U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



|                                                  |                                                                                          | 
|------------------------------------------------- | ---------------------------------------------------------------------------------------- | 
|(Mark One)                                       
|x                                                 | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|                                                  |                                                                                          | 
|For the quarterly period ended April 30, 2010    
|                                                  |                                                                                          | 
|o                                                 | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                                  |                                                                                          | 
|For the transition period from _______ to _______
|Commission file number  000-51574                



FOUR RIVERS BIOENERGY INC.

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



|                                                               |                                     
|-------------------------------------------------------------- | ------------------------------------
|Nevada                                                         | 980442163                           
|(State or other jurisdiction of
incorporation or organization) | (I.R.S. Employer Identification No.)
|                                                               |                                     
|14 South Molton Street, 3rd Floor
London, United Kingdom       | W1K 5QP                             
|(Address of principal executive offices)                       | (Zip Code)                          





Issuers telephone number:  44 1642 674085

_________________________________
(Former name, former address and former
fiscal year, if changed since last report)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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  ý     No  o



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



Large accelerated filer o     Accelerated Filer o     Non-accelerated filer o     Smaller reporting company ý



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



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



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APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 7,988,021 shares of common stock, par value $.001 per share, outstanding as of June 18, 2010.







2







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FOUR RIVERS BIOENERGY INC.

TABLE OF CONTENTS



|                               |    |                                                                                       |   
|------------------------------ | -- | ------------------------------------------------------------------------------------- | --
|PART I  FINANCIAL INFORMATION |   
|                               |    |                                                                                       |   
|Item 1.                        |    | Financial Statements:                                                                 | 5 
|Item 2.                        |    | Managements Discussion and Analysis of Financial Condition and Results of Operations | 19
|Item 3.                        |    | Quantitative and Qualitative Disclosures About Market Risk                            | 33
|Item 4.                        |    | Controls and Procedures                                                               | 33
|                               |    |                                                                                       |   
|PART II  OTHER INFORMATION    |   
|                               |    |                                                                                       |   
|Item 1.                        |    | Legal Proceedings                                                                     | 34
|Item 1A.                       |    | Risk Factors                                                                          | 34
|Item 2.                        |    | Unregistered Sales of Equity Securities and Use of Proceeds                           | 34
|Item 3.                        |    | Defaults Upon Senior Securities                                                       | 35
|Item 4.                        |    | [Reserved]                                                                            | 35
|Item 5.                        |    | Other Information                                                                     | 35
|Item 6.                        |    | Exhibits                                                                              | 35
|                               |    |                                                                                       |   
|SIGNATURES                     | 36







3







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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS



This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, and Section 27A of the Securities Act of 1933. Any statements contained in this report that are not statements of historical fact may be forward-looking statements. When we use the words anticipates, plans, expects, believes, should, could, may, will and similar expressions, we are identifying forward-looking statements. Forward-looking statements involve risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements.  These factors include our limited experience with our business plan; unexercised options to acquire land suitable for our business; unconstructed bio-energy production facilities; integration and deployment of acquired assets; pricing pressures on our product caused by competition, sensitivity to corn prices and bio-oils, the demand for bio-fuels, the capital cost of construction, the cost of energy, the cost of production, and the price and production of diesel and gasoline; the status of the federal bio-fuel incentives and our compliance with regulatory impositions; the continuing world interest in alternative energy sources; and our capital needs.



Except as may be required by applicable law, we do not undertake or intend to update or revise our forward-looking statements, and we assume no obligation to update any forward-looking statements contained in this report as a result of new information or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. You should carefully review and consider the various disclosures we make in this report and our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our business.





4







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PART I  FINANCIAL INFORMATION

Item 1.  Financial Statements.



FOUR RIVERS BIOENERGY INC.



INDEX TO FINANCIAL STATEMENTS



|                                                                                                                                                                                                        |     
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|                                                                                                                                                                                                        | Page
|                                                                                                                                                                                                        | Page
|Condensed Consolidated Balance Sheets as of April 30, 2010 (Unaudited) and October 31, 2009                                                                                                             | 6   
|                                                                                                                                                                                                        |     
|Condensed Consolidated Statements of Operations for the three and six months ended April 30, 2010 and 2009 and for the period from March 9, 2007 (date of inception) through April 30, 2010 (Unaudited) | 7   
|                                                                                                                                                                                                        |     
|Condensed Consolidated Statements of Stockholders Equity for period from March 9, 2007 (date of inception) through April 30, 2010 (Unaudited)                                                          | 8   
|                                                                                                                                                                                                        |     
|Condensed Consolidated Statements of Cash Flows for the six month  ended April 30, 2010 and 2009 and for the period from March 9, 2007 (date of inception) through April 30, 2010 (Unaudited)           | 9   
|                                                                                                                                                                                                        |     
|Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                                                                                        | 10  





5







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|                                                                                                                                                                      |           |              |             |   |             
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | ------------ | ----------- | - | ------------
|Four Rivers BioEnergy Inc.                                                                                                                                            |           |              |             |   |             
|(A Development Stage Enterprise)                                                                                                                                      |           |              |             |   |             
|Condensed Consolidated Balance Sheets                                                                                                                                 |           |              |             |   |             
|                                                                                                                                                                      |           |              |             |   |             
|                                                                                                                                                                      | April 30, |              | October 31,
|                                                                                                                                                                      | 2010      |              | 2009       
|                                                                                                                                                                      |           | (unaudited)  |             |   |             
|Assets                                                                                                                                                                |           |              |             |   |             
|Current assets                                                                                                                                                        |           |              |             |   |             
|Cash and cash equivalents                                                                                                                                             | $         | 308,404      |             | $ | 1,399,437   
|Restricted cash                                                                                                                                                       |           | -            |             |   | 200,000     
|Inventory                                                                                                                                                             |           | 47,955       |             |   | 128,507     
|Value added tax refunds receivable                                                                                                                                    |           | -            |             |   | 3,887       
|Prepaid expenses and other current assets                                                                                                                             |           | 276,615      |             |   | 231,622     
|Total current assets                                                                                                                                                  |           | 632,974      |             |   | 1,963,453   
|                                                                                                                                                                      |           |              |             |   |             
|Property and equipment                                                                                                                                                |           | 5,538,490    |             |   | 5,887,886   
|Land held for sale                                                                                                                                                    |           | 3,700,000    |             |   | 3,700,000   
|Patents and other                                                                                                                                                     |           | 283,180      |             |   | 283,180     
|Security deposit                                                                                                                                                      |           | 198,533      |             |   | 380,102     
|Total Assets                                                                                                                                                          | $         | 10,353,177   |             | $ | 12,214,621  
|                                                                                                                                                                      |           |              |             |   |             
|Liabilities and Stockholders' Equity                                                                                                                                  |           |              |             |   |             
|Current liabilities                                                                                                                                                   |           |              |             |   |             
|Accounts payable and accrued liabilities                                                                                                                              | $         | 1,827,126    |             | $ | 1,785,331   
|Value added tax payable                                                                                                                                               |           | 95,837       |             |   | -           
|Deferred consideration                                                                                                                                                |           | 540,000      |             |   | 600,000     
|Total Current Liabilities                                                                                                                                             |           | 2,462,963    |             |   | 2,385,331   
|                                                                                                                                                                      |           |              |             |   |             
|Deferred credit on asset purchase                                                                                                                                     |           | 252,000      |             |   | 252,000     
|Total Long Term Liabilities                                                                                                                                           |           | 252,000      |             |   | 252,000     
|                                                                                                                                                                      |           |              |             |   |             
|Commitment and contingencies                                                                                                                                          |           | -            |             |   | -           
|                                                                                                                                                                      |           |              |             |   |             
|Stockholders' Equity                                                                                                                                                  |           |              |             |   |             
|Preferred stock:                                                                                                                                                      |           |              |             |   |             
|Authorized: 100,000,000 shares with par value of $0.001 per share; issued and outstanding: none and 2 shares, as of April 30, 2010 and October 31, 2009, respectively |           | -            |             |   | -           
|Common stock:                                                                                                                                                         |           |              |             |   |             
|Authorized: 500,000,000 shares with par value of $0.001 per share, issued 8,221,356 shares, outstanding 7,921,356 shares, as of April 30, 2010 and October 31, 2009   |           | 7,922        |             |   | 7,922       
|Additional paid in capital                                                                                                                                            |           | 29,477,242   |             |   | 29,363,347  
|Accumulated other comprehensive income - foreign currency translation gain                                                                                            |           | 611,300      |             |   | 656,598     
|Deficit accumulated during development stage                                                                                                                          |           | (22,277,330) |             |   | (20,450,577)
|Stockholders' equity attributable to Four Rivers BioEnergy, Inc. Common Shareholders                                                                                  |           | 7,819,134    |             |   | 9,577,290   
|Non Controlling Interest                                                                                                                                              |           | (180,920)    |             |   | -           
|Total stockholders' equity                                                                                                                                            |           | 7,638,214    |             |   | 9,577,290   
|                                                                                                                                                                      |           |              |             |   |             
|Total Liabilities and Stockholders' Equity                                                                                                                            | $         | 10,353,177   |             | $ | 12,214,621  



