U.S.
SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-KSB





[X]QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
fiscal year ended December 31,
2007





[  ]TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
transition period from





Commission
File No.  000-49896





ESP
ENTERPRISES, INC.


(Exact
name of small business issuer as specified in its charter)




Colorado
            84-1493159(State
      or other jurisdiction of  Incorporation or
      organization)
            (I.R.S.
      Employer Identification
      No.)





1255
Lions Club Road


Scott,
LA 70583


(Address
of Principal Executive Offices)





(337)
706-7056


(Issuer’s
telephone number)





P.O.
Box 53846


Lafayette,
LA 70505


(Former
name, address and fiscal year, if changed since last report)





Check
whether the issuer (1) has filed all reports required to be filed by Section 13
or 15 (d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.


Yes x No o





Check
whether the
registrant has filed all documents and reports required to be filed by
Sections 12, 13, or 15 (d) of the Exchange Act subsequent to the distribution of
securities under a plan confirmed by a court.  Yes x  No o





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of May 20,
2008:  25,925,942 shares of common stock.





Transitional
Small Business Disclosure Format    Yes o  No x





Revenues
for year ended December 31, 2007: $697,122





Aggregate
market value of the voting common stock held by non-affiliates of the registrant
as of December 31, 2007, was: $N/A





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). oYes     xNo










Table of Contents






TABLE OF CONTENTS










PART
      IITEM 1.
              Description Of Business
              1ITEM 2.
              Description Of Properties
              9ITEM 3.
              Legal Proceedings
              9ITEM 4.
              Submission Of Matters To A Vote Of Security
      Holders
              9PART
      IIITEM 5.
              Market For Common Equity And Related Stockholder
      Matters
              10ITEM 6.
              Management’s Discussion and Analysis of Financial
      Condition
              12ITEM 7.
              Financial Statements
              FITEM8A.
              Control and Procedures
              18ITEM8B.
              Other Information
              18PART
      IIIITEM 9.
              Directors, Executive Officers, Promoters And Control
      Persons,

                  Compliance With Section 16(a) Of The Exchange
      Act
              19ITEM 10
              Executive Compensation
              21ITEM 11
              Security Ownership of Certain Beneficial Owners and
      Management
              22ITEM 12.
              Certain Relationships And Related
      Transactions
              23ITEM 13.
              Index To Exhibits And Reports On Form
    8-K
              23ITEM 14.
              Principal Accountant Fees And Services
              24SIGNATURES










Table of Contents




ITEM 1.Description of
Business.





General





As used
in this Form 10-KSB, references to the "Company," "we," “our” or "us" refer to
ESP Enterprises, Inc., unless the context otherwise indicates.





Forward-Looking
Statements





Matters
discussed in this document may constitute forward-looking statements. The
Private Securities Litigation Reform Act of 1995 provides safe harbor
protections for forward-looking statements in order to encourage companies to
provide prospective information about their businesses. Forward-looking
statements include statements concerning plans, objectives, goals, strategies,
future events or performance, and underlying assumptions and other statements,
which are other than statements of historical facts.





ESP
Enterprises, Inc. desires to take advantage of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 and is including this
cautionary statement in connection with this safe harbor legislation. This
document and any other written or oral statements made by us or on our behalf
may include forward-looking statements, which reflect our current views with
respect to future events and financial performance. The words “believe,”
“expect,” “anticipate,” “intends,” “estimates,” “forecast,” “project” and
similar expressions identify forward-looking statements.





The
forward-looking statements in this document are based upon various assumptions,
many of which are based, in turn, upon further assumptions, including without
limitation, management’s discussion and analysis or plan of operations. Although
we believe that these assumptions were reasonable when made, these statements
are not guarantees of future performance and are subject to certain risks,
uncertainties and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect our management’s view only as of the date of this report.





Background




We were
originally incorporated on April 9, 1998 in the state of Colorado as Downside
Up, Inc. (“DUI”).  On June 15, 2007, we acquired all of the stock of
ESP Petrochemicals, Inc., which was incorporated in the State of Louisiana on
November 7, 2006.  ESP Petrochemicals, Inc. sells and blends chemicals
for use in the oil and gas industry to customers primarily located in the Gulf
of Mexico and Gulf States region.
 
 On
September 14, 2007, we signed an Agreement and Plan of Reorganization with ESP
Resources, Inc. (“ESP Resources”) and the shareholders of ESP Resources (the
“Agreement”). The close of the transaction occurred on October 31, 2007 (the
“Closing Date”).  On the Closing Date, the ESP Resources shareholders
exchanged all of their ESP Resources shares for DUI common shares, and ESP
Resources merged with a wholly-owned subsidiary of DUI and became the surviving
corporation of such merger (the “Merger”) and the new wholly owned subsidiary of
DUI. As a result of the Merger, ESP Resources shareholders own approximately
seventy-five (75%) percent of DUI’s outstanding, post-Merger common shares, or
18,000,000 common shares. The Merger was approved by our Board of Directors and
by shareholders holding a majority of our common stock at a Special Meeting of
Stockholders held on October 31, 2007.  On October 31, 2007, pursuant
to the Merger, we amended our articles of incorporation to change our name to
ESP Enterprises, Inc.
  Through
one of our subsidiaries, we are a custom formulator of specialty chemicals for
the energy industry.  Our more specific mission is to provide
applications of surface chemistry to service to all facets of the fossil energy
business via a high level of innovation. We are focusing our efforts on solving
problems in a highly complex integration of processes to achieve the highest
level of quality petroleum output. Listening to our customers with their
changing demands and applying our skills as chemical formulators, enables us to
measure our success in this endeavor.






1
 Table of Contents




We are an
oil field service company that also acts as manufacturer, distributor and
marketer of specialty chemicals. ESP supplies specialty chemicals for a variety
of oil field applications including separating suspended water and other
contaminants from crude oil, pumping enhancement, cleaning, and a variety of
fluids and additives used in the drilling and production process. At each
drilling site or well that is in produc­tion, there exist a number of
factors that make each site unique. Wells that are operating short distances
from each other in the same field can have very different characteristics. This
variance in operating condi­tions, chemical makeup of the oil and the usage
of diverse equipment requires a very specific chemical blend to be used if
maximum drilling and production well performance is to be attained.




Our goal
is first, to solve the customer’s problem at the well and optimize drilling or
production, and secondly, to sell our line of chemical products. Typically, the
ESP field technician may gather informa­tion at a well site and
analyze this data at the company’s labs in Lafayette, Louisiana. The data
analysis provides testing parameters and reproduces conditions at the
wellhead. This allows us to design and test a new chemical blend in a very short
time. In many cases, a new blend may be in service at the well in as little as
24 hours. This unique process shortens the chemical development time frame from
what might have been as long as two months or more to a few days or hours. The
exceptional service, response times and chemical products that the ESP team is
able to provide its customers is unique within the industry.




Current
Product Line




ESP
currently offers production chemicals, drilling chemicals, waste remediation
chemicals, cleaners and waste treatment chemicals.





·
            Surfactants
      which are highly effective in treating production and injection
      problems·
            Well
      completion and work-over chemicals that maximize productivity from new and
      exiting wells·
            Bactericides
      that kill water borne bacterial growth, thus preventing corrosion and
      plugging·
            Scale
      compounds that prevent or treat scale deposits·
            Corrosion
      inhibitors, which are organic compounds that form a protective film on
      metal surfaces to insulate the metal from its corrosive
      environment·
            Antifoams
      that provide safe economic means of controlling foaming
  problems·
            ESP
      emulsion breakers, which are chemicals especially formulated for crude
      oils·
            Paraffin
      chemicals that inhibit and/or dissolve paraffin to prevent buildup. Their
      effectiveness is not diminished when used in conjunction with other
      chemicals.·
            Water
      Clarifiers that solve any and all of the problems associated with
      purifying effluent water, improve appearance, efficiency and
      productivity





Market
Definition




Based
upon total oil production estimates of 82.5 million barrels per day for 2006,
and an average treating cost of $0.21 per barrel, the overall global market for
the Specialty Chemical industry worldwide was estimated to have exceeded
$6.3 billion for the year ending 2006. Total oil production estimates of 87.5
million barrels per day for 2007, and an average treating cost of $0.21 per
barrel, the overall global market for the Specialty Chemical industry worldwide
was estimated to have exceeded $6.7 billion for the year ending
2007.





We
anticipate that the demand for specialty chemicals; including drilling muds,
additives and lubricants is expected to increase by approximately five percent
per year in keeping with historical data and estimates for increased oil
production for the next  five years.







2
 Table of Contents




Immediate
Target Markets





We have
targeted the Southern United States, Caribbean and South American regions.
Growth will take place throughout these areas due not only to new drilling
activity, but the predominance of independent producer production property
acquisitions. The predominance of which has major oil compa­nies spinning
off smaller, independent operations that operate more freely in this
entrepreneurial atmo­sphere. Our growth is taking place because of our
unique positioning in this market segment, strategic hiring practices,
joint-venture projects and the speed at which we can advance technology to meet
market demands. At the same time, the unprecedented growth of independent
operations is taking place; it is possible we will experience a major
consolidation in the production chemical business. The chemicals used in
oilfield production are not tied to drilling activity, but to ongoing oil
production. This is the main market that ESP serves. At present we estimate that
ESP is supplying less than 1 % of the market.





Marketing
and Sales Strategy




ESP’s
marketing strategy is to promote and support the fact that our service and
chemical products provide a unique and custom-tailored solution for each client,
which is more cost effec­tive in treating oilfield drilling and production
problems. The ESP sales strategy is based on many methodologies of reaching and
closing business with a potential customer.




ESP
focuses on the rapidly growing sector of the oil producing industry, which is
run by smaller, independent oil companies. The deci­sions are more likely to
be made at a local level, and are based more upon relationship, service and
perfor­mance, rather than wading through the bureaucracy of a multi-national
oil company purchasing process.




Technical
sales representatives call on customers in the field, at their corporate
headquarters and operations sites. Thereby business may come via referral from
an existing client or in many cases, the expansion of personal relationships,
which are in place. As most major oil exploration and production companies are
enterprises operating worldwide, with geographical headquarters in various
locations, it is seldom possible to acquire complete or even large portions of a
major oil company’s business through one central office or purchasing
department.




Research
and Development




In
response to demonstrated needs of our market, new chemicals and analytical
services are being developed to include waste remediation, water treatment, and
specialty biodegradable cleaning compounds. These new chemicals are especially
useful to the oilfield operators and producers who are focused to use the new
generation of biodegradable and non-toxic chemicals.




ESP is
developing innovative product and application technologies. Unlike major
competitors, which limit their developmental efforts to in-house technologies,
our product technology remains in-house, but development costs may also become
subsidized by outsourced vendors eager to meet market demands. In order to
protect proprietary developments, outsourced vendor technical staffs are
contracted under long term secrecy agree­ments. This approach towards
product development results in conditions where problem resolution is shortened,
and costs are lowered, while product life cycles are consequently
elongated.




All
developmental strategies are tied to specific commercial objectives, eliminating
costly dead end projects, lowering research costs in relation to revenue
generation, and maintaining focus on the ESP mission.





The
unique combination of utilizing our staff to analyze data along with on hands
laboratory testing has produced a variety of new compounds that solve a specific
problem in a short time period within the chemical industry.






3
 Table of Contents




Competition




Currently,
the market distribution is shared by very few participants, with one significant
market leader. There are several small – medium sized businesses that are
regionally located. The area of biggest growth in the Specialty Chemical market
is in the area of “Production Treatment Chemicals”. To be competitive in the
industry, we will continually enhance and update our technology. We have
allocated funds to research and development of new technologies to maintain the
efficacy of our technology and our ability to compete so we can continue to grow
our business.




Our
strategy for surpassing the competition is one of simply providing better
service and response time, combined with superior chemical solutions that can be
translated into savings for our customers. We believe that we are able to solve
these problems due to the following competitive advantages:





1.
              Personalized
      service.2.
              Expedited Field
      Analysis; and3.
              Convenience
      and access to the best available market rates and products that we can
      produce and identify that are currently offered by our suppliers for our
      customers.
 Additionally,
new companies are constantly entering the market. This growth and fragmentation
could also have a negative impact on our ability to obtain additional market
share. Larger companies which have been engaged in this business for
substantially longer periods of time may have access to greater financial and
other resources. These companies may have greater success in recruiting and
retaining qualified employees and in specialty chemical manufacturing and
marketing, which may give them a competitive advantage.





Employees





As of
April 25, 2008, the founding management of our company is comprised of a team of
highly skilled and experienced professionals. We focus on training and
professional development for all levels of employees and on hiring additional
experienced employees. We currently have five employees, all of whom are
full time. We expect to increase the number of employees as we implement our
business objectives and expand our management team. None of our employees are
represented by a labor union or covered by a collective bargaining agreement. We
believe that our relations with our employees are good.




