FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

[ ] 15,ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
   THE SECURITIES EXCHANGE ACT OF 1934
    For the fiscal year ended: December 31, 2007
                       OR
[ ]15,TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from

Commission file number:       000-51489

Earth Energy Reserves, Inc.
(formerly Asian American Business Development Company)
(Exact name of Small Business Issuer in its charter)


Nevada                          75-3000774
  (State or other jurisdiction of           (I.R.S. Employer
    incorporation or organization           Identification No.)

671 Heinz Parkway
Estes Park, CO                        80517
 (Address of principal executive offices)            (Zip Code)

Registrant's Telephone number, including area code:  (970) 577-8325


Securities registered pursuant to Section 12(b) of the Act:       None
Securities registered pursuant to Section 12(g) of the Act:
   Common Stock, $.0001 par value

Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act   [   ]

Check whether the Corporation (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months (or such shorter period that the Corporation was
required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.
Yes    __x__          No  _____

Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of Corporation's knowledge,
in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
[ x ]

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



<PAGE>2

The Corporation's revenues for its most recent fiscal year were $0.00.
As of December 31, 2007, the market value of the Corporation's voting
$.000l par value common stock held by non-affiliates of the Corporation
was $0.00.

The number of shares outstanding of Corporation's common stock, as of
December 31, 2007 and March 31, 2008 was 10,697,000 and 10,927,000
shares of its $.0001 par value common stock, respectively.

No documents are incorporated into the text by reference.

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



<PAGE>3
PART I
ITEM 1.    BUSINESS

Earth Energy Reserves, Inc. was incorporated in the State of Nevada on
February 12, 2002 as Wiltex First, Inc.  On March 10, 2005, the
Corporation filed a certificate of amendment with the State of Nevada
changing its name to Asian American Business Development Company.  On
March 13, 2006, the Corporation filed a certificate of amendment with
the State of Nevada changing its name to Earth Energy Reserves, Inc.

On December 16, 2005, the Corporation elected to be regulated as a
Business Development Company as that term is defined in Section 54 of
the Investment Company Act.  As a BDC, the Corporation was subject to
the laws and regulations contained in the Investment Company Act of
1940.  As a BDC, the Corporation became subject to significant
regulation of its activities.

On February 10, 2006, the board of directors unanimously approved a
proposal to withdraw the Corporation's election to be treated as a BDC
as soon as practicable, so that it might again conduct business as a
regular company rather than as a BDC subject to the Investment Company
Act.

As a result of our current business plan, the nature of the
Corporation's business is changing from simply being in the business of
investing, reinvesting, owning, holding, or trading in investment
securities toward that of an independent oil and company whose focus is
the acquisition, drilling and production of oil and natural gas in the
United States.  The board of directors believed that BDC regulation
would be inappropriate for such activities.

We intend to be an independent oil and natural gas company engaged in
the acquisition, drilling and production of oil and natural gas in the
United States.  Our principal areas of interest are the Gulf of Mexico,
Texas, Oklahoma, Louisiana, Utah, Montana, Wyoming and Canada.

We intend to invest primarily in domestic oil and natural gas
interests, including prospects, leases, wells, mineral rights, working
interests, royalty interests, overriding royalty interests, net profits
interests, production payments, farm-ins, drill to earn arrangements,
partnerships, easements, rights of way, licenses and permits, in the
offshore Gulf of Mexico, onshore Texas, onshore Louisiana, and several
Western states.  We also intend to produce and market production from
the oil and gas interests and may enter into operating, product
marketing, and other such arrangements in connection with such
production and marketing.

Our Strategy

Our exploration strategy is predicated upon the two core tenets of the
oil and natural gas industry.  First, the only competitive advantage in
the commodity-based oil and natural gas business is to be among the
lowest cost producers.  Second, virtually all the exploration and
production industry's value creation occurs through the drilling of
successful exploratory wells.  To this end, our business strategy
includes the following elements:

<PAGE>4

Participation in exploration prospects as a non-operator.  For the
foreseeable future, we intend to pursue prospects in partnership with
other companies with exploration, development and production
expertise.  We will participate as a non-operator and will evaluate
prospects based, in part, on the operator's track record and
resources.  We are in discussions with several other oil and gas
producers at the present time, however we have not entered into any
other agreements or understandings with any proposed partners and there
can be no assurance we will be able to enter into any other partnership
arrangement on terms acceptable to us.

Negotiated acquisitions of properties.  We may acquire producing
properties based on our view of the pricing cycles of oil and natural
gas and available exploitation opportunities of proved, probable and
possible reserves.  As of March 31, 2008, we have not acquired any such
properties.

Controlling general and administrative and geological and geophysical
costs.  We intend to maximize returns on capital by minimizing our
executive salaries and up-front costs in seismic data, hardware,
software, geological and geophysical overhead and prospect generation.
We also intend to outsource our geological, geophysical, reservoir
engineering and land functions, and partner with cost efficient
operators whenever possible.

At the present time, we have two part time employees, our chief
executive officer and our chief financial officer, James E. Hogue and
Jim Phillips, respectively.  We have developed an operating strategy
that is based on our participation in exploration prospects as a non-
operator for the foreseeable future.  We intend to use the services of
independent consultants and contractors to perform various professional
services, including reservoir engineering, land, legal, environmental
and tax services.  We will also pursue alliances with partners in the
areas of geological and geophysical services and prospect generation,
evaluation and prospect leasing.  As a non-operator working interest
owner, we intend to rely on outside operators to drill, produce and
market our natural gas and oil.  We believe that by limiting our
management and employee costs, we may be able to better control total
costs and retain flexibility in terms of project management.

Properties and Participations

We are in discussions with several oil and gas producers at the
present time concerning joint participations, however we have not
entered into any agreements or understandings with any proposed
partners.

Marketing and Pricing

We will derive revenue principally from the sale of oil and natural
gas.  As a result, our revenues are determined, to a large degree, by
prevailing prices for crude oil and natural gas.  We intend to sell our
oil and natural gas on the open market at prevailing market prices.  The



<PAGE>5

market price for oil and natural gas is dictated by supply and demand,
and we cannot accurately predict or control the price we may receive
for our oil and natural gas.