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





6







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|                                                                                        |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |              | 
|--------------------------------------------------------------------------------------- | ------------------------------------ | ----------- | ------------------------------------ | - | ---------------------------------- |  | ---------------------------------- | ----------- | ----------------------------------------------------------------------- | - | ----------- |  | - | ------------ | 
|Four Rivers BioEnergy Inc.                                                             
|(A Development Stage Enterprise)                                                       
|Condensed Consolidated Statements of Operations                                        
|                                                                                        | For the Three
Months Ended
April 30, |             | For the Three
Months Ended
April 30, |   | For the Six
Months Ended
April 30, |  | For the Six
Months Ended
April 30, |             | For the Period
from March 9,
2007 (date of inception) through April 30,
|                                                                                        | 2010                                 |             | 2009                                 |   | 2010                               |  | 2009                               |             | 2010                                                                   
|Revenues                                                                                | $                                    | -           |                                      | $ | -                                  |  | $                                  | -           |                                                                         | $ | -           |  | $ | 3,201,412   
|Cost of goods sold                                                                      |                                      | -           |                                      |   | -                                  |  |                                    | -           |                                                                         |   | -           |  |   | (4,196,687) 
|Gross Loss                                                                              |                                      | -           |                                      |   | -                                  |  |                                    | -           |                                                                         |   | -           |  |   | (995,275)   
|                                                                                        |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |             
|Operating expenses                                                                      |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |             
|Professional fees                                                                       | $                                    | 333,736     |                                      | $ | 201,398                            |  | $                                  | 515,261     |                                                                         | $ | 393,908     |  | $ | 2,141,975   
|Fair value of shares issued for services                                                |                                      | -           |                                      |   | -                                  |  |                                    | -           |                                                                         |   | -           |  |   | 179,667     
|Contractors, Payroll and administrative expenses                                        |                                      | 430,948     |                                      |   | 433,623                            |  |                                    | 1,154,763   |                                                                         |   | 1,097,943   |  |   | 8,153,862   
|Warrants issued for services                                                            |                                      | 113,895     |                                      |   | 463,083                            |  |                                    | 113,895     |                                                                         |   | 1,867,366   |  |   | 1,981,261   
|Bank charges                                                                            |                                      | 3,677       |                                      |   | 2,725                              |  |                                    | 7,224       |                                                                         |   | 5,565       |  |   | 31,884      
|Consulting expenses                                                                     |                                      | -           |                                      |   | 70,165                             |  |                                    | 77,446      |                                                                         |   | 768,020     |  |   | 1,970,000   
|Depreciation expense                                                                    |                                      | 41,498      |                                      |   | 9,823                              |  |                                    | 85,282      |                                                                         |   | 14,250      |  |   | 134,462     
|Asset impairment loss                                                                   |                                      | -           |                                      |   | -                                  |  |                                    | -           |                                                                         |   | -           |  |   | 4,457,103   
|Farming costs                                                                           |                                      | -           |                                      |   | -                                  |  |                                    | -           |                                                                         |   | 17,500      |  |   | 54,633      
|Other site costs                                                                        |                                      | 159,946     |                                      |   | 294,606                            |  |                                    | 442,288     |                                                                         |   | 294,606     |  |   | 1,604,071   
|Patent protection costs STT                                                             |                                      | 8,689       |                                      |   | -                                  |  |                                    | 21,293      |                                                                         |   | -           |  |   | 103,117     
|Relocation, storage and other costs STT                                                 |                                      | 73,996      |                                      |   | 171,298                            |  |                                    | 85,392      |                                                                         |   | 171,298     |  |   | 235,000     
|Office and sundry                                                                       |                                      | 71,434      |                                      |   | 37,059                             |  |                                    | 148,584     |                                                                         |   | 56,861      |  |   | 722,427     
|Rent expense                                                                            |                                      | 112,155     |                                      |   | 32,173                             |  |                                    | 232,238     |                                                                         |   | 57,722      |  |   | 469,011     
|Telephone and communications                                                            |                                      | 6,523       |                                      |   | 11,014                             |  |                                    | 16,864      |                                                                         |   | 16,146      |  |   | 87,009      
|Travel expense                                                                          |                                      | 62,849      |                                      |   | 126,732                            |  |                                    | 104,350     |                                                                         |   | 214,845     |  |   | 1,203,049   
|Total operating expenses                                                                |                                      | 1,419,346   |                                      |   | 1,853,699                          |  |                                    | 3,004,880   |                                                                         |   | 4,976,030   |  |   | 23,528,531  
|                                                                                        |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |             
|Loss from operations                                                                    |                                      | (1,419,346) |                                      |   | (1,853,699)                        |  |                                    | (3,004,880) |                                                                         |   | (4,976,030) |  |   | (24,523,806)
|                                                                                        |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |             
|Other income (expense)                                                                  |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |             
|Interest income                                                                         |                                      | 247         |                                      |   | 15,367                             |  |                                    | 1,312       |                                                                         |   | 75,150      |  |   | 561,510     
|Interest expense                                                                        |                                      | -           |                                      |   | (572)                              |  |                                    | -           |                                                                         |   | (1,158)     |  |   | (7,518)     
|Other income                                                                            |                                      | 31,315      |                                      |   | -                                  |  |                                    | 57,162      |                                                                         |   | -           |  |   | 57,162      
|Gain on sale of scrap and surplus assets                                                |                                      | 600,557     |                                      |   | 110,985                            |  |                                    | 933,979     |                                                                         |   | 110,985     |  |   | 1,152,934   
|Forgiveness of debt                                                                     |                                      | -           |                                      |   | -                                  |  |                                    | -           |                                                                         |   | -           |  |   | 296,714     
|Total other income                                                                      |                                      | 632,119     |                                      |   | 125,780                            |  |                                    | 992,453     |                                                                         |   | 184,977     |  |   | 2,060,802   
|                                                                                        |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |             
|Net loss before provision for income taxes                                              |                                      | (787,227)   |                                      |   | (1,727,919)                        |  |                                    | (2,012,427) |                                                                         |   | (4,791,053) |  |   | (22,463,004)
|Income taxes (benefit)                                                                  |                                      | -           |                                      |   | -                                  |  |                                    | -           |                                                                         |   | -           |  |   | -           
|Net loss                                                                                |                                      | (787,227)   |                                      |   | (1,727,919)                        |  |                                    | (2,012,427) |                                                                         |   | (4,791,053) |  |   | (22,463,004)
|                                                                                        |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |             
|Net loss attributable to the non-controlling interest                                   |                                      | 52,305      |                                      |   | -                                  |  |                                    | 185,674     |                                                                         |   | -           |  |   | 185,674     
|                                                                                        |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |             
|Net loss attributable to Four Rivers BioEnergy, Inc. Common Shareholders                | $                                    | (734,922)   |                                      | $ | (1,727,919)                        |  | $                                  | (1,826,753) |                                                                         | $ | (4,791,053) |  | $ | (22,277,330)
|                                                                                        |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |             
|Basic and diluted loss per share attributable to Four Rivers BioEnergy, Inc.            | $                                    | (0.09)      |                                      |   | (0.23)                             |  |                                    | (0.23)      |                                                                         |   | (0.68)      |  | $ | (3.46)      
|                                                                                        |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |             
|Weighted average number of basic and diluted                                            |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |             
|common shares outstanding used in loss per share calculation                            |                                      | 7,921,356   |                                      |   | 7,370,981                          |  |                                    | 7,921,356   |                                                                         |   | 7,083,142   |  |   | 6,444,635   
|                                                                                        |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |             
|Comprehensive loss:                                                                     |                                      |             |                                      |   |                                    |  |                                    |             |                                                                         |   |             |  |   |             
|Net loss                                                                                | $                                    | (787,227)   |                                      | $ | (1,727,919)                        |  | $                                  | (2,012,427) |                                                                         | $ | (4,791,053) |  | $ | (22,463,004)
|Foreign currency translation  (loss) gain                                              |                                      | (24,053)    |                                      |   | 219,147                            |  |                                    | (45,298)    |                                                                         |   | 211,229     |  |   | 611,300     
|Comprehensive loss                                                                      | $                                    | (811,280)   |                                      |   | (1,508,772)                        |  |                                    | (2,057,725) |                                                                         |   | (4,579,824) |  | $ | (21,851,704)
|Foreign currency translation  (loss) gain attributable to the non-controlling interest |                                      | (4,554)     |                                      |   | -                                  |  |                                    | (4,754)     |                                                                         |   | -           |  |   | (4,754)     
|Comprehensive loss attributable to Four Rivers BioEnergy, Inc. Common Shareholders      | $                                    | (806,726)   |                                      | $ | (1,508,772)                        |  | $                                  | (2,052,971) |                                                                         | $ | (4,579,824) |  | $ | (21,846,950)



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



7







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|                                                                             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|---------------------------------------------------------------------------- |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Four Rivers BioEnergy Inc.                                                   |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|(A Development Stage Enterprise)                                             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Condensed Consolidated Statements of Stockholders' Equity                    |  |  |  |  |  |  |  |  |  | 
|For the Period from March 9, 2007 (date of inception) through April 30, 2010 |  |  |  |  |  | 



|                                                                    |                 |  |              |   |        |             |           |             |         |       |            |            |             |         |               |             |                |          |               |       |           |  |   |             
|------------------------------------------------------------------- | --------------- |  | ------------ | - | ------ | ----------- | --------- | ----------- | ------- | ----- | ---------- | ---------- | ----------- | ------- | ------------- | ----------- | -------------- | -------- | ------------- | ----- | --------- |  | - | ------------
|                                                                    |                 |  |              |   |        |             |           |             |         |       |            |            |             | Deficit |               | Accumulated |                |          |               |       |           | 
|                                                                    | Preferred Stock |  | Common Stock |   |        |             |           | Accumulated |         | Other |            |            |             |         |               |            
|                                                                    | Number          |  |              |   |        | Number      |           |             |         |       | Additional |            | During the  |         | Comprehensive |             |                |          |               | Total
|                                                                    | of              |  |              |   |        | of          |           |             |         |       | Paid in    |            | Development |         | Income/       |             | Noncontrolling |          | Stockholders
|                                                                    | Shares          |  | Par Value    |   | Shares |             | Par Value |             | Capital |       | Stage      |            | (Loss)      |         | Interest      |             | Equity        
|Balance at inception (March 9, 2007), adjusted for recapitalization | -               |  | $            | - |        | 5,629,716   |           | $           | 5,630   |       | $          | (5,630)    |             | $       | -             |             | $              | -        |               | $     | -         |  | $ | -           
|Shares issued for cash                                              | -               |  |              | - |        | 1,197,029   |           |             | 1,197   |       |            | 1,998,803  |             |         | -             |             |                | -        |               |       | -         |  |   | 2,000,000   
|Net loss                                                            | -               |  |              | - |        | -           |           |             | -       |       |            | -          |             |         | (965,731)     |             |                | -        |               |       |           |  |   | (965,731)   
|                                                                    |                 |  |              |   |        |             |           |             |         |       |            |            |             |         |               |             |                |          |               |       |           |  |   |             
|Balance, October 31, 2007                                           | -               |  |              | - |        | 6,826,745   |           |             | 6,827   |       |            | 1,993,173  |             |         | (965,731)     |             |                | -        |               |       | -         |  |   | 1,034,269   
|Shares issued for services prior to reverse merger                  | -               |  |              | - |        | 1,197,030   |           |             | 1,197   |       |            | 245,303    |             |         | -             |             |                | -        |               |       | -         |  |   | 246,500     
|Effect of reverse merger and assumption of liabilities              | -               |  |              | - |        | -           |           |             | -       |       |            | (270,185)  |             |         | -             |             |                | -        |               |       | -         |  |   | (270,185)   
|Shares issued for cash in December 2007 at $13.77 per share, net    | -               |  |              | - |        | 1,657,881   |           |             | 1,658   |       |            | 22,827,364 |             |         | -             |             |                | -        |               |       | -         |  |   | 22,829,022  
|Shares issued for fees in December 2007                             | 2               |  |              | - |        | -           |           |             | -       |       |            | -          |             |         | -             |             |                | -        |               |       | -         |  |   | -           
|Shares returned for cancellation in December 2007                   | -               |  |              | - |        | (3,008,028) |           |             | (3,008) |       |            | 3,008      |             |         | -             |             |                | -        |               |       | -         |  |   | -           
|Shares issued for cash in July 2008 at $15.26 per share, net        | -               |  |              | - |        | 131,061     |           |             | 131     |       |            | 1,631,433  |             |         | -             |             |                | -        |               |       | -         |  |   | 1,631,564   
|Foreign currency translation adjustment                             | -               |  |              | - |        | -           |           |             | -       |       |            | -          |             |         | -             |             |                | (3,531)  |               |       | -         |  |   | (3,531)     
|Net loss                                                            | -               |  |              | - |        | -           |           |             | -       |       |            | -          |             |         | (4,264,839)   |             |                |          |               |       | -         |  |   | (4,264,839) 
|                                                                    |                 |  |              |   |        |             |           |             |         |       |            |            |             |         |               |             |                |          |               |       |           |  |   |             
|Balance, October 31, 2008                                           | 2               |  | $            | - |        | 6,804,689   |           | $           | 6,805   |       | $          | 26,430,096 |             | $       | (5,230,570)   |             | $              | (3,531)  |               | $     | -         |  | $ | 21,202,800  
|Stock warrants issued for compensation                              | -               |  |              | - |        | -           |           |             | -       |       |            | 1,404,283  |             |         | -             |             |                | -        |               |       | -         |  |   | 1,404,283   
|Shares issued for asset acquisition in March 2009                   | -               |  |              | - |        | 900,000     |           |             | 900     |       |            | 755,100    |             |         | -             |             |                | -        |               |       | -         |  |   | 756,000     
|Warrants issued for asset acquisition in March 2009                 | -               |  |              | - |        | -           |           |             | -       |       |            | 131,335    |             |         | -             |             |                | -        |               |       | -         |  |   | 131,335     
|Stock warrants issued for services in April 2009                    | -               |  |              | - |        | -           |           |             | -       |       |            | 463,083    |             |         | -             |             |                | -        |               |       | -         |  |   | 463,083     
|Shares issued for services in October 2009                          | -               |  |              | - |        | 216,667     |           |             | 217     |       |            | 179,450    |             |         | -             |             |                | -        |               |       | -         |  |   | 179,667     
|Foreign currency translation adjustment                             | -               |  |              | - |        | -           |           |             | -       |       |            | -          |             |         | -             |             |                | 660,129  |               |       | -         |  |   | 660,129     
|Net loss                                                            | -               |  |              | - |        | -           |           |             | -       |       |            | -          |             |         | (15,220,007)  |             |                |          |               |       | -         |  |   | (15,220,007)
|                                                                    |                 |  |              |   |        |             |           |             |         |       |            |            |             |         |               |             |                |          |               |       |           |  |   |             
|Balance, October 31, 2009                                           | 2               |  | $            | - |        | 7,921,356   |           | $           | 7,922   |       | $          | 29,363,347 |             | $       | (20,450,577)  |             | $              | 656,598  |               | $     | -         |  | $ | 9,577,290   
|Termination of Preferred Stock                                      | (2)             |  |              | - |        | -           |           |             | -       |       |            | -          |             |         | -             |             |                | -        |               |       | -         |  |   | -           
|Stock warrants issued for compensation                              | -               |  |              | - |        | -           |           |             | -       |       |            | 113,895    |             |         | -             |             |                | -        |               |       | -         |  |   | 113,895     
|Foreign currency translation adjustment                             | -               |  |              | - |        | -           |           |             | -       |       |            | -          |             |         | -             |             |                | (45,298) |               |       | 4,754     |  |   | (40,544)    
|Net loss                                                            | -               |  |              | - |        | -           |           |             | -       |       |            | -          |             |         | (1,826,753)   |             |                | -        |               |       | (185,674) |  |   | (2,012,427) 
|Balance, April 30, 2010                                             | -               |  | $            | - |        | 7,921,356   |           | $           | 7,922   |       | $          | 29,477,242 |             | $       | (22,277,330)  |             | $              | 611,300  |               | $     | (180,920) |  | $ | 7,638,214   



