UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





[X]
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended March 31,
2008


or


[   ]
            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 000-52852





BIOFUELS
POWER CORPORATION


(Exact
name of registrant as specified in its charter)





TEXAS
            56-2471691(State
      or other jurisdiction of
            (I.R.S.
      Employerincorporation
      or organization)
            Identification
      No.)10003
      Woodloch Forest Drive, Suite 900
            77380The
      Woodlands, Texas
            (zip
      code)(Address
      of principal executive offices)Registrant’s
      telephone number, including area code
            (281)
      364-9500





Securities
Registered pursuant to Section 12(g) of the Act


Common
Stock, par value $0.001 per share





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months and (2) has been subject to such filing
      requirements for the past 90 days.
            Yes ___
            No  
      X





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





Large
      accelerated filer
            
            Accelerated
      filerNon-accelerated
      filer
            
            Smaller
      reporting company
            X




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





Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.





Title
      of Class
            Outstanding
      at March 31, 2008Common
      Stock, $0.001 Par Value
            30,797,592
      Shares
























TABLE
OF CONTENTS








PART
      I
              FINANCIAL
      INFORMATION
              PAGEITEM
      1
              Financial
      StatementsBalance
      Sheets as of March 31, 2008 and December 31, 2007
              F-1Unaudited
      Consolidated Condensed Statements of Operations
              F-2for
      the three-month periods ended March 31, 2008 and 2007Unaudited
      Consolidated Condensed Statement of Stockholders’ Equity
              F-3for
      the three-month period ended March 31, 2008Unaudited
      Consolidated Condensed Statements of Cash Flow
              F-4for
      the three-month periods ended March 31, 2008 and 2007Notes
      to Unaudited Consolidated Condensed Financial Statements
              F-5
      - F-10ITEM
      2
              Managements’
      Discussion and Analysis of Financial Condition and Plan of
      Operation
              2ITEM
      3
              Quantitative
      and Qualitative Disclosures About Market Risk
              4ITEM
      4
              Controls
      and Procedures
              4PART
      II
              OTHER
      INFORMATIONITEM
      1
              Legal
      Proceedings
              6ITEM
      1A
              Risk
      Factors
              6ITEM
      2
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              6ITEM
      3
              Defaults
      Upon Senion Securities
              7ITEM
      4
              Submission
      of Matters to a Vote of Security Holders
              7ITEM
      5
              Other
      Information
              7ITEM
      6
              Exhibits
              7SIGNATURES
              8




























BIOFUELS
POWER CORP.


CONSOLIDATED
BALANCE SHEETS


March
31, 2008 and December 31, 2007





March
      31, 2008
            
            December
      31, 2007(Unaudited)
            
            (Audited)AssetsCurrent
      Assets:Cash
      and cash equivalents
            $
            912,913
            
            $
            1,089,308Accounts
      receivable
            
            450,697
            
            
            238,580Accounts
      receivable – affiliate
            
            -
            
            
            3,680Inventory
            
            297,297
            
            
            401,928Total
      current assets
            
            1,660,907
            
            
            1,733,496Property
      and equipment, net
            
            6,037,451
            
            
            5,753,535Investment
      in certificate of deposit (restricted)
            
            -
            
            
            889,823Total
      assets
            $
            7,698,358
            
            $
            8,376,854Liabilities and
      Stockholders' EquityCurrent
      Liabilities:Accounts
      payable
            $
            798,121
            
            $
            329,423Payable
      to affiliate
            
            -
            
            
            27,792Commissions
      payable
            
            -
            
            
            21,650Interest
      payable
            
            5,944
            
            
            14,264Total
      current liabilities
            
            804,065
            
            
            393,129Long
      Term LiabilitiesNote
      payable
            
            191,250
            
            
            191,250Minority
      interest
            
            -
            
            
            544,195Total
      liabilities
            
            995,315
            
            
            1,128,574Commitments
      and ContingenciesStockholders’
      equity:Common
      stock, $.001 par value, 50,000,000 shares authorized; 30,797,592 and
      30,306,390 shares issued and outstanding, respectively
            
            30,797
            
            
            30,306Additional
      paid in capital
            
            12,562,391
            
            
            11,776,732Deferred
      compensation
            
            (371,875
            )
            
            (595,000
            )Accumulated
      deficit
            
            (5,518,270
            )
            
            (3,963,758
            )Total
      stockholders' equity
            
            6,703,043
            
            
            7,248,280Total
      liabilities and stockholders' equity
            $
            7,698,358
            
            $
            8,376,854





See
accompanying notes to unaudited consolidated condensed financial
statements.










F-1








BIOFUELS
POWER CORP.


UNAUDITED
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS


for
the three months ended March 31, 2008 and 2007








March
      31,2008
            
            2007Sales
            $
            94,457
            
            $
            21,050Cost
      of sales
            
            653,741
            
            
            200,542Gross
      loss
            
            (559,284
            )
            
            (179,492
            )Selling,
      general and administrative expenses
            
            938,752
            
            
            669,605Operating
      loss
            
            (1,562,305
            )
            
            (849,097
            )Other
      income:Gain
      on investment in futures contract
            
            -
            
            
            1,711,000Other
      income, net
            
            14,454
            
            
            205Interest
      expense
            
            (6,661
            )
            
            -Total
      other income, net
            
            7,793
            
            
            1,711,205Net
      income/(loss) before minority interest
            
            (1,554,512
            )
            
            862,108Minority
      interest
            
            -
            
            
            (620,000
            )Net
      income/(loss)
            $
            (1,554,512
            )
            $
            242,108Basic
      and diluted net income/(loss) per common share
            $
            (0.05
            )
            $
            0.01Weighted
      average common shares outstanding – basic and diluted
            
            30,690,636
            
            
            21,637,000





See
accompanying notes to unaudited consolidated condensed financial
statements.












F-2










BIOFUELS
POWER CORP.