Price decreases would adversely affect our revenues, profits and the
value of our proved reserves.  Historically, the prices received for
oil and natural gas have fluctuated widely.  Among the factors that can
cause these fluctuations are:

   -  The domestic and foreign supply of natural gas and oil
   -  Overall economic conditions
   -  The level of consumer product demand
   -  Weather conditions
   -  The price and availability of competitive fuels such as heating
oil and coal
   -  Political conditions in the Middle East and other natural gas and
oil producing regions
   -  The level of oil and natural gas imports
   -  Domestic and foreign governmental regulations
   -  Potential price controls

We may enter into hedging arrangements to reduce our exposure to
decreases in the prices of oil and natural gas.  Hedging arrangements
may expose us to risk of significant financial loss in some
circumstances including circumstances where:

   -  There is a change in the expected differential between the
underlying price in the hedging agreement and actual prices received
   -  Our production and/or sales of natural gas are less than expected
   -  Payments owed under derivative hedging contracts typically come
due prior to receipt of the hedged month's production revenue
   -  The other party to the hedging contract defaults on its contract
obligations

In addition, hedging arrangements limit the benefit we would receive
from increases in the prices for oil and natural gas.  On the other
hand, we may choose not to engage in hedging transactions in the
future.  As a result, we may be more adversely affected by changes in
oil and natural gas prices than our competitors who engage in hedging
transactions.
Competition

We will compete with numerous other companies in virtually all facets
of our business. Our competitors in the exploration, development,
acquisition and production business include major integrated oil and
gas companies as well as numerous independents, including many that
have significantly greater financial resources and in-house technical
expertise.

Government Regulations

   -   Federal Income Tax.  Federal income tax laws will significantly
affect our operations.  The principal provisions that will affect us
are those that permit us, subject to certain limitations, to deduct as

<PAGE>6

incurred, rather than to capitalize and amortize, our domestic
"intangible drilling and development costs" and to claim depletion on a
portion of our domestic oil and natural gas properties based on 15% of
our oil and natural gas gross income from such properties (up to an
aggregate of 1,000 Bbls per day of domestic crude oil and/or equivalent
units of domestic natural gas).

   -  Environmental Matters.  Domestic oil and natural gas operations
are subject to extensive federal regulation and, with respect to
federal leases, to interruption or termination by governmental
authorities on account of environmental and other considerations such
as the Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA) also known as the "Super Fund Law."  The trend towards
stricter standards in environmental legislation and regulation could
increase our costs and others in the industry.  Oil and natural gas
lessees are subject to liability for the costs of clean-up of pollution
resulting from a lessee's operations, and may also be subject to
liability for pollution damages. We intend to obtain insurance against
costs of clean-up operations, but we have no such insurance at this time
and it is unlikely that we will be able to fully insure against all such
risks.  A serious incident of pollution may also result in the
Department of the Interior requiring lessees under federal leases to
suspend or cease operation in the affected area.

The Oil Pollution Act of 1990 (the OPA) and regulations hereunder
impose a variety of regulations on "responsible parties" related to the
prevention of oil spills and liability for damages resulting from such
spills in United States waters.  The OPA assigns liability to each
responsible party for oil removal costs and a variety of public and
private damages. While liability limits apply in some circumstances, a
party cannot take advantage of liability limits if the spill was caused
by gross negligence or willful misconduct or resulted from violation of
federal safety, construction or operating regulations.  Few defenses
exist to the liability imposed by the OPA.  In addition, to the extent
we acquire offshore leases and those operations affect state waters, we
may be subject to additional state and local clean-up requirements or
incur liability under state and local laws.  The OPA also imposes
ongoing requirements on responsible parties, including proof of
financial responsibility to cover at least some costs in a potential
spill.  We cannot predict whether the financial responsibility
requirements under the OPA amendments will adversely restrict our
proposed operations or impose substantial additional annual costs to us
or otherwise materially adversely affect us.  The impact, however,
should not be any more adverse to us than it will be to other similarly
situated or less capitalized owners or operators in the Gulf of Mexico.

Our onshore operations will be subject to numerous federal, state and
local laws and regulations controlling the discharge of materials into
the environment or otherwise relating to the protection of the
environment. Such laws and regulations, among other things, impose
absolute liability on the lessee for the cost of clean-up of pollution
resulting from a lessee's operations, subject the lessee to liability
for pollution damages, may require suspension or cessation of
operations in affected areas, and impose restrictions on the injection

<PAGE>7

of liquids into subsurface aquifers that may contaminate groundwater.
Such laws could have a significant impact on our operating costs, as
well as the natural gas and oil industry in general.  Federal, state
and local initiatives to further regulate the disposal of natural gas
and oil wastes are also pending in certain jurisdictions, and these
initiatives could have a similar impact on us.  Our operations will
also be subject to additional federal, state and local laws and
regulations relating to protection of human health, natural resources,
and the environment pursuant to which we may incur compliance costs or
other liabilities.

   Other Laws and Regulations.  Various laws and regulations often
require permits for drilling wells and also cover spacing of wells, the
prevention of waste of natural gas and oil including maintenance of
certain gas/oil ratios, rates of production and other matters.  The
effect of these laws and regulations, as well as other regulations that
could be promulgated by the jurisdictions in which we have production,
could be to limit the number of wells that could be drilled on our
properties and to limit the allowable production from the successful
wells completed on our properties, thereby limiting our revenues.

Employees

We have two employees, both of whom are part-time.  For the
foreseeable future, we intend to use the services of independent
consultants and contractors to perform various professional services,
including reservoir engineering, land, legal, environmental and tax
services.


ITEM 2.  PROPERTIES.

Our corporate offices are located at 671 Heinz Parkway, Estes Park,
Colorado 80517.   These offices consist of 500 square feet and are
provided free of charge from James Hogue, an officer and director.

The Corporation has not commenced business and has no assets.


ITEM 3.    LEGAL PROCEEDINGS.

The Corporation is not involved in any legal proceedings at this date.


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

During the last quarter of the fiscal year ended December 31, 2007, no
matters were submitted to a vote of Earth Energy security holders,
through the solicitation of proxies.





<PAGE>8
PART II

ITEM 5.    MARKET FOR CORPORATION'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Our common stock is not traded over the counter.  We do not intend
to apply for the listing of our common stock on the Over The Counter
Bulletin Board within the next twelve months.

Holders

As of March 31, 2008, the approximate number of shareholders of
common stock of Earth Energy was 35.

Dividends

We have not declared any cash dividends on our common stock since
our inception and do not anticipate paying any dividends in the
foreseeable future.  We plan to retain any future earnings for use
in our business.  Any decisions as to future payment of dividends
will depend on our earnings and financial position and such other
factors as the board of directors deems relevant.


ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.

Trends and Uncertainties.  We intend to be an independent oil and
natural gas company engaged in the acquisition, drilling and production
of oil and natural gas in the United States.  Our future operations may
be adversely affected by our competitors, fluctuating oil prices,
changing foreign political environments and any prolonged recessionary
periods.

Results of Operations.  We have not had any revenue since inception.
All of our expenses have been paid by Galaxy Partners Ltd. Corp, a
company controlled by James Hogue, an officer, director and principal
shareholder of Earth Energy and through the sale of our common stock.

