Universal Bioenergy 10Q 2011 Q1 Quarterly report

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 September 30, 2010

¨ 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 o 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 December 23, 2010

Common stock, $0.001 par value		77,247,517

UNIVERSAL BIOENERGY, INC.

INDEX

INDEX TO FORM 10Q FILING

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 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 Operations	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	25
Item 3		Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.		Controls and Procedures	40
PART II - OTHER INFORMATION
Item 1.		Legal Proceedings	42
Item 1A		Risk Factors	42
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.		Defaults Upon Senior Securities	45
Item 4.		Removed and Reserved	45
Item 5		Other information	46
Item 6.		Exhibits	46

	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)

	September 30, 2010			December 31, 2009
ASSETS: (Substantially pledged)

CURRENT ASSETS

Cash	$	17,151		$	2,819
Accounts receivables		2,412,623			-
Total current assets		2,429,774			2,819

PROPERTY AND EQUIPMENT - net		302,221			290,000

Advances for affiliates		13,967			-
Intangible assets		250,000			-
Deposit		6,620			3,100
TOTAL ASSETS	$	3,002,582		$	295,919

LIABILITIES AND STOCKHOLDERS' DEFICIT:

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	2,989,112		$	725,790
Advances from affiliates		54,757			54,050
Note payable- affiliate		-			70,000
Total current liabilities	$	3,043,869

Long term liabilties		312,119			849,840

TOTAL LIABILITIES		3,355,988			849,840

STOCKHOLDERS' DEFICIT:
Preferred stock Series A, $.001 par value, 1,000,000 shares
authorized, 0 and 100,000 issued and outstanding shares
September 30, 2010 and December 31, 2009, respectively		-			100
Preferred stock Series B, $.001 par value, 1,000,000 shares
authorized, 232,080 issued and outstanding shares
September 30, 2010 and December 31, 2009, respectively		232			232
Common stock, $.001 par value, 200,000,000 shares authorized;
77,247,517 and 39,405,000 issued and outstanding as of
September 30, 2010 and December 31, 2009, respectively		77,247			39,405
Additional paid-in capital		15,301,859			14,183,804
Noncontrolling interest		(40,978	)		-
Accumulated deficit		(15,691,766	)		(14,777,460	)
Total stockholders' deficit		(353,406	)		(553,919	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	3,002,582		$	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 Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009

REVENUES	$	6,388,639		$	-		$	20,355,534		$	-

COST OF SALES		6,381,535			-			20,332,897			-

GROSS PROFIT		7,104			-			22,637			-

OPERATING EXPENSES:
General and administrative		530,093			217,635			933,327			845,601
Sales and marketing		5,591			-			22,317			-
Depreciation expense		873			-			873			-
Total operating expenses		536,557			217,635			956,517			845,601

OTHER (INCOME) AND EXPENSES:
Other income		(1,143	)		-			(2,007	)		-
Interest expense		13,055			1,808			23,411			1,808
Total other expense		11,912			1,808			21,404			1,808

NET PROFIT (LOSS)	$	(541,365	)	$	(219,443	)	$	(955,284	)	$	(847,409	)

Net income attributable to noncontrolling interest	$	18,637		$	-		$	40,978		$	-

NET INCOME (LOSS) ATTRIBUTABLE TO UNIVERSAL	$	(522,728	)	$	(219,443	)	$	(914,306	)	$	(847,409	)

NET PROFIT (LOSS) PER SHARE:
Basic and diluted loss per share	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.03	)

Weighted average of shares outstanding		57,760,431			30,325,000			47,940,347			26,940,385

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 Nine Months Ended
	September 30,
	2010			2009

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(914,306	)	$	(847,409	)
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Depreciation expense		873			-
Non controlling interest		(40,978	)		-
Common stock issued for services		332,007			307,999
Changes in assets and liabilities:
Accounts recievables		(2,412,623	)		-
Accounts payables		2,767,114			-
Advances affiliate		707			-
Deposits		(3,520	)		487,516
Net cash used by operating activities		(270,726	)		(51,894	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to affiliate		(13,967	)		-
Property and equipment		(13,094	)		-
Net cash used in investing activities		(27,061	)		-

CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliates		-			26,894
Proceeds from notes payable		312,119			25,000
Net cash provided by financing activities		312,119			51,894

INCREASE IN CASH		14,332			-
CASH, BEGINNING OF YEAR		2,819			-
CASH, END OF YEAR	$	17,151		$	-

SUPPLEMENTAL CASH FLOW INFORMATION:

Interest paid	$	-		$	-
Taxes paid	$	-		$	-
Issuance of company stock for the conversion of debt	$	573,981		$	-

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, petroleum, solar, biofuels, wind, and green technology products. In April 2010, we expanded into the natural gas energy market, by the acquisition of NDR Energy Group. 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.

One of the Company’s primary goals is to acquire and develop oil and gas properties and assets. This includes oil and gas lease acquisitions, development of newly discovered or recently discovered oil and gas fields, re-entering existing wells, transmission and marketing of the products to our customer base. We are currently targeting natural gas producers, to obtain natural gas and other fuels directly from the wellhead.

NDR Energy Group LLC

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.

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.