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





8







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|                                                                            |                                    |             |                                    |   |                                                                         |  |   |              |  |  |  |  |  | 
|--------------------------------------------------------------------------- | ---------------------------------- | ----------- | ---------------------------------- | - | ----------------------------------------------------------------------- |  | - | ------------ |  |  |  |  |  | 
|Four Rivers BioEnergy Inc.                                                  |                                    |             |                                    |   |                                                                         | 
|(A Development Stage Enterprise)                                            |                                    |             |                                    |   |                                                                         | 
|Condensed Consolidated Statements of Cash Flows                             |                                    |            
|                                                                            | For the Six
Months Ended
April 30, |             | For the Six
Months Ended
April 30, |   | For the Period
from March 9,
2007 (date of
inception) through
April 30,
|                                                                            | 2010                               |             | 2009                               |   | 2010                                                                   
|Cash flows from operating activities                                        |                                    |             |                                    |   |                                                                         |  |   |             
|Net loss                                                                    | $                                  | (2,012,427) |                                    | $ | (4,791,053)                                                             |  | $ | (22,463,004)
|Adjustments to reconcile net loss to net cash used in operating activities: |                                    |             |                                    |   |                                                                         |  |   |             
|Asset impairment loss                                                       |                                    | -           |                                    |   | -                                                                       |  |   | 4,457,103   
|Depreciation expense                                                        |                                    | 85,282      |                                    |   | 14,250                                                                  |  |   | 219,415     
|Forgiveness of debt                                                         |                                    | -           |                                    |   | -                                                                       |  |   | (296,714)   
|Shares issued for services                                                  |                                    | -           |                                    |   | -                                                                       |  |   | 426,167     
|Stock warrants issued for compensation                                      |                                    | 113,895     |                                    |   | 1,867,366                                                               |  |   | 1,981,261   
|Reversal of capitalised cost and interest accruals - non-cash               |                                    | -           |                                    |   | 71,605                                                                  |  |   | 71,605      
|Gain on sale of scrap and surplus assets                                    |                                    | (933,979)   |                                    |   | (110,985)                                                               |  |   | (1,152,934) 
|Changes in operating assets and liabilities:                                |                                    |             |                                    |   |                                                                         |  |   |             
|Value added tax refunds receivable                                          |                                    | 3,724       |                                    |   | (69,926)                                                                |  |   | (43)        
|Inventory                                                                   |                                    | 73,359      |                                    |   | -                                                                       |  |   | (51,181)    
|Prepaid expenses and other current assets                                   |                                    | (30,422)    |                                    |   | 275,459                                                                 |  |   | (440,914)   
|Deposits                                                                    |                                    | 158,140     |                                    |   | -                                                                       |  |   | (210,233)   
|Accounts payable and accrued liabilities                                    |                                    | 131,762     |                                    |   | (57,015)                                                                |  |   | 1,955,818   
|Value added tax payable                                                     |                                    | 99,476      |                                    |   | -                                                                       |  |   | 99,476      
|Net cash used in operating activities                                       |                                    | (2,311,190) |                                    |   | (2,800,299)                                                             |  |   | (15,404,178)
|                                                                            |                                    |             |                                    |   |                                                                         |  |   |             
|Cash flows from investing activities                                        |                                    |             |                                    |   |                                                                         |  |   |             
|Purchase of property, equipment and intangible assets                       |                                    | (54,220)    |                                    |   | (4,269,433)                                                             |  |   | (10,640,551)
|Plant construction costs                                                    |                                    | -           |                                    |   | (80,439)                                                                |  |   | (1,885,245) 
|Cash collected from (placed in) escrow                                      |                                    | 200,000     |                                    |   | (330,025)                                                               |  |   | -           
|Proceeds from sale of assets                                                |                                    | 1,481,617   |                                    |   | 110,985                                                                 |  |   | 1,702,237   
|Costs associated with sale of assets                                        |                                    | (305,683)   |                                    |   | -                                                                       |  |   | (305,683)   
|Cash acquired in reverse merger                                             |                                    | -           |                                    |   | -                                                                       |  |   | 51,544      
|Prepaid expenses                                                            |                                    | -           |                                    |   | (100,000)                                                               |  |   | (100,000)   
|Net cash provided by (used in) investing activities                         |                                    | 1,321,714   |                                    |   | (4,668,912)                                                             |  |   | (11,177,698)
|                                                                            |                                    |             |                                    |   |                                                                         |  |   |             
|Cash flows from financing activities                                        |                                    |             |                                    |   |                                                                         |  |   |             
|Issuance of common stock, net of issuance costs                             |                                    | -           |                                    |   | -                                                                       |  |   | 26,460,586  
|Payment of deferred consideration                                           |                                    | (60,000)    |                                    |   | -                                                                       |  |   | (60,000)    
|Repayment of automobile loans                                               |                                    | -           |                                    |   | (10,475)                                                                |  |   | (40,821)    
|Repayment of directors loan                                                 |                                    | -           |                                    |   | -                                                                       |  |   | (10,015)    
|Net cash (used in) provided by financing activities                         |                                    | (60,000)    |                                    |   | (10,475)                                                                |  |   | 26,349,750  
|                                                                            |                                    |             |                                    |   |                                                                         |  |   |             
|Effects of accumulated foreign exchange on cash                             |                                    | (41,557)    |                                    |   | 211,229                                                                 |  |   | 540,530     
|                                                                            |                                    |             |                                    |   |                                                                         |  |   |             
|Net (decrease) increase in cash and cash equivalents                        |                                    | (1,091,033) |                                    |   | (7,268,457)                                                             |  |   | 308,404     
|Cash and cash equivalents at beginning of period                            |                                    | 1,399,437   |                                    |   | 15,044,772                                                              |  |   | -           
|Cash and cash equivalents at end of period                                  | $                                  | 308,404     |                                    | $ | 7,776,315                                                               |  | $ | 308,404     
|                                                                            |                                    |             |                                    |   |                                                                         |  |   |             
|Supplemental cash flow information                                          |                                    |             |                                    |   |                                                                         |  |   |             
|Interest paid                                                               | $                                  | -           |                                    | $ | 1,158                                                                   |  | $ | 7,518       
|Income taxes paid                                                           | $                                  | -           |                                    | $ | -                                                                       |  | $ | -           
|                                                                            |                                    |             |                                    |   |                                                                         |  |   |             
|Non-cash financing and investing activity                                   |                                    |             |                                    |   |                                                                         |  |   |             
|Property and equipment purchased on credit and automobile loans             | $                                  | -           |                                    | $ | -                                                                       |  | $ | 640,821     
|Issuance of common stock for property and equipment                         | $                                  | -           |                                    | $ | -                                                                       |  | $ | 1,008,000   
|Issuance for warrants for property and equipment                            | $                                  | -           |                                    | $ | -                                                                       |  | $ | 131,335     
|Loan receivable applied to asset purchase                                   | $                                  | -           |                                    | $ | -                                                                       |  | $ | 100,000     
|Prepaid expenses applied to asset purchase                                  | $                                  | -           |                                    | $ | -                                                                       |  | $ | 150,000     



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



9







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Four Rivers BioEnergy Inc.

(A Development Stage Company)

Notes to Condensed Consolidated Financial Statements

April 30, 2010 and 2009

(Unaudited)



Note 1 - Nature of Operations and Going Concern



Nature of Operations



We were incorporated under the name Med-Tech Solutions, Inc. (which we refer to as MTSI) in the State of Nevada on May 28, 2004, and we changed the name on January 25, 2008 to Four Rivers BioEnergy Inc. (which we refer to as Four Rivers or the Company and as the context requires, includes its subsidiaries).



The Companys objective is to build a network of logistically and technologically differentiated, profitable Bio-Energy plants across the United States, United Kingdom and potentially elsewhere.  The Company intends to achieve this objective through acquisition, expansion, improvement, consolidation and green field development of Bio-Energy plants.



To this end, during the year ended October 31, 2009 we made our first two acquisitions of bio energy assets, one of which has been further developed by us into a 23mmgy bio diesel plant based in England. The Company undertook a testing and commissioning process to establish the quality of bio-diesel product that could be made to certain specification levels, and that suitable volume quantities could be produced consistently, prior to planning to commence commercial production volumes. During the third and fourth quarters of fiscal 2009, we generated trial revenue through these operations of the plant as an initial stage to fully commercializing this plant.



On March 24, 2010, our UK subsidiary, Four Rivers BioFuels Limited (BioFuels), which owns the biodiesel facility referred to above, entered into an agreement (the Agreement) with BP Oil International Limited, a wholly owned subsidiary of BP plc (collectively BP), for the sale of a minimum of 60,000 metric tons per annum of EN 14214 specification biodiesel (Biodiesel Product) from its UK facility with an initial term of five years, extendable to seven years and also to enable BP to take any additional volume that is produced over the minimum.



The Agreement targets a commencement date of July 1, 2010 for the initial term; however, the Company has a period of six months to reach the production levels required by the contract and we currently expect production to commence in September, 2010. The Company is attempting to obtain financing necessary to secure the working capital required to meet its production targets under the Agreement; however, there can be no assurance that the Company will be able to obtain the necessary financing on terms acceptable to it or at all. The Company is also identifying and negotiating for supplies of feedstock in order to meet its productions targets under the Agreement. Although there is the risk that the Company cannot secure a regular supply of used cooking oil feedstock, it believes that there are adequate sources in the UK and elsewhere from which it will be able to obtain the required feedstock.



Although we have now largely completed commissioning and testing the plant to our satisfaction, we will not be able to produce and therefore sell bio-diesel in commercially viable quantities until we raise additional capital to acquire the feedstock required to produce bio-diesel in such quantities and to cover overhead costs during the period in which we ramp up production to and beyond the breakeven volume. We are currently negotiating with various parties through our financial advisers to obtain access to such capital but there can be no certainty about the outcome of such negotiations. Until such time, if ever, as we obtain access to such capital it is not economical to run the plant and we are holding it in a state of readiness to commence commercial scale production at some future date.





10







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In view of the prevailing market conditions and opportunities for acquisition of distressed assets and follow-on consolidation and growth within the bio-energy industry, the Company is evaluating, with its financial partners opportunities that may arise to acquire, in partnership with  investors introduced to it by its financial advisers, existing bio-energy facilities and related enterprises that are either overleveraged, not operating or operating inefficiently, incomplete or otherwise troubled.  The Company believes that with its internal expertise and know-how, it could complete, operate and/or improve those types of opportunities.



Legal Entity Restructuring



On December 23, 2009 and January 11, 2010, the Company incorporated three new entities, Four Rivers STT Technology, Inc., Four Rivers STT Trading Company, Inc., and Four Rivers Real Estate, Inc., referred to herein as (the New Entities).  All of the New Entities have been incorporated in Kentucky as part of a general restructuring of the Companys current legal structure, and are wholly owned subsidiaries of the Parent, Four Rivers BioEnergy Inc.  Prior to the New Entities being established, several asset purchases made have resided in the Companys wholly owned Kentucky based subsidiary, Four Rivers BioEnergy Company, Inc., and included the land held for sale and the STT intellectual property and machinery and equipment.  These assets are independent of each other and have been transferred within the group into the New Entities as appropriate, to assist with creating greater visibility around the assets and any subsequent operations that may be linked to those assets.



Going Concern



The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company is a development stage company and has not commenced planned principal operations. As shown in the accompanying unaudited condensed consolidated financial statements, the Company has only recently begun generating revenue on a trial basis in the third and fourth quarter of fiscal 2009 as an initial stage to fully commercialize its biodiesel products, such trial production however has been suspended as of October 31, 2009, and has incurred recurring losses for the period from March 9, 2007 (date of inception) through April 30, 2010. Additionally, the Company has negative cash flows from operations since date of inception and has an accumulated deficit of $22,277,330 at April 30, 2010. These factors raise substantial doubt about the Companys ability to continue as a going concern.



The Companys continued existence is dependent upon commencing its planned operations, managements ability to develop and achieve profitable operations and obtaining additional financing.  The Company intends to fund its operations and planned expansions and acquisitions through equity and debt financing arrangements.  The Company is actively seeking to raise equity and or debt capital to those ends and it has appointed advisors who are currently seeking to assist the Company raise equity and/or debt financing. This financing may be made directly into the Company or one or more of its subsidiaries or, in the case of possible acquisitions, by way of direct investment into a special purpose acquisition vehicle in which the Company will hold a stake.



There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all.  In the event we are unable to continue as a going concern, we may be forced to realize assets in order to remain viable or even elect or be required to seek protection from our creditors by filing a voluntary petition in bankruptcy or may be subject to an involuntary petition in bankruptcy. To date, management has not considered this alternative as a likely outcome, since it is progressing with various potential sources of new capital and we are currently planning upon a successful eventual outcome from these activities.  However, the capital markets remain difficult and there can be no certainty about these matters.