For the year ended December 31, 2007, Earth Energy received no
revenues.  For the year ended December 31, 2007, Earth Energy had
compensation and services paid in common stock of $1,750,000 or
1,750,000 common shares valued at $1.00 per common share.
Comparatively, for the year ended December 31, 2006, Earth Energy had
compensation or services paid in common stock of $2,950,000 or
2,950,000 common shares valued at $1.00 per common shares.  Management
valued the shares issued in 2006 and 2007 at $1.00 per share for
financial accounting purposes, which is the same value Earth Energy was
selling its common shares to an investor.

General and administrative expenses for the year ended December 31,
2007 increased to $327,519 from $147,240 for the year ended December
31, 2006.  These expenses for the year ended December 31, 2007
consisted of basic operating expenses and expenses relating to filing
the required reports with the Securities and Exchange Commission under
the Exchange Act of 1934.  The main reason for the increase was due to
an increase in legal, professional and consulting fees.

<PAGE>9

Recent Accounting Pronouncements

Statement No. 158, "Employers' Accounting for Defined Benefit Pension
and Other Postretirement Plans"-an amendment of FASB Statements No. 87,
88, 106, and 123R. This Statement improves financial reporting by
requiring an employer to recognize the over funded or under funded
status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its statement of
financial position and to recognize changes in that funded status in
the year in which the changes occur through comprehensive income of a
business entity or changes in unrestricted net assets of a not-for-
profit organization.

Statement No. 157, "Fair Value Measurements". This Statement defines
fair value, establishes a framework for measuring fair value in
generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. This Statement applies under
other accounting pronouncements that require or permit fair value
measurements.

Statement No. 156, "Accounting for Servicing of Financial Assets"-an
amendment of FASB Statement No. 140. This Statement amends FASB
Statement No. 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities, with respect to the
accounting for separately recognized servicing assets and servicing
liabilities.

Statement No. 155, Accounting for Certain Hybrid Financial Instruments-
an amendment of FASB Statement No. 133 and 140. This Statement amends
FASB Statements No. 133, Accounting for Derivative Instruments and
Hedging Activities , and No. 140,  Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities.

In the opinion of management, these Statements will have no material
effect on the financial statements of the Company.

Plan of Operation.  We have developed an operating strategy that is
based on our participation in exploration prospects as a non-operator
for the foreseeable future.  We intend to use the services of
independent consultants and contractors to perform various professional
services, including reservoir engineering, land, legal, environmental
and tax services.  We will also pursue alliances with partners in the
areas of geological and geophysical services and prospect generation,
evaluation and prospect leasing.  As a non-operator working interest
owner, we intend to rely on outside operators to drill, produce and
market our natural gas and oil.  We believe that by limiting our
management and employee costs, we may be able to better control total
costs and retain flexibility in terms of project management.

The Corporation may experience problems; delays, expenses and
difficulties sometimes encountered by an enterprise in the
Corporation's stage, many of which are beyond the Corporation's



<PAGE>10

control.  These include, but are not limited to, unanticipated problems
relating to additional costs and expenses that may exceed current
estimates and competition.

The Corporation is not delinquent in any of its obligations even though
the Corporation has generated no operating revenues.  The Corporation
intends to pursue our business plan utilizing cash made available from
the additional advances from Galaxy, the private sale of our securities
and future operations.  The Corporation's management is of the opinion
that the additional advances, proceeds of the sales of its securities
and future revenues will be sufficient to pay our expenses for the next
twelve months.

The Corporation is pursuing financing for its operations and seeking
additional private investments.  In addition, the Corporation is seeking
to expand its revenue base.  Failure to secure such financing or to raise
additional equity capital and to expand its revenue base may result in
the Corporation not being able pay its obligations.


ITEM 7. FINANCIAL STATEMENTS

Financial Statements

The response to this item is being submitted as a separate section of
this report beginning on page 18.



<PAGE>10

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

None

ITEM 8A.  CONTROLS AND PROCEDURES

Changes in Internal Controls

During the year ended December 31, 2007, there were no changes in our
internal controls over financial reporting (as defined in Rule 13a-
15(f) and 15d-15(f) under the Exchange Act) that have materially
affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer, we
conducted an evaluation of our disclosure controls and procedures, as
such term is defined under Rule 13a-15(e) and Rule 15d-15(e)
promulgated under the Securities Exchange Act of 1934, as amended, as
of December 31, 2007.  Based on this evaluation, our chief executive
officer and chief principal financial officers have concluded such
controls and procedures to be effective as of December 31, 2007 to
ensure that information required to be disclosed by the issuer in the
reports that it files or submits under the Act is recorded, processed,
summarized and reported, within the time periods specified in the
Commission's rules and forms and to ensure that information required to
be disclosed by an issuer in the reports that it files or submits under
the Act is accumulated and communicated to the issuer's management,
including its principal executive and principal financial officers, or
persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.

Management's Report on Internal Control over Financial Reporting

Management of the Corporation is responsible for establishing and
maintaining adequate internal control over financial reporting as
derived in Rule 13a-15(f) under the Securities Exchange Act of 1934.
We have assessed the effectiveness of those internal controls as of
December 31, 2007, using the Committee of Sponsoring Organizations of
the Treadway Commission ("COSO") Internal Control) Integrated Framework
as a basis for our assessment.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements.  Projections of any
evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.  All internal control systems, no matter how well
designed, have inherent limitations.  Therefore, even those systems
determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.

<PAGE>12

A material weakness in internal controls is a deficiency in internal
control, or combination of control deficiencies, that adversely affects
the Corporation's ability to initiate, authorize, record, process, or
report external financial data reliably in accordance with accounting
principles generally accepted in the United States of America such that
there is more than a remote likelihood that a material misstatement of
the Corporation's annual or interim financial statements that is more
than inconsequential will not be prevented or detected.  In the course
of making our assessment of the effectiveness of internal controls over
financial reporting, we did not identify any material weakness in our
internal control over financial reporting.  Therefore, it is our
conclusion that the Corporation's internal controls over financial
reporting were effective as of December 31, 2007.

This annual report does not include an attestation report of the
Corporation's registered public accounting firm regarding internal
control over financial reporting.  Management's report was not subject
to attestation by the Corporation's registered public accounting firm
pursuant to temporary rules of the Securities and Exchange Commission
that permit the Corporation to provide only management's report in this
annual report.

ITEM 8B.  OTHER INFORMATION

None



<PAGE>13
PART III

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
AND CORPORATE GOVERANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT.

