Universal Bioenergy, Inc. - FORM 10-Q

Attached files

file	filename
EX-31.2 - Universal Bioenergy, Inc.	v195585_ex31-2.htm
EX-32.1 - Universal Bioenergy, Inc.	v195585_ex32-1.htm
EX-31.1 - Universal Bioenergy, Inc.	v195585_ex31-1.htm
EX-32.2 - Universal Bioenergy, Inc.	v195585_ex32-2.htm

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 ACT OF 1934

For the quarterly period ended June 30, 2010

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES ACT OF 1934

For the transition period from ___________to ____________

Commission File Number 333-123465

UNIVERSAL BIOENERGY, INC.

(Exact name of Registrant as specified in its charter)

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

19800 Mac Arthur Blvd., Suite 300

Irvine, CA 92612

(Address of principal executive offices)

(888) 263-2009

(Issuer’s telephone number)

Indicate by check mark whether the Registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days: Yes x No ¨

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

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

Large accelerated filer ¨ Accelerated filer ¨ Non–Accelerated filer ¨ Smaller reporting company x

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

Transitional Small Business Disclosure Format (check one): Yes ¨ No x

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

Class		Outstanding at August 14, 2010
Common stock, $0.001 par value		45,455,000

UNIVERSAL BIOENERGY, INC.

INDEX

INDEX TO FORM 10Q FILING

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

		PAGE
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statement of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management Discussion & Analysis of Financial Condition and Results of Operations	23
Item 3	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
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	37
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Removed and Reserved	38
Item 5	Other information	38
Item 6.	Exhibits	38

CERTIFICATIONS

Exhibit 31 – Management certification

Exhibit 32 – Sarbanes-Oxley Act

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNIVERSAL BIOENERGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

	(Unaudited)			(Audited)
	June 30, 2010			December 31, 2009

ASSETS: (Substantially pledged)

CURRENT ASSETS

Cash	$	5,371		$	2,819
Accounts receivables - natural gas sales contracts		2,316,755			-
Prepaid expenses		7,331			-
Total current assets		2,329,457			2,819

PROPERTY AND EQUIPMENT		303,094			290,000

OTHER ASSETS
Intangible assets		250,000			-
Deposit		6,320			3,100
Total other assets		256,320			3,100

TOTAL ASSETS	$	2,888,871		$	295,919

LIABILITIES AND STOCKHOLDERS' DEFICIT:

CURRENT LIABILITIES:
Accounts payable - natural gas purchase contracts	$	2,314,001		$	-
Accounts payable and accrued expenses		1,059,061			725,790
Advances from affiliates		214,142			54,050
Notes payable		70,000			70,000

Total current liabilities		3,657,204			849,840

TOTAL LIABILITIES		3,657,204			849,840

STOCKHOLDERS' DEFICIT:
Preferred stock Series A, $.001 par value, 1,000,000 shares authorized, 0 and 100,000 issued and outstanding shares June 30, 2010 and December 31, 2009, respectively		100			100
Preferred stock Series B, $.001 par value, 1,000,000 shares authorized, 232,080 issued and outstanding shares June 30, 2010 and December 31, 2009, respectively		232			232
Common stock, $.001 par value, 200,000,000 shares authorized; 45,455,000 and 39,405,000 issued and outstanding as of June 30, 2010 and December 31, 2009, respectively		45,455			39,405
Additional paid-in capital		14,603,322			14,183,804
Noncontrolling interest in consolidated subsidiary		(26,775	)		-
Accumulated deficit		(15,390,667	)		(14,777,460	)
Total stockholders' deficit		(768,333	)		(553,919	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	2,888,871		$	295,919

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

UNIVERSAL BIOENERGY, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - unaudited

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009

REVENUES	$	13,966,895		$	-		$	13,966,895		$	-

COST OF SALES		13,951,362			-			13,951,362			-

GROSS PROFIT		15,533			-			15,533			-

OPERATING EXPENSES:
General and administrative		470,568		$	474,486		$	639,195		$	627,966
Total operating expenses		470,568			474,486			639,195			627,966

LOSS FROM OPERATIONS		(455,035	)		(474,486	)		(623,662	)		(627,966	)

OTHER (INCOME) AND EXPENSES:
Interest expense		5,178			-			10,356			-
Total other expense		5,178			-			10,356			-

NET PROFIT (LOSS)	$	(460,213	)	$	(474,486	)	$	(634,018	)	$	(627,966	)

Net loss attributable to noncontrolling interest	$	20,811		$	-		$	20,811		$	-

NET INCOME (LOSS) ATTRIBUTABLE TO UNIVERSAL	$	(439,402	)	$	(474,486	)	$	(613,207	)	$	(627,966	)

NET PROFIT (LOSS) PER SHARE:
Basic and diluted loss per share	$	(0.01	)	$	(0.02	)	$	(0.01	)	$	(0.02	)

Weighted average of shares outstanding		45,455,000			28,864,451			42,948,923			25,210,028

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

UNIVERSAL BIOENERGY, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - unaudited

	For the Six Months Ended
	June 30
	2010			2009

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(613,207	)	$	(627,966	)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Common stock issued for services		18,000			307,999
Changes in assets and liabilities:
Accounts recievable - gas sales contracts		(1,160,698	)		-
Prepaid expenses		(7,331	)		-
Accounts payables - gas purchase contracts		1,174,150			-
Accounts payable and accrued expenses		420,955			294,992
Deposits		(3,220	)		-
Net cash used by operating activities		(171,351	)		(24,975	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(409	)		-
Net cash used in investing activities		(409	)		-

CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliates		160,886			24,975
Repayment of advances		(7,794	)		-
Non-controlling interest in consolidated subsidiary		20,811			-
Net cash provided by financing activities		173,903			24,975

INCREASE IN CASH		2,552			-
CASH, BEGINNING OF YEAR		2,819			-
CASH, END OF YEAR	$	5,371		$	-

SUPPLEMENTAL CASH FLOW INFORMATION:

Interest paid	$	-		$	-
Taxes paid	$	-		$	-
Common stock issued in acquisition	$	250,000		$	-
Common stock issued in conversion of debt	$	157,568		$	-

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

UNIVERSAL BIOENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS

Overview of Our Company

Universal Bioenergy Inc., is an alternative energy company headquartered in Irvine, California. Our new strategic direction is to develop and market a diverse product line of alternative and natural energy products including, natural gas, solar, biofuels, wind, wave, tidal, and green technology products. We plan to continue our growth by means of mergers and acquisitions of other companies in the alternative energy and related industries, and to acquire patents, and license technologies to fully exploit in the marketplace. We have adapted our business strategy to become a more vertically integrated company, to give us greater management control over our supply chain, from the producer, through marketing, distribution, and directly to the customer. We believe this will bring greater revenues for our company and more value to our shareholders.

Company History

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

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

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

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

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

NOTE 2 - GOING CONCERN ISSUES

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. The Company has an accumulated losses through June 30, 2010 of $15,390,667. Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors and the support of certain stockholders.

These factors raise some doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. To continue as a going concern, Management is planning to raise additional funds through debt or equity capital to fund the growth of the Company. Management has re-engineered and re-positioned the Company, through its recent mergers and acquisitions.. Management is hopeful that the Company will be successful in raising additional capital to fund the Company’s plans for growth and expansion.