UNAUDITED
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY


for
the three months ended March 31, 2008





AdditionalCommon
      Stock
            
            Paid
      In
            
            Deferred
            
            AccumulatedShares
            
            Amount
            
            Capital
            
            Compensation
            
            Deficit
            
            TotalBalance
      at December 31, 2007
            
            30,306,390
            
            $
            30,306
            
            $
            11,776,732
            
            $
            (595,000
            )
            $
            (3,963,758
            )
            $
            7,248,280Issuance
      of common stock for cash, net of offering costs
            
            102,000
            
            
            102
            
            
            147,898
            
            
            -
            
            
            -
            
            
            148,000Issuance
      of common stock for services
            
            72,537
            
            
            73
            
            
            83,223
            
            
            -
            
            
            -
            
            
            83,296Issuance
      of common stock for limited partnership interest
            
            316,665
            
            
            316
            
            
            554,538
            
            
            -
            
            
            -
            
            
            554,854Amortization
      of deferred compensation
            
            -
            
            
            -
            
            
            -
            
            
            223,125
            
            
            -
            
            
            223,125Net
      loss
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,554,512
            )
            
            (1,554,512
            )Balance
      at March 31, 2008
            
            30,797,592
            
            $
            30,797
            
            $
            12,562,391
            
            $
            (371,875
            )
            $
            (5,518,270
            )
            $
            6,703,043







See
accompanying notes to unaudited consolidated condensed financial
statements.














F-3










BIOFUELS
POWER CORP.


UNAUDITED
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS


for
the three months ended March 31, 2008 and 2007





Three
      Months Ended March 31,2008
            
            
            2007Cash
      flows from operating activities:Net
      (loss)/income
            
            $
            (1,554,512
            )
            
            $
            242,108Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      expense
            
            
            343,199
            
            
            
            174,970Expense
      related to issuance of common stock for limited partnership
      interests
            
            
            12,501
            
            
            
            200,000Stock
      issued for services
            
            
            83,296
            
            
            
            -Gain
      on investment in futures contract
            
            
            -
            
            
            
            (1,711,000
            )Minority
      interest
            
            
            -
            
            
            
            620,000Amortization
      of deferred compensation
            
            
            223,125
            
            
            
            -Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            (212,119
            )
            
            
            (197,399
            )Prepaid
      fuel costs
            
            
            -
            
            
            
            302,679Inventory
            
            
            104,631
            
            
            
            (26,400
            )Accounts
      payable
            
            
            468,698
            
            
            
            (49,502
            )Accrued
      interest payable
            
            
            (8,320
            )
            
            
            -Net
      cash used in operating activities
            
            
            (539,501
            )
            
            
            (444,544
            )Cash
      flows from investing activities:Proceeds
      from liquidation of restricted certificate of deposit
            
            
            902,149
            
            
            
            -Purchase
      of property and equipment
            
            
            (674,717
            )
            
            
            (1,439,472
            )Purchase
      of investment in futures contract
            
            
            -
            
            
            
            (574,110
            )Sale
      of futures contract
            
            
            -
            
            
            
            2,549,918Purchase
      of certificate of deposit
            
            
            (12,326
            )
            
            
            -Net
      cash provided by investing activities
            
            
            215,106
            
            
            
            536,336Cash
      flows from financing activities:Net
      proceeds from sale of common stock
            
            
            148,000
            
            
            
            2,061,729Proceeds
      from issuance of notes payable
            
            
            -
            
            
            
            30,000Proceeds
      from subscription receivable
            
            
            -
            
            
            
            492,050Net
      cash provided by financing activities
            
            
            148,000
            
            
            
            2,583,779Net
      (decrease) / increase in cash and cash equivalents
            
            
            (176,395
            )
            
            
            2,675,571Cash
      and cash equivalents, beginning of period
            
            
            1,089,308
            
            
            
            2,703,535Cash
      and cash equivalents, end of period
            
            $
            912,913
            
            
            $
            5,379,106Supplemental
      disclosure of cash flow information:Interest
      paid
            
            $
            14,264
            
            
            $
            -Income
      taxes paid
            
            $
            -
            
            
            $
            -Non-cash
      investing and financing activities:Accrue
      accounts payable for offering costs
            
            $
            -
            
            
            $
            492,350Common
      stock issued upon conversion of limited partnership
    interest
            
            $
            554,854
            
            
            $
            -




See
accompanying notes to unaudited consolidated condensed financial
statements.










F-4










BIOFUELS
POWER CORPORATION


NOTES
TO FINANCIAL STATEMENTS


(Information
with respect to events occurring after December 31, 2007 is
unaudited)





1.         Summary of Significant
Accounting Policies





Basis of
Presentation The accompanying interim unaudited consolidated condensed
financial statements have been prepared without audit pursuant to the rules and
regulations of the U.S. Securities and Exchange Commission.  Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to such rules
and regulations.  These unaudited consolidated condensed financial
statements should be read in conjunction with the audited financial statements
and notes thereto of Biofuels Power Corp. (the "Company") for the year ended
December 31, 2007.  In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of financial position, results of operations and cash flows for the
interim periods presented have been included.  Operating results for
the interim periods are not necessarily indicative of the results that may be
expected for the respective full year.





The
balance sheet at December 31, 2007 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for a complete
presentation of annual financial statements.





BackgroundBiofuels Power Corp.
(“BPC”), a Texas corporation, was incorporated in 2004 as Aegis Products,
Inc.  The Company is a distributed energy company that is pioneering
the use of biodiesel to fuel small electric generating facilities that are
located in close proximity to end-users.  BPC’s first power plant is
currently located near Houston, Texas in the city of Oak Ridge
North.  During February 2007, BPC began generating and selling its
power through Fulcrum Power to Centerpoint Energy.





Aegis
Products, Inc. was incorporated in Texas on January 20, 2004 as a wholly-owned
subsidiary of Texoga Technologies Corp. (“Texoga”).  Effective
December 31, 2004, Aegis was spun off from Texoga through a share distribution
to the Texoga shareholders with 87 owners receiving a total of 14,512,380
shares.  During 2006, the Texoga BioFuels 2006-1 and 2006-2
partnerships were established and each raised $3.5 million to develop biofueled
power projects in the Houston, Texas area.  Texoga began serving as
the general partner and on November 6, 2006, Texoga transferred its general
partner role to Aegis which simultaneously changed its name to Biofuels Power
Corp.