Properties




We own no
real property and currently lease our office space.  Our principal
executive offices are located at 1255 Lions Club Road, Scott,
LA 70583.  Our telephone number is (337) 706-7056.




Litigation




We are,
from time to time, subject to other claims and litigation arising in the
ordinary course of business. In the opinion of management, the ultimate outcome
of claims and litigation of which management is aware will not have a material
adverse effect on our consolidated financial position or results of operation.
Management is not currently aware of any claims and litigation against the
Company.





Risk
Factors





An
investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in this
prospectus and any other filings we may make with the United States Securities
and Exchange Commission in the future before investing in our common stock. If
any of the following risks occur, our business, operating results and financial
condition could be seriously harmed. Please note that throughout this
prospectus, the words “we”, “our” or “us” refer to us and not to the selling
stockholders.







4
 Table of Contents




Risks
Relating to Our Business





·
            WE
      NEED TO MANAGE GROWTH IN OPERATIONS TO MAXIMIZE OUR POTENTIAL GROWTH AND
      ACHIEVE OUR EXPECTED REVENUES AND OUR FAILURE TO MANAGE GROWTH WILL CAUSE
      A DISRUPTION OF OUR OPERATIONS RESULTING IN THE FAILURE TO GENERATE
      REVENUE.




In order
to maximize potential growth in our current and potential markets, we believe
that we must expand our manufacturing and marketing operations. This expansion
will place a significant strain on our management and our operational,
accounting, and information systems. We expect that we will need to continue to
improve our financial controls, operating procedures, and management information
systems. We will also need to effectively train, motivate, and manage our
employees. Our failure to manage our growth could disrupt our operations and
ultimately prevent us from generating the revenues we expect.





In order
to achieve the above mentioned targets, the general strategies of our company
are to maintain and search for hard-working employees who have innovative
initiatives; on the other hands, our company will also keep a close eye on
expanding opportunities, for example, acquisition of state-owned
enterprises.





·
            IF
      WE NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, WE MAY NOT BE
      ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF
      OUR OPERATIONS.




If
adequate additional financing is not available on reasonable terms, we may not
be able to fund our future operations and we would have to modify our business
plans accordingly. There is no assurance that additional financing will be
available to us.




If we
cannot obtain additional funding, we may be required to: (i) limit our
investments in research and development; (ii) limit our marketing efforts; and
(iii) decrease or eliminate capital expenditures.




Such
reductions could materially adversely affect our business and our ability to
compete.




Even if
we do find a source of additional capital, we may not be able to negotiate terms
and conditions for receiving the additional capital that are acceptable to us.
Any future capital investments could dilute or otherwise materially and
adversely affect the holdings or rights of our existing shareholders. In
addition, new equity or convertible debt securities issued by us to obtain
financing could have rights, preferences and privileges senior to our common
stock. We cannot give you any assurance that any additional financing will be
available to us, or if available, will be on terms favorable to us.




·
            NEED
      FOR ADDITIONAL EMPLOYEES.





The
Company’s future success also depends upon its continuing ability to attract and
retain highly qualified personnel. Expansion of the Company’s business and the
management and operation of the Company will require additional managers and
employees with industry experience, and the success of the Company will be
highly dependent on the Company’s ability to attract and retain skilled
management personnel and other employees. Competition for such personnel is
intense. There can be no assurance that the Company will be able to attract or
retain highly qualified personnel. Competition for skilled personnel in the oil
and gas industry is significant. This competition may make it more difficult and
expensive to attract, hire and retain qualified managers and employees.
The Company’s inability to attract skilled management personnel and other
employees as needed could have a material adverse effect on the Company’s
business, operating results and financial condition. The Company’s arrangement
with its current employees is at will, meaning its employees may voluntarily
terminate their employment at any time. The Company anticipates that the use of
stock options, restricted stock grants, stock appreciation rights, and phantom
stock awards will be valuable in attracting and retaining qualified personnel.
However, the effects of such plan cannot be certain.








5
 Table of Contents





·
            WE
      MAY NEVER PAY ANY DIVIDENDS TO
SHAREHOLDERS.





We have
never declared or paid any cash dividends or distributions on our capital stock.
We currently intend to retain our future earnings, if any, to support operations
and to finance expansion and therefore we do not anticipate paying any cash
dividends on our common stock in the foreseeable future.




The
declaration, payment and amount of any future dividends will be made at the
discretion of the board of directors, and will depend upon, among other things,
the results of our operations, cash flows and financial condition, operating and
capital requirements, and other factors as the board of directors considers
relevant. There is no assurance that future dividends will be paid, and, if
dividends are paid, there is no assurance with respect to the amount of any such
dividend.





·
            OUR
      SPECIALTY CHEMICAL BUSINESS, OPERATED BY OUR SUBSIDIARY, ESP RESOURCES,
      INC., ONLY COMMENCED OPERATIONS IN FEBRUARY 2007, AND HAS LIMITED
      HISTORICAL OPERATING RESULTS UPON WHICH TO BASE FUTURE FINANCIAL
      PERFORMANCE, MAKING IT DIFFICULT FOR PROSPECTIVE INVESTORS TO ASSESS THE
      VALUE OF OUR STOCK.





Our
subsidiary, ESP Resources, Inc., was formed in November 2006 and began
operations in February 2007. Accordingly, our business has very limited
operating results and therefore it is impossible for an investor to assess the
performance of the Company or to determine whether the Company will ever become
profitable. An investor will be required to make an investment decision based
solely on our subsidiary’s limited operating history and Company management’s
background and experience.





·
            OUR
      SPECIALTY CHEMICAL BUSINESS WILL BE DEPENDENT ON THE OIL AND GAS INDUSTRY
      WHICH HAS HISTORICALLY BEEN VOLATILE AND COULD NEGATIVELY AFFECT OUR
      RESULTS OF OPERATIONS.





Demand
for our oil and gas field specialty chemical products and services depends in
large part upon the level of exploration and production of oil and gas and the
industry's willingness to spend capital on environmental and oil and gas field
services, which in turn depends on oil and gas prices, expectations about future
prices, the cost of exploring for, producing and delivering oil and gas, the
discovery rate of new oil and gas reserves and the ability of oil and gas
companies to raise capital.  Domestic and international political,
military, regulatory and economic conditions also affect the
industry.





Prices
for oil and gas historically have been volatile and have reacted to changes in
the supply of and the demand for oil and natural gas, domestic and worldwide
economic conditions and political instability in oil producing
countries.  No assurance can be given that current levels of oil and
gas activities will be maintained or that demand for our services will reflect
the level of such activities.  Prices for oil and natural gas are
expected to continue to be volatile and affect the demand for specialty chemical
products and services such as ours.  A material decline in oil or
natural gas prices or activities could materially affect the demand for our
products and services and, therefore, our financial condition.





·
            THE
      POTENTIAL COSTS OF ENVIRONMENTAL COMPLIANCE COULD HAVE A MATERIAL NEGATIVE
      ECONOMIC IMPACT ON OUR OPERATIONS AND FINANCIAL
  CONDITION.





Our
specialty chemical business is subject to federal, state and local environmental
laws, rules, regulations, and ordinances, including those concerning emissions
and discharges, and the generation, handling, storage, transportation,
treatment, disposal and import and export of hazardous materials ("Environmental
Laws"). The operation of the Company's facilities and the distribution of
chemical products entail risks under Environmental Laws, many of which provide
for substantial remediation costs in the event of discharges of contaminants and
fines and sanctions for violations. Violations of Environmental Laws could
result in the imposition of substantial criminal fines and penalties against the
Company's operating subsidiary and their officers and employees, as well as the
Company, in certain circumstances. The costs associated with responding to civil
or criminal matters can be substantial. Also, significant civil or criminal
violations could adversely impact the Company's marketing ability in the region
served by the Company. Compliance with existing and future Environmental Laws
may require significant capital expenditures by the Company.






6
 Table of Contents




There can
be no assurance that past or future operations will not result in the Company
incurring material environmental liabilities and costs or that compliance with
Environmental Laws will not require material capital expenditures by the
Company, each of which could have a material adverse effect on the Company's
results of operations and financial condition. At some of the Company's sites,
surface or subsurface contamination has been established, the full extent of
which is unknown. No assurance can be given that material liabilities will not
be incurred in the future as a result of the existing contamination. In
addition, although the Company intends to conduct appropriate due diligence with
respect to environmental matters in connection with future acquisitions, there
can be no assurance that the Company will be able to identify or be indemnified
for all potential environmental liabilities relating to any acquired business.
Although the Company has obtained insurance and indemnities for certain
contamination conditions, such insurance and indemnities are
limited.





·
            OPERATING
      HAZARDS COULD HAVE A MATERIAL ADVERSE IMPACT ON OUR OPERATIONS AND
      FINANCIAL CONDITION.





Our
specialty chemicals operations are subject to the numerous hazards associated
with the handling, transportation, blending, storage, sale, ownership and other
activities relating to chemicals. These hazards include, but are not limited to,
storage tank or pipeline leaks and ruptures, explosions, fires, chemical spills,
discharges or releases of toxic substances or gases, mechanical failures,
transportation accidents, any of which could materially and adversely affect the
Company. These hazards can cause personal injury and loss of life, severe damage
to or destruction of property and equipment, environmental damage and may result
in suspension of operations. The Company will maintain insurance coverage in the
amounts and against the risks it believes are in accordance with industry
practice, but this insurance will not cover all types or amounts of liabilities.
No assurance can be given either that (i) this insurance will be adequate to
cover all losses or liabilities the Company may incur in its operations or (ii)
the Company will be able to maintain insurance of the types or at levels that
are adequate or at reasonable rates.





·
            WE
      RELY ON THE SERVICES OF CERTAIN KEY
PERSONNEL





Our
specialty chemicals business relies on the efforts and talents of our President,
David Dugas, and our Vice President, Tony Primeaux. The loss of the services of
either one of these persons could adversely affect the operations of our
business. Neither of these executives currently has an employment agreement nor
are their lives insured for the benefit of the Company by key man life
insurance.





·
            THE
      SPECIALTY CHEMICALS BUSINESS IS HIGHLY COMPETITIVE AND THIS COMPETITION
      MAY ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS.




Our
specialty chemical business faces significant competition from major
international producers as well as smaller regional competitors. Our most
significant competitors include major chemicals and materials manufacturers and
diversified companies, a number of which have revenues and capital resources far
exceeding ours. Substitute products also exist for many of our products.
Therefore, we face substantial risk that certain events, such as new product
development by our competitors, changing customer needs, production advances for
competing products, price changes in raw materials, could result in declining
demand for our products as our customers switch to substitute products or
undertake manufacturing of such products on their own. If we are unable to
develop and produce or market our products to effectively compete against our
competitors, our results of operations may materially suffer.






7
 Table of Contents




Risks
Related to Our Common Stock





·
            OUR
      COMMON STOCK IS NOT TRADING ON ANY PUBLIC MARKET AND OUR SHARES ARE
      ILLIQUID. EVEN THOUGH WE INTEND TO APPLY TO LIST OUR COMMON SHARES FOR
      TRADING ON THE OTC BULLETIN BOARD, WE CAN NOT OFFER ANY ASSURANCES THAT
      OUR SHARES WILL QUALIFY FOR SUCH LISTING AND EVEN IF OUR SHARES DO
      QUALIFY, WHETHER A MARKET FOR THEM WILL EVER DEVELOP. ACCORDINGLY,
      PURCHASERS OF OUR COMMON SHARES MAY NOT BE ABLE TO RESELL OUR SHARES, OR
      IF RESOLD, THEY MAY NOT BE SALABLE AT THE PRICES PAID FOR
      THEM.




We intend
to apply to have our common stock quoted on the Over-the-Counter Electronic
Bulletin Board (“OTCBB”). The OTCBB is not an issuer listing service, market or
exchange. Although the OTCBB does not have any listing requirements per se, to
be eligible for quotation on the OTCBB, issuers must remain current in their
filings with the Securities Exchange Commission or applicable regulatory
authority. In order to be eligible to be listed on the OTCBB and to maintain
such eligibility, we would be required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 and we
would have to remain current in meeting our periodic securities reporting
obligations. If for any reason, however, any of our securities are not eligible
for initial or continued quotation on the Bulletin Board or an active public
trading market does not develop, purchasers of the shares may have difficulty
selling their securities should they desire to do so. If we are unable to
satisfy the requirements for quotation on the OTCBB, any trading in our common
stock would be conducted in the over-the-counter market in what are commonly
referred to as the “pink sheets.” As a result, an investor may find it more
difficult to dispose of the securities offered hereby.