Our management consists of:

Name                     Age               Title

James E. Hogue           69             President/CEO
                                       Chairman of the Board

James R. Phillips        58           Vice President/Secretary/
                                       Treasurer and Director

John Malone              58            Chief Financial Officer/
                                       Chief Marketing Officer/
                                               Director

James E. Hogue.  Mr. Hogue has served as chairman and president of
Earth Energy since inception.  Since 1991, Mr. Hogue has serviced as
president of Martex Oil and Gas, Inc.  From 1996 to 1999, Mr. Hogue
became president, chief operating officer and a director of Cotton
Valley Resources Corporation, a publicly traded AMEX company (KTN).
Mr. Hogue has served as chairman, president and chief financial officer
of Galaxy Partners Ltd. Corporation, a consulting firm, since 1995.

James R. Phillips, Jr.   Mr. Phillips has served as vice president,
secretary, treasurer and director of Earth Energy since March 2005.
From 1993 to 2004, Mr. Phillips was a financial consultant, registered
investment advisor of Raymond James and Associates, Inc., Waco, Texas.

Mr. Phillips holds the following business registrations/licenses:
   -   Registered Representative Securities Industry,
   -   Registered Investment Advisor
   -   Securities Licensing Series Seven
   -   Securities Licensing Series Six
   -   Commodities Licensed, and
   -   Insurance and Annuities Licensed

Mr. Phillips graduated from Texas Tech University in 1970 with a
Bachelor of Business Administration in Finance & Banking.

John Malone.  Mr. Malone has served as chief financial officer, chief
marketing officer and director since April 2006.  Mr. Malone has
practiced law for 31 years in Waco, Texas with emphasis on business
law.  Mr. Malone graduated from Baylor in 1972 with B.B.A. (cum laude)
and from Baylor Law School in 1975.  Mr. Malone is licensed to practice
law in Texas and in all federal courts in Texas, and licensed to
practice before the 5th Circuit Court of Appeals.

All directors hold office until the completion of their term of office,
which is not longer than three years, or until their successors have
been elected and have been qualified.  All officers are appointed

<PAGE>14

annually by the board of directors and, subject to existing employment
agreements, serve at the discretion of the board.  Currently, directors
receive no compensation.

Committees of the Board of Directors

Concurrent with having sufficient members and resources, Earth Energy's
board of directors will establish an audit committee, investment
committee and a compensation committee.  The audit committee will
review the results and scope of the audit and other services provided
by the independent auditors and review and evaluate the system of
internal controls.  The investment committee will review and approve
all investments in excess of $25,000 and assist in determining the
carrying values of portfolio investments.  The compensation committee
will manage the stock option plan and review and recommend compensation
arrangements for the officers.  No final determination has yet been
made as to the memberships of these committees or when we will have
sufficient members to establish committees.

All directors will be reimbursed by Earth Energy for any expenses
incurred in attending directors' meetings provided that Earth Energy
has the resources to pay these fees.  Earth Energy will consider
applying for officers and directors liability insurance at such time
when it has the resources to do so.

Stock Option Plan

Pursuant to the May 1, 2005 board of directors' approval and subsequent
stockholder approval, we adopted our 2005 Non-Statutory Stock Option
Plan whereby Earth Energy reserved for issuance up to 5,000,000 shares
of its common stock.

As previously indicated, the board of directors, on May 1, 2005,
adopted the plan so as to provide a long-term incentive for employees,
non-employee directors, consultants, attorneys and advisors of Earth
Energy and its subsidiaries, if any.  The board of directors believes
that Earth Energy's policy of granting stock options to such persons
will continue to provide it with a critical advantage in attracting and
retaining qualified candidates.  In addition, the plan is intended to
provide Earth Energy with maximum flexibility to compensate plan
participants.  It is expected that such flexibility will be an integral
part of Earth Energy's policy to encourage employees, non- employee
directors, consultants, attorneys and advisors to focus on the long-
term growth of stockholder value.  The board of directors believes that
important advantages to Earth Energy are gained by an option program
such as the plan which includes incentives for motivating employees of
Earth Energy, while at the same time promoting a closer identity of
interest between employees,
   -   non-employee directors,
   -   consultants,
   -   attorneys, and
   -   advisors on the one hand,
   -   and the stockholders on the other.


<PAGE>15

The principal terms of the plan are summarized below, however it is not
intended to be a complete description thereof and such summary is
qualified in its entirety by the actual text of the plan.

Summary Description of Earth Energy's 2005 Non-Statutory Stock Option
Plan

The purpose of the plan is to provide directors, officers and employees
of, consultants, attorneys and advisors to Earth Energy and its
subsidiaries, if any, with additional incentives by increasing their
ownership interest in Earth Energy.  Directors, officers and other
employees of Earth Energy and its subsidiaries are eligible to
participate in the plan.  Options in the form of Non-Statutory Stock
Options may also be granted to directors who are not employed by Earth
Energy and consultants, attorneys and advisors to Earth Energy
providing valuable services to Earth Energy and its subsidiaries.  In
addition, individuals who have agreed to become an employee of,
director of or an attorney, consultant or advisor to Earth Energy
and/or its subsidiaries are eligible for option grants, conditional in
each case on actual employment, directorship or attorney, advisor
and/or consultant status.  The plan provides for the issuance of NSO's
only, which are not intended to qualify as incentive stock options
within the meaning of Section 422 of the Internal Revenue Code, as
amended.

The board of directors of Earth Energy or a compensation committee will
administer the plan with the discretion generally to determine the
terms of any option grant, including the:
   -   exercise price,
   -   number of option shares,
   -   term,
   -   vesting schedule, and
   -   the post-termination exercise period.

 Notwithstanding this discretion:
   -   the term of any option may not exceed 10 years, and
   -   an option will terminate as follows:
   -   if such termination is on account of termination of employment
for any reason other than death, without cause, such options shall
terminate one year thereafter;
   -   if such termination is on account of death, such options shall
terminate 15 months thereafter; and
   -   if such termination is for cause (as determined by the board of
directors and/or compensation committee), such options shall terminate
immediately.

Unless otherwise determined by the board of directors or compensation
committee, the exercise price per share of common stock subject to an
option shall be equal to no less than 10% of the fair market value of
the common stock on the date such option is granted.  No NSO shall be
assignable or otherwise transferable except by will or the laws of
descent and distribution or except as permitted in accordance with SEC
Release No.33-7646 as effective April 7, 1999.