During
2007 BPC created a wholly owned subsidiary, Alternative Energy Consultants, LLC
(“AEC”).  AEC will engage in the business of designing and building of
standardized biodiesel refineries.





ConsolidationIn accordance with FIN
46(R), which requires the consolidation of certain variable interest entities,
these consolidated financial statements include the accounts of BPC, Texoga
BioFuels 2006-1, Ltd, (“TBF-1”) and Texoga BioFuels 2006-2, Ltd.
(“TBF-2”).  BPC, TBF-1 and TBF-2 are referred to collectively as the
“Company”.  For presentation purposes, the equity interests of the
limited partners in TBF-1 and TBF-2 have been reflected as minority interest
shareholders.  The consolidated financial statements also include the
accounts of Alternative Energy Consultants, LLC, which is a wholly-owned
subsidiary of BPC.  All material intercompany transactions have been
eliminated in consolidation.





Use of Estimates
and AssumptionsThe preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America (“U.S.”) requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
periods.  Actual results could materially differ from those
estimates.





Cash and Cash
EquivalentsThe Company considers
any highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.





Derivative
Instruments and HedgingThe Company uses
derivatives to hedge against increases in the price of feedstock, primarily
soybean oils, used in the production of biodiesel.  All derivative
instruments are recorded as assets or liabilities on the balance sheet at fair
value.  Changes in the fair value of derivatives are either recorded
in the income statement or other comprehensive income, as
appropriate.  The gain or loss on derivatives designated as fair value
hedges and the offsetting loss or gain on the hedged item attributable to the
hedged risk are
included in income in the period that changes in fair value
occur.  The effective portion of the gain or loss on derivatives
designated as cash flow hedges is included in other comprehensive income in the
period that changes in fair value occur and is reclassified to income in the
same period that the hedged item affects income.  The remaining gain
or loss in excess of the cumulative change in the present value of the cash
flows of the hedge item, if any, is recognized in income.  As of March
31, 2008, the Company did not have any open hedge contracts.














F-5









Revenue
RecognitionRevenue, which began to
be recorded during 2007, is recognized when the electricity produced is provided
to the electric grid maintained by the Electric Reliability Council of Texas
(ERCOT).  A power sales agreement is in place with Fulcrum Power, a
Qualified Scheduling Entity (QSE) for ERCOT.  Electric sales into
ERCOT may only be made through the scheduling of a QSE, which also receives
payment from ERCOT for all sales in a process called
“settlement.”  Initial settlement takes place eight days after the
date of sale with subsequent adjustments at 60 days and 180 days after the sale,
if needed.  To date, the Company has not experienced any material
settlement adjustments and it does not anticipate material settlement
adjustments in the future.  All of the sales from the Company’s Oak
Ridge North facility are made into the ERCOT Balancing Energy
Market.  Such sales are priced by ERCOT for each 15-minute interval of
each hour of each day.  The price for all balancing energy dispatched
in a given interval is the highest bid of any electricity dispatched by ERCOT in
that interval.  The price per megawatt is determined at the time of
the sale.  ERCOT bills each utility company purchaser, collects the
money due under a formal settlement process and remits the proceeds to the QSE
scheduling the electricity actually purchased.  The QSE pays the power
generator when it receives payment from ERCOT.  The Company pays
Fulcrum Power a monthly fee for services that are not directly related to the
revenue the Company receives from sales of electricity.





Biodiesel Tax
CreditsBiodiesel is classified
as a renewable fuel that is eligible for Federal credits of $1.00 per gallon for
biodiesel manufactured from virgin agricultural products and $0.50 per gallon
for biodiesel produced from non-virgin oils and fats.  The gallons
used are reported to the Federal government and the Company receives a payment
of $1.00 per gallon, which is accounted for as a direct offset to fuel prices
and included in the Company’s cost of sales.  During the three months
ended March 31, 2008, the Company received $53,957 in Federal
credits.





Accounts
ReceivableAccounts receivable
consist primarily of amounts due from certain companies for the sale of power to
the electric grid.  An allowance for doubtful accounts is provided,
when appropriate, based on past experience and other factors which, in
management’s judgment, deserve current recognition in estimating probable bad
debts.  Such factors include circumstances with respect to specific
accounts receivable, growth and composition of accounts receivable, the
relationship of the allowance for doubtful accounts to accounts receivable and
current economic conditions.  As of March 31, 2008 the Company had
trade accounts receivable of $107,982 and Federal credits receivable of
$342,715.





InventoryInventories are stated
at the lower of cost or market and consists of 51,187 gallons of unprocessed
fuel stock and 46,475 gallons of processed fuel stock at March 31,
2008.  Cost is determined using the first-in first-out (“FIFO”)
method.





Property and
EquipmentProperty and equipment
are stated at cost less accumulated depreciation.  Expenditures for
normal repairs and maintenance are charged to expense as
incurred.  Fixed assets are depreciated using the straight-line method
for financial reporting purposes over their estimated useful life of 3 to 10
years.  The cost and related accumulated depreciation of assets sold
or otherwise disposed of are removed from the accounts and any gain or loss is
included in operations.





Impairment of
Long-Lived AssetManagement reviews
long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be realizable.  If an
evaluation is required, the estimated future undiscounted cash flows associated
with the asset are compared to the asset’s carrying value amount to determine if
an impairment of such asset is necessary.  The effect of any
impairment would be to expense the difference between the fair value of such
asset and its carrying value.





Income
TaxesThe
Company uses the liability method in accounting for income
taxes.  Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and income tax
carrying amounts of assets and liabilities and are measured using the enacted
tax rates and laws that will be in effect when the differences are expected to
reverse.  The Company provides a valuation allowance to reduce
deferred tax assets to their net realizable value. The
Partnership’s taxable income or loss for any period is included in the tax
returns of the individual partners and, therefore, the Partnership does not
provide for federal income taxes.














