NATURAL GAS INDUSTRY COMPETITION

The natural gas industry in the United States can be very competitive, especially since natural gas is sold as a commodity, similar to pork bellies, corn, copper, oil and other commodities. After the natural gas it has been processed for sale and distribution to the market, it is basically the same product where ever it is produced. The market for commodities is inherently volatile, which means the price of commodities, including natural gas are sometimes subject to rapid and drastic changes. Most companies that sell natural gas to their respective customers complete primarily on price.

There are several different types of gas marketing companies with different origins from the industry. Many natural gas marketers were originally entities spun off from interstate pipeline companies, while other are made up of entities affiliated with local distribution companies. Some of the top natural gas marketers were originally affiliated with producers, and some entities were also formed from large volume natural gas consumers. The last type is the independent, newly formed entities that represent an estimated 10 percent of top natural gas marketers. Due to their varied experience, some natural gas marketers are active in a variety of energy markets, including the marketing of crude petroleum and electricity.

We do not directly compete with the major gas exploration and production companies. These companies are financially stronger than we are, however they may not able to respond to opportunities and changes in the marketplace as quickly as we may be able to. They usually have very large staffs and high overhead and operating costs. Our direct competition is primarily limited to the array of small to mid-sized gas marketers. Many of these firms are undercapitalized, and do not have their own gas supply and must obtain their gas supplies from the wellhead, at or near retail prices.

Most companies that sell natural gas to their respective customers complete primarily on price. However, we believe that with our comprehensive strategies to diversify the company, we will not only be able to compete on price, but also mitigate our risks in the marketplace and reposition our competition so that we can compete effectively. These strategies include;

• Acquisitions of small to mid-sized oil and gas producers and marketers to gain market share

• Acquisition of interests in gathering and transportation pipelines

• Vertical integration to manage the supply chain

• Oil and gas field development

• Owning and controlling our own gas supply

• Re-negotiating our existing supply agreements

• Obtaining gas at the producers price

• Aggregation of supply from multiple independent suppliers

• Access to the capital markets

• Offer a diversified energy product mix

• Alternative energy, e.g., biofuels and syngas to balance our portfolio

• Attract and retain quality personnel with incentive and equity based compensation

• Addition of new higher margin profit centers

We believe these strategies will protect us from many of shocks and volatility in the marketplace, and enable us to build a strong, profitable company that can compete effectively for the long-term in the industry.

GOVERNMENTAL REGULATIONS

The oil and natural gas industry is subject to various types of regulation throughout the world. Laws, rules, regulations and other policy implementations affecting the oil and natural gas industry have been pervasive and are under constant review for amendment or expansion. Pursuant to public policy changes, numerous government agencies have issued extensive laws and regulations binding on the oil and natural gas industry and its individual members, some of which carry substantial penalties for failure to comply. Such laws and regulations have a significant impact on oil and gas exploration, production and marketing and midstream activities. These laws and regulations increase the cost of doing business and, consequently, affect profitability. Because public policy changes affecting the oil and natural gas industry are commonplace and because existing laws and regulations are frequently amended or reinterpreted, we are unable to predict the future cost or impact of complying with such laws and regulations. However, we do not expect that any of these laws and regulations will affect our operations in a manner materially different than they would affect other oil and natural gas companies of similar size and financial strength.

Gas Deregulation

In November of 1978, Congress enacted legislation known as the Natural Gas Policy Act (“NGPA”), as part of broader legislation known as the National Energy Act (NEA), which began the process of de-regulating the natural gas industry. The process was completed in January 1, 1993, when all remaining NGPA “price regulations” were eliminated, allowing the market to completely determine the “price of natural gas”.

Although oil and natural gas prices are currently unregulated, Congress historically has been active in the area of oil and natural gas regulation. We cannot predict whether new legislation to regulate oil and natural gas might be proposed, what proposals, if any, might actually be enacted by Congress or the various state legislatures, and what effect, if any, the proposals might have on our operations. Sales of condensate and oil and natural gas liquids are not currently regulated and are made at market prices.

Historically, federal legislation and regulatory controls have affected the price of the natural gas that is produced and the manner in which the gas that is produced is marketed. The Federal Energy Regulatory Commission (“FERC”) has jurisdiction over the transportation and sale for resale of natural gas in interstate commerce by natural gas companies under the Natural Gas Act of 1938 and the Natural Gas Policy Act of 1978. Various federal laws enacted since 1978 have resulted in the complete removal of all price and non-price controls for sales of domestic natural gas sold in first sales, which include all of our sales of our own production. Under the Energy Policy Act of 2005, FERC has substantial enforcement authority to prohibit the manipulation of natural gas markets and enforce its rules and orders, including the ability to assess substantial civil penalties.

Natural Gas Sales and Transportation

The availability, terms and cost of transportation significantly affect sales of oil and natural gas. The interstate transportation and sale for resale of oil and natural gas is subject to federal regulation, including regulation of the terms, conditions and rates for interstate transportation, storage and various other matters, primarily by the FERC. Federal and state regulations govern the price and terms for access to oil and natural gas pipeline transportation. The FERC’s regulations for interstate oil and natural gas transmission in some circumstances may also affect the intrastate transportation of oil and natural gas.

FERC also regulates interstate natural gas transportation rates and service conditions and establishes the terms under which we may use interstate natural gas pipeline capacity, which affects the marketing of natural gas that we produce, as well as the revenues we receive for sales of our natural gas and release of our natural gas pipeline capacity. Commencing in 1985, FERC promulgated a series of orders, regulations and rule makings that significantly fostered competition in the business of transporting and marketing gas. Today, interstate pipeline companies are required to provide nondiscriminatory transportation services to producers, marketers and other shippers, regardless of whether such shippers are affiliated with an interstate pipeline company. FERC’s initiatives have led to the development of a competitive, open access market for natural gas purchases and sales that permits all purchasers of natural gas to buy gas directly from third-party sellers other than pipelines. However, the natural gas industry historically has been very heavily regulated; therefore, we cannot guarantee that the less stringent regulatory approach currently pursued by FERC and Congress will continue indefinitely into the future nor can we determine what effect, if any, future regulatory changes might have on our natural gas related activities.

COAL INDUSTRY MARKET SEGMENT

To further enhance our growth and expansion, the Company 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. Universal plans to mine, produce and market “Thermal/Steam” coal to sale to other major coal producers and electric utility customers for power generation. The Company will be pursuing acquisitions of mining operations which are the surface and high wall mining type and that does not include any underground mining. According to the American Coal Foundation, 9 out of every 10 tons of coal mined in the United States today is used to generate electricity, and more than half of the electricity used in this country is coal generated electricity. The following is a summary and overview of the industry and market, which information was excerpted primarily from the U.S. Department of Energy’s, “Energy Information Agency” (EIA).

Types of Coal

Coal is classified into four main types, or ranks (lignite, subbituminous, bituminous, anthracite), depending on the amounts and types of carbon it contains and on the amount of heat energy it can produce. For the most part, the higher ranks of coal contain more heat-producing energy. Coals with a high heat content are generally higher priced.

Bituminous coal contains 45-86% carbon. Bituminous coal was formed under high heat and pressure. It is the most abundant rank of coal found in the United States, accounting for about half of U.S. coal production. Bituminous coal is used to generate electricity and is an important fuel and raw material for the steel and iron industries. West Virginia, Kentucky, and Pennsylvania are the largest producers of bituminous coal.

According to the Energy Administration (EIA) in its “Annual Coal Report” released November 30, 2011, (which the information below is derived), due to its relatively low cost and abundance, coal is used to generate about half of the electricity consumed in the United States. Coal is the largest domestically-produced source of energy. Coal use, however, results in higher amounts of carbon dioxide per unit of energy than the use of oil or natural gas. The United States is home to the largest recoverable reserves of coal in the world. In fact, we have enough coal to last more than 200 years, based on current consumption levels. Coal is produced in 25 States spread across three coal-producing regions, but approximately 72% of current production originates in just five States: Wyoming, West Virginia, Kentucky, Pennsylvania, and Montana.

•U.S. coal production totaled 1,084.4 million short tons, about the same as the 2009 total of 1,074.9 million short tons. Wyoming continued to be the largest coal-producing State with 442.5 million short tons, 2.6 percent higher than the 2009 total of 431.1 million short tons.

•Coal consumption totaled 1,051.3 million short tons, up 5.1 percent from the 2009 consumption level of 997.5 million short tons. This increase can be attributed to higher consumption in the electric power, manufacturing, and coke sectors in 2010.

Use of Coal for Electric Power

About 86% of U.S. electricity is generated by three fuels: coal, natural gas, and nuclear (2011):

• Coal — 42%

• Natural Gas — 25%

• Nuclear — 19%

• Hydroelectric — 8%

• Other Renewables — 5%

• Petroleum and Other — 1%

Net generation of electricity in the United States was about 4,106 billion kilowatt hours (kWh).

In 2011, coal was the fuel for about 42% of the 4 trillion kilowatt hours of electricity generated in the United States. About 93% of U.S. coal consumption is in the electric power sector. Since 1976, coal has been the least expensive fossil fuel used to generate electricity when measured based on the cost per Btu (a unit of energy content). Although the cost of generating electricity from coal has increased, it is still lower than generating electricity from either natural gas or petroleum in most areas. Coal also has certain industrial applications such as cement making and conversion to coke for the smelting of iron ore at blast furnaces to make steel. A small amount of coal is also burned to heat commercial, military, and institutional facilities, and an even smaller amount is used to heat homes. Over the past 10 years, about 5% of the coal produced in the United States, on average, has been exported. The United States also imports a small amount of coal; some power plants along the Gulf Coast and the Atlantic Coast find it cheaper to import coal by sea from South America than to have it transported from domestic coal mines.

The United States has more than 1,400 coal-fired electricity generating units in operation at more than 600 plants across the country. Together, these power plants generate almost half of the electricity produced in the United States and consume about one billion short tons of coal per year. The share of our electricity generated from coal is expected to decrease by 2035. However, our growing demand for electricity is expected to lead to an increase in the actual amount of coal used, in the absence of new policies to limit or reduce emissions of carbon dioxide and other greenhouse gases. Such new policies could significantly change the outlook for coal use.

Industrial Uses of Coal

A variety of industries use coal's heat and by-products. Separated ingredients of coal (such as methanol and ethylene) are used in making plastics, tar, synthetic fibers, fertilizers, and medicines. Coal is also used to make steel. Coal is baked in hot furnaces to make coke, which is used to smelt iron ore into iron needed for making steel. It is the very high temperatures created from the use of coke that gives steel the strength and flexibility for things like bridges, buildings, and automobiles. The concrete and paper industries also use large amounts of coal.

Surface Mining

Surface mining (including mountain top removal) is used to produce most of the coal in the United States because it is less expensive than underground mining. Surface mining can be used when the coal is buried less than 200 feet underground. In surface mining, giant machines remove the top soil and layers of rock known as "overburden" to expose the coal seam. Once the mining is finished, the dirt and rock are returned to the pit, the topsoil is replaced, and the area is replanted. U.S. laws require that dust and water runoff from the affected area has to be controlled, and that the area has to be "reclaimed" close to its original condition. Many surface mines have been reclaimed so well that it can be hard to tell that there was a surface mine in the area.

Processing and Transporting Coal

After coal is mined and processed, it is ready to be shipped to market. The cost of shipping coal can cost more than the cost of mining it. About 71% of coal in the United States is transported, for at least part of its trip to market, by train. Coal can also be transported by barge, ship, truck, and even pipeline. It is often cheaper to transport coal on river barges, but barges cannot take coal everywhere that it needs to go. If the coal will be used near the coal mine, it can be moved by trucks and conveyors. Coal can also be crushed, mixed with water, and sent through a "slurry" pipeline. Sometimes, coal-fired electric power plants are built near coal mines to lower transportation costs.