·
            IF
      AND WHEN OUR COMMON SHARES ARE LISTED FOR TRADING ON THE OTC BULLETIN
      BOARD, OUR SHARES WILL LIKELY BE CLASSIFIED AS A “PENNY STOCK” AS THAT
      TERM IS GENERALLY DEFINED IN THE SECURITIES EXCHANGE ACT OF 1934 TO MEAN
      EQUITY SECURITIES WITH A PRICE OF LESS THAN $5.00. OUR SHARES WILL BE
      SUBJECT TO RULES THAT IMPOSE SALES PRACTICE AND DISCLOSURE REQUIREMENTS ON
      BROKER-DEALERS WHO ENGAGE IN CERTAIN TRANSACTIONS INVOLVING A PENNY
      STOCK.




We will
be subject to the penny stock rules adopted by the Securities and Exchange
Commission that require brokers to provide extensive disclosure to its customers
prior to executing trades in penny stocks. These disclosure requirements may
cause a reduction in the trading activity of our common stock, which in all
likelihood would make it difficult for our stockholders to sell their
securities.




Under the
penny stock regulations, a broker-dealer selling a penny stock to anyone other
than an established customer or accredited investor must make a special
suitability determination regarding the purchaser and must receive the
purchaser’s written consent to the transaction prior to the sale, unless the
broker-dealer is otherwise exempt. Generally, an individual with a net worth in
excess of $1,000,000, or annual income exceeding $200,000 individually, or
$300,000 together with his or her spouse, is considered an accredited investor.
In addition, under the penny stock regulations the broker-dealer is required
to:




·
            Deliver,
      prior to any transaction involving a penny stock, a disclosure schedule
      prepared by the Securities and Exchange Commission relating to the penny
      stock market, unless the broker-dealer or the transaction is otherwise
      exempt;·
            Disclose
      commissions payable to the broker-dealer and our registered
      representatives and current bid and offer quotations for the
      securities;·
            Send
      monthly statements disclosing recent price information pertaining to the
      penny stock held in a customer’s account, the account’s value and
      information regarding the limited market in penny stocks;
    and·
            Make
      a special written determination that the penny stock is a suitable
      investment for the purchaser and receive the purchaser’s written agreement
      to the transaction, prior to conducting any penny stock transaction in the
      customer’s account.




Because
of these regulations, broker-dealers may encounter difficulties in their attempt
to sell shares of our common stock, which may affect the ability of selling
stockholders or other holders to sell their shares in the secondary market and
have the effect of reducing the level of trading activity in the secondary
market. These additional sales practice and disclosure requirements could impede
the sale of our securities, if our securities become publicly traded. In
addition, the liquidity for our securities may be decreased, with a
corresponding decrease in the price of our securities. Our shares in all
probability will be subject to such penny stock rules and our stockholders will,
in all likelihood, find it difficult to sell their securities.






8
 Table of Contents




ITEM 2.Description of
Property.





Our
principal executive offices are located at 1255 Lions Club Road, Scott,
LA 70583. We believe that this space is adequate to operate our
current business and as business warrants we may expand into a larger
space.





ITEM 3.Legal
Proceedings.





There are
no pending legal proceedings to which the Company is a party or in which any
director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company.





ITEM 4.Submission of Matters to a Vote
of Security Holders.





On
February 28, 2008 an Information Statement was filed with the Securities and
Exchange Commission and was furnished, pursuant to Section 14C of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to the holders (the
"Stockholders") of the common stock, no par value per share (the "Common
Stock"), of ESP Enterprises, Inc., a Colorado Corporation (the "Company"), to
notify such Stockholders of the following:




On or
about February 11, 2008, the Company received written consents in lieu of a
meeting of Stockholders from holders of 15,075,000 shares representing
approximately 62% of the 24,300,000 shares of the total issued and outstanding
shares of voting stock of the Company (the "Majority Stockholders") authorizing
the Company to discontinue its business in the State of Colorado and to
redomesticate its business in the State of Delaware.




On or
about February 11, 2008, the Company received written consents in lieu of a
meeting of Stockholders from holders of 15,075,000 shares representing
approximately 62% of the 24,300,000 shares of the total issued and outstanding
shares of voting stock of the Company (the "Majority Stockholders") approving an
amendment to the Articles of Incorporation of the Company (the "Certificate of
Amendment") to set a par value for the Company’s common stock at $.001 per share
and for the Company’s preferred stock at $.001 per share.




On
February 11, 2008, the Board of Directors of the Company approved the
above-mentioned actions, subject to Stockholder approval. The Majority
Stockholders approved the action by written consent in lieu of a meeting on
February 11, 2008, in accordance with the Colorado Corporation Code ("CCC"). Notwithstanding
the above, as of May 20,
2008, the Company has not effectuated the change in par value and has not
redomesticated in the state of Delaware.   The Company intends to
undertake such actions by the end of the second quarter of 2008.





On
October 1, 2007 a Proxy Statement (the "Proxy Statement") was furnished to the
stockholders of Downside Up, Inc. (the former name of ESP Enterprises, Inc.), a
Colorado corporation (the "Company"), by the Board of Directors in connection
with the solicitation by the Company of the vote, in person or by proxy, of the
stockholders. The stockholders were being asked to vote their shares on the
following proposals:





1. The
approval of the Company’s acquisition of ESP Resources, Inc. by means of its
merger with a wholly owned subsidiary of the Company;





2. The
approval of an amendment to the Company’s Articles of Incorporation, increasing
the number of shares of common stock, $.0001 par value (the “Common Stock”)
which the Company has authority to issue from 20,000,000 to 200,000,000 shares;
and





3. The
approval of an amendment to the Company’s Articles of Incorporation, inserting a
new article permitting shareholder action by majority shareholder written
consent.





4. The
approval of an amendment to the Company’s Articles of Incorporation, changing
the Company’s corporate name to “ESP Enterprises, Inc.”.






9
 Table of Contents







PART
II





ITEM 5.Market for Common Equity and
Related Stockholder Matters





Market
Information





There is
no trading market for our Common Stock at present and there has been no trading
market to date. There is no assurance that a trading market will ever develop
or, if such a market does develop, that it will continue.




The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the
definition of a “penny stock,” for purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require: (i)
that a broker or dealer approve a person’s account for transactions in penny
stocks and (ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person’s account for
transactions in penny stocks, the broker or dealer must (i) obtain financial
information and investment experience and objectives of the person; and
(ii) make a reasonable determination that the transactions in penny stocks are
suitable for that person and that person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlight form, (i) sets forth the basis on
which the broker or dealer made the suitability determination and (ii) that the
broker or dealer received a signed, written agreement from the investor prior to
the transaction.





Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading, and about commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.





Holders





As of May
20, 2008 there were 25,925,942 shares of common stock issued and outstanding,
4,560,000 of which are controlled by David A. Dugas, the Company's
President.




Holders
of common stock do not have cumulative voting rights.




Therefore,
holders of a majority of the shares of common stock voting for the election of
directors can elect all of the directors. Holders of our common stock
representing a majority of the voting power of our capital stock issued and
outstanding and entitled to vote, represented in person or by proxy, are
necessary to constitute a quorum at any meeting of our stockholders. A vote by
the holders of a majority of our outstanding shares is required to effectuate
certain fundamental corporate changes such as liquidation, merger or an
amendment to our Articles of Incorporation.






10
 Table of Contents




Although
there are no provisions in our charter or by-laws that may delay, defer or
prevent a change in control, we are authorized, without shareholder approval, to
issue shares of preferred stock that may contain rights or restrictions that
could have this effect.




Holders
of common stock are entitled to share in all dividends that the board of
directors, in its discretion, declares from legally available funds. In the
event of liquidation, dissolution or winding up, each outstanding share entitles
its holder to participate pro rata in all assets that remain after payment of
liabilities and after providing for each class of stock, if any, having
preference over the common stock. Holders of our common stock have no
pre-emptive rights, no conversion rights and there are no redemption provisions
applicable to our common stock.





The
issued and outstanding shares of our Common Stock were issued in accordance with
the exemptions from registration afforded by Section 4(2) of the Securities Act
of 1933.




Dividends





Since
inception we have not paid any dividends on our common stock. We currently do
not anticipate paying any cash dividends in the foreseeable future on our common
stock.  Although we intend to retain our earnings, if any, to finance
the exploration and growth of our business, our Board of Directors will have the
discretion to declare and pay dividends in the future.




Payment
of dividends in the future will depend upon our earnings, capital requirements,
and other factors, which our Board of Directors may deem relevant.








11
 Table of Contents






ITEM 6.Management’s Discussion and
Analysis or Plan of Operation





The
information contained in this Management’s Discussion and Analysis of Financial
Condition and Results of Operation contains “forward looking statements”.
 Actual results may materially differ from those projected in the forward
looking statements as a result of certain risks and uncertainties set forth in
this report.  Although our management believes that the assumptions made
and expectations reflected in the forward looking statements are reasonable,
there is no assurance that the underlying assumptions will, in fact, prove to be
correct or that actual future results will not be materially different from the
expectations expressed in this Annual Report.  The following discussion
should be read in conjunction with the audited Consolidated Financial Statements
and related Notes included thereto.





Our
financial statements are stated in United States Dollars and are prepared in
accordance with United States Generally Accepted Accounting
Principles.




Plan
of Operations





Completion
of our plan of operation is subject to attaining adequate revenue. We cannot
assure investors that adequate revenues will be generated. In the absence of our
projected revenues, we may be unable to proceed with our plan of operations.
Even without significant revenues within the next twelve months, we still
anticipate being able to continue with our present activities, but we may
require financing to potentially achieve our goal for higher levels of profit,
revenue and growth.




We
anticipate that our operational as well as general and administrative expenses
for the next 12 months will total $1,385,000.00. The breakdown is as
follows:





New
      Facilities
            
            $
            250,000.00Equipment
      and inventory
            
            $
            250,000.00Research
      and Development
            
            $
            100,000.00Recruiting
      and hiring new employees
            
            $
            295,000.00Legal/Accounting
            
            $
            50,000.00Professional
      fees
            
            $
            200,000.00General/Administrative
            
            $
            240,000.00Total
            
            $
            1,385,000.00





New
Facilities




In March
2008, we  leased a new facility to utilize as the ESP blending
facility. Our current petrochemical blending operations are conducted in a
rented warehouse in Scott, LA. By moving to a new, larger facility, we
are  able to increase our blending and storage
capacity.





Additional
Equipment and Inventory




As a part
of our business expansion plan we will need to purchase additional equipment and
establish larger inventory levels. Our budget to establish product inventories
to meet increased market demand is $100,000. Equipment purchases for additional
field service vehicles are budgeted at $150,000 for a total amount of $250,000
for additional equipment and inventory during the next twelve
month.




Research
and Development




In
response to demonstrated needs of our market, new chemicals and analytical
services are being devel­oped to include waste remediation, water treatment,
and specialty biodegradable cleaning compounds. These new chemicals are
especially useful to the oilfield operator and producers who are focused to use
the new generation of biodegradable and non-toxic chemicals.






12
 Table of Contents




We plan
to increase research and development efforts to refine the group of cleaning and
other petrochemical prod­ucts. This effort will allow ESP to further fine-
tune its competitive advantages. We intend to develop additional Product
technology with both in house development costs as well as working with outside
vendors eager to meet demands. Total projected R&D development costs for the
next twelve months are budgeted at $100,000.




Recruiting
and Hiring of new employees




We expect
to increase the number of employees as we implement our business objectives and
recruit additional internal management. To augment the current ESP staff to
support and sustain prolonged growth under the plan of operations we plan to
recruit additional employees in positions with annual salaries as identified
below with a total budget of $295,000 during the next twelve
months.




·
            Administrative
      support
            
            $
            25,000·
            Warehouse
      employeeso    
      Production Manager
            
            $
            50,000o    
      Utility
            
            $
            40,000·
            Field
      Sales Technicians (2)
            
            $
            80,000·
            Chief
      Financial Officer
            
            $
            100,000




Professional
Fees




We have
allocated funds for professional fees to support our efforts in the listing of
our securities. Legal and accounting Fees are budgeted at $50,000. Additionally
we plan to retain the assistance of several professional consultants to assist
us in our growth and development and have budgeted $150,000 for this purpose for
a total amount of $200,000 in professional fees during next twelve
months.





Capitalizing on Strategic Acquisition
Opportunities -In order to enhance our competitive position, we will
continue to selectively explore strategic acquisitions. We believe there are
opportunities for strategic acquisitions that will give us a foothold into new
geographic markets. We will review potential acquisitions and, if necessary,
seek investment partners in order to raise the necessary funds to acquire any
operating business. Such partners may include banks, investment funds and
broker-dealers, and management intends to utilize its significant contacts among
these entities to facilitate such a relationship. We have no potential
acquisitions in mind at this time nor have we entered into any discussions with
any such potential partners. We do anticipate beginning to identify potential
acquisitions after the first quarter of 2008. However, the specific amount,
timing and terms will not be known until an agreement has been executed by us
and is reviewed by any potential investment partner.