The Company's ability to meet its obligations and continue as a going concern is dependent upon its ability to obtain additional financing, achievement of profitable operations and/or generating continuing additional revenue through the sale of natural gas and other alternative energy products. Although the Company plans to pursue additional debt and/or equity financing, there can be no assurance that the Company will be able to secure financing when needed or to obtain such financing on terms satisfactory to the Company, if at all.

NOTE 3 - BASIS OF PRESENTATION

Interim Financial Statements

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month and six months ended June 30, 2010 and 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. While management of the Company believes that the disclosures presented herein and adequate and not misleading, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2009 as filed with the Securities and Exchange Commission.

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Principle of Consolidation

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

On April 12, 2010 the Company acquired a direct 49% financial interest in NDR. Additionally, an entity owned by officers of the Company acquired an additional 2% financial interest in NDR for a total direct and indirect financial interest of 51% of NDR The operating agreement of NDR, an LLC provides for voting in proportion to ownership. The Company has 51% voting control of NDR and has accordingly consolidated its financial position, results of operations, and cash flows into these financial statements.

Use of Estimates and Assumptions

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

Revenue and Cost Recognition

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

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At June 30, 2010 and 2009 the Company had no cash equivalents.

Property and Equipment

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

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

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

Goodwill and Other Intangible Assets

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

Impairment of Long-Lived Assets

In accordance with ASC Topic 365, long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were events or changes in circumstances that necessitated an impairment of long lived assets. During 2008, the Company impaired its long lived assets based on the value of the Land, Equipment, and building facility by $1,655,972. Due to the reduction in valuations in Mississippi of land and building and diminished economic viability of biodiesel production the total valuations of that acquisition has reduced significantly the overall value of the assets to $290,000.

Income Taxes

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

The Company adopted the provisions of ASC Topic 740; "Accounting For Uncertainty In Income Taxes-An Interpretation Of ASC Topic 740 ("ASC Topic 740"). ASC Topic 740 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits, which may require periodic adjustments. At June 30, 2010, the Company did not record any liabilities for uncertain tax positions.

Share-Based Compensation

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

Concentration of Credit Risk

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

Earnings Per Share

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

Fair Value of Financial Instruments

The Company's financial instruments consist primarily of cash, accounts payable and accrued expenses, and debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.

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

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

¨	Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable or the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active;

¨	Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value.

Reclassification

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

Recent Accounting Pronouncements

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

In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

On February 24, 2010, the FASB issued guidance in the “Subsequent Events” topic of the FASC to provide updates including: (1) requiring the company to evaluate subsequent events through the date in which the financial statements are issued; (2) amending the glossary of the “Subsequent Events” topic to include the definition of “SEC filer” and exclude the definition of “Public entity”; and (3) eliminating the requirement to disclose the date through which subsequent events have been evaluated. This guidance was prospectively effective upon issuance. The adoption of this guidance did not impact the Company’s results of operations of financial condition.

In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for us with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which will become effective for us with the reporting period beginning July 1, 2011. Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on our financial statements.

NOTE 5 - NET LOSS PER SHARE

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

The following table represents the computation of basic and diluted income and losses per share:

	For the Six Months Ended June 30, 2010			For the Six Months Ended June 30, 2009

Income and Losses available for common shareholders	$	(634,018	)	$	(627,966	)

Weighted average common shares outstanding		(42,948,923	)		(25,210,028	)
Basic and fully diluted loss per share	$	.01		$	(.02	)

Net income and loss per share is based upon the weighted average shares of common stock outstanding

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

NOTE 6 - EQUITY

On November 3, 2007, the Company amended its articles of incorporation and authorized 200,000,000 shares of common stock, at $.001 par value and 45,455,000 are issued and outstanding as of June 30, 2010.

On November 3, 2007, the Company authorized an aggregate of 1,000,000 preferred series A and B shares, at $.001 par value and there are 100,000 series A issued and 232,350 series B issued and outstanding, respectively, as of June 30, 2010.

Under terms of the above agreements, on April 14, 2009 the Company issued 2,200,000 to each officer and director of the Company with total shares issued of 8,800,000. The stock was trading at $.035 and the Company expensed $77,000 for each issuance of shares of stock with a total expense of $308,000.

On May 25, 2010, the Company granted 2,000,000 to a consultant for her services rendered in the acquisition of NDR Energy LLC, as of June 30, 2010 those shares have not been issued.

Common Stock Issued

On January 1, 2010, the Company issued 750,000 to its prior CFO for extinguishment of his employment contract and the company reduced the accrued expenses by $157,568.

On March 26, 2010, the Company issued 300,000 to a consultant and expensed $18,000.

At June 30, 2010, there were no outstanding stock options or warrants.

On June 18, 2010 the Board of Directors approved increasing the authorized common shares to 1,000,000,000 and is in the process of filing the necessary paperwork with the State of Nevada.

Issuance of preferred shares

On September 18, 2008 the Company converted the following debt to preferred shares:

Converting	Preferred B		Debt & Accrued		Common Stock
Parties	Shares issued		Interest Converted		Surrendered
Mortenson Financial, Inc.		34,000		745,991		-
LaCroix Financial, Inc.		82,500		1,818,821		-
Mortenson Financial, Inc.		15,850		300,000		-
Mortenson Financial, Inc.		100,000		-		(1,000,000	)

In September 18, 2008 the Company converted the Notes payables of Lacroix International Holdings, Ltd. in the amount of $1,818,821 of principle and accrued interest for 82,500 preferred Series B shares.

On September 18, 2008 the Company converted the notes payables of Mortenson Financial Ltd. in the amount of $745,991 of principle and accrued interest for 34,000 of preferred Series B shares and converted another note in the amount of $300,000 to 15,850 of preferred Series B Shares.

On September 18, 2008 Mortenson Financial Ltd. converted 1,000,000 common shares to 100,000 of preferred Series B Shares.

The Preferred Series B shares are non-voting.

100,000 shares of Preferred Series A shares were also issued to then management for compensation. The Preferred Series A shares are voting at the ratio of 300 common shares per one share of preferred. On April 26, 2010, Richard D. Craven surrendered the 100,000 shares of Preferred Series A shares to the Company, after his resignation from his position with the Company and the preferred stock is now recorded as treasury stock until the company cancels the shares.

The Preferred Series B shares are convertible to common shares at a rate to be mutually agreed upon by the Company, Lacroix, and Mortensen. However, documents provided by former management to the SEC establish that management of Lacroix and Mortensen had tentatively agreed to convert the preferred shares received from the note conversions into common shares at the rate of ten shares of common to one share of preferred. Additionally, common shares were converted to preferred shares by Mortensen at a 10:1 ratio. Conversion at the 10:1 rate would result in the issuance of 2,320,800 shares of common stock or 5.4% dilution as of June 30, 2010. Conversion at an implied market rate ($.05 per share) would result in the issuance of approximately 4,641,600 shares of common stock or 10.3% dilution as of June 30 2010.