Reducing the Impacts of Coal Use

The Clean Air Act and the Clean Water Act require industries to reduce pollutants released into the air and the water. Industry has found several ways to reduce sulfur, nitrogen oxides (NOx), and other impurities from coal. They have found more effective ways of cleaning coal after it is mined, and coal consumers have shifted towards greater use of low sulfur coal. Power plants use flue gas desulfurization equipment, also known as "scrubbers," to clean sulfur from the smoke before it leaves their smokestacks. In addition, industry and government have cooperated to develop technologies that can remove impurities from coal or that make coal more energy-efficient so less needs to be burned.

Equipment intended mainly to reduce SO2 (such as scrubbers), NOx (such as catalytic converters), and particulate matter (such as electrostatic precipitators and baghouses) is also able to reduce mercury emissions from some types of coal. Scientists are also working on new ways to reduce mercury emissions from coal-burning power plants. Research is underway to address emissions of carbon dioxide from coal combustion. Carbon capture separates CO2 from emissions sources and recovers it in a concentrated stream. The CO2 can then be sequestered, which puts CO2 into storage, possibly underground, in such a way that it will remain there permanently.

Reuse and recycling can also reduce coal’s environmental impact. Land that was previously used for coal mining can be reclaimed for uses like airports, landfills, and golf courses. Waste products captured by scrubbers can be used to produce products like cement and synthetic gypsum for wallboard.

Scientists are working on ways to lower the costs and improve the efficiency of various carbon capture and sequestration (CCS) technologies with a goal of capturing approximately 90% of the carbon dioxide from coal plants before it is emitted into the atmosphere and then storing it below the Earth's surface.

International Coal Market

Worldwide, compared to all other fossil fuels, coal is the most abundant and is widely distributed across the continents. The estimate for the world's total recoverable reserves of coal as of January 1, 2009 was 948 billion short tons.

Estimated Recoverable Reserves" include only the coal that can be mined with today’s mining technology, after accessibility constraints and recovery factors are considered. EIA estimates there are 261 billion short tons of U.S. recoverable coal reserves, about 54% of the Demonstrated Reserve Base. Based on U.S. coal consumption for 2010, the U.S. recoverable coal reserves represent enough coal to last 249 years. However, EIA projects in the most recent Annual Energy Outlook (April 2011) that U.S. coal consumption will increase at about 1.1% per year for the period 2009-2035. If that growth rate continues into the future, U.S. recoverable coal reserves would be exhausted in about 119 years if no new reserves are added.

Future Outlook for the Coal Industry

International – The international market for coal consumption is a very dynamic and fast changing one especially in developing regions due to industrialization and technological development. This change has been one of increased consumption as noted in the EIA’s report International Energy Outlook 2011 where we see that in the years from 2000 to 2010, there have been significant increases in yearly coal consumption globally ranging from as little as 0.8% to as high 10.7% annually. Due to the industrialization in the developing regions of the globe, this trend of increasing coal consumption will remain a reality. EIA projections show a conservative average of almost 1.4% increased coal consumption each year through 2035.

The U.S. Energy Information Administration (EIA) says, coal as a fuel source for electricity generation will increase 25% by 2035 in the United States. Overall, the EIA predicts that coal will remain the dominate fuel source for electricity generation, growing to about 11,000 terawatt hours from its current level of about 8,000.

Employees

As of fiscal year end December 31, 2011, the Company had 13 employees. Each management hire has been carefully selected to address immediate needs in particular functional areas, but also with consideration of the Company’s future needs during a period of expected rapid growth and expansion. Value is placed not only on outstanding credentials in specific areas of functional expertise, but also on cross-functionality, collegiality, a strong knowledge of content acquisition and distribution, along with hands-on experience in scaling operations from initial beta and development stage through successful commercial deployment. We believe that the relationship with our employees is excellent. We regularly use independent consultants and outside contractors to perform various professional services, particularly in the areas of drilling, engineering, field, on-site production services and certain accounting functions.

Executive Officers of Universal Bioenergy and NDR Energy Group LLC

Our executive officers are appointed by, and serve at the pleasure of our Board of Directors. Set forth below is biographical information about each of our executive officers.

Vince M. Guest - President and Chief Executive Officer

Vince M. Guest was appointed as President and CEO on April 14, 2010. He has been a Director of Universal since March 5, 2009. He has over 25 years of professional management experience drawn from Fortune 500 firms in the U.S. His experience includes business management, operations, strategic alliances, energy services, organizational development, marketing, commercial real estate acquisitions, corporate finance, and management of real estate assets with a combined portfolio value exceeding $2.5 billion. He has arranged over $500 million in corporate capital funding and commercial and residential financing. He served as President of AmeriCapital Financial Corporation directing the commercial and residential real estate investment services group for 26 states nationwide. Previously, he served as Director of Energy Services for New Energy Ventures, managing the energy services division for the state of California. He worked as Director of Engineering for Trammel Crow-Winthrop Management and in management and professional positions at TRW, Citicorp, and Bristol-Myers Squibb.

Solomon RC Ali - Senior Vice President of Corporate Finance and Investor Relations

Solomon RC Ali was appointed as Senior Vice President of Corporate Finance and Investor Relations and Director on March 5, 2009. He was appointed as Corporate Vice President on May 25, 2010. He has over 23 years’ experience in investor relations, investment banking, mergers, acquisitions, corporate structure, marketing, asset management and is an expert in financial engineering and raising investment capital. He has personally managed and completed over 140 mergers and acquisitions in his career. As a highly qualified corporate executive he served as CEO of Rainco Industries, managed over 500 employees, managed over $100 million in assets and arranged over $250 million in investment capital and structured financing. His experience also includes corporate valuation, capitalization structure, development of Private Placement Memoranda, business plans, client positioning, managing the investment process with securities attorneys and accountants, for SEC and FINRA regulatory compliance and corporate registration filings. Mr. Ali has developed and implemented new policies, systems, procedures and strategically re-organized, re-structured, re-financed and turned around many troubled small cap companies and improved their operations and market capitalization value.

Ken Harris – NDR Energy Group - President and Chief Executive Officer

Ken Harris was appointed as President and CEO of NDR Energy Group on April 1, 2011. Ken has 22 years of experience as an Attorney, with experience in business operations, management, negotiations of NAESB supply and purchase contracts, business development, regulatory compliance, operations systems design and organizational development. Mr. Harris has worked as an Attorney with a legal practice covering business transactions, tort litigation, criminal law, personal injury, sports agency management. He also serves as a Founder / Partner with the law firm of Ken Harris and Associates. Previously he worked as a Founding Partner for Todd, Parham, Harris and Dixon, a Founding Partner for Harris and Drummond, an Associate with Hoover and Williams, an Associate with Wishart, Norris, Henninger & Pittman, and as a NBA/NFL Sports Agent for Bill Duffy & Associates. Ken also serves as host of the radio talk show “Law 360” on WGIC Radio in Charlotte, North Carolina. Ken received a B.A in Political Science, and a Juris Doctorate from the University of North Carolina at Chapel Hill. Ken Harris has represented some of the most significant business brands in urban America, and has worked extensively with Magic Johnson Enterprises for over 18 years.

Rickey Hart – NDR Energy Group – Senior Vice President and Business Development Officer

Rickey Hart serves in the position of Senior Vice President and Business Development Officer for NDR Energy Group. He founded NDR in 2000, and has over 25 years over professional experience, which includes 16 years in the oil and gas industry. His professional industry experience covers operations, marketing, and business development, negotiations of NAESB supply and purchase contracts, sales of natural gas, propane, lubricants and related energy services. He has also developed new markets for products, sales of pipeline transmission capacity, developed hedge programs, managed sales teams, and developed marketing, sales and promotions programs for many companies during his career. Previously he worked as a General Manager for New Image Consultants, Marketing Manager for SDS Petroleum Products, Account Manager for Texas Liquids and other managerial and professional positions for Jones and Associates, M&S Staff Consultants, and Twentieth Century Fox.

Ray Crooks – NDR Energy Group – Managing Partner and Principal Consultant

Ray Crooks has over 25 years of professional experience in energy services and the gas industry. He provides technical consulting services for NDR Energy’s public and private sector clients in the areas of natural gas planning, gas supply and pipeline management, contract negotiations for NAESB supply and purchase contracts, strategic planning, risk management and cost of service analyses. Ray is a candidate for a Doctorate in Business Administration, (DBA), and holds a Masters in Management Information Systems from Nova Southeastern University, a MBA in Finance from Webber International University, and a B.S. in Business Administration from the University of Central Florida.

WHERE YOU CAN FIND MORE INFORMATION

We will make available free of charge any of our filings as soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the Securities and Exchange Commission (“SEC”). We are not including the information contained in our website as part of, or incorporating it by reference into, this report on Form 10-K.

The public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20002. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at (http://www.sec.gov).

ITEM 1A - Risk Factors

As a smaller reporting company we are not required to provide a statement of risk factors. However, we believe this information may be valuable to our shareholders for this filing although we reserve the right to not provide risk factors in our future filings. You should carefully consider the following risk factors together with the other information contained in this Annual Report on Form 10-K, and in prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933, as amended. If any of the risks factors actually occur, our business, financial condition or results of operations could be materially adversely affected. In such cases, the trading price of our common stock could decline. We believe there are no changes that constitute material changes from the risk factors previously disclosed in the prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933 and include or reiterate the following risk factors:

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

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

Our operations are exposed to market risks that are beyond our control which could adversely affect our financial results and capital requirements.

Our risk management operations are subject to market risks beyond our control, including market liquidity, commodity price volatility caused by market supply and demand dynamics and counterparty creditworthiness. Although we maintain a risk management policy, we may not be able to completely offset the price risk associated with volatile gas prices, particularly in the non-regulated business segments, which could lead to volatility in our earnings.

Further disruptions in the credit markets could limit our ability to access capital and increase our costs of capital.

We rely upon access to both short-term and long-term credit markets to satisfy our liquidity requirements. The global credit markets have experienced significant disruptions and volatility during the last few years to a greater degree than has been seen in decades. In some cases, the ability or willingness of traditional sources of capital to provide financing has been reduced.

Volatility of natural gas and oil prices significantly affects our cash flow and capital resources and could hamper our ability to produce natural gas and oil economically.

Our financial results are highly dependent on the general supply and demand for oil and gas, which impact the prices we ultimately realize on our sales of these commodities. Natural gas and oil prices are volatile, and a decline in prices adversely affects our profitability and financial condition. The oil and gas industry is typically cyclical, and prices for natural gas and oil have been volatile. Historically, the industry has experienced downturns characterized by oversupply and/or weak demand. Long-term supply and demand for oil and gas is uncertain and subject to numerous factors outside of our control.

Estimates of Oil and Gas Reserves are Uncertain

The process of estimating oil and gas reserves is complex and requires significant judgment in the evaluation of available geological, engineering and economic data for each reservoir, particularly for new discoveries. Because of the high degree of judgment involved, different reserve engineers may develop different estimates of reserve quantities and related revenue based on the same data. In addition, the reserve estimates for a given reservoir may change substantially over time as a result of several factors including additional development activity, the viability of production under varying economic conditions and variations in production levels and associated costs. Consequently, material revisions to existing reserve estimates may occur as a result of changes in any of these factors. Such revisions to proved reserves could have a material adverse effect on our estimates of future net revenue, as well as our financial condition and profitability.

We depend significantly upon the continued involvement of our present management.

Our success depends to a significant degree upon the involvement of our management, who are in charge of our strategic planning and operations. We may need to attract and retain additional talented individuals in order to carry out our business objectives. The competition for such persons could be intense and there are no assurances that these individuals will be available to us.

Climate change and related regulatory responses may impact our business.