Completion
of the strategic acquisition component of our plan of operation is subject to
attaining adequate revenue or financing. We cannot assure investors that
adequate revenues will be generated to acquire additional companies. In the
absence of our projected revenues or financing, we may be unable to proceed with
our plan of strategic acquisitions.





Even
without a significant increase in revenues within the next twelve months, we
anticipate being able to continue with our present activities, but we may
require financing to achieve our objective of strategic acquisitions creating
increased profit, revenue and growth.










13
 Table of Contents




Results
of Operations




For the Fiscal Year Ended
December 31, 2007 Compared to the Fiscal Year Ended December 31,
2006





Revenues





Revenues
increased to $697,122 for the twelve months ended December 31, 2007 from $0 for
the two months ended December 31, 2006 an increase of
$697,122.   The increase in our revenue was due to the
commencement of our operation during the fiscal year ended 2007.





Costs of
Good Sold





Costs of
goods sold increased to $644,985 for the twelve months ended December 31, 2007
from $0 for the two months ended December 31, 2006, an increase of $644,985. The
increase was primarily attributable to the commencement of
operations.





Net
Loss





Net Loss
increased to $374,991 for the twelve months ended December 31, 2007 from $2,425
for the two months ended December 31, 2006, an increase of
$372,566.  The increase in net loss was due to the increase in our
expenses based on the commencement of our business operations.





General
and Adminstrative Expenses.





General
and Administrative Expenses for the twelve months ended December 31, 2007
increased to $428,896 from $2,680 for the two months ended December 31, 2006,
representing an increase of $426,216.  General and Adminstrative
Expenses for the year ended December 31, 2007 were comprised of $218,533 in
general and administrative expenses, $94,662 for professional fees, $94,000 in
consulting fees and $21,701 in salaries and wages.





Capital
Resources and Liquidity




Cash and
cash equivalents were $225,203 at December 31, 2007 and current assets totaled
$584,695 at December 31, 2007. The Company's total current liabilities were
$1,102,192 at December 31, 2007. During the year ended December 31, 2007, net
cash used in by operating activities was $403,245.
 
 Net cash
provided by investing activities totaled $63,137 for the year ended
December 31, 2007, compared with $0 for the same period ended December 31,
2006. $96,439 was cash provided by the mergers with PetroChemical and
Enterprises.
 
 Net cash
provided by financing activities totaled $565,211 for the year ended
December 31, 2007.  The net cash change was $225,103 and $100 for the
year ended December 31, 2007 and 2006, respectively.
 
 We will
continue to evaluate alternative sources of capital to meet our growth
requirements, including other asset or debt financing, issuing equity securities
and entering into other financing arrangements.  There can be no
assurance, however, that any of the contemplated financing arrangements
described herein will be available and, if available, can be obtained on terms
favorable to us.
  As
discussed in Note B to the consolidated financial statements, as of December 31,
2007 we have a net loss of $374,991, a negative cash flow from operations of
$403,245, a working capital deficiency of $517,497 and a stockholders'
deficiency of $371,930.  These factors raise substantial doubt about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.




14
 Table of Contents




Our
ability to continue operations will likely require additional capital. The
condition raises substantial doubt about our Company to continue as a going
concern. We expect cash flows from operating activities to improve, primarily as
a result of an increase in revenue, although there can be no assurance thereof.
We also converted $1,150,000 in convertible notes payable into common stock
after year end. The accompanying consolidated financial statements do not
include any adjustments that might be necessary should we be unable to continue
as a going concern. If we fail to generate positive cash flow or obtain
additional financing, when required, we may have to modify, delay, or abandon
some or all of our business and expansion plans.





On
February 2, 2007, we entered into a combined account factoring and security
agreement with Midsouth Bank, which was renewed on June 20, 2007 and expires
April 30, 2009.  Under the terms of the agreement, the we may obtain
advances up to 87 percent of eligible accounts receivable, subject to a three
percent factoring fee. We are required to hold ten percent in a reserve account,
which is released to us upon payment of the receivable.  The factoring
agreement is subject to a revolving line of credit master note, which limits
borrowing to $190,000.  The line of credit is payable upon demand, or
if no demand is paid, with monthly payments of interest at 15
percent.  All outstanding principle plus accrued unpaid interest is
due on April 30, 2008.  The payment terms of the line of credit will
not be enforced while the factoring agreement is in effect.  The line
of credit is secured by all of our inventory, accounts, and equipment and a
commercial guarantee of our stockholder.  The total borrowings under
the factoring agreement at December 31, 2007 were $165,146 with $17,855 held in
restricted cash reserve. Accounting receivable at December 31, 2007 consisted of
the following:





Accounts
      Receivable
            
            $
            251,047Less:
      Allowance for doubtful accounts
            
            
            65,243$
            185,804





Working Capital
Requirements




Historically
operations, short term financing and the sale of our company stock have been
sufficient to meet our cash needs. We believe that we will be able to generate
revenues from sales. However, our actual working capital needs for the long and
short term will depend upon numerous factors, including operating results,
competition, and the availability of credit facilities, none of which can be
predicted with certainty. Future expansion will be limited by the availability
of financing products and raising capital.





Recent
Accounting Pronouncements





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
objective of SFAS 157 is to increase consistency and comparability in fair value
measurements and to expand disclosures about fair value
measurements.  SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. SFAS 157 applies under other
accounting pronouncements that require or permit fair value measurements and
does not require any new fair value measurements. The provisions of SFAS No. 157
are effective for fair value measurements made in fiscal years beginning after
November 15, 2007. The adoption of this statement is not expected to have a
material effect on the Company's future reported financial position or results
of operations.





In
February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
159, “The Fair Value Option
for Financial Assets and Financial Liabilities – Including an Amendment of FASB
Statement No. 115”.  This statement permits entities to choose
to measure many financial instruments and certain other items at fair value.
Most of the provisions of SFAS No. 159 apply only to entities that elect the
fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments
in Debt and Equity Securities” applies to all entities with
available-for-sale and trading securities. SFAS No. 159 is effective as of the
beginning of an entity’s first fiscal year that begins after November 15, 2007.
Early adoption is permitted as of the beginning of a fiscal year that begins on
or before November 15, 2007, provided the entity also elects to apply the
provision of SFAS No. 157, “Fair Value Measurements”. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements.







15
 Table of Contents




In
December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
160, “Noncontrolling Interests
in Consolidated Financial Statements – an amendment of ARB No.
51”.  This statement improves the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards that require; the ownership interests in subsidiaries held by parties
other than the parent and the amount of consolidated net income attributable to
the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, changes in a
parent’s ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently, when a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value, entities provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners.  SFAS No. 160
affects those entities that have an outstanding noncontrolling interest in one
or more subsidiaries or that deconsolidate a subsidiary.  SFAS No. 160
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Early adoption is prohibited. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements.





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133”
(SFAS 161). This statement is intended to improve transparency in financial
reporting by requiring enhanced disclosures of an entity’s derivative
instruments and hedging activities and their effects on the entity’s financial
position, financial performance, and cash flows. SFAS 161 applies to all
derivative instruments within the scope of SFAS 133, “Accounting for Derivative
Instruments and Hedging Activities” (SFAS 133) as well as related hedged items,
bifurcated derivatives, and nonderivative instruments that are designated and
qualify as hedging instruments. Entities with instruments subject to SFAS 161
must provide more robust qualitative disclosures and expanded quantitative
disclosures. SFAS 161 is effective prospectively for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008,
with early application permitted. We are currently evaluating the disclosure
implications of this statement.





Critical
Accounting Policies




Principals
of Consolidation




The
financial statements for the period ended December 31, 2006 include ESP
Resources, Inc. The consolidated financial statements for the year ended
December 31, 2007 include ESP Enterprises from November 1, 2007 to December 31,
2007 and its wholly owned subsidiaries, ESP Resources, Inc. for the year ended
December 31, 2007 and ESP Petrochemicals, Inc. from June 15, 2007 to December
31, 2007. All significant inter-company balances and transactions have been
eliminated in consolidation. ESP Enterprises, Inc. and its subsidiaries ESP
Resources and ESP Petrochemicals are hereafter referred to as the
"Company".





Use
of Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.







16
 Table of Contents




Income
Taxes





The
Company accounts for income taxes under the Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes” (“Statement
109”).  Under Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases.  Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.  Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.





Derivative
Liabilities





Convertible
debt is accounted for in accordance with SFAS 133, Accounting for Derivative
Instruments and Hedging Activities (“SFAS 133”) and EITF No. 00-19, Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in a Company’s Own Stock,
(“EITF 00-19”). According to these pronouncements, we have recorded the embedded
conversion option related to our convertible debt at fair value on the reporting
date, resulting in the convertible instrument itself being recorded at a
discount from the face amount.





Revenue and Cost
Recognition





The
Company recognizes revenue from the sale of petro-chemical at the time title to
the products transfers, the amount is fixed and determinable, evidence of an
agreement exists and the customer bears the risk of loss. Amounts billed to
customers in sales transactions related to shipping and handling represent
revenues earned for the goods provided and are included in
sales.  Costs of shipping and handling are included in the cost of
goods sold.





Loss per
Share





Basic and
diluted net loss per common share is computed based upon the weighted average
number of common shares outstanding as defined by Financial Accounting Standards
No. 128, “Earnings Per Share.”  As of December 31, 2007 and 2006,
there were 1,150,000 and 0, respectively common share equivalents outstanding
which are anti-dilutive and not included in dilutive weighted average
calculation.




Fair Value of Financial
Instruments





The
carrying amounts of the Company’s financial instruments including accounts
payable, accrued expenses, derivative liability and notes payable approximate
fair value due to the relatively short period to maturity for these
instruments.




OFF-BALANCE
SHEET ARRANGEMENTS




We have
never entered into any off-balance sheet financing arrangements and have never
established any special purpose entities. We have not guaranteed any debt or
commitments of other entities or entered into any options on non-financial
assets.







17
 Table of Contents





ITEM
7.Financial
Statements
    
 ESP
ENTERPRISES, INC.
 AND
SUBSIDIARIES
 
 CONSOLIDATED
FINANCIAL STATEMENTS
 
 FOR
THE YEAR ENDED DECEMBER 31, 2007
 
       Table of Contents
 
 
 ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 
 
 CONTENTS
 
 
 PAGE
              F-1
              REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMPAGE
              F-2
              CONSOLIDATED
      BALANCE SHEET AS OF DECEMBER 31, 2007PAGE
              F-3
              STATEMENT
      OF OPERATIONS FOR THE PERIOD FROM NOVEMBER 20, 2006 (INCEPTION) TO
      DECEMBER 31, 2006 AND THE YEAR ENDED DECEMBER 31, 2007
      (CONSOLIDATED).PAGE
              F-4
              STATEMENT
      OF CHANGES IN STOCKHOLDERS’ DEFICIENCY FOR THE PERIOD FROM NOVEMBER 20,
      2006 (INCEPTION) TO DECEMBER 31, 2007 (CONSOLIDATED).PAGE
              F-5
              STATEMENT
      OF CASH FLOWS FOR THE PERIOD FROM NOVEMBER 20, 2006 (INCEPTION) TO
      DECEMBER 31, 2006 AND FOR THE YEAR ENDED DECEMBER 31, 2007
      (CONSOLIDATED).PAGES
              F-6
      - F-22
              NOTES
      TO CONSOLIDATED FINANCIAL
STATEMENTS
 
 
 Table of Contents
 
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 To the
Board of Directors of:
 ESP
Enterprises, Inc.
 
 We have
audited the accompanying consolidated balance sheet of ESP Enterprises, Inc. and
subsidiaries as of December 31, 2007, and the related consolidated statements of
operations, changes in stockholders’ deficit and cash flows for the year 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 audit.
 