The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.





11







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Note 2 - Summary of Significant Accounting Policies



General



The unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K. The results for the six months ended April 30, 2010, are not necessarily indicative of the results to be expected for the full year ending October 31, 2010.



The condensed consolidated balance sheet as at October 31, 2009 has been derived from the audited consolidated financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America.



Use of estimates



The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.



Development Stage Company



The Company is considered to be a development stage entity as defined by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 915. The Company undertook a testing and commissioning process to establish the quality of bio-diesel product that could be made to certain specification levels, and that suitable volume quantities could be produced consistently, prior to commercial production. During the third and fourth quarters of fiscal 2009, we generated trial revenue through these operations of the plant as an initial stage to fully commercializing this plant.



Although we have now largely completed commissioning and testing the plant to our satisfaction, we will not be able to produce and therefore sell bio-diesel in commercially viable quantities until we raise extra sufficient amount of capital or lines of credit to acquire the feedstock required to produce bio-diesel in such quantities. We are currently negotiating with various parties to obtain access to such capital but there can be no certainty about the outcome of such negotiations. Until such time, if ever, as we obtain access to such capital it is not economical to run the plant and we are holding it in a state of readiness to commence commercial scale production at some future date. Consequently, the Company will remain as a development stage entity until it is confident that the Plant is capable of producing biodiesel at a specified level of certification consistently, in large volumes, across a wide distribution of customers. The Company has not generated material revenues to date and has incurred significant expenses and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from March 9, 2007 (date of inception) through April 30, 2010, the Company has accumulated losses of $22,277,330.



Principles of consolidation



The consolidated financial statements include the accounts of Four Rivers BioEnergy Inc., The Four Rivers BioEnergy Company Inc., The Four Rivers BioEthanol Company Limited, Four Rivers STT Trading Company Inc., Four Rivers STT Technology Inc., Four Rivers Real Estate Inc. and BF Group Holdings Limited,  All significant intercompany transactions and balances have been eliminated in consolidation.



12







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Revenue Recognition



The Company recognizes revenue from product sales in accordance with ASC 605 Revenue Recognition. Four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists (through written sales documentation); (2) delivery has occurred (through delivery into customers tanks and acceptance); (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded, although we have not experienced any such items to date and do not expect any significant provisions in the future. We have no discount, rebate or warranty programs. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. Payments received in advance are deferred until revenue recognition is appropriate. We have no post-delivery obligations related to our products.



We received advanced payment under a contract entered into for the lease of certain STT® asset during the period ended January 31, 2010 from the customer of $63,729, which was treated as deferred revenue on the balance sheet since not all of the conditions of the contract had been satisfied by us at January 31, 2010. We had also capitalized and included in work in process in the balance sheet at January 31, 2010 those direct costs incurred by us prior to January 31, 2010 in relation to this contract.  This deferred income was realized as revenue and categorized within Other Income (as such transaction is not part of the Companys planned principal business), in the income statement in the three month period ended April 30, 2010 since, during that period, we satisfactorily completed all of the conditions associated with the license agreement.



The acquisition of bio-diesel plant assets in the North of England in April 2009 gave rise to the purchase of the bundle of assets which include other assets that are not part of the completed biodiesel plant. These assets include (a) an area of land surrounding the plant amounting to some 147 acres and which is currently unused but is zoned for industrial development and (b) certain redundant items of plant infrastructure and related equipment, storage, tanking, piping and machinery which mainly relate to prior years when the site was used on a larger scale for penicillin production by prior owners. During the three and six month period ended April 30, 2010 we selectively and strategically dismantled and separated the plant components not directly relevant to the current or future plans to expand the plant.  In addition we deployed specialist contracted labor to sell the stripped out redundant items to deliver cash flow during the downtime period. The net gain from the sale of stripped out redundant assets amounted to $600,557 and $933,979, respectively, for the three and six month period ended April 30, 2010 and is recorded and classified as part of "Other income (expense)" in the consolidated statements of operations (as such transaction is not part of the Companys planned principal business).



Foreign currency translation



The Companys functional and reporting currency is the United States Dollar.  The functional currency of the Companys subsidiaries, The Four Rivers BioEthanol Company Limited and BF Group Holdings Limited is their local currency (Great British Pound  GBP). Monetary assets and liabilities are translated into U.S. Dollars at balance sheet date and revenue and expense accounts are translated at the average exchange rate for the period or for year end. The translation adjustments are deferred as a separate component of stockholders equity, captioned accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the consolidated statements of operations.





13







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Basic and diluted loss per share



We utilize ASC 260, Earnings Per Share for calculating the basic and diluted loss per share. In accordance with ASC 260, the basic and diluted loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per share is computed similar to basic loss per share except that the denominator is adjusted for the potential dilution that could occur if stock options, warrants, and other convertible securities were exercised or converted into common stock. Potentially dilutive securities were not included in the calculation of the diluted loss per share as their effect would be anti-dilutive. The diluted net loss per share for the three month periods ended April 30, 2010 and 2009 does not reflect the effect of 1,325,000 and 625,000 shares, respectively, that are potentially issuable upon the exercise of the Companys stock warrants (calculated using the treasury method) because they would be anti-dilutive, thereby decreasing the net loss per common share.



Fair value of financial instruments



In May 2009, the Company adopted accounting guidance which requires disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements.



Our short-term financial instruments, including cash, receivables, prepaid expenses and other assets and accounts payable, consist primarily of instruments without extended maturities, the fair value of which, based on managements estimates, reasonably approximate their book value.



Segment information



The Company utilizes ASC 280 Segment Reporting which provides guidance on the way public companies report information about segments of their business in their quarterly and annual reports issued to stockholders.  It also requires entity-wide disclosures about the products and services that an entity provides, the material countries in which it holds assets and reports revenues and its major customers. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions how to allocate resources and assess performance. We have a single operating segment, the operations of our northeast England biodiesel plant on a trial basis as an initial stage to fully commercialize our biodiesel products. All revenue is derived from the United Kingdom.



Stock-Based Compensation



The Company accounts for its stock based compensation under ASC 718 Compensation  Stock Compensation using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.  This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of those equity instruments.



We use the fair value method for equity instruments granted to non-employees (if any) and will use the Black-Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.



Reclassification



Certain reclassifications have been made to prior periods data to conform with the current periods or years presentation. These reclassifications had no effect on reported income or losses





14







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Recent Accounting Pronouncements



In March 2010, the FASB issued new accounting guidance, under ASC Topic 605 on Revenue Recognition.  This standard provides that the milestone method is a valid application of the proportional performance model for revenue recognition if the milestones are substantive and there is substantive uncertainty about whether the milestones will be achieved.  Determining whether a milestone is substantive requires judgment that should be made at the inception of the arrangement.  To meet the definition of a substantive milestone, the consideration earned by achieving the milestone (1) would have to be commensurate with either the level of effort required to achieve the milestone or the enhancement in the value of the item delivered, (2) would have to relate solely to past performance, and (3) should be reasonable relative to all deliverables and payment terms in the arrangement.  No bifurcation of an individual milestone is allowed and there can be more than one milestone in an arrangement.  The standard is effective for interim and annual periods beginning on or after June 15, 2010.  The Company is currently evaluating the impact the adoption of this guidance will have on its condensed consolidated financial statements.



In February 2010, the FASB issued ASU No. 2010-09, which updates the guidance in ASC 855, Subsequent Events, such that companies that file with the SEC will no longer be required to indicate the date through which they have analyzed subsequent events. This updated guidance became effective immediately upon issuance and was adopted as of the first quarter of 2010.



In February 2010 the FASB issued Update No. 2010-08 Technical Corrections to Various Topics (2010-08). 2010-08 represents technical corrections to SEC paragraphs within various sections of the Codification. Management is currently evaluating whether these changes will have any material impact on its financial position, results of operations or cash flows.



In January 2010 the FASB issued Update No. 2010-06 Fair Value Measurements and DisclosuresImproving Disclosures about Fair Value Measurements (2010-06). 2010-06 requires new disclosures regarding significant transfers between Level 1 and Level 2 fair value measurements, and disclosures regarding purchases, sales, issuances and settlements, on a gross basis, for Level 3 fair value measurements. 2010-06 also calls for further disaggregation of all assets and liabilities based on line items shown in the statement of financial position. This amendment is effective for fiscal years beginning after December 15, 2010 and interim periods within those fiscal years. The Company is currently evaluating whether adoption of this standard will have a material impact on its consolidated financial position, results of operations or cash flows.



In January 2010 the FASB issued Update No. 2010-05 CompensationStock CompensationEscrowed Share Arrangements and Presumption of Compensation (2010-05). 2010-05 re-asserts that the Staff of the Securities Exchange Commission (the SEC Staff) has stated the presumption that for certain shareholders escrowed share represent a compensatory arrangement. 2010-05 further clarifies the criteria required to be met to establish a position different from the SEC Staffs position. The Company does not believe this pronouncement will have any material impact on its consolidated financial position, results of operations or cash flows.



In January 2010 the FASB issued Update No. 2010-04 Accounting for Various TopicsTechnical Corrections to SEC Paragraphs (2010-04). 2010-04 represents technical corrections to SEC paragraphs within various sections of the Codification. Management is currently evaluating whether these changes will have any material impact on its consolidated financial position, results of operations or cash flows.





15







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In January 2010 the FASB issued Update No. 2010-02 Accounting and Reporting for Decreases in Ownership of a Subsidiarya Scope Clarification (2010-02) an update of ASC 810 Consolidation. 2010-02 clarifies the scope of ASC 810 with respect to decreases in ownership in a subsidiary to those of a: subsidiary or group of assets that are a business or nonprofit, a subsidiary that is transferred to an equity method investee or joint venture, and an exchange of a group of assets that constitutes a business or nonprofit activity to a non-controlling interest including an equity method investee or a joint venture. Management does not expect adoption of this standard to have any material impact on its consolidated financial position, results of operations or operating cash flows.



In January 2010 the FASB issued Update No. 2010-01 Accounting for Distributions to Shareholders with Components of Stock and Casha consensus of the FASB Emerging Issues Task Force (2010-03) an update of ASC 505 Equity. 2010-03 clarifies the treatment of stock distributions as dividends to shareholders and their affect on the computation of earnings per shares. The Company has not and does not intend to declare dividends for preferred to common stock holders. Management does not expect adoption of this standard to have any material impact on its consolidated financial position, results of operations or operating cash flows.



Other recent accounting pronouncements issued by the FASB and the SEC did not have, or are not believed by management to have, a material impact on the Company's present or future consolidated financial statements.



Note 3  Non-Controlling Interest



The Company has acquired operating assets through a holding company structure consisting of a holding company, BF Group Holdings Limited, a United Kingdom formed company (BF Group), and several subsidiaries to own the land in freehold and leasehold, plant, patents and intellectual property and other assets and to operate those assets, as appropriate, for greatest operational, financing, income and tax efficiency.  The Company has an 85% equity interest in BF Group. The 15% third party ownership of BF Group is recorded as a noncontrolling interest in the financial statements.



Note 4 - Inventory



Inventory at April 30, 2010 and October 31, 2009 consists of the following:



|                |                |        |                  |   |        
|--------------- | -------------- | ------ | ---------------- | - | -------
|                |                |        |                  |   |        
|                | April 30,
2010 |        | October 31,
2009
|Raw materials   | $              | 47,955 |                  | $ | 109,578
|Work in process |                | -      |                  |   | 3,236  
|Finished goods  |                | -      |                  |   | 15,693 
|                | $              | 47,955 |                  | $ | 128,507



Note 5 - Related Party Transactions



The Company has contracted with P.C.F. Solutions Limited (PCF), a private Limited Company, of which Mr. Stephen Padgett, our Chief Executive Officer, is a director and majority shareholder. Under the terms of the agreement, PCF provides the Company with services of employees within PCF at agreed rates. The Company incurred consulting services through PCF totaling $72,600 and $139,875 for the three month periods ended April 30, 2010 and 2009, respectively, $150,225 and $196,750 for the six month periods ended April 30, 2010 and 2009, respectively, and $882,450 from March 9, 2007 (date of inception) to April 30, 2010.  Prior to February 1, 2009, Mr. Padgett was paid directly as an employee of the Company.





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The Company has contracted with The ARM Partnership (ARM), a private partnership of which Mr. Martin Thorp, our Chief Financial Officer, is a principal.  Under the terms of the agreement ARM provides the Company with the services of Mr. Robert Galvin, a partner of ARM, as the Companys Secretary at agreed rates. The Company incurred consulting services through ARM Partnership totaling $52,650 and $108,000 for the three month periods ended April 30, 2010 and 2009, respectively, $109,350 and $216,000 for the six month periods ended April 30, 2010 and 2009, respectively, and $759,115 from March 9, 2007 (date of inception) to April 30, 2010.