Climate change as a result of emissions of greenhouse gases is a significant topic of discussion and may generate U.S. federal and other regulatory responses in the near future. It is impracticable to predict with any certainty the impact of climate change on our business or the regulatory responses to it, although we recognize that they could be significant. However, it is too soon for us to predict with any certainty the ultimate impact, either directionally or quantitatively, of climate change and related regulatory responses.

To the extent that climate change increases the risk of natural disasters or other disruptive events in the areas in which we operate, we could be harmed. While we maintain business recovery plans that are intended to allow us to recover from natural disasters or other events that can be disruptive to our business, our plans may not fully protect us from all such disasters or events.

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

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

The market price for our common stock may be volatile, and you may not be able to sell our stock at a favorable price or at all.

Many factors could cause the market price of our common stock to rise and fall, including:

• actual or anticipated variations in our quarterly results of operations;
• changes in market valuations of companies in our industry;
• changes in expectations of future financial performance;
• fluctuations in stock market prices and volumes;
• issuances by us of dilutive common stock or other securities in the future;
• the addition or departure of key personnel; and
• announcements by us or our competitors of acquisitions, investments or strategic alliances.

It is possible that the proceeds from sales of our common stock may not equal or exceed the prices you paid for the shares after including the costs and fees of making the sales.

Substantial sales of our common stock, or the perception that such sales might occur, could depress the market price of our common stock.

We cannot predict whether future issuances of our common stock or resale in the open market will decrease the market price of our common stock. The consequence of any such issuances or resale of our common stock on our market price may be increased as a result of the fact that our common stock is thinly, or infrequently, traded. The exercise of any options, or the vesting of any restricted stock that we may grant to directors, executive officers and other employees in the future, the issuance of common stock in connection with acquisitions and other issuances of our common stock may decrease the market price of our common stock.

Holders of our common stock have a risk of potential dilution if we issue additional shares of common stock in the future.

Although our Board of Directors intends to utilize its reasonable business judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our common stock, the future issuance of additional shares of our common stock would cause immediate, and potentially substantial, dilution to the net tangible book value of those shares of common stock that are issued and outstanding immediately prior to such transaction. Any future decrease in the net tangible book value of our issued and outstanding shares could have a material adverse effect on the market value of our shares.

Certain shares of our common stock are restricted from immediate resale. The lapse of those restrictions, coupled with the sale of the related shares in the market, or the market’s expectation of such sales, could result in an immediate and substantial decline in the market price of our common stock.

Most of our shares of common stock are restricted from immediate resale in the public market. The restricted shares are restricted in accordance with Rule 144, which states that if unregistered, restricted securities are to be sold, a minimum of one year must elapse between the later of the date of acquisition of the securities from the issuer or from an affiliate of the issuer, and any resale of those securities in reliance on Rule 144. The Rule 144 restrictive legend remains on the stock until the holder of the stock holds the stock for longer than six months (unless an affiliate) and meets the other requirements of Rule 144 to have the restriction removed. The sale or resale of those shares in the public market, or the market’s expectation of such sales, may result in an immediate and substantial decline in the market price of our shares. Such a decline will adversely affect our investors, and make it more difficult for us to raise additional funds through equity offerings in the future.

Our Company’s Business Is Impacted By Any Instability And Fluctuations In Global Financial Systems.

The recent credit crisis and related instability in the global financial system, although somewhat abated, has had, and may continue to have, an impact on our prospective business and our prospective financial condition. We may face significant challenges if conditions in the financial markets do not continue to improve. Our ability to access the capital markets may be severely restricted at a time when we wish or need to access such markets, which could have a materially adverse impact on our flexibility to react to changing economic and business conditions or carry on our operations.

Reporting Requirements May Utilize A Substantial Portion Of Our Cash And Reduce The Period Of Time We Can Survive On Our Available Cash Reserves Prior To Generating Revenue.

We will incur ongoing costs and expenses for SEC reporting and compliance. To be eligible for quotation on the OTCQB, issuers must remain current in their filings with the SEC. Market Makers are not permitted to begin quotation of a security whose issuer does not meet this filing requirement. Securities already quoted on the OTCQB that become delinquent in their required filings will be removed following a 30 day grace period if they do not make their required filing during that time. In order for us to remain in compliance we will require future revenues to cover the cost of these filings, which could comprise a substantial portion of our available cash resources.

The Regulation Of Penny Stocks By SEC and FINRA (Financial Industry Regulatory Authority, Inc.) May Discourage The Tradability Of The Company's Securities And Thereby Make It Hard For Investors To Sell Their Shares At The Time And Prices They Might Otherwise Expect.

We are a "penny stock" company. We are subject to a Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors. For purposes of the rule, the phrase "accredited investors" means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, when combined with a spouse's income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination of the purchaser and receive the purchaser's written agreement to the transaction prior to the sale. Effectively, this discourages broker-dealers from executing trades in penny stocks. Consequently, the rule will affect the ability of purchasers in this offering to sell their securities in any market that might develop, because it imposes additional regulatory burdens on penny stock transactions.

In addition, the Securities and Exchange Commission has adopted a number of rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, and 15g-9 under the Securities and Exchange Act of 1934, as amended. Because our securities constitute "penny stocks" within the meaning of the rules, the rules would apply to us and to our securities. The rules will further affect the ability of owners of shares to sell their securities in a market that might develop for them because it imposes additional regulatory burdens on penny stock transactions.

Shareholders should be aware that, according to the Securities and Exchange Commission Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) "boiler room" practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, leaving investors with losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to the Company's securities.

Failure To Achieve And Maintain Effective Internal Controls In Accordance With Section 404 Of The Sarbanes-Oxley Act Could Have A Material Adverse Effect On Our Business And Operating Results.

It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. If we are unable to comply with these requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires of publicly traded companies.

If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, we are required to prepare assessments regarding internal controls over financial reporting and, furnish a report by our management on our internal control over financial reporting. We have begun the process of documenting and testing our internal control procedures in order to satisfy these requirements, which is likely to result in increased general and administrative expenses and may shift management time and attention from revenue-generating activities to compliance activities. While our management is expending significant resources in an effort to complete this important project, there can be no assurance that we will be able to achieve our objective on a timely basis. Failure to achieve and maintain an effective internal control environment or complete our Section 404 certifications could have a material adverse effect on our stock price.

In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover “material weaknesses” in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines “significant deficiency” as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected.

In the event that a material weakness is identified, we will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future.

Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

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

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

If we experience delays and/or defaults in customer payments, we could be unable to recover all expenditures.

Because of the nature of our contracts, at times we commit resources to projects prior to receiving payments from the customer in amounts sufficient to cover expenditures on projects as they are incurred. Delays in customer payments may require us to make a working capital investment. If a customer defaults in making their payments on a project in which we have devoted resources, it could have a material negative effect on our results of operations.

Our recent and future acquisitions may not be successful.

We expect to continue pursuing selective acquisitions of businesses. We cannot assure you that we will be able to locate acquisitions or that we will be able to consummate transactions on terms and conditions acceptable to us, or that acquired businesses will be profitable. Acquisitions may expose us to additional business risks different than those we have traditionally experienced. We also may encounter difficulties integrating acquired businesses and successfully managing the growth we expect to experience from these acquisitions.

We may choose to finance future acquisitions with debt, equity, cash or a combination of the three. We can give no assurances that any future acquisitions will not dilute earnings or disrupt the payment of a stockholder dividend. To the extent we succeed in making acquisitions, a number of risks will result, including:

• The possible assumption of material liabilities (including for environmental-related costs);

• Failure of due diligence to uncover situations that could result in legal exposure or to quantify the true liability exposure from known risks;

• The diversion of management's attention from the management of daily operations to the integration of

operations;

• Difficulties in the assimilation and retention of employees and difficulties in the assimilation of different cultures and practices, as well as in the assimilation of broad and geographically dispersed personnel and operations, as well as the retention of employees generally;

• The risk of additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and internal controls; and

• We may not be able to realize the cost savings or other financial benefits we anticipated prior to the acquisition.

The failure to successfully integrate acquisitions could have an adverse effect on our business, financial condition and results of operations.

Oil and Natural Gas investments are highly risky.  

The selection of prospects for oil and natural gas drilling, the drilling, ownership and operation of oil and natural gas wells, and the ownership of non-operating interests in oil and natural gas properties are highly speculative. We cannot predict whether any prospect will produce oil or natural gas or commercial quantities of oil or natural gas, nor can we predict the amount of time it will take to recover any oil or gas we do produce. Drilling activities may be unprofitable, not only from non-productive wells, but from wells that do not produce oil or natural gas in sufficient quantities or quality to return a profit. Delays and added expenses may also be caused by poor weather conditions affecting, among other things, the ability to lay pipelines. In addition, ground water, various clays, lack of porosity and permeability may hinder, restrict or even make production impractical or impossible.

We may be required to pay delay rentals to hold drilling prospects, which may deplete our capital.  

Oil and gas leases generally must be drilled upon by a certain date or additional funds known as delay rentals must be paid to keep the lease in effect. Delay rentals typically must be paid after the first year of entering into a lease if no production or drilling activity has commenced. If delay rentals become due on any property we acquire, we will have to pay our share of such delay rentals or lose its lease on the property. These delay rentals could equal or exceed the cost of the property. Further, payment of these delay rentals could seriously deplete the capital available to fund drilling activities, if and when they do commence.

A substantial or extended decline in oil or natural gas prices may adversely affect our business, financial condition and results of operations.  

The price that the we receive for oil or natural gas production from wells in which we have an interest will significantly affect our revenue, profitability, access to capital and future growth rate. Historically, the oil and natural gas markets have been volatile and will likely continue to be volatile in the future. The prices that we will receive for our interests in production and the levels of production depend on numerous factors. These factors include, but are not limited to, the following:

Oil and natural gas prices have fluctuated dramatically in recent years and will likely continue to be volatile in the future. Lower oil or natural gas prices may not only decrease our revenues but also may reduce the amount of oil or natural gas that may be produced economically from our prospects. A substantial or extended decline in oil and natural gas prices may materially and adversely affect our future business, financial condition, results of operations, liquidity or ability to finance planned capital expenditures.

Our future interests are subject to numerous environmental, health and safety regulations which may result in material liabilities and costs.  

Our future interests will be subject to various federal, state and local environmental, health and safety laws and regulations governing, among other things, the emission and discharge of pollutants into the ground, air or water, the generation, storage, handling, use and transportation of regulated materials and the health and safety of our employees. The operator of wells will be required to obtain environmental permits from governmental authorities for certain operations, including drilling permits for wells. There is a risk that the holder of any such permit will not be at all times in complete compliance with these permits and the environmental laws and regulations to which the operator is subject. If the operator violates or fails to comply with these laws, regulations or permits, the operator could be fined or otherwise sanctioned by regulators, including through the revocation of permits or the suspension or termination of operations. Failure to obtain permits in a timely manner or at all (due to opposition from community or environmental interest groups, governmental delays, or any other reasons) could impede operations, which could have a material adverse effect on our results of operations and its financial condition.

We could be held liable for all environmental, health and safety costs and liabilities arising out of its actions and omissions as well as those of third-party contractors and operators. To the extent we do not address these costs and liabilities or if it is otherwise in breach of applicable lease requirements, such leases could be suspended or terminated.

In addition, we expect continued legislative, regulatory and judicial attention to climate change issues. Various countries and U.S. states and regions have agreed to regulate emissions of greenhouse gases, including methane (a primary component of natural gas) and carbon dioxide, a byproduct of oil and natural gas combustion. The U.S. federal government, as well as the U.S. Environmental Protection Agency, are currently considering national greenhouse gas regulation, each having proposed bills or rules which would require or result in greenhouse gas emissions reductions. Final laws or regulations could be adopted this or next year. The regulation of greenhouse gases in the areas in which we and the end-users of oil and gas products operate could increase our operating costs or adversely affect the demand for natural gas and oil and, as a result, adversely impact our financial condition.