 We
conducted our audit 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 misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly
in all material respects, the financial position of ESP Enterprises, Inc. as of
December 31, 2007 and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note B to the
consolidated financial statements, the Company has a net loss of $374,991, a
negative cash flow from operations of $403,245, a working capital deficiency of
$517,497 and a stockholders' deficiency of $371,930. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans concerning these matters are also described in Note B. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
  WEBB
& COMPANY, P.A.
 Certified
Public Accountants
 
 Boynton
Beach, Florida
 May 12,
2008
 
 F-1
 Table of Contents
 
  ESP
      ENTERPRISES, INC. AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETDECEMBER
      31, 2007ASSETSCURRENT
      ASSETSCash
                  
                  $
                  225,203Accounts
      Receivable, Net
                  
                  
                  185,804Inventories,
      Net
                  
                  
                  147,015Prepaid
      Expenses and Other Current Assets
                  
                  
                  6,673Due
      from Officers
                  
                  
                  20,000Total
      Current Assets
                  
                  
                  584,695PROPERTY
      AND EQUIPMENT, NET
                  
                  
                  301,267OTHER
      ASSETSDeposits
                  
                  
                  3,503Restricted
      Cash
                  
                  
                  17,855Total
      Other Assets
                  
                  
                  21,358TOTAL
      ASSETS
                  
                  $
                  907,320
 See the
accompanying notes to consolidated financial statements
 F-2
 Table of Contents
  ESP
      ENTERPRISES, INC. AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEET – continuedDECEMBER
      31, 2007LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIESAccounts
      Payable
                  
                  $
                  116,615Factoring
      Payable
                  
                  
                  165,146Accrued
      Expenses
                  
                  
                  56,571Due
      to Stockholder
                  
                  
                  100Derivative
      Liability
                  
                  
                  393,363Convertible
      Notes Payable, net
                  
                  
                  312,669Current
      Maturities of Long-Term Debt
                  
                  
                  57,728Total
      Current Liabilities
                  
                  
                  1,102,192LONG-TERM
      LIABILITIESLong-Term
      Debt (Less Current Maturities)
                  
                  
                  177,058Total
      Liabilities
                  
                  
                  1,279,250Commitments
      and Contingencies
                  
                  
                  -STOCKHOLDERS'
      DEFICITPreferred
      Stock (.001 par value - 5,000,000 shares authorized,
                    none
      issued and outstanding)
                  
                  
                  -Common
      Stock (.0001 par value - 200,000,000 shares authorized, 24,000,000 shares
      issued and outstanding)
                  
                  
                  2,400Additional
      Paid-In Capital
                  
                  
                  4,086Subscription
      Receivable
                  
                  
                  (1,000
                  )Accumulated
      Deficit
                  
                  
                  (377,416
                  )Total
      Stockholders' Deficit
                  
                  
                  (371,930
                  )TOTAL
      LIABILITIES ANDSTOCKHOLDERS'
      DEFICIT
                  
                  $
                  907,320
  See the
accompanying notes to consolidated financial statements
  F-3
 Table of Contents
    ESP
      ENTERPRISES, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONSFor
      the PeriodNovember
      20, 2006Year
      Ended
                  
                  
                  (Inception)December
      31,
                  
                  
                  to
      December 31,2007
                  
                  
                  2006SALES,
      NET
                  
                  $
                  697,122
                  
                  
                  $
                  -COST
      OF GOODS SOLD
                  
                  
                  644,985
                  
                  
                  
                  -GROSS
      PROFIT
                  
                  
                  52,137
                  
                  
                  
                  -GENERAL
      AND ADMINISTRATIVE EXPENSESGeneral
      and Administrative
                  
                  
                  218,533
                  
                  
                  
                  2,680Professional
      Fees
                  
                  
                  94,662
                  
                  
                  
                  -Consulting
      Fees
                  
                  
                  94,000
                  
                  
                  
                  -Salaries
      and Wages
                  
                  
                  21,701
                  
                  
                  
                  -Total
      General and Administrative Expenses
                  
                  
                  428,896
                  
                  
                  
                  2,680LOSS
      FROM OPERATIONS
                  
                  
                  (376,759
                  )
                  
                  
                  (2,680
                  )OTHER
      INCOME (EXPENSES)Interest
      Expense
                  
                  
                  (180,661
                  )
                  
                  
                  (173
                  )Factoring
      Fees
                  
                  
                  (29,979
                  )
                  
                  
                  -Interest
      Income
                  
                  
                  36
                  
                  
                  
                  -Miscellaneous
      Expense
                  
                  
                  (261
                  )
                  
                  
                  -Loss
      on Sale of Assets
                  
                  
                  (429
                  )
                  
                  
                  -Gain
      on FMV of Derivatives
                  
                  
                  213,062
                  
                  
                  
                  -Total
      Other Income (Expenses)
                  
                  
                  1,768
                  
                  
                  
                  (173
                  )NET
      LOSS BEFORE PROVISION FOR INCOME TAXES
                  
                  
                  (374,991
                  )
                  
                  
                  (2,853
                  )PROVISION
      FOR INCOME TAXES (BENEFIT)
                  
                  
                  -
                  
                  
                  
                  (428
                  )NET
      LOSS
                  
                  $
                  (374,991
                  )
                  
                  $
                  (2,425
                  )Basic
      and Dilluted Loss Per Share
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.00
                  )Basic
      and Dilluted Weighted Average Common Shares
                  
                  
                  16,694,795
                  
                  
                  
                  13,050,000
  
 See the
accompanying notes to consolidated financial statements
   F-4
 Table of Contents
  ESP
      ENTERPRISES, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICITFOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006Preferred
      Stock
                  
                  
                  Common
      Stock
                  
                  
                  Paid-In
                  
                  
                  Subscription
                  
                  
                  AccumulatedShares
                  
                  
                  Par
      Value
                  
                  
                  Shares
                  
                  
                  Par
      Value
                  
                  
                  Capital
                  
                  
                  Receivable
                  
                  
                  Deficit
                  
                  
                  TotalBalance
      - Inception
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Common
      Stock Issues
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  13,050,000
                  
                  
                  
                  1,305
                  
                  
                  
                  675
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,000Net
      Loss - 2006
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (2,425
                  )
                  
                  
                  (2,425
                  )Balance
      - December 31, 2006
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  13,050,000
                  
                  
                  
                  1,305
                  
                  
                  
                  675
                  
                  
                  
                  -
                  
                  
                  
                  (2,425
                  )
                  
                  
                  (425
                  )Shares
      Issued for Reverse Merger
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  6,000,000
                  
                  
                  
                  600
                  
                  
                  
                  2,886
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3,486Shares
      Issued for Acquisition
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  4,800,000
                  
                  
                  
                  480
                  
                  
                  
                  320
                  
                  
                  
                  (1,000
                  )
                  
                  
                  -
                  
                  
                  
                  (200
                  )Shares
      Issued for Services
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  150,000
                  
                  
                  
                  15
                  
                  
                  
                  185
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  200Net
      Loss - 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (374,991
                  )
                  
                  
                  (374,991
                  )Balance,
      December 31, 2007
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  24,000,000
                  
                  
                  $
                  2,400
                  
                  
                  $
                  4,086
                  
                  
                  $
                  (1,000
                  )
                  
                  $
                  (377,416
                  )
                  
                  $
                  (371,930
                  )
  See the
accompanying notes to consolidated financial statements
  F-5
 Table of Contents
   ESP
      ENTERPRISES, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWSFor
      the PeriodNovember
      20, 2006Year
      Ended
                  
                  
                  (Inception)December
      31,
                  
                  
                  to
      December 31,2007
                  
                  
                  2006CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Loss
                  
                  $
                  (374,991
                  )
                  
                  $
                  (2,425
                  )Adjustments
      to Reconcile Net Loss toNet
      Cash Used In Operating Activities:Depreciation
                  
                  
                  39,208
                  
                  
                  
                  -Allowance
      for Uncollectible
                  
                  
                  65,243
                  
                  
                  
                  -Derivatives
                  
                  
                  (213,062
                  )
                  
                  
                  -Deferred
      Income Taxes
                  
                  
                  -
                  
                  
                  
                  (428
                  )Loss
      on disposal of fixed assets
                  
                  
                  429
                  
                  
                  
                  -Amortization
      of Note Payable Discount
                  
                  
                  136,194
                  
                  
                  
                  -Amortization
      of Deferred Offering Costs
                  
                  
                  10,797
                  
                  
                  
                  -Change
      in Assets and Liabilities:Accounts
      Receivable
                  
                  
                  80,856
                  
                  
                  
                  -Inventory
                  
                  
                  (96,894
                  )
                  
                  
                  -Prepaid
      Expenses
                  
                  
                  7,946
                  
                  
                  
                  (2,611
                  )Accounts
      Payable
                  
                  
                  (64,815
                  )
                  
                  
                  5,291Accrued
      Expenses
                  
                  
                  5,844
                  
                  
                  
                  173Net
      Cash Used In Operating Activities
                  
                  
                  (403,245
                  )
                  
                  
                  -CASH
      FLOWS FROM INVESTING ACTIVITIESCash
      Received from Merger, Net
                  
                  
                  96,439
                  
                  
                  
                  -Restricted
      Cash
                  
                  
                  (17,855
                  )
                  
                  
                  -Purchase
      of Property and Equipment
                  
                  
                  (15,447
                  )
                  
                  
                  -Net
      Cash Provided By Investing Activities
                  
                  
                  63,137
                  
                  
                  
                  -CASH
      FLOWS FROM FINANCING ACTIVITIESBank
      Overdraft
                  
                  
                  (9,048
                  )
                  
                  
                  -Stock
      Issued for Cash
                  
                  
                  2,000
                  
                  
                  
                  -Repayment
      of Notes Payable
                  
                  
                  (93,699
                  )
                  
                  
                  -Proceeds
      from Convertible Notes
                  
                  
                  700,000
                  
                  
                  
                  -Due
      to Stockholder
                  
                  
                  -
                  
                  
                  
                  100Loan
      Payable - Related Party
                  
                  
                  (34,042
                  )
                  
                  
                  -Net
      Cash Provided By Financing Activities
                  
                  
                  565,211
                  
                  
                  
                  100Net
      Increase in Cash
                  
                  
                  225,103
                  
                  
                  
                  100Cash
      at Beginning of Period
                  
                  
                  100
                  
                  
                  
                  -Cash
      at End of Period
                  
                  
                  225,203
                  
                  
                  
                  100Supplemental
      disclosure of cash flow information:Cash
      paid for interest
                  
                  $
                  -
                  
                  
                  $
                  -Cash
      paid for income taxes
                  
                  $
                  -
                  
                  
                  $
                  -
  
 See the
accompanying notes to consolidated financial statements
   F-6
 Table of Contents
 ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
 
 (A)          SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
  Nature of
Business
  ESP
Enterprises, Inc. (f/k/a DUI, Inc.), was incorporated in the State of Colorado
on April 9, 1998.  ESP Resources, Inc. was incorporated in the State
of Louisiana on November 20, 2006.
  On June
15, 2007, ESP Resources acquired all of the stock of ESP Petrochemicals, Inc.,
which was incorporated in the State of Louisiana on November 7,
2006.  ESP Petrochemicals, Inc. sells and blends chemicals for use in
the oil and gas industry to customers primarily located in the Gulf of Mexico
and Gulf States region.  The transaction has been accounted for as a
purchase.
 
 On
October 31, 2007, ESP Enterprises, Inc. pursuant to a share purchase agreement,
dated October 31, 2007, ESP Resources, Inc., consummated an agreement with ESP
Enterprises, Inc., pursuant to which ESP Resources, Inc., exchanged all of its
30,000,000 then issued and outstanding shares of common stock for 18,000,000
shares or approximately 75% of the common stock of ESP Enterprises, Inc. This
transaction has been accounted for as a reverse acquisition. Accounting
principles applicable to reverse acquisitions have been applied to record the
acquisition. Under this basis of accounting, ESP Resources, Inc is the
accounting acquirer and, accordingly, the consolidated entity is considered to
be a continuation of ESP Resources, Inc., with the net assets of ESP
Enterprises, Inc. deemed to have been acquired and recorded at its historical
cost.
 
 Principals
of Consolidation
 
 The
financial statements for the period ended December 31, 2006 include ESP
Resources, Inc. The consolidated financial statements for the year ended
December 31, 2007 include ESP Enterprises from November 1, 2007 to December 31,
2007 and its wholly owned subsidiaries, ESP Resources, Inc. for the year ended
December 31, 2007 and ESP Petrochemicals, Inc. from June 15, 2007 to December
31, 2007. All significant inter-company balances and transactions have been
eliminated in consolidation. ESP Enterprises, Inc. and its subsidiaries ESP
Resources and ESP Petrochemicals are hereafter referred to as (the
"Company").
 
 Use
      of Estimates
 
 The
      preparation of financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosure of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenues and expenses during the reporting
      period.  Actual results could differ from those
      estimates.
   F-7
 Table of Contents
  ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
 Cash
      and Cash Equivalents
 
 The
      Company considers all highly liquid debt instruments purchased with an
      original maturity of three months or less to be cash
      equivalents.  The Company had no cash equivalents at December
      31, 2007.
 
 Accounts
Receivable
 
 The
Company generally does not require collateral, and the majority of its trade
receivables are unsecured.  The carrying amount for accounts
receivable approximates fair value.
 