The Company has entered into consulting agreements with outside contractors who are also the Companys stockholders and directors. The Agreements are generally for a term of one year or less from inception and renewable unless either the Company or Consultant terminates such agreement by written notice.  The Company incurred $251,370 and $397,081 in fees to these individuals for the three month periods ended April 30, 2010 and 2009, respectively, $605,371 and $1,361,439 for the six month periods ended April 30, 2010 and 2009, respectively, and $4,795,977 for the period from March 9, 2007 (date of inception) through April 30, 2010, in a consulting role.



Note 6 - Stockholders Equity



The Company is authorized to issue 100,000,000 shares of preferred stock, with par value of $0.001 per share, of which no shares were outstanding at April 30, 2010 and two shares were issued and outstanding at October 31, 2009 (Series A Preferred). The Series A Preferred Stock terminated on December 4, 2009.



The Company is authorized to issue 500,000,000 shares of common stock, with par value of $.001 per share.  As of April 30, 2010 and October 31, 2009, there were 8,221,356 shares of common stock issued, of which 300,000 shares are held in escrow as contingent consideration for the acquisition of the Kreido assets that are not accounted for as outstanding at April 30, 2010 and October 31, 2009. Accordingly, there are 7,921,356 shares of common stock outstanding at April 30, 2010 and October 31, 2009.



On April 22, 2010, the Company approved the grant of warrants to purchase an aggregate of 700,000 shares of the Companys common stock to certain executive officers and directors of the Company. Of this amount, warrants to purchase an aggregate of 650,000 shares of common stock were awarded to individuals acting in their capacity as consultants and warrants to purchase 50,000 shares of common stock were awarded to a director of the Company. The warrants are exercisable at an exercise price of $0.47 per share and will expire 7 years from the date of vesting. The warrants vest as follows: one-third of the warrants vest immediately upon grant and the balance vests in three equal annual installments commencing on October 31, 2010. Compensation expense related to the employee warrants will be recorded over the vesting periods, based on the grant date fair value of $22,269. Compensation expense related to the consultant warrants will be recorded over the vesting periods, based upon the fair value of the warrants at each vesting period. During the three and six month periods ended April 30, 2010 we have recorded an expense of $106,709 related to the fair value of the warrants that vested during that period, using the Black-Scholes method based on the following weighted average assumptions:  (1) risk free interest rate of 3%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 177%; and (4) an average expected life of the warrants of 8.2 years.





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On April 22, 2010, the Company approved the modification of existing warrants to purchase an aggregate of 625,000 shares of the Companys common stock to certain executive officers of the Company. These warrants were awarded to individuals acting in their capacity as consultants. The modified warrants are exercisable at an exercise price of $0.47 per share and will expire 7 years from the date of vesting. The warrants vest as follows: one-third of the warrants vest immediately upon grant and the balance vests in three equal annual installments commencing on October 31, 2010. Compensation expense will be recorded over the vesting periods, based on the incremental value of the modified warrants at each vesting period over the fair value of the original warrants (which was calculated immediately before modification). During the three and six month periods ended April 30, 2010 we have recorded an expense of $7,186 related to the fair value of the warrants that vested during that period, using the Black-Scholes method based on the following weighted average assumptions:  (1) risk free interest rate of 3%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 177%; and (4) an average expected life of the warrants of 8.2 years.



Note 7  Subsequent Events



On December 31, 2009, a promissory note in the amount of $600,000 and which is represented by the deferred consideration on the Company balance sheet became due for payment.  The Company had reached an informal and non-binding agreement with the note holder to defer payment of the note until February 28, 2010.  The Company has also made a payment of $60,000 on December 30, 2009 which was accepted in good faith.   The Company did not pay the $540,000 balance of the note on the amended due date but expects to be able to repay the full amount outstanding if and when financings which are currently being negotiated and consummated. At April 30, 2010, the Company was in default under the term of the promissory note. The Company has kept the note holder informed of the current status of the proposed financing and the note holder has not taken formal action to collect the note. There can be no certainty regarding the proposed financing referred to above or of the promissory note holders continued goodwill. The note holder can demand payment in full at anytime.



On May 10, 2010, the Company authorized the issuance of a share certificate in the amount of 66,666 shares of its common stock to Corporate Profile LLC, the Companys retained investor relations advisor, for services rendered under an original agreement dated October 1, 2009.  The Company expenses the charge for the shares on a monthly basis in line with the terms of the agreement.





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Item 2.  Managements Discussion and Analysis or Plan of Operations.



Formation and Initial Financing



We were incorporated under the name Med-Tech Solutions, Inc. (which we refer to as MTSI) in the State of Nevada on May 28, 2004, and we changed the name on January 25, 2008 to Four Rivers BioEnergy Inc. (which we refer to as Four Rivers or the Company and as the context requires, includes its subsidiaries).  On March 26, 2007, the Company entered into an Acquisition Agreement (the Agreement) with The Four Rivers BioEnergy Company Inc., a Kentucky corporation (which we refer to as 4Rivers), and all of the shareholders of 4Rivers to acquire 4Rivers by share purchase and share exchange.  Pursuant to the Agreement, MTSI acquired the entire issued and outstanding shares of common stock of 4Rivers in two stages: (a) on March 26, 2007, 15% was acquired in exchange for an investment by MTSI in cash into 4Rivers of $2,000,000; and (b) on December 4, 2007, the remaining 85% were acquired by the issuance of 2,392,059 shares of MSTIs common stock to the shareholders of 4Rivers.    On December 4, 2007, as a condition of the acquisition, the Company raised $22,829,022, net of expenses, through a private placement of 1,657,881 shares of common stock.  On July 30, 2008, the Company raised an additional $1,631,564, net of expenses, in a private placement of 131,061 shares of common stock.  As a further condition of the Agreement, the Company received 3,655,087 shares of common stock for cancellation held by certain former stockholders and former management of the then MTSI.  In addition, the former director agreed to waive his prior loans extended to the then MTSI amounting to $296,714.  Upon consummation of the acquisition, 4Rivers and a dormant UK subsidiary, The Four Rivers Bioethanol Company Limited, (4Rivers UK) became the only two wholly-owned subsidiaries of the Company.  Subsequently, three new wholly-owned subsidiaries were formed; Four Rivers STT Trading Company Inc., Four Rivers STT Technology Inc. and Four Rivers Real Estate Inc., all incorporated in Kentucky.  The Company and 4Rivers transferred certain of their assets to these new subsidiaries to provide a more logical legal structure to the Group.



The acquisition was accounted for as a reverse acquisition, since the stockholders of 4Rivers owned a majority of the Companys common stock immediately following the transaction and their management has assumed operational, management and governance control. The reverse acquisition transaction is recorded as a recapitalization of 4Rivers pursuant to which 4Rivers is treated as the surviving and continuing entity although the Company is the legal acquirer rather than a business combination.  The Company did not recognize goodwill or any intangible assets in connection with this transaction.  Accordingly, the Companys historical consolidated financial statements are those of 4Rivers and 4Rivers UK.



Current Plan of Operations



Our business plan is to build, through acquisition, expansion, improvement, consolidation and green field development, as appropriate, a network of logistically and technologically differentiated, profitable bio-energy plants across the United States, the United Kingdom and potentially elsewhere.



We believe that there is considerable opportunity at this time to build such a business and create substantial shareholder value for a number of reasons:



·

The government mandated growth in the use of Bio-fuels in blended gasoline and blending with petroleum diesel including the use of low sulphur diesel will, we believe, create a significant under-supply situation;

·

The current immature and distressed state of the supply side of the market provides major opportunity to acquire and improve assets on a favorable basis;

·

The industry currently under utilizes available technology that can substantially improve operating efficiency and profitability and reduce carbon emissions; and

·

We believe that our management team has the breadth and depth of expertise and knowledge to effect this strategy.





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Since mid-2008, management has sought, identified and negotiated various acquisition opportunities which had become available out of distressed asset situations. Our strategy here is that the distressed state of the bio-ethanol and bio-diesel market continues to offer a window of opportunity to buy strategically important assets on favorable terms, and therefore we have decided to pursue the acquisition, improvement and integration of low cost, strategically important bio-fuels assets as the primary focus of our ongoing strategy.



Management believes that there are major opportunities to acquire, consolidate, expand and improve existing Bio-fuels plants, selecting specific assets by reference to detailed acquisition criteria that our management has developed. We believe that our management has the right mix of energy, industry and corporate finance / acquisition skills and expertise to effect such a strategy.



We have consummated two asset acquisitions in line with this strategy.



The Acquisition of the STT ® assets and technology from Kreido Technology Inc.



On March 5, 2009, the Company acquired certain assets of Kreido Biofuels, Inc., a Nevada corporation (Kreido), including certain equipment, materials and machinery and intellectual property rights relating to the STT® technology developed by Kreido. The Company plans to commercialize the STT® technology for the production of bio-diesel fuel and other products in the chemical and pharmaceutical industries.  The purchase price of the assets acquired from the sellers was approximately $4.6 million, which the Company believes is at a significant discount from the original costs incurred in acquiring and/or creating those assets by the Kreido, since the vendor was under substantial pressure to dispose of those assets.



Management plans to deploy these assets in several ways. Initially we plan to introduce one of the acquired reactors into our UK bio diesel plant to test its tolerance and operations on a commercial scale and to demonstrate its capability. We will then consider wider application of the technology in bio-fuels and we will develop a commercial strategy that may involve selling, leasing or otherwise partnering with bio-fuels manufacturers to derive value through the use of our STT® reactors, know-how and technology.



The STT® technology has wide application outside the biodiesel area and the Company is currently exploring various opportunities and commercial arrangements, including possible licensing arrangements or technology sales, to derive value from such opportunities as a separate subsidiary revenue stream without distracting in any way from the Companys core bio-energy strategy.  As an example, on November 30, 2009, the Company entered into a lease agreement, with purchase options, with Grean Technologies of Hamilton, Ohio for a Four Rivers STT® Reactor System. Grean Technologies will be using the system for process intensification research for their flavors and fragrances business.  This contract highlights the wide application of the STT® technology into other industries.



The Acquisition of biodiesel plant assets in North East England



On April 6, 2009, the Company signed a series of related agreements for the acquisition of a biodiesel plant and other assets located near Blyth, Northumberland, in North East England. The acquisition of the plant and related assets was from the administrator under a pre-packaged acquisition out of insolvency working with the principal creditor and the administrator.  The acquisition was of a completely constructed facility capable of initially producing approximately 23 million gallons per year (mgpy) of biodiesel (and readily expandable upwards to some 75mgpy) from a broad band of feed-stocks, including waste cooking oils, other waste oils and virgin oils using technologies that are believed to be unique in the biodiesel industry. In addition, the acquisition included 147 acres of land situated about two miles from the port of Blyth, Northumberland, England, security and office buildings, furniture and office equipment, and motor vehicles.





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The purchase price of the assets acquired from the administrator under a pre-packaged acquisition out of insolvency was approximately $800,000, which the Company believes is at a significant discount from the carrying value of these assets in the accounts of the predecessor entity.  The purchase price reflected the pressure to dispose of the assets by the insolvency practitioner since this was the only viable deal offer being made for the benefit of creditors at that time.



There are several aspects of the acquired plant and know-how that differentiates it from other biodiesel assets, particularly in terms of its ability to efficiently utilize a very wide range of feedstocks, including waste oils. Management plans to exploit these factors to (a) build the acquired plant into a viable, differentiated business and (b) share the know-how across other potential acquisition targets if and when these arise to provide commercial advantages to them. Further, management intends to deploy aspects of the previously acquired STT® technology and assets to make further improvements at the UK Biodiesel Plant, (the Plant).  Finally, the asset purchase included, at no incremental cost, a substantial amount of redundant assets, including pipes, tanks and equipment capable of increasing the size of the biodiesel plant, and significant amounts of unused land potentially capable of being used for industrial purposes, all of which the Company will explore ways to use for value in due course.



Originally Proposed Kentucky Project



During 2008 we exercised options to purchase several adjacent parcels of land near Calvert City in Marshall County, Kentucky utilizing part of the capital we raised in December 2007.  Our planned land acquisition and consolidation strategy in Kentucky was largely completed in line with our original plans in early 2008.  The Company purchased and still owns approximately 437 acres of land in adjacent plots which together create unique access to major river, road and rail arteries.  In line with our then plans we improved the land plots through consolidation into one site and by carrying out archaeological, wetland and topographical surveys, geotech investigations, engineering and design for the then intended bio-energy facility and general permitting works.