F-6











(Loss)/Income Per
Common ShareThe Company provides
basic and dilutive (loss)/income per common share information for each period
presented.  The basic net loss per common share is computed by
dividing the net (loss)/income by the weighted average number of common shares
outstanding.  Diluted net (loss)/income per common share is computed
by dividing the net (loss)/income, adjusted on an "as if converted" basis, by
the weighted average number of common shares outstanding plus potential dilutive
securities.  For the three months ended March 31, 2008 and 2007, the
Company did not have any potential dilutive securities.





Stock-Based
CompensationOn January 1, 2006, the
Company adopted Statement of Financial Accounting Standards 123(R) Share Based
Payments (“SFAS 123(R)”), using the modified prospective
method.  Under the modified prospective method, the Company would
begin recognizing expense on January 1, 2006 for the unvested portion of awards
granted before the adoption date expected to vest over the remaining vesting
period of the award.  New awards granted after the adoption date will
be expensed ratably over the vesting period of the award.





SFAS
123(R) is a revision of SFAS 123,Accounting for Stock-Based
Compensation, and supersedes APB No. 25,Accounting for Stock Issued to
Employees.  Under SFAS 123(R), the cost of employee services
received in exchange for stock is measured based on the grant-date fair value
(with limited exceptions).  That cost is to be recognized over the
period during which an employee is required to provide service in exchange for
the award (usually the vesting period).  The fair value of immediately
vested shares is determined by reference to quoted prices for similar shares and
the fair value of shares issued subject to a service period is estimated using
an option-pricing model.  Excess tax benefits, as defined in SFAS
123(R) are recognized as addition to paid-in-capital.





Fair Value of Financial
InstrumentsThe Company includes fair value information in the
notes to financial statements when the fair value of its financial instruments
is different from the book value.  When the book value approximates
fair value, no additional disclosure is made.  Fair value estimates of
financial instruments are based on relevant market information and may be
subjective in nature and involve uncertainties and matters of significant
judgment.  The Company believes that the carrying value of its assets
and liabilities approximates the fair value of such items.  The
Company does not hold or issue financial instruments for trading
purposes.





Concentration of
Credit RiskFinancial instruments
which subject the Company to concentrations of credit risk include cash and cash
equivalents and accounts receivable.  The Company maintains its cash
and cash equivalents with major financial institutions selected based upon
management’s assessment of the banks’ financial stability.  Balances
periodically exceed the $100,000 federal depository insurance
limit.  The Company has not experienced any losses on
deposits.  Accounts receivable generally arise from sales of power to
the electric grid. Collateral is generally not required for credit
granted.  The Company will provide allowances for potential credit
losses when necessary.





Recently Issued
Accounting PronouncementsFASB Statement of
Financial Accounting Standards No. 157, “Fair Value Measurements”
(“SFAS 157”), issued in September 2006, establishes a formal framework for
measuring fair value under GAAP.  It defines and codifies the many
definitions of fair value included among various other authoritative literature,
clarifies and, in some instances, expands on the guidance for implementing fair
value measurements, and increases the level of disclosure required for fair
value measurements.  Although SFAS 157 applies to and amends the
provisions of existing FASB and AICPA pronouncements, it does not, of itself,
require any new fair value measurements, nor does it establish valuation
standards.  SFAS 157 applies to all other accounting pronouncements
requiring or permitting fair value measurements, except for SFAS No. 123 (F),
share-based payment and related pronouncements, the practicability exceptions to
fair value determinations allowed by various other authoritative pronouncements,
and AICPA Statements of Position 97-2 and 98-9 that deal with software revenue
recognition.  This statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years.  The adoption of SFAS 157 did not have a
material impact on the Company’s financial condition or results of
operations.





In
February 2007, the FASB issued SFAS 159,“The Fair Value Option for
Financial Assets and Financial Liabilities”, which is an elective,
irrevocable election to measure eligible financial instruments and certain other
assets and liabilities at fair value on an instrument-by-instrument
basis.  The election may only be applied at specified election dates
and to instruments in their entirety rather than to portions of
instruments.  Upon initial election, the entity reports the difference
between the instruments’ carrying value and their fair value as a cumulative-effect
adjustment to the opening balance of retained earnings.  At each
subsequent reporting date, an entity reports in earnings, unrealized gains and
losses on items for which the fair value option has been
elected.  SFAS 159 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and is applied on a prospective
basis.  Early adoption of SFAS 159 is permitted provided the entity
also elects to adopt the provisions of SFAS 157 as of the early adoption date
selected for SFAS 159.  The adoption of SFAS 159 did not have a
material impact on the Company's financial condition or results of
operations.














F-7











In
December 2007, the FASB issued a revision and replacement of SFAS 141(“SFAS
141R”), “Business
Combinations,” to increase the relevance, representational faithfulness,
and comparability of the information a reporting entity provides in its
financial reports about a business combination and its effects.  SFAS
141R replaces SFAS 141, “Business Combinations” but
retains the fundamental requirements of SFAS 141 that the acquisition method of
accounting be used and an acquirer be identified for all business
combinations.  SFAS 141R expands the definition of a business and of a
business combination and establishes how the acquirer is to: (1) recognize and
measure in its financial statements the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the acquired company;
(2) recognize and measure the goodwill acquired in the business combination or a
gain from a bargain purchase; and (3) determine what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination.  SFAS 141R is applicable to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008, and is to be applied prospectively.  Early adoption is
prohibited. SFAS 141R will impact the Company only if it elects to enter into a
business combination subsequent to December 31, 2008.





In
December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51,” to
improve the relevance, comparability, and transparency of the financial
information a reporting entity provides in its consolidated financial
statements.  SFAS 160 amends ARB 51 to establish accounting and
reporting standards for noncontrolling interests in subsidiaries and to make
certain consolidation procedures consistent with the requirements of SFAS
141R.  It defines a noncontrolling interest in a subsidiary as an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements.  SFAS 160 changes the way
the consolidated income statement is presented by requiring consolidated net
income to include amounts attributable to the parent and the noncontrolling
interest.  SFAS 160 establishes a single method of accounting for
changes in a parent’s ownership interest in a subsidiary that does not result in
deconsolidation.  SFAS 160 also requires expanded disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners of a subsidiary.  SFAS 160 is
effective for financial statements issued for fiscal years beginning on or after
December 15, 2008, and interim periods within those fiscal
years.  Early adoption is prohibited.  SFAS 160 shall be
applied prospectively, with the exception of the presentation and disclosure
requirements which shall be applied retrospectively for all periods
presented.  The Company does not believe that the adoption of SFAS 160
would have a material effect on its consolidated financial position, results of
operations or cash flows.