 On
      February 2, 2007, the Company entered into a combined account factoring
      and security agreement with Midsouth Bank, which was renewed on June 20,
      2007 and expires April 30, 2009. Under the terms of the agreement, the
      Company may obtain advances up to 87 percent of eligible accounts
      receivable, subject to a three percent factoring fee. The Company is
      required to hold ten percent in a reserve account, which is released to
      the Company upon payment of the receivable. The factoring agreement is
      subject to a revolving line of credit master note, which limits borrowing
      to $190,000. The line of credit is payable upon demand, or if no demand is
      paid, with monthly payments of interest at 15 percent. All outstanding
      principle plus accrued unpaid interest is due on April 30, 2008. The
      payment terms of the line of credit will not be enforced while the
      factoring agreement is in effect. The line of credit is secured by all
      inventory, accounts, and equipment of the Company and a commercial
      guarantee of a Company stockholder. The total borrowings under the
      factoring agreement at December 31, 2007 were $165,146 with $17,855 held
      in restricted cash reserve. Accounting receivable at December 31, 2007
      consisted of the following:
 
 Accounts
      Receivable
              
              $
              251,047Less:
      Allowance for doubtful accounts
              
              
              65,243$
              185,804
 
 For the
year ended December 31, 2007 and the period ended December 31, 2006, the Company
recorded a provision for doubtful accounts of $65,243 and $0,
respectively.
 
 Inventory
 
 Inventory
      represents raw and blended chemicals and other items valued at the lower
      of cost or market with cost determined using the first-in first-out
      method, and with market defined as the lower of replacement cost or
      realizable value.
 
  F-8
 Table of Contents
  ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
  
 As
      of December 31, 2007, inventory consisted
of:
 
 Raw
      Materials
              
              $
              111,157Finished
      Goods
              
              
              35,858$
              147,015
 
 Property
and equipment of the Company is stated at cost.  Expenditures for
property and equipment which substantially increase the useful lives of existing
assets are capitalized at cost and depreciated.  Routine expenditures
for repairs and maintenance are expensed as incurred.
 
 Depreciation
      is provided principally on the straight-line method over the estimated
      useful lives ranging from five to seven years for financial reporting
      purposes.
 
 Income
      Taxes
 
 The
Company accounts for income taxes under the Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes” (“Statement
109”).  Under Statement 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases.  Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.  Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
 
 Advertising
 
 Advertising
      costs are charged to operations when incurred.  Advertising
      expense for the year ended December 31, 2007 and the period ended December
      31, 2006 was $196 and $0,
respectively.
 
 Concentrations
 
 The
company and its subsidiary maintain balances at one bank.  Accounts at
that institution are insured by the Federal Deposit Insurance Corporation up to
$100,000.  At December 31, 2007, the company had $17,309 of uninsured
balances.
 
  F-9
 Table of Contents
  ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
  The
company has four major customers that together account for 83% of accounts
receivable at December 31, 2007 and three major customers that together account
for 70% of the total revenues earned for the year then ended, as
follows:
  Accounts
      Receivable
                RevenueCustomer
                A
                28%
                19%Customer
                B
                22%Customer
                C
                18%Customer
                D
                15%
                40%Customer
                E
                
                11%83%
                70%
  The
Company has three vendors that together accounted for 77% of purchases for the
year ended December 31, 2007.
 
 Vendor
A              44%
 Vendor
B              
18%
 Vendor
C               15%
 
 Derivative
Liabilities
 
 Convertible
debt is accounted for in accordance with SFAS 133, Accounting for Derivative
Instruments and Hedging Activities (“SFAS 133”) and EITF No. 00-19, Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in a Company’s Own Stock,
(“EITF 00-19”). According to these pronouncements, we have recorded the embedded
conversion option related to our convertible debt at fair value on the reporting
date, resulting in the convertible instrument itself being recorded at a
discount from the face amount.
 
 Revenue and Cost
Recognition
 
 The
Company recognizes revenue from the sale of petro-chemical at the time title to
the products transfers, the amount is fixed and determinable, evidence of an
agreement exists and the customer bears the risk of loss. Amounts billed to
customers in sales transactions related to shipping and handling represent
revenues earned for the goods provided and are included in
sales.  Costs of shipping and handling are included in the cost of
goods sold.
 
 Business
Segments
 
 The
Company operates in one segment and therefore segment information is not
presented.
 
 
 F-10
 Table of Contents
 
  ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
 Loss per
Share
 
 Basic and
diluted net loss per common share is computed based upon the weighted average
number of common shares outstanding as defined by Financial Accounting Standards
No. 128, “Earnings Per Share.”  As of December 31, 2007 and 2006,
there were 1,150,000 and 0, respectively common share equivalents
outstanding which are anti-dilutive and not included in dilutive weighted
average calculation.
  Fair Value of Financial
Instruments
 
 The
carrying amounts of the Company’s financial instruments including accounts
payable, accrued expenses, derivative liability and notes payable approximate
fair value due to the relatively short period to maturity for these
instruments.
 
 Recent Accounting
      Pronouncements
 
 In
      September 2006, the FASB issued SFAS No. 157, “Fair Value
      Measurements”. The objective of SFAS 157 is to increase consistency
      and comparability in fair value measurements and to expand disclosures
      about fair value measurements.  SFAS 157 defines fair value,
      establishes a framework for measuring fair value in generally accepted
      accounting principles, and expands disclosures about fair value
      measurements. SFAS 157 applies under other accounting pronouncements that
      require or permit fair value measurements and does not require any new
      fair value measurements. The provisions of SFAS No. 157 are effective for
      fair value measurements made in fiscal years beginning after November 15,
      2007. The adoption of this statement is not expected to have a material
      effect on the Company's future reported financial position or results of
      operations.
 
 In
      February 2007, the Financial Accounting Standards Board (FASB) issued SFAS
      No. 159, “The Fair Value
      Option for Financial Assets and Financial Liabilities – Including an
      Amendment of FASB Statement No. 115”.  This statement
      permits entities to choose to measure many financial instruments and
      certain other items at fair value. Most of the provisions of SFAS No. 159
      apply only to entities that elect the fair value option. However, the
      amendment to SFAS No. 115 “Accounting for Certain
      Investments in Debt and Equity Securities” applies to all entities
      with available-for-sale and trading securities. SFAS No. 159 is effective
      as of the beginning of an entity’s first fiscal year that begins after
      November 15, 2007. Early adoption is permitted as of the beginning of a
      fiscal year that begins on or before November 15, 2007, provided the
      entity also elects to apply the provision of SFAS No. 157, “Fair Value
      Measurements”. The adoption of this statement is not expected to
      have a material effect on the Company's financial
    statements.
   F-11
 Table of Contents
  ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
 In
      December 2007, the Financial Accounting Standards Board (FASB) issued SFAS
      No. 160, “Noncontrolling
      Interests in Consolidated Financial Statements – an amendment of ARB No.
      51”.  This statement improves the relevance,
      comparability, and transparency of the financial information that a
      reporting entity provides in its consolidated financial statements by
      establishing accounting and reporting standards that require; the
      ownership interests in subsidiaries held by parties other than the parent
      and the amount of consolidated net income attributable to the parent and
      to the noncontrolling interest be clearly identified and presented on the
      face of the consolidated statement of income, changes in a parent’s
      ownership interest while the parent retains its controlling financial
      interest in its subsidiary be accounted for consistently, when a
      subsidiary is deconsolidated, any retained noncontrolling equity
      investment in the former subsidiary be initially measured at fair value,
      entities provide sufficient disclosures that clearly identify and
      distinguish between the interests of the parent and the interests of the
      noncontrolling owners.  SFAS No. 160 affects those entities that
      have an outstanding noncontrolling interest in one or more subsidiaries or
      that deconsolidate a subsidiary.  SFAS No. 160 is effective for
      fiscal years, and interim periods within those fiscal years, beginning on
      or after December 15, 2008. Early adoption is prohibited. The adoption of
      this statement is not expected to have a material effect on the Company's
      financial statements.
 
 In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133”
(SFAS 161). This statement is intended to improve transparency in financial
reporting by requiring enhanced disclosures of an entity’s derivative
instruments and hedging activities and their effects on the entity’s financial
position, financial performance, and cash flows. SFAS 161 applies to all
derivative instruments within the scope of SFAS 133, “Accounting for Derivative
Instruments and Hedging Activities” (SFAS 133) as well as related hedged items,
bifurcated derivatives, and nonderivative instruments that are designated and
qualify as hedging instruments. Entities with instruments subject to SFAS 161
must provide more robust qualitative disclosures and expanded quantitative
disclosures. SFAS 161 is effective prospectively for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008,
with early application permitted. We are currently evaluating the disclosure
implications of this statement.
 
 
 
 F-12
 Table of Contents
  ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
 
 (B)        
 GOING
CONCERN
 
 The
Company has a net loss of $374,991, a negative cash flow from operations of
$403,245, a working capital deficiency of $517,497 and a stockholders'
deficiency of $371,930.  These factors raise substantial doubt about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
 The
      Company's ability to continue operations will likely require additional
      capital. The condition raises substantial doubt about our Company to
      continue as a going concern. We expect cash flows from operating
      activities to improve, primarily as a result of an increase in revenue,
      although there can be no assurance thereof. We also converted $1,150,000
      in convertible notes payable into common stock after year end. The
      accompanying consolidated financial statements do not include any
      adjustments that might be necessary should we be unable to continue as a
      going concern. If we fail to generate positive cash flow or obtain
      additional financing, when required, we may have to modify, delay, or
      abandon some or all of our business and expansion
  plans.
 
 (C)
              PROPERTIES AND
      EQUIPMENT
 
 At December 31, 2007, property and
equipment is as follows:
 
 2007Plant,
      Property and Equipment
              
              $
              93,037Vehicles
              
              
              265,596Office
      Furniture and Equipment
              
              
              10,594Less
      accumulated depreciation
              
              
              (67,960
              )$
              301,267
  Depreciation
      expense for the year ended December 31, 2007 and the period ended December
      31, 2006 was $39,208 and 0, respectively.  The Company recorded
      $22,330 of depreciation in cost of goods sold during
  2007.
 
 
 
 F-13
 Table of Contents
 
 ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
 (D)        
 LONG-TERM
DEBT
 
 Long-term
      debt consisted of the following as of December 31,
  2007:
  Note
      payable to Midsouth Bank dated May 2007. The notebears
      interest at 12.00 percent per annum and is payable inmonthly
      installments of $194, maturing May 2012. The noteis
      secured by equipment and deposit accounts.
                
                $
                7,804Note
      payable to Midsouth Bank dated February 2007. Thenote
      bears interest at 12.00 percent per annum and is payablein
      monthly installments of $194, maturing February 2012.The
      note is secured by equipment and deposit accounts.
                
                
                6,508Note
      payable to FMC dated January 2007. The note bearsinterest
      at 2.90 percent per annum and is payable in monthlyinstallments
      of $945, maturing February 2012.  The note issecured
      by a vehicle.
                
                
                44,444Note
      payable to FMC dated January 2007.  The note
    bearsinterest
      at 2.9 percent per annum and is payable in monthlyinstallments
      of $902 maturing February 2012.  The note issecured
      by a vehicle.
                
                
                42,457Note
      payable to FMC dated January 2007.  The note
    bearsinterest
      at 2.90 percent per annum and is payable in monthlyinstallments
      of $902 maturing February 2012.  The note issecured
      by a vehicle.
                
                
                42,457
  
 
 F-14
 Table of Contents
 
  ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
 (D)          LONG-TERM DEBT -
continued
  Note
      payable to FMC dated January 2007. The note bearsinterest
      at 2.90 percent per annum and is payable in monthlyinstallments
      of $925 maturing February 2012.  The note issecured
      by a vehicle.
                
                
                43,532Note
      assumed with vehicle purchase, payable to FMCdated
      December 2006. The note bears interest at 9.90percent
      per annum and is payable in installments of $724maturing
      December 2011. The notes is secured by avehicle
      (see Note F below).
                
                
                28,606Note
      assumed with vehicle purchase, payable to St. MartinBank
      dated December 2005. The note bears interest at7.10
      percent per annum and is payable in installments of$852
      maturing December 2009. The note is secured bya
      vehicle (see Note F below).
                