NOTE 7 - PROPERTY AND EQUIPMENT

The Company has fixed assets as of June 30, 2010 and December 31, 2009 as follows:

	June 30, 2010		December 31, 2009
Equipment	$	178,094	$	165,000
Land		50,000		50,000
Building		75,000		75,000
Accumulated depreciation

Total	$	303,094	$	290,000

There was no depreciation expense for the three months ended June 30, 2010 and 2009 respectively. The Company has not recorded any depreciation expense related to its processing facility as it has not been placed in service as of December 31, 2009. The Company impaired the assets to its value and adjusted accumulated depreciation to zero during that impairment. See Note 4 - Impairment of Long-Lived Assets.

NOTE 8 – CONVERTIBLE DEBENTURE

	June 30, 2010		December 31, 2009
On July 9, 2009 the Company sold 25,000 units in a private placement for $25,000 at $1.00 per unit. The Units are similar to a debenture and act as a debt to the company. The term is for three years, and the Units receive a return of a 30% annual stock dividend and no payments are paid for the reduction of this debt. After the six month holding period the purchaser has the option to convert part or all of the Units into common stock at an exercise price of 5 cents per share, based on the principal invested. The note is secured by the general assets of the company including the property at 128 Biodiesel Drive, Nettleton, MS.		25,000		25,000
On November 23, 2009 the Company sold 22,500 units in a private placement for $22,500 at $1.00 per unit. The Units are similar to a debenture and act as a debt to the company. The term is for three years, and the Units receive a return of a 30% annual stock dividend and no payments are paid for the reduction of this debt. After the six month holding period the purchaser has the option to convert part or all of the Units into common stock at an exercise price of 5 cents per share, based on the principal invested. The note is secured by the general assets of the company including the property at 128 Biodiesel Drive, Nettleton, MS.		22,500		22,500

On November 23, 2009 the Company sold 22,500 units in a private placement for $22,500 at $1.00 per unit. The Units are similar to a debenture and act as a debt to the company. The term is for three years, and the Units receive a return of a 30% annual stock dividend and no payments are paid for the reduction of this debt. After the six month holding period the purchaser has the option to convert part or all of the Units into common stock at an exercise price of 5 cents per share, based on the principal invested. The note is secured by the general assets of the company including the property at 128 Biodiesel Drive, Nettleton, MS.		22,500		22,500

Total long-term note payable		70,000		70,000
Less current portion		70,000		70,000
Long-term portion of note payable	$	-	$	-

For the above convertible notes, pursuant to ASC Topic 470, the Company first reviewed and determined that no beneficial conversion feature existed. The Company then evaluated the convertible notes to determine if there was an embedded conversion option requiring bifurcation under ASC Topic 815 and ASC Topic 815.40 and determined that bifurcation was not required.

NOTE 9 - INCOME TAXES

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

For income tax reporting purposes, the Company’s aggregate unused net operating losses approximate $14,950,332 which expire in various years through 2028, subject to limitations of Section 382 of the Internal Revenue Code, as amended. The Company has provided a valuation reserve against the full amount of the net operating loss benefit, because in the opinion of management based upon the earning history of the Company, it is more likely than not that the benefits will not be realized.

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

NOTE 10

RELATED PARTY TRANSACTIONS

Effective January 2, 2009 management entered into an employment agreement with James Michael Ator, then CFO, Treasurer, and director, for an annual base pay of $156,000 plus a signing bonus of $100,000 to vest on January 2, 2010 to be paid in restricted stock. The agreement terms also included a vested equity ownership of 10% of the outstanding common shares, including anti-dilution provisions. See Note 10 regarding the subsequent settlement of this obligation.

Effective February 27, 2009 management entered into an employment agreement with Dr. Richard D. Craven, then CEO, President, and director, for an annual base pay of $156,000 plus a signing bonus of $100,000 to vest on January 2, 2010 to be paid in restricted stock. The agreement terms also included a vested equity ownership of 10% of the outstanding common shares, including anti-dilution provisions. See Note 10 regarding the subsequent resignation of Dr. Craven. Current management is currently negotiating settlement of this obligation.

Effective March 6, 2009 management entered into an employment agreement with Vince M. Guest, current CEO, CFO, and director, for an annual base pay of $156,000 plus a signing bonus of $25,000 to be paid in cash or free trading stock. The agreement terms also included a vested equity ownership of 10% of the outstanding common shares, including anti-dilution provisions. The terms also include a maximum incentive bonus of 17.5% of funds from the investor relations net operating department budget , and a 5% finder’s fee on all debt financing obtained by Mr. Guest on behalf of the Company.

Effective March 6, 2009 management entered into an employment agreement with Solomon RC Ali, current VP of Investor Relations, and director, for an annual base pay of $156,000 plus a signing bonus of $25,000 to be paid in cash or free trading stock. The agreement terms also included a vested equity ownership of 10% of the outstanding common shares, including anti-dilution provisions. The terms also include a maximum incentive bonus of 17.5% of funds from the investor relations net operating department budget , and a 5% finder’s fee on all debt financing obtained by Mr. Ali on behalf of the Company.

On October 13, 2009 the Company converted the outstanding notes of $100,000 owed to four unrelated entities to 5,000,000 common shares of stock. The stock was trading at $0.1185 and $100,000 was applied to the reduction of debt and the remaining balance of $480,000 was expensed to consulting expense. The Company converted the outstanding notes of $70,000 assigned to three unrelated entities, and $30,000 to another unrelated entity, which is managed by a Director of Universal, to 5,000,000 common shares of stock."

On April 12, 2010, the option to acquire the final 2% member interest in NDR was assigned to the officers of Universal, Richard D. Craven, Vince M. Guest and Solomon Ali, along with a grant of 4,000,000 shares of stock as a bonus for managing and closing the NDR Energy acquisition. The 2% stake was acquired for 4,000,000 shares of stock, by exercising the option. The 4,000,000 in stock was paid as a premium on the purchase price for the additional 2% of NDR’s member interests. All of the stock was issued to NDR. . The 2% member interest in NDR Energy is owned by Varlos Energy Holdings LLC, of which Vince M. Guest, Solomon Ali, and Richard D. Craven are members of the company. This option was extended to Richard Craven prior to knowledge of the SEC Enforcement matter discussed below and current management asserts that they were not fully informed by Richard Craven of his involvement in the SEC Enforcement matter.

On January 12, 2010 the Company issued 750,000 common shares to James Michael Ator for settlement of his outstanding employment agreement. See Note 6 for additional discussion.

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

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

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

On April 14, 2010, Dr. Richard D. Craven submitted his resignation as a member of our Board of Directors and as Chief Executive Officer and Principal Financial Officer to pursue other business matters. Dr. Richard D. Craven did not have any disagreement with the Company, on any matter related to the Company’s accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

Vince M. Guest has taken the position as Chief Executive Officer and Principal Financial Officer.

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

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

The Board of Directors has approved that the Company convert seasoned debt through December 31, 2009 to the Company’s common stock at a conversion price of $.005 to $.10 cents. The total outstanding debt of the Company at December 31, 2009 that has been approved for conversion is $774,699. Conversion at a rate of $.05 would result in the issuance of a range of 15,493,980 or 34% dilution to 7,746,990 or 18% dilutions based on the number of shares outstanding as of June 30, 2010. If this conversion is implemented it will result in a material issuance of common stock and dilution of all shareholders based upon the Board of Directors approved conversion price.

NOTE 11 – ACQUISTION

Entry into a Material Definitive Agreement.