<PAGE>16

The plan may be amended, altered, suspended, discontinued or terminated
by the board of directors without further stockholder approval, unless
such approval is required by law or regulation or under the rules of
the stock exchange or automated quotation system on which the common
stock is then listed or quoted.  Thus, stockholder approval will not
necessarily be required for amendments which might increase the cost of
the plan or broaden eligibility except that no amendment or alteration
to the plan shall be made without the approval of stockholders which
would:

   -   increase the total number of shares reserved for the purposes of
the plan or decrease the NSO price (except as provided in paragraph 9
of the plan) or change the classes of persons eligible to participate
in the plan, or
   -   extend the NSO period, or
   -   materially increase the benefits accruing to plan participants,
or
   -   materially modify plan participation eligibility requirements,
or
   -   extend the expiration date of the plan.

Unless otherwise indicated the plan will remain in effect until
terminated by the board of directors.

Section 16(a) Beneficial Ownership Reporting Compliance

To Earth Energy's knowledge, no director, officer or beneficial owner
of more than ten percent of any class of equity securities of Earth
Energy failed to file on a timely basis reports required by Section
16(a) of the Exchange Act during 2006.

Code of Ethics Policy

We have not yet adopted a code of ethics that applies to our principal
executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.

Corporate Governance.

There have been no changes in any state law or other procedures by
which security holders may recommend nominees to our board of
directors.  In addition to having no nominating committee for this
purpose, we currently have no specific audit committee and no audit
committee financial expert.  Based on the fact that our current
business affairs are simple, any such committees are excessive and
beyond the scope of our business and needs.

ITEM 10.  EXECUTIVE COMPENSATION

No officer, director or employee has received any cash compensation to
date, and no director, officer or employee has a contract or commitment
to receive annual compensation in excess of $100,000.  Each officer and
director will be paid a negotiated percentage of profits for the events
that they arrange.  They will receive no other compensation from us
until we are operating profitably.

<PAGE>17

Board of Directors Compensation.  Currently board members receive no
special compensation for meetings or time incurred.  Director liability
insurance may be provided to all members of the Board of Directors.  No
differentiation shall be made for any further compensation of "outside
directors" and those officers of the Corporation serving in that
capacity.


ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

     The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of March 31, 2008 by: (i)
each current director and nominee for director; (ii) all executive
officers and current directors of the Company as a group; and (iii) all
stockholders known by the Company to be beneficial owners of more than
five percent of the outstanding shares of Common Stock or Preferred
Stock.  The information in this table is based solely on a review by
the Company of its capital stock transfer records and on publicly
available filings made with the SEC by or on behalf of the stockholders
listed below, and is based on 10,927,000  outstanding shares of common
stock.
<TABLE>
<CAPTION>
Name and Address of           Number of Shares
Beneficial Owner           Beneficially Owned       Percent of Class

                               <c>                      <c>
James E. Hogue
671 Heinz Parkway
Estes Park, CO 80517          5,000,000                   45.76%

James Phillips
6801 Sanger Avenue
Suite 101
Waco, TZ 76710                1,600,000                   14.64%

John Malone
6011 Bosque Blvc.
Waco, Texas 76710             1,000,000                    9.15%

Officers and Directors
as a group (3 members)        7,600,000                   69.55%
</TABLE>
1.  Unless otherwise indicated, Earth Energy believes that all persons
named in the table have sole voting and investment power with respect
to all common shares beneficially owned by them.  A person is deemed to
be the beneficial owner of securities which may be acquired by such
person within 60 days from the date indicated above upon the exercise
of options, warrants or convertible securities.  Each beneficial
owner's percentage ownership is determined by assuming that options,
warrants or convertible securities that are held by such person (but
not those held by any other person) and which are exercisable within 60
days of the date indicated above, have been exercised.

<PAGE>18

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The note payable to related party is due Galaxy and represents amounts
paid by Galaxy for general and administrative expenses.  The note is
due on demand and bears interest at the rate of 8 percent calculated on
the average outstanding monthly balance.  The advance from the major
stockholder represents cash advanced to Earth Energy from its major
stockholder of Earth Energy.  The advance is due on demand and does not
accrue interest.

Certain general and administrative expenses of Earth Energy have been
paid by Galaxy and are shown as an increase in the note payable.
Interest expense has been accrued on the note payable and has been
added to the outstanding balance of the note payable.

The detail of the activity in the related party notes payable is as
follows:

                                                2006          2007
                                                ----          ----
Balance, beginning of period             $29,349       $44,700

General and administrative expenses
  advanced
    Management fees                       12,000        12,000
                                         -------       -------
      Total general and administrative
        Expenses                          12,000        12,000

Interest expense                           3,351         4,173
                                         -------       -------
Total change during period                15,351        16,173
                                         -------       -------
Balance, end of period                   $44,700       $60,873
                                         =======       =======

Director Independence.

Earth Energy's Board of Directors consists of James Hogue, James Phillips
and John Malone.  None of the directors are independent as such term is
defined by a national securities exchange or an inter-dealer quotation
system.  During the fiscal year ended December 31, 2007, there were no
transactions with related persons other than as described in the section
above entitled "Item 10.  Executive Compensation".


ITEM 13.  EXHIBITS

The following exhibits are filed with this report:

  Exhibit 31 - 302 certification
  Exhibit 32 - 906 certification




<PAGE>19

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Audit Fees.  We incurred aggregate fees and expenses of approximately
$17,061 and $10,000 from Killman, Murrell & Company, P.C. for the 2007
and 2006 fiscal years, respectively.  Such fees included work completed
for our annual audits and for the review of our financial statements
included in our Form 10-QSB.

Tax Fees.  We did not incur any aggregate tax fees and expenses from
Killman, Murrell & Company, P.C. for the 2007 and 2006 fiscal years for
professional services rendered for tax compliance, tax advice, and tax
planning.

All Other Fees.  We did not incur any other fees from Killman, Murrell
& Company, P.C. during fiscal 2007 or 2006.  The board of directors,
acting as the Audit Committee considered whether, and determined that,
the auditor's provision of non-audit services was compatible with
maintaining the auditor's independence.  All of the services described
above were approved by the Board of Directors pursuant to its policies
and procedures.  We intend to continue using Killman, Murrell &
Company, P.C. solely for audit and audit-related services, tax
consultation and tax compliance services, and, as needed, for due
diligence in acquisitions.





<PAGE>20

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Earth Energy has duly caused this
Report to be signed on its behalf by the undersigned duly authorized
person.

Date:    April 14, 2008

Earth Energy Reserves, Inc.

/s/ James E. Hogue
------------------------------
By: James E. Hogue, President

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on
behalf of Earth Energy and in the capacities and on the dates
indicated.
<TABLE>

                                                               <c>
/s/James E. Hogue           Principal Executive Officer        April 14, 2008
------------------------            Director
James E. Hogue

/s/John Malone             CFO, Chief Marketing Officer        April 14, 2008
------------------------            Director
John Malone

/s/James R. Phillips, Jr.       Vice President/Secretary       April 14, 2008
James R. Phillips, Jr.              Treasurer/Director
</TABLE>



<PAGE>21
PART I - FINANCIAL INFORMATION

EARTH ENERGY RESERVES, INC.

FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm        22

Balance Sheets as of December 31, 2006 and 2007                23

Statements of Operations for the Years Ended December
  31, 2006 and 2007                                            24

Statements of Changes in Stockholders' Equity (Deficit)
  for the Years Ended December 31, 2006 and 2007               25

Statements of Cash Flows for the Years Ended
  December 31, 2006 and 2007                                   26

Notes to the Financial Statements                              27






























<PAGE>22
Killman, Murrell & Company, P.C.
Certified Public Accountants
<TABLE>
330 N. A Street, Bldg 4, St. 200    1931 E. 37th Street, Suite 7              2626 Royal Circle

                                             <c>                                   <c>
Midland, TX 79705                         Odessa, TX 79762                  Kingwood, TX 77339
(432) 686-9381                           (432) 363-0067                       (281) 359-7224
Fax (432) 684-6722                      Fax (432) 363-0376                   Fax (281) 359-7112
</TABLE>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholder and Board of Directors
Earth Energy Reserves, Inc.
671 Heinz Parkway
Estes Park, CO  80517

We have audited the accompanying balance sheets of Earth Energy
Reserves, Inc. as of December 31, 2006 and 2007 and the related
statements of operations, stockholder's equity (deficit) and cash flows
for the years then ended.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States).  Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements.  The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company's internal control over
financial reporting.  Accordingly, we express no such opinion.  An
audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing and
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements
presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Earth
Energy Reserves, Inc. at December 31, 2006 and 2007, and the results of
its operations and its cash flows for the years then ended in
conformity with United States generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 2
to the financial statements, the Company's significant operating losses
raise substantial doubt about its ability to continue as a going
concern.  The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

/s/Killman, Murrell & Company, P.C.
Odessa, Texas
March 28, 2008

<PAGE>23

EARTH ENERGY RESERVES, INC.
BALANCE SHEETS
December 31, 2006 and 2007

ASSETS

                                            2006                2007
                                            ----                ----
CURRENT ASSETS
  Cash                                   $  291,752         $   45,089
  Accounts receivable                             -              2,204
                                         ----------         ----------
    Total Current Assets                    291,752             47,293

PROPERTY
  Leon River Energy leasehold                     -             53,747
  Walker Creek Unit leasehold                     -             73,150
                                         ----------         ----------
    Total Property                                -            126,897
                                         ----------         ----------
      TOTAL ASSETS                       $  291,752         $  174,190
                                         ==========         ==========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
  Notes payable to related party         $   44,700         $   60,873
  Compensation payable                            -             75,000
  Advances from majority shareholder         29,600             32,450
  Accrued expenses                           16,606             24,605
                                         ----------         ----------
    Total Current Liabilities                90,906            192,928
                                         ----------         ----------

STOCKHOLDERS' EQUITY (DEFICIT)
  Series A preferred stock $0.0001 par
    value, authorized 10,000,000 shares,
    none issued                                   -                  -
  Common stock, $0.0001 par value,
    authorized 90,000,000 issued and
    outstanding 10,697,000 and 10,927,000
    respectively                              1,070              1,093
  Additional paid-in-capital              3,622,230          5,482,207
  Retained (deficit)                     (3,422,454)        (5,502,038)
                                         ----------         ----------
    Total Stockholders' Equity (Deficit)    200,846            (18,738)
                                         ----------         ----------
      TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY (DEFICIT)     $  291,752         $  174,190
                                         ==========         ==========


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

<PAGE>24

EARTH ENERGY RESERVES, INC.
STATEMENTS OF OPERATIONS
For the years ended December 31, 2006 and 2007

                                              2006             2007
                                              ----             ----
OIL AND GAS REVENUES                    $         -       $    10,750
                                        -----------       -----------
OPERATING EXPENSES
  Lease operating expenses                        -             2,630
  Production taxes                                -               283
  Compensation paid in stock              2,950,000         1,750,000
  General and administration expenses       147,240           327,519
                                        -----------       -----------
  Total Operating Expenses                3,097,240         2,080,432
                                        -----------       -----------
OPERATING (LOSS)                         (3,097,240)       (2,069,682)

OTHER INCOME (EXPENSES)
  Interest income                                 -             1,003
  Interest expense                           (3,351)          (10,905)
                                        -----------       -----------
NET (LOSS) BEFORE INCOME TAX             (3,100,591)       (2,079,584)

Income tax benefit/(expense)                      -                 -
                                        -----------       -----------
NET (LOSS)                              $(3,100,591)      $(2,079,584)
                                        ===========       ===========

WEIGHTED AVERAGE NUMER OF
  SHARES OUTSTANDING                      8,636,615        10,783,538
                                        ===========       ===========

BASIC AND DILUTED (LOSS) PER SHARE      $     (0.36)      $     (0.19)


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



<PAGE>25

EARTH ENERGY RESERVES, INC.
STATEMENTS CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For the years ended December 31, 2006 and 2007
<TABLE>
                                                    Additional
                                Common Stock           Paid-      Retained
                            Shares       Amount     In Capital    (Deficit)    Totals
                          ----------   ----------   ----------   ----------  ---------

                           <c>        <c>          <c>          <c>         <c>

BALANCE, Dec 31, 2005      7,730,000  $     773    $ 273,227    $(321,863)  $ (47,863)

  Common stock issued
    for services           2,950,000        295    2,949,705            -   2,950,000
  Sale of common stock
    net of $17,700 in
    commissions              417,000         42      399,258            -     399,300
  Common stock returned to
    the Company             (400,000)       (40)          40            -           -
  Net (loss)                       -          -            -   (3,100,591) (3,100,591)
                          ----------  ---------   ----------   ----------  ----------

BALANCE, Dec 31, 2006     10,697,000      1,070    3,622,230   (3,422,454)    200,846

  Common stock issued
    for services           1,750,000        175    1,749,825            -   1,750,000
  Sale of common stock       110,000         11      109,989            -     110,000
  Common stock returned to
    the Company           (1,630,000)      (163)         163            -           -
  Net (loss)                       -          -            -   (2,079,584) (2,079,584)
                          ----------  ---------   ----------   ----------  ----------

BALANCE, Dec 31, 2007     10,927,000  $   1,093   $5,482,207  $(5,502,038) $  (18,738)
                          ==========  =========   ==========  ===========  ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.




