,530,791
            )**Balances,
                September 30, 2007**
            
            
            -
            
            $
            -
            
            
            27,488,705
            
            $
            27,488
            
            $
            215,000
            
            $
            10,053,600
            
            $
            (10,530,791
            )
            $
            (234,703
            )




**See
      accompanying notes to consolidated financial statements.**




8




**RENEWAL
      FUELS, INC.**





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


(Unaudited)





Successor
                Business
            
            
            
            Predecessor
                BusinessMarch
                9, 2007
              (Date
                of Inception) to
              September
                30, 2007
            
            
            
            Three
              Months
              Ended
              March
                31, 2007
            
            Nine
              Months
              Ended
              September
                30, 2006**Cash
                Flows From Operating Activities:**Net
                income (loss)
            
            $
            (10,530,791
            )
            
            
            $
            (79,461
            )
            $
            115,551Adjustments
                to reconcile net income (loss) to net cash
              provided
                by (used in) operating activities:Depreciation
                and amortization
            
            
            62,699
            
            
            
            
            471
            
            
            16,344Amortization
                of deferred financing fees
            
            
            447,325
            
            
            
            
            -
            
            
            -Accrued
                interest and amortization of debt discounts
            
            
            634,550
            
            
            
            
            -
            
            
            -Stock-based
                transaction expense
            
            
            5,131,231
            
            
            
            
            -
            
            
            -Research
                and development expense
            
            
            3,140,000
            
            
            
            
            -
            
            
            -Write
                off of acquired fixed assets
            
            
            22,931
            
            
            
            
            -
            
            
            -Changes
                in operating assets and liabilities, net:Accounts
                receivable
            
            
            -
            
            
            
            
            -
            
            
            11,198Inventories
            
            
            (12,856
            )
            
            
            
            26,151
            
            
            26,320Other
                current assets
            
            
            (83,016
            )
            
            
            
            11,915
            
            
            (1,252
            )Accounts
                payable and accrued expenses
            
            
            (316,707
            )
            
            
            
            (5,857
            )
            
            154,124Customer
                deposits
            
            
            -
            
            
            
            
            (12,224
            )
            
            (31,488
            )**Net
                Cash Provided By (Used In) Operating Activities**
            
            
            (1,504,634
            )
            
            
            
            (59,005
            )
            
            290,797**Cash
                Flows From Investing Activities:**Acquisition
                of FuelMeister assets
            
            
            (494,426
            )
            
            
            
            -
            
            
            -Acquisition
                of Biodiesel Solutions
            
            
            (422,014
            )
            
            
            
            -
            
            
            -Purchases
                of property and equipment
            
            
            (46,081
            )
            
            
            
            -
            
            
            (28,623
            )**Net
                Cash Provided By (Used In) Investing Activities**
            
            
            (962,521
            )
            
            
            
            -
            
            
            (28,623
            )**Cash
                Flows From Financing Activities:**Proceeds
                from issuance of common stock
            
            
            57,279
            
            
            
            
            -
            
            
            -Proceeds
                from issuance of warrants
            
            
            1,343,337
            
            
            
            
            -
            
            
            -Proceeds
                from issuance of beneficial conversion feature
            
            
            938,554Proceeds
                from issuance of long-term debt
            
            
            1,118,109
            
            
            
            
            -
            
            
            -Payment
                of debt issuance costs
            
            
            (450,000
            )
            
            
            
            -
            
            
            -Payment
                for fractional shares
            
            
            (68
            )
            
            
            
            -
            
            
            -Net
                contributions (distributions) from (to) owner
            
            
            -
            
            
            
            
            31,953
            
            
            (348,584
            )**Net
                Cash Provided By (Used In) Financing Activities**
            
            
            3,007,211
            
            
            
            
            31,953
            
            
            (348,584
            )




9




**RENEWAL
        FUELS, INC.**
  **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 (Unaudited)


*(-continued)*




Successor
              Business
            
            
            
            Predecessor
                Business**Net
                Increase (Decrease) In Cash**
            
            
            540,056
            
            
            
            
            (27,052
            )
            
            (86,410
            )Cash
                - Beginning of period
            
            
            -
            
            
            
            
            52,626
            
            
            276,850Cash
                - End of period
            
            $
            540,056
            
            
            
            $
            25,574
            
            $
            190,440**Supplemental
                Disclosure Of Cash Flow Information -**Interest
                paid
            
            $
            1,927
            
            
            
            $
            -
            
            $
            -Income
                taxes paid
            
            $
            -
            
            
            
            $
            -
            
            $
            -**Supplemental
                Disclosures Of Non-Cash Investing And****Financing
                Activities:**Net
                liabilities assumed in a recapitalization
            
            $
            1,677,020
            
            
            
            $
            -
            
            $
            -**See
                accompanying notes to consolidated financial statements.**





10


**RENEWAL
      FUELS, INC.**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**AS
      OF AND FOR THE PERIODS ENDED SEPTEMBER 30, 2007**


**(UNAUDITED)**





**NOTE
      1**  **NATURE
      OF BUSINESS AND GOING CONCERN**





**Reorganization
      of Tech Laboratories, Inc. and Reverse Merger with Renewal Biodiesel,
      Inc.**





On
      April
      20, 2007, Renewal Fuels, Inc., formerly Tech Laboratories, Inc. (the “Company”
or “we”, “us”, “our”), and its wholly-owned subsidiary, Renewal Fuels
      Acquisitions, Inc. (“Renewal Acquisitions”), entered into a merger agreement
      (the “Renewal Merger Agreement”) with Renewal Biodiesel, Inc. (formerly Renewal
      Fuels, Inc.) (“Renewal Biodiesel”). Renewal Biodiesel was incorporated in the
      state of Delaware on March 9, 2007 for the purpose of the acquisition of the
      FuelMeister Business described below. Pursuant to the Renewal Merger Agreement,
      Renewal Acquisitions was merged with and into Renewal Biodiesel. The former
      shareholders of Renewal Biodiesel were issued an aggregate of 343,610 shares
      of
      the Company’s series A convertible preferred stock (the “Preferred Stock”),
      which were immediately convertible at the option of the holders into an
      aggregate of 268,588 shares of our common stock. Following approval of the
      Renewal Merger Agreement by our shareholders, the Preferred Stock became
      convertible at the option of the holders into an aggregate of 22,907,323 shares
      of our common stock. On June 21, 2007, all of the holders converted their shares
      of Preferred Stock into 22,907,323 shares of the Company’s common
      stock.





Tech
      Laboratories had no active business operations immediately prior to the merger.
      Mr. John King, Chief Executive Officer and Mr. David Marks, Chairman were
      officers and directors and were minority shareholders of Renewal Biodiesel,
      Inc.





On
      July
      9, 2007, the Company, which was a New Jersey entity (“Tech Labs-NJ”), entered
      into an Agreement and Plan of Merger with Tech Laboratories, Inc., a
      Delaware entity (“Tech Labs - DE”) under which Tech Labs - NJ and Tech Labs - DE
      were merged with and into the surviving corporation, Tech Labs - DE, whose
      name
      was subsequently changed on August 1, 2007 to Renewal Fuels, Inc. The
      certificate of incorporation and bylaws of the surviving corporation became
      the
      certificate of incorporation and bylaws of the Company, and the directors and
      officers in office of the surviving corporation became the directors and
      officers of the Company.





On
      July
      10, 2007, the majority stockholders of the Company authorized a 1-for-15 reverse
      stock split pursuant to which, on August 1, 2007, the shares of common stock
      of
      the Company that were outstanding at July 31, 2007 (the “Old Shares”)
      automatically converted into new shares of common stock (the "New Shares").
      All common share and per share amounts in these financial statements have been
      retroactively restated to reflect this reverse stock split. The New Shares
      issued pursuant to the reverse stock split are fully paid and non-assessable.
      All New Shares have the same par value, voting rights and other rights as the
      Old Shares. Stockholders of the Company do not have preemptive rights to acquire
      additional shares of common stock which may be issued. Also on August 1, 2007,
      the Company changed its name from Tech Laboratories, Inc. to Renewal Fuels,
      Inc.
      and the Company’s quotation symbol on the OTC Bulletin Board was changed from
      TLBT to RNWF.




11





**Acquisition
      of FuelMeister Business**





Renewal
      Biodiesel, Inc. (formerly Renewal Fuels, Inc.)(“Renewal Biodiesel”) acquired all
      tangible and intangible assets of the FuelMeister Business of Biodiesel
      Solutions, Inc. (“BSI”), a Nevada corporation, effective March 30, 2007. As a
      result, Renewal Biodiesel is engaged in the business of designing, developing,
      manufacturing and marketing personal biodiesel processing equipment and
      accessories to convert used and fresh vegetable oil into clean-burning
      biodiesel. Renewal Biodiesel’s products allow customers to make biodiesel fuel,
      which is capable of powering all diesel fuel engines, for a current cost of
      approximately 70 cents per gallon. Renewal Biodiesel has a network of dealers
      in
      the United States for sale and distribution of its products. Renewal Biodiesel’s
      manufacturing facilities are currently located in Sparks, Nevada.





**Acquisition
      of BSI**





On
      July
      2, 2007, the Company and its wholly-owned subsidiary BSI Acquisitions, Inc.
      (“BSI Acquisitions”) entered into a merger agreement (the “BSI Merger
      Agreement”) with BSI (from whom Renewal Biodiesel had acquired the FuelMeister
      Business). Pursuant to the BSI Merger Agreement, BSI Acquisitions was merged
      with and into BSI and the Company thus acquired all of the remaining business
      of
      BSI, other than the FuelMeister Business which was previously acquired as a
      result of the reverse merger with Renewal Biodiesel. The former shareholders
      of
      BSI were issued an aggregate of 3,333,333 shares of common stock of the Company,
      1,333,333 shares of a new BSI convertible preferred stock (the “BSI Preferred
      Stock”), options to purchase 94,600 shares of the Company’s common stock and
      $500,000 in cash. The BSI Preferred Stock is immediately convertible at the
      option of the holders into common stock of the Company at a conversion price
      equal to the greater of (i) $0.75 or (ii) the average closing price of the
      common stock during the ten trading days immediately preceding the conversion
      date. Prior to the acquisition of BSI, the Company had loaned $200,000 to BSI
      under an 8% 180 day secured promissory note, due November 24, 2007. Upon the
      acquisition of BSI, the note receivable was reclassified as a capital
      contribution to BSI.





BSI
      will
      manufacture the BiodieselMaster®, a factory-built biodiesel processing plant
      that is designed to produce 350,000 gallons of biodiesel per year and is
      designed to be appropriately scaled for a variety of customers, including small
      communities, farms, farm co-ops and trucking fleets. The design will provide
      a
      biodiesel production system that is continuous, flexible, efficient, affordable,
      and fully-automated. The automated control system will minimize labor costs
      and
      facilitates remote diagnostics.





**Predecessor
      Business**





As
      described above, under the terms of the Renewal Merger Agreement, we acquired
      100% of the common stock of Renewal Biodiesel in exchange for the issuance
      by us
      of 22,907,323 common shares. Although we were the legal acquirer, Renewal
      Biodiesel was considered to be the accounting acquirer and, as such, the
      acquisition was accounted for as a reverse merger and recapitalization. As
      a
      result, the accompanying unaudited consolidated financial statements represent
      the results of operations and cash flows of the accounting acquirer and
      Successor (Renewal Biodiesel) from the date of its inception on March 9, 2007
      through September 30, 2007. The FuelMeister Business acquired by Renewal
      Biodiesel constitutes our Predecessor business. The accompanying unaudited
      consolidated financial statements, as of September 30, 2007 and for the period
      March 9, 2007 (date of inception) through September 30, 2007, are those of
      the
      Successor. The statements of operations for the three months ended March 31,
      2007 and for the three and nine months ended September 30, 2006, and the
      statements of cash flows for the three months ended March 31, 2007 and for
      the
      nine months ended September 30, 2006 are those of our Predecessor, the
      FuelMeister Business.


12




**Going
      Concern**





Our
      financial statements are prepared using accounting principles generally accepted
      in the United States of America applicable to a going concern, which contemplate
      the realization of assets and the liquidation of liabilities in the normal
      course of business. Since inception, we have incurred losses from operations.
      Furthermore, we will require a significant amount of capital to proceed with
      our
      business plan. As such, our ability to continue as a going concern is contingent
      upon us being able to secure an adequate amount of debt or equity capital to
      enable us to meet our operating cash requirements and successfully implement
      our
      business plan. In addition, our ability to continue as a going concern must
      be
      considered in light of the challenges, expenses and complications frequently
      encountered by entrance into new markets and the competitive environment in
      which we operate.





Our
      Predecessor historically funded its cash requirements through operations and
      contributions from the former owner. In connection with the acquisition of
      the
      FuelMeister Business and BSI, we obtained debt financing. We expect we will
      need
      to obtain additional funding through private or public equity and/or debt
      financing to pay for the infrastructure needed to support our planned growth
      but, as a public company, we believe we will have better access to additional
      debt or equity capital.





There
      can
      be no assurance that our plans will materialize and/or that we will be
      successful in raising required capital to grow our business and/or that any
      such
      capital will be available on terms acceptable to us. These factors, among
      others, indicate that we may be unable to continue as a going concern for a
      reasonable period of time. Our financial statements do not include any
      adjustments relating to the recoverability and classification of recorded asset
      amounts or the amounts and classification of liabilities that might be necessary
      should we be unable to continue as a going concern.





**NOTE
      2**  **ACQUISITIONS**





**Reverse
      Merger and Recapitalization**





On
      April
      20, 2007, we entered into a Merger Agreement with Renewal Biodiesel, a Delaware
      corporation formed in 2007 for the purposes of the asset acquisition of the
      FuelMeister Business described below. Under the terms of the agreement, we
      acquired 100% of the common stock of Renewal Biodiesel in exchange for the
      issuance by us of 343,610
      shares of our series A convertible preferred stock, which was subsequently
      converted into 22,907,323 common
      shares. The officers and directors of Renewal Biodiesel assumed similar
      positions with us. Although we were the legal acquirer, Renewal Biodiesel was
      considered the accounting acquirer and as such the acquisition was accounted
      for
      as a reverse merger and recapitalization. As a result, the accompanying
      consolidated financial statements represent the results of operations and cash
      flows of the accounting acquirer (Renewal Biodiesel) from the date of its
      inception on March 9, 2007. Immediately prior to the reorganization, we had
      673,356 shares of common stock outstanding and net liabilities of $1,677,020,
      consisting of the following, at fair value:





Net
                liabilities assumed:Accounts
                payable
            
            $
            203,992Long
                term debt, including accrued interest
            
            
            1,473,028Net
                liabilities assumed
            
            $
            1,677,020





The
      net
      liabilities assumed primarily represent debt obligations to YA Global
      Investments, L.P. (f/k/a Cornell Capital Partners L.P) (herein “YA Global”) and
      were assumed in connection with the provision of additional long-term debt
      financing provided by YA Global (see Note 7), which additional funding was
      provided simultaneously with the reverse merger and recapitalization.
      Accordingly, the net liabilities assumed have been recorded as deferred
      financing costs incurred in connection with the additional debt funding provided
      by YA Global and will be amortized by periodic charges to income on a
      straight-line basis over the life of that debt funding. In addition, the Company
      paid $180,000 in fees in connection with the additional debt funding provided
      by
      YA Global.




13





**Acquisition
      of Assets of FuelMeister Business**





On
      March
      9, 2007, Crivello Group, LLC (“Crivello”) and its wholly-owned subsidiary,
      Renewal Biodiesel, entered into an Asset Purchase Agreement with Biodiesel
      Solutions, Inc. (“BSI”), which was effective March 30, 2007. Pursuant to the
      Asset Purchase Agreement, BSI sold substantially all of the assets and property
      of its FuelMeister operations (the “FuelMeister Business”, the “Predecessor” or
      the “Predecessor Business”, an unrelated Company) to Renewal Biodiesel, in
      exchange for an aggregate purchase price of $500,000, subject to adjustment.
      Under the terms of the Agreement, the purchase price was subsequently adjusted
      to $494,426 to reflect the inventory on hand at closing. Of the adjusted
      purchase price, $100,000 was paid on execution of the Agreement as a down
      payment, $100,000 was paid at closing, $50,000 was paid on April 11, 2007,
      and
      the balance of the purchase price was paid by delivery of a promissory note,
      as
      amended, in the amount of $244,426. The promissory note was subsequently paid
      on
      April 20, 2007. The $250,000 cash portion of the $494,426 purchase price of
      the
      assets was funded by loans received from Crivello of $200,000 and cash of
      $57,279 received by Renewal Biodiesel from our founders for common stock. The
      loans from Crivello, together with the promissory note for $244,426, were repaid
      from the proceeds of loans from  YA
      Global
      (see Note 7). The difference of $5,131,231 between the fair value of the
      22,907,323 common shares issued to our founders as a result of the reverse
      merger described above, determined based on the trading price of $0.2265 per
      share immediately prior to the reorganization and reverse merger, and the amount
      they paid for their shares of Renewal Biodiesel of $57,279 has been recorded
      as
      stock-based transaction expense.





Renewal
      Biodiesel also entered into a management services agreement with BSI, pursuant
      to which BSI agreed to provide general management and administrative services
      to
      Renewal Biodiesel, as well as the use of its facilities. Renewal Biodiesel
      reimbursed BSI for the direct cost of services and facilities, as provided.
      The
      agreement terminated 90 days after the FuelMeister acquisition or upon ten
      days
      notice by Renewal Biodiesel. As discussed in Note 1, we acquired BSI on July
      2,
      2007, which effectively resulted in termination of the agreement.





The
      acquisition of the FuelMeister Business was accounted for by the purchase method
      in accordance with Financial Accounting Standards Board Statement No. 141 ("FAS
      141") and the results of its operations are included in these consolidated
      financial statements from the date of acquisition. The aggregate purchase price
      determined in accordance with FAS 141 was $494,426.