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 - 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 nine months ended September 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 3 – 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. The Company recognizes 49% as a non controlling interest in the company since the Company only owns 49% of NDR. That 49% reduction is incorporated in the Financial Statements a noncontrolling interest in the amount of $40,978 as this amount represents 49% of NDR’s loss of $83,629

Accounts Receivable

Substantially all of the Company’s accounts receivable balance is related to trade receivables. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in its existing accounts receivable. The Company will maintain allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments for products. Accounts with known financial issues are first reviewed and specific estimates are recorded. The remaining accounts receivable balances are then grouped in categories by the amount of days the balance is past due, and the estimated loss is calculated as a percentage of the total category based upon past history. The Company did not recognize any bad debt as there was no risk of non-collection of the accounts receivables

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 the majority of its consolidated revenue and cash flow from the sale of natural gas and related energy products 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 September 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 no events or changes in circumstances that necessitated an impairment of long lived assets.

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 September 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. measurement

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 4 - 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 Nine Months Ended September 30, 2010			For the Nine Months Ended September 30, 2009

Income and Losses available for common shareholders	$	(914,306	)	$	(847,409	)

Weighted average common shares outstanding		(47,940,347	)		(26,940,385	)

Basic and fully diluted loss per share	$	(.02	)	$	(.03	)

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 5 - 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 77,247,517 are issued and outstanding as of September 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 September 30, 2010. 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. 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 of that date.

Common Stock Issued

2010

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 compensation by $157,568.

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

On April 12, 2010 the Company issued 5,000,000 common shares for the acquisition of NDR Energy Group, LLC. (See Note 10 – Acquisition).

Under terms of their employment agreements, on September 13, 2010 the Company issued 1,411,150 to each officer and director of the Company with total shares issued of 4,233,450. The stock was trading at $.06 and the Company expensed $84,669 for each issuance of shares of stock with a total expense of $254,007. Also under the terms of his employment agreement an employee was issued 1,000,000 common shares at the trading price of $.06 and the Company expensed $60,000 as compensation.

On September 13, 2010 the Company converted its notes payable for a total of $47,936 and issued 2,000,000 common shares for that conversion. This conversion of debt reduced our notes payables of $42,500 and accrued interest of $5,436.

On September 27, 2010 the Company converted its accrued compensation for a total of $368,386 and issued 24,559,067 common shares for that conversion. This conversion of debt reduced our accrued compensation of $368,386.

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

On June18, 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.

2009

Under terms of their employment 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.

Under terms of their employment agreements, on November 23, 2009 the Company issued 1, 360,000 to each officer and director of the Company with total shares issued of 4,080,000. The stock was trading at $.105 and the Company expensed $142,800 for each issuance of shares of stock with a total expense of $428,400.

On November 30, 2009 the Company issues 5,000,000 common shares in the conversion of a $100,000 note payable.

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.

Preferred Series A shares are 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. 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 of that date.

Preferred Series B shares are non-voting.

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 2.9% dilution as of September 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 5.7% dilution as of September 30 2010.

NOTE 6 - PROPERTY AND EQUIPMENT

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

	September 30, 2010			December 31, 2009
Equipment	$	178,094		$	165,000
Land		50,000			50,000
Building		75,000			75,000
Accumulated depreciation		(873	)
Total	$	302,221		$	290,000

There was $873 and $0 depreciation expense for the three months ended September 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.

NOTE 7 – CONVERTIBLE DEBENTURE

	September 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

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.		2,500		22,500
On May 24, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $10,500 at 10% interest. The holder has the right to convert the note to common stock on November 24, 2010 at $.05		10,500		-
On May 24, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $10,500 at 10% interest. The holder has the right to convert the note to common stock on November 24, 2010 at $.05		10,500		-
On February 16, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $13,000 at 10% interest. The holder has the right to convert the note to common stock on August 17,2010 at $.05		13,000		-
On May 25, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $100,000 at 10% interest. The holder has the right to convert the note to common stock on November 25, 2010 at $.03		100,000		-
On July 15, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $4,500 at 10% interest. The holder has the right to convert the note to common stock on January 15, 2011 at $.05		4,500		-
On July 15, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $4,500 at 10% interest. The holder has the right to convert the note to common stock on January 15, 2011 at $.05		4,500		-
On June 30, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $32,000 at 10% interest. The holder has the right to convert the note to common stock on December 31, 2010 at $.03		32,000		-
August 26, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $36,919 at 10% interest. The holder has the right to convert the note to common stock on February 28, 2011 at $.03		36,919		-
On August 30, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $25,300 at 10% interest. The holder has the right to convert the note to common stock on February 28, 2011 at $.05		25,300		-
On August 30, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $25,300 at 10% interest. The holder has the right to convert the note to common stock on February 28, 2011 at $.05		25,300		-
On April 26, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $25,300 at 10% interest. The holder has the right to convert the note to common stock on October 26, 2010 at $.05		6,750		-
On April 26, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $25,300 at 10% interest. The holder has the right to convert the note to common stock on October 26, 2010 at $.05		6,750		-
On March 30, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor at 10% interest. The holder has the right to convert the note to common stock on September 30, 2010 at $.05		8,600		-
Advances from affiliates		54,757		-
Total long-term note payable		366,876		70,000
Less current portion		54,757		70,000
Long-term portion of note payable	$	312,119	$	-

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 8 - INCOME TAXES

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

For income tax reporting purposes, the Company’s aggregate unused net operating losses approximate $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 9 – RELATED PARTY TRANSACTION

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.

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 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 a monthly or quarterly bonus of five percent (5%) of net profits. The agreement also provides for participation in the Company’ s programs to acquire options or equity 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 a monthly or quarterly bonus of five percent (5%) of net profits. The agreement also provides for participation in the Company’ s programs to acquire options or equity 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.