<PAGE>26

EARTH ENERGY RESERVES, INC.
STATEMENTS OF CASH FLOWS
For the Years ended December 31, 2006 and 2007

                                              2006             2007
                                              ----             ----

CASH PROVIDED BY (USED IN):

OPERATING ACTIVITIES
  Net Loss for the period                 $(3,100,591)    $(2,079,584)
  Adjustments to reconcile net loss
    to net cash used by operating
    activities
      Stock issued for services             2,950,000       1,750,000
  Changes in operating liabilities
    Accounts receivable                             -          (2,204)
    Compensation payable                            -          75,000
    Accrued expenses                           13,928           7,999
                                          -----------     -----------
Cash used in operating activities            (136,663)       (248,789)
                                          -----------     -----------
INVESTING ACTIVITIES
  Acquisition of oil and gas leaseholds             -        (126,897)
                                          -----------     -----------
  Cash used in investing activities                 -        (126,897)
                                          -----------     -----------
FINANCING ACTIVITIES
  Notes payable to related party               11,100          16,173
  Interest added to note payable                3,351               -
  Advance from related party                   13,000           2,850
  Sale of common stock                        399,300         110,000
                                          -----------      ----------
Cash provided by financing activities         426,751         129,023
                                          -----------      ----------
Increase (decrease) in cash during year       290,088        (246,663)

Cash, beginning of the year                     1,664         291,752
                                          -----------      ----------
Cash, end of the year                     $   291,752      $   45,089
                                          ===========      ==========
Supplemental disclosure of cash flow information:
  Cash paid during the year for interest  $         -      $        -
                                          ===========      ==========
  Cash paid during the year for income
     taxes                                $         -      $        -
                                          ===========      ==========




The accompany notes are an integral part
of these financial statements.




<PAGE>27

EARTH ENERGY RESERVES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2006 and 2007

NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Earth Energy Reserves, Inc., formerly Asian American Business
Development Company ("Company") was incorporated in the State of
Nevada on February 12, 2002 as Wiltex First, Inc.  On March 10,
2005, the Company filed a certificate of amendment with the State
of Nevada changing its name to Asian American Business
Development Company and on March 13, 2006, the Company's name was
changed to Earth Energy Reserves, Inc.  The Company has elected
to prepare its financial statements in accordance with generally
accepted accounting principles (United States) and has selected
December 31, as its year end.

Galaxy Partners, LTD Corp. ("Galaxy") - a company owned by a
major shareholder of the Company - has managed and helped finance
the Company since inception.

Purpose

The Company's purpose is to engage in any lawful corporate
activity, including possible merger and acquisition
opportunities.  The Company has had no operations up until
November 2007, when it first received oil and gas revenues from
leaseholds purchased in July 2007.  The Company was formed to
provide a method for a private domestic or foreign company to
become a publicly reporting company, thereby causing their shares
to be qualified to trade in the domestic secondary markets.

The Company is attempting to locate another business for the
purpose of merging that company (the "Target Company") into the
Company.  It is possible that the Target Company will be a wholly
owned subsidiary of the Company or it may sell or transfer assets
into the Company and not merge.  The Company can offer no
assurance that it will be successful in locating and merging with
or acquiring another entity.

Income Taxes

The Company provides for income taxes by utilizing the asset and
liability approach to financial accounting and reporting for
income taxes.  Deferred income tax assets and liabilities are
computed for differences between the financial statement and tax
basis of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and
rates applicable to the period in which the differences are
expected to affect taxable income.  Valuation allowances are
established when necessary to reduce deferred tax assets to the



<PAGE>28

EARTH ENERGY RESERVES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2006 and 2007

NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)


amount expected to be realized.  Income tax expense is the tax
payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.

Use of Estimates and Assumptions

Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting
principles.  Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent
assets and liabilities, and the reported amounts of revenue and
expenses.  Actual results could vary from the estimates used

Common Stock and Net Loss per Common Share

The Company initially had 75,000 authorized shares of no par
capital stock of which 10,000 shares were issued.  In March of
2005, the Company amended its charter to provide for 90,000,000
shares of common stock with a par value of $0.0001 and 10,000,000
shares of Series "A" preferred stock with a par value of $0.0001.
In connection with the change in authorized capital stock, the
initial 10,000 shares were canceled and a new certificate for
5,000,000 shares was issued to the original investor.  Diluted
net loss per share reflects the potential dilution of securities
by adding other common stock equivalents, including stock
options, shares subject to repurchase, warrants and convertible
preferred stock, in the weighted-average number of common shares
outstanding for a period, if dilutive.  All potentially dilutive
securities have been excluded from the computation, as their
effect is anti-dilutive.

Cash and Cash Equivalents

The Company considers any highly liquid investments with
maturities of three months or less on the date of purchase to be
cash equivalents.  Cash equivalents are carried at cost, which
approximates fair value.

Fair Value of Financial Instruments

The carrying amount of the Note Payable to Related Party and the
advance from a major shareholder approximates fair value due to
the short-term nature of the liability.



<PAGE>29

EARTH ENERGY RESERVES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2006 and 2007

NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

Revenue Recognition

Oil, gas, and natural gas liquid revenues are recognized when the
products are sold and delivery to the purchaser has occurred.
Although receivables are concentrated in the oil and gas
industry, we do not view this as unusual credit risk.

Recent Accounting Pronouncements

Statement No. 158, "Employers' Accounting for Defined Benefit
Pension and Other Postretirement Plans"-an amendment of FASB
Statements No. 87, 88, 106, and 123R. This Statement improves
financial reporting by requiring an employer to recognize the
over funded or under funded status of a defined benefit
postretirement plan (other than a multiemployer plan) as an asset
or liability in its statement of financial position and to
recognize changes in that funded status in the year in which the
changes occur through comprehensive income of a business entity
or changes in unrestricted net assets of a not-for-profit
organization.

Statement No. 157, "Fair Value Measurements". This Statement
defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (GAAP), and
expands disclosures about fair value measurements. This Statement
applies under other accounting pronouncements that require or
permit fair value measurements.

Statement No. 156, "Accounting for Servicing of Financial
Assets"-an amendment of FASB Statement No. 140. This Statement
amends FASB Statement No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities,
with respect to the accounting for separately recognized
servicing assets and servicing liabilities.

Statement No. 155, Accounting for Certain Hybrid Financial
Instruments-an amendment of FASB Statement No. 133 and 140. This
Statement amends FASB Statements No. 133, Accounting for
Derivative Instruments and Hedging Activities , and No. 140,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities.

In the opinion of management, these Statements will have no
material effect on the financial statements of the Company.




<PAGE>30

EARTH ENERGY RESERVES, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2006 and 2007

NOTE 2: GOING CONCERN

The accompanying financial statements have been prepared in
conformity with accounting principles generally accepted in the
United States, which contemplates continuation of the Company as
a going concern.

