10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

S QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES ACT OF 1934

For the quarterly period ended March 31, 2013

OR

£ 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)

(949) 559-5017

(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   S     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 S

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  S

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

Transitional Small Business Disclosure Format (check one): Yes £ No S

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  May 20, 2013
Common stock, $0.001 par value	2,538,903,268

(1)

UNIVERSAL BIOENERGY INC. 

INDEX TO FORM 10-Q FILING

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2013 AND 2012

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		PAGE #
Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Income	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management Discussion & Analysis of Financial Condition and Results of Operations	14
Item 3	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5	Other information	24
Item 6.	Exhibits	24

CERTIFICATIONS

Exhibit 3.1 – Management Certification……………………………………………………... 24

Exhibit 3.2 – Sarbanes-Oxley Act……………………………………….………………….. 24

(2)

PART I — CONSOLIDATED FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying reviewed interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2012. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that can be expected for the year ending December 31, 2013.

(3)

UNIVERSAL BIOENERGY, INC.

CONSOLIDATED BALANCE SHEETS AS OF:

ASSETS:
	March 31, 2013			December 31, 2012
CURRENT ASSETS:
Cash	$	2,675		$	2,274
Accounts receivable		3,819,006			4,800,967
Other loans		600			600
Total current assets		3,822,281			4,803,841
PROPERTY AND EQUIPMENT - net		6,335			6,989
OTHER ASSETS:
Accounts receivable - other		52,639			10,050
Investments		2,919,500			2,919,500
Intangible assets		250,000			250,000
Deposit		7,453			7,452
Total other assets		3,229,591			3,187,002
TOTAL ASSETS	$	7,058,207		$	7,997,832
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
CURRENT LIABILITIES:
Accounts payable	$	4,016,833		$	4,983,318
Other accounts payable and accrued expenses		395,922			185,422
Accrued interest payable		530,155			468,572
Line of credit		6,618			7,942
Current portion of long term debt		2,281,123			248,395
Derivative liability		225,393			350,237
Advances from affiliates		4,250			4,250
Total current liabilities		7,460,295			6,248,136
Long-term Debt
Notes payable		655,705			2,261,406
Notes payable - related parties		568,059			934,728
Total Long-term Debt		1,223,764			3,196,134
Principal reductions of notes payable and line of credit
TOTAL LIABILITIES		8,684,059			9,444,270
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.001 par value, 1,000,000 shares
authorized. Preferred stock Series A, zero issued and outstanding shares		—			—
March 31, 2013 and December 31, 2012, respectively.
Preferred stock Series B, 232,080 issued and outstanding shares
March 31, 2013 and December 31, 2012, respectively		232			232
Common stock, $.001 par value, 3,000,000,000 shares authorized;
852,950,389 and 673,521,813 issued and outstanding as of
March 31, 2013 and December 31, 2012, respectively		852,950			673,522
Additional paid-in capital		20,936,246			20,546,023
Noncontrolling interest		(268,773	)		(263,836	)
Accumulated deficit		(23,146,507	)		(22,402,379	)
Total stockholders' deficit		(1,625,853	)		(1,446,438	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	7,058,207		$	7,997,832
The accompanying notes are an integral part of these consolidated financial statements.

(4)

UNIVERSAL BIOENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	For The Quarters Ending
	3/31/13			3/31/12
REVENUES	$	12,400,975		$	13,007,160
COST OF SALES		12,382,523			12,989,939
GROSS PROFIT		18,452			17,221
OPERATING EXPENSES:
General and administrative		291,346			430,385
Sales and marketing		292			9,502
Depreciation and amortization expense		654			654
Total operating expenses		292,293			440,541
LOSS FROM OPERATIONS		(273,840	)		(423,320	)
OTHER INCOME (EXPENSE):
Other income		1,109			4,295
Initial (loss) on embedded derivatives issued		(17,929	)		—
Change in fair value of derivative liabilities		(106,176	)		—
Interest (expense), including amortization of beneficial conversion feature		(352,229	)		(277,557	)
Total other expense		(475,225	)		(273,262	)
(LOSS) FROM CONTINUING OPERATIONS		(749,066	)		(696,582	)
(LOSS) FROM DISCONTINUED OPERATIONS
Loss on sale of bio-diesel plant equipment		—			—
Net (Loss)		(749,066	)		(696,582	)
Net income (loss) attributable to noncontrolling interest		(4,937	)		(41,952	)
NET (LOSS) ATTRIBUTABLE TO UNIVERSAL	$	(744,128	)	$	(654,630	)
Principal reductions of notes payable and line of credit
Basic and diluted loss per share	$	(0.00	)*	$	(0.01	)
Weighted average of shares outstanding		184,927,248			57,398,748
* Less than $0.01 per share
The accompanying notes are an integral part of these consolidated financial statements.

(5)

UNIVERSAL BIOENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For The Quarters Ended
	3/31/13			3/31/12
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss)	$	(749,066	)	$	(696,582	)
Adjustments to reconcile net (loss) to net cash
(used in) operating activities:
Depreciation expense		654			654
Common stock issued for dividend		—			—
Common stock issued for services		—			5,000
Amortization of Beneficial conversion features		726,466			146,666
Loss from sale of equipment		—			—
Loss on embedded derivatives		—			—
Changes in assets and liabilities:
Accounts receivable		981,961			7,957,044
Prepaid expenses and other assets		(42,589	)		39,063
Accrued expenses and other liabilities		270,760			191,592
Accounts payable		(966,485	)		(7,934,972	)
Net cash provided by (used) in operating activities		221,701			(291,535	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in participation agreement - see note 10		—			—
Net cash provided by (used in) investing activities		—			—
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal reductions of notes payable and line of credit		(285,500	)		(316,884	)
Proceeds from notes payable issued and line of credit		64,200			626,864
Net cash provided by (used) in financing activities		(221,300	)		309,980
INCREASE (DECREASE) IN CASH		401			18,445
CASH, BEGINNING OF YEAR		2,274			3,706
CASH, END OF YEAR	$	2,675		$	22,151
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	—		$	—
Taxes paid	$	—		$	—
Investment in membership acquisition by issuing notes payable				$	2,000,000
Issuance of common stock for the conversion of debt	$	285,500		$	485,138
Common stock issued for intangible assets in acquisition	$	—		$	—
Convertible notes issued for accrued liabilities	$	13,580		$	18,764
Beneficial conversion feature of convertible notes payable	$	1,138,941		$	2,565,787
The accompanying notes are an integral part of these consolidated financial statements.

(6)

UNIVERSAL BIOENERGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012

NOTE 1 - DESCRIPTION OF BUSINESS

Overview of the Company

Universal Bioenergy Inc. (the “Company”) is an independent diversified energy company, headquartered in Irvine, California. Our common stock is presently listed on the OTC Markets Group trading systems under the trading symbol “UBRG”. Universal Bioenergy Inc. was incorporated on August 13, 2004, in the State of Nevada, under the name of Palomine Mining Inc. On October 24, 2007, the Company changed its name from Palomine Mining Inc. to Universal Bioenergy Inc. to better reflect its new business plan and strategic direction.

The Company’s primary business focus is the production, marketing, and sales of natural gas, petroleum, coal, propane, refined petroleum products, electricity, and alternative energy. Through its 49% owned subsidiary, NDR Energy Group LLC, the Company presently sells natural gas to 30 of the largest public utilities, electric power producers, and local gas distribution companies that serve millions of commercial, industrial, and residential customers throughout the United States. The Company is also engaged in the acquisition of oil and gas fields, lease acquisitions, development of newly discovered or recently discovered oil and gas fields, re-entering existing wells, and transmission and marketing of the products to our customer base. The Company intends to continue its growth through an ongoing series of acquisitions.

Our principal and administrative offices are located at 19800 MacArthur Blvd., Suite 300, Irvine, California, 92612. Our telephone number is 949-559-5017.

Universal Bioenergy files or furnishes various reports with the Securities and Exchange Commission (“SEC”). These reports, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“1934 Act”), are available free of charge on Universal Bioenergy’s corporate website, www.universalbioenergy.com, as promptly as practicable after they are filed with, or furnished to, the SEC. The information contained on this website is not incorporated by reference into this Quarterly Report on Form 10-Q and should not be considered part of this report. Reports filed with the SEC are also made available on its website at www.sec.gov.

Whitesburg Friday Branch Mine LLC

On February 20, 2012, the Company expanded into the coal energy market by the acquisition of forty percent (40%) of the Member Interests of Whitesburg Friday Branch Mine LLC, “Whitesburg”, a Kentucky limited liability company. “Whitesburg” is engaged in the business of coal mining, operations, and coal production, at a coal mining property known as the Whitesburg Friday Branch Mine, located at Friday Branch Road, in Whitesburg, Letcher County, Kentucky, for the marketing of “Thermal/Steam” non-coking coal in the United States of America. The Whitesburg Mine operates, mines, and markets thermal coal for sale to electric utilities for use in coal fired power plant electric generation. The Whitesburg mining operations are the surface and high wall mining type and do not include any underground mining.

Company History

Universal Bioenergy, Inc. (UBRG) 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. This corporation has been inactive since January 2009.

In October 2007, UBNA entered into a Purchase Agreement with UBRG in which UBNA became a subsidiary of UBRG. The purchase was consummated on December 6, 2007.

On October 24, 2007, the Company changed its name from Palomine Mining Inc., to Universal Bioenergy, Inc. to better reflect its business plan.

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

On April 12, 2010, Universal Bioenergy and NDR Energy Group, LLC, a Maryland limited liability company, entered into a Member Interest Purchase Agreement in which Universal Bioenergy purchased a 49% Member Interest NDR Energy Group. NDR Energy Group markets energy and fuel such as natural gas, and propane.

On February 20, 2012, the Company acquired forty percent (40%) of the Member Interests of Whitesburg Friday Branch Mine LLC, a Kentucky limited liability company. Whitesburg Friday Branch Mine LLC is engaged in the business of coal mining, operations, production, and marketing of “Thermal/Steam” non-coking coal at a coal mining property known as the Whitesburg Friday Branch Mine, located in Letcher County, in Whitesburg, Kentucky.

On February 27, 2013, the Company announced it had established a new division that will focus on the sales of coal for export to the international market. The new division will take advantage of the growing demand for coal in countries whose economies, and infrastructure are experiencing high growth, have a greater demand for energy, electric power and coal to produce electricity and to manufacture steel. These countries include China, India, South Korea, Mexico and some European countries, including Germany, England, Ireland and Poland.

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 months period ended March 31, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

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, 2012, as filed with the Securities and Exchange Commission.

(7)

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, LLC. 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 Energy Group LLC (“NDR”). Additionally, through Varlos Energy Holdings LLC, an entity owned by officers of the Company, it acquired an additional control of 2% financial interest in NDR for a total direct and indirect financial interest and control of 51% of NDR. The operating agreement of NDR provides for voting in proportion to ownership. The Company directly has 51% voting control of NDR through its 49% member interest, and through a Voting Trust which the Company has the 2% voting interest of Varlos Energy Holdings LLC, and has accordingly consolidated its financial position, results of operations, and cash flows into these financial statements.

Use of Estimates and Assumptions

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

Revenue and Cost Recognition

Revenue includes product sales. The Company recognizes 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”.

Management has considered the various factors discussed in ASC 605-45-14-4-c and ASC 605-45-45 and believe that our natural gas purchase and sale transactions are appropriately reported gross rather than net. Generally the Company is the primary obligor in the arrangement, and the Company has latitude in establishing price, discretion in supplier selection, and credit risk in the event our customer defaults on the transaction. Additionally, the Company’s supplier is not the primary obligor in the arrangement, and the amount the Company earns is not fixed. Those transactions where the Company operates as an agent or broker for either the supplier or the customer at a fixed fee are reported net.

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 March 31, 2013and December 31, 2012 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 follows:

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, 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, 2011, 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, and Charlotte, North Carolina. 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.  

The Company's financial instruments consist primarily of cash, and accounts payable.

Fair Value of Financial Instruments

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

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

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

Level 1	Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2	Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable or the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active.
Level 3	Inputs to the valuation methodology are unobservable and significant to the fair value

Reclassification

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

Recently Issued Accounting Standards

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition, or the consolidated results of its operations.

In July 2012, the FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment”. The guidance allows companies to perform a “qualitative” assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test.

ASU 2012-02 allows companies the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired before determining whether it is necessary to perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired. Companies can choose to perform the qualitative assessment on none, some, or all, of its indefinite-lived intangible assets; or choose to only perform the quantitative impairment test for any indefinite-lived intangible in any period.

In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114. , Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

In October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. 

These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

No other accounting standards or interpretations issued recently are expected to a have a material impact on the Company’s consolidated financial position, operations, or cash flows.

(8)

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 Three Months Ended
		March 31, 2013		March 31, 2012
Net Loss for common shareholders	$	(744,128)	$	(654,630)
Weighted average common shares outstanding	$	184,927,248	$	57,398,748
Basic and fully diluted net loss per share	$	(.00)	$	(.01)
Net 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 net loss per share.

NOTE 5 - EQUITY

On December 26, 2012, the Company amended its Articles of Incorporation, and increased the authorized shares of common stock from 1,000,000,000 to 3,000,000,000 shares at $.001 par value. There are 852,950,389 sharesof common stock issued and outstanding as of March 31, 2013.

On June 6, 2012, our Board of Directors passed a resolution, and declared a stock dividend to distribute to all registered shareholders of record on or before July 13, 2012, on a 10 for 2 basis. The Company issued two (2) shares of common stock for every ten (10) shares of common stock held by the shareholders of record.

The Company has authorized a total of 10,000,000 shares of Preferred Stock with a par value of $0.001 per share. On September 29, 2008, the Company authorized 100,000 Series A Preferred shares, and 232,080 Series B Preferred Shares of stock. As of September 30, 2012, there were no Series A preferred shares issued and outstanding, and a total of 232,080 Series B preferred shares issued and outstanding.

RECENT SALES OF UNREGISTERED SECURITIES

Common Stock Issued

For First Quarter Period Ending March 31, 2013

At March 3, 2013, there were no outstanding stock options or warrants.

On January 29, 2013, the Company completed the final, and full, conversion of one of its Notes payable, dated July 9, 2012, for a Note with a principle amount of $42,500, and a total of 20,723,759 common shares were issued. The final conversion of the Note included $42,500 in principal and $1,700 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $42,500.

On January 31, 2013, the Company completed the final, and full, conversion of one of its Notes payable dated March 7, 2012, for a Note with a principle amount of $30,000, and a total of 20,909,090 common shares were issued. The final conversion of the Note included $30,000 in principal and $4,500 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $30,000.

On February 13, 2013, the Company completed the final, and full, conversion of one of its Notes, payable dated May 21, 2012, for a Note with a principle amount of $45,000, and a total of 37,111,112 common shares were issued. The final conversion of the Note included $45,000 in principal and $5,100 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $45,000.

On February 15, 2013, the Company completed a partial conversion one of its Notes payable, dated March 30, 2012, with a principal amount of $123,600. A total of $29,500 worth of the Note was converted, and 29,500,000 common shares were issued for that part of the conversion; which leaves a remaining balance of $69,100 of the principal of the Note. No accrued interest was due on the Note upon conversion. This conversion of debt reduced the Company’s Notes Payables by $29,500. The conversion rate was reduced from $0.005 to $0.001 by resolution of Board of Directors to offset declines in the stock price. The stock closing price was $0.0045 on the issue date.

On March 14, 2013, the Company converted one of its Notes payable, dated August 9, 2012, with a principle amount of $38,000, and issued 30,984,615 common shares for that conversion. The final conversion of the Note included $38,000 in principal and $2,280 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $38,000.

On March 14, 2013, the Company converted one of its Notes payable, dated December 31, 2011, with a principle amount of $40,500, and issued 16,200,000 common shares for that conversion. The final conversion of the Note included $40,500 in principal and $0.00 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $40,500. The conversion rate was reduced from $0.02 to $0.025 by resolution of Board of Directors to offset declines in the stock price. The stock closing price was $0.0029 on the issue date.

On March 15, 2012, the Company completed a partial conversion of one of its Notes Payables, dated December 31, 2010, with a Note amount of $136,000. A total of $60,000 worth of the Note was converted by a non-affiliate assignee, and 24,000,000 common shares were issued for that conversion. No accrued interest was due on the Note upon conversion. This leaves a remaining balance of $76,000 on this Note. This conversion of debt reduced the Company’s Notes Payables by $60,000. The conversion rate was reduced from $0.015 to $0.025 by resolution of Board of Directors to offset declines in the stock price. The stock closing price was $0.0029 on the issue date.

Issuance of Preferred Shares

More detailed information about the issuance of preferred shares was discussed in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2011. The information is fully discussed in Part II, Item 8. – Note 4 – Equity, “Preferred Stock”, pages 41 through 42. There have been no material changes from the information previously disclosed in that Form 10-K/A.

NOTE 6 - PROPERTY AND EQUIPMENT

The Company has property and equipment as of March 31, 2013 and December 31, 2012 as follows:

		March 31, 2013		December 31, 2012
Equipment	$	13,094	$	13,094
Land		-		-
Building		-		-
Accumulated depreciation		(6,759)		(6,105)
Total	$	6,335	$	6,989

There was $654 and $654 depreciation expense for the three months ended March 3, 2013 and 2012 respectively.

(9)