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

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

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

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

Additional Summary of the Purchase Agreement

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

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

The option to acquire the final 2% member interest in NDR was assigned to the officers of Universal, Richard D. Craven, Vince M. Guest and Solomon Ali, along with a grant of 4,000,000 shares of stock as a bonus for managing and closing the NDR Energy acquisition. The 2% stake was acquired for 4,000,000 shares of stock, by exercising the option. The 4,000,000 in stock was paid as a premium on the purchase price for the additional 2% of NDR’s member interests. All of the stock was issued to NDR. . The 2% member interest in NDR Energy is owned by Varlos Energy Holdings LLC, of which Vince M. Guest, Solomon Ali, and Richard D. Craven are members of the company. This option was extended to Richard Craven prior to knowledge of the SEC Enforcement matter discussed below and current management asserts that they were not fully informed by Richard Craven of his involvement in the SEC Enforcement matter.

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

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

The following (unaudited) proforma consolidated results of operations have been prepared as if the acquisition had occurred at January 1, 2009 and 2010.

	Three Months Ended						Six Months Ended
	2010			2009			2010			2009

REVENUES		13,966,895			3,124,065			25,182,463			11,886,656

Net Loss		(434,224	)		(478,025	)		(614,197	)		(633,079	)

Net income per share basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.03	)

Weighted average of shares outstanding		45,455,000			28,864,451			42,948,923			25,210,028

NOTE 12 - CONTINGENCIES

Management has recently become aware that cash and other assets invested in the Company prior to December 31, 2008 may have been received as a result of illegal activities by persons affiliated with certain current and former shareholders, Lacroix International Holdings Ltd. (Lacroix) and Mortensen Financial Ltd. (Mortensen). See SEC vs. Abellan, et al, (Case 3:08-CV-05502). Management has also recently become aware that the Securities and Exchange Commission (SEC) has subsequently obtained an order of disgorgement pertaining to the assets held by Lacroix and Mortensen which currently include shares of preferred and common stock of the Company.

The risk of disgorgement

The approximate $1 million in cash invested in the Company by Mortensen has been depleted. Additionally, the approximate $1.6 million value of the dormant biodiesel plant invested by Lacroix, with its unknown but implicit environmental liability, has been impaired to a net value of $290,000. At the advice of counsel, management believes, lacking definitive proof, it is not likely that the SEC would move to disgorge ownership of the biodiesel plant from the Company.

According to the court filings in SEC vs. Abellan et al, the SEC was not able to obtain the Andorran banking records of Lacroix and Mortensen, and accordingly cannot currently definitively link the funds invested in the Company to the illegal activities of Abellan. At the advice of counsel, management believes, while it is possible, it is unlikely, that even if the SEC is able to obtain those records, and is able to definitively link those funds to the assets invested in the Company that the SEC would move to disgorge ownership of the biodiesel plant from the Company. In an attempt to obtain clarification of this, and to provide full and fair disclosure, management requested clarification from SEC staff, who declined to provide clarification or comment.

The risk of rescission

Management has also recently become aware that the stated September 17, 2008 restructuring of debt to preferred shares was transacted subsequent to a September 11, 2008 injunction obtained by the SEC freezing the assets of Lacroix and Mortensen. The restructuring accordingly may constitute an illegal act. Current and former management both assert that they did not receive notice of the freeze and were not aware of the freeze at the time of the conversion.

Current management has also recently become aware that former management was contacted by SEC enforcement pertaining to the above related to an informal investigation of another company. It should be noted that the Company and its then management were not the focus of the informal investigation. Documents provided by former management to the SEC establish that the discussions between former management, Lacroix and Mortensen began at least two months in advance of the freeze order.

As creditor note holders, Lacroix and Mortensen had preference over equity holders in the event of liquidation. Additionally, even though the Lacroix note was “secured” by the biodiesel plant, no real or personal property liens were ever filed to perfect the liens. At the time of the conversion the Company lacked liquidity to pay the principal and interest due on these notes. The conversion to preferred shares abated the further accrual of interest on the notes.

As preferred shareholders, Lacroix and Mortensen still have preference over common shareholders in the event of liquidation, after satisfaction of the creditors. While the conversion of these shares to common would eliminate this preference, it could also result in improving the liquidity of these shares, once the restrictive legends are removed, and enable distribution of the shares as discussed below.

At the advice of counsel, management believes it is possible, but unlikely that the SEC would move to rescind the note to preferred conversion transaction which would improve their standing in the event of liquidation, but would dilute the potential of liquidity through the market. In an attempt to obtain clarification of this, and to provide full and fair disclosure, management requested clarification from SEC staff, who declined to provide clarification or comment.

The risk of dilution

As stated elsewhere, the preferred shares are convertible to common shares at a rate to be mutually agreed upon by the Company, Lacroix, and Mortensen. However, documents provided by former management to the SEC establish that management of Lacroix and Mortensen had tentatively agreed to convert the preferred shares received from the note conversions into common shares at the rate of ten shares of common to one share of preferred with the final conversion rate to mutually agreed upon by both parties. Additionally, common shares were converted to preferred shares by Mortensen at a 10:1 ratio. Conversion at the 10:1 rate would result in the issuance of 2,320,800 shares of common stock or 5.4% dilution as of June 30, 2010. Conversion at an implied market rate ($.05 per share) would result in the issuance of approximately 4,641,600 shares of common stock or 10.3% dilution as of June 30, 2010.

Current management has advised the stock transfer agent to freeze the preferred and common shares of Lacroix and Mortensen held in name or in street name, preventing their further conversion to cash. The Board of Directors of the Company has also frozen the option to convert the preferred shares to common. Counsel has advised management that such conversion of preferred shares to common could constitute a further violation of the asset freeze. In an attempt to obtain clarification of this, and to provide full and fair disclosure, management requested clarification from SEC staff, who declined to provide clarification or comment.

In consideration of the above, management asserts that they will not convert the preferred shares to common without the explicit consent of the SEC. Additionally, management is contemplating, under the authority of the SEC disgorgement order, seeking permission of the SEC to convert the preferred shares to common in the least dilutive fashion discussed above (10:1) and distribute those shares and other common shares owned by Lacroix and Mortensen to the shareholders harmed by Abellan.

The docket currently shows the status of the Abellan case as “terminated”, leaving Company counsel to believe that further action by the SEC against the Company is possible but unlikely.

NOTE 13 – SUBSEQUENT EVENTS

On May 25, 2010, the Company granted 2,000,000 to a consultant for her services rendered in the acquisition of NDR Energy LLC, as of June 30, 2010 those shares have not been issued.

On June 18, 2010 the Company approved amend the Articles of Incorporation to increase the authorized from 200,000,000 to 1,000,000,000 shares with a par value of $.001. The Company has not yet amended its articles of incorporation.

On July 28, 2010 the Company signed a Letter of Intent to acquire Norcor Technologies Corporation, an energy, technology and facilities services company, headquartered in Charlotte, North Carolina. Norcor Technologies, provides a broad range of products and services which are primarily for use in the Health Care industry, Military Facilities, and the U.S. Department of Transportation. Its primary focus is selling biodiesel, transportation fuels, energy services and facility energy efficiency retrofits. No assurances can be provided that a definitive agreement will be executed.