                
                18,978Total
                
                
                234,786Less
      Current Maturities
                
                
                (57,728
                )Total
      Long-Term Debt
                
                $
                177,058
  Maturities
of long-term debt are as follows:
 
 2008
                
                $
                57,7282009
                
                
                60,5062010
                
                
                53,0052011
                
                
                55,4042012
                
                
                8,143Total
                
                $
                234,786
 
 F-15
 Table of Contents
  ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
 (E)           CONVERTIBLE NOTES
PAYABLE
 
 During
June 2007, the Company commenced a private offering of its securities to
accredited investors in certain select states. The Company offered up to forty
“Units” to select accredited investors on a best effort basis. The Units are
offered for a total subscription price of $25,000 per Unit to persons who
qualify as “accredited investors” as such term is defined in the rules and
regulations of the Securities Act. Each Unit is comprised of one unsecured
convertible promissory note, accruing interest at ten percent (the “Note” or
“Notes”) and one warrant to purchase 25,000 shares of its common stock. All or a
portion of the principal and accrued interest on the Note, at the holder’s
option, may be converted into shares of its common stock, provided that its
common shares underlying the Notes are then included in a resale prospectus
forming part of a registration statement declared effective by the U.S.
Securities and Exchange Commission. Each warrant shall entitle the investor to
purchase up to 25,000 shares of its common stock at the exercise price of $1.00
per share, anytime during the five year period following issuance, provided as
well that its common shares underlying the Warrants are then included in a
resale prospectus forming part of a registration statement declared effective by
the U.S. Securities and Exchange Commission. The number of shares into which the
Notes are convertible will be equal to the quotient of the converted principal
and interest divided by the average trading price of the common shares over the
ten trading day period immediately preceding the conversion date, less a
twenty-five percent discount. Subject to 30 days’ notice, the Notes shall be
redeemed and paid in full at the earlier of either (I) two years from the date
of issuance or; (ii) upon the closing of a financing transaction of at least
$5,000,000.
 
 The
Company relied upon the exemptions from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”), of Section 4(2) and
Regulation D in connection with the issuance of the above identified securities.
The Company had a pre-existing relationship with the accredited investors who
subscribed to purchase the Units; and no general solicitation was involved; each
investor represented in his or her subscription agreement that he or she was an
accredited investor, and; investors acknowledged that the securities subscribed
for and to be issued were subject to transfer and sale restrictions and would
bear a restrictive legend, disclosing that any transfer or other disposition
could only be made in compliance with the registration requirements of the
Securities Act or pursuant to exemptions there from. We have increased our
private offering maximum from the original 40 Units, or $1,000,000, to 100
Units, or $2,500,000. Our private placement offering was extended to October 31,
2007. As of December 31, 2007, the Company has sold 42 Units resulting in gross
proceeds of $1,150,000. Accrued interest expense related to the convertible
notes totaled $43,125 at December 31, 2007.
 
 
 F-16
 Table of Contents
 
 ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
  The
relative fair value of the warrants issued with the convertible notes was
charged to additional paid-in capital with a corresponding discount on the
convertible notes payable.  The discount is amortized over the life of the
debt.
 
 The
Company generally does not use derivative instruments to hedge exposures to
cash-flow risks or market-risks that may affect the fair values of its financial
instruments. However, certain other financial instruments, such as embedded
conversion features, where an embedded option in a debt security contains the
price of a specific equity instrument, are bifurcated and are classified as
derivative liabilities. Such financial instruments are initially recorded at
fair value and subsequently adjusted to fair value at the close of each
reporting period.
 
 The fair
value for the derivative instruments was estimated at the date of grant using
the Black-Schools option-pricing model with the following assumptions and each
reporting period:
 
 Risk-free
      interest rate
              3.36
      - 4.82%Dividend
      yield
              0.00%Volatility
      factor
              25%Weighted
      average expected life
              .25 - .75 years
  The
derivative liability consisted of the following at December 31,
2007:
 Derivative
                LiabilityEmbedded
      conversion feature, December 31, 2007
              
              $
              393,363
  The fair
value of the embedded conversion feature was recorded as a derivative liability
with a corresponding discount on the convertible notes payable.  The
discount is amortized over the life of the debt.
 
 The
following is a summary of convertible notes payable as of December 31,
2007:
 
 Convertible
      Notes
              
              $
              1,150,000Less
      Note Payable Discount
              
              
              (837,331
              )$
              312,669
 
 As the
discounts associated with the warrants and derivative liability are amortized,
the reported outstanding principal balance of the convertible notes will
approach the remaining unpaid value. As of December 31, 2007, amortization of
the discounts totaled $164,944 and has been charged to interest
expense.
   F-17
 Table of Contents
 ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
 
 (F)           COMMITMENTS &
CONTINGENCIES
 
 In March
2007, the company entered into a one-year lease for its facilities, expiring
March 2008, in the amount of $3,117 per month. Rent expense related to this
lease for the twelve months ended December 31, 2007 was $37,404.
 
 In March
2007, the company entered into a month-to-month lease for a forklift in the
amount of $1,409 per month.
 
 In
February 2007, the company entered into a lease for various chemical tanks with
lease terms varying from six months to one year.  Rental fees under
this lease are determined on a per day basis in amounts of $1.65 per day or
$1.75 per day depending upon the model of tank rented.
 
 In March
2008, the Company entered into a five year lease for its facility, expiring
March 2013 in the amount of $8,750 per month. The lease may be renewed for an
additional five years, with an increase in rent to $9,500 per
month.
  Minimum
future lease commitments as of December 31, 2007, are summarized as
follows:
 
 Year ending December
      312008
              
              $
              96,7322009
              
              
              114,8312010
              
              
              114,8312011
              
              
              114,831thereafter
              
              
              139,162$
              580,387
  (G)           RELATED PARTY
TRANSACTIONS
 
 At
December 31, 2007, the Company had balances due from two stockholders in the
amount of $20,000.
 
 At
December 31, 2007, the Company had a balance due to a stockholder in the amount
of $100 which was used to fund the initial operations of the
Company.
 
 At
December 31, 2007, the Company had an accounts receivable balance due from a
related company in the amount of $65,243, of which $65,243 was set up as an
allowance relating to this balance.  Sales to this related company
amounted to $142,187 for the year ended December 31, 2007.
   F-18
 Table of Contents
 ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
  At
December 31, 2007 the Company had an accounts payable balance due to a related
company in the amount of $0. Purchases from this related company amounted to
$284,044 for year ended December 31, 2007.
  (H)          ACQUISITION
 
 On June
15, 2007 the Company entered into a Share-Exchange agreement for the acquisition
of all outstanding shares of ESP Petrochemicals, Inc., a Louisiana corporation.
ESP Resources issued 4,800,000 shares of common stock post reverse merger for
100% of the outstanding shares of ESP Petrochemicals, Inc.
  Purchase
      price
                
                $
                800Cash
                
                
                7,924Accounts
      receivable
                
                
                331,903Property
      and equipment
                
                
                325,457Inventory
                
                
                50,121Prepaid
      expense
                
                
                10,559Deposit
                
                
                3,503Loan
      to shareholder
                
                
                20,000Liabilities
      assumed
                
                
                (255,036
                )Notes
      payable, net
                
                
                (493,631
                )Net
      assets acquired
                
                $
                800
 
 F-19
 Table of Contents
 
 ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
 The table
below summarizes the unaudited pro forma information of the results of
operations as though the acquisitions had been completed as of January 1, 2007
and January 1, 2006, respectively:
  2007
                
                
                2006Gross
      revenue
                
                $
                1,259,272
                
                
                $
                0Cost
      of goods sold
                
                $
                892,243Total
      expenses
                
                
                753,876
                
                
                
                2,425Other
      Income (Expense)
                
                
                (3,835)Net
      income (loss) before taxes
                
                $
                (390,682
                )
                
                $
                (2,425
                )Loss
      per share
                
                $
                (0.02
                )
                
                $
                (0.00
                )Weighted
      average shares
                
                
                17,850,000
                
                
                
                17,850,000
  (I)            INCOME
TAXES
 
 Income
tax expense (benefit) for the periods ended December 31, 2007 and 2006 is
summarized as follows:
  2007
              
              
              2006Current
      Federal
              
              $
              -
              
              
              $
              -Deferred
      Federal
              
              
              -
              
              
              
              -Income
      Tax Expense
              
              $
              -
              
              
              $
              -
 
 The
following table presents reconciliation between the reported income taxes and
the income taxes that would be computed by applying the Company’s normal tax
rate (34%) to income before taxes for the periods ended December
31:
 
 2007
              
              
              2006Federal
      Income Tax Expense (34%)
              
              $
              (127,497)
              
              
              $
              (825)Tax
      effects of:Nondeductible
      expenses
              
              
              72,441
              
              
              
              -Disallowed
      meals & entertainment
              
              
              4,754
              
              
              
              -Valuation
      allowance
              
              
              50,302
              
              
              
              825Income
      Tax Expense
              
              $
              -
              
              
              $
              -Effective
      Rate
              
              
              -
              %
              
              
              -
              %
  The tax
effects of temporary differences that give rise to significant portions of
deferred tax assets and liabilities at December 31, 2007 and 2006 are as
follows:
 
 2007
              
              
              2006Deferred
      tax assets:
              
              
              51,127
              
              
              
              825Valuation
      Asset
              
              $
              (51,127
              )
              
              $
              (825
              )Total
      Deferred Tax Asset
              
              $
              -
              
              
              $
              -
   F-20
 Table of Contents
 ESP
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
  As of
December 31, 2007, the Company has a net operating loss carry forward of
approximately $150,373 available to offset future taxable income through
2027.  The valuation allowance at December 31, 2006 was
$825.  The net change in the valuation allowance for the year ended
December 31, 2007 was an increase of $50,302.
 
 (J)           SUBSEQUENT
EVENTS
 
 On
January 2, 2008, the Company entered into a two year consulting agreement with a
financial consultant. The agreement requires monthly payments of $2,500 and
450,000 shares of common stock with 150,000 shares having piggyback registration
rights.  The Company issued 150,000 shares in 2007 and the remainder
will be issued in 2008.
 
 During
March 2008, the Company entered into a capital lease for the purchase of
equipment for $42,837. The capital lease requires 60 monthly payments of $819
and contains a bargain purchase option.
 
 During
March 2008, the Company entered into conversion agreements with the convertible
note holders. The note holders agreed to convert $1,150,000 of notes payable and
$69,447 of accrued interest into 1,625,942 shares of common stock.
 
 During
February 2008, the Company amended its articles of incorporation to increase its
common stock to 200,000,000 shares of common stock at a par value of $.0001 and
20,000,000 preferred stock with a par value $.0001.


F-21
 Table of Contents


ITEM
      8.
            Changes In and Disagreements with Accountants on Accounting and
      Financial Disclosure





None.




ITEM
      8A.
            Controls and
Procedures





Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer (“CEO”) and Chief
Accounting Officer (“CAO”) (the Company’s principal financial and accounting
officer), of the effectiveness of the Company’s disclosure controls and
procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the
end of the period covered by this report. Based upon that evaluation, the
Company’s CEO and CAO concluded that the Company’s disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that the Company files or submits under the Exchange
Act, is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to the Company’s management, including the Company’s CEO and
CAO, as appropriate, to allow timely decisions regarding required
disclosure.




Management’s Report on
Internal Controls over Financial Reporting





Internal
control over financial reporting is a process to provide reasonable assurance
regarding the reliability of consolidated financial reporting and the
preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles.  There has been no change in
the Company’s internal control over financial reporting during the year ended
December 31, 2007 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.




The
Company’s management, including the Company’s CEO and CAO, does not expect that
the Company’s disclosure controls and procedures or the Company’s internal
controls will prevent all errors and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of the
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected.





Management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, management concluded that the
company’s internal control over financial reporting was effective as of December
31, 2007.




Item
      8B.
            Other Information





None.








18
 Table of Contents





PART
III





ITEM 9.
            Directors, Executive Officers, Promoters and Control Persons,
      Compliance with Section 16(a) of the Exchange
  Act





Executive Officers and
Directors




The
following table sets forth the names, ages, and positions of our new executive
officers and directors as of the May 20,
2008. Executive officers are elected annually by our Board of Directors.
Each executive officer holds his office until he resigns, is removed by the
Board, or his successor is elected and qualified. Directors are elected annually
by our stockholders at the annual meeting. Each director holds his office until
his successor is elected and qualified or his earlier resignation or
removal.





NAME
            AGE
            POSITIONDavid
      Dugas
            51
            Chairman,
      President, and Chief Executive Officer, and DirectorTony
      Primeaux
            52
            Vice
      President and DirectorMichael
      Cavaleri
            50
            Director





The
directors will serve until the annual meeting of the shareholders and until
their respective successors have been elected and qualified or until death,
resignation, removal or disqualification.





The
Company’s by-laws provide that the number of directors to serve on the Board of
Directors may be established, from time to time, by action of the Board of
Directors. Vacancies in the existing Board are filled by a majority vote of the
remaining directors on the Board. The Company’s executive officers are appointed
by and serve at the discretion of the Board.





Employment Agreements/ Terms
of Office





None of
the members of the Board of Directors or members of the management team
presently have employment agreements with us.





Option
Plan





There is
no stock option plan or common shares set aside for any stock option
plan.




Family
relationships




None.