NOTE 7 – NOTES PAYABLE

	March 31, 2013			December 31, 2012
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 at $.05.		25,300			25,300
On August 30, 2010 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $25,200 at 10% interest.  The holder has the right to convert the note to common stock at $.05.		25,200			25,200
On December 3, 2010 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $4800 at 10% interest.  The holder has the right to convert the note to common stock at $.005. Conversion price changed to $0.002 by Board.		4,800			4,800
On December 31, 2010 the Company entered into a two (2) year convertible Promissory Note with its President and CEO, Vince M. Guest for  $136,000 at 10% interest for the accrued compensation owed to him for the fiscal year 2010 in accordance with his Employment Agreement.  The holder has the right to convert the note to common stock at $015. Conversion price change to $0.0025 by Board. On March 15, 2013, $60,000 worth of the Note was converted by a non-affliate assignee, leaving a balance of $76,000.		76,000			136,000
On December 31, 2010 the Company entered into a two (2) year convertible Promissory Note with its Vice President Solomon Ali, for $165,000 at 10% interest for the accrued compensation owed to him for the fiscal year 2010 in accordance with his Employment Agreement.  The holder has the right to convert the note to common stock at $015. On July  12, 2012,  $100,000 worth of the Note was converted by non-affliates (assignees) to stock, leaving a balance of $65,000. Conversion price was changed to $0.005 by Board Resolution.  Converion price changed to $0.015 by Board.		65,000			65,000
On January 18, 2011 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $10,000 at 10% interest.  The holder has the right to convert the note to common stock at $.005. *See note below.		10,000			10,000
On January 19. 2011 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $10,000 at 10% interest.  The holder has the right to convert the note to common stock at $.005. *See note below.		10,000			10,000
On March 14. 2011 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $25,000 at 10% interest.  The holder has the right to convert the note to common stock at $005.		25,000			25,000
On March 14. 2011 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $25,000 at 10% interest.  The holder has the right to convert the note to common stock at $005.		25,000			25,000
On October 2, 2011 the Company entered into a three (3) year convertible Promissory Note with a non-related creditor for $202,200 at 10% interest.  The holder has the right to convert the note to common stock at $0.005. Conversion price changed to $0.002 by Board.		202,200			202,200
On October 23, 2011 the Company entered into a one (1) year convertible Promissory Note with a non-related creditor for $125,000 at 12% interest.  The holder has the right to convert the note to common stock at a 30% discount to the market price. This Note was sold on May 11, 2012 to another creditor, and an additional late fee of $5,000 was added to the principal of the note. Conversion price changed to $0.002 by Board.		130,000			125,000
On December 31, 2011 the Company entered into a two (2) year convertible Promissory Note with  its Vice President, Solomon Ali for $151,400 at 10% interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment Agreement.  The holder has the right to convert the note to common stock  at $0.01. Conversion price changed to $0.0025 by Board.		151,400			151,400
On December 31, 2011 the Company entered into a two (2) year convertible Promissory Note with  its Manager of Business Development, Don Deluna, for $40,500 at 10% interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment Agreement.  The holder has the right to convert the note to common stock at $0.02. Conversion price changed to $0.0025 On March 14, 2013 this Note was converted to stock.		—			40,500
On December 31, 2011 the Company entered into a two (2) year convertible Promissory Note with its President and CEO, Vince M. Guest for $162,175 at 10% interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment Agreement.  The holder has the right to convert the note to common stock at $0.01. Conversion price changed to $0.0025 by Board.		162,175			162,175
On December 31, 2011 the Company entered into a two (2) year convertible Promissory Note with  a non-related creditor  for $14,407.92 at 12% interest for consulting services provided to the Company in accordance with their Consulting Agreement.  The holder has the right to convert the note to common stock on  July 1, 2012 at $0.01.		14,407			14,407
On February 20, 2012 the Company entered into a two (2) year Promissory Note with a non-related creitor for $2,000,000 at 12% interest. The holder has the right to convert the note to common stock  at a 30% discount to market at the time of conversion. Conversion price changed to $0.002 by Board.		2,000,000			2,000,000
On February 29, 2012 the Company entered into a three (3) year convertible Promissory Note with a non-related creditor for $122,800 at 12% interest. The holder has the right to convert the note to common stock at $0.005. Conversion price changed to $0.002 by Board.		122,800			122,800
On March 7, 2012 the Company entered into a one (1) year convertible Promissory Note with a non-related creditor for $30,000 at 12% interest.  The holder has the right to convert the note to common stock  at a 50% discount to the market price. On January 31, 2013, this Note was converted to stock.		—			30,000
On March 15, 2012 the Company entered into a two (2) year convertible Promissory Note with  a non-related creditor for $70,000 at 12% interest.  The holder has the right to convert the note to common stock  at $0.008. Conversion price changed to $0.002 by Board.		70,000			70,000
On March 30, 2012 the Company entered into a three (3) year convertible Promissory Note with a non-related creditor for $123,600 at 12% interest. The holder has the right to convert the note to common stock at $0.005. On November 20, 2012, $25,000 worth of the Note was converted leaving a $98,600 balance. On February 15, 2013, $29,500 worth of the Note was converted leaving a $69,100 balance.		69,100			98,600
On April 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $75,000 at 12% interest. The holder has the right to convert the note to common stock at a fixed conversion price of $0.005 per share. Conversion price changed to $0.002 by Board.		75,000			75,000
On May 21, 2012 the Company entered into a eight (8) month convertible Promissory Note with a non-related creditor for $45,000 at 12% interest. The holder has the right to convert the note to common stock at a variable conversion price at 50% discount to the market price at the time of conversion. On February 13, 2013, this Note was converted to stock.		—			45,000
On May 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $31,100 at 12% interest. The holder has the right to convert the note to common stock at a fixed conversion price of $0.005 per share. Conversion price changed to $0.002 by Board.		31,100			31,100
On June 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $50,200 at 12% interest. The holder has the right to convert the note to common stock at a fixed conversion price of $0.005 per share. Conversion price changed to $0.002 by Board.		50,200			50,200
On July 2, 2012 the Company entered into a two (2) year Promissory Note with  its Vice President, Solomon Ali for $174,000 at 10% interest for a “special performance bonus” awarded him in accordance with his Employment Agreement. The Holder has the right to convert the Note to common stock at $0.005. Conversion price changed to $0.0025 by Board.		174,000			174,000
On July 2, 2012 the Company entered into a two (2) year Promissory Note with  its  President, Vince M. Guest for $174,000 at 10% interest for a “special performance bonus” awarded him in accordance with his Employment Agreement. The Holder has the right to convert the Note to common stock at $0.005. Conversion price changed to $0.0025 by Board.		174,000			174,000
On July 2, 2012 the Company entered into a two (2) year Promissory Note with  its Manager of Business Development, Donald DeLuna for $35,250 at 10% interest for a “special performance bonus” awarded him in accordance with his Employment Agreement. The Holder has the right to convert the Note to common stock at $0.005. Conversion price changed to $0.0025 by Board.		35,250			35,250
On July 9, 2012 the Company entered into a nine (9) month convertible Promissory Note with a non-related creditor for $42,500 at 8% interest.  The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion. Conversion price changed to $0.002 by Board. On January 29, 2013, this Note was converted to stock.		—			42,500
On July  12, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $36,000 at 10% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.005 per share.		36,000			36,000
On July 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $52,600 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.005 per share. Conversion price changed to $0.002 by Board.		52,600			52,600
On August 9, 2012 the Company entered into an eight (8) month convertible Promissory Note with a non-related creditor for $38,000 at 12% interest.  The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion. Conversion price changed to $0.002 by Board. On March 13, 2013, this Note was converted to stock.		—			38,000
On August 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $21,000 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.005 per share. Conversion price changed to $0.002 by Board.		21,000			21,000
On September  30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $57,500 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.005 per share. Conversion price changed to $0.002 by Board.		57,500			57,500
On October  10, 2012 the Company entered into a nine (9) month convertible Promissory Note with a non-related creditor for $42,500 at 8% interest.  The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion.		42,500			42,500
On October 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $15,403 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.		15,403			15,403
On November 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $135,100 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.		135,100			135,100
On December  5, 2012 the Company entered into an seven (7) month convertible Promissory Note with a non-related creditor for $51,500 at 12% interest.  The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion.		51,500			51,500
On December 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $121,150 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.		121,150			121,150
On December  31, 2012 the Company entered into an eight (8) month convertible Promissory Note with a non-related creditor for $42,500 at 8% interest.  The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion.		42,500			42,500
On December 31, 2012 the Company entered into a two (2) year convertible Promissory Note with  its Vice President, Solomon Ali for $162,500 at 10% interest for the accrued compensation owed to him for the fiscal year 2012 in accordance with his Employment Agreement.  The holder has the right to convert the Note to common stock at $0.0025.		162,500			162,500
On December 31, 2012 the Company entered into a two (2) year convertible Promissory Note with  its Manager of Business Development, Don Deluna, for $50,400 at 10% interest for the accrued compensation owed to him for the fiscal year 2012 in accordance with his Employment Agreement.  The holder has the right to convert the Note to common stock  at $0.0025.		50,400			50,400
On December 31, 2012 the Company entered into a two (2) year convertible Promissory Note with its President and CEO, Vince M. Guest for $130,000 at 10% interest for the accrued compensation owed to him for the fiscal year 2012 in accordance with his Employment Agreement.  The holder has the right to convert the Note to common stock at $0.0025.		130,000			130,000
On December 31, 2012 the Company entered into a two (2) year convertible Promissory Note with  a non-related creditor  for $39,851.60 at 12% interest for consulting services provided to the Company in accordance with their  Consulting Agreement.  The holder has the right to convert the Note to common stock at $0.0025.		39,851			39,851
On February 28, 2013 the Company entered into a three (3) year Promissory Note with a non-related creditor for $18,000 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.		18,000			—
On March 18, 2013 the Company entered into a nine (9) month convertible Promissory Note with a non-related creditor for $42,500 at 8% interest.  The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion. (Asher Enterprises)		42,500			—
On March 30, 2013 the Company entered into a three (3) year Promissory Note with a non-related creditor for $950.00 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.		950			—
Total long-term note payable	$	4,747,386		$	4,966,436
Less Current portion		(2,281,123	)		(248,395	)
Less Debt discount		(106,309	)		(125,091	)
Less Beneficial Conversion Feature		(1,138,941	)		(1,401,908	)
Long-term portion of notes payable	$	1,221,013		$	3,191,042

(10)

Principal maturities of notes payable as of March 31, 2013, for the next five years and thereafter is as follows:

2013	$903,283
2014	$2,875,702
2015	$786,953
2016	$21,700
2017	$ -0-
Total	$4,750,138

For the above convertible notes, pursuant to ASC Topic 470, the Company reviewed and determined that in most cases a beneficial conversion feature existed since the conversion price was less than market price at the date the notes were issued. The beneficial conversion feature is amortized over the life of the note using the interest method.

* For more information on the Convertible Notes see Part II - Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations under “Debt”, and Item 8 - Note 7, “Notes Payable”, and Part I – Item 1A, “Risk Factors”, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

(11)

Embedded Derivatives

Notes that are convertible at a discount to market are considered embedded derivatives. For more information on the Notes affected, refer to Management’s Discussion and analysis, and the above list.

Under Financial Accounting Standard Board (“FASB”), U.S. GAAP, Accounting Standards Codification, “Derivatives and Hedging”, ASC Topic 815 (“ASC 815”) requires that all derivative financial instruments be recorded on the balance sheet at fair value. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data; requiring judgment and estimates.

The Company issued convertible Notes, and has evaluated the terms and conditions of the conversion features contained in the Notes to determine whether they represent embedded or freestanding derivative instruments under the provisions of ASC 815. The Company determined that the conversion features contained in the Notes represent freestanding derivative instruments that meet the requirements for liability classification under ASC 815. As a result, the fair value of the derivative financial instruments in the Notes is reflected in the Company’s balance sheet as a liability. The fair value of the derivative financial instruments of the convertible Notes and warrants was measured at the inception date of the Notes and warrants, and each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded as non-operating, non-cash income, or expense at each balance sheet date.

The Company valued the conversion features in its convertible Notes using the Black-Scholes model. The Black-Scholes model values the embedded derivatives based on a risk-free rate of return ranging from 0.14% to 0.15%, grant dates of Notes, the term of the Notes, conversion prices ranging from 30% to 50% of current stock prices on the measurement date ranging from $0.0013 to $0.0022, and the computed measure of the Company’s stock volatility, ranging from 185.15% to 186.83%.

Included in the March 31, 2013, is a derivative liability in the amount of $225,393 to account for this transaction. This liability arose in the second quarter of 2012, and the balance was $350,237as of December 31, 2012. It will be revalued quarterly henceforth, and adjusted as a gain or loss to the statements of operations depending on its value at that time.

Included in our Statements of Operations for the three months ended March 31, 2013 and March 31, 2012, are $124,105 and $0 respectively in non-cash charges pertaining to the derivative liability as it pertains to change in derivative liability and amortization of debt discount, respectively.

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, 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 $6,500,000; 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.

The provision (benefit) for income taxes from continued operations for the three months ended March 31, 2013 and 2012 consist of the following:

		March 31, 2013		March 31, 2012
Current:
Federal	$	-	$	-
State		-		-
Deferred:
Federal	$	2,210,000	$	1,538,000
State		585,000		402,000
		2,795,000		1,940,000
Valuation allowance		(2,795,000)		(1,940,000)
(Benefit) provision for income taxes, net	$	-	$	-

The difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is as follows:

	March 31, 2013	March 31, 2012
Statutory federal income tax rate	34.0%	34.0%
State income taxes and other	9.0%	9.0%
Valuation allowance	(43.0%)	(43.0%)
Effective tax rate	-	-

Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset and liabilities result principally from the following:  

		March 31, 2013		March 31, 2012
Total deferred tax asset	$	2,795,000	$	1,940,000
Valuation allowance		(2,795,000)		(1,940,000)
Net deferred tax asset	$	-	$	-

The Company has a net operating loss carry forward of approximately $13,265,000; however, in accordance with IRC 382 the loss is limited to 49% of the loss carry forward. The loss is limited due to the change in control of at least 50%; therefore, this loss of approximately $6,500,000 is available to offset future taxable income through 2028.

During the three months ended March 31, 2013 and 2012 the valuation allowance increased by $1,140,000 and $250,000, respectively.

NOTE 9 – RELATED PARTY TRANSACTION

Related party transactions reported for this period are as follows:

There are no Related Party Transactions to report for this period.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;

There are no changes to report in our Board of Directors, Officers, or compensation arrangements for our Officers, during for the period ending March 31, 2013. The situation regarding these matters has not changed materially from the description in the Annual Report on Form 10-K for the period ended December 31, 2012.

(12)

NOTE 10 – ACQUISTION

Entry into a Material Definitive Agreement

Whitesburg Friday Branch Mine LLC

On February 20, 2012, Universal Bioenergy Corporation, a Nevada corporation (the “Company”), and Whitesburg Friday Branch Mine LLC, a Kentucky limited liability company (“WFBM” or “Whitesburg”), with its principal offices at 1541 Downtown West Boulevard, Knoxville, Tennessee 37919, entered into a Member Interest Exchange Agreement (the “Agreement”), dated October 17, 2011. Pursuant to the Agreement, and subject to the terms and conditions set forth therein, and the subsequent amendment to the Agreement dated February 20, 2012, (the “Amendment”), the Company acquired forty percent (40%) of the Member Interests of Whitesburg, from JLP and Partners LLC, a Kentucky Limited Liability Company (“JLP”), in exchange for consideration consisting of two million, seven hundred thousand dollars ($2,700,000) payable in cash, debt instrument and/or common stock of the Company pursuant to the terms and conditions set forth in the Agreement.

Pursuant to the Agreement, and following the execution of the Amendment, the parties properly and timely performed all terms and conditions as required pursuant to the Agreement, and therefore the transaction contemplated by the “Member Interest Purchase Agreement” (Agreement); and the Amendment was “closed” on February 20, 2012.

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

“Whitesburg” is engaged in the business of coal mining, operations, and coal production at a coal mining property known as the Whitesburg Friday Branch Mine, located at Friday Branch Road, in Whitesburg, Kentucky, for the marketing of “Thermal/Steam” non-coking coal in the United States of America.

Thermal/Steam coal is used as a primary source of energy for coal fired powered plant electric generation. The Whitesburg Mine operates, mines, and markets thermal coal in Letcher County in eastern Kentucky for sale to electric utilities for use in coal fired power plant electric generation. The Whitesburg mining operations are the surface and high wall mining type and do not include any underground mining. Whitesburg’s management has represented that it owns the leases for the coal mineral rights, and has the requisite mining permits from the State of Kentucky. Whitesburg Friday Branch Mine started full mining production in March 2012, and currently has coal on the ground ready to be delivered to its customers.

Universal’s management believes that the association with Whitesburg for the production and marketing of high grade thermal coal should give it a high margin energy product to sell to its electric utility and coal production customers.

Additional Summary of the Purchase Agreement

The Company was granted the right, but not the obligation, to conduct exploration, drill and develop the real property, to produce and market any and all Petroleum and Natural Gas (methane) and related hydrocarbons produced from the development the real property owned, managed or controlled by Whitesburg Friday Branch Mine, and from all geological formations under the property, and Leases, and/or from any new and/or existing gas wells.

The Company shall be granted One (1) Seat on “Whitesburg’s” Board of Directors, or appointed as a Managing Member to represent the interests of the Company and its shareholders, according to Whitesburg’s Operating Agreement.

Management determined that the Company was the acquirer in the business combination in accordance with FASB codification Topic 805, "Business Combinations", based on the following factors: (i) there was not a change in control of the Company since neither Whitesburg, nor any of the sellers obtained a controlling financial interest (ownership either directly or indirectly of more than 50 percent of the outstanding voting shares of the Company), or the power to control the Company through a lesser percentage of ownership by contract, lease, agreement with other stockholders, or by court decree; (ii) the Company was the entity in the transaction that issued its equity instruments (if any); and in a business combination, the acquirer usually is the entity that issues its equity interests; (iii) the Company’s pre-transaction directors retained the largest relative voting rights of the Company post-transaction; (iv) the composition of the Company’s current board of directors and management has not changed during this acquisition. The Company had no pre-existing relationship with Whitesburg.

NOTE 11– COMMITMENTS AND CONTINGENCIES

There are no Commitments and Contingencies to report for this period.

NOTE 12 – SUBSEQUENT EVENTS

The following events occurred subsequent to the period covered by this Form 10-Q Quarterly Report for the period ended March 31, 2013.

On April 1, 2013 the Company entered into an seven (9) month convertible Promissory Note with a non-related creditor for $19,500 at 12% interest. The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion.

On April 12, 2013, the Company completed a partial conversion one of its Notes payable dated March 30, 2012, with a principal amount of $123,600. A total of $20,100 worth of the Note was converted, and 20,100,000 common shares were issued for that part of the conversion, which leaves a remaining balance of $00.00 of the principal of the Note. No accrued interest was due on the Note upon conversion. This conversion of debt reduced the Company’s Notes Payables by $20,100.

On April 10, 2013, the Company converted a portfolio of 14 Promissory Notes payables, with a principle amount of $3,234,775 into common shares of stock and issued 1,568,630,000 common shares for that conversion. Previously, on January 11, 2013, a non-affliliated party purchased a portfolio of 14 of the Company’s Promissory Notes, in a private transaction directly from the individual Note Holders with a total principal amount of $3,234,775. The final conversion of these Notes included $3,234,775 in principal and $0.00 in accrued interest that was due on the Notes upon conversion. This leaves a remaining balance of $0.00 on these Notes. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $3,234,775. The 1,568,630,000 shares is the equivalent of 61.78% of the Company’s outstanding shares of common stock.

On April 15, 2013, the Company converted one of its Notes payable, dated August 30, 2010, with a principle amount of $25,300, and issued 22,000,000 common shares for that conversion. The final conversion of the Note included $25,300 in principal and $00.00 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $59,100 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $25,300.

On April 16, 2013, the Company completed the final, and full, conversion of one of its Notes payable, dated October 10, 2012, for a Note with a principle amount of $42,500, and a total of 35,923,077 common shares were issued. The final conversion of the Note included $42,500 in principal and $1,700 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $42,500.

On April 24, 2013, the Company completed a partial conversion one of its Notes payable dated March 30, 2012, with a principal amount of $123,600. A total of $49,000 worth of the Note was converted, and 39,299,802 common shares were issued for that part of the conversion. No accrued interest was due on the Note upon conversion. This conversion of debt reduced the Company’s Notes Payables by $49,000. A $49,000 portion of the original Note for $123,600 was acquired from the Note Holder by a non-related party. The $49,000 portion of the Note was purchased for $56,000, (for a premium of $7,000), and a modified note was issued for $56,000. This leaves a remaining balance of $7,000 of the principal of the Note.

On April 30, 2013 the Company entered into a three (3) year Promissory Note with a non-related creditor for $44,500 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.

(13)

NOTE 13 - GOING CONCERN ISSUES

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. The Company has accumulated losses totaling $23,146,507from its inception to March 31, 2013. Furthermore, the Company has consistently had to raise debt and equity capital to fund cash used in operations.

These factors raise doubt about the ability of the Company to continue as a going concern if the Company does not continue to raise sufficient amounts of capital. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Company's ability to meet its obligations and continue as a going concern is dependent upon its ability to obtain additional financing, achievement of profitable operations, and/or the discovery, distribution, and marketing of its supplies of natural gas, propane, and coal reserves.

The negative working capital at March 31, 2013, is a condition experienced by many high-growth companies similar to ours, and has not had a significant negative effect on our operations. This is due to our ability to raise capital; the contracts we have with our utility customers, their strong S&P credit ratings, and their consistent payment of our invoices on schedule. Due to the timing of the transactions we are able to maximize the efficiency of the billing and payment cycles, thereby minimizing the impact of any occasional periods of negative working capital. Additionally, our ability to purchase gas at the wellhead, from other independent producers at the producer’s price, and obtain lines of credit and accounts receivable facilities, should enable us to greatly improve our cash flow and increase our working capital.

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 from our current investors and creditors to achieve our goals and objectives. However, such financing from these investors and creditors 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 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.

The Company, in association with its investors and creditors, was able to raise sufficient amounts of capital to meet its operating expenses and working capital needs for the period ending March 31, 2013. We were also able to proceed with the acquisition of the ownership interest in a coal mining company; which management believes, but cannot guarantee, will generate additional revenue, positive working capital, and net earnings for the Company in the fiscal year 2013 and beyond.

NOTE 14 - CONCENTRATIONS

At March 31, 2013, 94%of the Company's accounts receivable was due from a single customer, during the three months ended March 31, 2013, and 85%of total revenue was generated from a single customer, for the three months ended March 31, 2012.

NOTE 15 - INVESTMENTSINPARTNERSHIPSANDLLC'S

Universal Bioenergy, Inc., isalimitedpartnerinProgas Energy Services, and is a minority member of Whitesburg Friday Branch Mine, LLC.

In 2011, the Company acquired a 7.5 percent interest in Progas Energy Services. The fair market value of which has not been established. Also in 2011, the Company acquired a 40 percent interest in Whitesburg Friday Branch Mine, LLC. The fair market value of which has not been established

Partnership	Percentage of Ownership			Book Equity 12/31/11		Partnership Contributions (Distributions)		Share of Net Income (Loss)		Book Equity 3/31/13
Progas Energy Services		7.5	%	$	189,500	$	0	$	5,564	$	195,064
Whitesburg Friday Branch Mine, LLC		40	%	$	700,000	$	2,000,000	$	0	$	2,700,000
Totals	$	889,500		$	2,000,000	$	5,564	$	2,895,064

* * * * * *

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.

(14)

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

The following discussion and analysis presents management’s perspective of our business, financial condition, and overall performance. This information is intended to provide investors with an understanding of our past performance, current financial condition, and outlook for the future; and should be read in conjunction with the financial statements presented herein and our reports filed with the Securities and Exchange Commission.

Included in this annual report are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA") as well as historical information.

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, planned capital expenditures, potential increases in prospective production costs, future cash flows and borrowings, pursuit of potential acquisition opportunities, the possibility that the industry may be subject to future regulatory or legislative actions (including additional taxes, changes in environmental regulation, and disclosure requirements under the Dodd-Frank Wall Street Reform and the Jobs Act of 2012 ), our financial position, business strategy and other plans, objectives for future operations, 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.

We claim the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.

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, 2012, as well as other factors that we are currently unable to identify or quantify but that may exist in the future.

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:

1. Fluctuations in crude oil, natural gas and natural gas liquids prices, refining and marketing margins.
2. 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.
3. Failure of new products and services to achieve market acceptance.
4. Unexpected technological or commercial difficulties in manufacturing, refining, or transporting our products.
5. Lack of, or disruptions in, adequate and reliable transportation for our crude oil, natural gas, natural gas liquids, liquefied natural gas (LNG) and refined products.
6. 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.
7. 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.
8. Potential disruption or interruption of our operations due to accidents, extraordinary weather events, civil unrest, political events, or terrorism.
9. International monetary conditions and exchange controls.
10. Substantial investment or reduced demand for products as a result of existing or future environmental rules and regulations.
11. Liability resulting from litigation.
12. 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.
13. Changes in tax and other laws, regulations (including alternative energy mandates), or royalty rules applicable to our business.
14. Limited access to capital or significantly higher cost of capital related to uncertainty in the domestic or international financial markets.
15. Inability to obtain economical financing for projects, construction, or modification of facilities and general corporate purposes.