2.         Going
Concern





During
the three months ended March 31, 2008, the Company has experienced negative
financial results as follows:


2008Net
      loss
            $
            (1,554,512
            )Negative
      cash flows from operations
            $
            $(539,501
            )Accumulated
      deficit
            $
            (5,518,270
            )





Management
has developed specific current and long-term plans to address its viability as a
going concern as follows:





·
            The
      Company is attempting to raise funds through debt and/or equity
      offerings.  If successful, these additional funds will be used
      to provide working capital.


·
            In
      the long-term, the Company believes that cash flows from growth in its
      operations will provide the resources for continued
      operations.


·
            The
      Company is also pursuing other strategic initiatives including a merger or
      sale of the Company as opportunities are
  available.


















F-8




There can
be no assurance that the Company will have the ability to implement its business
plan and ultimately attain profitability.  The Company’s long-term
viability as a going concern is dependent upon three key factors, as
follows:


·
              The
      Company’s ability to obtain adequate sources of debt or equity funding to
      meet current

                  commitments
      and fund the continuation of its business operations in the near
      term.·
              The
      ability of the Company to control costs and expand
    revenues.·
              The
      ability of the Company to ultimately achieve adequate profitability and
      cash flows from operations to sustain its operations.








3.         Hedge
Accounts





In May
2006, TBF-1 invested $479,000 in a soybean commodity hedge and in August 2006,
TBF-2 invested $365,000 in a second soybean commodity hedge.  At
December 31, 2006, the net fair market value of the hedge accounts, as reported
by the brokerage firm that held the accounts, was $2,094,400 including
unrealized gains of $1,250,400.  Since the two hedge accounts were a
correlative hedge to protect the price of feedstock used in the production of
biodiesel is used as the fuel in the Company’s renewable energy power plants,
the unrealized gain, net of minority interests, has been included in other
comprehensive income in stockholders’ equity.  During February 2007
the hedge was closed and the Company realized a gain of $1,711,000.





In
February 2007, TBF-1 invested $286,420 in a cotton commodity hedge and TBF-2
invested $287,690 in a cotton commodity hedge.  As of March 31, 2007,
the Company had an unrealized gain of $33,890, net of minority interest portion,
on its hedge positions.





As of
March 31, 2008, the Company did not have any open hedge contracts.





4.         Property and
Equipment





Property
and equipment consisted of the following at March 31, 2008:





2008Power
      generating equipment
            $
            5,300,252Buildings
      and improvements
            
            1,177,192Machinery
      and equipment
            
            708,466Less
      accumulated depreciation
            
            (1,148,459
            )Total
      property and equipment, net
            $
            6,037,451





Depreciation
expense for the three months ended March 31, 2008 and 2007 was $343,199 of which
$275,918 is included in Cost of Sales, respectively.





5.         Notes
Payable





As of
March 31, 2008, there are three remaining notes payable of $191,250 due to the
former limited partners of TBF-1.  These notes bear interest at 12.5%
due semi-annually.  Principal is due in full in forty-eight months
from the execution date of the note.  The notes are not
collateralized.





6.         Stockholders’
Equity





During
the three months ended March 31, 2008, the Company issued 72,537 shares of its
common stock to consultants for services performed.  These shares were
valued at $1.00 - $1.25 per share which was the fair value of the common stock
on the date of grant based on the cash price received for the common stock in a
private placement offering.  As a result, the Company recorded $83,296
in selling, general and administrative expenses. In addition, the Company
recognized $223,125 of compensation expense related to the deferred compensation
recorded on the issuance of common stock to employees during 2007.





During
the three months ended March 31, 2008, limited partners in TBF-2 converted 250
partnership units at 1,267 shares per unit resulting in the Company issuing
316,665 shares of common stock.  The Company has recorded the value of
the excess shares issued upon conversion of the limited partnership interests of
$12,501 as settlement expense in selling, general and administrative expenses in
the accompanying statement of operations for the
three months ended March 31, 2008.  At March 31, 2008, the Company
owns 3,500 units of TBF-1 and TBF-2 which represents 100% of the outstanding
units of the partnerships, respectively.














F-9











During
2008, the Company issued 102,000 shares of common stock, valued at $1.45 per
share, in exchange for $148,000 in a private placement offering.





7.         Commitments and
Contingencies





LitigationThe Company does not
have any litigation at this time.





CommitmentsDuring March 2008, as
part of a renegotiation of its lease for office space, the Company’s investment
in certificate of deposit was released as collateral for a letter of credit that
previously guaranteed this lease.  Subsequent to March 31, 2008, these
funds were invested in various mutual funds and pledged as collateral for the
Company’s new line of credit agreement.





During
March 2008, the Company entered into a purchase contract with an unrelated third
party to purchase up to 301,000 gallons of alternative fuel grade feedstock with
a base price of $1.66 per gallon including transportation costs.  In
accordance with the contract, the Company will take delivery of the feedstock as
needed from March 2008 through May 2008.





8.         Related Party
Transactions





In
January 2008, the Company paid $10,000 to an affiliated company for
transportation expenses.





Pursuant
to a tolling agreement, the Company incurred tolling fees with an affiliate in
the amount of $194,563 during the three months ended March 31,
2008.





9.         Subsequent
Events





During
April 2008, the Company entered into a line of credit agreement with a financial
institution.  In accordance with the agreement, the Company may draw
up to $440,000 in principal.  Outstanding principal is due on demand
or in one payment on February 28, 2009.  Interest on the outstanding
principal balance is due monthly beginning on May 28, 2008 and is calculated
based on the prime rate less one percentage point.  The line of credit
is collateralized by the Company’s investment in various mutual fund holdings,
which were also purchased subsequent to March 31, 2008.