On July 1, 2010 the company engaged the services of ICaptial Finance, Inc. to provide consulting services. The Company also converted Don deLuna’s salary of $5,673 to 141,825 common shares of the company. The Company further granted Don deLuna 1,000,000 common shares for his services on the NDR Energy Group, LLC acquisition.

On July 22, 2010 the Board of Directors approved the employement agreements of Vince Guest and Solomon R.C. Ali, further the Company cancelled the 100,000 Series A preferred Shares held by Richard C. Craven.

On July 22, 2010 the Company cancelled the 100,000 preferred A shares of the company where as no preferred A shares were issued and outstanding at that date.

* * * * * *

In this Quarterly Report on Form 10-Q, “Company,” “our company,” “us,” and “our” refer to Universal Bioenergy, Inc. and its subsidiaries, unless the context requires otherwise.

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

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

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

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

Overview of Our Company

We are an alternative energy company headquartered in Irvine, California. Our new strategic direction is to develop and market a diverse product line of alternative energy products including, natural gas, solar, biofuels, wind, wave, tidal, and green technology products. We also intend to provide energy and facilities services to government and commercial customers for facilities retrofits, modifications, lighting systems, building control systems and related energy saving technologies.

We plan to continue our growth by means of mergers and acquisitions of other companies in the alternative energy and related industries, and to acquire patents and license technologies to fully exploit in the marketplace. We are adapting our business strategy to become a more vertically integrated company, to give us greater management control over our supply chain, from the producer, through marketing, distribution, and directly to the customer. We believe this will bring greater revenues for our company and more value to our shareholders.

We are currently targeting natural gas producers, to obtain natural gas and other fuels directly from the wellhead. We are also pursuing solar energy companies for polymer based thin film solar cells that will produce greater energy conversion efficiencies, with less cost than silicon based photovoltaic cells.

Recent Developments

NDR Energy Group LLC. As part plans for growth, on April 12, 2010, we acquired a 49% stake in NDR Energy Group LLC, located in Charlotte, North Carolina.

NDR markets energy and fuel commodities such as natural gas, and transportation of petroleum fuels. Natural gas is one of the cleanest burning fuels available, and is a very important segment of the U.S. economy. Based on Management’s review of NDR’s financial records, NDR generated revenues of $25,182,463 in energy and fuel sales for the period of January 1, 2010 through June 30, 2010. These revenues have been reviewed, however they have not yet been audited by the Company’s Auditors. The Company anticipates the formal audit of these financial records, to be completed soon, and the information will be reported and filed with the SEC.

The Company intends to expand the product offerings of NDR Energy Group to include biofuels, solar, alternative fuels, and commercial energy efficiency conversion projects, and retrofits.

NDR Energy currently has firm contracts signed with 22 major utility companies nationwide. Some of the customers it has agreements with include, Southern California Gas Company, Pacific Gas & Electric, Baltimore Gas & Electric, Memphis Light Gas & Water, Duke (Ohio & Kentucky), Southern Company, Michigan Consolidated, Entergy (Texas and Gulf States), and the National Grid, the largest power producer in New York State. Some of the suppliers it has contracts with are Chevron Texaco, Chesapeake Energy Marketing, Conoco Phillips, Total and Anadarko.

Our plans in coordination with NDR Energy Group are to maximize the sales value of our utility contracts. As part of our new business model, we believe, this acquisition should provide us with distribution channels for marketing natural gas, biofuels, alternative fuels, solar, and green energy products to these and potential new customers.

Roblex Aviation, Inc. On January 6, 2010, we executed a Letter of Intent (“LOI”) with Roblex Aviation, Inc. (“Roblex”) of Carolina, Puerto Rico, upon which UBE would acquire all of Roblex. The terms and conditions of the acquisition are still being negotiated, and will be determined in the definitive agreement. No assurances can be provided that a definitive agreement will be executed. To date, the definitive agreement remains in negotiation stages.

Based on our due diligence, Roblex is a 13 year old air cargo company that has grown to be a noted leader in air cargo in the Puerto Rican and Caribbean Islands. It has principal routes to the Dominican Republic and US and British Virgin Islands with significant potential for growth and expansion. Roblex has over 40 employees and flies principally out of two locations, San Juan and Aguadilla, Puerto Rico. Roblex’s major clients include the United States Postal Service, Amerijet, and others as well as on-demand cargo services.

As indicated in our Form 8K filed on 1/25/2010, based on industry standards of valuation utilizing current average P/E ratios, as noted by Standard & Poor’s at a multiple of 15 - 17 times earnings, a valuation for the air cargo company of $17.25 million to $19.55 million dollars is a practical estimate of additional market value to Universal Bioenergy.

ICapital Finance Inc. On June 21, 2010, the Company signed an agreement to retain the services of iCapital Finance Inc., based in Irvine, California iCapital is a financial services company, specializing in the Micro and Small Cap Public Companies and Middle Market Private Companies offering a wide range of financial advisory services, including; Mergers & Acquisitions, equity and debt financing, strategic advice, and financial consulting. Its primary focus is in the Technology, Healthcare, Media & Telecommunications and Financial Services industries. iCapital has cultivated and maintains strong affiliations with top-tier firms including; GMAC, J.P Morgan, Greenwich Capital, and Prudential Securities.

iCapital will be providing their advisory services to Universal for financial and strategic business consulting, asset and technology purchases, and assisting the Company in its growth plans for mergers and acquisition. They will also assist us in our efforts to position the Company to qualify, and apply for listing on other stock exchanges, which list similarly situated alternative energy technology companies.

Norcor Technologies Corporation. On July 28, 2010, we executed a Letter of Intent (“LOI”) with Norcor Technologies Corporation (“Norcor”), of Charlotte, North Carolina, upon which we will acquire a major stake in Norcor. The terms and conditions of the acquisition are being negotiated, and will be determined in the definitive agreement. No assurances can be provided that a definitive agreement will be executed.

According to our Management, Norcor Technologies, provides a broad range of products and services which are primarily for use in the Health Care industry, Military Facilities, and the U.S. Department of Transportation. Norcor’s primary focus is selling transportation fuels, biodiesel, energy services, and facility energy efficiency retrofits. Norcor’s management states that they are in discussions with the U.S. Military for a contract to provide several of their bases with approximately $49,000,000 in biodiesel and transportation fuels, over the next one to three years. Management has been informed, they are also evaluating the building of a new biodiesel fuel blending facility, a solar energy plant in the U.S. and have an interest in natural gas wells in Oklahoma.

We intend to work with Norcor to further its business model and expansion plans in the fuel and energy services industry. Our management believes that Norcor will us allow us to market biofuels, transportation fuels and energy services, to Norcor’s customer base and marketing channels, as part of our new business focus. This major shift in strategy means that, by obtaining supplies of natural gas directly from the wellhead, Universal would become a supplier and would make significant more revenues and profits from higher margins. The natural gas would be marketed by NDR Energy Group, to its customers. Based solely on our initial due diligence, we believe that if the acquisition is completed, the potential profit to be generated from this acquisition is in the multi-million dollar range annually.

Gas Purchase Agreement with CenterPoint Energy Resources Corp. On August 11, 2010, NDR Energy Group, signed a Gas Purchase Agreement with CenterPoint Energy Resources Corp., a wholly owned subsidiary of CenterPoint Energy Inc., based in Houston, Texas. CenterPoint Energy Inc., reported total revenues of $8.2 Billion, including $3.7 Billion for their National Gas Distributions operations, for the year ended December 31, 2009.