Environmental, health and safety laws are complex, change frequently and have tended to become increasingly stringent over time. Costs of complying with current and future environmental, health and safety laws, and potential liabilities arising from releases of, or exposure to, regulated substances may adversely affect the our results of operations and its financial condition.

We may engage in future acquisitions that could dilute the ownership interests of our stockholders, cause us to incur debt and assume contingent liabilities.

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. In the event of any future acquisitions, we could:

• issue equity securities which would dilute current stockholders’ percentage ownership;
• incur substantial debt;
• assume contingent liabilities;
• expend significant cash

These actions could have a material adverse effect on our operating results or the price of our Common Stock. Moreover, even if we do obtain benefits in the form of increased sales and earnings, there may be a lag between the time when the expenses associated with an acquisition are incurred and the time when we recognize such benefits. We cannot ensure that we will be able to successfully integrate any businesses, products, technologies, or personnel that we might acquire in the future, and our failure to do so could have a material adverse effect on our business, operating results and financial condition.

If we do not effectively manage our growth, our existing infrastructure may become strained, and we may be unable to increase revenue growth.

Our past growth that we have experienced, and in the future may experience, may provide challenges to our organization, requiring us to expand our personnel and our operations. Future growth may strain our infrastructure, operations and other managerial and operating resources. If our business resources become strained, our earnings may be adversely affected and we may be unable to increase revenue growth. Further, we may undertake contractual commitments that exceed our labor resources, which could also adversely affect our earnings and our ability to increase revenue growth.

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 1B. UNRESOLVED STAFF COMMENTS

This Item is not applicable to us as we are not an accelerated filer, a large accelerated filer, or a well-seasoned issuer.

ITEM 2. PROPERTIES

The principal office of the Company is located at 19800 MacArthur Blvd., Suite 300, Irvine, California 92612.

The principal offices of our subsidiary NDR Energy Group LLC are located at 525 N. Tryon Street, Suite 1600, Charlotte, North Carolina 28202.

ITEM 3. LEGAL PROCEEDINGS

We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. 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 company’s or our company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

ITEM 4. REMOVED AND RESERVED

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES.

Universal common stock is traded in the over-the-counter market, and quoted in the OTC Markets Group Inter-dealer Quotation System and can be accessed on the Internet at www.otcmarkets.com under the symbol “UBRG.”

At December 31, 2011, there were 199,969,927 shares of common stock of Universal issued and outstanding and there were approximately 54 shareholders of record of the Company’s common stock.

The following table sets forth for the periods indicated the high and low bid quotations for Universal’s common stock. These quotations represent inter-dealer quotations, without adjustment for retail markup, markdown or commission and may not represent actual transactions.

Price Range of Common Stock

On December 31, 2011, the closing bid price of our common stock was $0.024.

Transfer Agent

Universal’s Transfer Agent and Registrar for the common stock is: Corporate Stock Transfer located at 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209.

RECENT SALES OF UNREGISTERED SECURITIES

Common Stock Issued

Fiscal Year 2011

At December 31, 2011, there were no outstanding stock options or warrants.

On February 10, 2011, the Company issued 1,000,000 shares of common stock to Progas Energy Services in accordance with the Amendment to the Participation and Operating Agreements, valued at $42,000 on the date of issue.

On February 14, 2011, the Company issued 2,500,000 shares of common stock to a consultant in accordance with their consulting agreement valued at $111,250 on the date of issue.

On February 15, 2011, the Company converted three of its Notes payable, dated 4/26/10, 5/24/10 and 7/15/10 for a combined total of $21,750 and issued 4,350,000 common shares for that conversion. No accrued interest was due on the note upon conversion. This conversion of debt reduced the Company’s notes payables by $21,750.

On February 15, 2011, the Company converted an additional three of its Notes payable dated 4/26/10, 5/24/10 and 7/15/10 for a combined of $21,750 and issued 4,350,000 common shares for that conversion. No accrued interest was due on the note upon conversion. This conversion of debt reduced the Company’s notes payables by $21,750. These notes were for a different investor than the one indicated above.

On February 15, 2011, the Company issued 1,000,000 shares of common stock to a consultant in accordance with their agreement valued at $40,000 on the date of issue.

On March 7, 2011, the Company converted one of its Notes payable dated 6/30/10, for a total of $32,000 and issued 6,400,000 common shares for that conversion. No accrued interest was due on the note upon conversion. This conversion of debt reduced the Company’s notes payables by $32,000.

On March 14, 2011, the Company converted one of its Notes payable dated 5/20/10, for a total of $28,000 and issued 5,600,000 common shares for that conversion. No accrued interest was due on the note upon conversion. This conversion of debt reduced the Company’s notes payables by $28,000.

On March 22, 2011, the Company converted one of its Notes payable dated 7/20/10, for a total of $15,350 and issued 3,070,000 common shares for that conversion. No accrued interest was due on the note upon conversion. This conversion of debt reduced the Company’s notes payables by $15,350.

On June 24, 2011, the Company converted four of its Notes payable dated 7/4/09, 2/16/10, 3/20/10 and 5/25/10 for a combined total of $146,600 and issued 8,635,555 shares of common stock. This conversion of debt reduced the Company’s notes payables by $146,600.

On July 12, 2011, the Company issued 11,415,311 shares of common stock, as a stock dividend to all registered shareholders of record in accordance with the Company’s resolution and declaration. Previously, on June 6, 2011, our Board of Directors passed a resolution and declared a stock dividend to distribute to all registered shareholders of record on or before July 1, 2011, on a 10 for 1 basis the stock indicated above.

On July 29, 2011 the Company converted one of its Notes payable dated 9/27/10, for a total of $50,000 and issued 10,000,000 common shares for that conversion. No accrued interest was due on the note upon conversion. This conversion of debt reduced the Company’s notes payables by $50,000.

On September 14, 2011, the Company issued 3,000,000 shares of common stock for services, of which 1,000,000 shares were issued to an employee of the Company, and 1,000,000 shares each, was issued to two employees of NDR Energy Group LLC for services, valued at $133,500 on the date of issue.

On September 22, 2011 the Company converted one of its Notes payable dated 11/23/10, for a total of $12,000 and issued 2,400,000 common shares for that conversion. No accrued interest was due on the Note upon conversion. This conversion of debt reduced the Company’s Notes payables by $12,000.

On October 12, 2011 the Company converted one of its notes payable dated 12/31/10, for a total of $30,000 and issued 1,500,000 common shares for that conversion. No accrued interest was paid on the Note upon conversion. This conversion of debt reduced the Company’s notes payables by $30,000.

On October 19, 2011 the Company completed a partial conversion of one of its Notes payable dated 12/31/10, and issued 23,545,000 common shares for that conversion. On October 20, 2011 the Company completed the final conversion of this Note and issued 18,487,600 shares for that conversion. The principal amount of the Note was $164,833, with $45,329 in accrued interest due on the Note upon conversion. The total amount due to the Holder at the time of conversion, (with principal and interest) was $210,162. This conversion of debt reduced the Company’s notes payables by $210,162.

On October 25, 2011 the Company completed a partial conversion of one of its Notes payable dated 08/26/10, with a principal amount of $36,919. A total of $27,249 worth of the Note was converted, and 5,449,800 common shares were issued for that part of the conversion, which leaves a remaining balance of $9,670 of the principal of the Note. No accrued interest was paid on the Note upon conversion. This conversion of debt reduced the Company’s notes payables by $27,249.

On October 27, 2011 the Company converted one of its Notes payable dated 12/31/10, with a principal amount of $16,045, and one dated 12/31/10 for $89,014 and issued 7,396,767 common shares for that conversion. The combined principal amount of the Notes was $105,059, with $10,238 in combined accrued interest due on the Notes upon conversion. The total amount due to the Holder at the time of conversion, (with principal and interest) was $115,297. This conversion of debt reduced the Company’s notes payables by $115,297.

On December 29, 2011 the Company completed a partial conversion one of its revised Notes payable dated 12/23/11, with an amount of $99,134. A total of $30,000 worth of the Note was converted, and 2,622,377 common shares were issued for that part of the conversion, which leaves a remaining balance of $69,134 of the principal of the Note. No accrued interest was paid on the Note upon conversion. This revised Note combined two existing Notes, one dated March 28, 2011 for $72,500, and one dated May 20, 2011 for $20,600, which were purchased by the current Note Holder from the previous Note Holder on December 23, 2011. This conversion of debt reduced the Company’s notes payables by $30,000.

2010

On October 5, 2010 the Company converted one of its Notes payable, for a total of 24,559,067 to shares of our Common Stock. This conversion of debt reduced the Company’s notes payables by $184,000, and the Company expensed $494,752.

Forward Stock Splits

There were no forward stock splits to report on for this period. On November 14, 2007 the Board of Directors authorized a 5-for-1 forward split. This forward split is reflected in the Statement of Shareholder’s Equity for the Form 10-K Annual Report for the period ended December 31, 2007.

Stock Dividend

On June 6, 2011, our Board of Directors passed a resolution and declared a stock dividend to distribute to all registered shareholders of record on or before July 1, 2011, on a 10 for 1 basis. On July 12, 2011, our transfer agent, issued 11,415,311 shares of common stock to all registered shareholders of record in accordance with the resolution and declaration.

ITEM 6. SELECTED FINANCIAL DATA

The following information has been summarized from financial information included elsewhere and should be read in conjunction with such financial statements and notes thereto.

Summary of Statements of Operations of Universal Bioenergy  

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

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 “Item 8. Financial Statements and Supplementary Data” of this report.

As used below, “we”, “us”, “our”, “Universal”, “Universal Bioenergy”, “Company” or “our company” refers to Universal Bioenergy, Inc. and all of its subsidiaries.

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

Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled “Risk Factors” in the Company’s this Annual Report on Form 10-K for the year ended December 31, 2011, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.

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

Overview of Our Company

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”. 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.

Our primary business focus is the production, marketing and sales of natural gas, propane, coal, oil and alternative energy. Through our subsidiary, NDR Energy, we presently sell natural gas to 28 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. We are also engaged in the acquisition of oil and gas fields, lease acquisitions and development of newly discovered or recently discovered oil and gas fields, re-entering existing wells, transmission and marketing of the products to our customer base. We are continuing our growth through an ongoing series of acquisitions.

NDR Energy Group LLC.

In April 2010, we expanded into the natural gas energy market by the acquisition of a 49% stake in NDR Energy Group LLC, in Charlotte, North Carolina (“NDR Energy”). NDR Energy Group was established in the State of Maryland on September 28, 2005. Through NDR Energy, we have contracts signed with 28 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 28 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.

Our 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 2011, 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.

Our management believes that our business model and strategy is working very successfully. We are a high growth company that is rapidly growing at double-digit rates. We achieved sales of $41,320,647 for 2010 and increased its sales by 73.64% to a record $71,747,840 in 2011.

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, 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;

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 the Notes into common stock, then the Company’s debt would be eliminated from its balance sheet.

(8) The tax benefits of debt financing is 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 does not have any equity interests, it has 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 months 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 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 will be further enhanced once the company is able to sell off its account receivables. NDR 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. 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 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 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 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.

Recent Developments and Significant Accomplishments

Progas Energy Services Inc. - Oil and Gas Field Development

On December 10, 2010, we signed an agreement with Progas Energy Services Inc., of Texas. The agreement is a joint venture between "Texas Gulf Oil & Gas", Universal's new subsidiary, and ProGas, to jointly develop the Northwest Premont Oil & Gas Field, located in Texas’s Gulf Coast natural trend, in Jim Wells County Texas. The plans include potentially developing up to 115 oil and gas wells from this field. Progas has developed over 2000 oil and gas wells, and they have over 200 years of combined experience in the oil and gas industry. According to Progas Energy, the estimated reserves of the field are over 20 million barrels of oil, and over 20 billion cubic feet (Bcf), of gas.