Involvement in certain legal
proceedings




No
bankruptcy petition has been filed by or against any business of which such
person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time.




No
director has been convicted in a criminal proceeding and is not subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses).




No
director has been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking
activities.




No
director has been found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, that has not been
reversed, suspended, or vacated.









19
 Table of Contents




Director
Compensation




Our
directors will not receive a fee for attending each board of directors meeting
or meeting of a committee of the board of directors. All directors will be
reimbursed for their reasonable out-of-pocket expenses incurred in connection
with attending board of director and committee meetings.




Audit Committee and Audit
Committee Financial Expert




Our board
of directors functions as an audit committee and performs some of the same
functions as an audit committee including: (1) selection and oversight of our
independent accountant; (2) establishing procedures for the receipt, retention
and treatment of complaints regarding accounting, internal controls and auditing
matters; and (3) engaging outside advisors. We are not a "listed company" under
SEC rules and is therefore not required to have an audit committee comprised of
independent directors. Our board of directors has determined that its members do
not include a person who is an "audit committee financial expert" within the
meaning of the rules and regulations of the SEC. Our board of directors has
determined that each of its members is able to read and understand fundamental
financial statements and has substantial business experience that results in
that member's financial sophistication. Accordingly, the board of directors
believes that each of its members have the sufficient knowledge and experience
necessary to fulfill the duties and obligations that an audit committee would
have.




Code of
Ethics




A code of
ethics relates to written standards that are reasonably designed to deter
wrongdoing and to promote:




·
            Honest
      and ethical conduct, including the ethical handling of actual or apparent
      conflicts of interest between personal and professional
      relationships;




·
            Full,
      fair, accurate, timely and understandable disclosure in reports and
      documents that are filed with, or submitted to, the SEC and in other
      public communications made by an
issuer;





·
            Compliance
      with applicable governmental laws, rules and
  regulations;





·
            The
      prompt internal reporting of violations of the code to an appropriate
      person or persons identified in the code;
and





·
            Accountability
      for adherence to the code.




Due to
the limited scope of our current operations, we have not adopted a corporate
code of ethics that applies to its principal executive officer, principal
accounting officer, or persons performing similar functions.




Indemnification




Under
Colorado law and pursuant to our articles of incorporation and bylaws, we may
indemnify our officers and directors for various expenses and damages resulting
from their acting in these capacities. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to our
officers or directors pursuant to those provisions, our counsel has informed us
that, in the opinion of the SEC, this indemnification is against public policy
as expressed in the Securities Act, and is therefore unenforceable.






20
 Table of Contents




Section 16(a) Beneficial
Ownership Reporting





Section
16(a) of the Securities Exchange Act of 1934, as amended, requires that
directors, executive officers and persons who own more than 10% of the
outstanding common stock of certain reporting companies file initial reports of
ownership and reports of changes in ownership in such common stock with the
Securities and Exchange Commission ("SEC"). Officers, directors and stockholders
who own more than 10% of the outstanding common stock of certain reporting
companies are required by the SEC to furnish such companies with copies of all
Section 16(a) reports they file. We are required to comply with Section 16(a).
Accordingly, stock ownership information contained in this report is based on
what is known to us.




ITEM 10.  EXECUTIVE COMPENSATION




Compensation of Executive
Officers





The
following summary compensation table sets forth all compensation awarded to,
earned by, or paid to the named executive officers paid by us during the fiscal
years ended December 31, 2007 and 2006 in all capacities for the accounts of our
executives, including the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO):




SUMMARY
COMPENSATION TABLE





Long
      Term CompensationAnnual
      Compensation
            
            Awards
            
            PayoutsNameand
              PrincipalPosition
            
            Year
            
            Salary
              ($)
            
            Bonus
      ($)
            
            Other
              Annual
      Compensation ($)
            
            Restricted
              Stock
              Award(s)
              ($)
            
            Securities
              Underlying
      Options/
              SARs
      (#) (#)
            
            LTIP
              Payouts
      ($)
            
            All
      Other
              Compensation
              ($)David
      Dugas
              President,
      CEO (1)
            
            2007
            
            $52,500
            
            $0
            
            $0
            
            N/A
            
            N/A
            
            N/A
            
            N/ATony
      Primeaux
              Vice
      President
            
            2007
            
            $99,750
            
            $0
            
            $0
            
            N/A
            
            N/A
            
            N/A
            
            N/AMichael
      Cavaleri (former CEO and President) (2)
            
            2007
              2006
              2005
            
            $0
              $0
              $0
            
            $0
              $0
              $0
            
            $0
              $0
              $0
            
            N/A
              N/A
              N/A
            
            N/A
              N/A
              N/A
            
            N/A
              N/A
              N/A
            
            N/A
              N/A
              N/AAngelo
      Luca
              (Vice
      President) (2)
            
            2007
              2006
              2005
            
            $0
              $0
              $0
            
            $0
              $0
              $0
            
            $0
              $0
              $0
            
            N/A
              N/A
              N/A
            
            N/A
              N/A
              N/A
            
            N/A
              N/A
              N/A
            
            $0
              N/A
              N/A





(1)
            David
      Dugas was compensated $52,500 through the consulting firm, Diversified
      Consulting, LLC, of which Mr. Dugas is the principal.(2)
            Michael
      Cavaleri resigned as our Chief Executive Officer and President, and Angelo
      Luca resigned as our Vice President on October 31,
  2007.




Employment
Agreements




None of
the members of the Board of Directors or members of the management team
presently have employment agreements with us.





Certain Legal
Proceedings




No
director, nominee for director, or executive officer of the Company has appeared
as a party in any legal proceeding material to an evaluation of his ability or
integrity during the past five years.






21
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Option Grants Table. There
were no individual grants of stock options to purchase our common stock made to
the executive officer named in the Summary Compensation Table from January 1,
2007 through December 31, 2007.  Warrants were granted to the
executive officer in 2006, however the same have been returned to the
corporation unexercised, and have been terminated.




Aggregated Option Exercises and
Fiscal Year-End Option Value Table. There were no stock options exercised
during period ending December 31, 2007, by the executive officer named in the
Summary Compensation Table.





Long-Term Incentive Plan (“LTIP”)
Awards Table.There were no awards made to a named executive officer in
the last completed fiscal year under any LTIP




ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT




The
following table sets forth certain information regarding our common stock
beneficially owned on May 20, 2008 for (i) each shareholder known to be the
beneficial owner of 5% or more of our outstanding common stock, (ii) each of our
officers and directors, and (iii) all executive officers and directors as a
group. In general, a person is deemed to be a "beneficial owner" of a security
if that person has or shares the power to vote or direct the voting of such
security, or the power to dispose or to direct the disposition of such security.
A person is also deemed to be a beneficial owner of any securities of which the
person has the right to acquire beneficial ownership within 60 days. To the best
of our knowledge, all persons named have sole voting and investment power with
respect to such shares, except as otherwise noted.





Title
      of Class
            Name
      and Address of
              Beneficial
      Owner
            Amount
      and Nature of
              Beneficial
      Ownership
            Percentage
      of Class (1)Common
      Stock
            David
      A. Dugas (2)(3)
              President,
      CEO, and Director
              P.O.
      Box 53846, Lafayette, LA 70505
            4,560,000
            17.59%Common
      Stock
            Tony
      J. Primeaux (4)
              Vice
      President, Director
              408
      Kilbourne Circle
              Carencro,
      LA 70520
            2,200,000
            8.04%


Common
      Stock
            Michael
      Cavaleri (1)
              Director
              750
      Broad Street
              Shrewsbury,
      New Jersey 07702
            800,000
            3.08%Common
      Stock
            Donald
      Mitchell (5)
              525
      Melrose Ave.
              Winter
      Park, FL 32789
            5,115,000
            19.73%Common
      Stock
            Angelo
      Luca
              Former
      Officer and Director
              750
      Broad Street
              Shrewsbury,
      New Jersey 07702
            100,000
            *Common
      Stock
            All
      Executive Officers and Directors as a group (3)
            7,560,000
            29.16%






22
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(1)           Based
on 25,925,942 shares of our common stock outstanding as of May 20,
2008.


(2)Mr.
Dugas’ shares in the amount of 3,712,000 are owned by DTAS 2006 Family Trust of
which Mr. Dugas is a Trustee.




(3)           Ms.
Mary D. Dugas  is the ex-wife of Mr. Dugas, and is the beneficial
owner of 848,000 shares.




(4)Mr. Tony
Primeaux is the beneficial owner of 2,200,000 shares. Mr. Primeaux’s daughter,
Ms. Lindsay M. Primeaux is the beneficial owner of 100,000 shares and Mr.
Primeaux’s daughter Amy Primeaux is the beneficial owner of 100,000
shares.
  Mr.
Donald Mitchell is the beneficial owner of 5,115,000 shares through his trust
DAM 2005 Family Trust or 19.73% of our outstanding stock.




Changes in
Control




There are
no arrangements which may result in a change in control of us.





ITEM 12.  Certain Relationships and Related
Transactions.





On
October 31, 2007 we issued 800,000 shares of our common stock to our officer and
director, Michael Cavaleri, and 100,000 shares of our common stock to Angelo
Luca, our former director, for services rendered to the Company.





At
December 31, 2007, the Company had balances due from two stockholders in the
amount of $20,000.




At
December 31, 2007, the Company had a balance due to a stockholder in the amount
of $100 which was used to fund the initial operations of the
Company.




At
December 31, 2007, the Company had an accounts receivable balance due from a
related company in the amount of $65,243, of which $65,243 was set up as an
allowance relating to this balance.  Sales to this related company
amounted to $142,187 for the year ended December 31, 2007.




(A)
            At
      December 31, 2007 the Company had an accounts payable balance due to a
      related company in the amount of $0. Purchases from this related company
      amounted to $284,044 for year ended December 31,
  2007.





ITEM 13.  Exhibits and Reports on Form 8K.





a)
            Exhibits





Exhibit
      No.
            Description3.1
            Articles
      of Incorporation (1)3.2
            Bylaws
      (1)5.1
            Opinion
      of Anslow & Jaclin, LLP (1)10.1
            Agreement
      and Plan of Reorganization with ESP Resources, Inc. dated September 14,
      2007 (2)10.2
            Consulting
      Agreement with Grandview Capital dated January 2, 2008
  (2)14.1
            Code
      of Ethics (3)31.1
            Certification pursuant
      to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.(3)32.1
            Certification
      pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.(3)




(1)
            Incorporated
      by reference to the Company’s Registration on Form 10-SB filed on June 28,
      2002 (SEC File No. 000-49896).




(2)
            Incorporated
      by reference to the Company's Current Report on Form 8-K dated September
      14, 2007 and filed on September 19, 2007 (SEC File No.
      000-49896).




(3)
            Filed
      herewith.






23
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b)       Reports
on Form 8-K





Form 8-K
Filed on September 19, 2007 disclosing entry into Agreement and Plan of
Reorganization with ESP Resources, Inc. and the shareholders of ESP Resources,
Inc.





Form 8-K
filed on November 7, 2007 disclosing the close of the transaction pursuant to
the Agreement and Plan of Reorganization with ESP Resources, Inc. and the
shareholders of ESP Resources, Inc.




ITEM 14.PRINCIPAL ACCOUNTANT FEES AND
SERVICES





Audit
Fees




For the
Company’s fiscal years ended December 31, 2007 and December 31, 2006, the
Company was billed approximately $15,593 and $27,330 respectively for
professional services rendered for the audit and review of its financial
statements.




Audit Related
Fees




For our
fiscal years ended December 31, 2007 and 2006 we did not incur any audit related
fees.




Tax Fees




For the
Company’s fiscal years ended December 31, 2007 and December 31, 2006, the
Company incurred no expenses for preparation of its corporate income tax
returns.




All Other
Fees




The
Company did not incur any other fees related to other services rendered by its
principal accountant for the fiscal years ended December 31, 2007 and
2006.




Audit and Non-Audit Service
Pre-Approval Policy




We
currently do not have an audit committee. However, our board of directors has
approved all the services described above.








24
 Table of Contents




SIGNATURES




In
accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, there unto duly
authorized.




ESP
ENTERPRISES, INC.




Registrant









Date:       May
20, 2008





By:
            /s/
      David
      Dugas




David
      Dugas


President,
      Chief Executive Officer and Chairman of the Board of
    Directors








Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.




Name
            
            Title
            
            Date/s/
      David Dugas
              David
      Dugas
            
            Chief
      Executive Officer,
              President
      and Chairman
            
            May
      20, 2008/s/
      Tony Primeaux
              Tony
      Primeaux
            
            Vice
      President and Director
            
            May
      20, 2008/s/
      Michael Cavaleri
              Michael
      Cavaleri
            
            Director
            
            May
      20, 2008