Under the terms of the agreement, NDR Energy Group will sell natural gas directly to CenterPoint Energy Resources Corp. CenterPoint Energy Inc., (NYSE: CNP), based on their filings with the SEC, is the nation’s third largest publicly traded gas distribution company, with 3.2 million natural gas customers in six states, including Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas.

With the signing of the agreement, our company and NDR Energy will assist CenterPoint Energy Resources Corp., in providing clean and reliable natural gas to its 3.2 million residential, commercial and industrial customers. Management believes, although we cannot guarantee, this transaction with CenterPoint Energy Resources Corp., should generate millions of dollars in additional revenues, for the Company. Management also believes the transaction should have a significant impact on Universal’s market value and assets.

OTC Bulletin Board. On August 18, 2010, our common stock was approved to began trading on the OTC Bulletin Board again. The OTC Bulletin Board® (OTCBB) is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter (OTC) equity securities.

The Company’s Future Plans and Outlook

Universal Gas Supply Division. As part of our plans for growth and expansion, we are proposing to establish a new division, whereby we will be a “direct supplier” of natural gas to our 22 current major utility customers and our future customers. We will then be able to purchase the gas at wholesale, or at “wellhead pricing”. Management believes that the major benefits to our company are, greater revenues, significantly higher profit margins, lower product costs, increased assets, and increased competitiveness. This will also allow us to implement our business strategy to become a more vertically integrated company, giving us greater control over the supply chain, directly from the producer, (with our company as the supplier), through marketing, distribution, and selling directly to the customer. Our management is currently in discussions with several gas/oil production companies, to obtain agreements to purchase natural gas and other fuels directly from the wellhead, to market directly to our customers. The gas would then be marketed and sold to our customers, through our subsidiary, NDR Energy Group.

According to the U.S. Energy Information Administration, (EIA) energy from natural gas accounts for 24 percent of total energy consumed in the United States, making it a vital component of the nation's energy supply. Additionally, the U.S. Energy Information Administration, in its Annual Energy Outlook 2009 Report, estimates that natural gas demand in the United States could be 24.36 Tcf, (Trillion Cubic Feet), by the year 2030. The EIA, Natural Gas Year-In Review 2009, Report stated, Over the past several years, natural gas use for electric power has increased, with gas making up an increasing percentage share of total generation relative to coal. In 2009, natural gas made up almost 24 percent of net power generation with 931,000 Megawatt-hours (MWH) of electric power generated from natural gas. By comparison, in 1996, natural gas made up only 14 percent of power generation. Therefore, we feel this increase in future demand for natural gas should prove to be very favorable for our plans to sell gas to our customers as a “direct supplier”.

Universal Energy Services Division. As part of our plans for growth and expansion, we are proposing to establish a new division, we provide energy and facilities services to our existing and growing customer base. The plan would include marketing and implementing facilities services, building modernization, energy system retrofits capital improvement projects, facilities systems, energy supplies, energy management consulting services, and / cost reduction strategies. Potential customers would encompass Federal and State Departments and Agencies, Cities, Municipalities, and large commercial and industrial corporate clients.

Mergers & Acquistions. Management is planning for more aggressive growth and expansion, by additional mergers and acquisitions, to generate significant revenues and profits, and by shifting our focus to invest in far more profitable alternative energy technologies. We anticipate, but can provide no assurances, acquiring 5 to 10 additional new companies in the next 2 years. Some of the companies being targeted are, natural gas producers, to obtain natural gas and other fuels directly from the wellhead, and solar energy companies for polymer based thin film solar cells, and other companies to build tidal energy facilities, acquisition of energy technology patents and licenses.

National Stock Exchange Listing. With its planned growth by mergers, acquisitions, and future revenues, Management is evaluating and positioning the Company to potentially qualify, and apply to be listed on a major national stock exchange, which stock exchanges list similarly situated alternative energy technology companies, such as NASDAQ, NYSE Amex Equities, or others.

Management has fully reviewed the qualifications for the relative national stock exchanges to determine which one we can best position the Company to qualify for, and apply to be listed. Therefore, on June 18, 2010 the Company approved amending the Articles of Incorporation to increase the amount of authorized shares of common stock from 200,000,000 to 1,000,000,000 shares with a par value of $.001. One of the qualifications requirements to be listed on most stock exchanges is a minimum bid price for a company’s shares of stock. The minimum share bid price to qualify for NASDAQ, is $4.00 per share, and for NYSE Amex, the minimum share price is $2.00 to $3.00 per share, depending on which initial listing standard a company may qualify for. For the Company to qualify for either of those to stock exchanges, our share price would have to increase to the $2.00 to $4.00 range. Management believes that, if we can successfully position the Company to qualify to meet the listing requirements for one of the stock exchanges, it would greatly increase the market value of the Company, and should make it attractive to more retail and institutional investors. We also feel this would be of great benefit to our shareholders.

Financial Analysis Summary and Projected Revenues and Earnings.

New Business Model. At our Strategic Business Summit in Las Vegas, in December 2009, we announced we were charting a bold new course to grow by mergers and acquisitions, and by shifting our focus to invest in far more profitable alternative energy technologies. This will allow us to drive our business forward this year to build solid revenue and profits. We plan to continue our growth by means of mergers and acquisitions of other companies in the alternative energy and related industries, and to acquire patents and license technologies to fully exploit in the marketplace. We have adapted our business strategy to become a more vertically integrated company, to give us greater management control over our supply chain, from the producer, through marketing, distribution, and directly to the customer. We believe this will bring even greater revenues for our company and more value to our shareholders.

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

Analysis of Current Results of Operations. With the aggressive pursuit of producing revenues, current management has created significant value and generated revenues of $13,966,895, since the acquisition of NDR Energy on April 12, 2010, when previously there were no revenue generated in the prior 2 to 3 years. The high proportionate cost of sales relative to the gross revenues, reflected in this period, is due to purchasing the gas from some of the suppliers at near retail cost, and additional high financing and factoring costs added to the gas by the suppliers. This has resulted in a reduced gross profit margin for this period, as reflected in the financial information section of this report. Management plans are to reduce the purchasing cost of the gas, and the financing cost, by obtaining our own credit facility, and lines of credit. This will allow us to purchase the gas in larger quantities, with greater economies of scale, on better terms, at lower costs and reduce the high financing costs, thereby significantly increasing our the gross profit. We have already submitted our documentation to several financial institutions and funding companies to obtain the credit facilities.

To provide us with even greater revenues and profit, our management is in discussions with several gas/oil production companies, to purchase natural gas and other fuels directly from the wellhead, at wholesale or “wellhead prices” to market directly to our customers. Then our management believes, but cannot guarantee, we will be a supplier, thereby generating greater revenues, significantly higher profit margins, lower product costs, increased assets, and increased competitiveness.

To collect on our accounts receivables, typically, after the gas is delivered from our supplier to our customer, an invoice is submitted to the customer between the 10th and 15th of the month. The customer then, in accordance with our “Sale and Purchase Agreement”, sends us full payment via wired funds by the 25th of the month, or 10 –15 days after receipt of the invoice.