Under terms of their employment agreements, on March 26, 2010 the Company issued 1,411,150 to each officer and director of the Company with total shares issued of 4,233,450. The stock was trading at $.06 and the Company expensed $84,669 for each issuance of shares of stock with a total expense of $254,007. Also under the terms of his employment agreement and employee was issued 1,000,000 common shares at the trading price of $.06 and the Company expensed $60,000 as compensation.

Under terms of their employment agreements, on November 23, 2009 the Company issued 1,360, 000 to each officer and director of the Company with total shares issued of 4,080,000. The stock was trading at $.105 and the Company expensed $142,800 for each issuance of shares of stock with a total expense of $428,400.

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 a monthly or quarterly bonus of five percent (5%) of net profits. The agreement also provides for participation in the Company’s programs to acquire options or equity 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 of Investor Relations and Corporate Finance. His term of service under this agreement commenced on July 1, 2010 and continues for a term of two (2) years with renewal options. The agreement provides for a base salary of $174,000 for the first year of the term and an annual increase of at least 8% thereafter. The agreement also provides Solomon Ali with a monthly or quarterly bonus of five percent (5%) of net profits. The agreement also provides for participation in the Company’s programs to acquire options or equity 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. On September 13, 2010 the Company converted its notes payable for a total of $47,936 and issued 2,000,000 common shares for that conversion and on September 27, 2010 the Company converted its accrued compensation for a total of $368,386 and issued 24,559,067 common shares for that conversion.

On July 22, 2010, the Board of Directors approved that the Company convert debt and liabilities through December 31, 2009 to the Company’s common stock at a conversion price of $.005 to $.05 cents to offset any decline in value.

NOTE 10 – 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 Consolidation Services, 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						Nine Months Ended
	2010			2009			2010			2009

REVENUES		3,980,202			3,124,065			17,947,097			20,876,656

Net Loss		(514,058	)		(478,025	)		(949,470	)		(734,079	)

Net income per share basic and diluted	$	(0.01	)	$	(0.00	)	$	(0.02	)	$	(0.03	)

Weighted average of shares outstanding		57,760,431			28,864,451			47,940,347			25,210,028

NOTE 11 - 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, which 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, which 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 agree 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 2.9% dilution as of September 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 5.7% dilution as of September 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, which 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 12 – SUBSEQUENT EVENTS

On October 11, 2010 the company, signed a Letter of Intent with ProGas Energy Services Inc., of Texas, to jointly develop a newly discovered or recently discovered oil and gas field located in Texas's Gulf Coast natural trend in Jim Wells County, Texas. The plans include the development of ten initial wells, and the potential development of up to 110 oil and gas wells from this field, to supply oil and natural gas for Universal's customers nationwide.

October 25, 2010 the Company signed a definitive agreement for the acquisition of Roblex Aviation Inc., for a purchase price of $10.4 million. Roblex is a FAA registered, first class air Cargo Company, located in San Juan Puerto Rico, serving the Caribbean market. Roblex's flies out of San Juan International Airport, with primary routes to the Dominican Republic, and the U.S. and British Virgin Islands. Roblex's blue chip customers and clients include the United States Postal Service, Amerijet, and Delta Cargo, and United Parcel Service. In accordance with the provisions of the Agreement, and due to certain issues discovered in its due diligence of Roblex Aviation, Management terminated the Agreement on December 14, 2010. The Company has the option to consider reviewing Roblex Aviation, for an acquisition, and a new agreement at a later date.

On November 6, 2010 the Company signed a Letter of Intent with WBH Capital Inc., based in Claremont, California, to form a new joint venture for strategic business acquisitions and development of alternative energy projects. The intent of the "Venture" is to raise up to $200 million in capital for the various acquisitions and projects. The acquisitions, include companies, patents and licensing technologies in the natural and alternative energy industries, including solar, algae based biofuels, wind, tidal, green technology products, and waste to energy projects.

On December 13, 2010 our subsidiary NDR Energy Group, signed an agreement with Amerisource Funding of Houston, Texas for Amerisource to provide it with an aggregate $36 million dollar annual revolving funding line, for its future growth and expansion.

On December 8, 2010 we established a new company, known as Texas Gulf Oil & Gas Inc. This company will develop oil and gas field projects, obtain products from the wellhead, and positions us be a producer and direct supplier of oil and natural gas to our customers. The company will also manage the transmission and marketing of the product to our customers. The major benefits to the Company are, greater revenues, higher profit margins, lower product costs, and increased competitiveness.

On December 17, 2010 we signed an agreement with ProGas Energy Services Inc., of Texas, to jointly develop newly discovered or recently discovered oil and gas field, known as the Northwest Premont Oil & Gas Field, located in Texas’s Gulf Coast natural trend, in Jim Wells County Texas. The plans include potentially developing up to 110 oil and gas wells from this field. Three initial wells have already been drilled, are producing oil and gas, and should bring immediate profit to Universal.

* * * * * *

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 natural energy products including natural gas and petroleum and alternative energy products including, solar, biofuels, wind, , 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.

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. The Company officers own 2% of NDR Energy Group, LLC and the Company recognize 49% of non-controlling interest in its subsidiary.

Based on Management’s review of NDR’s financial records, NDR generated revenues of $34,455,243 in energy and fuel sales for the period of January 1, 2010 through September 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.

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.

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.

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.

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 nine 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.

Progas Energy Services Inc. On October 11, 2010 the company, signed a Letter of Intent with ProGas Energy Services Inc., of Texas, to jointly develop a newly discovered or recently discovered oil and gas field located in Texas's Gulf Coast natural trend in Jim Wells County, Texas. The plans include the development of ten initial wells, and the potential development of up to 110 oil and gas wells from this field, to supply oil and natural gas for Universal's customers nationwide.