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

Universal Bioenergy Inc. is an independent diversified energy company, headquartered in Irvine, California. Our common stock is presently listed on the OTC Markets Group under the trading symbol “UBRG”. Our Company was incorporated on August 13, 2004, in the State of Nevada, under the name of Palomine Mining Inc. On October 24, 2007, we changed our name from Palomine Mining Inc. to Universal Bioenergy Inc. to better reflect our new business plan and strategic direction.

Our primary business focus is the production, marketing, and sales of natural gas, propane, coal, oil, and alternative energy. Through our subsidiary NDR Energy Group, located in Charlotte, North Carolina,we presently sell natural gas. Through NDR Energy Group, we have contracts signed with 30 major utility companies in the United States with strong Standard & Poor’s credit ratings. NDR Energy Group markets and distributes natural gas and propane to 30 of the largest public utilities, electric power producers, and local gas distribution companies that serve millions of commercial, industrial, and residential customers throughout the country. Our customers include Southern California Gas Company, Pacific Gas & Electric, CenterPoint Energy Resources, Baltimore Gas & Electric, Memphis Light Gas & Water, Duke (Ohio & Kentucky), Michigan Consolidated, and National Grid. Our gas suppliers include EDF Trading, Chevron Texaco, Conoco Phillips, Chesapeake Energy Marketing, and Anadarko.

We are also engaged in the acquisition of oil and gas fields, lease acquisitions, development of newly discovered or recently discovered oil and gas fields, re-entering existing wells, and transmission and marketing of the products to our customer base. We are continuing our growth through an ongoing series of acquisitions.

Recent Developments and Significant Accomplishments

NDR Energy Signs MOU with Sacred Power to Market Solar and Wind Systems 

On January 3, 2013, the Company announced that NDR Energy Group signed a Memorandum of Understanding (MOU) with Sacred Power Corporation. In the joint venture Sacred Power will provide clean energy products and equipment, and NDR Energy will market their solar and wind power products and technologies, to its growing base of commercial, industrial, and municipal customers. Sacred Power Corporation is located in New Mexico, and provides renewable and distributive energy and telecommunications solutions, remote power systems, and grid tie photovoltaic power generators, to the government and commercial customers; including the U.S. Military, Department of Defense, Department of Energy, U.S. Forest Service, and NASA. Sacred Power provides government, commercial, and residential customers with Photovoltaic (PV), Renewable & Distributive Energy systems. These include PV polycrystalline and thin-film, wind turbines, solar hot water systems, solar hot air systems, and other distributive energy systems.

Universal Bioenergy Reports Firms Seeking to Acquire an Operating Interest in the Company

On January 08, 2013, the Company announced that it started preliminary discussions with several companies that have expressed an interest in acquiring an operating interest, or acquiring a significant equity stake, in the Company. The interest has come from companies that include the Company’s creditors, investors, and other firms. The Company has entertained preliminary discussions with these firms to determine the validity of the offers and the strength of the companies expressing an interest in a potential acquisition, or acquiring an operating interest in the Company. There can be no assurance that the preliminary discussions between Universal and these firms regarding their proposals will ultimately lead to a formal offer being made; or if a formal offer is made, that it will result in a completed transaction.

NDR Energy Group Signs Major Contract With Rainbow Energy Marketing to Market Electric Power

On January 22, 2013, the Company announced that NDR Energy Group signed a Master Power Purchase and Sale Agreement with Rainbow Energy Marketing Corporation to sell wholesale electric power. NDR Energy has been engaged in negotiations with several large electric power producers and marketers to purchase their bulk wholesale electric power. NDR Energy will sell the electric power to its electric utility customers to assist them in meeting the base load requirements of their customers, and also sell power to large commercial and industrial customers. Rainbow Energy Marketing is a subsidiary of a large diversified energy industry leader in acquiring, drilling, producing, and reworking oil and gas properties; as well as the wholesale buying and selling of natural gas and electricity throughout the United States and Canada. The company has been in the deregulated electric power industry since 1994, and has been focused on balancing supply and demand needs for electric utilities, independent power producers, and other market participants.

NDR Energy Group Announces Approval of FERC License to Market Electric Power

On February 12, 2013, the Company announced that NDR Energy Group received final approval for its “Power Marketing License” from the Federal Energy Regulatory Commission (FERC) in a move that positions the Company to engage in the buying and selling of wholesale and retail electricity. NDR Energy Group intends to market and distribute bulk wholesale and retail electric power to its current electric utility customer base, and its expanding customer base; which will include federal and state agencies, the U.S. military, cities, municipalities, and large commercial and industrial companies. NDR Energy will be able to offer integrated energy solutions that will assist its growing customer base to buy, manage, and use, electricity and natural gas.

(15)

NDR Energy Awarded Gas Supply Contract with Southern California Gas

On February 13, 2012, the Company announced that NDR Energy Group was awarded a contract to supply natural gas to Southern California Gas Company, a subsidiary of Sempra Energy. According to Southern California Gas Company, Southern California Gas Company is the nation’s largest natural gas distribution utility with 20.9 million customers. Under the terms of the contract NDR Energy Group is to supply the customer with an estimated 20,000 mcf per day, or a total of 560 million cubic feet (bcf) of natural gas for the month of February.

Universal Bioenergy Launches International Coal Division for Export to Foreign Markets

On February 22, 2013, the Company announced that it is planning to establish a new division that will focus on the sales of coal for export to the international market to generate additional revenues, higher margins, and potential profits. The new division will take advantage of the growing demand for coal in countries whose economies and infrastructure are experiencing high growth, have a greater demand for energy, electric power, and coal, to produce electricity, and to manufacture steel. These countries include China, India, and South Korea, Mexico, and some European countries; including Germany, England, Ireland, and Poland. Executives of Universal Bioenergy have engaged in direct meetings with representatives of the U.S. Department of Commerce in Irvine, California, to assist the Company in its efforts to export coal and other energy products to the international market. The Company will also be working the U.S. Department of Commerce’s offices in those targeted countries to facilitate the export of energy products to companies in those countries.

NDR Energy Awarded Gas Supply Contract with Ameren Illinois

In April 2013 NDR Energy was awarded a contract to supply natural gas to Ameren Illinois, the third largest natural gas distribution utility in Illinois. The parent company, Ameren Corporation is one of the largest investor owned utilities in the nation, and provides natural gas and electric service to approximately 2.4 million electric customers and nearly one million natural gas customers. Its parent company is traded on the NYSE.

NDR Energy Signs MOA with JSG Solar to Build a $167 Million Solar Power Farm

On May 6, 2013, NDR Energy Group signed a Memorandum of Agreement (MOA) with JSG Solar Inc., to build a solar power farm in eastern North Carolina, with an estimated cost of $167 million. The solar power facility would be owned by NDR Energy Group and built to generate 100MW (megawatts) of electricity for sale to public utilities in the North Carolina service area. NDR Energy Group is in discussion with an investment group in Ireland to obtain the required capital to build the facility. NDR Energy is also in discussions one of the largest electric power companies in the United States, that supplies and delivers energy to approximately 4 million customers to sell them the electric power via a 25 year term Power Purchase Agreement (PPA). The project is projected to generate an estimated $301 million in revenues over 25 years.

The final terms and conditions of the transaction are being negotiated, and will be determined in the definitive agreement. No assurances can be provided that a definitive agreement will be executed. Execution of a definitive agreement is subject to among other things, confirming due diligence by Universal, NDR Energy Group, standard regulatory approvals, and other conditions and approvals by both companies’ management and board of directors. The Company and NDR Energy Group can provide no assurances that the project will be constructed, and that if it is constructed it will be profitable for Universal.

NDR Energy Group Sets New Natural Gas Sales Record for April

In April 2013, NDR Energy Group sold an estimated 1.51 billion cubic feet (Bcf) of natural gas, setting a new record for the month April. The volume of natural gas sold by NDR Energy set a new record for April, is the highest in the Company’s history for April, and tops the previous record sales of 1.4 billion cubic feet of gas in April 2010. The 1.51 billion cubic feet of natural gas sold in April is a 8% increase over the 1.4 billion cubic feet of natural gas sold for the month of April 2010. The 1.51 billion cubic feet of natural gas sold in April also represents a 103% increase over the 0.74 billion cubic feet of gas sold for April of 2012.

Business Strategy

Our primary objective is be one of the top independent energy companies in the U.S., and to deliver maximum value to our shareholders, and generate increasing revenues and solid earnings for the long-term growth of our Company. By building on our successes in 2012 we plan, although we cannot provide assurances as to timing and attainment, to achieve these future objectives by pursuing the following strategies:

In the year 2010, management totally re-organized and re-structured the Company with a new strategic direction and business plan, of which these strategies were implemented in 2011 and are ongoing. Our primary objective is to exploit changes in the energy market, with the intent to propel the Company to a dominant market position, and be one of the top independent energy companies in the United States. Another major objective in our revised business plan is to finding new ways to create more value for our shareholders and investors. Our management intends to deliver greater value to our shareholders and investors by generating increasing revenues, producing solid earnings, and improving returns on invested capital for the long-term growth of our Company. We believe this is the ultimate measure of our success.

Mergers and Acquisitions

We plan to continue our growth by means of mergers and acquisitions of other companies in the natural gas, propane, petroleum, coal, and alternative energy industries. This may also include liquefied natural gas (LNG), compressed natural gas (CNG), biofuels, syngas, and acquisitions of patented energy technologies.

Vertical Integration

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 our customer.

Oil and Gas Field Development

We intend to pursue the acquisition of more oil and gas properties and assets. This includes existing oil and gas fields, development of newly discovered or recently discovered oil and gas fields, re-entering existing capped wells, and lease acquisitions. We especially have a high level of interest in the development of existing fields whereby we can re-enter previously drilled capped wells to extract the oil and gas using new drilling/extraction methods and techniques. Fields with previously drilled capped wells would be of highest priority for us, since they had been “proven wells” before, and would therefore have lower development costs and lower associated financial risks.

Own Our Oil and Gas Supply

We plan to own and/or control our own natural gas supply by obtaining the gas at the wellhead from supplies with large reserves and inventories to market and distribute directly to our growing customer base.

Increase Operating Income

We intend to increase our operating income and earnings by obtaining our gas at the wellhead at the producers’ price; and aggregating the purchase of our gas supply through a large number of independent producers with long-term purchase agreements to supply to our customers.

CORPORATE FINANCE

The Company’s Capital Structure

In management’s efforts to grow and expand the Company, we must obtain the necessary capital to achieve those objectives, and decide on the best methods to obtain that capital and the capital structure of the Company. The primary ways a company will raise capital is either through debt financing (borrowing money), or equity financing (selling a portion of the company via shares of stock), or a combination of both. The type of capital chosen (debt or equity), and methods of raising the capital depend on a number of factors including the company’s life cycle stage, e.g., start-up, development, high-growth or maturity, future growth prospects, strength of the national economy, and the credit markets.

Potential investors in any company, including ours, will consider those factors and the relative risks to their investment capital. To limit their risks, these investors may limit the size of their investment, or provide it to the company in stages, that is contingent upon the company reaching stated goals e.g., production, marketing, distribution, and revenues. The ultimate question for management is: How do you get the investors to commit to making what could be a high risk investment for them, although one that would correspondingly benefit the Company; however, one that the investor could lose if the Company were to fail?. Management considered both the equity and the debt financing options based on the Company’s life cycle stage, economy, credit, markets, and other circumstances at the time, and reached the following conclusions:

(16)

Equity Financing - Management decided not to raise capital through an equity offering in its initial start-up and development stage for a variety of reasons.

(1) The Company would have had to go through the process of filing a registration statement.

(2) The direct and indirect flotation costs of the issuance of an equity capital raise could have run $250,000 or more; and the Company did not have those funds available.

(3) It would have been very difficult to get an investment banker to underwrite a new issuance for a development stage company with a limited operating history and revenues.

(4) Many investors did not want to take an equity position in the Company at that time, and the corresponding risks of ownership.

(5) The issuance of equity to these investors, after resolving the potential regulatory hurdles, legal issues, time constraints, and costs, would have resulted in immediate dilution for the other shareholders; giving them only limited hopes that value would be created.

Therefore, due to the above stated reasons, the economic climate, and the Company’s circumstances at that time, management elected not to pursue raising capital through an equity offering at that time.

Debt Financing – Management elected to raise capital for the Company through debt financing for the following reasons:

(1) Due to the Companies rapid growth, it had immediate and continuous need for capital.

(2) The investors were more willing to invest funds more expeditiously, and take a creditor’s position instead of as an owner by taking an equity position.

(3) With those immediately available funds management could grow the Company rapidly, and create short-term economic value to the Company by closing on several target mergers and acquisitions prior to any equity dilution taking place.

(4) The investors were issued Promissory Notes that were unsecured without any collateral (taking a high risk).

(5) The Notes required no monthly payments which allowed us to use that free cash flow for operating expenses; reduced our cash outlays, interest payments, and improve our budget plans, and forecast our cash flow.

(6) The investor received the potential upside of conversion of the Notes into equity while protecting our downside with the use of the cash flow.

(7) Should the investors decide to convert their respective Notes into common stock, then the corresponding debt represented by that Note would be eliminated from the Company’s balance sheet. The respective investors typically will convert the principal balance on their Notes in 25% to 33% portions, and usually will not convert their Notes into more than 4.99% of the Company’s outstanding shares of stock at any time.

(8) The tax benefits of debt financing are that it’s less expensive while the Company is taxed on earnings, it is not generally taxed on borrowed money, and the interest on the Notes is tax deductible.

(9) Since the investors do not have any equity interests in the Company, they also have no voting rights or other control over the management of the Company, its operations, and no claim to its future earnings.

(10) If the Company ever suffers a negative financial situation, it is much easier to re-negotiate the terms of the Notes with the individual investors than with a bank, or a group of investors, through an equity or bond offering.

Based on the reasons above, and since the Company required immediate capital to rapidly expand, grow, restructure its operations, enter new markets, finance new acquisitions, and execute its marketing plans; raising capital through debt financing was our best alternative. This strategy resulted in our gaining a greater share of the energy market, increased revenues, increased assets, market capitalization value, and our shareholders owning a portion of a much larger and more valuable company. As the Company continues to advance and develop through the different stages of its business life cycle management will evaluate options, alternatives, and make strategic decisions for the best investment opportunities, financing, and capital structure at that time.

Accounts Receivables

We are currently seeking to obtain additional accounts receivable financing and commercial letters of credit to significantly improve our revenues and profits for the purchase and sale of natural gas. We currently invoice our customers between the 10th and 15th of the month for the previous month’s gas sales. The customer, in accordance with our “Purchase Agreement”, sends us full payment via wired funds by the 25th of the month, or 10 to15 days after receipt of our invoice.

Presently NDR Energy Group turns over its accounts receivables for the sale of natural gas about 7 to 12 times per year or every 30 to 40 days. We are currently in the process of re-negotiating our agreements with our electric utility customers to change the invoicing and payment terms from 30 to 40 days to invoicing them on a weekly basis. While there can be no guarantees, management believes that if implemented, this will increase the accounts receivables turnover times to 52 times per year, and will shorten the collection time that we receive payment on our customer’s invoices. This change coupled with the use of an accounts receivables factoring line will give NDR Energy the ability to purchase gas from our suppliers at larger discounts; thereby increasing the overall profit margin to as much as $0.07 to $0.20 per mcf (MMBtu) in the sale of gas to our existing customers.

The growth and position of NDR Energy Group will be further enhanced once the Company is able to sell off its account receivables. NDR Energy Group will then have the ability to purchase and sell gas more often; for example, on a daily and weekly basis instead of just on a monthly basis or longer. We believe this would also allow us to generate more accounts receivables, and purchase even larger quantities of gas. The profit margins for the sales of gas on the daily “Spot Market” and the weekly sales of gas is, in our estimation, significantly higher by as much $1.00 to $5.00 or more in the winter months than the margins on the NYMEX futures market. Therefore, it is critical that NDR Energy Group have access to accounts receivables (AR) funding line and Letters of Credit so it may take advantage of opportunities and discounts to sell gas on the daily and weekly time frames. It will also enable NDR Energy Group to develop new gas supplier relationships and agreements with better terms, conditions, and less restrictive repayment policies. There can be no assurances that these objectives can be attained.

Our Utility Customers

All of our utility customers are typically multi-million and multi-billion dollar municipally owned, or Fortune 500 investor owned publicly traded utilities with strong Standard & Poor’s credit ratings. We generally enter into a purchase or sales agreement with the customer and/or supplier using the North American Energy Standards Board (“NAESB”) “Base Contract for Sale and Purchase of Natural Gas”; which is the standard agreement used in the natural gas industry. The contract terms are usually 1 to 5 years to supply gas to its customers; however, in some cases shorter terms of 1 to 6 months will be considered for some customers. We will invoice the customers between the 10th and 15th of each month for the previous month’s gas sales; and the customer, in accordance with our “Purchase Agreement”, sends us full payment via wired funds by the 25th of the month, or 10 to15 days after receipt of the invoice. The customers have paid all of the invoices for the delivery of gas for the last 5 to 7 years without fail. This further reduces the risk to our Company and our shareholders.

Terminated Agreements

There are no terminated agreements to report for this reporting period.

(17)

THE COMPANY’S FUTURE PLANS AND OUTLOOK

Stock Dividends and Distributions

Due to management’s strong confidence in the current and future growth and expansion of the Company, it is considering additional ways to bring more value to our shareholders. We are considering, but can provide no assurances as to implementation, the following proposals for dividends and distributions:

1. A special dividend in the form of common stock;
2. Regular dividends issued in stock or cash (subject to the Company’s future earnings and availability of funds);
3. A dividend in the form of Preferred stock, or Preferred stock with the option to convert them to common stock. The issuance of any options or its exercise at a cost would be subject to SEC guidelines and a possible registration of an offering.
4. The issuance of warrants or options to buy additional shares from the Company, (subject to SEC guidelines).

In addition to potential price appreciation of the common stock, this could provide the shareholders with additional current income, cash flow, and (although we cannot guarantee it) the potential to earn higher returns from these stock dividends and distributions than they might earn on their other investments.

The Company’s management is currently evaluating the above proposals, and others in this regard, and its potential benefits to the shareholders and impacts on the Company. However, no decisions have been made regarding this matter. We believe this will reward our loyal shareholders for their ongoing support, and to give them a greater stake in our Company.

Universal Bioenergy Considers Changing Its Name

Our management is presently considering changing its name to reflect its current business model and its future growth as it continues to expand its marketing of natural gas, propane, petroleum, and thermal coal. The name Universal Bioenergy, reflected our original plans to produce and market “green” energy technologies; such as biodiesel fuel, solar, wind, wave, and other technologies. In December 2009, after conducting its business summit in Las Vegas, Nevada, on January 12, 2010, we announced that it was charting a bold new course for our Company. We shut down our biodiesel refinery in Nettleton, Mississippi in 2010, and later on March 31, 2011, we completed the dismantling of the facilities structures and plant equipment at the biodiesel refinery. This marked our exit from green energy technologies, and to grow and expand into more profitable conventional energy products and technologies. The name “Universal Bioenergy” has also caused some confusion in the minds of potential shareholders and investors because we no longer market and produce “green energy” products. We believe a strategic name change will help us to build a better “brand”, improve our image, attract more shareholders and investors, and more fully reflect the emphasis of our current and future business trends in the marketplace. On June 18^th 2010, the majority of the shareholders, and the Board of Directors each approved separate Resolutions to amend the Articles of Incorporation granting the Board of Directors the right to change our Company’s name. On May 9, 2011, we filed a Certificate of Amendment with the Nevada Secretary of State, to amend our Articles of Incorporation; which granted the Board of Directors the full right and authority to change the name of the Company at a future date without any shareholder action or approval.

Universal Bioenergy – Considers Options for Merger, Acquisition or Consolidation

Our management is considering the possibility of completing a merger or consolidation with another company to increase its market share, share price, market value, expand horizontally into other national or international geographical markets, expand vertically and create more value for its shareholders. Our Company’s management is currently evaluating the possibility of a merger or consolidation and its potential benefits and impacts on our Company; however, no decisions have been made regarding this matter. Any final proposals regarding this matter would be presented to the Board of Directors and the shareholders for approval as required by Federal and State laws, guidelines, and our corporate By-Laws.

The issues and benefits that would have to be considered include:

1. The potential value of the synergies and strategic fit of the target or acquiring company.
2. The financial, accounting, tax, and legal effects.
3. The acquisition or sell of stock and/or assets of either company.
4. Consideration of a merger or consolidation with another company to create a new stronger more valuable company.
5. Completion of a horizontal acquisition of a competitor or other company in our industry.
6. Completion of a vertical acquisition with another company either upstream or downstream in our industry that may include exploration companies, producers, distributors, and marketers.
7. Consideration of a triangular, or a reverse triangular, merger with a strong operating company on another exchange such as the NASDAQ, NYSE/AMEX or OTCBB.
8. Potential increase in the price of our common stock.
9. Economies of scale from the two companies combined resources.
10. Potential reductions in operating costs.
11. Potential to increase the earnings and earnings per share of the Company.
12. The potential to create more value for our shareholders.