Texas Gulf Oil & Gas Inc.

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

NDR Energy Group Signs Agreement with New Horizons Energy Group LLC

On January 7, 2011, NDR Energy, signed an Agreement with New Horizons Energy Group LLC, a natural gas and energy services consulting company based in Mt. Dora, Florida. We will provide consulting services, including U.S. natural gas market information, gas scheduling, gas nominations, daily gas monitoring, capacity release, daily and monthly pipeline balancing, risk management and hedging policy, procurement and management of gas storage assets, and managing operating accounts for designated pipelines. They will also assist with the procurement of natural gas and negotiations of gas purchase contracts.

Universal Bioenergy Applies for Listing on the Frankfurt Stock Exchange

On February 8, 2011, Universal Bioenergy announced that it had applied to have its Company's stock listed on the Frankfurt Stock Exchange in Frankfurt, Germany. The Frankfurt Stock Exchange is one of largest trading exchanges for securities in the world, and is the home of the DAX "blue chip" stock market index. The Frankfurt Stock Exchange is home to public companies from over 80 different countries with almost 40% from North America.

Universal Bioenergy and Progas Energy “Strikes Oil & Gas”

On March 3, 2011, we announced that Progas Energy Services had stuck oil and gas on several wells that it had drilled in Texas. Progas Energy Services is Universal’s joint venture partner in developing an oil and gas field in Jim Wells County, Texas. According to Progas, the field possibly houses 20,000,000 Bbls of oil, with an estimated value of $1.98 billion based on the, June 10, 2011 NYMEX, West Texas Intermediate (WTI) price of, $95.60, and over 20,000,000 mcf of natural gas, with an estimated value of $95.60 million, based on the, June 10, 2011 NYMEX price of $4.78.

Universal Bioenergy Retains Small Cap Consulting GmbH as Advisors

On March 7, 2011, we announced that it had engaged the services of Small Cap Consulting GmbH, based in Travemunde, Germany as their business consultant and advisor in Europe. Small Cap Consulting will coordinate the process to help us obtain final approval for listing on the Frankfurt Stock Exchange, in Germany. Small Cap Consulting will also provide advisory services in the areas of investor relations, financial communications, media relations, and mergers and acquisitions for the European financial market place.

Universal Bioenergy In Talks For Acquisition of Oil & Gas Properties to Develop In Louisiana

On March 7, 2011, we announced that its key executives and its acquisition team are in talks with representatives to acquire oil and gas properties to develop in Louisiana. While no assurances can be provided as to closing any acquisitions, our acquisition team completed a trip to Louisiana for direct talks and negotiations with representatives of land owners to acquire oil and gas lease rights for a field with several thousand acres of land.

Standard & Poor's Initiates Factual Stock Report Coverage on Universal Bioenergy

On April 7, 2011, Standard & Poor’s announced that it has commenced Factual Stock Report coverage our company. S&P’s Factual Stock Report coverage will be accessible on an ongoing basis to the investment community by scores of buy-side institutions, and sell-side firms that utilize S&P research and information platforms daily. S&P’s Report is distributed to an estimated 85,000 brokers and financial consultants, scores of global institutional fund managers, and over 24 million self-directed online individual investors. The weekly Report covers the latest pricing, trading volume, recent developments, a financial review, key operating information, Industry and peer comparisons, institutional holdings analysis, Street Consensus and opinions, performance charts, business summary, fundamental data, and news.

Universal Signs Agreement With International Monetary

On April 13, 2011, we announced we signed an agreement to retain the services of International Monetary (“IM”), based in Newport Beach, California, as its investment banking consulting firm. “IM” will also provide strategic advisory services, proprietary investor relations services (IR), financial solutions, debt/equity sources, and advise the Company’s management on other strategic decisions.

Universal’s 2010 President’s Annual Letter To Our Shareholders

On April 29, 2011, management issued its 2010 Annual Letter to Shareholders that covered updates on our operations, finances and future outlook for the shareholders and the investment community. A complete copy of the Letter can be read in the attachment to the Form 8K filed with the SEC on April 29, 2011.

Universal’s NDR Energy Group Awarded $2.8 Million Gas Supply Agreement with Nicor Gas

On May 5, 2011, we announced that NDR Energy was awarded a contract to supply natural gas to Nicor Gas, one of the nation's largest gas distribution companies. Accordingly to Nicor, Nicor has distributed natural gas for over 50 years, and serves more than 2 million customers in a service territory that encompasses most of the northern third of Illinois, excluding the city of Chicago. In 2010, the customer’s parent company reported revenues of over $2.7 billion. The value of gas to be supplied under the agreement is expected, but not guaranteed, to be approximately $2.8 million. Since most of these contracts are for delivery of gas from between 1 to 12 months in the future, due to price fluctuations in gas supplies, transportation and other factors, the final net profit cannot be determined until after the delivery, invoicing and payment of the gas from the customer. The resultant profit will be reflected in the Company’s financials for the corresponding period after the delivery, invoicing and payment of the gas. The natural gas is scheduled to be delivered to Nicor Gas at a rate of 6750 mcf per day from December 1, 2010, through February 28, 2012.

Universal’s NDR Energy Awarded $3.6 Million Gas Supply Contract with Southern California Gas

On May 16, 2011, we announced that NDR Energy 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 20.7 million customers. The contract signed on May 12, 2011, is to supply 775 million cubic feet of natural gas with an estimated value of approximately $3.6 million, to the customer for a period of thirty days. Since most of these contracts are for delivery of gas from between 1 to 12 months in the future, due to price fluctuations in gas supplies, transportation and other factors, the final net profit cannot be determined until after the delivery, invoicing and payment of the gas from the customer. The resultant profit will be reflected in the Company’s financials for the corresponding period after the delivery, invoicing and payment of the gas.

Universal Bioenergy Increases Authorized Shares of Common Stock to 1 Billion Shares

On May 19, 2011, we announced that we amended our Articles of Incorporation and increased our authorized shares of common stock from 200,000,000 to 1,000,000,000 shares. On May 9, 2011, we filed a Certificate of Amendment to the Company’s Articles of Incorporation with the Nevada Secretary of State. This is a long-term strategic move that was planned in June of 2010 to expand our company and benefit our shareholders.

The shares will remain within the corporate treasury until we need to use them. Furthermore, the Board of Directors does not intend to use them for a reverse stock split. We believe our shareholders could receive many benefits starting with an increase in the stock price, more revenues, earnings, greater market valuation of our company, millions of dollars in assets and more liquidity. This action will enable us grow and expand very quickly through some potentially large mergers and acquisitions that we have been working on for some time, therefore we need to have the shares available to us now, and the flexibility to meet those goals.

Management plans to use those additional authorized shares for acquisitions and needs to be able to respond very quickly to these business opportunities as they become available in the marketplace. Some of these near term projects include the further development of the North Premont field in Texas with Progas Energy, the acquisition of some other very large oil and gas fields, and acquiring interests in gathering and transport pipelines. Some of the acquisition targets are in the $10 to $25 million range and management believes, but cannot guarantee, that these acquisitions could result in significant profits and asset value. The additional authorized shares may also be used for building strategic relationships with other major companies, expanding our product lines and the acquisition of alternative energy patents and technologies.

NDR Energy Awarded $1.9 Million Gas Supply Contract with Keyspan Gas East Corporation

On May 31, 2011, we announced that NDR Energy was awarded a gas supply contract with Keyspan Gas East Corporation. The contract was awarded by a subsidiary of an entity reporting to be a $21.2 billion international electric and gas utility company, and is one of the largest natural gas distribution utilities in the United States that provides gas to around 3.5 million customers in its service area. Since most of these contracts are for delivery of gas from between 1 to 12 months in the future, due to price fluctuations in gas supplies, transportation and other factors, the final net profit cannot be determined until after the delivery, invoicing and payment of the gas from the customer. The resultant profit will be reflected in the Company’s financials for the corresponding period after the delivery, invoicing and payment of the gas.

Approval of Stock Dividend

On June 6, 2011, our Board of Directors passed a resolution and declared a stock dividend to distribute to all registered shareholders of record on or before July 1, 2011, on a 10 for 1 basis. On July 12, 2011, our transfer agent, issued 11,415,311 shares of common stock to all registered shareholders of record in accordance with the resolution and declaration.

The Company received the final notification and confirmation from FINRA on June 8, 2011 announcing the final approval to distribute the common stock dividend to our shareholders. The final notification was posted on FINRA’s, OTC Bulletin Board website at www.otcbb.com, under the tab “Daily List”, and the “Headlines By Date”, 2011 Daily List Index for dividends for June 8, 2011.

Of the 11,415,311dividend shares, a total of 8,666,676 shares were issued as free trading shares, pursuant to an exemption from registration requirements of Rule 144, under the Securities Act of 1933 (the “Securities Act”), to all shareholders holding free trading shares as of the record date.

On July 12, 2011, the 8,666,676 dividend shares were deposited with the Depository Trust Company (“DTC”), and registered in the name of the DTC’s nominee, CEDE & Company, who subsequently distributed the shares to the DTC’s participants, banks and broker dealers for final distribution and deposit of the shares into the accounts of the beneficial shareholders. The balance of the 11,415,311 shares, or a total of 2,748,635 dividend shares were issued with a restrictive legend in a hard certificate form and sent via certified mail to all shareholders with restricted shares as of the record date.

The payment of a dividend in stock instead of cash helps the Company to maintain its cash and still reward our shareholders with a dividend. We feel this will reward our loyal shareholders for their ongoing support, and to give them a greater stake in our Company.

The Depository Trust Company Deposit Restrictions or “Chill”

The Depository Trust Company (DTC), is a subsidiary of the Depository Trust & Clearing Corporation. The DTC manages the electronic clearing and settlement of stocks and other securities, similar to an escrow agent. Securities that are eligible to be electronically cleared and settled through the DTC are considered "DTC eligible". Universal’s stock has been “DTC eligible” for the Deposit/Withdrawal At Custodian (DWAC) and the Fast Automated Securities Transfer (FAST) program, (an electronic method of transferring shares) in the secondary market for many years.

On July 27, 2011 the DTC’s Corporate Compliance Department notified our transfer agent Corporate Stock Transfer, who subsequently notified the Company, that the DTC had imposed a “Chill” or minor deposit restriction/suspension on Universal’s stock on July 22, 2011, and the Company was removed from the DWAC/FAST Program.

On July 12, 2011, the Company issued a stock dividend to all shareholders of record as of July 1, 2011. Based on our discussions with the DTC, the “Chill” may have been caused by the issuance of the stock dividend. The DTC informed us that they required verification that the dividend shares and/or other shares issued by the Company, were either properly registered with the SEC, or exempt from registration under the Securities Act of 1933 (the “Securities Act”). According to the DTC’s “Deposit User Guide”, it appears a “Chill” or suspension is an action that is sometimes taken by the DTC when there is either a “Corporate Action” taken by an issuer, or due to “temporary service problems” of the transfer agent. It can also be triggered by a large stock dividend, a forward stock split or reverse stock split by an issuer.

The “Chill” does not affect our normal business operations. However, shareholders with internet brokerage accounts such as TD Ameritrade or E*Trade may not be able to purchase our stock, although they should still be able to sell our stock through these internet brokers as usual. However, full service stock brokerage firms will still clear and settle our stock manually, the shares be traded as freely as usual without any DTC imposed restrictions.