F-10











ITEM 2
            MANAGEMENT’S
      DISCUSSION AND ANALYSES OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





The
following discussion of the financial condition and plan of operations contains
forward-looking statements that involve risks and uncertainties. Please see
“Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements”
elsewhere in this annual report on Form 10-K.





Financial
condition, liquidity and capital resources





At March
31, 2008, we had $7,698,358 in total assets and $995,315 in liabilities,
resulting in a stockholders’ equity of $6,703,043. Our net working capital at
March 31, 2008 was $856,842.





During
the quarter ended March 31, 2008, we incurred a net loss of ($1,554,512), which
included $318,922 in non-cash expenses relating to equity issuance and
compensation transactions and $343,199 in non-cash depreciation
expense.





During
the first quarter of 2008, our revenues were limited because our 10 Mw
Montgomery County facility was placed in service during the quarter and we
experienced significant down-time as we refined and  resolved our
start-up issues, developed new operating protocols and resolved the typical
problems associated with placing a new generating facility in service. Our
revenues were also adversely impacted by seasonally low electric prices. While
our revenues were low during the first quarter, our operating expenses were
higher than normal because of the non-recurring costs associated with the
start-up of our Montgomery County facility, the non-recurring costs of
registering our securities under the Exchange Act, and use of higher priced
feedstock and fuel inventories that we purchased in 2007. For the remainder of
the year, we expect our cost of sales to decline significantly as a direct
result of reduced start-up expenses and significantly reduced fuel costs. We
also expect our outlays for legal and accounting services to decline
significantly.





We
believe our available resources, together with our anticipated operating
revenue, will be sufficient to pay our anticipated operating expenses for a
period of three to six months from the date of this quarterly report on Form
10-Q. Our available resources are not sufficient to pay all of our anticipated
capital costs and we are presently seeking additional financing. We believe we
will need at least $20 million in additional capital to finance our planned
facility expansions and future acquisitions. Capital requirements are difficult
to plan for companies like ours that are developing novel business models. We
expect that we will need additional capital to pay our day-to-day operating
costs, finance our feedstock and fuel inventories, finance additions to our
infrastructure, pay for the development of additional generating facilities and
the marketing of our green electricity. We intend to pursue additional financing
as opportunities arise.





Our
ability to obtain additional financing will be subject to a variety of
uncertainties. The inability to raise additional funds on terms favorable to us,
or at all, could have a material adverse effect on our business, financial
condition and results of operations. If we are unable to obtain additional
capital when required, we would be forced to scale back our planned
expenditures, which would adversely affect our growth prospects.





As a
result of our limited operating history, our operating plan and our growth
strategy are unproven and we have limited insight into the long-term trends that
may impact our business. There is no assurance that our operating plan and
growth strategy will be successful or that we will be able to compete
effectively, achieve market acceptance for green electricity or address the
risks associated with our existing and planned business activities.





Plan
of Operation





We began
selling electricity from our 5 MW facility in Oak Ridge North, Texas in February
2007 and commenced commercial sales of electricity from our 10 MW Montgomery
County facility in January 2008. During the quarter ended March 31, 2008, we
received $94,457 in revenue from our generating facilities, incurred
$653,741 in fuel and direct operating costs resulting in a gross loss
of ($559,284). After deducting $1,003,021 in selling, general and administrative
expenses, we had a net operating loss of ($1,562,305). During the quarter ended
March 31, 2007, we liquidated cash flow hedge investments and realized
$1,711,000 million in non-recurring investment gains. We also received $205 in
net interest income. After adjusting for the minority interests of the limited
partners in TBF-I and TBF-II, our net income for the quarter ended March 31,
2007 was $242,108.












-2-











We plan
to operate our Oak Ridge North and Montgomery County facilities as peaking
plants until we are able to negotiate suitable end-user contracts for the sale
of green electricity. Based on prevailing electric prices in Texas, we believe
we will be able to operate our facilities for at least six hours per day during
the winter months and for up to 18 hours per day during the summer months.
Accordingly, our revenues will be cyclical and our performance will vary
significantly from quarter to quarter. Since our single largest operating
expense will be fuel costs, which have been highly variable during recent
months, there is no assurance that we will ever attain
profitability.





We own a
2.5 MW steam turbine generator but cannot put the turbine in service until we
buy a suitable boiler, complete project engineering, build out the new system
and conduct necessary shakedown testing. We are presently conducting a technical
and mechanical evaluation of several used boilers that appear suitable for our
purposes and can be acquired for less than $100,000. After we purchase a
suitable boiler, we anticipate a lead time of six months to complete all
necessary installation and testing activities. The total estimated future costs
associated with our planned acquisition of a boiler and the installation of our
2.5 MW turbine are approximately $500,000. We plan to finance the boiler
acquisition and turbine installation with our currently available capital
resources.





We have
recently purchased a heat recovery steam generator (“HRSG”) that can increase
our generating capacity by approximately 10 MW without increasing our fuel
costs. In order to install the HRSG and put our planned secondary heat recovery
system in service, we will need to buy a suitable steam turbine with a rated
capacity of 10 to 15 MW, complete project engineering, build out the new system
and conduct necessary shakedown testing. We are presently conducting a technical
and mechanical evaluation of a used steam turbine that appears suitable for our
purposes and can be acquired for less than $1 million. Once we purchase a
suitable turbine, we anticipate a lead time of nine to twelve months to move the
HRSG and steam turbine to our Montgomery County site and complete all necessary
installation and testing activities. The total estimated future costs associated
with our planned acquisition of a steam turbine and the installation of the
secondary heat recovery system are approximately $2.5 million. We do not have
sufficient financial resources to complete our planned acquisition and
installation of the secondary heat recovery system and there can be no assurance
that suitable financing will be available when needed. If we are not able to
attract adequate financing, we may have to delay or abandon our plans to install
the secondary heat recovery system.





In
combination, we believe our existing and proposed facilities will give us
sufficient corporate mass to make credible sales presentations to potential
purchasers of green electricity and users of heat and air conditioning services
(“HACS”). There can be no assurances that future contract prices for green
electricity or HACS will provide sufficient revenue to offset our anticipated
operating expenses.