Plans to Up-List to NASDAQ or other National Stock Exchange

Based on our growth by mergers, acquisitions, revenues, and future plans for expansion, our management is evaluating and positioning our Company to potentially qualify, and apply to up-list, to a major national stock exchange; which stock exchanges list similarly situated energy technology companies such as NASDAQ, NYSE Amex Equities, or others. Our management has already been in discussions with several investment bankers, advisory firms, and our securities counsel to review the exchange requirements, legal issues involved, improving our capital structure, procedural guidelines, and other related issues to qualify to be listed on one of the major national exchanges. Management believes that if we can successfully position our company to qualify to meet the listing requirements for one of the stock exchanges it would greatly increase our market value, and should make it attractive to more retail and institutional investors. We also feel this would be of great benefit to our shareholders. No assurances can be provided that this aspect of our long-term business plan will be achieved.

Consideration of Reverse Stock Split

As an additional requirement to qualify to be listed on one of the major national stock exchanges, management, in consultation with its accountants, auditors, investment advisors, and securities counsel, is considering the options of the benefits of implementing a reverse split of its common stock. If a reverse stock split were affected, it would result in a reduction in the number of the Company’s outstanding shares, and a corresponding increase in the price of our stock or its earnings per share. Some of the factors under consideration are:

1. Improving the liquidity and marketability of the stock to a more popular trading range to make it more attractive to institutional and other major investors.
2. Increase the price to a range to reflect the revenues, growth, and stability of the Company.
3. Increase the price to qualify for the minimum share price requirements to qualify for a major stock exchange such as NASDAQ or NYSE/AMEX.
4. The Company may consider purchasing the shares of some of the minority shareholders.
5. Allow the Company to raise more capital for its growth and expansion.

Management believes that the current stock price is currently undervalued, the share price does not fully reflect its true value in proportion to its operating fundamentals, and is not based on the Company’s rapid growth, revenues, acquisitions, and plans for expansion. Many institutional investors and investment funds have guidelines that prevent them from investing in our common stock at the current prices that the stock trades at. With a high stock price, it is possible that many institutional investors, larger private equity firms, hedge funds, pensions, and trusts that were previously prohibited from acquiring our shares could then purchase our shares. The reverse stock split of our shares of common stock may also help to create greater investor interest in the Company by producing a share price the common stock for our Company that is more consistent with other high growth companies of our size in our in the market place. If a reverse stock split was implemented it would reduce the amount of outstanding shares, increase our share price, and help the Company qualify to up-list to a major stock exchange such as NASDAQ, or NYSE/AMEX. Management believes this would be beneficial to our shareholders.

Our management is currently evaluating the possibility of a reverse stock split and its potential benefits and impacts on our Company; however, no decisions have been made regarding this matter. Any final proposals regarding this matter would be presented to the Board of Directors and the shareholders for approval as required by Federal and State laws, guidelines, and our corporate By-Laws.

(18)

Interest from Companies Wanting to Acquire Universal Bioenergy or its Assets

Management has on occasion received unsolicited letters of interest from several companies over the past few months that have expressed an interest in acquiring the Company, acquiring a large equity stake in the Company, or in purchasing some of its assets; such as our outstanding corporate debt, or electric utility customer contracts. These have come from companies that include, but are not limited to, our creditors, our investors, and other parties. The offers have been made either directly from those companies or through their representatives; in which case some of the companies have desired to remain anonymous for a period of time.

Management cannot initially determine the validity of the offer, and the strength of the companies expressing an interest in a potential acquisition, without opening some exploratory discussions and some reasonable measure of preliminary due diligence. Management will typically review all of these potential inquiries, or expressed interest. to ascertain if the offer is genuine, their true motivations, and attempt to gauge the real level of interest of the offer, prior to presenting it to the Board of Directors. In the event that management determines that an offer is serious, it may open discussions and sign appropriate non-disclosure documents, obtain a Letter of Intent or Term Sheet from the offeror, and begin its due diligence. Some of the factors that we will consider will be the financial strength of the company making the offer, obtaining the “best price” for the acquisition or the assets, the potential economic benefit to our shareholders, tax liability, legal issues, accounting and financial impacts, and the potential synergies and strategic fit of the acquiring company.

Acquisitions can take up a great deal of time and expense, and require that we engage our mergers and acquisitions (M&A) team of experts; including our experienced investment bankers, accountants, auditors, lawyers, and other technical personnel, to assist in the due diligence and closing the potential transaction. Control of, and proper disclosure of, factual information in these matters are critical; and unfounded rumors can have a potential negative impact on the Company and the transaction. Although we review and consider all unsolicited offers, no decisions have been made on any of these offers, and furthermore, we can provide no assurances that we would pursue, or otherwise enter into, a formal agreement for any of these transactions.

Therefore, when these potential transactions elevate to a situation whereby the Company either engages in serious discussions, negotiations, executes a Term Sheet, Letter of Intent, or it otherwise is deemed to be a material event, the Company will take the appropriate steps to timely disclose the information to the public and its shareholders in its regulatory filings.

New Business Model

Mergers and Acquisitions

Management has determined that it is in our best interests to chart a strategic course for the Company to grow faster by more mergers and acquisitions. Management is planning for expansion, by additional mergers and acquisitions to generate greater revenues and profits, and by shifting our focus to invest in far more profitable natural and alternative energy technologies. We anticipate, but can provide no assurances, of acquiring 5 to 10 acquisitions of additional new companies with revenues in the $10 million to $80 million range with stable cash flows and EBITDA’s in the $1 million to $8 million range in the next 1 to 3 years. The potential target’s profile will primarily include companies with well-established marketing and distribution channels, a defensible competitive position, and strong growth opportunities. This will also include companies that have a strong asset base with hard or fixed assets, property, plant, equipment, proprietary technologies, patents, and exclusive licenses. We are aggressively seeking potential acquisition targets to meet these objectives.

Some  companies being targeted are, oil producers, oil drilling companies, refined oil product producers, natural gas producers, gas marketers,  pipeline companies, pipeline construction companies, gas storage facilities, propane producers, high wall surface coal mines, refined oil product producers, and the acquisition of energy technology patents and licenses. We’re also looking at acquiring producing petroleum and gas wells, assets/properties, and related energy companies. Acquiring interests in properties in these areas will work very well with our strategic plans for the expansion of our subsidiary Texas Gulf Oil & Gas Inc.  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, but can provide no assurances, that this will bring even greater revenues for our Company, solid earnings, and bring more value to our shareholders.

Termination of Acquisitions

As part of our business strategy we review acquisition and strategic investment prospects that we believe would complement our current product offerings, augment our market coverage, or enhance our technological capabilities, or otherwise offer growth opportunities. From time to time we review investments in new businesses and we expect to make investments in, and to acquire, businesses, products, or technologies in the future. We expect to continue pursuing selective acquisitions of businesses. Very often during the acquisition and due diligence process management will not be able to consummate the transaction because we cannot close it on terms and conditions acceptable to us, or because of other negative factors as described below.

In the event that management and its acquisitions team have identified a strong potential target company, we will issue a Letter of Intent to start the due diligence process to acquire that company. Afterwards, our legal counsel will prepare a definitive agreement with all of the final terms and conditions to complete the acquisition. Proper due diligence for proper technical, financial, and legal review can be very expensive and time consuming. Often during the due diligence process we discover that the representations and warranties made by the target company regarding its business, operations, assets, financials, books, records, properties, contracts, liabilities, pending litigation, permits, licenses, and business status are not accurate or complete; there may be misrepresentations, or there is an adverse material change in the business prior to the closing of the acquisition. In that event, management will elect to terminate that acquisition to avoid any negative impacts on our operations, avoid any adverse legal and financial exposure to the Company, and to protect our shareholders. Due to these factors we, and other companies that pursue other companies as acquisition targets, do not expect that they will close on every potential acquisition target.

Market Expansion

Management believes that there are currently 3,240 utilities in the United States. Through NDR Energy Group, we have firm contracts signed with 30 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, and more customers for our gas supply division; thereby further increasing our revenues and profits. No assurances can be provided that such plans will come to fruition or be profitable.

Forecast of Projected Revenues and Earnings and Market Value

Our primary objective is to exploit changes in the energy market to propel the Company to a dominant market position, and be one of the top independent energy companies in the United States. Another major goal is to finding new ways to create more value for, and maximize the wealth of our shareholders; and bring increased value to our stakeholders and the investment community. The financial projections presented below are estimates based on Management’s analysis of the present targeted market segments of the energy industry we are involved in, future industry trends, our current and growing customer base, our strategic joint ventures, strategic alliances, and other capital development projects we are pursuing. The financial plan is intended for rapid but controlled growth and required our management to make certain assumptions and estimates.

Focus on Earnings

We achieved sales revenue of $12,400,975for the three months year ending March 31, 2013, as compared to $13,007,160 for the same period in 2012. Our cost of sales was$ 12,382,523for the three months ending March 3, 2013, as compared to $12,989,939 for the same period in 2012. While building our business, we focused on generating substantial sales revenues, a broad customer base, and gaining the greatest share of the market in the shortest period of time. That strategy affected how we obtained our supplies, their relative cost, and how we priced our products for sell to our customers. To gain a great market share in a short period of time, initially resulted in higher cost of goods sold, and selling the product, at or slightly below our costs, and that directly impacted our profitability. This caused almost negligible gross profit and negative earnings. This strategy was only a temporary measure while we were building greater market share, last year.  

A major goal for the fiscal 2013 year and beyond is to begin to generate earnings for the Company. We intend to increase our operating income and earnings through current and future acquisitions in the energy industry, and high profit centers; which will include gas storage, physical and financial gas trading, transportation, management, and higher sales of natural gas, propane, oil and coal. We also plan to obtain our natural gas supplies at the wellhead, and aggregating the purchase of our gas supply through a large number of independent producers with long-term purchase agreements to supply to our customers.

Our management’s plans for increasing earnings include the following:

• First, we are changing our strategy for obtaining our supplies of natural gas.

• Second, we are negotiating with independent oil and gas producers to obtain our supplies at the wellhead, and aggregating the supply under long-term supply agreements to market to our customers.

• Third, we engaged in a joint venture with Progas Energy Services to develop the Northwest Premont oil and gas field in Texas. We will obtain our share of the oil and gas from that field from the wellhead at the producer’s price.

• Forth, we are attempting to obtain more bank funding, lines of credit, and Letters of Credit, as opposed to using the suppliers “trade credit”, to purchase the gas.

• Fifth, we will be re-negotiating our existing supplier agreements 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 should drive our costs down, and potentially produce higher profit margins for our company.  

• Sixth, our management has decided to expand into the coal energy sector of the energy industry. Thermal/Steam non-coking coal is used as a primary source of energy for coal fired powered plant electric generation. We plan to mine, produce, and market “Thermal/Steam” coal to sale to other major coal producers and electric utility customers for power generation.

• Seventh, our Company, through NDR Energy Group, has expanded its product mix to include the sales and distribution of propane due to the higher profit margins.

• Eighth, we intend to expand into gas storage, physical and financial gas trading, transportation, and gas management.

(19)

New Profit Centers

We also plan to increase our revenues and profits by engaging in some, or all, of the services indicated below. These services are currently being provided to us by our natural gas suppliers and the cost for these services are charged to us, and are included in the price of the gas that we purchase from them. We believe implementing these new profit centers may generate an additional $0.05 to $0.25 in revenue per mcf of natural gas that we sell to our customers. These services include:

1. Scheduling - tracking nominations, confirmations, product movement, and verification

2. Gas Nominations - delivery of a specified volume over a defined period of time

3. Capacity Releases - release of transportation capacity on interstate natural gas pipelines

4. Gas Transmission - Delivery via the interstate pipeline system to the Local Utility and customers

5. Pipeline Balancing - matching customer's daily usage with the customer's confirmed pipeline delivery

6. Risk Management – developing supply pricing strategy, options, demand, daily and futures contracts

7. Gas Storage - match seasonal load variations, and production, over periods of fluctuating demand

8. Gas Trading - physical trading and financial trading, and hedging of gas futures

Value of Our Customer Contracts

Our customer contracts are a very valuable asset for us. Through NDR Energy Group we presently sell natural gas to 30 of the largest public utilities, electric power producers, and local gas distribution companies, which serve millions of commercial, industrial, and residential, customers throughout the United States. Since they are regulated by various Federal and/or State agencies, they must guarantee a constant uninterruptible supply of natural gas and electricity to their customers; which include private homes, commercial and industrial users, medical facilities, educational facilities, federal/ state buildings, the military, and many more. Therefore, the public gas and electric utility companies have very stringent guidelines about the suppliers and vendors they do business with. The pursuit and acquisition of new customers by us can be time consuming and very costly, especially when you are attempting to transact business with large national and multinational companies with very strict guidelines. They usually require us and NDR Energy to respond to a very rigorous Request for Qualifications (RFQ) or Request for Proposals (RFP) process; which includes extensive background information on the company, its officers, operations staff, financial stability, credit worthiness, track record, and our ability to furnish them with a firm, reliable, uninterruptible supply of natural gas. We are responsible for transportation of the gas to their contracted delivery points, any shortages, and the gas must meet certain standards in terms of quality, pressure, and heat content. There can also be substantial legal and monetary damages to us for failure to pay our suppliers for the gas, and for failure to deliver the gas to the utilities because they could not supply electricity and gas to the general public.

Management believes, but cannot guarantee, each of our customer contracts would have a potential to generate an estimated $12+ million annually in natural gas sales. We believe the retail value of each of these contracts could be very significant if someone were to purchase one or more these contracts based on their potential sales value over a period of 5 to 10 years or more.

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, that we can be successful in raising additional capital to fund our plans for growth and expansion.

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 our management has re-engineered our 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.

Corporate Governance and Management

Amendment to Company’s Articles of Incorporation

On December 26, 2012, the Company filed with the Nevada Secretary of State a Certificate of Amendment to the Company’s Articles of Incorporation. The Amendment was approved by a Unanimous Written Consent of all the Directors of Universal Bioenergy, Inc., on December 19, 2012, pursuant to the authority granted them by a “Written Consent Of The Holders Of A Majority Of The Voting Shares Of Universal Bioenergy, Inc.”, dated June 18, 2010; which granted to the Board of Directors the full right and authority to increase or otherwise change the authorized shares of Common Stock and Preferred Stock. The information regarding this issue was fully disclosed in the Company’s Form 8-K Report, filed on December 28, 2012. The information regarding this issue was originally fully disclosed in the Company’s Form 10-Q Reports that were filed for the quarterly periods ending June 30, 2011 and September 30, 2011, and the Form 8-K Report filed on May 19, 2011. A complete copy of the Amendment is attached as Exhibit 99.1. The Amendment incorporated the following changes:

a. Increased the number of authorized shares of the Corporation’s common stock from 1,000,000,000 to a total of 3,000,000,000 shares.

b. The total number of shares of "Preferred Stock" that the Corporation is authorized to issue is 10,000,000 shares with a par value of $0.001 per share.

Our Beneficial Shareholders

At March 31, 2013, there were 852,950,389shares of our Common Stock issued and outstanding, and there were approximately 69shareholders of record of our common stock on the records of our transfer agent. The shareholder of record is the name of an individual or entity that an issuer or transfer agent carries in its records as the registered holder (not necessarily the beneficial owner) of the issuer's securities. Dividends and other distributions are paid only to shareholders of record.

The actual “Beneficial Shareholder” (the true owner of the shares) will generally have their shares held in the “street name” of their nominee, within a brokerage account, a mutual fund, or a custodian bank for safety and convenience of trading, with the bank or broker holding title to the shares. The Depository Trust Company (DTC), through its partnership nominee CEDE & Company, is the largest shareholder of record of our shares of Common Stock. CEDE & Company, as nominee, holds over 554.38 million shares of our common stock for its Broker Dealers and other members on behalf of their beneficial shareholders. Management believes based on its tracking of the transactional record data of OTCMarkets / Pink Sheets of the total volume of stock trades and number of executed trades that the estimated amount of beneficial shareholders of our stock is in the range of 3000 to 5000 or more.

Management Incentive Programs

We have an incentive program for the Officers, in accordance with their Employment Agreements, whereby they may receive bonuses and equity awards based on the added “economic value” that they bring to our company. This may include increases in revenues, earnings, cash flow, debt reduction, return on net assets, return on stockholders equity, return on assets, return on capital, stockholder returns, return on sales, gross or net profit margin, productivity, expense, margins, operating efficiency, objective measures of customer satisfaction, working capital, financing, earnings per share, market share, inventory turns, acquisitions or strategic transactions, or other means of bringing additional value to our Company. Since management has deferred most or all of their compensation, provisions have been made to issue them long-termPromissory Notes for their salary, with the option to convert the Notes into to common stock of our company.

Discontinued Operations 

There are no Discontinued Operations to report for this period.

Net Loss as adjusted for non-recurring and/or non-cash expenses
		Three Months Ended		Three Months Ended
		March 31, 2013		March 31, 2012
Losses available for common shareholders	$	(744,128)	$	($654,630)
Other non-cash expenses		654		654
Stock issued for services		0		5000
Losses available for common shareholder, as adjusted	$	(743,474)	$	($648,976)

(20)

RESULTS OF OPERATIONS

Three Months Ended March 31, 2013 compared to the Three Months Ended March 31, 2013

Review and Analysis of Current Results of Operations

Revenues

Our revenues for the three months period ended March 31, 2013, decreased; they also decreased for the three months period ended March 31,2012, due to the following conditions in the U.S. energy market;

According to the Energy Information Administration, the warm weather this winter has resulted in natural gas working inventories that continue to set new record seasonal highs. EIA’s average 2012 Henry Hub natural gas spot price forecast is $3.17 per million British thermal units (MMBtu); a decline of about $0.83 per MMBtu from the 2011 average spot price. EIA expects that Henry Hub spot prices will average $3.96 per MMBtu in 2013.

According to Bloomberg / Business week, “The price of natural gas is at a 10-year low after a surprising jump in supplies. But the government says natural gas inventories expanded more than expected following a recent production boom. Supplies are currently 59 percent above the five-year average, and they're expected to keep growing over the next few months.”

Our primary revenues from this period are from the sale of natural gas and propane.  Our revenues for the three months ended March 31, 2013 were $12,400,975 as compared to $13,007,160 for the same period in 2012. This resulted in an decrease of $606,185in revenues or 4.89% over the previous year. Our Cost of Sales for this period was $12,382,943. This has resulted in a gross profit margin for this period of $18,452.  

The high proportionate cost of sales relative to the gross revenues reflected in this period is due to purchasing the gas from some of the suppliers at near retail cost, and high financing costs added to the gas by the suppliers. Management plans are to reduce the purchasing cost of the gas, and the financing cost, by obtaining our own credit facility and lines of credit and obtaining our gas at the wellhead. We believe this will allow us to purchase the gas in larger quantities, with greater economies of scale, on better terms, at lower costs, and reduce the high financing costs; thereby significantly increasing our gross profit.

Additionally, in 2012, while building our business, we focused on generating substantial sales revenues, a broad customer base, and gaining the greatest share of the market in the shortest period of time. That strategy affected how we obtained our supplies, their relative cost, and how we priced our products for sell to our customers. To gain a great market share in a short period of time initially resulted in higher cost of goods sold, and selling the product at or slightly below our costs; which directly impacted our profitability. This caused almost negligible gross profit and negative earnings in 2012; which continued in the second and third quarter of 2012. This strategy was only a temporary measure while we were building greater market share last year.  

We incurred losses of $744,128 for the three months ended March 31, 2013 and $654,630 for the same period in 2012. Our accumulated deficit since our inception through March 31, 2013 amounts to $23,146,507. We did not issue any common shares for services for this period which had an aggregate fair value of approximately $0.00 that was included in the $292,293 in general and administrative expenses for the three month period ended March 31, 2013. We also incurred interest expenses of $352,229. Excluding the value of the common stock that was issued for services, and interest expenses which together totaled $352,229, would correspondingly reduce our net loss of $744,128 to an adjusted net loss of $391,899 for the period ending March 31, 2013. Based on an adjusted net loss of $391,899, this loss equals only 3.16% of our total revenues of $12,400,975 for the period ended March 31, 2012, as compared to 1.13% for the same period ended 2012.*

*This disclosure of information as presented is a non-GAAP accounting measure, and is not based on GAAP accounting principles or guidelines.

Note! Regarding Increase in Expenses and Losses. This increase in operating expenses, and the resulting net loss, was primarily due to increases in accrued interest, the current portion of long term debt, and in embedded derivative liability costs as indicated below.

The Company issued convertible Promissory Notes, and determined that the conversion features contained in the Notes represent freestanding derivative instruments that meet the requirements for liability classification under Financial Accounting Standard Board (“FASB”), U.S. GAAP, Accounting Standards Codification, Derivatives and Hedging (Topic ASC 815). As a result, the fair value of the derivative financial instruments in the Promissory Notes is reflected in the Company’s balance sheet as a liability. The fair value of the derivative financial instruments of the convertible Notes and warrants was measured at the inception date of the Promissory Notes and warrants, and each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded as non-operating, non-cash income, or expense, at each balance sheet date.

The Company valued the conversion features in its convertible Promissory Notes using the Black-Scholes model. Included in our Statements of Operations for the three ended March 31, 2013, are $124,105 in non-cash charges pertaining to the derivative liability as it pertains to change in derivative liability and amortization of debt discount, respectively.

Operating Costs and Expenses

Our Cost of Sales for the three months ended March 31, 2013 were $12,382,523as compared to $12,989,939 for the same period in 2012.  Our primary operation is the marketing of natural gas and propane to our major customers nationwide. Our operating expenses for the three months ended March 31, 2013 were $292,293 as compared to $440,541 for the same period in 2012. We pay our employees and consultants largely in common shares as our cash availability is currently limited.