Roblex Aviation Inc. October 25, 2010 the Company signed a definitive agreement for the acquisition of Roblex Aviation Inc., for a purchase price of $10.4 million. 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. The aircraft Hanger in Aguadilla is currently being leased to FEDEX.

In accordance with the provisions of the Agreement, and due to certain issues discovered in its due diligence of Roblex Aviation, the Company terminated the Agreement on December 14, 2010. The Company has the option to consider reviewing Roblex Aviation, for an acquisition, and a new agreement at a later date.

WBH Capital Business Capital Inc. On November 6, 2010 the Company signed a Letter of Intent with WBH Capital Inc., based in Claremont, California, to form a new joint venture for strategic business acquisitions and development of alternative energy projects. The intent of the "Venture" is to raise up to $200 million in capital for the various acquisitions and projects. The acquisitions, include companies, patents and licensing technologies in the natural and alternative energy industries, including solar, algae based biofuels, wind, tidal, green technology products, and waste to energy projects.

Southern California Gas Company Gas Purchase Agreement. On November 17, 2010, NDR Energy Group signed a purchase order in accordance with its NAESB agreement to supply natural gas to Southern California Gas Company, a subsidiary of Sempra Energy, for the month of December 2010.

According to Southern California Gas Company, it is the nation’s largest natural gas distribution utility, with 20.7 million customers. Sempra Energy, its parent company, reported revenues of $8.1 billion, including $3.8 billion from natural gas sales and transportation in 2009, as indicated in its 2009 annual report. The NAESB agreement limits us from disclosing the details; however this Southern California Gas transaction will generate millions of dollars in revenues for the Company. With this agreement, NDR Energy Group will deliver a record amount of gas to Southern California Gas, for a company of our size, and assisting them to provide natural gas to their 20.7 million customers in their service area.

Amerisource Funding. On December 13, 2010 the Company signed an agreement with Amerisource Funding of Houston, Texas for Amerisource to provide it with an aggregate $36 million dollar annual revolving funding line, for its future growth and expansion. The agreement will provide the Company and NDR Energy with working capital and accounts receivable financing for an indefinite term, and has provisions for increasing the funding line as the Company grows. Amerisource Funding is a market leader in providing working capital and accounts receivable management solutions to small and middle market businesses. Founded in 1984, Amerisource has financed over $1 billion of funding for thousands of companies in virtually every U.S. State and Canada, and has provided small and middle market businesses with financing solutions and outsourced management of accounts receivable, credit and collection functions, all of which are vital to the success of any business.

Texas Gulf Oil & Gas Inc. On December 8, 2010, as part of our plans for growth and expansion, we established a new division, known as Texas Gulf Oil & Gas Inc. This division’s purpose is develop projects, and allow us to be a producer and direct supplier of natural gas, and we would also manage the transmission and marketing of the product to our 22 existing major utility customers nationwide. We will obtain the gas directly from the ground, at the “wellhead”. The major benefits to the Company are, greater revenues, significantly higher profit margins, lower product costs, increased assets, and increased competitiveness.

Progas Energy Services. On December 20, 2010 the Company signed an agreement with ProGas Energy Services Inc., of Texas. The agreement is a joint venture between "Texas Gulf Oil & Gas," Universal's new subsidiary, and ProGas, to jointly develop a newly discovered or recently discovered oil and gas field located in the Premont Northwest oil and gas field, in Texas's Gulf Coast natural trend, in Jim Wells County Texas. The plans include potentially developing up to 110 oil and gas wells from this field. Three initial wells have already been drilled, are producing oil and gas, and should bring immediate profit to Universal.

Record Sales Volumes of Natural Gas for December 2010. The Company achieved a new record of natural gas sales in a single month. The Company sold a record sales volume of 3.41 billion cubic feet, (Bcf) of natural gas to six of its 22 major electric utility customers for the month of December, through its subsidiary NDR Energy Group. The record sales were due to the increased demand for natural gas from our utility customers, and the hard work and innovative marketing efforts of the executive staff at NDR Energy Group.

New Horizons Energy Group LLC. On January 7, 2011, NDR Energy Group LLC, signed an Agreement to retain the services of New Horizons Energy Group LLC, based in Mt Dora, Florida. New Horizons Energy Group is a natural gas and energy services consulting company. The company will be providing an array of services to NDR Energy and Universal Bioenergy, that will include information on the U.S. natural gas market, natural gas scheduling, natural gas nominations, daily gas monitoring, capacity release for procurement and sales, daily and monthly pipeline balancing, risk management and hedging policy, procurement and management of gas storage assets, and managing operating accounts for designated pipelines. They will also assist with the procurement of natural gas and negotiations of gas purchase contracts. One of the managing members of NDR Energy Group, who is a Universal Bioenergy shareholder, is also a managing member of New Horizons Energy Group.

The Company’s Future Plans and Outlook

On January 12, 2010 the Company announced it was charting a bold new course for the company by diversifying and shifting its focus to far more profitable energy technologies. In April 2010, we expanded into the natural gas energy market, by the acquisition of NDR Energy Group. This was a very good move for the Company, as this brought a major financial benefit to Universal, and its shareholders, by bringing the Company millions of dollars in revenues. Therefore, based on the future outlook for the industry, Management believes this potential increase in the future demand for natural gas, should prove to be very favorable for our plans to sell gas to our customers as a “direct supplier”. At our Business Summit, we took a hard look at global trends in alternative energy, and concluded we wanted to be in markets with the lowest development costs, ease of commercialization, and the highest revenues and profits. We’re diversifying into high growth areas, and reducing our dependence on just biodiesel.