The
      following is a summary of the net assets acquired at the date of acquisition,
      at
      fair value:





Net
                assets acquired:Inventory
            
            $
            34,426Fixed
                assets
            
            
            9,145Website
                domain
            
            
            50,150Tradename
            
            
            118,000Customer
                lists, engineering drawings and other intangibles
            
            
            189,000Goodwill
            
            
            93,705Net
                assets acquired
            
            $
            494,426






14




**Acquisition
      of BSI**





On
      July
      2, 2007, we entered into a merger agreement with BSI, as a result of which
      we
      acquired the remainder of BSI's business (i.e., other than the FuelMeister
      Business acquired previously). BSI is engaged in the business of designing,
      manufacturing and marketing processing equipment and accessories, including
      personal biodiesel processors and “community scale” biodiesel processor systems,
      which convert fresh and used vegetable oils into clean burning biodiesel fuel.
      It complements and optimizes Renewal’s ability to design, develop, manufacture
      and market both personal and community scale biodiesel processing equipment
      and
      accessories.





As
      consideration for the acquisition of BSI, we issued an aggregate of 3,333,333
      shares of common stock, 1,000,000 new preferred shares of BSI convertible into
      1,333,333 shares of our common stock, options to purchase 94,600 shares of
      our
      common stock and $500,000 in cash. The
      BSI
      Preferred Stock is immediately convertible at the option of the holders into
      common stock of the Company at a conversion price equal to the greater of (i)
      $0.75, or (ii) the average closing price of the common stock during the ten
      trading days immediately preceding the conversion date. Prior to the acquisition
      of BSI, the Company loaned $200,000 to BSI under an 8% 180 day secured
      promissory note, due November 24, 2007. Upon the acquisition of BSI, the note
      receivable was reclassified as a capital contribution to BSI.





Also
      on
      July 2, 2007, we entered into a Securities Purchase Agreement with YA Global
      providing for the sale to YA Global of secured convertible debentures in the
      aggregate principal amount of $2,700,000, of which $2,000,000 was advanced
      immediately. The second installment of $700,000 will be funded within two
      business days after the Company has unconditionally booked and received at
      least
      a 50% deposit for the sale of at least one BiodieselMaster® unit. We
      also issued to YA Global five-year warrants to purchase 2,250,000 shares of
      our
      common stock at $0.90 per share. The Debentures bear interest at the prime
      rate
      plus 2.75% (but not less than 10%) and mature two years from the date of
      issuance (the "Maturity Date"). The Company is not required to make any payments
      until the Maturity Date. The holder of the Debentures may convert at any time
      amounts outstanding into shares of Common Stock at a conversion price per share
      equal to the lesser of (i) $0.05, or (ii) 80% of the lowest closing bid price
      of
      the Common Stock during the ten trading days immediately preceding the
      conversion date.





The
      aggregate purchase price for the BSI Acquisition was determined based on the
      fair value of the consideration issued, which consisted of common stock,
      preferred shares of BSI convertible into our common stock, options to purchase
      our common stock and cash, as follows:





3,333,333
                shares of common stock
            
            $
            2,000,0001,000,000
                shares of preferred stock of BSI
            
            
            800,00096,400
                common stock options
            
            
            48,181Note
                receivable from BSI reclassified to contributed capital
            
            
            200,000Cash
                paid, net of $77,986 cash acquired
            
            
            422,014Total
                purchase price
            
            $
            3,470,195




15




The
      purchase price was allocated to BSI’s net tangible and intangible assets based
      on their estimated fair values as of the date of the completion of the
      acquisition and based on a report by an independent, reputable appraiser in
      accordance with the professional standards of the American Society of Appraisers
      and the Institute of Business Appraisers. The amount allocated to purchased
“in
      process research and development costs” was valued at fair value using a debt
      free cash flow method. As required by current accounting literature, these
      costs
      are immediately expensed in the current period’s income statement. The
      allocation of the total purchase price is summarized below:





Purchase
                Price
            
            Asset
                LifeAllocation
            
            In
                YearsWorking
                capital, net and excluding cash acquired
            
            $
            (204,231
            )
            
            -Fixed
                assets
            
            
            90,477
            
            
            3
                - 10In
                process research and development
            
            
            3,140,000
            
            
            -Employee
                contracts
            
            
            114,000
            
            
            2Non-compete
                agreements
            
            
            100,000
            
            
            1.5Goodwill
            
            
            229,979
            
            
            IndefiniteNet
                Assets Acquired
            
            $
            3,470,195




**Purchase
      Accounting For Acquisitions**





The
      results of operations of the 2007 Acquisitions are included in the Company's
      results of operations beginning from their respective acquisition dates. The
      following unaudited pro forma information combines the consolidated results
      of
      operations of the Company and the companies that it acquired as if the
      acquisitions had occurred at the beginning of fiscal year 2006:




Three
                Months
              Ended
                September, 30,
            
            For
                The Nine Months Ended
              September
                30,2007
            
            2006
            
            2007
            
            2006Revenues
            
            $
            148,800
            
            $
            459,539
            
            $
            500,292
            
            $
            1,378,617Loss
                from Operations
            
            $
            (615,896
            )
            $
            (178,488
            )
            $
            (1,452,114
            )
            $
            (8,794,637
            )Net
                Loss
            
            $
            (1,216,899
            )
            $
            (743,966
            )
            $
            (3,389,752
            )
            $
            (10,491,193
            )Per
                Share - basic and fully diluted
            
            $
            (0.04
            )
            $
            (0.12
            )
            $
            (0.07
            )
            $
            (0.38
            )Weighted
                average shares outstanding
            
            
            27,488,705
            
            
            27,488,705
            
            
            27,488,705
            
            
            27,488,705




The
      unaudited pro forma information does not purport to be indicative of the results
      that would actually have been achieved had the acquisitions occurred as of
      the
      date of the periods indicated.




**NOTE
      3** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





**Basis
      of Presentation**





The
      accompanying unaudited consolidated financial statements have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      of
      America for interim financial information and the instructions to Form 10-QSB
      and Rule 310 of Regulation SB of the Securities and Exchange Commission (the
      "SEC"). Accordingly, these consolidated financial statements do not include
      all
      of the footnotes required by accounting principles generally accepted in the
      United States of America. In management’s opinion, all adjustments (consisting
      of normal and recurring adjustments) considered necessary for a fair
      presentation have been included. Operating results for the three months ended
      September 30, 2007 are not necessarily indicative of the results that may be
      expected for the year ending December 31, 2007.





The
      accompanying unaudited consolidated financial statements, as of September 30,
      2007 and for the period March 9, 2007 (date of inception) through September
      30,
      2007, are those of Renewal Fuels, Inc., the Successor. The statements of
      operations and of cash flows for the three months ended March 31, 2007 and
      for
      the three and nine months ended September 30, 2006 are those of the FuelMeister
      Business, our Predecessor.




16





**Accounting
      Policies**





We
      have
      generally adopted the accounting policies of the Predecessor. Unless
      specifically stated, the accounting policies described below are the accounting
      policies of both the Successor and the Predecessor, which do not differ during
      all periods presented.





**Principles
      of Consolidation**





*Successor*





The
      consolidated financial statements include the accounts of Renewal Fuels, Inc.
      (“Renewal”) from April 20, 2007, the date of the reverse merger between Renewal
      and its wholly owned subsidiary Renewal Biodiesel, Inc. (“Renewal Biodiesel”),
      the accounts of Renewal Biodiesel from March 9, 2007, the date that Renewal
      Biodiesel was incorporated and the accounts of Biodiesel Solutions, Inc. (“BSI”)
      from July 2, 2007, the date of its acquisition. All inter-company accounts
      and
      transactions have been eliminated in consolidation.





*Predecessor*





The
      accompanying financial statements of the FuelMeister business (the “FuelMeister
      Business” or the “Predecessor”, a carve-out business of Biodiesel Solutions,
      Inc. and a predecessor business of Renewal Biodiesel, which carve-out business
      was acquired by Renewal Biodiesel on March 30, 2007), are presented on a
      carved-out basis as if it had been an independent reporting entity for the
      periods presented. Certain revenue and expenses of Biodiesel have been allocated
      by management between the FuelMeister Business and the operations retained
      by
      Biodiesel, based either on specific attribution of those revenues and expenses
      or, where necessary and appropriate, based on management’s best estimate of an
      appropriate allocation.





**Use
      of Estimates**





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenses during the reporting periods
      presented. Estimates that are critical to the accompanying financial statements
      arise from our belief that we will secure an adequate amount of cash to continue
      as a going concern, and that all long-lived assets and inventories are
      recoverable. The markets for our products are characterized by intense
      competition, rapid technological development, evolving standards and short
      product life cycles, all of which could impact the future realization of our
      assets. Estimates and assumptions are reviewed periodically and the effects
      of
      revisions are reflected in the period that they are determined to be necessary.
      It is at least reasonably possible that our estimates could change in the near
      term with respect to these matters.





**Revenue
      Recognition**





Revenue
      from equipment and parts and accessories sales are generally recognized at
      the
      date of shipment and revenue from services is recognized when the services
      are
      performed and all substantial contractual obligations have been satisfied.





Our
      revenue recognition policy is consistent with the criteria set forth in SEC
      Staff Accounting Bulletin 104, “Revenue Recognition in Financial Statements”
(“SAB 104”) for determining when revenue is realized or realizable and earned.
      In accordance with the requirements of SAB 104, we recognize revenue when (1)
      persuasive evidence of an arrangement exists; (2) delivery has occurred; (3)
      our
      price to the buyer is fixed or determinable and (4) collectibility of the
      receivables is reasonably assured.




17





**Product
      Warranties**





At
      the
      time a sale is recognized, the company records the estimated future warranty
      costs. These costs are estimated based on historical warranty claims. For the
      current period we used the historical warranty experience of the Predecessor
      company. Warranty provisions are included as a component of cost of
      sales.





**Allowance
      for Doubtful Accounts**





The
      allowance for doubtful accounts is evaluated on a regular basis and adjusted
      based upon management's best estimate of probable losses inherent in
      receivables, based on historical experience, including the historical loss
      experience of the Predecessor. Receivables are determined to be past due if
      they
      have not been paid by the payment due dates. Debts are written off against
      the
      allowance when deemed to be uncollectible. Subsequent recoveries, if any, are
      credited to the allowance when received.





**Cash
      and Cash Equivalents**





We
      consider all highly liquid instruments purchased with an original maturity
      of
      three months or less to be cash equivalents.




**Inventories**





Inventories
      are stated at the lower of cost or market with cost determined using a first-in,
      first-out basis. At September 30, 2007, inventories consisted of inventory
      and
      displays amounting to $45,749 and $1,533, respectively.





**Inventory
      Obsolescence**





We
      evaluate our inventory for excess and obsolescence on a quarterly basis. In
      preparing our evaluation, we look at the expected demand for our products for
      the next six to twelve months in order to determine whether or not such raw
      materials, WIP and finished goods require a change in the inventory reserve
      in
      order to record the inventory at net realizable value. After discussions with
      the senior management team, a reserve is established so that inventory is
      appropriately stated at the lower of cost or net realizable value.





**Property
      and Equipment**





Property
      and equipment are stated at cost. Major additions are capitalized, while minor
      additions and maintenance and repairs, which do not extend the useful life
      of an
      asset, are expensed as incurred. Depreciation and amortization are provided
      using the straight-line method over the estimated useful lives of the respective
      assets, which range from 3 to 10 years.





We
      evaluate the carrying value of property and equipment when events and
      circumstances warrant such a review. If the carrying values of the assets are
      considered to be impaired, a loss is recognized based on the amount by which
      the
      carrying value exceeds the fair market value of the asset. We have not
      experienced any impairment of our property and equipment.




18





**Intangible
      Assets**





Intangible
      assets, consisting primarily of customer lists, engineering drawings and other
      intangibles acquired as part of the acquisition of the FuelMeister Business
      and
      of BSI, are amortized over their estimated useful lives, which range from 1
      to
      15 years.





**Stock-Based
      Compensation**





In
      accordance with Financial Accounting Standards Board Statement No. 123 (“FAS 123
      (Revised)”), *Share-Based
      Payments* ,
      we
      account for equity instruments issued to employees for services based on the
      fair value of the equity instruments issued, and account for equity instruments
      issued to those other than employees based on the fair value of the
      consideration received, or the fair value of the equity instruments, whichever
      is more readily measurable. We anticipate that the shares issued upon exercise
      of any stock option would be obtained from our authorized and unissued
      shares.





**Derivative
      Instruments and Beneficial Conversion Features**





We
      do not
      use derivative instruments to hedge exposures to cash flow, market, or foreign
      currency risks.





We
      review
      the terms of convertible debt and equity instruments we issue to determine
      whether there are embedded derivative instruments, including the embedded
      conversion option, that are required to be bifurcated and accounted for
      separately as a derivative financial instrument. When the ability to physical
      or
      net-share settle the conversion option is deemed to be not within the control
      of
      the company, the embedded conversion option may be required to be accounted
      for
      as a derivative financial instrument liability. In circumstances where the
      convertible instrument contains more than one embedded derivative instrument,
      including the conversion option, that is required to be bifurcated, the
      bifurcated derivative instruments are accounted for as a single, compound
      derivative instrument. In connection with the sale of convertible debt and
      equity instruments, we may also issue freestanding options or warrants. We
      may
      also issue options or warrants to non-employees in connection with consulting
      or
      other services they provide. Depending on their terms, these options and
      warrants may be accounted for as derivative instrument liabilities, rather
      than
      as equity.





Certain
      instruments, including convertible debt and equity instruments and the
      freestanding options and warrants issued in connection with those convertible
      instruments, may be subject to registration rights agreements, which impose
      penalties for failure to register the underlying common stock by a defined
      date.
      These potential cash penalties are accounted for in accordance with FAS No.
      5, *Accounting
      for Contingencies.*





When
      the
      embedded conversion option in a convertible debt instrument is not required
      to
      be bifurcated and accounted for separately as a derivative instrument, we review
      the terms of the instrument to determine whether it is necessary to record
      a
      beneficial conversion feature, in accordance with EITF Issues 98-05 and 00-27.
      When the effective conversion rate of the instrument at the time it is issued
      is
      less than the fair value of the common stock into which it is convertible,
      we
      recognize a beneficial conversion feature, which is credited to equity and
      reduces the initial carrying value of the instrument.





When
      convertible debt is initially recorded at less than its face value as a result
      of allocating some or all of the proceeds received to derivative instrument
      liabilities, to a beneficial conversion feature or to other instruments, the
      discount from the face amount, together with the stated interest on the
      convertible debt, is amortized over the life of the instrument through periodic
      charges to income, using the effective interest method.




19





**Research
      and Development Costs**





Research
      and development costs related to product development are expensed as incurred.
      The only such costs incurred during the periods covered by these financial
      statements were the purchased “in process research & development costs”
incurred in the acquisition of BSI in the amount of $3,140,000 as discussed
      in
      Note 2.





**Advertising
      Costs**





Advertising
      costs are expensed as incurred. For the three months ended September 30, 2007
      and the period from March 9, 2007 (date of inception) to September 30, 2007,
      advertising costs were $96,188 and $140,171, respectively.





**Shipping
      and Handling Costs**





Shipping
      and handling costs are reported as a component of cost of sales. ******





**Net
      Income (Loss) Per Share**





We
      compute net income (loss) per share in accordance with FAS No. 128, *Earnings
      per Share* (“FAS
      128”), and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). Under the provisions
      of FAS 128 and SAB 98, basic net income (loss) per share is computed by dividing
      the net income (loss) available to common stockholders for the period by the
      weighted average number of common shares outstanding during the period. Diluted
      net income (loss) per share is computed by dividing the net loss for the period
      by the number of common and common equivalent shares outstanding during the
      period. Because of our net losses in 2007, none of these common stock equivalent
      shares are dilutive; accordingly basic and diluted net loss per share are
      identical for each of the periods in the accompanying statements of
      operations.





**Income
      Taxes**





*Successor*





We
      account for income taxes under the liability method, in accordance with FAS
      No.
      109, *Accounting
      for Income Taxes* .
      Under
      the liability method of FAS 109, deferred income taxes are recognized for the
      tax consequences of temporary differences by applying enacted statutory rates
      applicable to future years to differences between the tax bases of assets and
      liabilities and their financial statement carrying amounts. Also, the effect
      on
      deferred taxes of a change in tax rates is recognized in income in the period
      that included the enactment date.





*Predecessor*





Through
      December 31, 2006, the Predecessor’s stockholder elected under the Internal
      Revenue Code to be taxed as an S Corporation. In lieu of corporate income taxes,
      the stockholders of S Corporations are taxed on their proportionate share of
      a
      company’s taxable income. Accordingly, no provision or liability for federal
      income taxes has been included in the accompanying Predecessor financial
      statements.





Effective
      January 1, 2007, and in connection with the amendment and restatement of the
      Predecessor’s articles of incorporation, the Predecessor became a C corporation
      and therefore became subject to income taxes. From January 1, 2007, the
      Predecessor accounted for income taxes under the liability method. The
      Predecessor’s financial statements do not include a pro forma provision for
      income taxes (as if it were a C corporation for the periods presented) in
      accordance with FAS 109, because the overall provision (benefit) for all periods
      presented would have been zero as (1) any current income taxes due would have
      been reduced to zero through a deferred income tax benefit (as a result of
      a
      carry forward of prior year net operating losses) and because (2) the net
      deferred income tax assets arising from the remaining net operating loss
      carryforwards and other temporary differences existing at March 31, 2007 would
      have been fully reserved by a valuation allowance.




20





**Impact
      of Recently Issued Accounting Pronouncements**





The
      Financial Accounting Standards Board has recently issued several Financial
      Accounting Standards, as summarized below. None of these statements have had,
      or
      are expected to have, a significant effect on our financial
      statements.