The DTC requires one of their Members/Participants to verify that the issued stock was either “properly registered with the SEC or exempt from registration”. We have engaged the services of a DTC Participant to assist the Company in resolving this matter. We have all of the documentation regarding the issuance of the stock dividend shares and all other shares that have been issued by the Company. The documentation will all be submitted to the DTC in cooperation with one of their Participants. We feel very confident, although we cannot guarantee, that once all of the required information is submitted and reviewed by the DTC’s compliance department, the “Chill” will be lifted

NDR Energy Group Expands Into Propane Gas Market

NDR Energy Group Awarded Contract with Washington Gas Light Company

On July 27, 2011 we announced that we are expanding into the propane gas market. Our subsidiary NDR Energy was awarded a contract in June 2011 to supply propane gas to Washington Gas Light Company. Headquartered in Washington, DC, according to Washington Gas Light Company (Washington Gas Company) delivers natural gas to more than one million residential, commercial and industrial customers throughout Washington, DC, and the surrounding region. Washington Gas is a regulated subsidiary of WGL Holdings, Inc., a public utility holding company. Under the terms of the agreement NDR Energy is to supply an initial quantity of 990,000 gallons of propane gas to the customer with an estimated value of $1.5 million As part of our new business model, we are positioning the Company to be a huge player in the propane gas market. We believe this will be another major profit center for the Company. Since most of these contracts are for delivery of gas from between 1 to 12 months in the future, due to price fluctuations in gas supplies, transportation and other factors, the final net profit cannot be determined until after the delivery, invoicing and payment of the gas from the customer. The resultant profit will be reflected in the Company’s financials for the corresponding period after the delivery, invoicing and payment of the gas.

NDR Energy Awarded Gas Supply Contract with Pacific Gas & Electric

On August 8, 2011, we announced that NDR Energy was awarded a gas supply contract with Pacific Gas & Electric’s, Electric Fuel Division Corporation. According to Pacific Gas & Electric, PG&E is one of the largest combination natural gas and electric utilities in the United States. PG&E provides natural gas and electric service to approximately 15 million people throughout a 70,000-square-mile service area in northern and central California. Its parent company is traded on the NYSE and reported  revenues of $13.84 billion in its 2010 annual report. The value of the gas to be supplied under the agreement is approximately $1.9 million in a single month. Since most of these contracts are for delivery of gas from between 1 to 12 months in the future, due to price fluctuations in gas supplies, transportation and other factors, the final net profit cannot be determined until after the delivery, invoicing and payment of the gas from the customer. The resultant profit will be reflected in the Company’s financials for the corresponding period after the delivery, invoicing and payment of the gas.

Letter of Intent Signed with Whitesburg Friday Branch Mine LLC

On August 11, 2011, we signed a Letter of Intent with Whitesburg Friday Branch Mine LLC, a Kentucky Limited Liability Company to acquire a major interest in its thermal coal production and mining operations in eastern Kentucky. No assurances can be provided that a definitive agreement shall be reached.

NDR Energy Awarded Gas Supply Contract with Ameren Illinois

On August 17, 2011 the Company announced that 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, traded on the NYSE, reported  revenues of $7.6 billion in 2010.

Report Update on the Northwest Premont Oil & Gas Field Development

On August 30, 2011, we announced an updated report on the Guerra #2 well. According to Progas, in previous reports regarding the Guerra #2 well, this well was drilled to 4000 feet and tested oil and gas in 12 potentially productive sands at depths from 2200 to 3950 feet, encountering a total of 118 net feet of natural gas pay.

After running 45 days of tests to draw down the pressure of each of the productive zones in the well, and selling test gas to the Tennessee Gas pipeline, the open flow calculations were performed by independent engineer, AP Yang PE of Houston. The resulting open flow calculations were as follows;

a. The lower lobe flow of the Laughlin oil sand deposit tested at 15,541 mcf per day, (mcf/d), or 15,541,000

cubic feet of gas per day

b. The upper lobe flow tested at 5,063 mcf/d or 5,063,000 cubic feet per day

This results in a combined total of 20,604 mcf/d or 20,604,000 cubic feet per day, which is an exceptional rate for a well producing from a depth of 3324 to 3340 feet in depth, a total of 16 net feet of natural gas pay. This is a new zone that was not expected to produce natural gas, and therefore new field discovery documents will be filed with the Railroad Commission of Texas (RRC), which has primary regulatory jurisdiction over the oil and natural gas industry it Texas, to announce its discovery. In addition to the Laughlin sand, there are at least another 9 zones which cored and tested natural gas in over 70 feet of gas sands, and 2 oil sands which tested and flowed oil when perforated, that are behind pipe below the gas zones for production at a later date. It is to be noted, that the calculated open test flow rates are not the flow rates at which the wells will normally operate to produce natural gas. The calculated rates are based on test flows of natural gas to the atmosphere through various choke sizes, (oil and gas service valves) from which is then extrapolated to an absolute open flow potential of the well. A well will normally produce natural gas at a rate of 5% to 15% of the open flow rate.

According to Progas, the reserves estimates for the Guerra #2 well have not been completed at this time, however the preliminary estimates are 100,000 to 150,000 barrels (bbls) oil, and 1,5000,000 mcf to 2,500,000 mcf (1.5 billion cubic feet, “bcf “ to 2.5 bcf) of natural gas.

The above estimates of oil and gas are the tests from only one single zone in the Guerra #2 well. There are at least another 9 zones which cored and tested natural gas in over 70 feet of gas sand, and 2 oil sands which tested and flowed oil when perforated, that are behind pipe below the gas zones for production at a later date. The oil and gas and the future revenues from these zones are not included in the estimates indicated above. The investors/partners, Including Universal Bioenergy, that have a working interest in the wells, would receive 60% of the estimated total value of the oil and gas produced and sold from the Guerra #2 well, as indicated above.

NDR Energy Group Signs Contract with Duke Energy Commercial Asset Management Group, Inc

On September 26, 2011, we announced that NDR Energy Group, its subsidiary, signed an agreement to supply natural gas to Duke Energy Commercial Asset Management Group Inc., the commercial power division of Duke Energy, one of the largest electric power companies in the United States. Duke Energy, is a Fortune 500 company, traded on the New York Stock Exchange, and reported revenues of $14.27 billion in 2010 in their SEC filings. Duke Energy supplies and delivers energy to approximately 4 million U.S. customers. They have approximately 35,000 megawatts of electric generating capacity in the Carolinas and the Midwest, and natural gas distribution services in Ohio and Kentucky. Their commercial and international businesses own and operate diverse power generation assets in North America and Latin America, including a portfolio of renewable energy assets.

Universal Bioenergy Launch of New Corporate Website

On October 11, 2011, the Company launched a totally new corporate website to better serve the needs of its shareholders, investors and the public interests. The new website reflects Universal’s commitment to be one of the largest independent energy companies, and provides the investment community with the most current information on the Company’s products, mergers, acquisitions, growth and expansion. It also highlights the Company’s subsidiaries such as NDR Energy Group and Texas Gulf Oil & Gas.

The corporate website was designed specifically with our shareholders in mind, and was designed to allow the user the ability to explore a wide variety of valuable information about the Company. Among the highlights of the website are, a History of the Company, Business Strategy, Marketing Plans, Product Distribution, the Energy Industry and Future Plans and Outlook of the Company. It also features current information on the Company’s Stock Performance, a Newsroom, News Releases, a weekly Standard & Poor’s Factual Stock Report on Universal and an extensive Investors Relations section for their shareholders and investors. The website can be located at www.universalbioenergy.com. The website and its contents are expressly not incorporated into this filing.

Acquisition of Whitesburg Friday Branch Mine LLC Thermal Coal Mining Operations

On October 17, 2011, our company and Whitesburg Friday Branch Mine LLC, a Kentucky Limited Liability Company (“Whitesburg”), entered into a Member Interest Exchange Agreement, (the “Exchange Agreement”). Pursuant to the Exchange Agreement, and subject to the conditions set forth therein, the Company will acquire 40% of the Member Interests and assets of Whitesburg Friday Branch Mine LLC, of Kentucky, a privately held company, from JLP and Partners LLC, a Kentucky Limited Liability Company (“JLP”), for a total consideration of $2.5 million. The Whitesburg Friday Mine, operates, mines and produces thermal coal in eastern Kentucky for sale to electric utilities for use in coal fired generation, steam plant electric power production.

Steam plant electrical power production is highly dependent on thermal coal. Thermal coal is used as a primary source of energy for coal fired steam powered generators in electric utility plants. The Whitesburg mining operations are the surface and high wall mining type, and does not include any underground mining. Whitesburg already owns the leases for the coal mineral rights and has the required mining permits from the State of Kentucky. Since NDR Energy Group already sells natural gas to our electric utility customers to generate electricity, thermal coal would give us another energy related product to sell to our current and expanding customer base to increase our revenues. The Agreement also includes provisions for us to develop the oil and natural gas potential on the mine property if these resources are discovered. According to the Energy Information Administration, coal as a fuel source for electricity generation will increase 25% by 2035 in the United States. As petroleum reserves diminish, gas to liquid process can use coal as a source for many chemical compounds for the chemical, polymer and other industries. Additionally, an advantage of using clean coal technology will be to increase demand for coal as the source to produce synthetic natural gas (syngas). According to Whitesburg Friday Branch Mine LL, the mine is projected to produce over $264 million in revenues from the sale of coal in the next 5 years. No assurances can be provided that such revenues will transpire.

This acquisition was reported on the Company Report on Form 8-K, filed with the Securities and Exchange Commission on February 28, 2012.

NDR Energy Group Signs Contract with Laclede Gas Company

On October 25, 2011, NDR Energy Group completed the execution of a natural gas supply agreement with Laclede Gas Company. Laclede Gas is a public utility engaged in the retail distribution and sale of natural gas. According to Laclede Gas Company, it is the largest natural gas distribution utility in Missouri, serving approximately 630,000 residential, commercial and industrial customers in the city of St. Louis and ten other counties in Eastern Missouri. As an adjunct to its gas distribution business, Laclede Gas Company operates an underground natural gas storage field, a propane storage cavern and propane vaporization facilities. Laclede Gas Company is a wholly owned subsidiary of the Laclede Group, Inc., a public utility holding company which reported over $1.73 billion in revenue 2010, in its SEC filings.

NDR Energy Group Signs Agreement with The Energy Authority

On December 20, 2011 the Company announced NDR Energy Group signed an agreement to supply natural gas to “The Energy Authority”, (TEA) an energy consortium with 46 public power companies’ members. This partnership brings Universal and NDR Energy together with The Energy Authority’s 46 public power utilities members and partners across the nation, which represent more than 25,000 MW of combined generation assets with all fuel types. The Energy Authority with its headquarters in Florida, was organized in 1997 by three of its seven current owners to consolidate the purchase of energy supplies for its 46 power company members, enhance the use of its owners' electric generating assets in the wholesale electric power market, optimize power purchases from the wholesale market for its owners, and create economies of scale and reduced operating costs with respect to energy trading and marketing. In 2010, the TEA purchased over $824 million in energy for its members.

Universal’s Creditors Express Strong Support and Confidence in Company’s Growth Prospects

On December 21, 2011, we announced that its major creditors and investors have given it strong support and a major vote of confidence in the future growth of our Company for 2012 and beyond. These investors and creditors invested funds in the Company when we were 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 stock, and were taking what was considered to be a high risk investment at that time. They have indicated to management that they will be holding their debt and equity positions in our Company, and currently, to our knowledge, have no plans to sell their respective shares into the marketplace. They have expressed confidence in management’s efforts to progressively build strong business fundamentals, increasing revenues, improving the balance sheet, stock liquidity, future acquisitions, and the company’s long-term growth. They consider themselves long-term investors. Therefore, we believe, although we can provide no assurances, that they will be extending the us more credit and making additional investments into our Company in the future.

Company Terminated Agreements

Letter of Intent with Pacific Rim Native American Investments Corporation

On May 9, 2011, we executed a Letter of Intent with Pacific Rim Native American Investments Corporation, a Native American company whereby, we would act as Developer and Manager for Pacific Rim for a period of 5 years to develop, explore, drill, manage and market the oil and natural gas potential on lands and territories owned, managed or controlled by Pacific Rim on behalf of many sovereign Indian Nations and Tribes. Management and their consultants completed their preliminary due diligence and decided not to move forward to complete this transaction. In accordance with the provisions of the Letter of Intent, during the due diligence process, we terminated the Letter of Intent on August 12, 2011.