Current State and Future Out Look For the Natural Gas Industry

U.S. Natural Gas Market. Natural gas is very important part of the energy sector of the U.S. economy. About 99 percent of the natural gas used in the United States comes from North America, and is transported through a 2.3-million mile underground pipeline system. According to the U.S. Energy Information Administration, (EIA), the United States used approximately 22.84 trillion cubic feet (Tcf) of natural gas in 2009. A total of about 25% of all energy used in the United States in 2009 came from natural gas. Additionally, it is one of the cleanest burning fossil fuels, and its use is expected to continue to grow. Natural gas is used in the production of steel, glass, paper, clothing, brick, electricity, and as an essential raw material for many common products. Some products that use natural gas as a raw material are: paints, fertilizer, plastics, antifreeze, dyes, photographic film, medicines, and explosives. Slightly more than half of the homes in the United States use natural gas as their main heating fuel. Natural gas is also used in homes to fuel stoves, water heaters, clothes dryers, and other household appliances.

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.” Consumption of natural gas for electric power increased from a level of 18.3 billion cubic feet, (Bcf) per day in 2008, to 18.9 Bcf per day in 2009. This increase was caused by fuel-switching due to sharp declines in the price of natural gas, as coal prices actually rose between 2008 and 2009, while consumption of coal at electric power plants declined 11 percent.

Future Outlook. Consumption of natural gas will increase 20% by 2030, according to the U.S. Department of Energy (DOE). The EIA’s “Annual Energy Outlook 2010”, includes estimates for total technically recoverable natural gas resources in the United States as of January 1, 2008 at 2,119 Tcf. This estimate includes proved reserves, inferred reserves, and undiscovered technically recoverable resources.

According to a report released by the Massachusetts Institute of Technology, it stated that, “Natural gas will provide an increasing share of America’s energy needs over the next several decades, doubling its share of the energy market to 40 percent, from 20 percent.

Texas Gulf Oil & Gas Inc. On December 8, 2010, as part of our plans for growth and expansion, we established a new division known as “Texas Gulf Oil & Gas Inc.”, domiciled in Georgia. The company will acquire and enter joint ventures to develop oil and natural gas field projects, and this will position us we to be a “direct supplier” of natural gas to our current and our future utility and corporate customers. We will then be able to purchase the gas from the “wellhead”. This division will also manage the transmission and marketing of the product to our 22 existing major utility customers nationwide. The major benefits to the Company are, greater revenues, significantly higher profit margins, lower product costs, increased assets, and increased competitiveness. This will also position 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, through marketing, distribution, and selling directly to the customer. The Company is currently in discussions with several independent oil and 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 NDR Energy Group.

Progas Energy Services. On December 203, 2010 the Company signed an agreement with ProGas Energy Services Inc., of Texas. The agreement is a joint venture between "Texas Gulf Oil & Gas," Universal's new subsidiary, and ProGas, to jointly develop a newly discovered or recently discovered oil and gas field located in the Premont Northwest oil and gas field, in Texas's Gulf Coast natural trend, in Jim Wells County Texas. The plans include potentially developing up to 110 oil and gas wells from this field. Three initial wells have already been drilled, are producing oil and gas, and should bring immediate profit to Universal. The Premont Northwest field is potentially one of the largest oil fields discovered in Jim Wells County, Texas, the most prolific oil and gas producing county in the state of Texas.

According to Progas, the field was originally discovered in the 50’s and was thought to be a small extension of the Northwest Premont field. However, the field was not developed before the previous operators passed away, and many zones were not known to be potentially productive as have been recently proven with modern drilling and testing techniques. Progas, the operator and developer of the property, prior to Universal’s involvement, re-entered existing wells that were abandoned by the previous operator to test potential zones for production. Initial estimated reserves of the field were under 2,000,000 bbls of oil and just over 4,000,000 mcf of natural gas. However after testing these wells and a considerable geologic study, the projected and estimated reserves were adjusted to over 20,000,000 barrels of oil and 17 billion cubic feet (bcf), 17,000,000 mcf, of gas from 11 potentially productive oil and gas sands. Based on the estimated reserves of the field of 20 million barrels of oil, the oil would have an estimated value of $1.82 billion, based on the November 28, 2010, NYMEX price of $91.42 per barrel.

This joint venture is major step for the Company, and has three major benefits to Universal and its shareholders. First it allows Universal to acquire natural gas reserves from the ground, for a small fraction of the purchase costs that it currently pays to other producers that it markets natural gas for. Second it would provide Universal, with a source of natural gas of its own, which can be marketed to its major utility gas customers throughout the U.S. While most gas marketers are limited to a 1% to 2% profit on the spread of natural gas prices, (less than 1 cent per mcf), Universal’s exploration costs for its share of the field is estimated to be less than 10% of the NYMEX price for November 28, 2010, which is $4.26 per mcf, allowing Universal to earn a 90% gross profit, or $3.83 per mcf at current prices, on the spread of gas that it owns in the field, and that it sells into the market place. This will give Universal a distinct advantage in the marketplace and a considerably higher profit margin for gas that is sold to its customers. Third, while many gas marketing companies have to buy gas from others, their ability to purchase gas is somewhat subject to availability. Universal will be able to supply the natural gas produced, that it owns, as well as the natural gas of the other industry partners in the development of the field, such as Progas Energy, who have offered Universal the right to market their gas. Based on the estimated reserves of 17 billion cubic feet (bcf), (17 million mcf), of gas, this would have an estimated value of $72.4 million, based on the November 28, 2010, NYMEX price of $4.26 per mcf.