We decreased our total operating expenses from $440,541 for the period ending 2012, by a total of $148,248, or by 33.65%, to $292,293for the period ending March 31, 2013.

Based on business our plans for growth and expansion, and increasing revenues through sales of natural and other products, we believe we will reduce our net losses down to zero, and then move our company toward solid profitability.

Assets

Our “total assets” have increased by $1,823,678, or 3.84% to $7,058,207for the period ending March 31, 2013, compared to $5,234,529 for the same period in 2013. This was due to an increase in the amount of our Accounts Receivables from the sales of natural gas.

Liquidity and Capital Resources

Our management looks to a variety of funding sources to meet our short and long-term liquidity requirements. We currently generate the majority of our consolidated revenues and cash flow from the marketing and sale of natural gas and propane to its 30 electric utility customers through NDR Energy. Our revenues, profits, and future growth, depend to a great extent on the prevailing prices of natural gas. Our revenue, profitability, and future growth, 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 ($638,014) for the period ending March 31, 2013, as compared to a working capital deficit of ($922,031) for the period ending March 31, 2012. This increased our working capital deficit by $2,715,983 or by 200.95%. The working capital deficit was due to the amount of funds borrowed from our creditors, purchase of natural gas inventories and our capital spending exceeding our cash flows from operations.

We typically have positive cash flow and working capital each month to meet our capital requirements. The negative working capital for the period ending March 31, 2013, is an occasional event experienced by many companies, and has not had a significant negative effect on our operations. This is due to our ability to raise capital, the contracts we have with our utility customers, their strong S&P credit ratings, and their consistent payment of our invoices on schedule. Due to the timing of the transactions, we are able to maximize the efficiency of the billing and payment cycles; thereby minimizing the impact of any occasional periods of negative working capital. Additionally, as we purchase gas at the wellhead, obtain lines of credit and accounts receivable facilities, this should enable us to greatly improve our cash flow and increase our working capital.

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 we have 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 March 31, 2013 and 2012 were as follows:

Cash Flows from Operating Activities

Our cash provided by operating activities for the three months ended March 31, 2013 was $ 221,701 as compared to cash used in operating activities of $291,535 for the three months ended March 31, 2012. The decrease was primarily attributable to amortization of beneficial conversion feature and the accruing certain management salaries.

Cash Flows from Investing Activities

Cash used in investing activities for the three months ended March 31, 2013 was $0.00 as compared to cash provided by investing activities of $0.00 for the three months ended March 31, 2012.

Cash Flows from Financing Activities

Our cash used in financing activities for the three months ended March 31, 2013 wasas compared to $221,300 for the three months ended March 31, 2012. The net cash used in financing activities is primarily attributable to our Notes Payables.

Liabilities / Indebtedness

Current liabilities increased to $7,460,295 for the three months ended March 31, 2013, compared to $2,991,261 for the same period in 2012. This 149% increase was primarily due to a $1,978,420 increase in current portion of long term debt and an increase of $ 1,852,304 in accounts payable from the purchasing costs and supplies of natural gas. Our long term liabilities are $1,223,764 for the period ending March 31, 2013, compared to $1,392,487 for the three months ending March 2012. This increase was primarily due to the conversion of the accrued compensation and expenses of certain officers and employees into long term notes payable.

(21)

DEBT

Debt and Debt Financing

Long-Term Debt and Promissory Notes - In its efforts to expand and grow, we borrowed direct cash funds from various investors to raise capital, and we issued them debt instruments in the form of Promissory Notes to evidence that debt. These are long-term Notes with various rates and maturities that grant the Note Holder the right (but not the obligation) to convert them into shares of our common stock of the Company in lieu of receiving payment in cash. The issued Notes are primarily unsecured obligations. The principal amount of the Notes may be prepaid at the option of Maker, in whole or part at any time, together with all accrued interest upon written notice to Holder.

Many of these Notes have above market interest rates, and high price conversion discounts rates to market. Management issued the Note primarily for the following reasons.

a. Universal was considered a development stage company, with a limited operating history, and had limited revenues and earnings.

b. The investors that accepted a Note, with deferred payments, with the option to convert the Note to high risk penny stock, for the cash obligation, felt they were taking an extremely high risk.

c. The investors’ concern about the historically high inherent risks in penny stocks.

d. The investors’ concern about the lack of liquidity and limited trading volume in our stock.

e. The investors’ concern about the volatility of the stock price at that time.

f. A significant price discount to market was required by them to offset declines in the stock price to cover the risk of partial or even total loss.

g. The investors had very limited or no collateral for their investments or loans to the Company.

h. Many of the Notes were issued when our common stock was trading in the 2 cent to 3 cent range.

i. The loans were made on the best possible terms we could get from the investors at that time, because of the high risks, the recessionary economy and tight credit lending market at that time.

j. Due to these inherent risk factors, and their potential effect on the investors, the Board of Directors approved the conversion prices for the Notes in a range of $.005 to $.05 per share, or at a 30% to 50% discount to market.

The investors have provided us with critical short and long-term funds that we have used for operations, working capital, and investment capital, for our business acquisitions to expand and grow our Company. These investors invested funds in our Company when it was still a development stage company with a limited operating history, limited revenues, negative earnings, and limited stock liquidity. They accepted Promissory Notes with the option to convert them to shares of common stock, and were taking what was considered to be a high risk investment at that time. We retain the right to re-negotiate the terms and conditions of the Notes; including increasing the conversion prices if the stock price rises considerably and consistently over time, on terms that would be more favorable to us and our shareholders. It could take several years to convert all of the Notes to stock if all of the investors requested it. It is possible that some may never convert their Notes to stock and may take cash only when we are is in the best position to settle the obligation on a cash basis. No additional consideration was paid to convert any Note.

Most of the Notes that some of the investors elected to convert were not converted at the stated amount in the Note, (such as $0.005 in some cases), but were converted at a 30% to 50% discount to the market price at the time of conversion to reflect a re-negotiated conversion price due to a modification of the terms of the Note.

Should the investors decide to convert their respective Notes into common stock then the corresponding debt represented by that Note would be eliminated from the Company’s balance sheet. The respective investors typically will convert the principal balance on their Notes in 25% to 33% portions, and usually will not convert their Notes into more than 4.99% of the Company’s outstanding shares of stock at any time.

LIST OF PROMISSORY NOTES

List of Notes from January 1, 2013 through March 31, 2013

On February 28, 2013 the Company entered into a three (3) year Promissory Note with a non-related creditor for $18,000 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.

On March 18, 2013 the Company entered into a nine (9) month convertible Promissory Note with a non-related creditor for $42,500 at 8% interest. The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion.

On March 30, 2013 the Company entered into a three (3) year Promissory Note with a non-related creditor for $950.00 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.

If all of these Notes were converted to common stock it could take several years; and the amount of stock that could be issued cannot be determined. This would result in a dilution of the proportional, or percentage of ownership of the shareholders; however, we do not believe the value of the shareholders stock would be adversely affected. In an effort to build a strong operating company the officers and some our employees have not taken their salaries for the last few years, and have become creditors of the Company. The accrued compensation due them by the Company has become a debt or liability on the books. We have issued them Promissory Notes that include an option to convert the notes to shares of common stock to reflect these liabilities. This has reduced some of the need to borrow from outside creditors. They have also taken on the very same risks upon themselves as the outside lenders and creditors. The officers would prefer to be paid in cash as opposed to shares of common stock. If the officers ever elect to convert their Notes into shares of common stock the shares will be subject to Rule 144 restrictions as control securities when selling them into the market.

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 10-Q Report 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 10-Q, Annual Report on Form 10-K, and Form 10-K/A, 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.

(22)

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to risks associated with commodity prices and interest rates. Commodity price risk is the potential loss that we may incur as a result of changes in the fair value of a particular instrument or commodity. Interest-rate risk results from our portfolio of debt and equity instruments that we issue to provide financing and liquidity for our business activities.

Commodity Price Risk

Our most significant market risk relates to the prices we receive for our oil and natural gas production. Realized pricing is primarily driven by the prevailing worldwide price for crude oil, and spot market prices applicable to the production of oil and gas in the our U.S. and Canada. Pricing for oil and gas production has been volatile and unpredictable for several years.

Interest Rate Risk

We are subject to interest rate risk on our long-term fixed and variable interest rate borrowings. Fixed rate debt, where the interest rate is fixed over the life of the instrument, exposes us to (i) changes in market interest rates reflected in the fair value of the debt, and (ii) the risk that we may need to refinance maturing debt with new debt at a higher rate. Variable rate debt, where the interest rate fluctuates, exposes us to short-term changes in market interest rates as our interest obligations on these instruments are periodically re-determined based on prevailing market interest rates.

As of March 31, 2013, we were not engaged in any other activities that would cause exposure to the risk of material earnings or cash flow loss due to changes in interest rates or market commodity prices.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our principal executive officer, and our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the last day of the fiscal period covered by this report, March 31, 2013. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management; including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2013.

(b) Changes in Internal Control Over Financial Reporting

During the nine months ended March 31, 2013, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

(23)

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material changes to the information included in Item 3, “Legal Proceedings” in our 2012 Annual Report on Form 10-K. 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; with the exception of the legal proceeding indicated below;

On April 10, 2013, Modern Branding Solutions, (Plaintiff) filed a claim against the Company (Defendant) in the amount of $21,533.78 for unpaid services in the Superior Court of California, County of San Diego, for services provided to the Company. The Company is disputing and reviewing this Claim, and both parties are in negotiations to settle the dispute amicably outside of court.

ITEM 1A - RISK FACTORS

In addition to the other information set forth in this report the factors discussed in "Part I — Item 1A — Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, could materially affect our business, financial condition, or operating results. The risks described in our Annual Report on Form 10-K and our subsequent SEC reports are not the only risks facing us. There are additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial that may also materially adversely affect our business, financial condition, or operating results. While not required for smaller reporting companies, we include the following previously disclosed risk factors in addition to the risk factors previously provided:

THE MARKET PRICE OF OUR COMMON STOCK MAY LIMIT ITS ELIGIBILITY FOR CLEARING HOUSE DEPOSIT.

We are advised that if the market price for shares of our common stock is less than $0.10 per share, Depository Trust Company and other securities clearing firms may decline to accept our shares for deposit and refuse to clear trades in our securities.  This would materially and adversely affect the marketability and liquidity of our shares, and accordingly may materially and adversely affect the value of an investment in our common stock.

WE ARE AN “EMERGING GROWTH COMPANY” AND WE CANNOT BE CERTAIN IF THE REDUCED DISCLOSURE REQUIREMENTS APPLICABLE TO EMERGING GROWTH COMPANIES WILL MAKE OUR COMMON STOCK LESS ATTRACTIVE TO INVESTORS.

We are an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012 or JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”; including not being required to comply with the auditor attestation requirements of section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. An “emerging growth company” can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

WE WILL INCUR INCREASED COSTS AND DEMANDS UPON MANAGEMENT AS A RESULT OF COMPLYING WITH THE LAWS AND REGULATIONS THAT AFFECT PUBLIC COMPANIES, WHICH COULD MATERIALLY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS, FINANCIAL CONDITION, BUSINESS AND PROSPECTS.

As a public company, and particularly after we cease to be an “emerging growth company,” we will incur significant legal, accounting, and other expenses, that we did not incur as a private company; including costs associated with public company reporting and corporate governance requirements. These requirements include compliance with Section 404 and other provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC.

The increased costs associated with operating as a public company will decrease our net income, or increase our net loss, and may require us to reduce costs in other areas of our business. Additionally, if these requirements divert our management’s attention from other business concerns they could have a material adverse effect on our results of operations, financial condition, business, and prospects.

However, for as long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.”

If the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30, we would cease to be an “emerging growth company” as of the following June 30, or if we issue more than $1 billion in non-convertible debt in a three-year period, we would cease to be an “emerging growth company” immediately.

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 senior securities during the period ended March 31, 2013, except as follows for certain Promissory Notes (“Note”) and issuances of equity:

On January 29, 2013, the Company completed the final, and full, conversion of one of its Notes payable, dated July 9, 2012, for a Note with a principle amount of $42,500, and a total of 20,723,759 common shares were issued. The final conversion of the Note included $42,500 in principal and $1,700 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $42,500.

On January 31, 2013, the Company completed the final, and full, conversion of one of its Notes payable dated March 7, 2012, for a Note with a principle amount of $30,000, and a total of 20,909,090 common shares were issued. The final conversion of the Note included $30,000 in principal and $4,500 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $30,000.

On February 13, 2013, the Company completed the final, and full, conversion of one of its Notes, payable dated May 21, 2012, for a Note with a principle amount of $45,000, and a total of 37,111,112 common shares were issued. The final conversion of the Note included $45,000 in principal and $5,100 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $45,000.

On February 15, 2013, the Company completed a partial conversion one of its Notes payable, dated March 30, 2012, with a principal amount of $123,600. A total of $29,500 worth of the Note was converted, and 29,500,000 common shares were issued for that part of the conversion; which leaves a remaining balance of $69,100 of the principal of the Note. No accrued interest was due on the Note upon conversion. This conversion of debt reduced the Company’s Notes Payables by $29,500. The conversion rate was reduced from $0.005 to $0.001 by resolution of Board of Directors to offset declines in the stock price. The stock closing price was $0.0045 on the issue date.

On March 14, 2013, the Company converted one of its Notes payable, dated August 9, 2012, with a principle amount of $38,000, and issued 30,984,615 common shares for that conversion. The final conversion of the Note included $38,000 in principal and $2,280 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $38,000.

On March 14, 2013, the Company converted one of its Notes payable, dated December 31, 2011, with a principle amount of $40,500, and issued 16,200,000 common shares for that conversion. The final conversion of the Note included $40,500 in principal and $0.00 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $40,500. The conversion rate was reduced from $0.02 to $0.025 by resolution of Board of Directors to offset declines in the stock price. The stock closing price was $0.0029 on the issue date.

On March 15, 2013, the Company completed a partial conversion of one of its Notes Payables, dated December 31, 2010, with a Note amount of $136,000. A total of $60,000 worth of the Note was converted by a non-affiliate assignee, and 24,000,000 common shares were issued for that conversion. No accrued interest was due on the Note upon conversion. This leaves a remaining balance of $76,000 on this Note. This conversion of debt reduced the Company’s Notes Payables by $60,000. The conversion rate was reduced from $0.015 to $0.025 by resolution of Board of Directors to offset declines in the stock price. The stock closing price was $0.0029 on the issue date.

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.

(24)

Item 3.  Defaults Upon Senior Securities

There were no defaults upon senior securities during the period ended March 31, 2013.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5.  Other Information

There is no other information to report with respect to which information is not otherwise called for by this form except as follows:

On April 10, 2013, the Company converted a portfolio of 14 Promissory Notes payables, with a principle amount of $3,234,775 into common shares of stock and issued 1,568,630,000 common shares for that conversion. Previously, on January 11, 2013, a non-affiliated party purchased a portfolio of 14 of the Company’s Promissory Notes, in a private transaction directly from the individual Note Holders with a total principal amount of $3,234,775. The final conversion of these Notes included $3,234,775 in principal and $0.00 in accrued interest that was due on the Notes upon conversion. This leaves a remaining balance of $0.00 on these Notes. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $3,234,775. The 1,568,630,000 shares is the equivalent of 61.78% of the Company’s outstanding shares of common stock. The purchasing party was Global Energy Group, and its controlling person have not been disclosed to us and is undetermined at this time. The purchasing party is now deemed an affiliate.

Item 6.  Exhibits

Exhibit No.	Exhibit
3.1	Articles of Incorporation (1)
3.2	Bylaws (1)
3.3	Amendment to Articles of Incorporation (2)
3.3(a)	Amendment of Articles of Incorporation (7)
10.5	Employment Agreement by and between Universal and Dr. Richard Craven (3)
10.6	Employment Agreement by and between Universal and Vince M. Guest (4)
10.7	Employment Agreement by and between Universal and Solomon Ali (4)
14.1	Code of Ethics (5)
31.1	*Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes- Oxley Act.
31.2	*Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.1	*Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2	*Certification of Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

 ___________________________________________________________________

*filed herewith

(1) Incorporated by reference to the registration statement on Form SB-2 as filed on March 21,

2005.

(2) Incorporated by reference to the Current Report on Form 8-K as filed on October 31, 2007.

(3) Incorporated by reference to the Current Report on Form 8-K as filed on February 29, 2008.

(4) Incorporated by reference to the Form 10K for year ended December 31, 2009 as filed on

August 12, 2010.

(5) Incorporated by reference to the 2nd amended Form 10K/A for year ended December 31,

2007 as filed on January 4, 2010.

(6) Incorporated by reference to the 2nd amended Form 10K/A for year ended December 31, 2007 as filed on January 4, 2010.

(7) Incorporated by reference to the Current Report on Form 8-K as filed on December 28, 2012.

(25)

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: May 20,2013		By: /s/ Vince M. Guest
		Vince M. Guest
		President and Chief Executive Officer, Principle Financial Officer, Principal Accounting Officer and Director

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULES 13A-14 AND 15D-14

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Vince M. Guest, certify that: 

1.     I have reviewed this Quarterly Report on Form 10-Q of Universal Bioenergy, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the Registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and

d.   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Registrant Date: May 20, 2013	UNIVERSAL BIOENERGY, INC. By: /s/ Vince M. Guest
	Vince M. Guest
	President and Chief Executive Officer, Principle Financial Officer, Principal Accounting Officer and Director

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULES 13A-14 AND 15D-14

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Vince M. Guest, certify that: 

1. I have reviewed this Quarterly Report on Form 10-Q of Universal Bioenergy, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 c. Evaluated the effectiveness of the Registrant’s disclosure and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations: and

d.   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The Registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

Registrant Date: May 20, 2013	UNIVERSAL BIOENERGY, INC. By: /s/ Vince M. Guest
	Vince M. Guest
	President and Chief Executive Officer, Principle Financial Officer, Principal Accounting Officer and Director

EX-32.1

 Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Universal Bioenergy, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Vince M. Guest, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Registrant Date: May 20, 2013	UNIVERSAL BIOENERGY, INC. By: /s/ Vince M. Guest
	Vince M. Guest
	President and Chief Executive Officer, Principle Financial Officer, Principal Accounting Officer and Director

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Universal Bioenergy, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Vince M. Guest, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Registrant Date: May 20, 2013	UNIVERSAL BIOENERGY, INC. By: /s/ Vince M. Guest
	Vince M. Guest
	President and Chief Executive Officer, Principle Financial Officer, Principal Accounting Officer and Director

XML

NOTE 15 - INVESTMENTS IN PARTNERSHIPS AND LLC'S (Details Narrative)	Feb. 20, 2012	Dec. 01, 2011
Schedule of Investments [Abstract]
Progras Energy Services Acquisition Percent		7.5
Whiteburg Friday Branch Mine, LLC Aquisition Precentage	40	40

XML

NOTE 5 - EQUITY (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Apr. 30, 2013	Apr. 24, 2013	Apr. 16, 2013	Apr. 15, 2013	Apr. 12, 2013	Apr. 10, 2013	Apr. 01, 2013	Mar. 15, 2013	Mar. 14, 2013	Feb. 15, 2013	Feb. 13, 2013	Jan. 31, 2013	Jan. 29, 2013	Dec. 31, 2012	Dec. 26, 2012	Sep. 30, 2012	Sep. 30, 2008
Authorized Shares of Common Stock	3,000,000,000															3,000,000,000	3,000,000,000
Par Value Per Share	$ 0.001		$ 0.02									$ 0.0045				$ 0.001	$ 0.001
Common Stock Issued and Outstanding	852,950,389
Preferred Stock Authorized	1,000,000															1,000,000			10,000,000
Preferred Stock Par Value	$ 0.001															$ 0.001	$ 0.001		$ 0.001
Preferred Stock Series A Authorized	1,000,000															1,000,000			100,000
Series B Preferred Stock Authorized																		232,080
Series B Preferred Shares Issued and Outstanding																		232,080
Origninal Note Principal										$ 136,000	$ 38,000	$ 123,600	$ 45,000	$ 30,000	$ 42,500
Accrued Inrterest				0	1,700	0	0	0		0	2,280	0	5,100	4,500	1,700
Converted Amount			44,500	49,000	42,500	25,600	20,100	3,234,775		60,000	38,000	29,500		30,000	42,500
Common Shares Issued on conversion	285,500	485,138
Common Shares Issued on conversion										24,000,000	30,984,615	29,500,000	37,111,112
Debt on Notes Payable reduction				49,000	42,500	25,300	20,100	3,234,775			38,000	29,500	45,000
Common Stock Issued on Conversion														20,909,090	20,723,759
Reduction of Notes Payable										60,000	38,000	29,500	455,000	30,000	42,500
Balance of Notes Payable				56,000						76,000		69,100
Rate of Conversion									0.50	0.025		0.0001
Progas Energy Service
Origninal Note Principal										40,000
Accrued Inrterest										0
Converted Amount										40,000
Common Shares Issued on conversion										16,200,000
Debt on Notes Payable reduction										40,500
Reduction of Notes Payable										$ 40,500
Rate of Conversion										0.025

XML

NOTE 6 - PROPERTY AND EQIUPMENT (Details Narrative) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Property, Plant and Equipment [Abstract]
Depreciation Expense	$ 654	$ 654

XML

NOTE 7 - NOTES PAYABLE (Policies)

3 Months Ended

Mar. 31, 2013

Notes to Financial Statements

Embedded Derivatives

Embedded Derivatives

Notes that are convertible at a discount to market are considered embedded derivatives. For more information on the Notes affected, refer to Management’s Discussion and analysis, and the above list.