Issued
            
            StatementFebruary
                2006
            
            FAS
                155 - “Accounting for Certain Hybrid Financial Instruments; an amendment
                of Financial Accounting Standard Nos. 133 and 140"March
                2006
            
            FAS
                156 - “Accounting for Servicing of Financial Assets, an amendment of FASB
                Statement No. 140, Accounting for Transfers and Servicing of Financial
                Assets and Extinguishments of Liabilities”June
                2006
            
            FAS
                Interpretation 48 - "Accounting for Uncertainty in Income
                Taxes"September
                2006
            
            FAS
                157 - “Fair Value Measurements”September
                2006
            
            FAS
                158 - “Employers’ Accounting for Defined Benefit Pension and Other
                Postretirement Plans” - an amendment of FASB Statements No. 87, 88, 106,
                and 132(R)”February
                2007
            
            FAS
                159 - “The Fair Value Option for Financial Assets and Financial
                Liabilities—Including an amendment of FASB Statement No.
                115”




**NOTE
      4** **FINANCIAL
      INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK**





We
      believe the book value of our cash, accounts payable and accrued expenses
      approximates their fair values due to their short-term nature.





We
      sell
      products to value added distributors and other customers and generally require
      payment in advance or at the time of sale. Periodically, we extend credit based
      on an evaluation of the customer's financial condition, generally without
      requiring collateral. Our terms for our accounts receivable are generally net
      30
      days. As such, exposure to losses on receivables is principally dependent on
      each customer's financial condition.  We monitor our exposure to credit
      losses and maintain allowances for any anticipated losses.  At September
      30, 2007, we did not have any accounts receivable. Our ability to collect
      receivables arising in the future may be affected by economic
      fluctuations.




21





We
      maintain all of our cash in deposit accounts with one financial institution,
      which deposit accounts at times may exceed federally insured limits.  We
      have not experienced any losses in such accounts.





**NOTE
      5** **PROPERTY
      AND EQUIPMENT**





At
      September 30, 2007, property and equipment consists of the
      following:





Computer
                equipment and software
            
            $
            39,929Production
                and shop equipment
            
            
            64,061Vehicles
            
            
            3,303Tenant
                Improvements
            
            
            12,810Greenhouses
                and improvements
            
            
            64,247Office
                furniture and equipment
            
            
            15,878Website
                domain
            
            
            50,150250,378Less
                accumulated depreciation and amortization
            
            
            9,392Property
                and equipment - net
            
            $
            240,986





Depreciation
      expense of $8,163 and $9,392, respectively, for the three month period ended
      September 30, 2007 and for the period from March 9, 2007 (Inception) to
      September 30 2007, respectively, is included in other operating expenses in
      the
      accompanying consolidated statements of operations.





**NOTE
      6**  **INTANGIBLE
      ASSETS**





The
      following table summarizes amortized and unamortized intangible assets:





As
                of September 30, 2007Gross
                Carrying Amount
            
            Accumulated
                Amortization
            
            Net
                Carrying AmountAmortized
                Intangible Assets:Customer
                lists
            
            $
            70,000
            
            $
            2,333
            
            $
            67,667Engineering
                drawings
            
            
            70,000
            
            
            7,000
            
            
            63,000Non-compete
                agreement
            
            
            146,000
            
            
            27,938
            
            
            118,062Patent
                application
            
            
            3,000
            
            
            1,500
            
            
            1,500Employment
                agreements
            
            
            114,000
            
            
            14,036
            
            
            99,964$
            403,000
            
            $
            52,807
            
            $
            350,193Unamortized
                Intangible Assets:Tradename
            
            $
            118,000Goodwill
            
            
            323,684$
            441,684Aggregate
                Amortization Expense:Quarter
                ended September 30, 2007
            
            $
            52,807Estimated
                Amortization Expense:Quarter
                ending December 31, 2007
            
            
            
            
            
            
            
            $
            42,318Year
                ending December 31, 2008
            
            
            
            
            
            
            
            
            166,175Year
                ending December 31, 2009
            
            
            
            
            
            
            
            
            53,034Year
                ending December 31, 2010
            
            
            
            
            
            
            
            
            18,667Year
                ending December 31, 2011
            
            
            
            
            
            
            
            
            18,667Year
                ending December 31, 2012
            
            
            
            
            
            
            
            
            8,167Thereafter
            
            
            
            
            
            
            
            
            43,165$
            350,193




22




Amortized
      intangible assets acquired during the period ended September 30, 2007 have
      a
      weighted-average amortization period of 4.65 years.





**NOTE
      7**  **LONG-TERM
      DEBT**





At
                September 30, 2007, long-term debt consists of the
                following:New
                Obligations:YA
                Global Investments, L.P., $1,000,000 convertible debenture, due April
                20,
                2009, including interest at prime + 2.75% (11% at September 30,
                2007)
            
            $
            1,048,945Less
                unamortized discount from warrants and beneficial conversion
                feature
            
            
            (372,825
            )676,120YA
                Global Investments, L.P.,, $400,000 convertible debenture, due May
                31,
                2009, including interest at prime + 2.75% (11% at September 30,
                2007)
            
            
            414,515Less
                unamortized discount from beneficial conversion feature
            
            
            (400,000
            )14,515YA
                Global Investments, L.P., $2,000,000 convertible debenture, due July
                2,
                2009, including interest at prime + 2.75% (11% at September 30,
                2007)
            
            
            2,053,890Less
                unamortized discount from warrants and beneficial conversion
                feature
            
            
            (1,396,038
            )657,852Prior
                Obligations:Montgomery
                Equity Partners, Ltd., $322,220 15% convertible debenture, due on
                demand,
                including accrued interest of $140,722
            
            
            462,942Montgomery
                Equity Partners, Ltd., $300,000 15% convertible debenture, due on
                demand,
                including accrued interest of $79,027
            
            
            379,027LH
                Financial, $156,080 18% convertible promissory note, due on demand,
                including accrued interest of $101,577
            
            
            257,6572,448,113Less:
                prior obligations in default classified as current
            
            
            1,099,626$
            1,348,487





**New
      Obligations**





On
      April
      20, 2007, the Company entered into a Securities Purchase Agreement (the
      "Purchase Agreement") with YA
      Global providing for the sale by the Company to YA
      Global of its
      secured convertible debentures in the aggregate principal amount of $1,400,000
      (the "New Debentures") of which $1,000,000 was advanced immediately. The second
      instalment of $400,000 was funded on May 31, 2007, following clearance by the
      Securities and Exchange Commission (the “SEC”) of an information statement
      disclosing shareholder approval of the issuance of the Preferred Stock to the
      former shareholders of Renewal Biodiesel.




23





The
      New
      Debentures bear interest at the prime rate plus 2.75% (but not less than 10%)
      and mature on April 20, 2009 and May 31, 2009 (the "Maturity Dates"). The
      Company is not required to make any payments until the Maturity Dates. The
      holder of the New Debentures (the "Holder") may convert at any time principal
      amounts outstanding under the New Debentures into shares of common stock of
      the
      Company at a conversion price per share equal to the lower of (a) $0.60 or
      (b)
      80% of the lowest closing bid price of the common stock during the ten trading
      days immediately preceding the conversion date. The Company has the right to
      redeem a portion or all amounts outstanding under the New Debentures prior
      to
      the Maturity Dates at a 15% redemption premium provided that (i) the closing
      bid
      price of the common stock is less than the fixed conversion price of the New
      Debentures; (ii) the underlying shares are subject to an effective registration
      statement; and (iii) no event of default has occurred and is continuing. The
      New
      Debentures contain standard anti-dilution adjustments for stock splits and
      similar events. In the event that the Company sells or otherwise issues common
      stock at a price below the current conversion price, the fixed conversion price
      will be reduced to such lower price. If an Event of Default occurs, as defined
      in the New Debentures, the holder may demand immediate repayment of all amounts
      due under the New Debentures. In addition to non-payment of principal or
      interest when due, defaults under other obligations and bankruptcy or similar
      events, the Events of Default include a Change in Control of the Company, the
      Company’s failure to file, achieve or maintain effectiveness of the required
      registration statement (see below) if registration has been demanded by the
      Holder of the New Debentures, and the failure to maintain the listing of the
      Company’s common stock on a recognized exchange. Certain of these Events may
      constitute derivative instruments. When the risks and rewards of such derivative
      instruments are not clearly and closely related to the risks and rewards
      associated with the New Debentures, the effect of these Events is considered
      in
      valuing any compound derivative instrument that may be bifurcated from the
      New
      Debentures.





The
      obligations to YA Global, together with prior obligations to YA
      Global described below, are secured by a security interest in the Company’s assets,
      including its intellectual property. In addition, the Company pledged the shares
      of Renewal Biodiesel to YA
      Global as
      additional security for the obligations to YA
      Global .





Under
      the
      Purchase Agreement, the Company also issued to YA
      Global five-year warrants to purchase 1,200,000 shares of common stock at an exercise
      price of $0.15 per share. The warrants were valued at $238,932 using the
      Cox-Ross-Rubenstein binomial model, based on the market price at the time they
      were issued of $0.2265, estimated volatility of 123%, a risk free rate of 4.75%
      and the five year life of the warrants.





In
      connection with the Purchase Agreement, the Company also entered into a
      registration rights agreement with YA
      Global (the
      "Registration Rights Agreement") providing for the filing of a registration
      statement (the "Registration Statement") with the SEC registering the common
      stock issuable upon conversion of the New Debentures and exercise of the
      warrants. Upon written demand from the Holder, the Company is obligated to
      file
      a Registration Statement within 45 days of such demand and to use its best
      efforts to cause the Registration Statement to be declared effective no later
      than 150 days following receipt of such demand. The Company is also required
      to
      ensure that the Registration Statement remains in effect until all of the shares
      of common stock issuable upon conversion of the New Debentures and exercise
      of
      the warrants have been sold or may be sold without volume restrictions pursuant
      to Rule 144(k) promulgated by the SEC. In the event of a default of its
      obligations under the Registration Rights Agreement, including its agreement
      with respect to the filing and effectiveness dates for the Registration
      Statement, the Company is required to pay to YA Global, as liquidated damages,
      for each thirty day period that the Registration Statement has not been filed
      or
      declared effective, as the case may be, a cash amount equal to 2% of the face
      amount of the Debentures, not to exceed 24%. As of November 14, 2007, no demand
      for registration has been received by the Company.




On
      July
      2, 2007, the Company entered into an additional Securities Purchase Agreement
      (the "Additional Purchase Agreement") with YA
      Global providing for the sale by the Company to YA
      Global of its
      secured convertible debentures in the aggregate principal amount of $2,700,000
      (the "Additional Debentures") of which $2,000,000 was advanced immediately.
      The
      second installment of $700,000 will be funded within two business days after
      the
      Company has unconditionally booked and received at least a 50% deposit for
      the
      sale of at least one BiodieselMaster® unit.




24





The
      interest rate, repayment terms, conversion rights, conversion price,
      anti-dilution provisions, redemption provisions, events of default and
      registration requirements of the Additional Debentures are identical to those
      of
      the New Debentures described above, except that the fixed element of the
      conversion price is $0.75, not $0.60.





The
      obligations to YA Global, together with prior obligations to YA Global, are
      secured by a security interest in the Company’s assets and the assets of its
      subsidiaries, including their intellectual property. In addition, the Company
      pledged the shares of BSI to YA
      Global as
      additional security for the obligations to YA
      Global .





Under
      the
      Additional Purchase Agreement, the Company also issued to YA
      Global five-year warrants to purchase 2,250,000 shares of common stock at an exercise
      price of $0.90 per share. The warrants were valued at $1,104,405 using the
      Cox-Ross-Rubenstein binomial model, based on the market price at the time they
      were issued of $0.60, estimated volatility of 123%, a risk free rate of 4.90%
      and the five year life of the warrants.





**Prior
      Obligations**





On
      April
      20, 2007, as part of the net liabilities assumed on the reverse merger, the
      Company assumed certain existing obligations to YA
      Global and
      other entities. These obligations included two existing 15% convertible
      debenture obligations dated December 27, 2005 due to Montgomery Equity Partners,
      Ltd, an affiliate of YA
      Global (the
“Old Debentures”), in the face amounts of $537,220 and $300,000, together with
      accrued interest at April 20, 2007 of $105,310 and $58,808, respectively. The
      Old Debentures were due on December 27, 2006. In connection with one of these
      Old Debentures, the Company previously issued warrants to purchase 6,666 shares
      of common stock at an exercise price of $0.015 per share. As amended on May
      31,
      2007, the Old Debentures are
      convertible into shares of common stock at a conversion price per share equal
      to
      the lesser of (a) $0.60 or (b) 80% of the lowest closing bid price of the common
      stock during the ten trading days immediately preceding the conversion
      date .





In
      connection with these Old Debentures, the Company is obligated to file a
      Registration Statement with the SEC, registering the shares issuable on
      conversion of the Old Debentures and the Old Warrants. The Company has not
      filed
      the required registration statement (which was required to be filed by March
      27,
      2006 and effective by May 26, 2006). Under the terms of the Old Debentures,
      the
      Company is required to pay to YA Global, as liquidated damages, for each thirty
      day period that the Registration Statement has not been filed or declared
      effective, as the case may be, a cash amount equal to 2% of the face amount
      of
      the Old Debentures. The Company has received a letter from YA
      Global  waiving
      all rights to collect any and all liquidated damages, whether in shares of
      stock
      or cash, arising from any default under any of the convertible debenture
      agreements.





The
      Company also assumed the remaining portions of a convertible promissory note
      that was originally issued in 2000. A portion of the note is held by YA
      Global and a
      portion is held by entities associated with LH Financial. The notes are
      convertible into shares of common stock at a conversion price per share equal
      to
      85% of the average of the five lowest closing bid prices of the common stock
      during the 22 trading days immediately preceding the conversion date. During
      the
      period April 21, 2007 to September 30, 2007, YA
      Global converted their entire principal amount of $168,000 plus all accrued interest
      thereon of $61,000 into 574,807 common shares.




25






On
      September 21, 2007, YA
      Global converted $215,000 of the $537,220 principal amount of the Old Debentures held
      by it into 1,343,750 shares of common stock at $0.16 per share (the lesser
      of
      $0.60 or 80% of the lowest closing bid price of the common stock during the
      ten
      trading days immediately preceding the conversion date, which was $0.20). These
      shares were issued by the transfer agent on October 5, 2007. As of November
      14,
      2007, there have been no conversions of convertible debentures subsequent to
      September 30, 2007.





**Derivative
      Instrument Liabilities and Beneficial Conversion Feature**





In
      accounting for the Convertible Debentures and the associated Warrants, the
      Company has considered the requirements of EITF
      Issue 00-19, "Accounting for Derivative Financial Instruments Indexed To, and
      Potentially Settled In, a Company's Own Common Stock". Because
      the number of shares that may be required to be issued on conversion of the
      Convertible Debentures is dependent on the price of the Company’s common stock,
      the number of shares ultimately required is indeterminate. However, full
      conversion of the outstanding Convertible Debentures and exercise of outstanding
      Warrants, together with currently outstanding common stock and all other
      currently existing requirements to issue common stock, require the Company
      to
      have approximately 52 million common shares authorized. The Company is
      authorized to issue 3 billion common shares. As a result, management of the
      Company believes it will have sufficient authorized shares available to
      physically settle all contracts that currently require delivery of common
      shares. Furthermore, management of the Company, together with investors
      associated with management, control a majority of the outstanding common shares
      of the Company. Accordingly, management of the Company believes it is in a
      position to secure shareholder approval of an increase in the authorized number
      of shares, should such an increase be required in the future. As a result of
      management’s conclusion that it will have sufficient authorized shares available
      to settle all outstanding contracts requiring delivery of common shares, the
      conversion option embedded in the Convertible Debentures has not been bifurcated
      and the Warrants issued in connection with the Convertible Debentures have
      been
      accounted for as equity instruments.





The
      Company has also reviewed the terms of the Convertible Debentures to determine
      whether there are embedded derivative instruments, other than the conversion
      option, that may be required to be bifurcated and accounted for separately
      as
      derivative instrument liabilities. Certain events of default associated with
      the
      Convertible Debentures, including failure to effect or maintain registration
      when required, the failure to maintain the listing of the Company’s common stock
      on a recognized exchange and similar events, have risks and rewards that are
      not
      clearly and closely associated with the risks and rewards of the debt
      instruments in which they are embedded. However, events of default serve only
      to
      permit the holder to demand repayment and do not require the Company to pay
      any
      premium on default. Accordingly, these embedded derivative instruments are
      considered to have minimal, if any, value.





If
      the
      conversion option embedded in the Convertible Debentures has not been
      bifurcated, then if the effective conversion price for a Convertible Debenture
      is less than the market value of the underlying shares at the time the debenture
      is issued (usually as a result of the allocation of part of the proceeds
      received to common stock warrants or other instruments), the Company recognizes
      a beneficial conversion feature in accordance with EITF Issues 98-05 and 00-27.
      The value of the beneficial conversion feature, which is credited to additional
      paid-in capital, reduces the initial carrying amount of the debenture. During
      the period ended June 30, 2007 and the three months ended September 30, 2007,
      the Company recorded beneficial conversion features aggregating $923,841 and
      $348,287, respectively.





The
      discount from the face amount of the Convertible Debentures represented by
      the
      value initially assigned to any associated Warrants and to any beneficial
      conversion feature is amortized over the period to the due date of each
      Convertible Debenture, using the effective interest method. Included in the
      beneficial conversion feature of $923,841 recorded during the period ended
      June
      30, 2007 was $333,574 related to debentures assumed by the Company on the
      reverse merger described in Note 2. Because those debentures are past due,
      the
      discount from the face amount of the debentures was immediately expensed and
      is
      included in interest expense for the period.




26




For
      warrants and option-based derivative instruments, the Company estimates fair
      value using the Cox-Ross-Rubinstein binomial valuation model, based on the
      market price of the common stock on the valuation date, an expected dividend
      yield of 0%, a risk-free interest rate based on constant
      maturity rates published by the U.S. Federal Reserve applicable to the remaining
      term of the instruments (which rates ranged from 4.57% to 4.9%) ,
      and an
      expected life equal to the remaining term of the instruments. Because
      of the limited historical trading period of our common stock, the expected
      volatility of our common stock over the remaining life of the conversion options
      and Warrants was estimated at 123%, based on a review of the volatility of
      entities considered by management as most comparable to our
      business.