The original planned development of the Kentucky site involved raising substantial debt and equity capital during 2008, following the initial placement of equity and acquisition and improvement of the Kentucky land. However, the severe and sudden decline in the capital markets caused us to initially postpone this work and the prolonged and deep global recession has effectively prevented us from pursuing that part of our original strategy and, conversely, opened up significant new opportunities to implement the second element of our original strategy  to acquire distressed assets on favorable terms and improve them.  Whilst we anticipate that at some point, recovery of the capital markets and the anticipated future under-supply of Bio-fuels will converge making green field bio-fuels developments potentially economic again, we do not now believe that the situation will arise for a significant time; and during 2009, we concluded that it was in the best interest of the Company to seek to sell the Kentucky land, subject to a reasonable price being obtained, and release working capital tied up in the land to fund the business plans that we have developed around assets that we have acquired in line with the second and increasingly relevant part of our overall strategy.



Comparison of the three and six month periods ended April 30, 2010 and 2009 and for the period from March 9, 2007 (date of inception) through April 30, 2010



Results of Operations



We have incurred a net loss of $787,227 and $2,012,427 for the three and six month periods ended April 30, 2010.  This compares to a net loss of $1,727,919 and $4,791,053 for the three and six month periods ended April 30, 2009.  We have incurred a net loss of $22,463,004 for the period from March 9, 2007 (date of inception) through April 30, 2010.





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Revenues



During the year ended October 31, 2009 we recorded revenues of $3,201,412 which arose from the sale of bio diesel produced in our UK bio diesel plant. These sales were developed during a period of testing and proving the plant following our acquisition of the plant assets in April, 2009 and our subsequent development of those assets into a business. Having tested and proven the production capability of the plant we stopped production pending raising adequate finance to acquire adequate volume of feedstock and enable us to increase the scale of production to the full capacity of the plant. Consequently in the three and six month periods ended April 30, 2010 and 2009 respectively, no revenue was generated from the sale of biodiesel since production had not commenced at that time.  We do not anticipate that we will generate any further material revenues from the sale of biodiesel until such time as we have entered into commercial production at the biodiesel plant, which is dependent upon the outcome of ongoing discussions with certain third parties that are aimed at providing finance to the Company or to the subsidiary company which owns the bio diesel plant and which may include establishing joint ventures with strategic or financial partners. There can be no certainty at this time about the success of outcome of these discussions and therefore there is no certainty about our ability to generate future biodiesel revenues or to commence full scale production on a commercial basis.



The sale of residual stocks of completed bio diesel and surplus stocks of feedstock oils amounted to $42,872 during the six month period ended April 30, 2010 (all of which arose in the three month period ended January 31, 2010).  This income is recorded and classified within the category Other Income in the consolidated statements of operations. No such revenue arose in the three and six month periods ended April 30, 2009



In March 2009 we acquired the assets and intellectual property which now comprises our STT®area of activity. We have not fully developed this area because of the need to concentrate our available capital on the UK biodiesel plant and our first planned biofuels application of the STT®technology is expected to be within our UK plant biodiesel process and is therefore pending the commencement of full scale production of that plant. However, we acquired a number of complete and incomplete STT®reactors and related equipment as part of the asset acquisition and we have been seeking the commercialization of these assets and the related intellectual property in non biofuels applications. We do not intend to enter into significant non biofuels STT commercial activity ourselves, however we are and plan to continue to seek strategic partners to promote and sell our STT®technology in other non biofuels industries, which are likely to be on the basis of license sales agreements. At this stage it is too early to determine the likely success of such subsidiary revenue generation.  However, in November 2009 we entered into an agreement to license one of our STT reactors to a third party involved in the fragrance industry.  We received advanced payment under this contract from the customer of $63,729 during the three month period ended January 31, 2010 which was treated as deferred revenue on the January 31, 2010 balance since not all of the conditions of the contract had been satisfied by us at that time.  We have also capitalized and included in work in process in the balance sheet at January 31, 2010 those direct costs  incurred by us prior to January 31, 2010 in relation to this contract.  This deferred income was realized as revenue and categorized within Other Income(as such transaction is not part of our planned principal business), in the income statement in the three month period ended April 30, 2010 since, during that period, we satisfactorily completed all of the conditions associated with the license agreement.





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Operating loss



The main components of the recorded operating loss during the three and six month periods ended April 30, 2010 and 2009, and for the period from March 9, 2007 (date of inception) through April 30, 2010 are analyzed as follows:



|                                                                                 |      |  |                                     |         |                                   |   |                                                    |  |      |           |      |   |           |  |   |           
|-------------------------------------------------------------------------------- | ---- |  | ----------------------------------- | ------- | --------------------------------- | - | -------------------------------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | ----------
|                                                                                 |      |  | Three month periods
ended April 30, |         | Six month periods
ended April 30, |   | Period from
Inception
(March 9, 2007)
to April 30,
|                                                                                 | Note |  | 2010                                |         | 2009                              |   | 2010                                               |  | 2009 |           | 2010
|Losses in UK Plant                                                               |      |  |                                     |         |                                   |   |                                                    |  |      |           |      |   |           |  |   |           
|Gross Loss in UK plant                                                           | 1    |  | $                                   | -       |                                   | $ | -                                                  |  | $    | -         |      | $ | -         |  | $ | 1,009,685 
|Indirect Plant overhead costs                                                    | 2    |  |                                     | 159,946 |                                   |   | 294,606                                            |  |      | 442,288   |      |   | 294,606   |  |   | 1,604,071 
|Indirect labour and administrative expenses at UK plant                          | 2    |  |                                     | 655,536 |                                   |   | 317,502                                            |  |      | 1,242,604 |      |   | 317,502   |  |   | 3,414,478 
|                                                                                 |      |  | $                                   | 815,482 |                                   | $ | 612,108                                            |  | $    | 1,684,892 |      | $ | 612,108   |  | $ | 6,028,234 
|                                                                                 |      |  |                                     |         |                                   |   |                                                    |  |      |           |      |   |           |  |   |           
|Operating Costs and Expenses (excluding UK Plant)                                |      |  |                                     |         |                                   |   |                                                    |  |      |           |      |   |           |  |   |           
|Professional fees                                                                | 3    |  | $                                   | 160,094 |                                   | $ | 190,345                                            |  | $    | 326,503   |      | $ | 382,855   |  | $ | 1,828,912 
|Contractors, payroll and administrative expenses                                 | 4    |  |                                     | 129,108 |                                   |   | 207,780                                            |  |      | 488,595   |      |   | 872,100   |  |   | 6,003,616 
|Consulting expenses                                                              | 5    |  |                                     | -       |                                   |   | 70,165                                             |  |      | 77,446    |      |   | 768,020   |  |   | 1,970,000 
|STT overhead costs                                                               | 6    |  |                                     | 82,686  |                                   |   | 171,298                                            |  |      | 106,686   |      |   | 171,298   |  |   | 338,118   
|Travel and accommodation expenses                                                | 7    |  |                                     | 62,401  |                                   |   | 121,952                                            |  |      | 100,677   |      |   | 210,064   |  |   | 1,163,462 
|Occupancy, communications and other central group overheads                      | 8    |  |                                     | 55,679  |                                   |   | 16,969                                             |  |      | 106,185   |      |   | 92,219    |  |   | 587,841   
|                                                                                 |      |  | $                                   | 489,968 |                                   | $ | 778,509                                            |  | $    | 1,206,092 |      | $ | 2,496,556 |  | $ | 11,891,949
|                                                                                 |      |  |                                     |         |                                   |   |                                                    |  |      |           |      |   |           |  |   |           
|Non Cash Items charged                                                           |      |  |                                     |         |                                   |   |                                                    |  |      |           |      |   |           |  |   |           
|Fair value of warrants issued to director, employee and contractors for services |      |  | $                                   | 113,895 |                                   | $ | 463,083                                            |  | $    | 113,895   |      | $ | 1,867,366 |  | $ | 1,981,261 
|Fair value of shares issued for professional services                            |      |  |                                     | -       |                                   |   | -                                                  |  |      | -         |      |   | -         |  |   | 179,667   
|Asset impairment loss                                                            |      |  |                                     | -       |                                   |   | -                                                  |  |      | -         |      |   | -         |  |   | 4,457,103 
|                                                                                 |      |  | $                                   | 113,895 |                                   | $ | 463,083                                            |  | $    | 113,895   |      | $ | 1,867,366 |  | $ | 6,618,031 



1.

The direct cost of sales from the sale of biodiesel from our UK plant in the period from March 9, 2007 (date of inception) to April 30, 2010 exceeded the related sales giving rise to a gross loss of $1,009,685. This gross loss culminated in sales arising during a period of testing, improving and commissioning the new plant and therefore significant adverse efficiency and cost variances arose. We do not consider that these losses are indicative of the ongoing gross margin which we expect the plant to deliver in the event that we obtain the necessary financing required to commence full scale commercial production as described under revenues above. No sales of biodiesel arose in the three month and six month periods ended April 30, 2010 and April 30, 2009 respectively, since there was no testing of the plant during those periods.



2.

The UK biodiesel plant overhead and indirect labor costs in the three and six month periods ended April 30, 2010 amounted to $815,482 and $1,684,892 respectively; and $5,018,549 in the period from March 9, 2007 (date of inception) to April 30, 2010. In the three and six month periods ended April 30, 2009 our UK biodiesel plant overhead and indirect labor costs amounted to $612,108, all of which arose in the short period since the acquisition of the plant in the period ended April 30, 2009.





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3.

Professional fees incurred in the three and six month periods ended April 30, 2010 amounted to $160,094 and $326,503 compared to $190,345 and $382,855 in the three and six month periods ended April 30, 2009.  The differences are not significant. Professional fees incurred in the period from March 9, 2007 (date of inception) to April 30, 2010 amounted to $1,828,912 and is comprised primarily of compliance, legal, audit and financial and acquisition related advisory fees.



4.

Contractors, payroll and administrative expenses (excluding those incurred in the UK plant which are included within the UK plant numbers in the table above) in the three and six month periods ended April 30, 2010 amounted to $129,108 and $488,595 respectively, as compared to $207,780 and $872,100 in the three and six month periods ended April 30, 2009. The material reductions reflect a lower headcount and reduced activity and the fact that agreement has been reached with all key parent company directors, executives and contractors to accept reductions in the amount of compensation earned, until the company is able to raise additional funds through debt or equity financings, in addition to deferred payment of such expenses. Contractors, payroll and administrative expenses in the period from March 9, 2007 (date of inception) to April 30, 2010 amounted to $6,003,616.



5.

Consulting expenses in the three and six month periods ended April 30, 2010 amounted to $Nil and $77,446 respectively as compared to $70,165 and $768,020 in the three and six month periods ended April 30, 2009. This material reduction is due to certain substantial consulting costs incurred in the period ended April 30, 2009 associated with aborted financing activity and to the general reduction in the use of consultants in the current year. Consulting expenses in the period from March 9, 2007 (date of inception) to April 30, 2010 amounted to $1,970,000.



6.

STT overhead costs relate to the maintenance costs of the STT technology and patents acquired from Kreido in March 2009, including patent protection and storage of the acquired reactors and related assets. These costs amounted to $82,686 and $106,686 in the three and six month periods ended April 30, 2010 respectively, as compared to $171,298 in the three and six month periods ended April 30, 2009 (which was a short period since the Kreido acquisition occurred in March 2009). The reduction arose because of a significant initial costs associated with the STT assets immediately following the acquisition falling away to a much lower run-rate.  In the period from March 9, 2007 (date of inception) to April 30, 2010 STT overhead costs amounted to $338,118.



7.

Travel and accommodation expenses in the three and six month periods ended April 30, 2010 amounted to $62,401 and $100,677 respectively, as compared to $121,952 and $210,064 in the three and six month periods ended April 30, 2009 respectively.  This material reduction is due to significantly lower volume of travel incurred by group executives. Travel and accommodation expenses in the period from March 9, 2007 (date of inception) to April 30, 2010 amounted to $1,163,462.



8.

Occupancy, communications and other central group overheads (excluding UK plant) in the three and six month periods ended April 30, 2010 amounted to $55,679 and $106,185 respectively, as compared to $16,969 and $92,219 in the three and six month periods ended April 30, 2009.  Occupancy, communications and other central group overheads (excluding UK plant) amounted to $587,841 in the period from March 9, 2007 (date of inception) to April 30, 2010.