Under Financial Accounting Standard Board (“FASB”), U.S. GAAP, Accounting Standards Codification, “Derivatives and Hedging”, ASC Topic 815 (“ASC 815”) requires that all derivative financial instruments be recorded on the balance sheet at fair value. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data; requiring judgment and estimates.

The Company issued convertible Notes, and has evaluated the terms and conditions of the conversion features contained in the Notes to determine whether they represent embedded or freestanding derivative instruments under the provisions of ASC 815. The Company determined that the conversion features contained in the Notes represent freestanding derivative instruments that meet the requirements for liability classification under ASC 815. As a result, the fair value of the derivative financial instruments in the Notes is reflected in the Company’s balance sheet as a liability. The fair value of the derivative financial instruments of the convertible Notes and warrants was measured at the inception date of the Notes and warrants, and each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded as non-operating, non-cash income, or expense at each balance sheet date.

The Company valued the conversion features in its convertible Notes using the Black-Scholes model. The Black-Scholes model values the embedded derivatives based on a risk-free rate of return ranging from 0.14% to 0.15%, grant dates of Notes, the term of the Notes, conversion prices ranging from 30% to 50% of current stock prices on the measurement date ranging from $0.0013 to $0.0022, and the computed measure of the Company’s stock volatility, ranging from 185.15% to 186.83%.

Included in the March 31, 2013, is a derivative liability in the amount of $225,393 to account for this transaction. This liability arose in the second quarter of 2012, and the balance was $350,237as of December 31, 2012. It will be revalued quarterly henceforth, and adjusted as a gain or loss to the statements of operations depending on its value at that time.

Included in our Statements of Operations for the three months ended March 31, 2013 and March 31, 2012, are $124,105 and $0 respectively in non-cash charges pertaining to the derivative liability as it pertains to change in derivative liability and amortization of debt discount, respectively.

XML

NOTE 8 - INCOME TAXES - Provision (benefit) for Income Taxes (Details) (USD $)	3 Months Ended		204 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2028
Income Tax Disclosure [Abstract]
Federal			$ 6,500,000
State
Federal	2,210,000	1,538,000
State	585,000	402,000
Total for federal and state deferred tax	2,795,000	1,940,000
Valuation allowance	$ (2,795,000)	$ 1,940,000

XML

NOTE 13 - GOING CONCERNS (Details Narrative) (USD $)	Mar. 31, 2013
Notes to Financial Statements
Accumulated Losses	$ 23,220,685

XML

NOTE 7 - NOTES PAYABLE (Details Narrative)	3 Months Ended
	Mar. 31, 2013
Notes to Financial Statements
Risk-free rate minium	14.00%
Risk-free rate maximum	0.15
Conversion price of shares low	0.30
Conversion price of shares high	0.50
Stock Volatility low	18.515%
Stock volatility high	18.683%

XML

NOTE 4 - NET LOSS PER SHARE

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

NOTE 4 - NET LOSS PER SHARE

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 Three Months Ended
		March 31, 2013		March 31, 2012
Net Loss for common shareholders	$	(744,128)	$	(654,630)
Weighted average common shares outstanding	$	184,927,248	$	57,398,748
Basic and fully diluted net loss per share	$	(.00)	$	(.01)
Net 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 net loss per share.

XML

NOTE 8 - INCOME TAXES - Income Tax Expense Comparison (Details)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Income Tax Disclosure [Abstract]
Statutory federal income tax rate	34.00%	34.00%
State income taxes and other	9.00%	9.00%
Valuation allowance	(43.00%)	(43.00%)
Effective tax rate

XML

NOTE 8 - INCOME TAXES (Tables)

3 Months Ended

Mar. 31, 2013

Income Tax Disclosure [Abstract]

Provision (benefit) for Income Taxes

		March 31, 2013		March 31, 2012
Current:
Federal	$	-	$	-
State		-		-
Deferred:
Federal	$	2,210,000	$	1,538,000
State		585,000		402,000
		2,795,000		1,940,000
Valuation allowance		(2,795,000)		(1,940,000)
(Benefit) provision for income taxes, net	$	-	$	-

Income Tax Expense Comparison

	March 31, 2013	March 31, 2012
Statutory federal income tax rate	34.0%	34.0%
State income taxes and other	9.0%	9.0%
Valuation allowance	(43.0%)	(43.0%)
Effective tax rate	-	-

Deferred Income Taxes

		March 31, 2013		March 31, 2012
Total deferred tax asset	$	2,795,000	$	1,940,000
Valuation allowance		(2,795,000)		(1,940,000)
Net deferred tax asset	$	-	$	-

XML

NOTE 6 - PROPERTY AND EQIUPMENT (Tables)

3 Months Ended

Mar. 31, 2013

Property, Plant and Equipment [Abstract]

Property and Equipment

The Company has property and equipment as of March 31, 2013 and December 31, 2012 as follows:

		March 31, 2013		December 31, 2012
Equipment	$	13,094	$	13,094
Land		-		-
Building		-		-
Accumulated depreciation		(6,759)		(6,105)
Total	$	6,335	$	6,989

XML

NOTE 8 - INCOME TAXES - Deferred Income Taxes (Details) (USD $)	Mar. 31, 2013	Mar. 31, 2012
Income Tax Disclosure [Abstract]
Total deferred tax asset	$ 2,795,000	$ 1,940,000
Valuation allowance	(2,795,000)	(1,940,000)
Net deferred tax asset

XML

NOTE 15 - INVESTMENTS IN PARTNERSHIPS AND LLC'S (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Investments [Abstract]

Investment schedule

Partnership	Percentage of Ownership	Book Equity 12/31/11	Partnership Contributions (Distributions)	Share of Net Income (Loss)	Book Equity 3/31/13
Progas Energy Services	7.5%	$189,500	$0	$5,564	$195,064
Whitesburg Friday Branch Mine, LLC	40%	$700,000	$2,000,000	$0	$2,700,000
Totals		$889,500	$2,000,000	$5,564	$2,895,064

XML

NOTE 7 - NOTES PAYABLE (Tables)

3 Months Ended

Mar. 31, 2013

Notes to Financial Statements

Schedule of Notes Payable

2013	$903,283
2014	$2,875,702
2015	$786,953
2016	$21,700
2017	$ -0-
Total	$4,750,138

XML

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, LLC. 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 Energy Group LLC (“NDR”). Additionally, through Varlos Energy Holdings LLC, an entity owned by officers of the Company, it acquired an additional control of 2% financial interest in NDR for a total direct and indirect financial interest and control of 51% of NDR. The operating agreement of NDR provides for voting in proportion to ownership. The Company directly has 51% voting control of NDR through its 49% member interest, and through a Voting Trust which the Company has the 2% voting interest of Varlos Energy Holdings LLC, and has accordingly consolidated its financial position, results of operations, and cash flows into these financial statements.

Use of Estimates and Assumptions

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

Revenue and Cost Recognition

Revenue includes product sales. The Company recognizes 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”.

Management has considered the various factors discussed in ASC 605-45-14-4-c and ASC 605-45-45 and believe that our natural gas purchase and sale transactions are appropriately reported gross rather than net. Generally the Company is the primary obligor in the arrangement, and the Company has latitude in establishing price, discretion in supplier selection, and credit risk in the event our customer defaults on the transaction. Additionally, the Company’s supplier is not the primary obligor in the arrangement, and the amount the Company earns is not fixed. Those transactions where the Company operates as an agent or broker for either the supplier or the customer at a fixed fee are reported net.

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 March 31, 2013and December 31, 2012 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 follows:

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, 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, 2011, 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, and Charlotte, North Carolina. 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.  

The Company's financial instruments consist primarily of cash, and accounts payable.

Fair Value of Financial Instruments

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

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

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

Level 1	Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2	Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable or the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active.
Level 3	Inputs to the valuation methodology are unobservable and significant to the fair value

Reclassification

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

Recently Issued Accounting Standards

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition, or the consolidated results of its operations.

In July 2012, the FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment”. The guidance allows companies to perform a “qualitative” assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test.

ASU 2012-02 allows companies the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired before determining whether it is necessary to perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired. Companies can choose to perform the qualitative assessment on none, some, or all, of its indefinite-lived intangible assets; or choose to only perform the quantitative impairment test for any indefinite-lived intangible in any period.

In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114. , Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

In October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. 

These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

No other accounting standards or interpretations issued recently are expected to a have a material impact on the Company’s consolidated financial position, operations, or cash flows.

XML

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)	Mar. 31, 2013
Accounting Policies [Abstract]
NDR Energy Group financial interest1	0.49
NDR Energy Group financial interest2	0.02
Direct and Indirect controlling interest	0.51
Voting Control	0.51
Member Interest	0.49
Voting Trust interest	0.02

XML

NOTE 6 - PROPERTY AND EQIUPMENT - Property and Equipment (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Abstract]
Equipment	$ 13,094	$ 13,094
Land
Building
Accumulated depreciation	(6,759)	(6,105)
Total	$ 6,335	$ 6,989

XML

Consolidated Balance Sheets (Unaudited) (USD $)	Mar. 31, 2013	Dec. 31, 2012
CURRENT ASSETS:
Cash	$ 2,675	$ 2,274
Accounts receivables	3,819,006	4,800,967
Other loans	600	600
Total current assets	3,822,281	4,803,841
PROPERTY AND EQUIPMENT - net	6,335	6,989
OTHER ASSETS:
Accounts receivables - other	52,639	10,050
Investments	2,919,500	2,919,500
Intangible assets	250,000	250,000
Deposit	7,453	7,452
Total other assets	3,229,591	3,187,002
TOTAL ASSETS	7,058,207	7,997,832
CURRENT LIABILITIES:
Accounts payable	4,016,833	4,983,318
Other accounts payable and accrued expenses	395,922	185,422
Accrued interest payable	530,155	468,572
Line of Credit	6,618	7,942
Current portion of long term debt	2,281,123	248,395
Derivative liability	225,393	350,237
Advances from affiliates	4,250	4,250
Total current liabilities	7,460,295	6,248,136
Notes payable	655,705	2,261,406
Notes payable - related parties	568,059	934,728
Total Long term debt	1,223,764	3,196,134
TOTAL LIABILITIES	8,684,059	9,444,270
Preferred stock, $.001 par value; 1,000,000shares authorized, Preferred stock Series A, zero issued and outstanding shares March 31, 2013 and December 31, 2012, respectively
Preferred stock Series B, 232,080 issued and outstanding shares March 31, 2013 and December 31, 2012, respectively	$ 232	$ 232
Common stock, $.001 par value, 3,000,000,000 shares authorized; 852,950,389 and 673,521,813 issued and outstanding as of March 31, 2013 and December 31, 2012, respectively	852,950	673,522
Additional paid-in capital	20,936,246	20,546,023
Noncontrolling interest	(268,773)	(263,836)
Accumulated deficit	(23,146,507)	(22,402,379)
Total stockholders' deficit	(1,625,853)	(1,446,438)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 7,058,207	$ 7,997,832

XML

NOTE 15 - INVESTMENTS IN PARTNERSHIPS AND LLC'S - Ownership of Partnership Percentage (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2011
Progas Energy Service
Percentage of Ownership	75.00%
Book Equity	$ 195,064	$ 189,500
Partnership Contributions	0
Share of Net Income Loss)	5,564	0
WhitesburyFridayBranchMineLLC Member
Percentage of Ownership	40.00%
Book Equity	27,000,000	700,000
Partnership Contributions	2,000,000
Share of Net Income Loss)	$ 0

XML

NOTE 1 - DISCRIPTION OF BUSINESS

3 Months Ended

Mar. 31, 2013

Notes to Financial Statements

NOTE 1 - DISCRIPTION OF BUSINESS

NOTE 1 - DESCRIPTION OF BUSINESS

Overview of the Company

Universal Bioenergy Inc. (the “Company”) is an independent diversified energy company, headquartered in Irvine, California. Our common stock is presently listed on the OTC Markets Group trading systems under the trading symbol “UBRG”. Universal Bioenergy Inc. was incorporated on August 13, 2004, in the State of Nevada, under the name of Palomine Mining Inc. On October 24, 2007, the Company changed its name from Palomine Mining Inc. to Universal Bioenergy Inc. to better reflect its new business plan and strategic direction.

The Company’s primary business focus is the production, marketing, and sales of natural gas, petroleum, coal, propane, refined petroleum products, electricity, and alternative energy. Through its 49% owned subsidiary, NDR Energy Group LLC, the Company presently sells natural gas to 30 of the largest public utilities, electric power producers, and local gas distribution companies that serve millions of commercial, industrial, and residential customers throughout the United States. The Company is also engaged in the acquisition of oil and gas fields, lease acquisitions, development of newly discovered or recently discovered oil and gas fields, re-entering existing wells, and transmission and marketing of the products to our customer base. The Company intends to continue its growth through an ongoing series of acquisitions.

Our principal and administrative offices are located at 19800 MacArthur Blvd., Suite 300, Irvine, California, 92612. Our telephone number is 949-559-5017.

Universal Bioenergy files or furnishes various reports with the Securities and Exchange Commission (“SEC”). These reports, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“1934 Act”), are available free of charge on Universal Bioenergy’s corporate website, www.universalbioenergy.com, as promptly as practicable after they are filed with, or furnished to, the SEC. The information contained on this website is not incorporated by reference into this Quarterly Report on Form 10-Q and should not be considered part of this report. Reports filed with the SEC are also made available on its website at www.sec.gov.

Whitesburg Friday Branch Mine LLC

On February 20, 2012, the Company expanded into the coal energy market by the acquisition of forty percent (40%) of the Member Interests of Whitesburg Friday Branch Mine LLC, “Whitesburg”, a Kentucky limited liability company. “Whitesburg” is engaged in the business of coal mining, operations, and coal production, at a coal mining property known as the Whitesburg Friday Branch Mine, located at Friday Branch Road, in Whitesburg, Letcher County, Kentucky, for the marketing of “Thermal/Steam” non-coking coal in the United States of America. The Whitesburg Mine operates, mines, and markets thermal coal for sale to electric utilities for use in coal fired power plant electric generation. The Whitesburg mining operations are the surface and high wall mining type and do not include any underground mining.

Company History

Universal Bioenergy, Inc. (UBRG) 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. This corporation has been inactive since January 2009.

In October 2007, UBNA entered into a Purchase Agreement with UBRG in which UBNA became a subsidiary of UBRG. The purchase was consummated on December 6, 2007.

On October 24, 2007, the Company changed its name from Palomine Mining Inc., to Universal Bioenergy, Inc. to better reflect its business plan.

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

On April 12, 2010, Universal Bioenergy and NDR Energy Group, LLC, a Maryland limited liability company, entered into a Member Interest Purchase Agreement in which Universal Bioenergy purchased a 49% Member Interest NDR Energy Group. NDR Energy Group markets energy and fuel such as natural gas, and propane.

On February 20, 2012, the Company acquired forty percent (40%) of the Member Interests of Whitesburg Friday Branch Mine LLC, a Kentucky limited liability company. Whitesburg Friday Branch Mine LLC is engaged in the business of coal mining, operations, production, and marketing of “Thermal/Steam” non-coking coal at a coal mining property known as the Whitesburg Friday Branch Mine, located in Letcher County, in Whitesburg, Kentucky.

On February 27, 2013, the Company announced it had established a new division that will focus on the sales of coal for export to the international market. The new division will take advantage of the growing demand for coal in countries whose economies, and infrastructure are experiencing high growth, have a greater demand for energy, electric power and coal to produce electricity and to manufacture steel. These countries include China, India, South Korea, Mexico and some European countries, including Germany, England, Ireland and Poland.

XML

NOTE 10 - ACQUISTION (Details Narrative) (USD $)	Feb. 20, 2012	Dec. 01, 2011
Notes to Financial Statements
Whitesburg Acquisition Precentage	40	40
Business Acquisition Purchase Price	$ (2,700,000)

XML

NOTE 10 - ACQUISTION (Policies)

3 Months Ended

Mar. 31, 2013

Notes to Financial Statements

Entry into a Material Definitive Agreement

Entry into a Material Definitive Agreement

Whitesburg Friday Branch Mine LLC

On February 20, 2012, Universal Bioenergy Corporation, a Nevada corporation (the “Company”), and Whitesburg Friday Branch Mine LLC, a Kentucky limited liability company (“WFBM” or “Whitesburg”), with its principal offices at 1541 Downtown West Boulevard, Knoxville, Tennessee 37919, entered into a Member Interest Exchange Agreement (the “Agreement”), dated October 17, 2011. Pursuant to the Agreement, and subject to the terms and conditions set forth therein, and the subsequent amendment to the Agreement dated February 20, 2012, (the “Amendment”), the Company acquired forty percent (40%) of the Member Interests of Whitesburg, from JLP and Partners LLC, a Kentucky Limited Liability Company (“JLP”), in exchange for consideration consisting of two million, seven hundred thousand dollars ($2,700,000) payable in cash, debt instrument and/or common stock of the Company pursuant to the terms and conditions set forth in the Agreement.

Pursuant to the Agreement, and following the execution of the Amendment, the parties properly and timely performed all terms and conditions as required pursuant to the Agreement, and therefore the transaction contemplated by the “Member Interest Purchase Agreement” (Agreement); and the Amendment was “closed” on February 20, 2012.

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

“Whitesburg” is engaged in the business of coal mining, operations, and coal production at a coal mining property known as the Whitesburg Friday Branch Mine, located at Friday Branch Road, in Whitesburg, Kentucky, for the marketing of “Thermal/Steam” non-coking coal in the United States of America.

Thermal/Steam coal is used as a primary source of energy for coal fired powered plant electric generation. The Whitesburg Mine operates, mines, and markets thermal coal in Letcher County in eastern Kentucky for sale to electric utilities for use in coal fired power plant electric generation. The Whitesburg mining operations are the surface and high wall mining type and do not include any underground mining. Whitesburg’s management has represented that it owns the leases for the coal mineral rights, and has the requisite mining permits from the State of Kentucky. Whitesburg Friday Branch Mine started full mining production in March 2012, and currently has coal on the ground ready to be delivered to its customers.

Universal’s management believes that the association with Whitesburg for the production and marketing of high grade thermal coal should give it a high margin energy product to sell to its electric utility and coal production customers.

Additional Summary of the Purchase Agreement

Additional Summary of the Purchase Agreement

The Company was granted the right, but not the obligation, to conduct exploration, drill and develop the real property, to produce and market any and all Petroleum and Natural Gas (methane) and related hydrocarbons produced from the development the real property owned, managed or controlled by Whitesburg Friday Branch Mine, and from all geological formations under the property, and Leases, and/or from any new and/or existing gas wells.

The Company shall be granted One (1) Seat on “Whitesburg’s” Board of Directors, or appointed as a Managing Member to represent the interests of the Company and its shareholders, according to Whitesburg’s Operating Agreement.

Management determined that the Company was the acquirer in the business combination in accordance with FASB codification Topic 805, "Business Combinations", based on the following factors: (i) there was not a change in control of the Company since neither Whitesburg, nor any of the sellers obtained a controlling financial interest (ownership either directly or indirectly of more than 50 percent of the outstanding voting shares of the Company), or the power to control the Company through a lesser percentage of ownership by contract, lease, agreement with other stockholders, or by court decree; (ii) the Company was the entity in the transaction that issued its equity instruments (if any); and in a business combination, the acquirer usually is the entity that issues its equity interests; (iii) the Company’s pre-transaction directors retained the largest relative voting rights of the Company post-transaction; (iv) the composition of the Company’s current board of directors and management has not changed during this acquisition. The Company had no pre-existing relationship with Whitesburg.

XML

NOTE 12 - SUBSEQUENT EVENTS (Details Narrative) (USD $)	Apr. 30, 2013	Apr. 24, 2013	Apr. 16, 2013	Apr. 15, 2013	Apr. 12, 2013	Apr. 10, 2013	Apr. 01, 2013	Mar. 31, 2013	Mar. 15, 2013	Mar. 14, 2013	Feb. 15, 2013	Feb. 13, 2013	Jan. 31, 2013	Jan. 29, 2013	Dec. 31, 2012	Dec. 26, 2012
Subsequent Events [Abstract]
Convertible Promissory Note	$ 44,500	$ 123,600	$ 42,500	$ 235,200	$ 123,600	$ 3,234,775	$ 19,500
Interest Rate	0.12						0.12
Variable Conversion Price							0.50		0.025		0.0001
Converted Amount	44,500	49,000	42,500	25,600	20,100	3,234,775			60,000	38,000	29,500		30,000	42,500
Common Shares Issued on conversion		39,299,802	35,923,077	22,000,000	20,100,000	1,568,630,000
Accrued Inrterest		0	1,700	0	0	0			0	2,280	0	5,100	4,500	1,700
Debt on Notes Payable reduction		49,000	42,500	25,300	20,100	3,234,775				38,000	29,500	45,000
Precentage of outstanding shares						60.78
Balance of Notes Payable		$ 56,000							$ 76,000		$ 69,100
Par Value Per Share	$ 0.02							$ 0.001			$ 0.0045				$ 0.001	$ 0.001

XML

NOTE 9 - RELATED PARTY TRANSACTON (Policies)

3 Months Ended

Mar. 31, 2013

Related Party Transactions [Abstract]

Departure of Directors/Officers

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;

There are no changes to report in our Board of Directors, Officers, or compensation arrangements for our Officers, during for the period ending March 31, 2013. The situation regarding these matters has not changed materially from the description in the Annual Report on Form 10-K for the period ended December 31, 2012.