**NOTE
      8**   **LEASE
      COMMITMENTS**





Prior
      to
      the acquisition of BSI on July 2, 2007, the Company leased operating space
      and
      other services from BSI and, subsequent to the acquisition, has continued to
      operate from the 30,000 square foot facility leased by BSI. The BSI lease is
      accounted for as an operating lease, expires on October 31, 2008 and requires
      payments of approximately $11,000 per month, plus a share of operating costs
      estimated to be $3,000 per month.





**NOTE
      9**   **STOCKHOLDERS’
      EQUITY**





The
      authorized capital stock of the Company is 3,020,000,000 shares, consisting
      of
      3,000,000,000 shares of Common Stock, par value $0.001 per shares and 20,000,000
      shares of Preferred Stock, par value $0.001 per share.





The
      Board
      of Directors is authorized to divide the 20,000,000 shares of Preferred Stock
      into one or more series, and to determine for each such series its designation,
      the number of shares of such series, the powers, preferences and rights and
      the
      qualifications, limitations or restrictions for the shares of such series.





**Common
      Stock**





Holders
      of the Company’s common stock are entitled to one vote for each share on all
      matters submitted to a stockholder vote. Holders of common stock do not have
      cumulative voting rights. Therefore, holders of a majority of the shares of
      common stock voting for the election of directors can elect all of the
      directors. Holders of the Company’s common stock representing a majority of the
      voting power of the Company’s capital stock issued, outstanding and entitled to
      vote, represented in person or by proxy, are necessary to constitute a quorum
      at
      any meeting of stockholders. A vote by the holders of a majority of the
      Company’s outstanding shares is required to effectuate certain fundamental
      corporate changes such as liquidation, merger or an amendment to the Company’s
      articles of incorporation.  Additionally,
      holders of the Company’s common stock are entitled to share in all dividends
      that the Board of Directors, in its discretion, declares from legally available
      funds. In the event of liquidation, dissolution or winding up, each outstanding
      share entitles its holder to participate pro rata in all assets that remain
      after payment of liabilities and after providing for each class of stock, if
      any, having preference over the common stock. The Company’s common stock has no
      pre-emptive rights, no conversion rights and there are no redemption provisions
      applicable to the Company’s common stock.





On
      March
      09, 2007, immediately prior to the reorganization, which was accounted for
      as a
      reverse merger and recapitalization, Renewal Biodiesel issued shares of its
      common stock to 23 accredited investors for an aggregate consideration of
      $57,279. Additionally, the fair value of the common stock issued to the
      shareholders of Renewal Biodiesel, was estimated to be $0.2265 per share, based
      on the trading price of our common stock immediately prior to the reorganization
      and reverse merger. The difference between the fair value of the shares issued
      and the amount paid by the shareholders of Renewal Biodiesel for their shares
      resulted in an immediate non-cash expense of $5,131,231.




27





On
      April
      20, 2007, free standing warrants, with a fair value of $238,932 were issued
      in
      conjunction with a convertible debenture as discussed in Note 7. Additionally,
      the beneficial conversion feature for this convertible debenture in the amount
      of $238,932 and prior obligations in the amount of $923,841 were recorded.





During
      May and June, 2006, $82,900 of the Company’s convertible debentures were
      converted into 224,447 shares at a per share price ranging between $0.192 and
      $0.501, calculated at the average five lowest bid prices in the twenty two
      days
      preceding the notice of conversion.





On
      June
      21, 2007 all of the holders converted 343,610 shares of Series A Convertible
      Preferred Stock into 22,907,323 shares of the Company’s common stock.





On
      July
      2, 2007, in conjunction with the acquisition of BSI, 3,333,333 shares of the
      Company’s common stock , with a fair value of $0.60, were issued as discussed in
      Note 2. Additionally, 96,400 Common Stock options, not part of the Company’s
      employee stock option plan, were granted to BSI employees in connection with
      the
      acquisition. These options were valued at $48,181, using the
      Cox-Ross-Rubinstein binomial model, based on an expected term of 3 years, an
      estimated volatility of 123% and a risk-free rate of 4.90%





On
      July
      2, 2007, freestanding warrants, with a fair value of $1,104,405 were issued
      in
      conjunction with a convertible debenture as discussed in Note 7. Additionally,
      the beneficial conversion feature for this convertible debenture in the amount
      of $348,287 was recorded.





On
      July
      12 and July 13, 2007, $146,100 of the Company’s convertible debentures were
      converted into 350,360 shares at a per share price of $0.417, calculated at
      the
      average five lowest bid prices in the twenty two days preceding the notice
      of
      conversion.





On
      July
      31, 2007, in conjunction with the 1-for-15 reverse stock split, $68 was paid
      out
      in lieu of 114 fractional shares.





On
      September 21, 2007, $215,000 of the Company’s convertible debentures were
      converted into 1,343,750 shares at a per share price of $0.16 (calculated at
      the
      lower of $0.60 or 80% of the lowest bid price of the common stock during the
      ten
      trading days immediately preceding the conversion date, which was $0.20). The
      conversion was completed by the transfer agent on October 5, 2007.





**Preferred
      Stock**





Holders
      of the Company’s Preferred Stock are entitled to one vote for each share on all
      matters submitted to a preferred stockholder vote. Holders do not have a right
      to vote with the common stockholders. Holders of Preferred Stock do not have
      cumulative voting rights. Holders of the Company’s Preferred Stock representing
      a majority of the voting power of the Company’s Preferred Stock issued,
      outstanding and entitled to vote, represented in person or by proxy, are
      necessary to constitute a quorum at any meeting of Preferred stockholders.
      Holders of the Company’s Preferred Stock are entitled to share in all dividends
      that the Board of Directors, in its discretion, declares from legally available
      funds.




28





The
      Board
      of Directors previously designated 343,610 shares as Series A Convertible
      Preferred Stock. These shares were issued in exchange for the acquisition of
      Renewal Biodiesel, as described in Notes 1 and 2 and were subsequently converted
      into shares of the Company’s Common Stock on June 21, 2007.





On
      July
      2, 2007, in conjunction with the acquisition of BSI, the former shareholders
      of
      BSI were issued an aggregate of 1,000,000 shares of a new BSI Series B
      convertible preferred stock (the “BSI Preferred Stock”). The BSI Preferred Stock
      is immediately convertible at the option of the holders into common stock of
      the
      Company at a conversion price equal to the greater of (i) $0.75, or (ii) the
      average closing price of the common stock during the ten trading days
      immediately preceding the conversion date.





**NOTE
      10**   **STOCK
      OPTION PLANS**





On
      July
      10, 2007, the majority stockholders approved the 2007 Stock Incentive Stock
      Plan
      (the "2007 Incentive Plan") and authorized 1,000,000 shares of common stock
      for
      issuance of stock awards and stock options thereunder. As of November 14, 2007,
      no stock awards or stock options have been issued under the 2007 Incentive
      Plan.





Under
      the
      2007 Incentive Plan, options may be granted which are intended to qualify as
      Incentive Stock Options ("ISOs") under Section 422 of the Internal Revenue
      Code
      of 1986 (the "Code") or which are not ("Non-ISOs") intended to qualify as
      Incentive Stock Options thereunder. The primary purpose of the 2007 Incentive
      Plan is to attract and retain the best available personnel for the Company
      by
      granting stock awards and stock options in order to promote the success of
      the
      Company's business and to facilitate the ownership of the Company's stock by
      employees. The 2007 Incentive Plan will be administered by the Company's Board
      of Directors, as the Board of Directors may be composed from time to time.





Under
      the
      2007 Incentive Plan, stock awards and options may be granted to key employees,
      officers, directors or consultants of the Company. The purchase price of the
      common shares subject to each ISO shall not be less than the fair market value
      (as set forth in the 2007 Incentive Plan), or in the case of the grant of an
      ISO
      to a Principal Stockholder, not less that 110% of fair market value of such
      common shares at the time such Option is granted. The purchase price of the
      common shares subject to each Non-ISO shall be determined at the time such
      Option is granted, but in no case less than 85% of the fair market value of
      such
      common shares at the time such Option is granted.




29





The
      following table summarizes information concerning all options and warrants
      at
      September 30, 2007:


Stock
                  Options
              
              WarrantsWeighted
              
              WeightedAverage
                  Exercise Price
              
              Average
                  Exercise PriceShares
              
              Per
                  Share
              
              Shares
              
              Per
                  Share
              
              Total
              
              ExercisableBalance
                  at 03/09/2007 (Inception):
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Granted
              
              
              96,400
              
              $
              0.750
              
              
              3,456,667
              
              $
              0.590
              
              
              3,553,067
              
              
              1,230,767Excercised
              
              
              -
              
              
              
              
              
              -
              
              
              
              
              
              -Expired
              
              
              -
              
              
              
              
              
              -
              
              
              
              
              
              -Forfeited
              
              
              -
              
              
              
              
              
              -
              
              
              
              
              
              -Balance
                  at 06/30/2007:
              
              
              96,400
              
              $
              0.750
              
              
              3,456,667
              
              $
              0.590
              
              
              3,553,067
              
              
              1,230,767




The
                following table summarizes information concerning options and warrants
                outstanding and excercisable at September 30,
                2007:




Options
                  Outstanding
              
              Options
                  ExercisableWeighted
              
              
              
              AverageWeighted
              
              Number
              
              Average
              
              Number
              
              ExerciseAverage
              
              of
              
              Exercise
              
              of
              
              Price
                  PerRange
                  of Exercise Prices
              
              Remaining
                  Life
              
              Options
              
              Price
                  Per Share
              
              Options
              
              Share$0.750
              
              
              4.75
              
              
              96,400
              
              $
              0.750
              
              
              24,100
              
              $
              0.750$0.750
              
              
              4.75
              
              
              96,400
              
              $
              0.750
              
              
              24,100
              
              $
              0.750




Warrants
                  Outstanding
              
              
              Warrants
                  ExercisableWeighted
              
              
              
              
              
              WeightedWeighted
              
              
              
              
              
              Average
              
              
              
              
              
              AverageAverage
                Remaining
              
              
              Numberof
              
              
              Exercise
                Price
                  Per
              
              
              Numberof
              
              
              Exercise
                Price
                  PerRange
                  of Exercise Prices
              
              
              Life
              
              
              Warrants
              
              
              Share
              
              
              Warrants
              
              
              Share$.015
              
              
              4.75
              
              
              6,667
              
              $
              0.015
              
              
              6,667
              
              $
              0.015$0.150
              
              
              4.75
              
              
              1,200,000
              
              $
              0.150
              
              
              1,200,000
              
              $
              0.150$0.900
              
              
              4.75
              
              
              2,250,000
              
              $
              0.900
              
              
              2,250,000
              
              $
              0.900$0.015
                    - 0.900
              
              
              4.75
              
              
              3,456,667
              
              $
              0.586
              
              
              1,206,667
              
              $
              0.149




**NOTE
      11**  **OTHER
      COMMITMENTS AND CONTINGENCIES**





As
      described in Note 7, the Company entered into a Registration Rights Agreement
      with YA
      Global providing for the filing of a registration statement with the SEC registering
      the common stock issuable upon conversion of the debentures and exercise of
      the
      warrants sold to YA Global. Upon written demand from YA Global, the Company
      is
      obligated to file a Registration Statement within 45 days and to use its best
      efforts to cause the Registration Statement to be declared effective no later
      than 150 days following receipt of such demand. The Company is also required
      to
      ensure that the Registration Statement remains in effect until all of the shares
      of common stock issuable upon conversion of the debentures and exercise of
      the
      warrants have been sold or may be sold without volume restrictions pursuant
      to
      Rule 144(k). In the event of a default of its obligations under the Registration
      Rights Agreement, the Company is required to pay to YA Global, for each thirty
      day period that the Registration Statement has not been filed or declared
      effective, a cash amount equal to 2% of the face amount of the Debentures,
      not
      to exceed 24%. As of November 14, 2007, no demand for registration has been
      received by the Company.





On
      July
      10, 2007 the Company executed a letter of intent to acquire North Shore Energy
      Technologies ("North Shore"), a sustainable energy company planning to build
      a
      bio-refinery capable of economically converting wood waste into highly-versatile
      methanol. However, the signed letter of intent expired and the company has
      no
      plans to pursue this acquisition





**NOTE
      12**  **SUBSEQUENT
      EVENTS**





As
      described in Note 7, on October 5, 2007, 1,343,750 of the Company’s common
      shares were issued by the transfer agent upon completion of a request received
      on September 21, 2007 to convert $215,000 of the Company’s convertible
      debentures.




30


**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**




We
      believe transparency and clarity are the primary goals of successful financial
      reporting. We remain committed to increasing the transparency of our financial
      reporting, providing our shareholders with informative financial disclosures
      and
      presenting an accurate view of our financial position and operating
      results.





Management’s
      Discussion and Analysis of Financial Condition and Results of Operations
      (“MD&A”) is designed to provide a reader of our financial statements with a
      narrative from the perspective of our management on our financial condition,
      results of operations, liquidity, and certain other factors that may affect
      our
      future results. Our MD&A is presented in the following
      sections:




·
            Overview


·
            History


·
            Business
                Strategy, Core Philosophies, and Current
                Operations


·
            Results
                of Operations


·
            Going
                Concern Statement


·
            Critical
                Accounting Policies and Estimates


·
            Recent
                Accounting Pronouncements


·
            Liquidity
                and Capital Resources


·
            Off-Balance-Sheet
                Arrangements


·
            Qualitative
                and Quantitative Disclosures About Market
                Risk


·
            Outlook





The
      following discussion and other sections of this Form 10-QSB contain
      forward-looking statements that involve a number of risks and uncertainties.
      These forward-looking statements are made pursuant to the “safe-harbor”
provisions of the Private Securities Litigation Reform Act of 1995 and are
      made
      based on management’s current expectations or beliefs, as well as assumptions
      made by, and information currently available to, management. All statements
      regarding future events, our future financial performance and operating results,
      our business strategy and our financing plans are forward-looking statements.
      In
      many cases, you can identify forward-looking statements by terminology, such
      as
“may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative
      of such terms and other comparable terminology. These statements are only
      predictions. Known and unknown risks, uncertainties and other factors could
      cause our actual results to differ materially from those projected in the
      forward-looking statements.





THE
      INFORMATION CONTAINED IN THIS FORM 10-QSB IS NOT A COMPLETE DESCRIPTION OF
      OUR
      BUSINESS OR THE RISKS ASSOCIATED WITH AN INVESTMENT IN US. READERS ARE REFERRED
      TO DOCUMENTS FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION,
      WHICH IDENTIFY IMPORTANT RISK FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
      FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS.





**OVERVIEW**





As
      of the
      end of the quarter, September 30, 2007, Renewal Fuels, Inc. (“Renewal”) had two
      wholly-owned subsidiaries - Renewal Biodiesel, Inc. (“Renewal Biodiesel”) and
      Biodiesel Solutions, Inc. (“BSI”).




31





Renewal
      Biodiesel was incorporated in the state of Delaware on March 9, 2007 and
      acquired the business, fixed assets and inventory of the FuelMeister business
      of
      BSI, effective March 30, 2007. Renewal Biodiesel is engaged in the business
      of
      designing, developing, manufacturing and marketing personal biodiesel processing
      equipment and accessories to convert used and fresh vegetable oil into
      clean-burning biodiesel. Renewal Biodiesel’s products allow customers to make
      biodiesel fuel, which is capable of powering all diesel fuel engines, for a
      current cost of approximately 70 cents per gallon. Renewal Biodiesel has
      developed a network of dealers in the United States for sale and distribution
      of
      its products. Renewal Biodiesel’s manufacturing facilities are currently located
      in Sparks, Nevada.





BSI
      is
      developing and will manufacture a factory-built biodiesel processing plant
      that
      is designed to produce 350,000 gallons of biodiesel per year, appropriately
      scaled for a variety of customers, including small communities, farms, farm
      co-ops and trucking fleets. The design will provide a biodiesel production
      system that is continuous, flexible, efficient, affordable, and fully-automated.
      The automated control system will minimize labor costs and facilitates remote
      diagnostics. BSI’s manufacturing facilities are currently located in Sparks,
      Nevada, adjacent to the manufacturing facilities for Renewal
      Biodiesel.





**HISTORY**





**Reorganization
      of Tech Laboratories, Inc. and Reverse Merger with Renewal Biodiesel,
      Inc.**





On
      April
      20, 2007, Tech Laboratories, Inc. entered into a Merger Agreement with Renewal
      Biodiesel, a Delaware corporation formed in 2007 for the purposes of the asset
      acquisition of the FuelMeister Business described below. Under the terms of
      the
      agreement, we acquired 100% of the common stock of Renewal Biodiesel in exchange
      for the issuance by us of 343,610
      shares of our series A convertible preferred stock, which was subsequently
      converted into 22,907,323 common
      shares. The officers and directors of Renewal Biodiesel assumed similar
      positions with us. Although we were the legal acquirer, Renewal Biodiesel was
      considered the accounting acquirer and as such the acquisition was accounted
      for
      as a reverse merger and recapitalization. As a result, the accompanying
      consolidated financial statements represent the results of operations and cash
      flows of the accounting acquirer (Renewal Biodiesel) from the date of its
      inception on March 9, 2007. Immediately prior to the reorganization, we had
      673,356 shares of common stock outstanding and net liabilities of $1,677,020,
      consisting of the following, at fair value:





Net
                liabilities assumed:Accounts
                payable
            
            $
            203,992Long
                term debt, including accrued interest
            
            
            1,473,028Net
                liabilities assumed
            
            $
            1,677,020





The
      net
      liabilities assumed primarily represent debt obligations to YA Global
      Investments, L.P. (“YA Global”) and were assumed in connection with the
      provision of additional long-term debt financing provided by YA Global (see
      Note
      7 in our accompanying consolidated financial statements included in this
      Report), which additional funding was provided simultaneously with the reverse
      merger and recapitalization. Accordingly, the net liabilities assumed were
      recorded as deferred financing costs incurred in connection with the additional
      debt funding provided by YA Global and are being amortized by periodic charges
      to income on a straight-line basis over the life of that debt funding. In
      addition, the Company paid $180,000 in fees in connection with the additional
      debt funding provided by YA Global.