Since inception, the Company has been incurring net operating
losses due to a limited ability to generate revenue. The future
success of the Company is likely dependent on its ability to
attain additional capital, or to find an acquisition to add value
to its present shareholders and ultimately, upon its ability to
attain future profitable operations.  There can be no assurance
that the Company will be successful in obtaining such financing,
or that it will attain positive cash flow from operations.


NOTE 3: LEON RIVER ENERGY AND WALKER CREEK UNIT LEASEHOLDS

In July 2007, the Company purchased a 26.37% working interest and
a 19.78% net revenue interest in the Leon River Energy leasehold
and a 20% interest in the Walker Creek Unit leasehold for a total
of $126,897.

As of December 31, 2007, the Company had recognized $10,750 in
oil and gas revenues; furthermore, accumulated depletion was not
calculated as a reserves report on the leaseholds was not
available and revenue from the lease was minimal.  In February
2008, the Company sold the Walker Creek Unit back to its original
owner due to poor production.

As of December 31, 2007, the Leon River Energy leasehold was a
non-producing leasehold.


NOTE 4: AMOUNTS DUE TO RELATED PARTIES

The note payable to related party is due Galaxy and represents
amounts paid by Galaxy for general and administrative expenses.
The note is due on demand and bears interest at the rate of eight
percent (8%) calculated on the average outstanding monthly
balance.  The advance from the major stockholder represents cash
advanced to the Company from its major stockholder of the
Company.  The advance is due on demand and does not accrue
interest.

All General and Administrative expenses of the Company have been
paid by Galaxy and are shown as an increase in the note payable.
Interest expense has been accrued on the note payable and has
been added to the outstanding balance of the note payable.

<PAGE>31

EARTH ENERGY RESERVES, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2006 and 2007

NOTE 4: AMOUNTS DUE TO RELATED PARTIES (Continued)

The detail of the activity in the related party notes payable is
as follows:

                                                2006          2007
                                                ----          ----
Balance, beginning of period             $29,349       $44,700

General and administrative expenses
  advanced
    Management fees                       12,000        12,000
                                         -------       -------
      Total general and administrative
        Expenses                          12,000        12,000

Interest expense                           3,351         4,173
                                         -------       -------
Total change during period                15,351        16,173
                                         -------       -------
Balance, end of period                   $44,700       $60,873
                                         =======       =======

NOTE 5: FEDERAL INCOME TAXES

Total income tax benefit is less than the amount computed by
multiplying the loss before income taxes by the statutory federal
income tax rate.  The reasons for the difference and the related
tax effects for the year ended December 31, 2006 and 2007 are:

                                                 2006         2007
                                                 ----         ----

  Tax benefit at statutory rates             $1,054,201     $707,058
  Non-deductible expense                     (1,003,000)    (595,000)
  Change in valuation allowance                 (51,201)    (112,058)
                                             ----------     --------
    Net income tax benefit                   $        -     $      -
                                             ==========     ========

The components of the deferred tax assets are as follows:

                                                 2006         2007
                                              ----------   ----------
Deferred Tax Assets
  Net Operating Loss Carryforward             $   86,903   $  198,961
                                              ----------   ----------
    Total Deferred Tax Assets                     86,903      198,961




<PAGE>32

EARTH ENERGY RESERVES, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2006 and 2007

NOTE 5: FEDERAL INCOME TAXES (Continued)
    Less Valuation Allowance                     (86,903)    (198,961)
                                              ----------   ----------
                                              $        -   $        -
                                              ==========   ==========

The Company has no deferred tax liabilities.

At December 31, 2007, the Company had federal income tax net
operating loss carryforwards of approximately $585,180 to offset
future taxable income, which begins to expire in 2023.

NOTE 6: COMMON STOCK ISSUANCE

During 2006, the Company sold 417,000 shares of its $0.0001 par
value common stock at $1.00 per share ($417,000) net of $17,300
commissions.

Purchasers of the common stock also received a warrant, for each
share of common stock acquired which entitles the holder to
purchase one share of the Company's common stock at $1.50 per
share.  The warrant holder can exercise the warrant at any time
for a period of three years.  As a result of the common stock
sales at December 31, 2006, the Company has 417,000 warrants
outstanding.

During 2006, the Company issued 2,950,000 shares of the Company's
common stock for services rendered as follows:
<TABLE>
                    Number of                             Per Share
                       Date           Shares                Value             Amount
                   ----------        --------            -----------         --------
                    
                <c>                   <c>               <c>
                April 1, 2006        1,900,000              $1.00          $1,900,000
               August 26, 2006         650,000               1.00             650,000
              December 16, 2006        400,000               1.00             400,000
                                     ---------                             ----------
                                     2,950,000                             $2,950,000
                                     =========                             ==========
</TABLE>

Management valued the shares at $1.00 per share for financial
accounting purposes, which is the same value the Company was
selling shares to an investor.

During 2007, the Company issued an additional 1,750,000 shares of
the Company's common stock for services performed by the
following individuals:



<PAGE>33
EARTH ENERGY RESERVES, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2006 and 2007

NOTE 6: COMMON STOCK ISSUANCE (Continued)
<TABLE>
                                     Number of            Per Share
   Individual                         Shares                Value            Amount
   ----------                       --------            -----------         --------
     
                               <c>                   <c>               <c>
James Phillips                         700,000              $  1.00       $  700,000
John Malone                            500,000                 1.00          500,000
John Holdridge                         500,000                 1.00          500,000
Ed Lonergan                             50,000                 1.00           50,000
                                     ---------                            ----------
                                     1,750,000                            $1,750,000
                                     =========                            ==========
</TABLE>
Management continued to value the shares at $1.00 per share for
financial accounting purposes, which is the same value the
Company was selling shares to its investors.

In December 2006, the Company accepted the resignation of Chief
Financial Officer, Chief Marketing Officer, and Director Mr. John
Thompson and the surrender of 400,000 shares of common stock
issued to him.  Mr. Thompson did agree to remain as an advisor
for the Company.  In April 2007, the Company accepted the
resignation of President and Chief Operating Officer Mr. William
Jones and the surrender of 1,300,000 shares of common stock
issued to him.  In June 2007, the Company cancelled 325,000
shares issued to Mr. Charles Edwards for advisory services which
were never performed.  Finally, in August 2007, the Company
cancelled an additional 5,000 shares held by a shareholder at
$1.00 per share.

NOTE 7: STOCK OPTION PLAN

On May 1, 2005, the Board of Directors adopted the Company's 2005
non-statutory stock option plan ("Plan") whereby the Company
reserved 5,000,000 of its authorized but un-issued common stock
for issuance under the Plan.  As of December 31, 2006 and 2007,
no stock options have been granted under the Plan.