Our current “total assets” have increased by 976%, to $2,888,971 for the period ending June 30, 2010, from $295,919 for the year ending December 31 of 2009. Our current estimated book value per share based on our company’s stockholders equity of $2,888,871 is $0.064 per share. We have also reduced the net “losses from operations”, by 65%, to a net loss $219,402 for the period ending June 30, 2010, from $627,966 in the period ending June 30, 2009, a total reduction of $408,564. Based on our plans for growth and expansion, and increasing revenues through sales of natural and other products, we believe we will continue the trend to reduce our net losses down to zero, and then move our company toward solid profitability.

Analysis of Projected Revenue, Earnings and Market Value. The management of our company has already acted in accordance with their new business strategy. As part of the execution of the plan, on April 12, 2010, we completed the acquisition of NDR Energy Group, a marketer of natural gas and energy. Based on Management’s review of NDR’s financial records, NDR generated revenues of $25,182,463 in energy and fuel sales for the period of January 1, 2010 through June 30, 2010. Due to the acquisition, we has generated revenues of $13,966,895, from the close of the transaction through the end of June 30, 2010 although our cost of sales reduced our profit from these revenues to just over $15,000. We anticipate the formal audit of these financial records, will be completed soon, and the information will be reported and filed with the SEC.

Management believes, but cannot guarantee, that it can sell approximately1,136,000 MMBtus or $5.21 million, in natural gas to each of its 22 customers on a monthly basis. This is based on the NYMEX Henry Hub July 2010 MTD, (month-to-date) average price, of $4.59 per MMBtu’s. This would result in a projected 25,000,000 MMBtus monthly or $114.8 million in monthly revenues from sales of gas to all of our 22 customers. The objective would be to sell 300,000,000 MMBtus annually, resulting in a projected $1.377 billion in revenues annually from the sales of natural gas alone. This would result in a conservatively projected net profit to the Company of $21 million or more annually, based on purchasing the gas from our current suppliers. Although no assurances of performance can be provided, we believe that when our company establishes it own gas supply division, then the estimated net earnings could be in the range of $75 million annually or significantly higher. Additionally, with the acquisition of another proposed 100 customers, this will result in even higher revenues and profits in the future.

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

On June 18, 2010 the Company approved amending the Articles of Incorporation to increase the amount of authorized shares of common stock from 200,000,000 to 1,000,000,000 shares with a par value of $.001. The purpose of increasing the number of shares of common stock is to use them for business and financial purposes, including raising capital, for mergers and acquisitions, acquiring products or services in exchange for stock, attracting and retaining employees, increasing our shareholder base, and being able to respond rapidly to opportunities that arise in the marketplace.

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

History of Universal Bioenergy North America

Our subsidiary, Universal Bioenergy North America, Inc. is a Nevada corporation formed on January 23, 2007 which was acquired by our company in December 2007, for the purpose of operating a biodiesel plant in Nettleton, Mississippi to produce biodiesel fuel and a marketable byproduct of glycerin. The biodiesel plant was acquired by Universal Bioenergy North America out of a bankruptcy action. . As of the date of this report, we have not manufactured any biodiesel fuel but are negotiating with potential M&A candidates. Presently, UBNA’s plant is non-operational and the company is seeking new acquisitions in the alternative energy industry.

The economic viability of most biodiesel producers, including us, is dependent on the biodiesel fuel tax credit. The tax credit was allowed to expire on December 31, 2009, causing widespread layoffs in the biodiesel industry since the credit is needed by most producers to remain economically viable. The Senate voted on March 10, 2010 to restore the credit. Restoration of the credit required reconciliation and signature of President Obama which did not occur before the August summer recess.

RESULTS OF OPERATIONS

For the Three and Six Months Ended June 30, 2010 compared to June 30, 2009

Universal Bioenergy Inc.

Analysis of Current Operations. Management has created significant value and generated revenues of $13,966,895, since the acquisition of NDR Energy on April 12, 2010, when previously there was none generated in the prior 2 to 3 years. The high proportionate cost of sales relative to the gross revenues, reflected in this period, is due to purchasing the gas from some of the suppliers at near retail cost, and additional high financing and factoring costs added to the gas by the suppliers. This has resulted in a reduced gross profit margin for this period. Management plans are to reduce the purchasing cost of the gas, and the financing cost, by obtaining our own credit facility, and lines of credit. This will allow us to purchase the gas in larger quantities, with greater economies of scale, on better terms, at lower costs and reduce the high financing costs, thereby significantly increasing our the gross profit. We have already submitted our documentation to several financial institutions and funding companies to obtain the credit facilities.

Our general and administrative expenses increase to $470,568 and $474,486 for the three months ended June 30, 2010 and 2009, respectively as compared to $639,195 and $627,966 for the six months ended June 30, 2010 and 2009, respectively. The primary reason for the increase in general and administrative expenses is that the company issued $395,569 in our common stock as compensation for services for the six months ended June 30, 2010.

We incurred losses of approximately $460,213 and $474,486 for the three months ended June 30, 2010 and 2009 as compared to $634,018 and $627,966 for the six months ended June 30, 2010 and 2009. Our accumulated losses through June 30, 2010 amount to $15,390,667.

To provide us with even greater revenues and profit, the Company is in discussions with several gas/oil production companies, to purchase natural gas and other fuels directly from the wellhead, at wholesale or “wellhead prices” to market directly to our customers. Then the Company will be a supplier, thereby generating greater revenues, significantly higher profit margins, lower product costs, increased assets, and increased competitiveness.

The Company’s current “total assets” have increased by 976%, to $2,888,971 for the period ending June 30, 2010, from $295,919 for the year ending December 31 of 2009. The Company’s current estimated book value per share based on the Company’s stockholders equity of $2,888,871 is $0.064 per share. We have also reduced the net “losses from operations”, by 65%, to a net loss $219,402 for the period ending June 30, 2010, from $627,966 in the period ending June 30, 2009, by a total $408,564. Based on our plans for growth and expansion, and increasing revenues through sales of natural and other products, we believe we will continue the trend to reduce the Company’s net losses down to zero, and then move the Company toward solid profitability.

Universal Bioenergy North America, Inc. (UBNA)

Universal Bioenergy North America, Inc., (UBNA) is a operating subsidiary of the Company. The Company has generated no revenues from the subsidiary, Universal Bioenergy North America, Inc., as the refinery was not in production as of June 30, 2010. UBNA will continue to accrue some minimal operating losses until the refinery is operating, and at a point where sufficient production levels can be reached to meet its relative liabilities.

The cost of modifying our refinery is cost intensive as is merging or acquiring other business entities, so it is critical for us to raise appropriate capital to implement our business plan. We incurred losses of approximately $613,207 and $627,966 for the six months ended June 30, 2010 and 2009. Our losses since our inception through June 30, 2010 amount to $15,390,667.

Part of these losses and need for impairment as determined by management is due in part to a decrease in value of assets related to the economic downturn in the local area and in the commercial real estate marketplace. Management believes that there has been a 30% or greater reduction in the value of real property at the Nettleton, MS plant site due to these conditions. There is no guarantee that such asset reduction will be recouped as economic conditions improve.

Liquidity and Capital Resources

As reflected in the accompanying financial statements and footnotes, we are operating with limited resources, used cash in operations of $171,351 and $24,975 for the six months ended June 30, 2010 and 2009, respectively. The ability of our company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Our cash provided by financing activities for the six months ended June 30, 2010 was $173,903 as compared to $24,975 for the six months ended June 30, 2009. The primary increase in financing activities is related to the increase in advances from shareholders.