32





Tech
      Laboratories had no active business operations immediately prior to the merger.
      Mr. John King, Chief Executive Officer and Mr. David Marks, Chairman were
      officers and directors and were minority shareholders of Renewal Biodiesel.





Immediately
      prior to the reorganization, Renewal Biodiesel issued an aggregate of 5,727,979
      shares of its common stock to 23 accredited investors for an aggregate
      consideration of $57,279. Under the terms of the agreement, we acquired 100%
      of
      the 5,727,979 shares of common stock of Renewal Biodiesel in exchange for the
      issuance by us of 343,610 shares of series A preferred stock, which were
      subsequently converted into 23,907,323 common shares (approximately 97% of
      the
      outstanding common shares immediately after the reorganization). The average
      share price paid for the 5,727,979 shares of Renewal Biodiesel exchanged for
      our
      common shares was $0.01. Current officers, directors and principal stockholders
      of ours, who beneficially own in the aggregate approximately 80% of our
      outstanding common stock, owned the following aggregate shares of common stock
      of Renewal Biodiesel:




Name
            
            Common
                Shares
              Received
            
            Renewal
                Biodiesel Shares Owned
            
            Average
                Price PaidCrivello
                Group LLC (1)
            
            
            666,666
            
            
            166,700
            
            $
            0.01Frank
                P. Crivello SEP IRA (1)
            
            
            13,333,333
            
            
            3,334,000
            
            $
            0.01John
                King
            
            
            2,300,000
            
            
            575,115
            
            $
            0.01David
                Marks (2)
            
            
            2,700,000
            
            
            675,135
            
            $
            0.01Other
                investors as a group (17)
            
            
            3,907,324
            
            
            977,029
            
            $
            0.0122,907,323
            
            
            5,727,979




(1)
              Mr.
                  Crivello is also the managing member of Crivello Group,
                  LLC.
  (2)
              Of
                  the shares attributed to Mr. Marks, 200,000 shares are registered
                  in the
                  name of the Irrevocable Children’s Trust of which Mr. Marks is a trustee
                  and 200,000 are registered in the name of Phoenix Investors, LLC
                  of which
                  Mr. Marks is Managing
                  Director.




Although
      we were the legal acquirer, Renewal Biodiesel was considered the accounting
      acquirer and as such the acquisition was accounted for as a reverse merger
      and
      recapitalization. The officers and directors of Renewal Biodiesel assumed
      similar positions with us. As a result, the accompanying consolidated financial
      statements represent the results of operations and cash flows of the accounting
      acquirer (Renewal Biodiesel) from the date of its inception on March 9, 2007.





The
      fair
      value of the common stock issued to the shareholders of Renewal Biodiesel was
      estimated to be $0.2265 per share, based on the trading price of our common
      stock immediately prior to the reorganization and reverse merger. The difference
      between the fair value of the shares issued and the amount paid by the
      shareholders of Renewal Biodiesel for their shares resulted in an immediate
      expense of $5,131,231.





On
      July
      9, 2007, the Company, which was a New Jersey entity (“Tech Labs-NJ”), entered
      into an Agreement and Plan of Merger with Tech Laboratories, Inc., a
      Delaware entity (“Tech Labs - DE”) under which Tech Labs - NJ and Tech Labs - DE
      were merged with and into the surviving corporation, Tech Labs - DE, whose
      name
      was subsequently changed on August 1, 2007 to Renewal Fuels, Inc. The
      certificate of incorporation and bylaws of the surviving corporation became
      the
      certificate of incorporation and bylaws of the Company, and the directors and
      officers in office of the surviving corporation became the directors and
      officers of the Company.




33





On
      July
      10, 2007, the majority stockholders of the Company authorized a 1-for-15 reverse
      stock split which was effective on August 1, 2007. As a result, the shares
      of common stock of the Company (the "Old Shares") that were outstanding at
      July
      31, 2007 automatically converted into 23,805,126 shares of common stock
      (the "New Shares"). All common share and per share amounts in our financial
      statements have been retroactively restated to reflect this reverse stock split.
      The New Shares issued pursuant to the reverse stock split are fully paid and
      non-assessable. All New Shares have the same par value, voting rights and other
      rights as the Old Shares. Stockholders of the Company do not have preemptive
      rights to acquire additional shares of common stock which may be issued. Also
      on
      August 1, 2007, the Company changed its name from Tech Laboratories, Inc. to
      Renewal Fuels, Inc. and the Company’s quotation symbol on the OTC Bulletin Board
      was changed from TLBT to RNWF.





**Acquisition
      of Assets of FuelMeister Business**





On
      March
      9, 2007, Crivello Group, LLC (“Crivello”) and its wholly-owned subsidiary,
      Renewal Biodiesel, entered into an Asset Purchase Agreement with Biodiesel
      Solutions, Inc. (“BSI”), which was effective March 30, 2007. Pursuant to the
      Asset Purchase Agreement, BSI sold substantially all of the assets and property
      of its FuelMeister operations (the “FuelMeister Business” , the “Predecessor” or
      the “Predecessor Business”, an unrelated Company) to Renewal Biodiesel, in
      exchange for an aggregate purchase price of $500,000, subject to adjustment.
      Under the terms of the Agreement, the purchase price was subsequently adjusted
      to $494,426 to reflect the inventory on hand at closing. Of the adjusted
      purchase price, $100,000 was paid on execution of the Agreement as a down
      payment, $100,000 was paid at closing, $50,000 was paid on April 11, 2007,
      and
      the balance of the purchase price was paid by delivery of a promissory note,
      as
      amended, in the amount of $244,426. The promissory note was subsequently paid
      on
      April 20, 2007. The $250,000 cash portion of the $494,426 purchase price of
      the
      assets was funded by loans received from Crivello of $200,000 and cash of
      $57,279 received by Renewal Biodiesel from our founders for common stock. The
      loans from Crivello, together with the promissory note for $244,426, were repaid
      from the proceeds of loans from YA Global (see Note 7 in the accompanying
      consolidated financial statements). The difference of $5,131,231 between the
      fair value of the 22,907,323 common shares issued to our founders as a result
      of
      the reverse merger described above, determined based on the trading price of
      $0.2265 per share immediately prior to the reorganization and reverse merger,
      and the amount they paid for their shares of Renewal Biodiesel of $57,279 has
      been recorded as stock-based transaction expense.





Renewal
      Biodiesel also entered into a management services agreement with BSI, pursuant
      to which BSI agreed to provide general management and administrative services
      to
      Renewal Biodiesel, as well as the use of its facilities. Renewal Biodiesel
      reimbursed BSI for the direct cost of services and facilities, as provided.
      The
      agreement terminated 90 days after the FuelMeister acquisition or upon ten
      days
      notice by Renewal Biodiesel. As discussed in Note 1 to the financial statements,
      we acquired BSI on July 2, 2007, which effectively resulted in termination
      of
      the agreement.





The
      acquisition of the FuelMeister Business was accounted for by the purchase method
      in accordance with Financial Accounting Standards Board Statement No. 141 ("FAS
      141") and the results of its operations are included in these consolidated
      financial statements from the date of acquisition. The aggregate purchase price
      determined in accordance with FAS 141 was $494,426.





The
      following is a summary of the net assets acquired at the date of acquisition,
      at
      fair value:





Net
                assets acquired:Inventory
            
            $
            34,426Fixed
                assets
            
            
            9,145Website
                domain
            
            
            50,150Tradename
            
            
            118,000Customer
                lists, engineering drawings and other intangibles
            
            
            189,000Goodwill
            
            
            93,705Net
                assets acquired
            
            $
            494,426





34





**Acquisition
      of BSI**





On
      July
      2, 2007, we entered into a merger agreement with BSI, as a result of which
      we
      acquired the remainder of BSI's business (i.e., other than the FuelMeister
      Business acquired previously). BSI is engaged in the business of designing,
      manufacturing and marketing processing equipment and accessories, including
      personal biodiesel processors and “community scale” biodiesel processor systems,
      which convert fresh and used vegetable oils into clean burning biodiesel fuel.
      It complements and optimizes Renewal’s ability to design, develop, manufacture
      and market both personal and community scale biodiesel processing equipment
      and
      accessories.





As
      consideration for the acquisition of BSI, we issued an aggregate of 3,333,333
      shares of common stock, 1,000,000 new Series B preferred shares of BSI,
      initially convertible into 1,333,333 shares of our common stock, options to
      purchase 94,600 shares of our common stock and $500,000 in cash. The
      BSI
      Preferred Stock is immediately convertible at the option of the holders into
      common stock of the Company at a conversion price equal to the greater of (i)
      $0.75, or (ii) the average closing price of the common stock during the ten
      trading days immediately preceding the conversion date. Prior to the acquisition
      of BSI, the Company loaned $200,000 to BSI under an 8% 180 day secured
      promissory note, due November 24, 2007. Upon the acquisition of BSI, the note
      receivable was reclassified as a capital contribution to BSI.





Also
      on
      July 2, 2007, we entered into a Securities Purchase Agreement with YA Global
      providing for the sale to YA Global of secured convertible debentures in the
      aggregate principal amount of $2,700,000, of which $2,000,000 was advanced
      immediately. The second installment of $700,000 will be funded within two
      business days after the Company has unconditionally booked and received at
      least
      a 50% deposit for the sale of at least one BiodieselMaster® unit. We
      also issued to YA Global five-year warrants to purchase 2,250,000 shares of
      our
      common stock at $0.90 per share. The Debentures bear interest at the prime
      rate
      plus 2.75% (but not less than 10%) and mature two years from the date of
      issuance (the "Maturity Date"). The Company is not required to make any payments
      until the Maturity Date. The holder of the Debentures may convert at any time
      amounts outstanding into shares of Common Stock at a conversion price per share
      equal to the lesser of (i) $0.05, or (ii) 80% of the lowest closing bid price
      of
      the Common Stock during the ten trading days immediately preceding the
      conversion date.





The
      aggregate purchase price for the BSI acquisition was determined based on the
      fair value of the consideration issued, which consisted of common stock,
      preferred shares of BSI convertible into our common stock, options to purchase
      our common stock and cash, as follows:





3,333,333
                shares of common stock
            
            $
            2,000,0001,000,000
                shares of preferred stock of BSI
            
            
            800,00096,400
                common stock options
            
            
            48,181Note
                receivable from BSI reclassified to contributed capital
            
            
            200,000Cash
                paid, net of $77,986 cash acquired
            
            
            422,014Total
                purchase price
            
            $
            3,470,195




35





The
      purchase price was allocated to BSI’s net tangible and intangible assets based
      on their estimated fair values as of the date of the completion of the
      acquisition and based on a report by an independent, reputable appraiser in
      accordance with the professional standards of the American Society of Appraisers
      and the Institute of Business Appraisers. The amount allocated to purchased
“in
      process research and development costs” was valued at fair value using a debt
      free cash flow method. As required by current accounting literature, these
      costs
      are immediately expensed in the current period’s income statement. The
      allocation of the total purchase price is summarized below:




Purchase
                Price
            
            Asset
                LifeAllocation
            
            In
                YearsWorking
                capital, net and excluding cash acquired
            
            $
            (204,231
            )
            
            -Fixed
                assets
            
            
            90,477
            
            
            3
                - 10In
                process research and development
            
            
            3,140,000
            
            
            -Employee
                contracts
            
            
            114,000
            
            
            2Non-compete
                agreements
            
            
            100,000
            
            
            1.5Goodwill
            
            
            229,979
            
            
            IndefiniteNet
                Assets Acquired
            
            $
            3,470,195




**Purchase
      Accounting For Acquisitions**





The
      results of operations of the 2007 Acquisitions are included in the Company's
      results of operations beginning after their respective acquisition dates. The
      following unaudited pro forma information combines the consolidated results
      of
      operations of the Company and the companies that it acquired as if the
      acquisitions had occurred at the beginning of fiscal year 2006:




Three
                Months
              Ended
                September, 30,
            
            For
                The Nine Months Ended
              September
                30,2007
            
            2006
            
            2007
            
            2006Revenues
            
            $
            148,800
            
            $$
            459,539
            
            $$
            500,292
            
            $$
            1,378,617Loss
                from Operations
            
            $
            (615,896
            )
            $
            (178,488
            )
            $
            (1,452,114
            )
            $
            (8,794,637
            )Net
                Loss
            
            $
            (1,216,899
            )
            $
            (743,966
            )
            $
            (3,389,752
            )
            $
            (10,491,193
            )Per
                Share - basic and fully diluted
            
            $
            (0.04
            )
            $
            (0.12
            )
            $
            (0.07
            )
            $
            (0.38
            )Weighted
                average shares outstanding
            
            
            27,488,705
            
            
            27,488,705
            
            
            27,488,705
            
            
            27,488,705




The
      unaudited pro forma information does not purport to be indicative of the results
      that would actually have been achieved had the acquisitions occurred as of
      the
      date of the periods indicated.





**Predecessor
      Business**





As
      described above, under the terms of the Renewal Merger Agreement, we acquired
      100% of the common stock of Renewal Biodiesel in exchange for the issuance
      by us
      of 22,907,323 common shares. Although we were the legal acquirer, Renewal
      Biodiesel was considered to be the accounting acquirer and, as such, the
      acquisition was accounted for as a reverse merger and recapitalization. As
      a
      result, the accompanying unaudited consolidated financial statements represent
      the results of operations and cash flows of the accounting acquirer and
      Successor (Renewal Biodiesel) from the date of its inception on March 9, 2007
      through September 30, 2007. The FuelMeister Business acquired by Renewal
      Biodiesel constitutes our Predecessor business. The accompanying unaudited
      consolidated financial statements, as of September 30, 2007 and for the period
      March 9, 2007 (date of inception) through September 30, 2007, are those of
      the
      Successor. The statements of operations for the three months ended March 31,
      2007 and for the three and nine months ended September 30, 2006, and the
      statements of cash flows for the three months ended March 31, 2007 and for
      the
      nine months ended September 30, 2006 are those of our Predecessor, the
      FuelMeister Business.





36





**BUSINESS
      STRATEGY, CORE PHILOSOPHIES, CURRENT OPERATIONS**





Renewal
      Fuels is dedicated to technologies that enable the production of high quality
      fuels from a variety of non-food feedstock sources and waste streams. We believe
      that developed and emerging technologies to produce fuels from waste will
      provide an important alternative to feedstock sources which compete with uses
      for food.





Renewal
      Fuels’ business model includes strategic partnerships and acquisitions in the
      expanding biofuels industry. Increasing political and social responsiveness,
      combined with exciting developments in biofuel technology, has created an
      unprecedented environment for organic growth as well as growth through
      acquisitions. Our focused business model is designed to facilitate high profit
      margins and security of feedstock pricing.





The
      management of Renewal Fuels is establishing relationships with multiple biofuel
      entities with projects, products, and technologies at various stages of
      development, fitting the Company’s mission. The company is currently seeking
      additional technologies and businesses to add to its portfolio, which currently
      includes the businesses described below.





Renewal
      manufactures and markets the FuelMeister® line of personal biodiesel processors
      from its facility in Sparks, NV. The FuelMeister allows a user to make biodiesel
      from waste vegetable oil, for personal use. The FuelMeister line of biodiesel
      processors are produced from industrial-grade materials. In general, it takes
      approximately 1/2 hour hands-on time per batch of biodiesel fuel production.
      The
      products offered are not do-it-yourself kits, but complete systems with all
      key
      components needed to make biodiesel ‘at home’ with ease and
      confidence.





FuelMeister
      biodiesel processors are supplied with a user safety kit, oil titration and
      field test kit, high quality steel methanol pump, and easy prime oil draw tube.
      Quick disconnect fittings allow for future expansion and more convenient
      connection of tanks. If capacity needs change, additional modular tanks, lids,
      and accessories can be added to the FuelMeister II platform. A customer can
      start making biodiesel the same day the system arrives. All that is required
      is
      a barrel of used fryer oil (typically collected at no charge from local
      restaurants), lye (at a typical cost of 20¢/gallon of biodiesel), a barrel of
      racing methanol (at a typical cost of 50¢ /gallon of biodiesel), a barrel for
      the finished biodiesel, AC power, and a water hose. Renewal’s products are
      designed specifically to allow shipment by UPS in order to minimize customers’
freight expenses. This design was accomplished during an extensive upgrade
      to
      the product’s specifications in 2006. Any machines operating on diesel fuel,
      including cars, trucks, generators, tractors, furnaces, etc. may be powered
      with
      the biodiesel produced with the FuelMeister II biodiesel production
      system.





BSI,
      which was acquired on July 2, 2007, manufactures a complementary product to
      FuelMeister called BiodieselMaster®. This product is a factory-built biodiesel
      processing plant that is appropriately scaled for a variety of customers,
      including small communities, farms, farm co-ops and trucking fleets. The
      BiodieselMaster® is a community-scale biodiesel processing unit that is designed
      to produce 350,000 gallons of biodiesel per year. The design provides a
      biodiesel production system that is continuous, flexible, efficient, affordable,
      and fully-automated. The automated control system minimizes labor costs and
      facilitates remote diagnostics.




37





**RESULTS
      OF OPERATIONS**





Although
      the revenue generating activities of the FuelMeister Business, the Predecessor
      business, remained significantly intact after the acquisition, there have been
      changes in our marketing strategy, administrative costs (including those
      expenses related to public equity market participation) and financing
      activities. As a result, we believe that the expenses of the Predecessor
      business are not representative of our current business, financial condition
      or
      results of operations. Accordingly, where practicable we have included various
      forward looking statements regarding the effects of our new operating structure.