We
believe there are a large number of existing combined heat and power facilities
in the Houston-Galveston-Brazoria Eight Hour Ozone Non-Attainment
Area  (“HGB”) that are not presently economic because of natural gas
prices. We are evaluating a number of inactive facilities as potential
acquisition targets and actively seeking additional potential acquisitions. Our
business strategy is to acquire or build electric generating facilities that
will be powered by biodiesel fuel. We believe the heat and power generated by
those facilities can then be used to satisfy industrial demand within the HGB
while significantly reducing the air quality footprint of industrial concerns
that may contract to purchase our electricity. In many cases, we believe the
cost savings from industrial plant pollution control upgrades will more than
offset the premium that we will be required to charge for green electricity
generated from alternative fuels.





We
believe our company has a unique market focus, is well positioned
demographically and is operationally efficient. Many retail electric providers
are actively seeking “green energy” for sale to environmentally conscious
residential and commercial customers who are willing to pay more for electricity
produced from renewable energy resources. Our expertise in the field and our
innovative approach to green energy distinguish our company from its
competitors. Nevertheless, there is a possibility that new competitors, who
could be better capitalized than our company, could seize upon our business
model and produce electricity more efficiently, which might allow them to
capture a significant share of our target market.





Until we
are able to negotiate contracts that provide for a significant green energy
premium, we intend to rely on equity financing to cover our current and
anticipated operating losses. We need additional capital and intend to take
advantage of financing opportunities as they arise. There is no assurance that
our current financial resources and the proceeds of any future financing
activities will be sufficient to pay our operating costs until we can negotiate
a significant GEP, or that any GEP we negotiate will be sufficient to offset all
of our operating costs.












-3-











Contractual
obligations





We have
contractual obligations that may affect our financial condition. The following
table summarizes our significant contractual obligations as of the date of this
report:





Total
            
            Less
      than
              1 year
            
            1
      to 3
              years
            
            3
      to 5
              years
            
            More than
              5 yearsCorporate
      office lease
            
            $
            1,117,385
            
            $
            115,343
            
            $
            239,697
            
            $
            246,906
            
            $
            515,439Generating
      facility leases
            
            
            273,608
            
            
            74,288
            
            
            152,501
            
            
            46,819Employment
      contracts
            
            
            –
            
            
            –
            
            
            –
            
            
            –
            
            
            –Total
            
            $
            1,390,993
            
            $
            189,631
            
            $
            392,198
            
            $
            293,725
            
            $
            515,439





We are
presently negotiating a sublease of the office space that will, if the sublease
is successfully consummated, eliminate our future rental
obligations.





Off-balance
Sheet Arrangements





We have
no off-balance sheet arrangements.








ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.





We are a
smaller reporting issuer as defined in Item 10 of Regulation S-K and are not
required to report the quantitative and qualitative measures of market risk
specified in Item 305 of Regulation S-K.








ITEM
      4
            CONTROLS
      AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





We
maintain disclosure controls and procedures that are designed to ensure that the
information we are required to disclose in our reports filed or submitted under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission’s rules and forms. Our disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
is accumulated and communicated to management, including our chief executive
officer and our chief financial officer, to allow timely decisions regarding
required disclosure.





In
designing and evaluating our disclosure controls and procedures, management
recognized that disclosure controls and procedures, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the disclosure controls and procedures are met. Additionally, in
designing disclosure controls and procedures, our management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible disclosure controls and procedures. While the design of our disclosure
controls and procedures is adequate for our current needs and anticipated future
conditions, there can be no assurance that our current design will succeed in
achieving its stated goals under all possible future conditions. Accordingly we
may be required to modify our disclosure controls and procedures in the
future.





Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures as of March 31, 2008. Based on this evaluation, our Chief Executive
Officer and our Chief Financial Officer concluded the design of our system of
disclosure controls and procedures was not effective as of those dates to ensure
that material information relating to our Company would be made known to them
and that our system of disclosure controls and procedures was operating to
provide a reasonable level of assurance that information required to be
disclosed in our reports would be recorded, processed, summarized and reported
in a timely manner.  These conclusions were based on the
identification of the following material weaknesses:










·
            We
      did not maintain an effective control environment including sufficient
      personnel with the requisite knowledge of Generally Accepted Accounting
      Principles (GAAP) and the rules and regulations established by the SEC and
      appropriate policies and procedures relative to the Company’s accounting
      finance and information technology
functions;












-4-








·
            Inadequate
      controls over the process for the identification and implementation of the
      proper accounting for complex and non-routine transactions, particularly
      as they relate to hedge investments, financing and related party
      transactions;·
            We
      did not properly segregate duties and restrict access to accounting
      systems and data, spreadsheets used for critical calculations were not
      properly controlled, agreements and contracts were not always promptly
      provided to the accounting function, and assets were not always properly
      safeguarded; and·
            We
      do not have a comprehensive set of policies and procedures, related to
      corporate governance, accounting , human resources, and other significant
      matters.





·
              We
      added or are initiating the following additional controls to the Company’s
      internal control over financial reporting, which we expect will improve
      such internal control subsequent to the date of the assessment and earlier
      assessments that also concluded internal controls were not effective.
      These changes are:




·
            We
      have retained a qualified independent consultant to assist our Chief
      Financial Officer and accounting staff in matters relating to the
      identification and implementation of proper accounting procedures and
      provide guidance on financial reporting issues that apply to the
      Company;·
            We
      performed additional analysis and other procedures in order to identify
      weaknesses in order to develop an adequate system of disclosure and
      financial controls,·
            We
      are continuing to restructure certain departmental responsibilities as
      they relate to the financial reporting function,·
            We
      have commenced the search for a qualified full time Chief Financial
      Officer.





As a
result of these changes, management believes that all material weaknesses have
been remediated.





Management’s
Report on Internal Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Exchange Act Rule 13a-15(f). Our
system of internal control over financial reporting is designed to provide
reasonable assurance to our management and board of directors regarding the
preparation and fair presentation of published financial statements and the
reliability of financial reporting.  Because of their inherent
limitations, internal controls over financial reporting may not prevent or
detect misstatements. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.