Letter of Intent with Indian Odyssey Corporation

On May 9, 2011, we executed a Letter of Intent with Indian Odyssey Corporation, a Native American company whereby we would act as Developer and Manager for Indian Odyssey for a period of 5 years to develop, explore, drill, manage and market the oil and natural gas potential on lands and territories owned, managed or controlled by Indian Odyssey Rim on behalf of several sovereign Indian Nations and Tribes. Management and their consultants completed their preliminary due diligence and decided not to move forward to complete this transaction. In accordance with the provisions of the Letter of Intent, during the due diligence process, we terminated the Letter of Intent on August 12, 2011.

Universal in Talks to Acquire Ownership Interest in Gas Pipelines

On May 12, 2011, we announced that our acquisition team is in talks to acquire an ownership interest in a natural gas gathering company that owns several gas pipelines that are used to transport natural gas from the wells in the Premont Northwest oil and gas field to the main Tennessee Gas Pipeline Tap. The combined value of those pipelines is estimated to be in the tens of millions of dollars, and should bring additional revenue, potential profits and asset value to our company if the contemplated transactions are completed. No assurances can be provided that any definitive agreement will be executed. This transaction has been terminated.

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

The Company 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 Company’s 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 the 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 Corporation at a future date without out 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, and revenues, and future plans for expansion, our management is evaluating and positioning the 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 effected, 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, and the share price does not fully reflect its true value in proportion to its operating fundamentals, and 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.

New Business Model

Mergers and Acquisitions

Management has determined that it is in our best interests to chart a bold new course for the Company to grow by 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, acquiring 3 to 5 additional new companies in the next 2 to 3 years.

Some  companies being targeted are, natural gas producers  to obtain natural gas  directly from the wellhead,  gas gathering pipeline companies, propane producers, high wall surface coal mines and the acquisition of energy technology patents and licenses. We’re also looking at acquiring petroleum and gas wells, assets and properties in Texas, Louisiana and other states. Acquiring interests in properties in these areas will work very well with our strategic plans for 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 this will bring even greater revenues for our company and 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 there are 3240 utilities in the United States. Through NDR Energy, we have firm contracts signed with 22 of these major utilities, and are in discussions with another 14 utility companies to obtain contracts from them also. Our plans are to develop an aggressive sales force, to obtain agreements with a total of 100 utilities, and other customers including, Federal and State Departments and Agencies, Cities, Municipalities, and large commercial and industrial corporate clients, in the next 12 to 24 months. This will give us a much greater market share, more customers for our gas supply division, thereby further increasing our revenues and profits.

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 Management to make certain assumptions and estimates.

Focus on Earnings

We achieved a record in sales revenue of $71,747,840, for the year ending December 31, 2011, as compared to $41,320,647 for the same period in 2010, which is an increase of 73.64%. In 2010 and 2011, 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, in 2010 and 2011. This strategy was only a temporary measure, while we were building greater market share, last year.  

A major goal for the fiscal 2012 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.

Or 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. Universal plans to mine, produce and market “Thermal/Steam” coal to sale to other major coal producers and electric utility customers for power generation.

• Seventh, our the 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.

New Profit Centers

We also plan to increase our revenues and profits by engaging in some are 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. 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, we presently sell natural gas to 28 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. 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, it officers, operations staff, financial stability, credit worthiness, track record, and our ability to 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.

The information presented below is a revised conservative estimated projection of our gas sales for 2011. They are not guaranteed, and could be more or less. However, it will give some insight into where we think we could be this year. These projections are for sales of natural gas only and do not include sales of petroleum or any other alternative energy products. Based on these projections, 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 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 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.

Financial Restructuring Plan

On February 25, 2011, the Board of Directors approved a Resolution and a “Financial Restructuring Plan” to reduce debt and improve the companies “Balance Sheet”. The plan calls for our company to reduce its debt, and converting the balance of the outstanding debt on the Balance Sheet to shares of our Common Stock, to our various Note Holders and creditors. This will result in an additional issuance of shares of our Common Stock that will likely increase the issued and outstanding shares of our Common Stock to an undeterminable amount of 150 shares. Many of the existing Notes carry interest rates that are very high, and that are above the current market rates. The benefit to us is to eliminate the outstanding debt and liabilities owed by our company, reduce interest expenses, enhance our financial position, strengthen the Balance Sheet, and increase our liquidity. Management believes that taking these actions will improve our profitability, and allow us to pursue our strategies for our growth and expansion. We believe that this should also be very beneficial to our shareholders.

Corporate Governance and Management

Amendment to Company’s Articles of Incorporation

On May 9, 2011, we filed a Certificate of Amendment with the Nevada Secretary of State, to amend our Articles of Incorporation. The information regarding the Amendment was fully disclosed in a Form 8K that was filed on for the quarterly periods ending June 30, 2010 and September 30, 2010. A complete copy of the Amendment is attached as Exhibit 99.1 the Amendment incorporated the following changes;

1. Increased the number of authorized shares of the Company’s common stock from 200,000,000 to a total of 1,000,000,000 shares.
2. Grant to the Board of Directors the full right and authority to increase or otherwise change the authorized shares of common stock and preferred stock without any shareholder action or approval.
3. Grant to the Board of Directors the full right and authority to change the name of the Corporation at a future date without out any shareholder action or approval.
4. To authorize that each Director shall be elected to serve for a minimum period of one year, and up to three years, or shall serve until his successor is elected and qualifies. Directors need not be stockholders.

Our Beneficial Shareholders

At December 31, 2011, there were 199,969,927 shares of our Common Stock issued and outstanding and there were approximately 54 shareholders of record of our common stock on the records of our transfer agent. See Part II, Item 5. 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 81,218,528 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 4000.

Management Incentive Programs

The Company has an incentive program for the Officers, in accordance with their Employment Agreements, whereby they may receive bonuses and equity awards based on the “economic value added”, that they bring to the 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 the Company. Since management has deferred most or all of their compensation, provisions have been made to issue them long-term Notes for their salary, with the option to convert the Notes into to common stock of the Company.

Our present management team inherited a development stage company that in previous years had no revenue, earnings, limited operations, and very little volume and liquidity in its stock. They built a good, solid operating company, with strong revenues in a short period of time, during the worst economic downturn the United States has experienced since the “Great Depression”. They managed to turn around a small development stage company with no revenues, built an operating company, and generated revenues in excess of $71 million, all in two year.

Voting Trust and Control of NDR Energy Group LLC

The Company and Varlos Energy Holdings LLC entered into a Voting Trust, via a Voting Trust Agreement whereby Varlos Energy granted and transferred its Two (2%) percent member interests to the Company and its Voting Trustee, Vince M. Guest, for the purpose of having the Company to vote Varlos Energy’s member interests in NDR Energy Group LLC, for any corporate lawful act for a period not to exceed Ten (10) years. This Voting Trust vests in the Company, and the Trustee, Fifty One (51%) percent (the “Majority”) of the control of the membership ownership interests of NDR Energy Group LLC, and the authority over all of its management and operations decisions, with the combination of the Company’s Forty Nine (49%) percent member interests and the voting rights and control of Varlos Energy’s Two (2%) percent member interests.

Universal Bioenergy North America Inc.

Discontinued Operations

Universal Bioenergy North America, Inc., (UBNA), is a subsidiary of our company. It is a Nevada corporation that was formed on January 23, 2007 that was acquired by our company in December 2007, for the purpose of operating a biodiesel plant in the city of Nettleton, County of Monroe, Mississippi to produce biodiesel fuel and a marketable byproduct of glycerin. The biodiesel plant was acquired by Universal Bioenergy North America out of a bankruptcy action. As of the date of this report, we have not manufactured any biodiesel fuel We have generated no revenues from the subsidiary, Universal Bioenergy North America, Inc., as the refinery was not in production as of September 30, 2011. Due to the current state and future outlook of the biodiesel market, management decided to dismantle the refinery, and engaged an outside contractor to complete the work.

On March 31, 2011, we completed the dismantling of the facilities structures and plant equipment at the biodiesel refinery in Nettleton, Mississippi. The plant was dismantled due to the following reasons; (1) the current negative economic climate, (2) the collapse of the biodiesel market in 2009 and 2010, (3) the market operating at 10% to 17% capacity, (4) a glut of idle biodiesel plants on the market and bankrupt producers, (5) the negative future market outlook, (6) the estimated cost of over $500,000 to restart the plant, (7) potential legal liabilities, (8) lack of a clear and strong U.S energy policy, (9) lack of consistent federal government support, tax credits and subsidies, (10) inability of biodiesel to effectively compete against petroleum diesel, (11) low profit margins, (12) and the volatility and high cost of feedstocks.

On August 31, 2011, the property located in Nettleton that was formerly used as a biodiesel refinery, was sold by the Monroe County Chancery Clerk, of the State of Mississippi at a county tax forfeiture sale to recover the property taxes due the County. After consulting with our outside professionals, and due to the circumstances indicated above regarding the dismantling of the plant, the negative state of the biodiesel industry and our new direction to pursue the production and marketing of natural gas, petroleum, coal and propane; our management determined that retaining the property would provide no further benefit to our company, and furthermore it was not consistent with our long-term business objectives. Therefore, it was decided not to pay the property taxes, thereby forfeiting the property and allow the Monroe County Chancery Clerk to sell the property at the tax forfeiture sale. According to the Monroe County tax records, the property was purchased at the tax forfeiture sale by another company which had no relationship with our company, or any of our Officers, Directors or Employees.

RESULTS OF OPERATIONS

Fiscal Years Ended December 31, 2011 compared to December 31, 2010

Review and Analysis of Current Results of Operations

Revenues

With a business plan focused on producing revenues, current management has created significant value and since the acquisition of NDR Energy on April 12, 2010, when previously there were no revenue generated in the prior 2 to 3 years. Our primary revenues from this period are from the sale of natural gas and propane.  Our revenues for the twelve months ended December 31, 2011 were $71,747,840 as compared to $41,320,647 for the same period in 2010. This resulted in an increase of $30,427,193 in revenues or 73.64% over the previous year. Our Cost of Sales for this period was $71,604,210. This has resulted in a gross profit margin for this period of $143,629.  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. This will allow us to purchase the gas in larger quantities, with greater economies of scale, on better terms, at lower costs and reduce the high financing costs, thereby significantly increasing our the gross profit.

Additionally, in 2011, 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 2011. This strategy was only a temporary measure, while we were building greater market share, last year.  See the sections “New Business Strategy”, “Focus on Earnings” and “New Profits Centers” above.

We incurred losses of $2,037,042 for the twelve months ended December 31, 2011 and $1,947,963 for the same period in 2010. Our accumulated deficit since our inception through December 31, 2011 amounts to $19,470,213. We issued 3,000,000 of common shares for services with an aggregate fair value of approximately $133,500 that was included in the $1,187,624 in general and administrative expenses for the twelve month period ended December 31, 2011. Excluding the value of the common shares of $133,500 from the general and administrative expenses of $1,187,624 would reduce the actual net G&A expenses to $1,054,124. We also incurred interest (expenses) including amortization of beneficial conversion feature of $923,644. Excluding the value of the common stock that was issued for services, and interest expenses which together totaled $,1,054,144 would correspondingly reduce our net loss of $2,037,042 to an adjusted net loss of $979,898 for the period ending December 31, 2011. Based on an adjusted net loss of $979,898 this loss equals only 1.37% of our total revenues of $71,747,840 for the period ended December 31, 2011, as compared to 2.48% for the same period ended 2010.

Operating Costs and Expenses.