*The
      discussion that follows of Results of Operations is in the following
      sections:*





·
            *Results
                of operations for the three months ended September 30, 2007
                (Successor);*





·
            *Results
                of operations for the period March 9, 2007 (date of inception) through
                September 30, 2007
                (Successor);*


·
            *Results
                of operations for the three months ended September 30, 2006
                (Predecessor);*





·
            *Results
                of operations for the three months ended March 31, 2007
                (Predecessor);*





·
            *Results
                of operations for the nine months ended September 30, 2006
                (Predecessor);*







***RESULTS
      OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007***





The
      information contained in this section is that of the Successor, Renewal Fuels,
      Inc., for the three months ended September 30, 2007 (unaudited).





**Net
                Sales**
            
            $
            148,800
            
            
            100.0
            %Cost
                of sales
            
            
            109,048
            
            
            73.3
            %**Gross
                Profit**
            
            
            39,752
            
            
            26.7
            %**Operating
                Expenses:**Employee
                compensation and benefits
            
            
            243,101
            
            
            163.4
            %Occupancy
                and equipment
            
            
            71,045
            
            
            47.7
            %Advertising
            
            
            96,187
            
            
            64.6
            %Research
                and development
            
            
            3,140,000
            
            
            2110.2
            %Professional
                fees
            
            
            80,150
            
            
            53.9
            %Other
                general and administrative expenses
            
            
            217,665
            
            
            146.3
            %Amortization
                of intangible assets
            
            
            52,807
            
            
            35.5
            %Total
                Operating Expenses
            
            
            3,900,955
            
            
            2621.6
            %**Operating
                Income (Loss)**
            
            
            (3,861,203
            )
            
            -2594.9
            %Interest
                income
            
            
            68
            
            
            0.0
            %Deferred
                financing fees
            
            
            (266,076
            )
            
            -178.8
            %Interest
                expense
            
            
            (221,050
            )
            
            -148.6
            %Other
                expenses
            
            
            (23,326
            )
            
            -15.7
            %0.0
            %**Net
                Income (Loss)**
            
            $
            (4,371,587
            )
            
            -2937.9
            %




38




**Revenues**





For
      the
      three months ended September 30, 2007, revenues were $148,800, a decrease when
      compared with the Predecessor’s three months ended September 30, 2006, due to
      management’s focus on the commercial BiodieselMaster® product and less on the
      FuelMeister product.





**Cost
      of Sales and Gross Profit**





Cost
      of
      sales for the three months ended September 30, 2007 was $109,048 or 73.3% of
      revenues for the quarter, resulting in a gross profit margin of $39,752 or
      26.7%
      for the three months ended September 30, 2007.





**Employee
      Compensation and Benefits**





Employee
      compensation and benefits were $243,101 or 163.4% of revenues for the three
      months ended September 30, 2007,. These expenses have increased when compared
      with the Predecessor’s three months ended September 30, 2006 due to increased
      engineering and labor costs associated with the BiodieselMaster®
product.





**Occupancy
      and Equipment**





Occupancy
      and equipment expenses, consisting of rent, depreciation, amortization, and
      other miscellaneous expenses, amounted to $71,045 or 47.7% of revenues for
      the
      three months ended September 30, 2007, an increase when compared with the
      Predecessor’s three months ended September 30, 2006 due to facility expansion
      for the BiodieselMaster ® product.





**Advertising
      Expenses**





Advertising
      expenses were $96,187, or 64.6% of revenues, for the three months ended
      September 30, 2007 and increased when compared with the Predecessor’s three
      months ended September 30, 2006 due to website costs and management’s re-launch
      of the FuelMeister product.




**Research
      and Development Expenses**





Research
      and development expenses for the three months ended September 30, 2007 were
      $3,140,000, representing in-process research and development costs incurred
      in
      the acquisition of BSI on July 2, 2007.





**Professional
      Fees**





Professional
      fees, consisting primarily of accounting, attorney and valuation fees, were
      $80,150 or 53.9% of revenues for the three months ended September 30, 2007
      and
      increased compared with the Predecessor’s three months ended September 30, 2006
      due to increased costs associated with SEC compliance and related matters.





**General
      and Administrative Expenses**





General
      and administrative expenses, consisting of administrative expenses, insurance
      and other non-manufacturing related expenses, were $217,665 or 146.3% of revenue
      for the three months ended September 30, 2007 and increased compared with the
      Predecessor’s three months ended September 30, 2006 due to additional costs
      associated with the BiodieselMaster® product.




39





**Amortization
      of Intangible Assets**





Amortization
      of intangible assets was $52,807 or 35.5% of revenue for the three months ended
      September 30, 2007, primarily due to the amortization of assets acquired in
      the
      acquisition of BSI





**Net
      Financial (Income) Expense**





Net
      financial (income) expense, consisting primarily of interest expense of $221,050
      and amortization of deferred financing fees of $266,076, amounted to a net
      expense of $510,384 for the three months ended September 30, 2007, and increased
      compared with the Predecessor’s three months ended September 30, 2006, due to
      the amortization of deferred financing costs and debt discount associated with
      our convertible debenture obligations.





**Provision
      for Income Taxes**





During
      the three months ended September 30, 2007, we experienced an operating loss
      for
      tax purposes. FuelMeister, our Predecessor, had historically experienced
      operating losses, and as FuelMeister’s management were uncertain as to whether
      FuelMeister would be able to utilize these tax losses before they expire, they
      provided a reserve for the income tax benefits associated with FuelMeister’s net
      future tax assets which primarily related to its cumulative net operating
      losses. We have adopted the same policy to reserve such net tax assets until
      such time as profitability is reasonably assured and it becomes more likely
      than
      not that we will be able to utilize such assets.





**Net
      Loss**





As
      a
      result of the above, we reported a net loss of $4,371,587 for the three months
      ended September 30, 2007.





***RESULTS
      OF OPERATIONS FOR THE PERIOD MARCH 9, 2007 (DATE OF INCEPTION) THROUGH SEPTEMBER
      30, 2007***





The
      information contained in this section is that of the Successor, Renewal Fuels,
      Inc., for the period March 9, 2007 (date of inception) through September 30,
      2007 (unaudited).





**Net
                Sales**
            
            $
            392,887
            
            
            100.0
            %Cost
                of Sales
            
            
            251,390
            
            
            64.0
            %**Gross
                Profit**
            
            
            141,497
            
            
            36.0
            %**Operating
                Expenses:**Employee
                compensation and benefits
            
            
            277,373
            
            
            70.6
            %Stock-based
                transaction expense
            
            
            5,131,231
            
            
            1306.0
            %Occupancy
                and equipment
            
            
            79,302
            
            
            20.2
            %Advertising
            
            
            140,170
            
            
            35.7
            %Research
                and development
            
            
            3,140,000
            
            
            799.2
            %Professional
                fees
            
            
            429,891
            
            
            109.4
            %Other
                general and administrative expenses
            
            
            315,209
            
            
            80.2
            %Amortization
                of intangible assets
            
            
            52,807
            
            
            13.4
            %Total
                Operating Expenses
            
            
            9,565,983
            
            
            2434.8
            %**Operating
                Income (Loss)**
            
            
            (9,424,486
            )
            
            -2398.8
            %Interest
                income
            
            
            823
            
            
            0.2
            %Deferred
                financing fees
            
            
            (447,325
            )
            
            -113.9
            %Interest
                expense
            
            
            (636,477
            )
            
            -162.0
            %Other
                expenses
            
            
            (23,326
            )
            
            -5.9
            %0.0
            %**Net
                Income (Loss)**
            
            $
            (10,530,791
            )
            
            -2680.4
            %




40




**Net
      Sales**





For
      the
      period from March 9, 2007 (inception) through September 30, 2007, net sales
      were
      $392,887 and decreased when compared with the Predecessor’s nine months ended
      September 30, 2006 due to management’s focus on the commercial BiodieselMaster®
product and less on the FuelMeister product.





**Cost
      of Sales and Gross Profit**





Cost
      of
      sales for the three months ended September 30, 2007 was $251,390 or 64.0% of
      revenues and decreased compared with the Predecessor’s nine months ended
      September 30, 2006 due to management’s focus on the commercial BiodieselMaster®
product and less on the FuelMeister product. Gross profit margin was $141,497
      or
      36.0% for the period from March 9, 2007 (inception) through September 30, 2007.





**Employee
      Compensation and Benefits**





Employee
      compensation and benefits were $277,373 or 70.6% of revenues for the period
      from
      March 9, 2007 (inception) through September 30, 2007 and increased compared
      with
      the Predecessor’s nine months ended September 30, 2006 due to increased
      engineering and labor costs associated with the BiodieselMaster®
product.





**Stock
      Based Transaction Expense**





Stock
      based transaction expense related to the reverse merger and recapitalization
      was
      $5,131,231 for the period from March 9, 2007 (inception) through September
      30,
      2007.





**Occupancy
      and Equipment**





Occupancy
      and equipment expenses, consisting of rent, depreciation, amortization, and
      other miscellaneous expenses, amounted to $79,302 or 20.2% of revenues for
      the
      period from March 9, 2007 (inception) through September 30, 2007 and increased
      compared with the Predecessor’s nine months ended September 30, 2006 due to
      facility expansion for the BiodieselMaster ® product.





**Advertising
      Expenses**





Advertising
      expenses were $140,170, or 35.7% of revenues, for the period from March 9,
      2007
      (inception) through September 30, 2007 and increased compared with the
      Predecessor’s nine months ended September 30, 2006 due to website costs and
      management’s re-launch of the FuelMeister product.





**Research
      and Development Expenses**





Research
      and development expenses for the period from March 9, 2007 (inception) through
      September 30, 2007were $3,140,000 representing in-process research and
      development costs incurred in the acquisition of BSI on July 2, 2007..




41





**Professional
      Fees**





Professional
      fees, consisting primarily of accounting, attorney and valuation fees, were
      $429,891 or 109.4% of revenues for the period from March 9, 2007 (inception)
      through September 30, 2007 and increased compared with the Predecessor’s nine
      months ended September 30, 2006 due to increased costs associated with SEC
      compliance and related matters.





**General
      and Administrative Expenses**





General
      and administrative expenses, consisting of administrative expenses, insurance
      and other non-manufacturing related expenses, were $315,208 or 80.2% of revenue
      for the period from March 9, 2007 (inception) through September 30, 2007 and
      increased compared with the Predecessor’s three months ended September 30, 2006
      due to additional costs associated with the BiodieselMaster® product.





**Amortization
      of Intangible Assets Expense**





Amortization
      of intangible assets was $52,807 or 13.4% of revenue for the period from March
      9, 2007 (inception) through September 30, 2007, primarily related to the
      amortization of assets related to the acquisition of BSI on July 2, 2007.





**Net
      Financial (Income) Expense**





Net
      financial (income) expense, consisting primarily of interest expense of $636,477
      and amortization of deferred financing fees of $477,325, amounted to a net
      expense of $1,106,305 for the period from March 9, 2007 (inception) through
      September 30, 2007.





**Provision
      for Income Taxes**





During
      the period from March 9, 2007 (inception) through September 30, 2007, we
      experienced an operating loss for tax purposes. FuelMeister, our Predecessor,
      had historically experienced operating losses, and as FuelMeister’s management
      were uncertain as to whether FuelMeister would be able to utilize these tax
      losses before they expire, they provided a reserve for the income tax benefits
      associated with FuelMeister’s net future tax assets which primarily related to
      its cumulative net operating losses. We have adopted the same policy to reserve
      such net tax assets until such time as profitability is reasonably assured
      and
      it becomes more likely than not that we will be able to utilize such
      assets.





**Net
      Loss**





As
      a
      result of the above, we reported a net loss of $10,530,791 for the period from
      March 9, 2007 (inception) through September 30, 2007.




42




***RESULTS
      OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006
      (PREDECESSOR)***





The
      information contained in this section is that of our Predecessor, the
      FuelMeister Business, for the three months ended September 30, 2006
      (unaudited).





**Net
                Sales**
            
            $
            571,386
            
            
            100
            %Cost
                of sales
            
            
            350,804
            
            
            61.4
            %**Gross
                Profit**
            
            
            220,582
            
            
            38.6
            %**Operating
                Expenses:**Employee
                compensation and benefits
            
            
            65,405
            
            
            11.4
            %Occupancy
                and equipment
            
            
            24,705
            
            
            4.3
            %Advertising
            
            
            37,452
            
            
            6.6
            %Professional
                fees
            
            
            6,588
            
            
            1.2
            %Other
                general and administrative expenses
            
            
            34,918
            
            
            6.1
            %Total
                Operating Expenses
            
            
            169,069
            
            
            29.6
            %**Operating
                Income (Loss)**
            
            
            51,513
            
            
            9.0
            %**Net
                Income (Loss)**
            
            $
            51,513
            
            
            9.0
            %





**Revenues**





For
      the
      three months ended September 30, 2006, FuelMeister’s revenue was $571,386.





**Cost
      of Sales and Gross Profit**





Cost
      of
      sales for the three months ended September 30, 2007 was $350,804 or 61.4% of
      revenues for the quarter. As a result, gross profit margin was $220,581 or
      38.6%.





**Employee
      Compensation and Benefits**





Employee
      compensation and benefits were $65,405 or 11.4% of revenues for the three months
      ended September 30, 2006.





**Occupancy
      and Equipment**





Occupancy
      and equipment expenses, consisting of rent, depreciation, amortization, and
      other miscellaneous expenses, amounted to $24,705 or 4.3% of revenues for the
      three months ended September 30, 2006.





**Professional
      Fees**





Professional
      fees, consisting primarily of accounting and attorney fees of $6,588 were 1.2%
      of revenues for the three months ended September 30, 2006.





**General
      and Administrative Expenses**





General
      and administrative expenses, consisting of administrative expenses, insurance
      and other non-manufacturing related expenses, were $34,918, or 6.1% of revenue
      for the three months ended September 30, 2006.





**Provision
      for Income Taxes**





During
      the three months ended September 30, 2006, FuelMeister experienced an operating
      loss for tax purposes. FuelMeister had historically experienced operating
      losses, and as FuelMeister’s management were uncertain as to whether FuelMeister
      would be able to utilize these tax losses before they expire, they provided
      a
      reserve for the income tax benefits associated with FuelMeister’s net future tax
      assets which primarily related to its cumulative net operating losses.




43





**Net
      Income**





As
      a
      result of the above, FuelMeister reported net income of $51,513 or 9.1% of
      revenues for the three months ended September 30, 2006.




***RESULTS
      OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2007
      (PREDECESSOR)***





The
      information contained in this section is that of our Predecessor, the
      FuelMeister Business, for the three months ended March 31, 2007
      (unaudited).








**Net
                Sales**
            
            $
            104,360
            
            
            100.0
            %Cost
                of Sales
            
            
            76,802
            
            
            73.6
            %**Gross
                Profit**
            
            
            27,558
            
            
            26.4
            %**Operating
                Expenses:**Occupancy
                and equipment
            
            
            18,666
            
            
            17.9
            %Advertising
            
            
            8,474
            
            
            8.1
            %Other
                general and administrative expenses
            
            
            79,879
            
            
            76.5
            %Total
                Operating Expenses
            
            
            107,019
            
            
            102.5
            %**Operating
                Income (Loss)**
            
            
            (79,461
            )
            
            (76.1
            %)**Net
                Income (Loss)**
            
            $
            (79,461
            )
            
            (76.1
            %)




**Revenues**





For
      the
      three months ended March 31, 2007, FuelMeister’s revenue was $104,360.





**Cost
      of Sales and Gross Profit**





Cost
      of
      sales for the three months ended March 31, 2007 was $76,802, or 73.6% of
      revenues, resulting in a gross profit margin of $27,558 or 26.4%.





**Advertising
      Expenses**





Advertising
      expenses were $8,474, or 8.1% of revenues, for the three months ended March
      31,
      2007.





**General
      and Administrative Expenses**





General
      and administrative expenses, consisting of payroll, administrative expenses,
      insurance, legal and other non-manufacturing related expenses were $79,879
      for
      the three months ended March 31, 2007. Payroll accounted for most of the expense
      with $52,320 for the three months ended March 31, 2007.




44





**Occupancy
      and Equipment**





Occupancy
      and equipment expense, consisting of rent, depreciation, amortization, and
      other
      miscellaneous expenses, amounted to $18,666 for the three months ended March
      31,
      2007.




**Provision
      for Income Taxes**





During
      the three months ended March 31, 2007, FuelMeister experienced operating and
      tax
      losses. FuelMeister had historically experienced operating losses, and as
      FuelMeister’s management were uncertain as to whether FuelMeister would be able
      to utilize these tax losses before they expire, they provided a reserve for
      the
      income tax benefits associated with FuelMeister’s net future tax assets which
      primarily relate to its cumulative net operating losses.





**Net
      Loss**





As
      a
      result of the above, FuelMeister reported a net loss of $79,461 for the three
      months ended March 31, 2007.





***RESULTS
      OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006
      (PREDECESSOR)***





The
      information contained in this section is that of our Predecessor, FuelMeister,
      for the nine months ended September 30, 2006 (unaudited).





**Net
                Sales**
            
            $
            1,638,813
            
            
            100
            %Cost
                of Sales
            
            
            1,034,220
            
            
            63.1
            %**Gross
                Profit**
            
            
            604,593
            
            
            36.9
            %**Operating
                Expenses:**Employee
                compensation and benefits
            
            
            197,103
            
            
            12.0
            %Occupancy
                and equipment
            
            
            98,481
            
            
            6.0
            %Advertising
            
            
            55,542
            
            
            3.4
            %Professional
                fees
            
            
            18,617
            
            
            1.1
            %Other
                general and administrative expenses
            
            
            119,299
            
            
            7.3
            %Total
                Operating Expenses
            
            
            489,042
            
            
            29.8
            %**Operating
                Income (Loss)**
            
            
            115,551
            
            
            7.1
            %**Net
                Income (Loss)**
            
            $
            115,551
            
            
            7.1
            %




**Revenues**





For
      the
      nine months ended September 30, 2006, FuelMeister’s revenue was $1,638,813.





**Cost
      of Sales and Gross Profit**





Cost
      of
      sales for the nine months ended September 30, 2006 was $1,034,220 or 63.1%
      of
      revenues for the quarter. As a result, gross profit margin was $604,593 or
      36.9%.