Our
management assessed the effectiveness of our internal control over financial
reporting as of March 31, 2008. In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in Internal Control - Integrated Framework. Based on that
assessment, we believe that as of March 31, 2008, our internal control over
financial reporting is effective.





Beginning
with our Annual Report on Form 10-K for the year ending December 31,
2008, management’s report on internal control over financial reporting must
contain a statement that our independent registered public accountants have
issued an attestation report on management’s assessment of such internal
controls and conclusion on the operating effectiveness of those controls, unless
the SEC extends the compliance date for such auditor attestation.





Changes
in Internal Control Over Financial Reporting





There was
no change in our internal control over financial reporting that occurred during
our first quarter ended March 31,
2008 that materially affected, or is likely to materially affect, our internal
control over financial reporting.












-5-









Limitations
on the Effectiveness of Internal Controls





Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. An internal 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 the Company have been detected. These inherent limitations include
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 internal 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, control may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may
deteriorate.





PART
II – OTHER INFORMATION





ITEM
      1.
            LEGAL
      PROCEEDINGSNONE.





ITEM
      1A.
            RISK
      FACTORS





We are a
smaller reporting issuer as defined in Regulation S-K and are not required to
report material changes from the risk factors previously disclosed in our report
on Form 10-K for the year ended December 31, 2007.





ITEM
      2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





During
the three months ended March 31, 2008, the Company:





·
            Issued
      72,537 shares of its common stock to three consultants as compensation for
      services;





·
            Issued
      316,665 shares of its common stock to two limited partners in TBF-2
      in exchange for 250 partnership units:
and





·
            Sold
      102,000 shares of its common stock to thirteen investors for $148,000 in
      cash.





issuance
of shares in compensatory transactions was effected in reliance on the exemption
from registration set forth in Rule 701. Each recipient signed a written
agreement that described the terms of the grant and was provided information
about the risks associated with our securities, audited financial
statements for the year ended December 31, 2006 and unaudited financial
statements for the nine months ended September 30, 2007. Each recipient was also
afforded the opportunity to ask questions and receive answers concerning the
terms and conditions of the grant; and to obtain such additional information and
documentation as they deemed necessary to verify the accuracy of information
furnished, or material to their investment decisions. All shares were
distributed to the recipients as outright grants and no recipient paid any cash
consideration. The distribution of shares in compensatory transactions was
affected without any advertising or general solicitation and all of the
purchasers are employees of or consultants to our company. None of the shares
were issued in connection with the offer or sale of securities in a
capital-raising transaction, or for the purpose of directly or indirectly
promoting or maintaining a market for our shares, which are not presently traded
on any market. All certificates representing shares issued in compensatory
transactions were imprinted with a restrictive legend to the effect that the
shares were not transferable by the holders thereof in the absence of an
effective registration statement under the Securities Act, or an available
exemption therefrom.





The
exchange of partnership units for shares of common stock was effected in
reliance on the exemption from registration set forth in Section 4(2) of the
Securities Act and Rule 506 of Regulation D promulgated thereunder. The
securities were offered and sold solely to accredited investors who had a
pre-existing business relationship with our company by virtue of their ownership
of interests in a limited partnership managed by our company. In connection with
the exchange offer, all limited partners were provided disclosure documentation
that was appropriate for an offering restricted to accredited investors;
afforded the opportunity to ask questions and receive answers concerning the
terms and conditions of the offering; afforded the opportunity to obtain such
additional information and documentation as they deemed necessary to verify the
accuracy of information furnished; and afforded the opportunity to obtain any
additional information they considered material to their investment decisions.
The exchange offer was affected without any advertising or general solicitation.
In connection with each exchange of partnership units, the purchaser provided
detailed responses to a written questionnaire that gave our company reasonable
cause to believe that the investor was in fact an “accredited investor,” as
defined in Rule 501 of Regulation D. All certificates issued in exchange for
partnership units were imprinted with a restrictive legend to the effect that
the shares were not transferable by the holders thereof in the absence of an
effective registration statement under the Securities Act, or an available
exemption therefrom.












-6-









The sale
of common stock for cash was effected in reliance on the exemption from
registration set forth in Section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder. The offer was directed solely to accredited
investors who each had a pre-existing business relationship with our company or
the broker-dealers we retained to act as selling agents. All potential investors
were provided disclosure documentation that was appropriate for an offering
restricted to accredited investors; afforded the opportunity to ask questions
and receive answers concerning the terms and conditions of the offering;
afforded the opportunity to obtain such additional information and documentation
as they deemed necessary to verify the accuracy of information furnished; and
afforded the opportunity to obtain any additional information they considered
material to their investment decisions. The offer and sale of our shares was
affected without any advertising or general solicitation. All certificates
representing shares sold for cash were imprinted with a restrictive legend to
the effect that the shares were not transferable by the holders thereof in the
absence of an effective registration statement under the Securities Act, or an
available exemption therefrom.








ITEM
      3.
            DEFAULTS
      UPON SENIOR SECURITIESNONEITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERSNONE.ITEM
      5.
            OTHER
      INFORMATIONNONE.ITEM
      6.
            EXHIBITS





(a)
            EXHIBITS31.1
            Certification
      of Chief Executive Officer Pursuant to Rule 13a-14(a)31.2
            Certification
      of Chief Financial Officer Pursuant to Rule 13a-14(a)32.1
            Statement
      of Chief Executive Officer Pursuant to Section 1350 of Title 18 of the
      United States Code32.2
            Statement
      of Chief Financial Officer Pursuant to Section1350 of Title 18 of the
      United States Code(b)
            REPORTS
      ON FORM 8-KNONE














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SIGNATURES





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





BIOFUELS
      POWER CORPORATION





/s/ Fred
      O’ConnorFred
      O’Connor, Chief Executive OfficerDated:
      May 21, 2008/s/ Robert
      WilsonRobert
      Wilson, Vice President - FinanceDated:
      May 21, 2008







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