Debt

Convertible Debt

On July 9, 2009, we sold 25,000 units in a private placement for $25,000 at $1.00 per unit. The Units are similar to a debenture and act as a debt to the company. The term is for three years, and the Units receive a return of a 30% annual stock dividend and no payments are paid for the reduction of this debt. After the six month holding period the purchaser has the option to convert part or all of the Units into common stock at an exercise price of 5 cents per share, based on the principal invested. The note is secured by the general assets of the company including the property at 128 Biodiesel Drive, Nettleton, MS.

On November 23, 2009, we sold 22,500 units in a private placement for $22,500 at $1.00 per unit. The Units are similar to a debenture and act as a debt to the company. The term is for three years, and the Units receive a return of a 30% annual stock dividend and no payments are paid for the reduction of this debt. After the six month holding period the purchaser has the option to convert part or all of the Units into common stock at an exercise price of 5 cents per share, based on the principal invested. The note is secured by the general assets of the company including the property at 128 Biodiesel Drive, Nettleton, MS.

On November 23, 2009,we sold 22,500 units in a private placement for $22,500 at $1.00 per unit. The Units are similar to a debenture and act as a debt to the company. The term is for three years, and the Units receive a return of a 30% annual stock dividend and no payments are paid for the reduction of this debt. After the six month holding period the purchaser has the option to convert part or all of the Units into common stock at an exercise price of 5 cents per share, based on the principal invested. The note is secured by the general assets of the company including the property at 128 Biodiesel Drive, Nettleton, MS.

WHERE YOU CAN FIND MORE INFORMATION

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold any derivative instruments that engage in any hedging activities. Most of our activity is in the resale of natural gas..

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Our Chief Executive Officer and Chief Financial Officer is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face additional limitations. Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties. Often, one or two individuals control every aspect of the Company's operation and are in a position to override any system of internal control. Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company's internal control over financial reporting as of June 30, 2010. In making this assessment, our Chief Executive Officer and Chief Financial Officer used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer, concluded that, as of June 30, 2010, our internal control over financial reporting was effective.

b) Changes in Internal Control over Financial Reporting.

During the Quarter ended June 30, 2010, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The Company’s concern was the filing of our 2007 Form 10K/A on September 9, 2009 by James Michael Ator the former CFO, without Board of Directors approval and without approval from our independent auditors. The other area of concern was the proper internal signature by the Board of Directors for all filings that are issued. The Company’s former management further did not properly record the acquisition of UBNA as the purchase method of accounting and recorded it as a reverse merger and recapitalization. The acquisition was less than 51% and should have been recorded as the purchase method of accounting.

The Company’s Richard Craven the former CEO was also involved with the Mortenson and LaCroix transactions as described in Note 12 to the financial statements. Although former management asserts they had no knowledge of the Abellan scheme or the freeze order, in the best interest of the Company they resigned, surrendered the preferred A shares, and have no further affiliation with the Company. Due to the size of our Company and the costs associated to remediate these issues, we still consider these concerns to be extremely relevant.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries' officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

ITEM 1A - Risk Factors

Risk Factors

You should carefully consider the following risk factors together with the other information contained in this Interim Report on Form 10-Q, and in prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933, as amended. If any of the risks factors actually occur, our business, financial condition or results of operations could be materially adversely affected. In such cases, the trading price of our common stock could decline. We believe there are no changes that constitute material changes from the risk factors previously disclosed in the prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933 and include or reiterate the following risk factors:

Risk Factors Related to Our Business

We May Not Have Access To Sufficient Capital To Pursue Our Business And Therefore Would Be Unable To Achieve Our Planned Future Growth.

We intend to pursue a growth strategy that includes development of the Company business and technology. Currently we have limited capital which is insufficient to pursue our plans for development and growth. Our ability to implement our growth plans will depend primarily on our ability to obtain additional private or public equity or debt financing. We are currently seeking additional capital. Such financing may not be available at all, or we may be unable to locate and secure additional capital on terms and conditions that are acceptable to us. Our failure to obtain additional capital will have a material adverse effect on our business.

We may be adversely affected by environmental, health and safety laws, regulations and liabilities.

As we pursue our business plan, we will become subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, and the health and safety of our employees. In addition, some of these laws and regulations require our suppliers and our contemplated distribution facilities to operate under permits that are subject to renewal or modification. These laws, regulations and permits can often require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment. A violation of these laws and regulations or permit conditions can have a material adverse effect on our business.

Risk Factors Related to Our Stock

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

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

Our Common Stock Is Subject To Penny Stock Regulation

Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Since our shares are deemed to be "penny stock", trading in the shares will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited investors.

FINRA Sales Practice Requirements May Also Limit A Stockholder's Ability To Buy And Sell Our Stock.

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

We May Not Have Access To Sufficient Capital To Pursue Our Business And Therefore Would Be Unable To Achieve Our Planned Future Growth.

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

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

The Notes to Our Financial Statements Contain Explanatory Language That Some Doubt Exists About Our Ability To Continue As A Going Concern

Our financial statements contain explanatory language that some doubt exists about our ability to continue as a going concern. The notes discloses that we are in the development stage with limited resources, used cash in operations of $872,570 from inception, and have an accumulated deficit of $15,647,224. This raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

The failure to raise additional capital and implement its business plan could have a material adverse effect on our business, financial condition, and results of operations. If we are unable to obtain sufficient financing in the near term or achieve profitability, then we would, in all likelihood, experience severe liquidity problems and may have to curtail our operations. If we curtail our operations, we may be placed into bankruptcy or undergo liquidation, the result of which will adversely affect the value of our common shares.

We Do Not Intend To Pay Dividends

We do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are rapid, there is no assurance with respect to the amount of any such dividend.

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

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

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

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

There were no sales of unregistered upon senior securities during the period ended June 30, 2010. Except for the Company issued 5,000,000 shares of common stock for the NDR acquisition, 750,000 shares of common stock to its prior CFO for extinguishment of his employment contract and Company issued 300,000 shares of common stock to a consultant and expensed $18,000. The offer and sale of such shares of our common stock were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act of 1933 (the “Securities Act”) and in Section 4(2) of the Securities Act, based on the following: (a) the investors confirmed to us that they were “accredited investors,” as defined in Rule 501 of Regulation D promulgated under the Securities Act and had such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the offering; (c) the investors were provided with certain disclosure materials and all other information requested with respect to our company; (d) the investors acknowledged that all securities being purchased were “restricted securities” for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act; and (e) a legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.

Item 3. Defaults Upon Senior Securities

There were no defaults upon senior securities during the period ended June 30, 2010.

Item 4. Removed and Reserved

Item 5. Other Information

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

Item 6. Exhibits

31.1 Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act.

31.2 Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act.

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act.

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act.

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.

	UNIVERSAL BIOENERGY, INC.


Dated: August 30, 2010	By	/s/ Vince M. Guest
		Vince M. Guest
	Chief Executive Officer (Principle Executive Officer)
	Principle Financial Officer, and President

Universal Bioenergy, Inc. - FORM 10-Q - August 30, 2010

Attached files

Universal Bioenergy, Inc. Reports