**Employee
      Compensation and Benefits**





Employee
      compensation and benefits were $197,103 or 12.0% of revenues for the nine months
      ended September 30, 2006.




45





**Occupancy
      and Equipment**





Occupancy
      and equipment expenses, consisting of rent, depreciation, amortization, and
      other miscellaneous expenses, amounted to $98,481 or 6.0% of revenues for the
      nine months ended September 30, 2006.





**Professional
      Fees**





Professional
      fees, consisting primarily of accounting and attorney fees of $18,617 were
      1.1%
      of revenues for the nine months ended September 30, 2006.





**General
      and Administrative Expenses**





General
      and administrative expenses, consisting of administrative expenses, insurance
      and other non-manufacturing related expenses, were $119,299 or 7.3% of revenue
      for the nine months ended September 30, 2006.





**Provision
      for Income Taxes**





During
      the nine months ended September 30, 2006, we experienced an operating loss
      for
      tax purposes. FuelMeister, our Predecessor, had historically experienced
      operating losses, and as FuelMeister’s management were uncertain as to whether
      FuelMeister would be able to utilize these tax losses before they expire, they
      provided a reserve for the income tax benefits associated with FuelMeister’s net
      future tax assets which primarily related to its cumulative net operating
      losses. We have adopted the same policy to reserve such net tax assets until
      such time profitability is reasonably assured and it becomes more likely than
      not that we will be able to utilize such assets.





**Net
      Income**





As
      a
      result of the above, we reported net income of $115,552 for the nine months
      ended September 30, 2006.





**GOING
      CONCERN**





Our
      financial statements are prepared using accounting principles generally accepted
      in the United States of America applicable to a going concern, which contemplate
      the realization of assets and the liquidation of liabilities in the normal
      course of business. Since inception, we have incurred losses from operations.
      Furthermore, we will require a significant amount of capital to proceed with
      our
      business plan. As such, our ability to continue as a going concern is contingent
      upon us being able to secure an adequate amount of debt or equity capital to
      enable us to meet our operating cash requirements and successfully implement
      our
      business plan. In addition, our ability to continue as a going concern must
      be
      considered in light of the challenges, expenses and complications frequently
      encountered by entrance into new markets and the competitive environment in
      which we operate.




46





Our
      Predecessor historically funded its cash requirements through operations and
      contributions from the former owner. In connection with the acquisition of
      the
      FuelMeister Business and BSI, we obtained debt financing. We expect we will
      need
      to obtain additional funding through private or public equity and/or debt
      financing to pay for the infrastructure needed to support our planned growth
      but, as a public company, we believe we will have better access to additional
      debt or equity capital.





There
      can
      be no assurance that our plans will materialize and/or that we will be
      successful in raising required capital to grow our business and/or that any
      such
      capital will be available on terms acceptable to us. These factors, among
      others, indicate that we may be unable to continue as a going concern for a
      reasonable period of time. Our financial statements do not include any
      adjustments relating to the recoverability and classification of recorded asset
      amounts or the amounts and classification of liabilities that might be necessary
      should we be unable to continue as a going concern.





**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**





The
      preparation of financial statements in conformity with United States generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amount of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. Actual results could differ from those estimates. Our
      management routinely makes judgments and estimates about the effects of matters
      that are inherently uncertain.





Our
      critical accounting policies are those where we have made the most difficult,
      subjective or complex judgments in making estimates, and/or where these
      estimates can significantly impact our financial results under different
      assumptions and conditions. Our critical accounting policies are:




·
            Revenue
                Recognition




·
              Allowance
                  for Doubtful Accounts
 ·
                Derivative
                    Financial Instruments
 ·
                  Warranty
                      Obligations
 ·
                    Inventory
                        Obsolescence


**Revenue
      Recognition**





In
      accordance with Staff Accounting Bulletin 104 - Revenue Recognition in Financial
      Statements (“SAB 104”), revenue is generally recognized and earned when all of
      the following criteria are satisfied a) persuasive evidence of sales
      arrangements exist; b) delivery has occurred; c) the sales price is fixed or
      determinable, and d) collectibility is reasonably assured. It is the fourth
      criterion that requires us to make significant estimates. In those cases where
      all four criteria are not met, we defer recognition of revenue until the period
      these criteria are satisfied. In some cases where collectibility is an issue,
      we
      defer revenue recognition until the cash is actually received.





**Allowance
      for Doubtful Accounts**





The
      allowance for doubtful accounts is evaluated on a regular basis and adjusted
      based upon management's best estimate of probable losses inherent in
      receivables, based on historical experience, including the historical loss
      experience of the Predecessor. Receivables are determined to be past due if
      they
      have not been paid by the payment due dates. Debts are written off against
      the
      allowance when deemed to be uncollectible. Subsequent recoveries, if any, are
      credited to the allowance when received.




47





**Derivative
      Financial Instruments**





In
      connection with the sale of debt or equity instruments, we may sell options
      or
      warrants to purchase our common stock. In certain circumstances, these options
      or warrants may be classified as derivative liabilities, rather than as equity.
      Additionally, the debt or equity instruments may contain embedded derivative
      instruments, such as conversion options, which in certain circumstances may
      be
      required to be bifurcated from the associated host instrument and accounted
      for
      separately as a derivative instrument liability.




The
      identification of, and accounting for, derivative instruments is complex. Any
      derivative instrument liabilities are re-valued at the end of each reporting
      period, with changes in the fair value of the derivative liability recorded
      as
      charges or credits to income, in the period in which the changes occur. For
      options, warrants and bifurcated conversion options that are accounted for
      as
      derivative instrument liabilities, we determine the fair value of these
      instruments using the Cox-Ross-Rubinstein binomial option pricing model. That
      model requires assumptions related to the remaining term of the instruments
      and
      risk-free rates of return, our current common stock price and expected dividend
      yield, and the expected volatility of our common stock price over the life
      of
      the instruments. Because of the limited trading history for our common stock,
      we
      have estimated the future volatility of our common stock price based on not
      only
      the history of our stock price but also the experience of other entities
      considered comparable to us. The identification of, and accounting for,
      derivative instruments and the assumptions used to value them can significantly
      affect our financial statements.





**Product
      Warranties**





At
      the
      time a sale is recognized, the company records the estimated future warranty
      costs. These costs are estimated based on historical warranty claims. For the
      current period we used the historical warranty experience of the Predecessor
      company. Warranty provisions are included as a component of cost of
      sales.





**Inventory
      Obsolescence**





We
      evaluate our inventory for excess and obsolescence on a quarterly basis. In
      preparing our evaluation, we look at the expected demand for our products for
      the next six to twelve months in order to determine whether or not such raw
      materials, WIP and finished goods require a change in the inventory reserve
      in
      order to record the inventory at net realizable value. After discussions with
      the senior management team, a reserve is established so that inventory is
      appropriately stated at the lower of cost or net realizable value.





**RECENT
      ACCOUNTING PRONOUNCEMENTS**





***Impact
      of Recently Issued Accounting Pronouncements*** **** -
      The
      Financial Accounting Standards Board has recently issued several Financial
      Accounting Standards, as summarized below. None of these statements have had,
      or
      are expected to have, a significant effect on our financial statements or those
      of our Predecessor.





Issued
            
            StatementFebruary
                2006
            
            FAS
                155 - “Accounting for Certain Hybrid Financial Instruments; an amendment
                of Financial Accounting Standard Nos. 133 and 140" (“FAS
                155”)March
                2006
            
            FAS
                156 - “Accounting for Servicing of Financial Assets, an amendment of FASB
                Statement No. 140, Accounting for Transfers and Servicing of Financial
                Assets and Extinguishments of Liabilities”June
                2006
            
            FAS
                Interpretation 48 - "Accounting for Uncertainty in Income
                Taxes"September
                2006
            
            FAS
                157 - “Fair Value Measurements”September
                2006
            
            FAS
                158 - “Employers’ Accounting for Defined Benefit Pension and Other
                Postretirement Plans” - an amendment of FASB Statements No. 87, 88, 106,
                and 132(R)”February
                2007
            
            FAS
                159 - “The Fair Value Option for Financial Assets and Financial
                Liabilities—Including an amendment of FASB Statement No.
                115”


48


**LIQUIDITY
      AND CAPITAL RESOURCES**





**Cash
      and Cash Flows From Operations:**





The
      accompanying condensed consolidated financial statements have been prepared
      assuming we will continue as a going concern. During the period from inception
      on March 9, 2007 through September 30, 2007, we had a net loss of $10,530,791
      which included non-cash items totaling $8,771,000, consisting primarily of
      stock-based transaction expense, acquired in process R&D, and amortization
      of deferred financing fees and intangible assets. Our existence is dependent
      on
      management’s ability to develop profitable operations and successful integration
      of our acquired businesses.





Net
      cash
      used in investing activities was $962,521, of which $494,426 was used in the
      acquisition of the assets of the FuelMeister Business, our Predecessor, $46,081
      was used for fixed asset acquisitions, and $422,014 was used in the acquisition
      of BSI.





Net
      cash
      provided by financing activities was $3,007,211 consisting of $1,118,109 of
      proceeds from the sale of convertible debt, beneficial conversion
      feature, and warrants to YA Global, less $450,000 of fees incurred,
      issuance of warrants for $343,337, issuance if beneficial conversion
      feature for $938,554, and $57,279 in proceeds from the sale of our common stock
      to our founders. At September 30, 2007, our primary debt has terms of
      approximately 21 months with interest rates ranging from 11% to 15%. All of
      our
      debt is convertible by the holder into shares of our common stock. Substantially
      all of our debt has variable interest rates and, accordingly, a change in
      interest rates will affect our results of operations. However, interest is
      generally payable on maturity, rather than currently, and thus our cash flows
      from operations would not be immediately impacted in the short-term by an
      adverse change in interest rates.





**Financing
      Through Equity**





On
      March
      09, 2007, founders stock and stock based transaction expenses were incurred
      in
      the amount of $57,279 and $5,131,231, respectively, as a result of the reverse
      merger.





**Financing
      Through Convertible Debentures**





**New
      Obligations**





On
      April
      20, 2007, the Company entered into a Securities Purchase Agreement (the
      "Purchase Agreement") with YA
      Global providing for the sale by the Company to YA
      Global of its
      secured convertible debentures in the aggregate principal amount of $1,400,000
      (the "New Debentures") of which $1,000,000 was advanced immediately. The second
      instalment of $400,000 was funded on May 31, 2007, following clearance by the
      Securities and Exchange Commission (the “SEC”) of an information statement
      disclosing shareholder approval of the issuance of the Preferred Stock to the
      former shareholders of Renewal Biodiesel.





The
      New
      Debentures bear interest at the prime rate plus 2.75% (but not less than 10%)
      and mature on April 20, 2009 and May 31, 2009 (the "Maturity Dates"). The
      Company is not required to make any payments until the Maturity Dates. The
      holder of the New Debentures (the "Holder") may convert at any time principal
      amounts outstanding under the New Debentures into shares of common stock of
      the
      Company at a conversion price per share equal to the lower of (a) $0.60 or
      (b)
      80% of the lowest closing bid price of the common stock during the ten trading
      days immediately preceding the conversion date. The Company has the right to
      redeem a portion or all amounts outstanding under the New Debentures prior
      to
      the Maturity Dates at a 15% redemption premium provided that (i) the closing
      bid
      price of the common stock is less than the fixed conversion price of the New
      Debentures; (ii) the underlying shares are subject to an effective registration
      statement; and (iii) no event of default has occurred and is continuing. The
      New
      Debentures contain standard anti-dilution adjustments for stock splits and
      similar events. In the event that the Company sells or otherwise issues common
      stock at a price below the current conversion price, the fixed conversion price
      will be reduced to such lower price. If an Event of Default occurs, as defined
      in the New Debentures, the holder may demand immediate repayment of all amounts
      due under the New Debentures. In addition to non-payment of principal or
      interest when due, defaults under other obligations and bankruptcy or similar
      events, the Events of Default include a Change in Control of the Company, the
      Company’s failure to file, achieve or maintain effectiveness of the required
      registration statement (see below) if registration has been demanded by the
      Holder of the New Debentures, and the failure to maintain the listing of the
      Company’s common stock on a recognized exchange. Certain of these Events may
      constitute derivative instruments. When the risks and rewards of such derivative
      instruments are not clearly and closely related to the risks and rewards
      associated with the New Debentures, the effect of these Events is considered
      in
      valuing any compound derivative instrument that may be bifurcated from the
      New
      Debentures.




49





The
      obligations to YA Global, together with prior obligations to YA
      Global described below, are secured by a security interest in the Company’s assets,
      including its intellectual property. In addition, the Company pledged the shares
      of Renewal Biodiesel to YA
      Global as
      additional security for the obligations to YA
      Global .





Under
      the
      Purchase Agreement, the Company also issued to YA
      Global five-year warrants to purchase 1,200,000 shares of common stock at an exercise
      price of $0.15 per share. The warrants were valued at $238,932 using the
      Cox-Ross-Rubenstein binomial model, based on the market price at the time they
      were issued of $0.2265, estimated volatility of 123%, a risk free rate of 4.75%
      and the five year life of the warrants.





In
      connection with the Purchase Agreement, the Company also entered into a
      registration rights agreement with YA
      Global (the
      "Registration Rights Agreement") providing for the filing of a registration
      statement (the "Registration Statement") with the SEC registering the common
      stock issuable upon conversion of the New Debentures and exercise of the
      warrants. Upon written demand from the Holder, the Company is obligated to
      file
      a Registration Statement within 45 days of such demand and to use its best
      efforts to cause the Registration Statement to be declared effective no later
      than 150 days following receipt of such demand. The Company is also required
      to
      ensure that the Registration Statement remains in effect until all of the shares
      of common stock issuable upon conversion of the New Debentures and exercise
      of
      the warrants have been sold or may be sold without volume restrictions pursuant
      to Rule 144(k) promulgated by the SEC. In the event of a default of its
      obligations under the Registration Rights Agreement, including its agreement
      with respect to the filing and effectiveness dates for the Registration
      Statement, the Company is required to pay to YA Global, as liquidated damages,
      for each thirty day period that the Registration Statement has not been filed
      or
      declared effective, as the case may be, a cash amount equal to 2% of the face
      amount of the Debentures, not to exceed 24%. As of November 14, 2007, no demand
      for registration has been received by the Company.





On
      July
      2, 2007, the Company entered into an additional Securities Purchase Agreement
      (the "Additional Purchase Agreement") with YA
      Global providing for the sale by the Company to YA
      Global of its
      secured convertible debentures in the aggregate principal amount of $2,700,000
      (the "Additional Debentures") of which $2,000,000 was advanced immediately.
      The
      second installment of $700,000 will be funded within two business days after
      the
      Company has unconditionally booked and received at least a 50% deposit for
      the
      sale of at least one BiodieselMaster® unit.





The
      interest rate, repayment terms, conversion rights, conversion price,
      anti-dilution provisions, redemption provisions, events of default and
      registration requirements of the Additional Debentures are identical to those
      of
      the New Debentures described above, except that the fixed element of the
      conversion price is $0.75, not $0.60.




50





The
      obligations to YA Global, together with prior obligations to YA Global, are
      secured by a security interest in the Company’s assets and the assets of its
      subsidiaries, including their intellectual property. In addition, the Company
      pledged the shares of BSI to YA
      Global as
      additional security for the obligations to YA
      Global .





Under
      the
      Additional Purchase Agreement, the Company also issued to YA
      Global five-year warrants to purchase 2,250,000 shares of common stock at an exercise
      price of $0.90 per share. The warrants were valued at $1,104,405 using the
      Cox-Ross-Rubenstein binomial model, based on the market price at the time they
      were issued of $0.60, estimated volatility of 123%, a risk free rate of 4.90%
      and the five year life of the warrants.





**Prior
      Obligations**





On
      April
      20, 2007, as part of the net liabilities assumed on the reverse merger, the
      Company assumed certain existing obligations to YA
      Global and
      other entities. These obligations included two existing 15% convertible
      debenture obligations dated December 27, 2005 due to Montgomery Equity Partners,
      Ltd, an affiliate of YA
      Global (the
“Old Debentures”), in the face amounts of $537,220 and $300,000, together with
      accrued interest at April 20, 2007 of $105,310 and $58,808, respectively. The
      Old Debentures were due on December 27, 2006. In connection with one of these
      Old Debentures, the Company previously issued warrants to purchase 6,666 shares
      of common stock at an exercise price of $0.015 per share. As amended on May
      31,
      2007, the Old Debentures are convertible into shares of common stock at a
      conversion price per share equal to the lesser of (a) $0.60 or (b) 80% of the
      lowest closing bid price of the common stock during the ten trading days
      immediately preceding the conversion date.





In
      connection with these Old Debentures, the Company is obligated to file a
      Registration Statement with the SEC, registering the shares issuable on
      conversion of the Old Debentures and the Old Warrants. The Company has not
      filed
      the required registration statement (which was required to be filed by March
      27,
      2006 and effective by May 26, 2006). Under the terms of the Old Debentures,
      the
      Company is required to pay to YA Global, as liquidated damages, for each thirty
      day period that the Registration Statement has not been filed or declared
      effective, as the case may be, a cash amount equal to 2% of the face amount
      of
      the Old Debentures. The Company has received a letter from YA
      Global  waiving
      all rights to collect any and all liquidated damages, whether in shares of
      stock
      or cash, arising from any default under any of the convertible debenture
      agreements.





The
      Company also assumed the remaining portions of a convertible promissory note
      that was originally issued in 2000. A portion of the note is held by YA
      Global and a
      portion is held by entities associated with LH Financial. The notes are
      convertible into shares of common stock at a conversion price per share equal
      to
      85% of the average of the five lowest closing bid prices of the common stock
      during the 22 trading days immediately preceding the conversion date. During
      the
      period April 21, 2007 to September 30, 2007, YA
      Global converted their entire principal amount of $168,000 plus all accrued interest
      thereon of $61,000 into 574,807 common shares.