XML

NOTE 2 - BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2013

Notes to Financial Statements

NOTE 2 - BASIS OF PRESENTATION

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 months period ended March 31, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

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, 2012, as filed with the Securities and Exchange Commission.

XML

Consolidated Balance Sheets (Parenthetical) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Statement of Financial Position [Abstract]
Preferred Stock A, par value	$ 0.001	$ 0.001
Preferred Stock, shares authorized	1,000,000	1,000,000
Preferred Stock, shares issued	0	0
Preferred Stock, shares outstanding	$ 0	$ 0
Preferred Stock B, par value	$ 0.001	$ 0.001
Preferred Stock, shares authorized	1,000,000	1,000,000
Preferred Stock, shares issued and outstanding	232,080	232,080
Common Stock, par value	$ 0.001	$ 0.001
Common Stock, shares authorized	3,000,000,000	3,000,000,000
Common Stock, shares issued	852,950,389	673,521,813
Common Stock, shares outstanding	852,950,389	673,521,813

XML

NOTE 12 - SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2013

Subsequent Events [Abstract]

NOTE 12 - SUBSEQUENT EVENTS

NOTE 12 – SUBSEQUENT EVENTS

The following events occurred subsequent to the period covered by this Form 10-Q Quarterly Report for the period ended March 31, 2013.

On April 1, 2013 the Company entered into an seven (9) month convertible Promissory Note with a non-related creditor for $19,500 at 12% interest. The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion.

On April 12, 2013, the Company completed a partial conversion one of its Notes payable dated March 30, 2012, with a principal amount of $123,600. A total of $20,100 worth of the Note was converted, and 20,100,000 common shares were issued for that part of the conversion, which leaves a remaining balance of $00.00 of the principal of the Note. No accrued interest was due on the Note upon conversion. This conversion of debt reduced the Company’s Notes Payables by $20,100.

On April 10, 2013, the Company converted a portfolio of 14 Promissory Notes payables, with a principle amount of $3,234,775 into common shares of stock and issued 1,568,630,000 common shares for that conversion. Previously, on January 11, 2013, a non-affliliated party purchased a portfolio of 14 of the Company’s Promissory Notes, in a private transaction directly from the individual Note Holders with a total principal amount of $3,234,775. The final conversion of these Notes included $3,234,775 in principal and $0.00 in accrued interest that was due on the Notes upon conversion. This leaves a remaining balance of $0.00 on these Notes. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $3,234,775. The 1,568,630,000 shares is the equivalent of 61.78% of the Company’s outstanding shares of common stock.

On April 15, 2013, the Company converted one of its Notes payable, dated August 30, 2010, with a principle amount of $25,300, and issued 22,000,000 common shares for that conversion. The final conversion of the Note included $25,300 in principal and $00.00 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $25,300.

On April 16, 2013, the Company completed the final, and full, conversion of one of its Notes payable, dated October 10, 2012, for a Note with a principle amount of $42,500, and a total of 35,923,077 common shares were issued. The final conversion of the Note included $42,500 in principal and $1,700 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $42,500.

On April 24, 2013, the Company completed a partial conversion one of its Notes payable dated March 30, 2012, with a principal amount of $123,600. A total of $49,000 worth of the Note was converted, and 39,299,802 common shares were issued for that part of the conversion. No accrued interest was due on the Note upon conversion. This conversion of debt reduced the Company’s Notes Payables by $49,000. A $49,000 portion of the original Note for $123,600 was acquired from the Note Holder by a non-related party. The $49,000 portion of the Note was purchased for $56,000, (for a premium of $7,000), and a modified note was issued for $56,000. This leaves a remaining balance of $7,000 of the principal of the Note.

On April 30, 2013 the Company entered into a three (3) year Promissory Note with a non-related creditor for $44,500 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2013	May 20, 2013
Document And Entity Information
Entity Registrant Name	Universal Bioenergy, Inc.
Entity Central Index Key	0001320729
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		2,538,903,268
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2013

XML

NOTE 13 - GOING CONCERNS

3 Months Ended

Mar. 31, 2013

Notes to Financial Statements

NOTE 13 - GOING CONCERNS

NOTE 13 - GOING CONCERN ISSUES

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. The Company has accumulated losses totaling $23,146,507 from its inception to March 31, 2013. Furthermore, the Company has consistently had to raise debt and equity capital to fund cash used in operations.

These factors raise doubt about the ability of the Company to continue as a going concern if the Company does not continue to raise sufficient amounts of capital. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Company's ability to meet its obligations and continue as a going concern is dependent upon its ability to obtain additional financing, achievement of profitable operations, and/or the discovery, distribution, and marketing of its supplies of natural gas, propane, and coal reserves.

The negative working capital at March 31, 2013, is a condition experienced by many high-growth companies similar to ours, and has not had a significant negative effect on our operations. This is due to our ability to raise capital; the contracts we have with our utility customers, their strong S&P credit ratings, and their consistent payment of our invoices on schedule. Due to the timing of the transactions we are able to maximize the efficiency of the billing and payment cycles, thereby minimizing the impact of any occasional periods of negative working capital. Additionally, our ability to purchase gas at the wellhead, from other independent producers at the producer’s price, and obtain lines of credit and accounts receivable facilities, should enable us to greatly improve our cash flow and increase our working capital.

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 from our current investors and creditors to achieve our goals and objectives. However, such financing from these investors and creditors 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 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.

The Company, in association with its investors and creditors, was able to raise sufficient amounts of capital to meet its operating expenses and working capital needs for the period ending March 31, 2013. We were also able to proceed with the acquisition of the ownership interest in a coal mining company; which management believes, but cannot guarantee, will generate additional revenue, positive working capital, and net earnings for the Company in the fiscal year 2013 and beyond.

XML

Consolidated Statements of Operations (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Income Statement [Abstract]
REVENUES	$ 12,400,975	$ 13,007,160
COST OF SALES	12,382,523	12,989,939
GROSS PROFIT	18,452	17,221
OPERATING EXPENSES:
General and administrative	291,346	430,385
Sales and marketing	292	9,502
Depreciation and amortization expense	654	654
Total operating expenses	292,293	440,541
LOSS FROM OPERATIONS	(273,840)	(423,320)
OTHER INCOME (EXPENSE):
Other income	1,109
Initial (loss) on embedded derivatives issued	(17,929)
Change in fair value of derivative liabilities	(106,176)
Interest (expense), including amortization of beneficial conversion feature	352,229	(435)
Total other expense	(475,225)	435
Net (Loss)	(749,066)	(696,582)
Net Income ( loss) attributable to noncontrolling interest	(4,937)	(41,952)
NET LOSS ATTRIBUTABLE TO UNIVERSAL	$ (744,128)	$ (654,630)
Principal reductions of notes payable and line of credit
Basic and diluted loss per share	$ 0.00	$ (0.01)
Weighted average of shares outstanding	184,927,248	57,398,748

XML

NOTE 7 - NOTES PAYABLE

3 Months Ended

Mar. 31, 2013

Notes to Financial Statements

NOTE 7 - NOTES PAYABLE

NOTE 7 – NOTES PAYABLE

	March 31, 2013			December 31, 2012
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 at $.05.		25,300			25,300
On August 30, 2010 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $25,200 at 10% interest.  The holder has the right to convert the note to common stock at $.05.		25,200			25,200
On December 3, 2010 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $4800 at 10% interest.  The holder has the right to convert the note to common stock at $.005. Conversion price changed to $0.002 by Board.		4,800			4,800
On December 31, 2010 the Company entered into a two (2) year convertible Promissory Note with its President and CEO, Vince M. Guest for  $136,000 at 10% interest for the accrued compensation owed to him for the fiscal year 2010 in accordance with his Employment Agreement.  The holder has the right to convert the note to common stock at $015. Conversion price change to $0.0025 by Board. On March 15, 2013, $60,000 worth of the Note was converted by a non-affliate assignee, leaving a balance of $76,000.		76,000			136,000
On December 31, 2010 the Company entered into a two (2) year convertible Promissory Note with its Vice President Solomon Ali, for $165,000 at 10% interest for the accrued compensation owed to him for the fiscal year 2010 in accordance with his Employment Agreement.  The holder has the right to convert the note to common stock at $015. On July  12, 2012,  $100,000 worth of the Note was converted by non-affliates (assignees) to stock, leaving a balance of $65,000. Conversion price was changed to $0.005 by Board Resolution.  Converion price changed to $0.015 by Board.		65,000			65,000
On January 18, 2011 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $10,000 at 10% interest.  The holder has the right to convert the note to common stock at $.005. *See note below.		10,000			10,000
On January 19. 2011 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $10,000 at 10% interest.  The holder has the right to convert the note to common stock at $.005. *See note below.		10,000			10,000
On March 14. 2011 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $25,000 at 10% interest.  The holder has the right to convert the note to common stock at $005.		25,000			25,000
On March 14. 2011 the Company entered into a two (2) year convertible Promissory Note with a non-related creditor for $25,000 at 10% interest.  The holder has the right to convert the note to common stock at $005.		25,000			25,000
On October 2, 2011 the Company entered into a three (3) year convertible Promissory Note with a non-related creditor for $202,200 at 10% interest.  The holder has the right to convert the note to common stock at $0.005. Conversion price changed to $0.002 by Board.		202,200			202,200
On October 23, 2011 the Company entered into a one (1) year convertible Promissory Note with a non-related creditor for $125,000 at 12% interest.  The holder has the right to convert the note to common stock at a 30% discount to the market price. This Note was sold on May 11, 2012 to another creditor, and an additional late fee of $5,000 was added to the principal of the note. Conversion price changed to $0.002 by Board.		130,000			125,000
On December 31, 2011 the Company entered into a two (2) year convertible Promissory Note with  its Vice President, Solomon Ali for $151,400 at 10% interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment Agreement.  The holder has the right to convert the note to common stock  at $0.01. Conversion price changed to $0.0025 by Board.		151,400			151,400
On December 31, 2011 the Company entered into a two (2) year convertible Promissory Note with  its Manager of Business Development, Don Deluna, for $40,500 at 10% interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment Agreement.  The holder has the right to convert the note to common stock at $0.02. Conversion price changed to $0.0025 On March 14, 2013 this Note was converted to stock.		—			40,500
On December 31, 2011 the Company entered into a two (2) year convertible Promissory Note with its President and CEO, Vince M. Guest for $162,175 at 10% interest for the accrued compensation owed to him for the fiscal year 2011 in accordance with his Employment Agreement.  The holder has the right to convert the note to common stock at $0.01. Conversion price changed to $0.0025 by Board.		162,175			162,175
On December 31, 2011 the Company entered into a two (2) year convertible Promissory Note with  a non-related creditor  for $14,407.92 at 12% interest for consulting services provided to the Company in accordance with their Consulting Agreement.  The holder has the right to convert the note to common stock on  July 1, 2012 at $0.01.		14,407			14,407
On February 20, 2012 the Company entered into a two (2) year Promissory Note with a non-related creitor for $2,000,000 at 12% interest. The holder has the right to convert the note to common stock  at a 30% discount to market at the time of conversion. Conversion price changed to $0.002 by Board.		2,000,000			2,000,000
On February 29, 2012 the Company entered into a three (3) year convertible Promissory Note with a non-related creditor for $122,800 at 12% interest. The holder has the right to convert the note to common stock at $0.005. Conversion price changed to $0.002 by Board.		122,800			122,800
On March 7, 2012 the Company entered into a one (1) year convertible Promissory Note with a non-related creditor for $30,000 at 12% interest.  The holder has the right to convert the note to common stock  at a 50% discount to the market price. On January 31, 2013, this Note was converted to stock.		—			30,000
On March 15, 2012 the Company entered into a two (2) year convertible Promissory Note with  a non-related creditor for $70,000 at 12% interest.  The holder has the right to convert the note to common stock  at $0.008. Conversion price changed to $0.002 by Board.		70,000			70,000
On March 30, 2012 the Company entered into a three (3) year convertible Promissory Note with a non-related creditor for $123,600 at 12% interest. The holder has the right to convert the note to common stock at $0.005. On November 20, 2012, $25,000 worth of the Note was converted leaving a $98,600 balance. On February 15, 2013, $29,500 worth of the Note was converted leaving a $69,100 balance.		69,100			98,600
On April 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $75,000 at 12% interest. The holder has the right to convert the note to common stock at a fixed conversion price of $0.005 per share. Conversion price changed to $0.002 by Board.		75,000			75,000
On May 21, 2012 the Company entered into a eight (8) month convertible Promissory Note with a non-related creditor for $45,000 at 12% interest. The holder has the right to convert the note to common stock at a variable conversion price at 50% discount to the market price at the time of conversion. On February 13, 2013, this Note was converted to stock.		—			45,000
On May 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $31,100 at 12% interest. The holder has the right to convert the note to common stock at a fixed conversion price of $0.005 per share. Conversion price changed to $0.002 by Board.		31,100			31,100
On June 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $50,200 at 12% interest. The holder has the right to convert the note to common stock at a fixed conversion price of $0.005 per share. Conversion price changed to $0.002 by Board.		50,200			50,200
On July 2, 2012 the Company entered into a two (2) year Promissory Note with  its Vice President, Solomon Ali for $174,000 at 10% interest for a “special performance bonus” awarded him in accordance with his Employment Agreement. The Holder has the right to convert the Note to common stock at $0.005. Conversion price changed to $0.0025 by Board.		174,000			174,000
On July 2, 2012 the Company entered into a two (2) year Promissory Note with  its  President, Vince M. Guest for $174,000 at 10% interest for a “special performance bonus” awarded him in accordance with his Employment Agreement. The Holder has the right to convert the Note to common stock at $0.005. Conversion price changed to $0.0025 by Board.		174,000			174,000
On July 2, 2012 the Company entered into a two (2) year Promissory Note with  its Manager of Business Development, Donald DeLuna for $35,250 at 10% interest for a “special performance bonus” awarded him in accordance with his Employment Agreement. The Holder has the right to convert the Note to common stock at $0.005. Conversion price changed to $0.0025 by Board.		35,250			35,250
On July 9, 2012 the Company entered into a nine (9) month convertible Promissory Note with a non-related creditor for $42,500 at 8% interest.  The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion. Conversion price changed to $0.002 by Board. On January 29, 2013, this Note was converted to stock.		—			42,500
On July  12, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $36,000 at 10% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.005 per share.		36,000			36,000
On July 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $52,600 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.005 per share. Conversion price changed to $0.002 by Board.		52,600			52,600
On August 9, 2012 the Company entered into an eight (8) month convertible Promissory Note with a non-related creditor for $38,000 at 12% interest.  The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion. Conversion price changed to $0.002 by Board. On March 13, 2013, this Note was converted to stock.		—			38,000
On August 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $21,000 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.005 per share. Conversion price changed to $0.002 by Board.		21,000			21,000
On September  30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $57,500 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.005 per share. Conversion price changed to $0.002 by Board.		57,500			57,500
On October  10, 2012 the Company entered into a nine (9) month convertible Promissory Note with a non-related creditor for $42,500 at 8% interest.  The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion.		42,500			42,500
On October 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $15,403 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.		15,403			15,403
On November 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $135,100 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.		135,100			135,100
On December  5, 2012 the Company entered into an seven (7) month convertible Promissory Note with a non-related creditor for $51,500 at 12% interest.  The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion.		51,500			51,500
On December 30, 2012 the Company entered into a three (3) year Promissory Note with a non-related creditor for $121,150 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.		121,150			121,150
On December  31, 2012 the Company entered into an eight (8) month convertible Promissory Note with a non-related creditor for $42,500 at 8% interest.  The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion.		42,500			42,500
On December 31, 2012 the Company entered into a two (2) year convertible Promissory Note with  its Vice President, Solomon Ali for $162,500 at 10% interest for the accrued compensation owed to him for the fiscal year 2012 in accordance with his Employment Agreement.  The holder has the right to convert the Note to common stock at $0.0025.		162,500			162,500
On December 31, 2012 the Company entered into a two (2) year convertible Promissory Note with  its Manager of Business Development, Don Deluna, for $50,400 at 10% interest for the accrued compensation owed to him for the fiscal year 2012 in accordance with his Employment Agreement.  The holder has the right to convert the Note to common stock  at $0.0025.		50,400			50,400
On December 31, 2012 the Company entered into a two (2) year convertible Promissory Note with its President and CEO, Vince M. Guest for $130,000 at 10% interest for the accrued compensation owed to him for the fiscal year 2012 in accordance with his Employment Agreement.  The holder has the right to convert the Note to common stock at $0.0025.		130,000			130,000
On December 31, 2012 the Company entered into a two (2) year convertible Promissory Note with  a non-related creditor  for $39,851.60 at 12% interest for consulting services provided to the Company in accordance with their  Consulting Agreement.  The holder has the right to convert the Note to common stock at $0.0025.		39,851			39,851
On February 28, 2013 the Company entered into a three (3) year Promissory Note with a non-related creditor for $18,000 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.		18,000			—
On March 18, 2013 the Company entered into a nine (9) month convertible Promissory Note with a non-related creditor for $42,500 at 8% interest.  The Holder has the right to convert the Note to common stock after six months at a variable conversion price at 50% discount to the market price at the time of conversion. (Asher Enterprises)		42,500			—
On March 30, 2013 the Company entered into a three (3) year Promissory Note with a non-related creditor for $950.00 at 12% interest. The Holder has the right to convert the Note to common stock at a fixed conversion price of $0.002 per share.		950			—
Total long-term note payable	$	4,747,386		$	4,966,436
Less Current portion		(2,281,123	)		(248,395	)
Less Debt discount		(106,309	)		(125,091	)
Less Beneficial Conversion Feature		(1,138,941	)		(1,401,908	)
Long-term portion of notes payable	$	1,221,013		$	3,191,042

Principal maturities of notes payable as of March 31, 2013, for the next five years and thereafter is as follows:

2013	$903,283
2014	$2,875,702
2015	$786,953
2016	$21,700
2017	$ -0-
Total	$4,750,138

For the above convertible notes, pursuant to ASC Topic 470, the Company reviewed and determined that in most cases a beneficial conversion feature existed since the conversion price was less than market price at the date the notes were issued. The beneficial conversion feature is amortized over the life of the note using the interest method.

* For more information on the Convertible Notes see Part II - Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations under “Debt”, and Item 8 - Note 7, “Notes Payable”, and Part I – Item 1A, “Risk Factors”, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Embedded Derivatives

Notes that are convertible at a discount to market are considered embedded derivatives. For more information on the Notes affected, refer to Management’s Discussion and analysis, and the above list.

Under Financial Accounting Standard Board (“FASB”), U.S. GAAP, Accounting Standards Codification, “Derivatives and Hedging”, ASC Topic 815 (“ASC 815”) requires that all derivative financial instruments be recorded on the balance sheet at fair value. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data; requiring judgment and estimates.

The Company issued convertible Notes, and has evaluated the terms and conditions of the conversion features contained in the Notes to determine whether they represent embedded or freestanding derivative instruments under the provisions of ASC 815. The Company determined that the conversion features contained in the Notes represent freestanding derivative instruments that meet the requirements for liability classification under ASC 815. As a result, the fair value of the derivative financial instruments in the Notes is reflected in the Company’s balance sheet as a liability. The fair value of the derivative financial instruments of the convertible Notes and warrants was measured at the inception date of the Notes and warrants, and each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded as non-operating, non-cash income, or expense at each balance sheet date.

The Company valued the conversion features in its convertible Notes using the Black-Scholes model. The Black-Scholes model values the embedded derivatives based on a risk-free rate of return ranging from 0.14% to 0.15%, grant dates of Notes, the term of the Notes, conversion prices ranging from 30% to 50% of current stock prices on the measurement date ranging from $0.0013 to $0.0022, and the computed measure of the Company’s stock volatility, ranging from 185.15% to 186.83%.

Included in the March 31, 2013, is a derivative liability in the amount of $225,393 to account for this transaction. This liability arose in the second quarter of 2012, and the balance was $350,237 as of December 31, 2012. It will be revalued quarterly henceforth, and adjusted as a gain or loss to the statements of operations depending on its value at that time.

Included in our Statements of Operations for the three months ended March 31, 2013 and March 31, 2012, are $124,105and $0 respectively in non-cash charges pertaining to the derivative liability as it pertains to change in derivative liability and amortization of debt discount, respectively.

XML

NOTE 6 - PROPERTY AND EQIUPMENT

3 Months Ended

Mar. 31, 2013

Property, Plant and Equipment [Abstract]

NOTE 6 - PROPERTY AND EQIUPMENT

NOTE 6 - PROPERTY AND EQUIPMENT

The Company has property and equipment as of March 31, 2013 and December 31, 2012 as follows:

		March 31, 2013		December 31, 2012
Equipment	$	13,094	$	13,094
Land		-		-
Building		-		-
Accumulated depreciation		(6,759)		(6,105)
Total	$	6,335	$	6,989

There was $654 and $654depreciation expense for the three months ended March 31, 2013 and 2012 respectively.

