927472--3/31/2009--PetroAlgae

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{financial, litigation, operation}

{gas, price, oil}

{product, market, service}

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{stock, price, operating}

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Risks Related to Our Business We may be unable to solve unforeseen technical and engineering challenges that would make the algae-to-oil system unfeasible. We face significant challenges in successfully and rapidly scaling-up a pilot facility, and there is no guarantee that we will succeed We are dependent upon funding from our principal shareholder Our indebtedness is secured by all the Company s assets and a portion of our indebtedness is due on demand. We may become insolvent if such debt is called prior to maturity, repayment of such debt is due prior to our ability to obtain funds to repay such debt or if we fail to restructure such debt. Significant declines in the prices of oil and natural gas could reduce the appeal and commercial feasibility of our products and services We may be unable to fully enforce our intellectual property in certain countries The biodiesel production and marketing industry is competitive. There are many competitors that have greater financial and other resources than we do and one or more of these competitors could, by using their greater resources or otherwise, gain market share at our expense. If we are unable to recruit and retain the necessary specialist and experienced individuals, our business will suffer as a result We have a history of losses and there is no guarantee we will achieve positive cash flow. The algae-to-oil system may be too expensive for a particular target market Biofuel competes with other existing products and other alternative products, which if more successful, could reduce the demand for biodiesel. If a competitor were to achieve a technological breakthrough that resulted in significant cost reductions, our operations and business could be negatively impacted Competition from the advancement of alternative fuels may lessen the demand for biodiesel and negatively impact our profitability. The profitability of any algae-to-oil system could be negatively impacted if biodiesel refiners are unable to refine the available biodiesel foodstock into biodiesel Our business is operated through PA LLC. The operating agreement of PA LLC provides for certain minority investor rights, including certain anti-dilution rights. If we do not secure the cooperation of the minority investor with regard to certain corporate actions that we may deem in the best interests of the business, any investment in the Company could materially suffer. We may be sued or become a party to litigation, which could require significant management time and attention and result in significant legal expenses and may result in an unfavorable outcome which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Risks Related to Our Common Stock The market price of our common stock is likely to be highly volatile and subject to wide fluctuations. Future sales of common stock or the issuance of securities senior to the common stock or convertible into, or exchangeable or exercisable for, common stock could materially adversely affect the trading price of the common stock, and our ability to raise funds in new equity offerings. Because PetroAlgae became public by means of an assignment into a public shell, it may not be able to attract the attention of major brokerage firms. It is not anticipated that there will be an active public market for the common stock in the near term and you may have to hold your common stock for an indefinite period of time. Because of the concentration of voting power in our Company held by Eugene Grin and David Grin, your ability as a shareholder to influence the management of the Company will be extremely limited. There are no automated systems for negotiating trades on the OTCBB and it is possible for the price of a stock to go up or down significantly during a lapse of time between placing a market order and its execution, which may affect your trades in our securities. Our stock may be considered a penny stock if it trades below $5.00 per share. This can adversely affect its liquidity. We do not anticipate payment of dividends, and investors will be wholly dependent upon the market for the common stock to realize economic benefit from their investment. Holders of our common stock may suffer significant dilution in the future.

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927472--3/31/2009--PetroAlgae_Inc.