Mergers & Acquisitions. Management is planning for 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 to 3 years. Some companies being targeted are, natural gas producers, to obtain natural gas directly from the wellhead, solar energy companies for polymer based thin film solar cells, companies to build tidal energy facilities, and the acquisition of energy technology patents and licenses. We’re also looking at acquiring natural gas assets and properties in the Eagle Ford Shale region in south Texas, which has very large supplies of oil and natural gas. Acquiring interests in properties in this area will work very well with our strategic plans for Texas Gulf Oil & Gas Inc., and Progas Energy Services. We’re presently in discussions with a company, with a radical new frictionless wind energy technology, that improves wind energy capacity by as much as 80%. that we believe will totally revolutionize the industry. We’re also looking at algae based biofuels and other green energy technology products to bring to market.

National Stock Exchange Listing. With its planned growth by mergers, acquisitions, and future revenues, Universal’s 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 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.

Natural Gas 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. Total revenues for the period ending September 30, 2010 were $20,355,534, compared to no reported revenues for the same period in 2009. Current management has created significant value and generated revenues of $20,355,534, since the acquisition of NDR Energy on April 12, 2010, when previously there were no revenue generated in the prior 2 to 3 years.

In 2010, as we were building our business, we were revenue oriented, and focused primarily on generating substantial sales revenues first, building a strong foundation with a broad customer base, and gaining greater market share. Our goal was to gain the greatest share of the energy market in the shortest period of time. That strategy initially affected how we obtained our supplies, their relative cost, and how we ultimately priced our products for sell to our customers. To gain greater markets share in a rapid fashion, initially resulted in a higher ”burn rate", higher cost of goods sold, and it directly impacted our profitability. This caused almost negligible gross profit and negative earnings, in 2010. This strategy was only a temporary measure, while we were building greater market share, this past year.

The high proportionate cost of sales relative to the gross revenues, is also due in part to purchasing gas from some suppliers at close to retail cost, using their costly “trade credit”, and associated high financing costs, added to the gas by some suppliers. This has resulted in a reduced gross profit margin for this period of $22,637, Our goal was to build a solid customer base and revenues first. We believe we achieved that objective.

Our goal for 2011, since we have built a solid customer base, and captured a good share of the market, is to become more "profit oriented". We’ll have a different strategy for procuring our supplies, and the quantities and price points that we sell the product for, to our customers. That's why we’re contracting directly with the oil & gas producers to obtain our supplies from the wellhead. The Company is currently pursuing obtaining its own bank and funding “lines of credit”, instead of using the suppliers “trade credit”, to purchase the gas. This will allow us to purchase the gas in larger quantities, with greater economies of scale, on better terms, at lower purchase costs, and reduce the high financing costs. This means our cost of sales should significantly decrease, and our pricing structure to our customers will be more flexible, resulting in potentially higher profit margins for the Company.

Other “profit centers” that we plan to use to increase our revenues and profits, will include performing our own gas scheduling, gas nominations, capacity releases, transmission, pipeline balancing, risk management, storage and gas trading/hedging. We feel that by implementing these strategies and tactics, this should be very favorable for the Company and our shareholders.

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 $2,709,482, or 924% to $3,002,582 for the period ending September 30, 2010, compared to $293,100 for the same period in 2009. 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 continues to act 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 $34,455,243, in energy and fuel sales for the period of January 1, 2010 through September 30, 2010. Due to the acquisition, of the total of $34,455,243 in revenues, we have generated revenues of $20,355,534, from the close of the transaction through the end of September 30, 2010, although our cost of sales reduced our profit from these revenues to just over $22,637. 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 approximately 1,136,000 MMBtus or $4.84 million, in natural gas to each of its 22 customers on a monthly basis. This is based on the NYMEX Henry Hub December, 2010 MTD, (month-to-date) average price, of $4.26 per MMBtu’s. This would result in a projected 25,000,000 MMBtus monthly or $106.5 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 $1.278 billion in revenues annually from the sales of natural gas alone. This would result in a conservatively projected net profit to the Company of $25 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 remain as a going concern, and develop a long term profitable business, Management is planning to raise additional funds in debt or equity capital to fund the growth of our company. We anticipate using the proceeds to purchase some of the companies we have targeted for future acquisitions, and some for working capital. Management believes, although we cannot guarantee, and remains confident, that we will be able to raise capital in sufficient amounts to execute the business strategies, plans and decisions that have been made, and to meet the potential challenges in the current economic environment. 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.

Financial Restructuring Plan to Reduce Debt and Improve Balance Sheet. Management intends to restructure its Balance Sheet, by reducing its debt, and converting the balance of the outstanding debt on the Balance Sheet to shares of common stock, and issue the shares to its various Note Holders and creditors. This will result in an additional issuance of shares of stock that will likely increase the outstanding shares of the Company’s common stock to an amount exceeding 100 million shares. Many of the existing Notes carry interest rates that are very high, and that are above the current market rates. The benefit to the Company is to eliminate the outstanding debt and liabilities owed by the Company, reduce interest expenses, enhance our financial position, strengthen the Balance Sheet, and increase our liquidity. Management believes that taking these actions will improve our profitability, and allow us to pursue our strategies for our growth and expansion. This should also be very beneficial 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. Presently, UBNA’s plant is non-operational and the company is seeking new acquisitions in the natural and 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.