XML

NOTE 5 - EQUITY (Policies)

3 Months Ended

Mar. 31, 2013

Equity [Abstract]

NOTE 5 - EQUITY

NOTE 5 - EQUITY

On December 26, 2012, the Company amended its Articles of Incorporation, and increased the authorized shares of common stock from 1,000,000,000 to 3,000,000,000 shares at $.001 par value. There are 852,950,389 sharesof common stock issued and outstanding as of March 31, 2013.

On June 6, 2012, our Board of Directors passed a resolution, and declared a stock dividend to distribute to all registered shareholders of record on or before July 13, 2012, on a 10 for 2 basis. The Company issued two (2) shares of common stock for every ten (10) shares of common stock held by the shareholders of record.

The Company has authorized a total of 10,000,000 shares of Preferred Stock with a par value of $0.001 per share. On September 29, 2008, the Company authorized 100,000 Series A Preferred shares, and 232,080 Series B Preferred Shares of stock. As of September 30, 2012, there were no Series A preferred shares issued and outstanding, and a total of 232,080 Series B preferred shares issued and outstanding.

RECENT SALES OF UNREGISTERED SECURITIES

RECENT SALES OF UNREGISTERED SECURITIES

Common Stock Issued

For First Quarter Period Ending March 31, 2013

At March 3, 2013, there were no outstanding stock options or warrants.

On January 29, 2013, the Company completed the final, and full, conversion of one of its Notes payable, dated July 9, 2012, for a Note with a principle amount of $42,500, and a total of 20,723,759 common shares were issued. The final conversion of the Note included $42,500 in principal and $1,700 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $42,500.

On January 31, 2013, the Company completed the final, and full, conversion of one of its Notes payable dated March 7, 2012, for a Note with a principle amount of $30,000, and a total of 20,909,090 common shares were issued. The final conversion of the Note included $30,000 in principal and $4,500 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $30,000.

On February 13, 2013, the Company completed the final, and full, conversion of one of its Notes, payable dated May 21, 2012, for a Note with a principle amount of $45,000, and a total of 37,111,112 common shares were issued. The final conversion of the Note included $45,000 in principal and $5,100 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $45,000.

On February 15, 2013, the Company completed a partial conversion one of its Notes payable, dated March 30, 2012, with a principal amount of $123,600. A total of $29,500 worth of the Note was converted, and 29,500,000 common shares were issued for that part of the conversion; which leaves a remaining balance of $69,100 of the principal of the Note. No accrued interest was due on the Note upon conversion. This conversion of debt reduced the Company’s Notes Payables by $29,500. The conversion rate was reduced from $0.005 to $0.001 by resolution of Board of Directors to offset declines in the stock price. The stock closing price was $0.0045 on the issue date.

On March 14, 2013, the Company converted one of its Notes payable, dated August 9, 2012, with a principle amount of $38,000, and issued 30,984,615 common shares for that conversion. The final conversion of the Note included $38,000 in principal and $2,280 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $38,000.

On March 14, 2013, the Company converted one of its Notes payable, dated December 31, 2011, with a principle amount of $40,500, and issued 16,200,000 common shares for that conversion. The final conversion of the Note included $40,500 in principal and $0.00 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $40,500. The conversion rate was reduced from $0.02 to $0.025 by resolution of Board of Directors to offset declines in the stock price. The stock closing price was $0.0029 on the issue date.

On March 15, 2012, the Company completed a partial conversion of one of its Notes Payables, dated December 31, 2010, with a Note amount of $136,000. A total of $60,000 worth of the Note was converted by a non-affiliate assignee, and 24,000,000 common shares were issued for that conversion. No accrued interest was due on the Note upon conversion. This leaves a remaining balance of $76,000 on this Note. This conversion of debt reduced the Company’s Notes Payables by $60,000. The conversion rate was reduced from $0.015 to $0.025 by resolution of Board of Directors to offset declines in the stock price. The stock closing price was $0.0029 on the issue date.

Issuance of Preferred Shares

Issuance of Preferred Shares

More detailed information about the issuance of preferred shares was discussed in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2011. The information is fully discussed in Part II, Item 8. – Note 4 – Equity, “Preferred Stock”, pages 41 through 42. There have been no material changes from the information previously disclosed in that Form 10-K/A.

XML

NOTE 14 - CONCENTRATIONS

3 Months Ended

Mar. 31, 2013

Risks and Uncertainties [Abstract]

NOTE 14 - CONCENTRATIONS

NOTE 15 - CONCENTRATIONS

At March 31, 2013, 94%of the Company's accounts receivable was due from a single customer, during the three months ended March 31, 2013, and 85%of total revenue was generated from a single customer, for the three months ended March 31, 2012.

XML

NOTE 10 - ACQUISTION

3 Months Ended

Mar. 31, 2013

Notes to Financial Statements

NOTE 10 - ACQUISTION

NOTE 10 – ACQUISTION

Entry into a Material Definitive Agreement

Whitesburg Friday Branch Mine LLC

On February 20, 2012, Universal Bioenergy Corporation, a Nevada corporation (the “Company”), and Whitesburg Friday Branch Mine LLC, a Kentucky limited liability company (“WFBM” or “Whitesburg”), with its principal offices at 1541 Downtown West Boulevard, Knoxville, Tennessee 37919, entered into a Member Interest Exchange Agreement (the “Agreement”), dated October 17, 2011. Pursuant to the Agreement, and subject to the terms and conditions set forth therein, and the subsequent amendment to the Agreement dated February 20, 2012, (the “Amendment”), the Company acquired forty percent (40%) of the Member Interests of Whitesburg, from JLP and Partners LLC, a Kentucky Limited Liability Company (“JLP”), in exchange for consideration consisting of two million, seven hundred thousand dollars ($2,700,000) payable in cash, debt instrument and/or common stock of the Company pursuant to the terms and conditions set forth in the Agreement.

Pursuant to the Agreement, and following the execution of the Amendment, the parties properly and timely performed all terms and conditions as required pursuant to the Agreement, and therefore the transaction contemplated by the “Member Interest Purchase Agreement” (Agreement); and the Amendment was “closed” on February 20, 2012.

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

“Whitesburg” is engaged in the business of coal mining, operations, and coal production at a coal mining property known as the Whitesburg Friday Branch Mine, located at Friday Branch Road, in Whitesburg, Kentucky, for the marketing of “Thermal/Steam” non-coking coal in the United States of America.

Thermal/Steam coal is used as a primary source of energy for coal fired powered plant electric generation. The Whitesburg Mine operates, mines, and markets thermal coal in Letcher County in eastern Kentucky for sale to electric utilities for use in coal fired power plant electric generation. The Whitesburg mining operations are the surface and high wall mining type and do not include any underground mining. Whitesburg’s management has represented that it owns the leases for the coal mineral rights, and has the requisite mining permits from the State of Kentucky. Whitesburg Friday Branch Mine started full mining production in March 2012, and currently has coal on the ground ready to be delivered to its customers.

Universal’s management believes that the association with Whitesburg for the production and marketing of high grade thermal coal should give it a high margin energy product to sell to its electric utility and coal production customers.

Additional Summary of the Purchase Agreement

The Company was granted the right, but not the obligation, to conduct exploration, drill and develop the real property, to produce and market any and all Petroleum and Natural Gas (methane) and related hydrocarbons produced from the development the real property owned, managed or controlled by Whitesburg Friday Branch Mine, and from all geological formations under the property, and Leases, and/or from any new and/or existing gas wells.

The Company shall be granted One (1) Seat on “Whitesburg’s” Board of Directors, or appointed as a Managing Member to represent the interests of the Company and its shareholders, according to Whitesburg’s Operating Agreement.

Management determined that the Company was the acquirer in the business combination in accordance with FASB codification Topic 805, "Business Combinations", based on the following factors: (i) there was not a change in control of the Company since neither Whitesburg, nor any of the sellers obtained a controlling financial interest (ownership either directly or indirectly of more than 50 percent of the outstanding voting shares of the Company), or the power to control the Company through a lesser percentage of ownership by contract, lease, agreement with other stockholders, or by court decree; (ii) the Company was the entity in the transaction that issued its equity instruments (if any); and in a business combination, the acquirer usually is the entity that issues its equity interests; (iii) the Company’s pre-transaction directors retained the largest relative voting rights of the Company post-transaction; (iv) the composition of the Company’s current board of directors and management has not changed during this acquisition. The Company had no pre-existing relationship with Whitesburg.

XML

NOTE 8 - INCOME TAXES

3 Months Ended

Mar. 31, 2013

Income Tax Disclosure [Abstract]

NOTE 8 - INCOME TAXES

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, 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 $6,500,000; 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.

The provision (benefit) for income taxes from continued operations for the three months ended March 31, 2013 and 2012 consist of the following:

		March 31, 2013		March 31, 2012
Current:
Federal	$	-	$	-
State		-		-
Deferred:
Federal	$	2,210,000	$	1,538,000
State		585,000		402,000
		2,795,000		1,940,000
Valuation allowance		(2,795,000)		(1,940,000)
(Benefit) provision for income taxes, net	$	-	$	-

The difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is as follows:

	March 31, 2013	March 31, 2012
Statutory federal income tax rate	34.0%	34.0%
State income taxes and other	9.0%	9.0%
Valuation allowance	(43.0%)	(43.0%)
Effective tax rate	-	-

Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset and liabilities result principally from the following:  

		March 31, 2013		March 31, 2012
Total deferred tax asset	$	2,795,000	$	1,940,000
Valuation allowance		(2,795,000)		(1,940,000)
Net deferred tax asset	$	-	$	-

The Company has a net operating loss carry forward of approximately $13,265,000; however, in accordance with IRC 382 the loss is limited to 49% of the loss carry forward. The loss is limited due to the change in control of at least 50%; therefore, this loss of approximately $6,500,000 is available to offset future taxable income through 2028.

During the three months ended March 31, 2013 and 2012 the valuation allowance increased by $1,140,000 and $250,000, respectively.

XML

NOTE 9 - RELATED PARTY TRANSACTON

3 Months Ended

Mar. 31, 2013

Related Party Transactions [Abstract]

NOTE 9 - RELATED PARTY TRANSACTON

NOTE 9 – RELATED PARTY TRANSACTION

Related party transactions reported for this period are as follows:

There are no Related Party Transactions to report for this period.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;

There are no changes to report in our Board of Directors, Officers, or compensation arrangements for our Officers, during for the period ending March 31, 2013. The situation regarding these matters has not changed materially from the description in the Annual Report on Form 10-K for the period ended December 31, 2012.

XML

NOTE 11 - CONTINGENCIES

3 Months Ended

Mar. 31, 2013

Notes to Financial Statements

NOTE 11 - CONTINGENCIES

NOTE 11 - CONTINGENCIES

There are no Commitments and Contingencies to report for this period.

XML

NOTE 8 - INCOME TAXES (Details Narrative) (USD $)	3 Months Ended		204 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2028
Income Tax Disclosure [Abstract]
Operating Losses (Net)	$ (273,840)	$ (423,320)	$ 6,500,000
Net Operating Loss Carry Forward			13,265,000
Taxable Income Offset			$ 6,500,000

XML

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Principle of Consolidation

Principle of Consolidation

The consolidated financial statements include the accounts of Universal Bioenergy, Inc., Universal Bioenergy North America, Inc., and NDR Energy Group, LLC. 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 Energy Group LLC (“NDR”). Additionally, through Varlos Energy Holdings LLC, an entity owned by officers of the Company, it acquired an additional control of 2% financial interest in NDR for a total direct and indirect financial interest and control of 51% of NDR. The operating agreement of NDR provides for voting in proportion to ownership. The Company directly has 51% voting control of NDR through its 49% member interest, and through a Voting Trust which the Company has the 2% voting interest of Varlos Energy Holdings LLC, and has accordingly consolidated its financial position, results of operations, and cash flows into these financial statements.

Use of Estimates and Assumptions

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 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”.

Management has considered the various factors discussed in ASC 605-45-14-4-c and ASC 605-45-45 and believe that our natural gas purchase and sale transactions are appropriately reported gross rather than net. Generally the Company is the primary obligor in the arrangement, and the Company has latitude in establishing price, discretion in supplier selection, and credit risk in the event our customer defaults on the transaction. Additionally, the Company’s supplier is not the primary obligor in the arrangement, and the amount the Company earns is not fixed. Those transactions where the Company operates as an agent or broker for either the supplier or the customer at a fixed fee are reported net.

Cash and Cash Equivalents

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 March 31, 2013and December 31, 2012 the Company had no cash equivalents.

Property and Equipment

The Company has property and equipment as of March 31, 2013 and December 31, 2012 as follows:

		March 31, 2013		December 31, 2012
Equipment	$	13,094	$	13,094
Land		-		-
Building		-		-
Accumulated depreciation		(6,759)		(6,105)
Total	$	6,335	$	6,989

Goodwill and Other Intangible Assets

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

Impairment of Long-Lived Assets

In accordance with ASC Topic 365, long-lived assets, such as property, plant, 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

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, 2011, the Company did not record any liabilities for uncertain tax positions.

Share-Based Compensation

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

Concentration of Credit Risk

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

Earnings Per Share

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.  

The Company's financial instruments consist primarily of cash, and accounts payable.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

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

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

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

Level 1	Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2	Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable or the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active.
Level 3	Inputs to the valuation methodology are unobservable and significant to the fair value

Reclassification

Reclassification

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

Recently Issued Accounting Standards

Recently Issued Accounting Standards

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition, or the consolidated results of its operations.

In July 2012, the FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment”. The guidance allows companies to perform a “qualitative” assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test.

ASU 2012-02 allows companies the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired before determining whether it is necessary to perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired. Companies can choose to perform the qualitative assessment on none, some, or all, of its indefinite-lived intangible assets; or choose to only perform the quantitative impairment test for any indefinite-lived intangible in any period.

In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114. , Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

In October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. 

These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

No other accounting standards or interpretations issued recently are expected to a have a material impact on the Company’s consolidated financial position, operations, or cash flows.

XML

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Property and Equipment Depreciation and Amortization

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

XML

NOTE 7 - NOTES PAYABLE - Principal maturities of notes payable (Details) (USD $)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Principal Maturities	$ 0	$ 21,700	$ 786,953	$ 2,875,702	$ 903,283

XML

Consolidated Statements of Cash Flows (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$ (749,066)	$ (696,582)
Adjustments to reconcile net (loss) to net cash (used in) operating activities: (in use) operating activities
Depreciation expense	654	654
Common stock issued for dividend
Common stock issued for services		5,000
Amortization of Beneficial conversion features	726,466	146,666
Loss from sales of equipment
Loss on embedded derivatives
Accounts recievable	981,961	7,957,044
Prepaid expenses and other assets	(42,589)	39,063
Accrued expenses and other liabilities	270,760	191,592
Accounts payable	(966,485)	(7,934,972)
Net cash used in operating activities	221,701	(291,535)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in participation agreement-see note 10
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable and line of credit	(285,500)	316,884
Proceeds from notes payable issued and line of credit	64,200	626,864
Net cash provided by financing activities	(221,300)	309,980
INCREASE (DECREASE) IN CASH	401	18,445
CASH, BEGINNING OF YEAR	2,274	3,706
CASH, END OF YEAR	2,675	22,151
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid
Taxes paid
Investment in membership acquistion by issuing notes payable		2,000,000
Issuance of common stock for the conversion of debt	285,500	485,138
Common stock issued for intangible assets in acquisition
Convertible notes issued for accrued liabilities	13,580	18,764
Beneficial conversion feature of convertible notes payable	$ 1,138,941	$ 2,565,787

XML

NOTE 5 - EQUITY

3 Months Ended

Mar. 31, 2013

Equity [Abstract]

NOTE 5 - EQUITY

NOTE 5 - EQUITY

On December 26, 2012, the Company amended its Articles of Incorporation, and increased the authorized shares of common stock from 1,000,000,000 to 3,000,000,000 shares at $.001 par value. There are 852,950,389 sharesof common stock issued and outstanding as of March 31, 2013.

On June 6, 2012, our Board of Directors passed a resolution, and declared a stock dividend to distribute to all registered shareholders of record on or before July 13, 2012, on a 10 for 2 basis. The Company issued two (2) shares of common stock for every ten (10) shares of common stock held by the shareholders of record.

The Company has authorized a total of 10,000,000 shares of Preferred Stock with a par value of $0.001 per share. On September 29, 2008, the Company authorized 100,000 Series A Preferred shares, and 232,080 Series B Preferred Shares of stock. As of September 30, 2012, there were no Series A preferred shares issued and outstanding, and a total of 232,080 Series B preferred shares issued and outstanding.

RECENT SALES OF UNREGISTERED SECURITIES

Common Stock Issued

For First Quarter Period Ending March 31, 2013

At March 3, 2013, there were no outstanding stock options or warrants.

On January 29, 2013, the Company completed the final, and full, conversion of one of its Notes payable, dated July 9, 2012, for a Note with a principle amount of $42,500, and a total of 20,723,759 common shares were issued. The final conversion of the Note included $42,500 in principal and $1,700 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $42,500.

On January 31, 2013, the Company completed the final, and full, conversion of one of its Notes payable dated March 7, 2012, for a Note with a principle amount of $30,000, and a total of 20,909,090 common shares were issued. The final conversion of the Note included $30,000 in principal and $4,500 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $30,000.

On February 13, 2013, the Company completed the final, and full, conversion of one of its Notes, payable dated May 21, 2012, for a Note with a principle amount of $45,000, and a total of 37,111,112 common shares were issued. The final conversion of the Note included $45,000 in principal and $5,100 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $45,000.

On February 15, 2013, the Company completed a partial conversion one of its Notes payable, dated March 30, 2012, with a principal amount of $123,600. A total of $29,500 worth of the Note was converted, and 29,500,000 common shares were issued for that part of the conversion; which leaves a remaining balance of $69,100 of the principal of the Note. No accrued interest was due on the Note upon conversion. This conversion of debt reduced the Company’s Notes Payables by $29,500. The conversion rate was reduced from $0.005 to $0.001 by resolution of Board of Directors to offset declines in the stock price. The stock closing price was $0.0045 on the issue date.

On March 14, 2013, the Company converted one of its Notes payable, dated August 9, 2012, with a principle amount of $38,000, and issued 30,984,615 common shares for that conversion. The final conversion of the Note included $38,000 in principal and $2,280 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $38,000.

On March 14, 2013, the Company converted one of its Notes payable, dated December 31, 2011, with a principle amount of $40,500, and issued 16,200,000 common shares for that conversion. The final conversion of the Note included $40,500 in principal and $0.00 in accrued interest that was due on the Note upon conversion. This leaves a remaining balance of $0.00 on this Note. This conversion of debt reduced the Company’s Notes Payables by a principal amount of $40,500. The conversion rate was reduced from $0.02 to $0.025 by resolution of Board of Directors to offset declines in the stock price. The stock closing price was $0.0029 on the issue date.

On March 15, 2012, the Company completed a partial conversion of one of its Notes Payables, dated December 31, 2010, with a Note amount of $136,000. A total of $60,000 worth of the Note was converted by a non-affiliate assignee, and 24,000,000 common shares were issued for that conversion. No accrued interest was due on the Note upon conversion. This leaves a remaining balance of $76,000 on this Note. This conversion of debt reduced the Company’s Notes Payables by $60,000. The conversion rate was reduced from $0.015 to $0.025 by resolution of Board of Directors to offset declines in the stock price. The stock closing price was $0.0029 on the issue date.

Issuance of Preferred Shares

More detailed information about the issuance of preferred shares was discussed in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2011. The information is fully discussed in Part II, Item 8. – Note 4 – Equity, “Preferred Stock”, pages 41 through 42. There have been no material changes from the information previously disclosed in that Form 10-K/A.

XML

NOTE 4 - NET LOSS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

Computation of basic and diluted income and loss per share

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

		For the Three Months Ended
		March 31, 2013		March 31, 2012
Net Loss for common shareholders	$	(744,128)	$	(654,630)
Weighted average common shares outstanding	$	184,927,248	$	57,398,748
Basic and fully diluted net loss per share	$	(.00)	$	(.01)
Net loss per share is based upon the weighted average shares of common stock outstanding

XML

NOTE 14 - CONCENTRATIONS (Details Narrative)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Risks and Uncertainties [Abstract]
Concentration Risk Precentage	94.00%	85.00%

XML

NOTE 15 - INVESTMENTS IN PARTNERSHIPS AND LLC'S

3 Months Ended

Mar. 31, 2013

Schedule of Investments [Abstract]

NOTE 15 - INVESTMENTS IN PARTNERSHIPS AND LLC'S

NOTE 15 - INVESTMENTSINPARTNERSHIPSANDLLC'S

Universal Bioenergy, Inc., isalimitedpartnerinProgas Energy Services, and is a minority member of Whitesburg Friday Branch Mine, LLC.

In2011,theCompanyacquireda7.5percentinterestinProgas Energy Services. Thefair market value

ofwhich has not been established. Also in2011,the Companyacquired a 40percentinterest in Whitesburg Friday Branch Mine, LLC. The fair market value of which has not been established.

Partnership	Percentage of Ownership	Book Equity 12/31/11	Partnership Contributions (Distributions)	Share of Net Income (Loss)	Book Equity 3/31/13
Progas Energy Services	7.5%	$189,500	$0	$5,564	$195,064
Whitesburg Friday Branch Mine, LLC	40%	$700,000	$2,000,000	$0	$2,700,000
Totals		$889,500	$2,000,000	$5,564	$2,895,064