On
      September 21, 2007, YA
      Global converted $215,000 of the $537,220 principal amount of the Old Debentures held
      by it into 1,343,750 shares of common stock at $0.16 per share (the lesser
      of
      $0.60 or 80% of the lowest closing bid price of the common stock during the
      ten
      trading days immediately preceding the conversion date, which was $0.20). These
      shares were issued by the transfer agent on October 5, 2007. As of November
      14,
      2007 there have been no conversions of convertible debentures subsequent to
      September 30, 2007.





**Derivative
      Instrument Liabilities and Beneficial Conversion Feature**





In
      accounting for the Convertible Debentures and the associated Warrants, the
      Company has considered the requirements of EITF
      Issue 00-19, "Accounting for Derivative Financial Instruments Indexed To, and
      Potentially Settled In, a Company's Own Common Stock". Because
      the number of shares that may be required to be issued on conversion of the
      Convertible Debentures is dependent on the price of the Company’s common stock,
      the number of shares ultimately required is indeterminate. However, full
      conversion of the outstanding Convertible Debentures and exercise of outstanding
      Warrants, together with currently outstanding common stock and all other
      currently existing requirements to issue common stock, require the Company
      to
      have approximately 52 million common shares authorized. The Company is
      authorized to issue 3 billion common shares. As a result, management of the
      Company believes it will have sufficient authorized shares available to
      physically settle all contracts that currently require delivery of common
      shares. Furthermore, management of the Company, together with investors
      associated with management, control a majority of the outstanding common shares
      of the Company. Accordingly, management of the Company believes it is in a
      position to secure shareholder approval of an increase in the authorized number
      of shares, should such an increase be required in the future. As a result of
      management’s conclusion that it will have sufficient authorized shares available
      to settle all outstanding contracts requiring delivery of common shares, the
      conversion option embedded in the Convertible Debentures has not been bifurcated
      and the Warrants issued in connection with the Convertible Debentures have
      been
      accounted for as equity instruments.




51





The
      Company has also reviewed the terms of the Convertible Debentures to determine
      whether there are embedded derivative instruments, other than the conversion
      option, that may be required to be bifurcated and accounted for separately
      as
      derivative instrument liabilities. Certain events of default associated with
      the
      Convertible Debentures, including failure to effect or maintain registration
      when required, the failure to maintain the listing of the Company’s common stock
      on a recognized exchange and similar events, have risks and rewards that are
      not
      clearly and closely associated with the risks and rewards of the debt
      instruments in which they are embedded. However, events of default serve only
      to
      permit the holder to demand repayment and do not require the Company to pay
      any
      premium on default. Accordingly, these embedded derivative instruments are
      considered to have minimal, if any, value.





If
      the
      conversion option embedded in the Convertible Debentures has not been
      bifurcated, then the effective conversion price for a Convertible Debenture
      is
      less than the market value of the underlying shares at the time the debenture
      is
      issued (usually as a result of the allocation of part of the proceeds received
      to common stock warrants or other instruments), the Company recognizes a
      beneficial conversion feature in accordance with EITF Issues 98-05 and 00-27.
      The value of the beneficial conversion feature, which is credited to additional
      paid-in capital, reduces the initial carrying amount of the debenture. During
      the period ended June 30, 2007 and the three months September 30, 2007, the
      Company recorded beneficial conversion features aggregating $923,841 and
      $348,287, respectively.





The
      discount from the face amount of the Convertible Debentures represented by
      the
      value initially assigned to any associated Warrants and to any beneficial
      conversion feature is amortized over the period to the due date of each
      Convertible Debenture, using the effective interest method. Included in the
      beneficial conversion feature of $923,841 recorded during the period ended
      June
      30, 2007 was $333,574 related to debentures assumed by the Company on the
      reverse merger described above. Because those debentures are past due, the
      discount from the face amount of the debentures was immediately expensed and
      is
      included in interest expense for the period.




For
      warrants and option-based derivative instruments, the Company estimates fair
      value using the Cox-Ross-Rubinstein binomial valuation model, based on the
      market price of the common stock on the valuation date, an expected dividend
      yield of 0%, a risk-free interest rate based on constant
      maturity rates published by the U.S. Federal Reserve applicable to the remaining
      term of the instruments, (which rates ranged from 4.57% to 4.90%) ,
      and an
      expected life equal to the remaining term of the instruments. Because
      of the limited historical trading period of our common stock, the expected
      volatility of our common stock over the remaining life of the conversion options
      and Warrants was estimated at 123%, based on a review of the volatility of
      entities considered by management as most comparable to our
      business.




52





**Investing**




**Acquisition
      of Assets of FuelMeister Business**





As
      noted
      above, on March 9, 2007, Crivello Group, LLC (“Crivello”) and its wholly-owned
      subsidiary, Renewal Biodiesel, entered into an Asset Purchase Agreement with
      Biodiesel Solutions, Inc. (“BSI”), which was effective March 30, 2007. Pursuant
      to the Asset Purchase Agreement, BSI sold substantially all of the assets and
      property of its FuelMeister operations (the “FuelMeister Business”, the
“Predecessor” or the “Predecessor Business”, an unrelated Company) to Renewal
      Biodiesel, in exchange for an aggregate purchase price of $500,000, subject
      to
      adjustment. Under the terms of the Agreement, the purchase price was
      subsequently adjusted to $494,426 to reflect the inventory on hand at
      closing.





**Acquisition
      of BSI**





As
      noted
      above, on July 2, 2007, we entered into a merger agreement with BSI, as a result
      of which we acquired the remainder of BSI's business (i.e., other than the
      FuelMeister Business acquired previously). BSI is engaged in the business of
      designing, manufacturing and marketing processing equipment and accessories,
      including personal biodiesel processors and “community scale” biodiesel
      processor systems, which convert fresh and used vegetable oils into clean
      burning biodiesel fuel. It complements and optimizes Renewal’s ability to
      design, develop, manufacture and market both personal and community scale
      biodiesel processing equipment and accessories.





**OFF-BALANCE
      SHEET ARRANGEMENTS**





We
      currently have no off balance sheet arrangements, other than the property leases
      described in the footnotes to the financial statements.




**QUALITATIVE
      AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK**





We
      are
      exposed to certain market risks which exist as part of our ongoing business
      operations. We currently do not engage in derivative and hedging transactions
      to
      mitigate the affects of the risks below. Because the operating structure of
      our
      business is different from that of our Predecessor, FuelMeister, we have
      described only those risks as they apply to our current operating environment.





**Interest
      Rates**





Changes
      in U.S. interest rates would affect the interest paid on our borrowings and/or
      earned on our cash and cash equivalents. Based on our overall interest rate
      exposure at September 30, 2007, a near-term change in interest rates, based
      on
      historical small movements, would not materially affect our operations or the
      fair value of interest rate sensitive instruments. Our debt instruments have
      variable interest rates and terms and, therefore, a significant change in
      interest rates could have a material adverse effect on our financial position
      or
      results of operations if we are unable to change the prices we charge to
      customers for our products.





We
      considered the historical volatility of short term interest rates and determined
      that it was reasonably possible that an adverse change of 100 basis points
      could
      be experienced in the near term. Based on our borrowings at September 30, 2007,
      a hypothetical 1.00% (100 basis-points) increase in interest rates would result
      in additional expenses of approximately $10,000 for the quarter or an annual
      increase in expenses of approximately $40,000.




53





**Foreign
      Currency Fluctuations**





Currently
      we do not have significant transactions in currencies other than the U.S.
      dollar.





We
      currently do not engage in hedging. However, we may do so in the future.





**OUTLOOK**





Activities
      in each of our businesses over the months since inception have been focused
      on
      establishing a strong foundation for growth.  For Renewal Biodiesel, this
      foundation is based on a strong dealer network, well-designed marketing/sales
      plans, and expansion of the product line.  We have made great strides
      in each of these areas, and have recovered from a difficult transition period
      from previous management, caused in part by lack of advertising spending in
      the
      first half of 2007.  We have established a strong management and operations
      team, and re-energized the marketing and sales efforts.  We have also
      established new distribution models and begun planning for new product
      introductions in the next six months.  Management of Renewal Biodiesel has
      been able to accomplish these gains while keeping Sales, General, and
      Administrative spending low, thereby creating a strong platform for
      profitability in the months ahead.  In addition, the recent increases in
      fuel prices have created a surge in buyer awareness and interest in the
      FuelMeister line of products.  We expect to see strong growth in the next
      year at Renewal Biodiesel, on the strength of the established
      foundation.




Since
      our
      acquisition of BSI, our focus has been on completion of the demonstration
      version of the BiodieselMaster®.  These efforts have included completion of
      production-model specifications, construction of the demonstration unit, and
      commissioning activities.  We have now completed the majority of these
      activities as well as establishment of a pipeline of customers.  As
      expected, we are ready to enter the market with BiodieselMaster® in the
      fourth quarter, and the level of interest in the product to date bodes well
      for
      our sales growth and profitability in this business.




Finally, we
      are actively negotiating with various parties to add to our portfolio of
      businesses and technologies.  We remain very excited by the opportunities
      in the biofuels sector, particularly those focused on production of biofuels
      from non-food feedstock.  When evaluating partnership and acquisition
      opportunities, our criteria include sustainability of the business model,
      sustainability of feedstock sources, and sustainability of the
      environment.  We are committed to making biofuels a viable and common part
      of the solution to cure the planet of its addiction to oil.





**ITEM
      3. Controls And Procedures.**





**Disclosure
      Controls and Procedures**




We
      carried out an evaluation of the effectiveness of the design and operation
      of
      our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities
      Exchange Act of 1934 (the “Exchange Act”) under the supervision and with the
      participation of our chief executive officer, chief financial officer and other
      members of our management team. Our disclosure controls and procedures are
      designed to provide reasonable assurance of achieving their objectives. Although
      we hired a considerable number of the staff from the Predecessor business,
      we
      have new management and are using financial accounting consultants.  Any
      system of controls can provide only reasonable, and not absolute, assurance
      that
      the objectives of the control system are met. In addition, the design of any
      control system is based in part upon certain assumptions about the likelihood
      of
      future events. Based upon the evaluation of the effectiveness of the design
      and
      operation of our disclosure controls and procedures, the chief executive officer
      and chief financial officer concluded that our disclosure controls and
      procedures were effective as of September 30, 2007 in timely alerting them
      to
      material information required to be included in our Exchange Act filings.




54




**Management’s
      Report on Internal Control Over Financial Reporting**




We
      will
      be required by the Sarbanes-Oxley Act to include an assessment of our internal
      control over financial reporting in our Annual Report on Form 10-KSB
      beginning with our filing for our fiscal year ending December 31, 2007 and
      attestation from an independent registered public accounting firm in our Annual
      Report on Form 10-KSB beginning with our filing for our fiscal year ending
      December 31, 2008.




**Changes
      in Internal Control Over Financial Reporting**




There
      have been no changes in our internal controls over financial reporting during
      the quarter ended September 30, 2007, which have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.




55





**PART
      II - OTHER INFORMATION**





**ITEM
      1.** **Legal
      Proceedings** **.**





None.





**ITEM
      2.** **Unregistered
      Sales Of Equity Securities And Use Of Proceeds** **.**





None.





**ITEM
      3.** **Defaults
      Upon Senior Securities** **.**





None.





**ITEM
      4.** **Submission
      Of Matters To A Vote Of Security Holders** **.**





On
      July
      31, 2007, the majority stockholders of the Company approved a 1-for-15 reverse
      stock split pursuant to a written consent in lieu of a special meeting of
      stockholders and, as a result, all outstanding shares of Common Stock (the
      "Old
      Shares") were automatically converted into 23,805,126 shares of common
      stock (the "New Shares"). The authorized number of shares of common stock was
      not impacted by the reverse stock split. The reason for the reverse stock split
      was to increase the per share stock price to generate greater interest among
      professional investors and institutions. All New Shares have the same par value,
      voting rights and other rights as the Old Shares.





On
      July
      31, 2007, the majority stockholders of the Company approved the 2007 Stock
      Incentive Stock Plan (the "2007 Incentive Plan") and authorized 1,000,000 shares
      of Common Stock, for issuance of stock awards and stock options thereunder.
      The
      primary purpose of the 2007 Incentive Plan is to attract and retain the best
      available personnel for the Company by granting stock awards and stock options
      in order to promote the success of the Company's business and to facilitate
      the
      ownership of the Company's stock by employees.





**ITEM
      5.** **Other
      Information** **.**





None.




56





**ITEM
      6.** **Exhibits** **.**





**Exhibit
                Number**
            
            **Description**3.1
            
            Amendment
                to Certificate of Incorporation of Tech Laboratories, Inc.
                (1)3.2
            
            Amended
                and Restated By-laws of Tech Laboratories, Inc. (1)10.1
            
            Agreement
                and Plan of Merger, dated April 20, 2007, among Tech Laboratories,
                Inc.,
                Renewal Fuels Acquisitions, Inc. and Renewal Fuels, Inc.
                (1)10.2
            
            Asset
                Purchase Agreement, dated March 30, 2007, among Crivello Group, LLC,
                Renewal Fuels, Inc. and Biodiesel Solutions, Inc. (1)10.3
            
            Securities
                Purchase Agreement, dated April 20, 2007, by and between Tech
                Laboratories, Inc. and Cornell Capital Partners L.P.
                (1)10.4
            
            $1,000,000
                principal amount Secured Convertible Debenture, dated April 20, 2007,
                by
                and between Tech Laboratories, Inc. and Cornell Capital Partners
                L.P.
                (1)10.5
            
            Warrant
                to purchase 18,000,000 shares of Common Stock of Tech Laboratories,
                Inc.
                dated April 20, 2007 (1)10.6
            
            Registration
                Rights Agreement, dated April 20, 2007, by and between Tech Laboratories,
                Inc. and Cornell Capital Partners L.P. (1)10.7
            
            Pledge
                and Escrow Agreement, dated April 20, 2007, by and between Tech
                Laboratories, Inc., David Gonzalez and Cornell Capital Partners L.P.
                (1)10.8
            
            Restated
                Security Agreement, dated April 20, 2007, by and between Tech
                Laboratories, Inc. and Cornell Capital Partners L.P.
                (1)10.9
            
            Services
                Agreement between Renewal Fuels, Inc. and Biodiesel Solutions, Inc.,
                dated
                as of March 30, 2007 (1)10.10
            
            Settlement
                Agreement between Tech Laboratories, Inc. and Stursburg & Veith, dated
                as of April 25, 2007 (1)10.11
            
            Amendment
                No. 1 to Secured Convertible Debenture No. TCHL-1-1, dated May 31,
                2007,
                by and between Tech Laboratories, Inc. and Cornell Capital Partners
                L.P.
                (2)10.12
            
            Amended
                and Restated $1,000,000 principal amount Secured Convertible Debenture,
                dated May 31, 2007, by and between Tech Laboratories, Inc. and Cornell
                Capital Partners L.P. (2)10.13
            
            Amendment
                No. 1 to Secured Convertible Debenture No. TCHL-1-2, dated May 31,
                2007,
                by and between Tech Laboratories, Inc. and Cornell Capital Partners
                L.P.
                (2)10.14
            
            $400,000
                principal amount Secured Convertible Debenture, dated May 31, 2007,
                by and
                between Tech Laboratories, Inc. and Cornell Capital Partners L.P.
                (2)10.15
            
            $300,000
                principal amount Secured Convertible Debenture, dated December 27,
                2005,
                by and between Tech Laboratories, Inc. and Montgomery Equity Partners,
                Ltd. (incorporated by reference to the exhibits to Registrant’s Form 8-K
                filed on January 10, 2006).10.16
            
            Amendment
                No. 1 to Secured Convertible Debenture No. MEP-2, dated May 31, 2007,
                by
                and between Tech Laboratories, Inc. and Montgomery Equity Partners,
                Ltd.
                (2)10.17
            
            Amended
                and Restated $537,220 principal amount Secured Convertible Debenture,
                dated December 27, 2005, by and between Tech Laboratories, Inc. and
                Montgomery Equity Partners, Ltd. (incorporated by reference to the
                exhibits to Registrant’s Form 8-K filed on January 10,
                2006).10.18
            
            Amendment
                No. 1 to Secured Convertible Debenture No. MEP-3, dated May 31, 2007,
                by
                and between Tech Laboratories, Inc. and Montgomery Equity Partners,
                Ltd.
                (2)10.19
            
            Agreement
                and Plan of Merger, dated July 2, 2007, among Tech Laboratories,
                Inc., BSI
                Acquisitions, Inc. and Biodiesel Solutions, Inc. (3)




57




10.20
            
            Securities
                Purchase Agreement, dated July 2, 2007, by and between Tech Laboratories,
                Inc. and Cornell Capital Partners L.P. (3)10.21
            
            $2,000,000
                principal amount Secured Convertible Debenture, dated July 2, 2007,
                by and
                between Tech Laboratories, Inc. and Cornell Capital Partners L.P.
                (3)10.22
            
            Warrant
                to purchase 33,750,000 shares of Common Stock of Tech Laboratories,
                Inc.
                dated July 2, 2007 (3)10.23
            
            Amendment
                No. 1 to Registration Rights Agreement, dated July 2, 2007, by and
                between
                Tech Laboratories, Inc. and Cornell Capital Partners L.P.
                (3)10.24
            
            Security
                Agreement, dated July 2, 2007, by and between Biodeisel Solutions,
                Inc.,
                Renewal Fuels, Inc. and Cornell Capital Partners L.P.
                (3)31.1
            
            Certification
                by Chief Executive Officer and Chief Financial Officer pursuant to
                Rule
                13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200232.1
            
            Certification
                by Chief Executive Officer and Chief Financial Officer pursuant to
                18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002(1)Incorporated
                by reference to Form 8-K filed on April 26, 2007
              
              (2)Incorporated
                by reference to Form 8-K filed on June 8, 2007
              
              (3)Incorporated
                by reference to Form 8-K filed on July 6,
                2007




58




**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.


**RENEWAL
                FUELS, INC.**Dated:November
              16, 2007
            By:
            /s/ John
              KingJohn
                King,Chief
                Executive Officer and Chief Financial Officer
              (Principal
                Financial and Accounting Officer)




59