Our Cost of Sales for the twelve months ended December 31, 2011 were $71,604,210 as compared to $41,273,543 for the same period in 2010.  Our primary business operations consists of the marketing and distribution of natural gas and propane to our major customers nationwide. Our general and administrative expenses for the twelve months ended December 31, 2011 were $1,187,624 as compared to $1,251,674 for 2010 a decrease of

$ 64,050. We pay our employees and consultants largely in common shares as our cash availability is currently limited.

Our total operating expenses decreased from $1,333,818 for the period ending 2010, by a total of $116,958, or by 8.77%, to $1,216,860 for the period ending December 31, 2011. Based on our plans for growth and expansion, and increasing revenues through sales of natural and other products, we believe we will soon reduce our net losses down to zero, and then move our company toward solid profitability. Since we are a high growth company, growing by mergers and acquisitions, we expect to have corresponding increases in costs reflected in our operating expenses. However, although our total revenues increased by $73.64%, our total operating expenses decreased by only 8.77%.

Assets

Our “total assets” have decreased by $2,047,886, or 15.44% to $11,212,845 for the period ending December 31, 2011, compared to $13,260,731 for the same period in 2010. A total of $2,850,371 of that resulted from a reduction in the amount of our Accounts Receivables from the sales of natural gas due to the unseasonably warm winter on the east coast, a reduced demand in natural gas for heating, a decline in natural gas prices, and an increase in natural gas working inventories. Our Property and Equipment and long-term physical assets were also reduced by $127,000 for the period ending December 31, 2010 and $125,000 December 231, 2011 due to the discontinued operations of our biodiesel refinery in Nettleton, Mississippi. See – Universal Bioenergy North America Inc., Discontinued Operations for more information. However, this reduction in our “total assets”, was offset somewhat by an increase in our investment in the Whitesburg Friday Branch Mine, LLC acquisition.

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, sales and distribution of natural gas to our 28 electric utility customers through our NDR Energy Group subsidiary. Our present 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. As we further diversify into the marketing and distribution of propane, oil and coal, our future revenues and profitability will come from multiple sources and they will be less dependent on the sales of natural gas alone.

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 $42,481 for the period ending December 31, 2011, as compared to a working capital deficit of $214,309 for the period ending December 31, 2010. This increased our working capital deficit by $210,172 or by 98.07%. The working capital deficit was due to the costs of pursuing acquisitions, funding of NDR Energy’s operating expenses, the amount of funds borrowed from our creditors, purchase of natural gas inventories, our capital spending exceeding our cash flows from operations, and from the increase in accrued expenses.

We typically have positive cash flow and working capital each month to meet our capital requirements. The negative working capital for the period ending December 31, 2011 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 twelve months ended December 31, 2011 and 2010 were as follows:

Cash Flows from Operating Activities

Our cash used in operating activities for the twelve months ended December 31, 2011 was ($996,116) as compared to ($322,979) for the twelve months ended December 31, 2010. The increase was primarily attributable to the costs associated with the growth and expansion of NDR Energy Group and our other operations.

Cash Flows from Investing Activities

Cash used in investing activities for the year ended December 31, 2011 was $889,500 as compared to cash provided by investing activities of $24,906 for the twelve months ended December 31, 2010. This was an increase of $864,594 or an increase of 3471.43% due to our cash needs to grow by means of acquisitions. The use of cash in the year ended December 31, 2011 was related to the investment in participation agreements for Progas Energy Services, the acquisition of the member interests in Whitesburg Friday Branch Mine LLC, and cash provided by investing activities that is attributable to the purchase of fixed assets of $13,094 and the sale of property and equipment for $38,000.

Cash Flows from Financing Activities

Our cash provided by financing activities for the year ended December 31, 2011 was $1,889,321 as compared to $295,254 for the year ended December 30, 2010. The net cash provided by financing activities is primarily attributable to our Notes Payables issued and the investment in the Whitesburg Friday Branch Mine.

Liabilities / Indebtedness

Current liabilities decreased to $10,422,309 for the twelve months ended December 31, 2011, compared to $13,071,803 for the same period in 2010. This 18.31% decrease was primarily due to a $2,741,102 decrease in accounts payable from the purchasing costs and supplies of natural gas. Our long term liabilities are $494,646 for the period ending December 31, 2011, compared to $238,355 for the year ending December 2010. This increase was primarily due to the conversion of the accrued compensation and expenses of certain officers and employees into long term notes payable, to reduce our current liabilities, improve our cash flow, and improve the Balance Sheet.

DEBT

Debt and Debt Financing

Long-Term Debt and Promissory Notes - In its efforts to expand and grow, the Company borrowed direct cash funds from various investors to raise capital, and the Company 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 grants the Note Holder the right, (but not the obligation) to convert them into 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;

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 the Company. These investors invested funds in the 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 stock, and were taking what was considered to be a high risk investment at that time. The Company has 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 the Company and its shareholders. It could take several years to convert all of the Notes to stock if all of the investors requested it. It’s possible that some may never convert their Notes to stock and may take cash only when the Company is in the best position to settle the obligation on a cash basis.

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.

List of Notes

On November 23, 2010 we entered into a two (2) year Promissory Note with a non-related creditor for $12,000 at 10% interest. The holder has the right to convert the note to common stock. The Note can be converted at $.005.The Note can be converted at $.005.

On December 3, 2010 we entered into a two (2) year Promissory Note with a non-related creditor for $4800 at 10% interest. The holder has the right to convert the note to common stock. The Note can be converted at $.005.The Note can be converted at $.005.

On December 31, 2010 we entered into a two (2) year Promissory Note with Richard D Craven, its former CEO for $16,045 at 10% interest for the accrued compensation and expenses owed to him for the fiscal year 2008 in accordance with his Employment Agreement. The holder has the right to convert the note to common stock. The Note can be converted at $.02.

On December 31, 2010 we entered into a two (2) year Promissory Note with Richard D Craven, its former CEO for $163,694 at 10% interest for the accrued compensation and expenses owed to him for the fiscal year 2009 in accordance with his Employment Agreement. The holder has the right to convert the note to common stock. The Note can be converted at $.01.

On December 31, 2010 we entered into a two (2) year Promissory Note with its Vice President, Solomon Ali for $164,833 at 10% interest for the accrued compensation owed to him for the fiscal year 2009 in accordance with his Employment Agreement. The holder has the right to convert the note to common stock. The Note can be converted at $.005.

On December 31, 2010 we entered into a two (2) year Promissory Note with an Employee, for $30,000 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 . The Note can be converted at $.02.

On December 31, 2010 we entered into a two (2) year 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. The Note can be converted at $.015.

On December 31, 2010 we entered into a two (2) year 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. The Note can be converted at $.015.

On December 31, 2010 we entered into a two (2) year Promissory Note with Richard D Craven, its former CEO for $89,014 at 10% interest for the accrued compensation and expenses 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. The Note can be converted at $.015.

On January 18, 2011 we entered into a two (2) year 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. The Note can be converted at $.005.

On January 19, 2011 we entered into a two (2) year 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. The Note can be converted at $.005.

On February 23, 2011 we entered into a two (2) year Promissory Note with a non-related creditor for $45,400 at 10% interest. The holder has the right to convert the note to common stock. The Note can be converted at $.005.

On February 25, 2011 we entered into a six (6) month Promissory Note with a non-related creditor for $9,400 at 10% interest. The holder has the right to convert the note to common stock. The Note can be converted at $.02.

On March 10, 2011 we entered into a two (2) year 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. The Note can be converted at $.005.

On March 14, 2011 we entered into a two (2) year 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. The Note can be converted at $.005.

On March 28, 2011 we entered into a two (2) year Promissory Note with a non-related creditor for $72,500 at 10% interest. The holder has the right to convert the note to common stock. The Note can be converted at $.005.

On May 20, 2011, we entered into a three (3) year Promissory Note with a non-related creditor for $20,600 at 10% interest. The holder has the right to convert the note to common stock. The Note can be converted at $.005.

On May 23, 2011, we entered into a three (3) year Promissory Note with a non-related creditor for $89,000 at 10% interest. The holder has the right to convert the note to common stock. The Note can be converted at $.005.

On May 30, 2011, we entered into a three (3) year Promissory Note with a non-related creditor for $110,424 at 10% interest. The holder has the right to convert the note to common stock. The Note can be converted at $.005.

On June 25, 2011, we entered into a three (3) year Promissory Note with a non-related creditor for $49,200 at 10% interest. The holder has the right to convert the note to common stock. The Note can be converted at $.005.

On July 29, 2011, we entered into a three (3) year Promissory Note with a non-related creditor for $40,000 at 10% interest. The holder has the right to convert the note to common stock. The Note can be converted at $.005.

On August 29, 2011, we entered into a three (3) year Promissory Note with a non-related creditor for $29,500 at 10% interest. The holder has the right to convert the note to common stock. The Note can be converted at $.005.

On October 2, 2011 the Company entered into a three (3) year 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. The Note can be converted at $0.005.

On October 20, 2011 the Company entered into a one (1) year Promissory Note with a non-related creditor for $200,000 at 12% interest. The holder has the right to convert the note to common stock. The Note can be converted at a 30% discount to the market price.

On October 22, 2011 the Company entered into a one (1) year 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. The Note can be converted at a 30% discount to the market price.

On October 23, 2011 the Company entered into a one (1) year 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. The Note can be converted at a 30% discount to the market price.

On October 25, 2011 the Company entered into a one (1) year Promissory Note with a non-related creditor for $103,600 at 12% interest. The holder has the right to convert the note to common stock. The Note can be converted at a 30% discount to the market price.

On October 25, 2011 the Company entered into a three (3) year Promissory Note with a non-related creditor for $96,400 at 12% interest. The holder has the right to convert the note to common stock. The Note can be converted at $0.005.

On October 31, 2011 the Company entered into a three (3) year Promissory Note with a non-related creditor for $74,760 at 10% interest. The holder has the right to convert the note to common stock. The Note can be converted at $0.005.

On October 31, 2011 the Company entered into a ten (10) month Promissory Note with a non-related creditor for $68,000 at 8% interest. The holder has the right to convert the note to common stock. The Note can be converted at a 50% discount to the market price.

On December 23, 2011 the Company entered into a one (1) year Promissory Note with a non-related creditor for $50,000 at 12% interest. The holder has the right to convert the note to common stock. The Note can be converted at a 50% discount to the market price.

On December 31, 2011 the Company entered into a two (2) year 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. The Note can be converted at $0.01.

On December 31, 2011 the Company entered into a two (2) year 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. The Note can be converted at $0.02.

On December 31, 2011 the Company entered into a two (2) year 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. The Note can be converted at $0.01.

On December 31, 2011 the Company entered into a two (2) year 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. The Note can be converted at $0.01.

On December 23, 2011, two existing Notes, one dated March 28, 2011 for $72,500, and one dated May 20, 2011 for $20,600 were purchased from the Note Holder by another non-related creditor. The Notes were assigned via an Assignment and Modification Agreement which combined the two existing Notes into a revised Note in the amount of $99,134, at 12% interest. The revised $99,134 Note includes the original principal amount of $93,100 for both Notes and accrued interest in the amount of $6,034. The holder has the right to convert the note to common stock at a 48% discount to the market price at the time of conversion.

If all of these Notes were converted to common stock it could result in the potential issuance of an estimated 290,897,966 shares over several years. 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 employees of the Company have not taken their salaries for the last few years, and have become creditors of the Company. The accrued compensation due to them by the Company, has become a debt or liability on the Company’s books. The Company has issued them Promissory Notes that includes an option to convert them common stock to reflect these liabilities. This has reduced some of the need from borrowing 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 also as opposed to stock. If the officers ever elect to convert their Notes into 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-K 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 Current Reports on Form 8-K, including all amendments that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.

ITEM 7A. 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. See “Item 1A. Risk Factors.”

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 December 31, 2011, 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

UNIVERSAL BIOENERGY, INC.

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Bongiovanni & Associates, CPA'S