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Other income (expense)



The operating loss was offset partially by other income which arose as follows:



|                                               |      |  |                                     |           |                                   |   |                                                    |  |      |           |      |   |         |  |   |          
|---------------------------------------------- | ---- |  | ----------------------------------- | --------- | --------------------------------- | - | -------------------------------------------------- |  | ---- | --------- | ---- | - | ------- |  | - | ---------
|                                               |      |  | Three month periods
ended April 30, |           | Six month periods
ended April 30, |   | Period from
inception
(March 9, 2007)
to April 30,
|                                               | Note |  | 2010                                |           | 2009                              |   | 2010                                               |  | 2009 |           | 2010
|Other income (expense)                         |      |  |                                     |           |                                   |   |                                                    |  |      |           |      |   |         |  |   |          
|Interest income                                | 2    |  | $                                   | 247       |                                   | $ | 15,367                                             |  | $    | 1,312     |      | $ | 75,150  |  | $ | 561,510  
|                                               |      |  |                                     |           |                                   |   |                                                    |  |      |           |      |   |         |  |   |          
|Interest expense                               |      |  | $                                   | -         |                                   | $ | (572)                                              |  | $    | -         |      | $ | (1,158) |  | $ | (7,518)  
|                                               |      |  |                                     |           |                                   |   |                                                    |  |      |           |      |   |         |  |   |          
|Other income:                                  |      |  |                                     |           |                                   |   |                                                    |  |      |           |      |   |         |  |   |          
|Other income  STT                             |      |  | $                                   | 63,729    |                                   | $ | -                                                  |  | $    | 71,332    |      | $ | -       |  | $ | 71,332   
|STT  Direct costs                             |      |  |                                     | (42,155)  |                                   |   | -                                                  |  |      | (42,155)  |      |   | -       |  |   | (42,155) 
|Rental income                                  |      |  |                                     | 9,741     |                                   |   | -                                                  |  |      | 15,617    |      |   | -       |  |   | 15,617   
|Sale of RTFO certificates                      |      |  |                                     | -         |                                   |   | -                                                  |  |      | 7,284     |      |   | -       |  |   | 7,284    
|Sale of UCO stock                              |      |  |                                     | -         |                                   |   | -                                                  |  |      | 42,872    |      |   | -       |  |   | 42,872   
|Cost of the sale of UCO stock                  |      |  |                                     | -         |                                   |   | -                                                  |  |      | (37,788)  |      |   | -       |  |   | (37,788) 
|Forgiveness of debt                            |      |  |                                     | -         |                                   |   | -                                                  |  |      | -         |      |   | -       |  |   | 296,714  
|Total other income                             |      |  | $                                   | 31,315    |                                   | $ | -                                                  |  | $    | 57,162    |      | $ | -       |  | $ | 353,876  
|                                               |      |  |                                     |           |                                   |   |                                                    |  |      |           |      |   |         |  |   |          
|Sale of scrap and surplus assets               |      |  | $                                   | 777,396   |                                   | $ | 110,985                                            |  | $    | 1,481,616 |      | $ | 110,985 |  | $ | 1,702,236
|Cost associated with the sale of scrap         |      |  |                                     | (146,199) |                                   |   | -                                                  |  |      | (305,682) |      |   | -       |  |   | (305,682)
|Cost basis of other assets                     |      |  |                                     | (35,302)  |                                   |   | -                                                  |  |      | (90,499)  |      |   | -       |  |   | (92,164) 
|Book value of assets sold                      |      |  |                                     | 4,662     |                                   |   | -                                                  |  |      | (151,456) |      |   | -       |  |   | (151,456)
|Net profit from sale of redundant scrap assets | 1    |  | $                                   | 600,557   |                                   | $ | 110,985                                            |  | $    | 933,979   |      | $ | 110,985 |  | $ | 1,152,934



Notes to accompany the above table:



1.

The April 2009 transaction which gave rise to the purchase of the bundle of assets which include the now completed UK biodiesel plant also included other assets that are not part of the completed biodiesel plant. These assets include (a) an area of land surrounding the plant amounting to some 147 acres and which is currently unused but is zoned for industrial development and (b) certain redundant items of plant infrastructure and related equipment, storage, tanking, piping and machinery which mainly relate to prior years when the site was used on a larger scale for penicillin production by prior owners. During the six month period ended April 30, 2010 we took advantage of the planned temporary shutdown of production to divert our plant work force to clearing the entire site and stripping down the redundant items described in (b) above. In addition we deployed specialist contracted labor to sell the stripped out redundant items to deliver cash flow during the downtime period. The gain from the sale of stripped out redundant assets is recorded and classified as part of "Other income (expense)" in the consolidated statements of operations  as shown in the table above.



2.

The interest income of $247 and $1,312 for the three and six month periods ended April 30, 2010, was materially less than the amounts recorded for the three and six month periods ended April 30, 2009 of $15,367 and $75,150 respectively, due to higher cash balances held on deposit in the prior year periods.





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Property Plant and Equipment



During the six month periods ended April 30, 2010, the Company made purchases of plant and equipment at its UK plant to prepare the plant for efficient production amounting to $54,220. In the comparable prior year period additions to property and equipment amounted to $4,269,433 mainly comprising the purchase of the STT assets and the UK biodiesel Plant; both of these asset acquisitions arose in the period March to April 2009



During the period from March 9, 2007 (date of inception) through April 30, 2010, the Company purchased property and equipment, comprised of the following main categories:



Land purchases amounting to $6,272,281 were made in early 2008. These were defrayed  for cash other than one parcel which was acquired in part on credit of $600,000 financed by deferred consideration.



On January 28, 2009, the Company, entered into an asset purchase and other related agreements with Kreido Biofuels, Inc., a Nevada corporation (Kreido), to acquire identified assets owned by Kreido, including certain machinery and intellectual property rights relating to the STT® technology developed by Kreido. The Company plans to commercialize the STT® technology for the production of bio-diesel fuel and other by-products. The transaction closed on March 5, 2009.



The aggregate cost of the assets was $4,681,269. Consideration paid included $2,797,210 in cash, issuance of 1,200,000 shares of the Companys common stock (of which 300,000 shares are held in escrow as contingent consideration) and a warrant to purchase 200,000 shares of the Companys common stock at an exercise price of $8.00 per share with an expiration date of March 5, 2014. The warrant provides for anti-dilution adjustment in limited circumstances and piggyback registration rights with respect to the underlying shares of common stock. The Company also incurred direct acquisition costs of $744,724, related to finders fees and legal fees.



On April 6, 2009, the Company signed a series of related agreements for the acquisition of a biodiesel plant and other assets located near Blyth, Northumberland, in North East England. The acquisition of the plant and related assets is from the administrator under a pre-packaged acquisition out of insolvency.



The total cost of the acquisition of the biodiesel plant and other assets was $804,623, all of which is allocated to plant and equipment based on relative fair values. Aggregate cost is comprised of cash paid of $399,627 plus direct acquisition costs of $404,996. Acquisition costs consist of finders fees and legal fees.



Liquidity and Capital Resources



At April 30, 2010 the Company had cash balances of $308,404 and a working capital deficit of $1,829,989, compared to cash balances at April 30, 2009 of $7,776,315 and working capital of $6,370,505, respectively.  We reported total stockholders equity at April 30, 2010 of $7,638,214, compared to $19,377,677 at April 30, 2009.



At April 30, 2010 we had current liabilities of $2,462,963 (compared to $1,851,013 at April 30, 2009) which mainly comprised (a) $1,290,122 in our UK plant subsidiary, (b) $540,000 in our subsidiary which owns the land in Kentucky, being the $600,000 deferred consideration payable in respect of the land less an interim payment made of $60,000 and (c) $632,841 in the parent company that are mainly due to contractors and professional advisers. Most of these creditors have agreed to informal agreements to defer payment since they are aware of our overall asset base, but we are reliant on the ongoing goodwill and support of these creditors ahead of possible finance raisings referred to below.





26







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At April 30, 2010 the Companys wholly owned subsidiary, Four Rivers BioEnergy Company, Inc., was in default under the terms of the $600,000 promissory note payable (referred to under (b) in the preceding paragraph) which was due for payment on or before December 31, 2009. Due to cash shortages the Company was unable to make payment under that note by the due date, but made a partial payment on account amounting to $60,000. The promissory note holder agreed on an informal basis, and as a matter of goodwill, not to formally pursue Four Rivers BioEnergy Company, Inc., for the collection on the basis that the Company has informed the note holder of the intention to repay the entire balance due if and when the Company receives proceeds from a financing initiative. Initially the note holder informally agreed to take no action until February 28, 2010 at which time he would reconsider his position. The Company has kept the note holder informed of the current status of the proposed financing and the note holder has not taken formal action to collect the note.  There can be no certainty regarding the proposed financing referred to above or of the promissory note holders continued goodwill.  The note holder can demand payment in full at anytime.



The Company requires significant new capital in the near future to continue its development plans and in particular to commercialize the assets that it acquired during the year ended October 31, 2009, in particular the UK bio-diesel plant and the STT assets.



Although management is actively engaged in various initiatives to raise cash including initiatives to raise capital by way of the issuance of new debt and/or equity capital instruments and the possible sale of its Kentucky land and possibly other assets, these endeavors have not yet produced conclusive results and there can be no certainty that they will do so, particularly in light of the ongoing depressed state of the global capital markets, especially for development stage enterprises. Even if financing is available, it may not be on terms that are acceptable to the Company.



In addition, in the medium term, the Company does not have any determined sources for the full amount of funding required to implement its entire preferred strategy including commercialization and expansion of its UK bio-diesel plant and the commercialization of its STT technology and assets. If the Company is unable to raise the necessary capital at the times it requires such funding, it may have to materially change its business plan, including commercialization of the UK bio-diesel plant, delaying implementation of aspects of the business plan, sales of assets and/or curtailing or abandoning its business plan.



The Company is a highly speculative investment and investors may lose some or all of their investment in the Company.



Sources and Use of Funds



Since inception, the Company has financed itself primarily by the sale of equity securities. The Company raised $2,000,000 on March 26, 2007, $22,829,022 (net of issuance costs) on December 4, 2007, and $ 1,631,564 (net of issuance costs) on July 30, 2008, by way of three separate private placements of shares of common stock. The total cash funds raised since inception of $26,460,586 have been used principally as follows:



(a)

The acquisition of the land in Kentucky and various costs associated with improvements made to the land for its initial proposed purpose, together with initial costs associated with the planned construction of a bio energy plant on that land together with direct contractors costs allocable to the proposed Kentucky project, all amounting in total to approximately $7.35 million



(b)

The acquisition of the STT related assets from Kreido Biofuels, together with subsequent costs incurrent in protecting the acquired STT assets of approximately $5.30 million



(c)

The acquisition and subsequent investment in testing, stabilizing and preparing the UK plant for commercialization amounting to approximately $6.0 million





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(d)

Legal, professional, consulting and advisory fees relating to potential and actual acquisition and corporate finance activity amounting to approximately $6.15 million



(e)

Compliance, legal and audit costs of approximately $1.8 million



Current assets and liabilities



At April 30, 2010, we had current assets of $632,974, comprised of (a) cash of $308,404, (b) inventory of $47,955 comprised of materials located at our UK plant of (c) various prepaid expenses, sundry receivables and advances of $276,615.



Our current liabilities at April 30, 2010 amounted to $2,462,963 of which accounts payable and accrued expenses, value added tax payable amounted to $1,922,963 and a promissory note amounting to $540,000 representing unpaid deferred consideration for part of the Kentucky land acquisition.



At April 30, 2009, cash was $7,776,315 and we had other current assets of $445,203 and current liabilities of $1,851,013.



We attribute our net loss to having no commercial scale revenues to sustain our operating costs as we are a development stage company.



Net Cash Used in Operating Activities



Cash utilized in operating activities was $2,311,190 for the six month period ended April 30, 2010, as compared to $2,800,299 for the six month period ended April 30, 2009.  The reduction is due to a reduction in group level costs between the two periods offset in part by new costs incurred in the acquisitions made since January 31, 2009 (STT and UK biodiesel plant). Total cash utilized in operating activities was $15,404,178, from March 9, 2007 (date of inception) through April 30, 2010.



Net Cash Provided by (Used in) Investing Activities



During the six month period ended April 30, 2010 cash provided by investing activities was $1,321,714, compared with cash spent on investment activities in the six month period ended April 30, 2009 of $4,668,912. The change is due primarily to cash received in the six month period ended April 30, 2010 from the sale of scrap, redundant and surplus assets of $1,481,617, offset by $305,683 of costs associated with sale of the scrap and assets, for which no equivalent amount arose in the six month period ended April 30, 2009.  In addition the Company had returned to it funds which were previously held in escrow amounting to $200,000 and which related to an aborted transaction, in the six month period ended April 30, 2010.  This compares to cash deposited into escrow amounting to $330,025 related to the purchase of STT assets, in the six month period ended April 30, 2009.