Net Loss as adjusted for non-recurring and/or non-cash expenses

	Nine Months Ended			Nine Months Ended
	September 30,			September 30,
	2010			2009

Losses available for common shareholders	$	(914,306	)	$	(847,409	)

Other non-cash expenses		873			-
Stock issued for services		332,007			307,999

Losses available for common shareholder, as adjusted	$	(581,426	)	$	(539,410	)

RESULTS OF OPERATIONS

Nine Months Ended September 30, 2010 compared to the Nine Months Ended September 30, 2009

Revenues

Our revenues for the three months ended September 30, 2010 were $6,388,639 as compared to $0 for the same period in 2009. Revenues for the nine months ended September 30, 2010 was $20,355,534 as compared to $0 for the same period in 2009. Our primary revenues from this period are from the sale of natural gas. We incurred losses of approximately $914,734 and $847,409 for the nine months ended September 30, 2010 and 2009. Our losses since our inception through September 30, 2010 amount to $15,691,766. We issued 5,983,450 of common shares for services with an aggregate fair value of approximately $332,007 that was included in the $933,327 in general and administrative expenses for the nine month period ended September 30, 2010. Excluding the value of the common shares of $332,007 from the general and administrative expenses of $933,327, would reduce the actual net G&A expenses to $601,320, and correspondingly reduce our actual net loss to $582,299 for the period ended September 30, 2010. This would reduce our actual net loss by a total of $265,110 or 31.28% to $582,299 from the period ending September 30, 2010 compared to $847,409 from the same period in 2009.

Operating Costs and Expenses.

Our Cost of Sales for the three months ended September 30, 2010 were $6,381,535 as compared to $0 for 2009. Cost of Sales for the nine months ended September 30, 2010 were $20,332,897 as compared to $0 for the same period in 2009. Our primary operation is the marketing of natural gas to our major customers nationwide.

Our general and administrative expenses for the three months ended September 30, 2010 were $530,093 as compared to $217,635 for 2009. General and administration expenses for the nine months ended September 30, 2010 were $933,327 as compared to $845,601 for 2009. The increase in general and administrative expenses was due to the additions to our management team and the hiring of consultants in anticipation of future acquisitions. We pay our employees and consultants largely in common shares as our cash availability is currently limited. We issued 5,983,450 of common shares for services with an aggregate fair value of approximately $332,007, that was included in the $933,327 in general and administrative expenses for the nine month period ended September 30, 2010.

Our “total assets” have increased by $2,709,482, or 924% to $3,002,582 for the period ending September 30, 2010, compared to $293,100 for the same period in 2009. 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.

Liquidity and Capital Resources

The Company looks to a variety of funding sources, to meet our short and long-term liquidity requirements. The Company currently generates the majority of its consolidated revenues and cash flow from the marketing and sale of natural gas to its 22 electric utility customers. The Company’s revenues, profits and future growth depend to a great extent on the prevailing prices of natural gas. The revenue, profitability and future growth of our Company, are largely dependent on a number of factors including, the prevailing and future prices for natural gas, which is also dependent or influenced by numerous factors beyond our control, such as regulatory developments, changing economic conditions, and competition from other energy sources.

Working Capital

Our working capital requirements increased significantly, and we incurred significant fluctuations in our working capital for this period. This resulted in a working capital deficit of $614,095 due to the acquisition of NDR Energy, the amount of funds borrowed from our creditors, our capital spending exceeding our cash flows from operations, and from the increase in accounts payable and accrued expenses.

Cash Flows

The prices and margins in the energy industry are normally volatile, and are driven to a great extent by market forces over which the Company has no control. Taking into consideration other extenuating factors, as these prices and margins fluctuate, this would result in a corresponding change in our revenues and operating cash flows. Our cash flows for the nine months ended September 30, 2010 and 2009 were as follows:

Cash Flows from Operating Activities

Our cash used in operating activities for the nine months ended September 30, 2010 was $270,726 as compared to $51,894 for the nine months ended September 30, 2009. The increase was primarily attributable to the costs associated with the launch of NDR’s natural gas operations.

Cash Flows from Investing Activities

Cash use in investing activities for the nine months ended September 30, 2010 was $27,061 as compared to $0.00 for the nine months ended September 30, 2009. The increase was related to the purchase of fixed assets of $13,094 and advances to an affiliate of $13,967.

Cash Flows from Financing Activities

Our cash provided by financing activities for the nine months ended September 30, 2010 was $312,119 as compared to $51,894 for the nine months ended September 30, 2009. The proceeds were from a series of convertible notes payables.

Liabilities / Indebtedness

Current liabilities increased to $3,043,869 for the nine months ended September 30, 2010, compared to $714,381 for the same period in 2009. This was primarily due to a $2,335,452 increase in accounts payable from the purchase of supplies of natural gas, accrued expenses and some costs incurred as part of the NDR Energy acquisition. Our long term liabilities have decreased by $537,721, or 63.27% to $312,119 for the period ending September 30, 2010, compared to $849,840 for the period ending December 2009. This was due to the conversion of certain notes payable, and accrued compensation to common stock to reduce the debt, and improve the balance sheet.

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. This note was converted to common stock and is no longer due.

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. This note converted $20,000 to common stock and has an outstanding balance of $2,500.

On May 24, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $10,500 at 10% interest. The holder has the right to convert the note to common stock on November 24, 2010 at $.05

On February 16, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $13,000 at 10% interest. The holder has the right to convert the note to common stock on August 17,2010 at $.05

On May 25, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $100,000 at 10% interest. The holder has the right to convert the note to common stock on November 25, 2010 at $.03

On July 15, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $4,500 at 10% interest. The holder has the right to convert the note to common stock on January 15, 2011 at $.05

On June 30, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $32,000 at 10% interest. The holder has the right to convert the note to common stock on December 31, 2010 at $.03

August 26, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $36,919 at 10% interest. The holder has the right to convert the note to common stock on February 28, 2011 at $.03

On August 30, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $25,300 at 10% interest. The holder has the right to convert the note to common stock on February 28, 2011 at $.05

On April 26, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $25,300 at 10% interest. The holder has the right to convert the note to common stock on October 26, 2010 at $.05

On March 30, 2010 the Company entered into a two (2) year convertible promissory note with a non-related creditor for $8,600 at 10% interest. The holder has the right to convert the note to common stock on September 30, 2010 at $.05

Off-Balance Sheet Arrangements

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

WHERE YOU CAN FIND MORE INFORMATION

You are advised to read this Form 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.

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions.

We based the forward-looking statements on our current expectations, estimates and projections about ourselves and the industries in which we operate in general. We caution you these statements are not guarantees of future performance as they involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following:

	a.	Fluctuations in crude oil, natural gas and natural gas liquids prices, refining and marketing margins.
	b.	Potential failures or delays in achieving expected reserve or production levels from existing and future oil and gas development projects due to operating hazards, drilling risks and the inherent uncertainties in predicting oil and gas reserves and oil and gas reservoir performance.

Failure of new products and services to achieve market acceptance.

Unexpected technological or commercial difficulties in manufacturing, refining or transporting our products.

Lack of, or disruptions in, adequate and reliable transportation for our crude oil, natural gas, natural gas liquids, LNG and refined products.

Inability to timely obtain or maintain permits, including those necessary for construction projects; or to comply with government regulations; or make capital expenditures required to maintain compliance.

Failure to complete definitive agreements and feasibility studies for, and to timely complete construction of, announced and future exploration and production, LNG, and transportation projects.

Potential disruption or interruption of our operations due to accidents, extraordinary weather events, civil unrest, political events or terrorism.

International monetary conditions and exchange controls.

Substantial investment or reduced demand for products as a result of existing or future environmental rules and regulations.

Liability resulting from litigation.

General domestic and international economic and political developments, including armed hostilities; expropriation of assets; changes in governmental policies relating to crude oil, natural gas, natural gas liquids or refined product pricing, regulation or taxation; other political, economic or diplomatic developments; and international monetary fluctuations.

Changes in tax and other laws, regulations (including alternative energy mandates), or royalty rules applicable to our business.

Limited access to capital or significantly higher cost of capital related to uncertainty in the domestic or international financial markets.

Inability to obtain economical financing for projects, construction or modification of facilities and general corporate purposes.

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 September 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 September 30, 2010, our internal control over financial reporting was effective.

a) Changes in Internal Control over Financial Reporting.

During the Quarter ended September 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. As of January 2, 2010, Mike Ator is no longer associated with the Company.

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.

b) Changes in Internal Control and Procedures

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company's internal controls and procedures as of September 30, 2009. Based upon our evaluation, Management has addressed the material weaknesses in our internal control deficiencies as follows:

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

· We have communicated a greater sense of control consciousness within our organization, and the critical nature of maintaining these controls in the current environment.

· We have engaged the services of Employees, Management, and outside professionals who have the qualifications and training to fulfill their assigned functions, with respect to preparing financial statements, reports and internal controls in accordance with. generally accepted accounting principles in the various transactions.

∙ Any deficiencies in terms of completeness, or accuracy in the internal control process must be reported to Management on a timely basis.

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

· To create an effective control environment, Management and those charged with corporate governance must assess the effect of any potential significant deficiency communicated to them, and correct the significant deficiency or material weakness that might exist in the internal control environment.

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’s growth by mergers and acquisitions, and by shifting our focus to invest in far more profitable alternative energy technologies. We believe, although we cannot guarantee, and remain confident, that we will be able to raise capital in sufficient amounts to execute the business strategies, plans and decisions that have been made by the Company, and to meet the potential challenges. 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 to achieve our goals and objectives. 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 may 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 may 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.

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 September 30, 2010. Except for the Company under terms of the above agreements, on March 26, 2010 the Company issued 1,411,150 to each officer and director of the Company with total shares issued of 4,233,450. The stock was trading at $.06 and the Company expensed $84,669 for each issuance of shares of stock with a total expense of $254,007. Also under the terms of his employment agreement and employee was issued 1,000,000 common shares at the trading price of $.06 and the Company expensed $60,000 as compensation.

On September 13, 2010 the Company converted is notes payable for a total of $47,936 and issued 2,000,000 common shares for that conversion. This conversion of debt reduced our notes payables of $42,500 and accrued interest of $5,436.

On September 27, 2010 the Company converted is accrued compensation for a total of $368,386 and issued 24,559,067 common shares for that conversion. This conversion of debt reduced our accrued compensation of $368,386.

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 September 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: January 18, 2011		By	/s/ Vince M. Guest
			Vince M. Guest
		Chief Executive Officer (Principle Executive Officer)
		Principle Financial Officer, and President

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Universal Bioenergy (UBRG) Inactive 10-Q2011 Q1 Quarterly report

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