Cash used in investing activities in the period from inception (March 9, 2007) to April 30, 2010 amounted to $11,177,698 and comprised mainly of the acquisition of land, plant and equipment and plant construction costs.





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Net Cash (Used in) Provided by Financing Activities and Future Possible Financings



During the period from March 9, 2007 (date of inception) through April 30, 2010, the Company received net cash provided by financing activities of $26,460,586 from private placements. During the six month periods ended April 30, 2010 and April 30, 2009 the Company did not receive any cash from financing activities. The Company attributes this to (a) the materially adverse state of the global capital markets during these periods and to (b) the fact that it did not own a viable production plant until recently, when it finished commissioning the UK biodiesel plant that it acquired in April 2009. Following this the Company has entered into various ongoing discussions with certain third parties that are aimed at providing finance to the Company or to the subsidiary company which owns the bio diesel plant and which may include establishing joint ventures with strategic or financial partners. There can be no certainty at this time about the success of outcome of these discussions and therefore there is no certainty about our ability to generate future biodiesel revenues or to commence full scale trading on a commercial basis.



There is no assurance that the Company will be able to obtain any financing or enter into any form of credit arrangement.  Even if such financing is offered, the terms may not be acceptable to the Company. If the Company is not able to secure financing or it is offered on unacceptable terms, then its business plan and strategy may have to be modified or curtailed or certain aspects terminated, in particular the Company requires new capital in the short term to enable it to complete the commercialization plans for its acquired assets and to continue in operation. Although the Companys management is in discussion with several potential sources of finance, including from potential financial and/or strategic partners there can be no assurance that these possible financings will close or that they will close in time to meet the short term financial needs of the Company and its subsidiaries, further, there is no assurance that even with financing, the Company will be able to achieve its goals.



The accompanying unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Our ability to continue as a going concern will be dependent upon our ability to generate sufficient cash flow from our planned operations to meet our obligations on a timely basis, to obtain additional financing, and ultimately attain profitability. We currently have no sources of financing available and we do not expect to earn any revenues in the near term. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.



Critical Accounting Policies and Estimates



Significant Accounting Policies



Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our consolidated financial condition and results of operations, we view certain of these policies as critical.  Policies determined to be critical are those policies that have the most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.



We believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.





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General



The Companys Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles, which require management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue, if any, and expenses, and the disclosure of contingent assets and liabilities.  Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Senior management has discussed the development, selection and disclosure of these estimates with the Board of Directors.  Management believes that the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from these estimates under different assumptions or conditions.



An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the consolidated financial statements. Management believes the following critical accounting policies reflect the significant estimates and assumptions used in the preparation of the Consolidated Financial Statements.



Development Stage Company



The Company is considered to be a development stage entity as defined by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 915. The Company undertook a testing and commissioning process to establish the quality of bio-diesel product that could be made to certain specification levels, and that suitable volume quantities could be produced consistently, prior to commercial production. During the third and fourth quarters of fiscal 2009, we generated trial revenue through these operations of the plant as an initial stage to fully commercializing this plant.



Although we have now largely completed commissioning and testing the plant to our satisfaction, we will not be able to produce and therefore sell bio-diesel in commercially viable quantities until we raise extra sufficient amount of capital or lines of credit to acquire the feedstock required to produce bio-diesel in such quantities. We are currently negotiating with various parties to obtain access to such capital but there can be no certainty about the outcome of such negotiations. Until such time, if ever, as we obtain access to such capital it is uneconomic to run the plant and we are holding it in a state of readiness to commence commercial scale production at some future date. Consequently, the Company will remain as a development stage entity until it is confident that the Plant is capable of producing biodiesel at a specified level of certification consistently, in large volumes, across a wide distribution of customers. The Company has not generated material revenues to date and has incurred significant expenses and has sustained losses.



Going Concern



The unaudited condensed consolidated financial statements have been prepared on the going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of operations. If we were not to continue as a going concern, we would likely not be able to realize on our assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the consolidated financial statements. There can be no assurances that we will be successful in generating additional cash from equity or other sources to be used for operations. The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.





30







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Principles of Consolidation



The consolidated financial statements include the accounts of Four Rivers BioEnergy Inc., The Four Rivers BioEnergy Company Inc., The Four Rivers BioEthanol Company Limited, Four Rivers STT Trading Company Inc., Four Rivers STT Technology Inc., Four Rivers Real Estate Inc. and BF Group Holdings Limited.  All significant intercompany transactions and balances have been eliminated in consolidation.



Revenue recognition



The Company recognizes revenue from product sales in accordance with ASC 605 Revenue Recognition. Four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists (through written sales documentation); (2) delivery has occurred (through delivery into customers tanks and acceptance); (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded, although we have not experienced any such items to date and do not expect any significant provisions in the future. We have no discount, rebate or warranty programs. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. Payments received in advance are deferred until revenue recognition is appropriate. We have no post-delivery obligations related to our products.



Stock-Based Compensation



The Company accounts for its stock based compensation under ASC 718 Compensation  Stock Compensation using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.  This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of those equity instruments.



We use the fair value method for equity instruments granted to non-employees (if any) and will use the Black-Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.



Foreign Currency Translation



The Companys functional and reporting currency is the United States Dollar.  The functional currency of the Companys subsidiaries, The Four Rivers BioEthanol Company Limited and BF Group Holdings Limited is their local currency (Great British Pound  GBP). Monetary assets and liabilities are translated into U.S. Dollars at balance sheet date and revenue and expense accounts are translated at the average exchange rate for the period or for year end. The translation adjustments are deferred as a separate component of stockholders equity, captioned accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the consolidated statements of operations.



Reclassification



Certain reclassifications have been made to prior periods data to conform with the current periods or years presentation. These reclassifications had no effect on reported income or losses.





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Recent accounting pronouncements



In March 2010, the FASB issued new accounting guidance, under ASC Topic 605 on Revenue Recognition.  This standard provides that the milestone method is a valid application of the proportional performance model for revenue recognition if the milestones are substantive and there is substantive uncertainty about whether the milestones will be achieved.  Determining whether a milestone is substantive requires judgment that should be made at the inception of the arrangement.  To meet the definition of a substantive milestone, the consideration earned by achieving the milestone (1) would have to be commensurate with either the level of effort required to achieve the milestone or the enhancement in the value of the item delivered, (2) would have to relate solely to past performance, and (3) should be reasonable relative to all deliverables and payment terms in the arrangement.  No bifurcation of an individual milestone is allowed and there can be more than one milestone in an arrangement.  The standard is effective for interim and annual periods beginning on or after June 15, 2010.  The Company is currently evaluating the impact the adoption of this guidance will have on its condensed consolidated financial statements.



In February 2010, the FASB issued ASU No. 2010-09, which updates the guidance in ASC 855, Subsequent Events, such that companies that file with the SEC will no longer be required to indicate the date through which they have analyzed subsequent events. This updated guidance became effective immediately upon issuance and was adopted as of the first quarter of 2010.



In February 2010 the FASB issued Update No. 2010-08 Technical Corrections to Various Topics (2010-08). 2010-08 represents technical corrections to SEC paragraphs within various sections of the Codification. Management is currently evaluating whether these changes will have any material impact on its financial position, results of operations or cash flows.



In January 2010 the FASB issued Update No. 2010-06 Fair Value Measurements and DisclosuresImproving Disclosures about Fair Value Measurements (2010-06). 2010-06 requires new disclosures regarding significant transfers between Level 1 and Level 2 fair value measurements, and disclosures regarding purchases, sales, issuances and settlements, on a gross basis, for Level 3 fair value measurements. 2010-06 also calls for further disaggregation of all assets and liabilities based on line items shown in the statement of financial position. This amendment is effective for fiscal years beginning after December 15, 2010 and interim periods within those fiscal years. The Company is currently evaluating whether adoption of this standard will have a material impact on its consolidated financial position, results of operations or cash flows.



In January 2010 the FASB issued Update No. 2010-05 CompensationStock CompensationEscrowed Share Arrangements and Presumption of Compensation (2010-05). 2010-05 re-asserts that the Staff of the Securities Exchange Commission (the SEC Staff) has stated the presumption that for certain shareholders escrowed share represent a compensatory arrangement. 2010-05 further clarifies the criteria required to be met to establish a position different from the SEC Staffs position. The Company does not believe this pronouncement will have any material impact on its consolidated financial position, results of operations or cash flows.



In January 2010 the FASB issued Update No. 2010-04 Accounting for Various TopicsTechnical Corrections to SEC Paragraphs (2010-04). 2010-04 represents technical corrections to SEC paragraphs within various sections of the Codification. Management is currently evaluating whether these changes will have any material impact on its consolidated financial position, results of operations or cash flows.





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In January 2010 the FASB issued Update No. 2010-02 Accounting and Reporting for Decreases in Ownership of a Subsidiarya Scope Clarification (2010-02) an update of ASC 810 Consolidation. 2010-02 clarifies the scope of ASC 810 with respect to decreases in ownership in a subsidiary to those of a: subsidiary or group of assets that are a business or nonprofit, a subsidiary that is transferred to an equity method investee or joint venture, and an exchange of a group of assets that constitutes a business or nonprofit activity to a non-controlling interest including an equity method investee or a joint venture. Management does not expect adoption of this standard to have any material impact on its consolidated financial position, results of operations or operating cash flows.



In January 2010 the FASB issued Update No. 2010-01 Accounting for Distributions to Shareholders with Components of Stock and Casha consensus of the FASB Emerging Issues Task Force (2010-03) an update of ASC 505 Equity. 2010-03 clarifies the treatment of stock distributions as dividends to shareholders and their affect on the computation of earnings per shares. The Company has not and does not intend to declare dividends for preferred to common stock holders. Management does not expect adoption of this standard to have any material impact on its consolidated financial position, results of operations or operating cash flows.



Other recent accounting pronouncements issued by the FASB and the SEC did not have, or are not believed by management to have, a material impact on the Company's present or future consolidated financial statements.



Off-Balance Sheet Arrangements



None.



Item 3.  Quantitative and Qualitative Disclosures About Market Risk.



Market risk sensitive instruments include all financial or commodity instruments and other financial instruments (such as investments and debt) that are sensitive to future changes in interest rates, current exchange rates, commodity prices or other market factors. We are exposed to market risk related to changes in interest rates, which could adversely affect the value of our current assets and liabilities. At April 30, 2010, we had cash and cash equivalents consisting of cash on hand and highly liquid money market and demand savings accounts with original terms to maturity of less than 90 days. We do not believe that our results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to our cash and cash equivalents, given our current ability to hold our liquid investments to maturity.



Item 4.  Controls and Procedures.



Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Companys reports filed or submitted under the Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Companys reports filed under the Exchange Act is accumulated and communicated to management, including  our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.





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Evaluation Of Disclosure Controls And Procedures



As of the end of the period covered by this quarterly report, management carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.



Limitations on Effectiveness of Controls and Procedures



Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.  These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



Changes In Internal Controls Over Financial Reporting



In connection with the evaluation of our internal controls, our principal executive officer and principal financial officer have determined that during the period covered by this quarterly report, there have been no changes to our internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.



PART II  OTHER INFORMATION



Item 1.  Legal Proceedings.



None



Item 1A.  Risk Factors.



There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2009.



Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.



None.





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Item 3.  Defaults Upon Senior Securities.



At April 30, 2010 the Companys wholly owned subsidiary, Four Rivers BioEnergy Company, Inc., was in default under the terms of the $600,000 promissory note payable which was due for payment on or before December 31, 2009. Due to cash shortages the Company was unable to make payment under that note by the due date, but made a partial payment on account amounting to $60,000.



Item 4.  [Reserved]



Item 5.  Other Information.



None



Item 6.  Exhibits.



|        |  |                                                                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                               
|31.1    |  | Certification of the Companys Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrants Quarterly Report on Form 10-Q for the quarter ended April 30, 2010.
|        |  |                                                                                                                                                                                                                           
|31.2    |  | Certification of the Companys Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrants Quarterly Report on Form 10-Q for the quarter ended April 30, 2010.
|        |  |                                                                                                                                                                                                                           
|32.1    |  | Certification of the Companys Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.                      





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SIGNATURES

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



| |                           
| | --------------------------
| | FOUR RIVERS BIOENERGY INC.





|                    |     |                                                                     
|------------------- | --- | --------------------------------------------------------------------
|                    |     |                                                                     
|Date: June 18, 2010 | By: | /s/ Stephen Padgett                                                 
|                    |     | Name:  Stephen Padgett
Title:  President and Chief Executive Officer
|                    |     |                                                                     
|Date: June 18, 2010 | By: | /s/ Martin Thorp                                                    
|                    |     | Name:  Martin Thorp
Title:  Chief Financial Officer                 





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